Phase Transitions Of My Friend Moe ‘The Bitcoin Hater.’
The 4th phase goes back to Bitcoin but now it’s about security concerns and for good reason. No one wants someone to steal their money.
Moe says, “my main argument is how is it regulated? The fact that people way smarter could hack and steal your Bitcoin and money in an instant is scary. There is no insurance against that. What if someone shuts down the network and I lose everything?”
Moe really wants to accept Bitcoin as the new normal but he still is holding onto the belief that his nation-state is looking out for him and his money. I love you Moe but you are so naivé to think that.
Bitcoin gives people their financial autonomy back. This is an amazing attribute but it comes at a cost. You and only you have control over your funds. You lose them, there is no getting your coins back. You can’t roll back Bitcoin’s ledger; it is immutable. Accountability is not on anyone else but yourself. This ideology isn’t something that should be feared but embraced because you can move your money around whenever you want/buy whatever you want without a bank asking questions. I am sure there are many of you out there reading this who have been beyond frustrated with their bank, not just with speed but transparency.
Let’s explain to Moe about the power of the Bitcoin network and then we can show him how to keep his coins safe. Again, this paper is not to dive deep into the technical aspects of Bitcoin, but to offer a roadmap to beginners. In saying this, I won’t go into too much detail about the protocol, but I will leave you several references to read, watch, and listen to so you can educate yourself further. Onwards!
The Bitcoin Network
The first thing we should look at is the health of the network. The network relies on miners to verify transactions. According to the cash app Bitcoin education blog, “Powerful computer networks created each unique Bitcoin by using very complex math. This is called mining! A new kind of database, the Blockchain, validates that each Bitcoin exists — and confirms its rightful owner.”
The more miners there is the more computing power in the network. The more hashing (computing) power in the network, the greater its security, and its overall resistance to attack. At its current state, Bitcoin is too big to fail.
No Moe, quantum computing doesn’t threaten it.
No Moe, electricity isn’t being wasted.
So back to the health and security of the network — take a look at the growing hash rate since Bitcoin’s creation.
Linear and log scale
As you can clearly see, the Bitcoin network is growing more and more secure as time goes on. There is a lot to go into as far as the technology behind the Bitcoin protocol. Yet, Moe doesn’t need to concern himself with that. No one cares how the internet really works, no one cares how hockey was started, no one cares how the restaurant made your delicious mushroom risotto. Bitcoin & money only work because of a belief system. You need to believe it is money and then the technology can come after. Bitcoin is just a better form of money and, on top of that, it is the biggest supercomputer in the world with no leader to bring it down.
Keeping Moe’s Wealth Secured
Moe has a belief that his bank is keeping his money safe and that it is hard to steal. Moe says, “My bank is FDIC insured up to $250,000. There is no insurance against Bitcoin. I could lose it all.”
What Moe doesn’t understand is that the bank is stealing your money, they just call it a few different names like mortgage-backed securities, increasing the money supply, changing interest rates, or normal 2% inflation.
“Hedge funds, banks, and insurance companies caused the subprime mortgage crisis. Hedge funds and banks created mortgage-backed securities. The insurance companies covered them with credit default swaps. Demand for mortgages led to an asset bubble in housing. When the Federal Reserve raised the federal funds rate, it sent adjustable mortgage interest rates skyrocketing. As a result, home prices plummeted, and borrowers defaulted. Derivatives spread the risk into every corner of the globe. That caused the 2007 banking crisis, the 2008 financial crisis, and the Great Recession. It created the worst recession since the Great Depression.”
The point here is that banks, hedge funds, you name it, don’t care about your FDIC insurance. They don’t keep the necessary reserve deposits required to operate properly. Why? Banks make money by lending money out. Banks also know the Federal Reserve will bail them out if they are over-leveraged and don’t have enough liquidity.
The minute you put your money into a bank, they are using that to leverage. The number you’re seeing in your account is just a fairytale number. It is Fugazi! They don’t actually have that money, which is why in times of crisis, banks make limits on withdrawals. These situations are way more severe in foreign countries.
I am not fighting against lending money. Banks have every right to run a business and a profitable one. Yet, the consumer should be compensated for such risk and we are not. We get no return to hold our money in a bank. We actually lose money and purchasing power every year holding cash in a bank due to low-interest rates and inflation.
Banks are robbing us blind and the Federal Reserve Bank is creating an inflationary environment to do it.
“If you save money, you lose.”
-Senator Proxmire in “Secrets Of The Temple” by William Greider (page. 165)
Most recently, the chairman of the FED, Jerome Powell said this on a recent interview with 60 Minutes:
The FED’s job is extremely difficult during this time, however, we are making short term gains that are going to negatively impact us long term. Do you think they care? Nope. They are just kicking the can down the road. Boomers love to make fun of millennials when we should be criticizing them. News flash, you raised us! You are raising us with trillions and trillions of dollars in debt.
“…savings has become an unrewarding economic experience. Inflation eats away at savings and erodes savings as a store of economic value. Unfairly low returns on savings discourage savings and encourage current consumption. This is the wrong economic policy at a time when inflation is our №1 economic problem”
-Senate Committee report in “Secrets Of The Temple” by William Greider (page. 168)
I recently talked to a financial advisor and they literally laughed and nonchalantly said, “Just more debt you will have to pay off when we are dead.”
I am sorry, what did you just say?
We simply can’t print and laugh our way out of this.
This begs the question, why do we pay taxes?
This begs the question, how do you think the bank isn’t stealing from you? Moe, for the love of God, put the money back in your control!
Moe is now realizing the deal with the devil he has been doing since opening up his checking account, growing his student loan debt, getting the 9–5, investing in a safe, diversified 401k, and consuming/buying unnecessary shit that won’t make him happy.
Yet, Moe is still nervous about security. What if he buys some BTC and a hacker takes it away?
Moe reads headlines about old Mt. Gox and the wild west of crypto.
This is a great summary of Mt. Gox below:
The Mt. Gox collapse happened in 2014 and it’s important to highlight that there has been a lot of development in the space since then. The infrastructure and liquidity are ten-fold better than in 2014. Yes, this asset class is highly volatile and speculative, but we are judging a baby that can’t even talk or walk yet. This asset class is growing up before our eyes and there are amazing companies being built to protect and secure your Bitcoin/wealth.
There is a saying in crypto “not your keys, not your coins.” With Bitcoin, you have a wallet that has two addresses. One of them is public-facing and the other is private. Think of it this way, the mailing address at your house is your public address. Anyone can send you something if they have your address. However, the keys to your house are yours and yours alone. If someone gets your keys, then they can do what they want with the stuff in your house. Your Bitcoin wallet is similar. Of course, the security functionality is far greater and more throughout than simply the keys to one’s house.
Once you buy Bitcoin on an exchange like Coinbase, Gemini, Kraken, or cash app, that exchange creates a wallet for you with public and private keys. You are trusting the exchange with your private keys. You are trusting the exchange with the keys to your house.
So ‘not your keys, not your coins’ is simply a helpful hint to newcomers to move their BTC from the exchange wallet to another wallet where you control the keys to your house. I will list helpful companies in my roadmap/conclusion. These companies have a sole mission to keep your Bitcoin safe from hackers.
Deep breath Moe. On to the last phase!