The Truth Behind Bitcoin
Just when bitcoin was presumed dead after the Mt. Gox scandal, it rose from the ashes on Monday with the opening of Coinbase, a U.S.-based bitcoin exchange backed by the New York Stock Exchange. In an excerpt from his book, Robinson takes us inside the world of zealous bitcoin true believers.
Once upon a time, stretching as far back as the 8th century, some people tried to convince other people that they could turn base metals into gold.
It can’t be done.
In 2009, along came someone, or some people, who called himself, or themselves, Satoshi Nakamoto, and went the alchemists one better. The mysterious inventor of the crypto-currency bitcoin—who appeared like a ghost out of nowhere, never showed his face or revealed his true identity, and vanished two years later—apparently managed to convince some people that he had turned thin air into money.
We first met on a summer’s day in 2013, in a New York City hotel—the Satoshi Faithful and me—during a one-day bitcoin conference, held in a high-ceilinged, carpeted hall with 350 folding chairs, a stage along the far wall with a podium set up for speakers, a long table laid out for panel discussions and, behind that, a big screen to show power point slides.
Waiting for the morning session to begin, as everyone mingled there, and in an ante-room where coffee was served, it struck me that most of these people knew most of these people and, given their age, this could have been their five-year high school reunion.
Not that I’d expected a geek and nerd crowd of spotty 14 year-olds. But here was a room filled with used-to-be spotty 14 year-olds who, somewhere along the way, had smoked the same brand of fervent enthusiasm that you find in believers on any given Sunday at a packed revivalist church.
“Ignore bitcoin at your peril,” a young man warned.
I asked, “Why’s that?”
“Fiat currencies are doomed.”
A young woman told me, “I’m here to get rich.”
That was a common theme, and I felt a paternal instinct to remind her that when it comes to investing, there is a single truth that can never be ignored—the higher the returns, the higher the risk.
She didn’t want to know. “In bitcoin we trust.”
Someone else said to me, “Ten percent of global trade, that’s all bitcoin has to do, and when we capture ten percent of global trade, each bitcoin will be worth one million dollars.”
“Gee, only ten percent of the world’s trade.” I wanted to find out, “And just when do you suppose that will happen?”
He promised, “Sooner, rather than later.”
I’m sure he didn’t have a clue how much money is represented by 10% of global trade. Or, as one economist later told me, if such a thing is even possible that’s exactly why bitcoin won’t survive. If that ever happened, people would flee bitcoin for gold.
An equally earnest fellow informed me, “The problem is that central bankers are white collar terrorists. It’s obvious. Their job is to steal your money. They erode the value of the dollar. Ever hear of inflation? They can’t do that with bitcoin.” He wrote me off with a shrug. “But you’re too old to see the benefits of new technologies.”
Perhaps I was the oldest person in the room, but I couldn’t let that go unanswered. “No, I’m not.”
“You won’t admit it, even when you’re using it without realizing it.” He showed his disdain. “Fiat money is a waste of time. And when everyone in the world is using bitcoins instead of your old fashioned fiat money…”
Another person assured me, with absolute authority, “The dollar is dead.”
I wondered, “Has anyone else in the country heard this news yet?”
“Do you deny Austrian economics? The government is in a panic. They know this is the end. But there’s nothing they can do. It’s too late.” Another of The Faithful now proclaimed, “Without central banking, all the wars of the 20th century would not have taken place.”
I suggested, all the wars of the 18th century and of the 17th century and of the 16th century, too, had taken place before central banks.
He wasn’t interested.
I’d come with an open mind to find out about bitcoin the currency and had run head first into bitcoin the religion. I wouldn’t have blinked if they’d all been wearing orange robes.
What I was seeing, others had seen before. Economist Nouriel Roubini expressed it best when he likened bitcoin bugs to gold bugs, describing them as, “Fanatics who speak of bitcoin in cult-like religious ways. Like gold bugs they have paranoid conspiracy views on the dollar.”
Someone I would speak with more than a year later assured me, “Most of the people behind bitcoin see it as a grand plot to take over democracy. They just don’t understand that bankers never lose.”
Leading the chants was an anarchist crowd. But instead of Hari Krishna, their mantra was, “The absurdity of central banks,” and “The irrelevancy of self-serving capital controls.”
Here they had the volume turned way up. Especially when it came to financial support for the WikiLeaks leader, Julian Assange, and the NSA secret-leaker Edward Snowden.
Credit card companies had stopped taking contributions to both, but both could access bitcoins. Which is how The Faithful came to honor bitcoins as a blessed medal for constitutionally protected free speech.
Divinity extended to their support of various people in Iran, usually, but not exclusively, poets, dissidents and musicians. Ignoring any sanctions in place, The Faithful proclaimed sanctions didn’t apply because bitcoin and the First Amendment are synonymous. From there, free speech morphed into the use of bitcoins to purchase illegal drugs for personal use on underground websites like Silk Road.
One fellow at the conference told a story about how he’d received a panic email from a school group in Nigeria, 6600 miles away, who’d accidentally crossed the border into another country and needed money to bribe officials to get home. Luckily, this man had bitcoins to send them and, thanks to that, the group made it back safely.
If it’s true, I’m glad that he was able to help them.
But… Third World thugs with guns at remote border crossings accepting bitcoins? Seriously? The story was far too convenient, far too self-serving and simply not believable.
Still, The Faithful ate it up, blindly accepting as truth whatever they wanted to hear.
After that, a refugee from Iran who’d sought safety in the US, received a big round of applause for saying that people in Iran had more freedom of speech than anyone in the United States.
That was followed by a standing ovation for a woman who announced that she didn’t care about the US Constitution, because the government was using it to deny us our Constitutional rights and, therefore, the Constitution didn’t matter.
Later, I would come across these comments in bitcoin forums. The parentheses are theirs, not mine:
“You can bet the Rothschild Global Central Bankers (who work for the Jesuit global trusts) do not want this currency to succeed, and will do everything in their power and considerable wealth to crash it or cause it to become invalidated. They have openly stated throughout history they do not like competition, sinking the Titanic (actually the Olympia) to rid some of their foes (do your homework). That is just one of hundreds of examples. If world wars, etc. are not beyond their means to secure their dominance, what makes you think they wouldn’t attempt to game this system? Bitcoin represents their worst nightmare.”
Disregarding the anti-Semitic drivel of using Rothschild as shorthand for Jews—and all the time wondering how the Jesuits got involved and, if it was the Olympia that hit the iceberg whatever happened to the Titanic?—the running theme of “them against us,” and “the rest of the world is out of step” unites The Faithful in their quest for world currency domination.
Another person wrote, “Banks have been given trillions of Federal Reserve Notes at virtually 0% interest, under the assumption that the banks would loan out the money, thus stimulating the economy.
However, the banks haven’t been actually obligated in any way to utilize the funds in this manner. The result has been that the bankers have been using most of it on high-frequency stock trading, cocaine, and hookers.”
Someone else pointed out, “We live in a world where the global economy is literally dependent on the quality of blowjob some international banking cartel manager received this morning.”
It goes on and on and on.
The government can’t be trusted.
Banks can’t be trusted.
Fiat currencies are doomed.
The dollar is dead.
Bitcoin and us… we are the only answer.
Wherever they can, The Faithful expound on how bitcoin represents, “An existential threat to the power structure created by hierarchical money printing.”
To see that bitcoin will triumph, they claim you merely have to, “Look at what central banks have done to humanity. Why would you even want them touching money?”
And, “People and states are moving away from the dollar. And when it reaches a critical mass, the dollar will blow up. And the dollar will go the way of every massive devalued fiat currency.”
This anger in their bellies is particularly alive and well on Twitter.
“Bitcoin isn’t ideological, but anti-ideological. Because it empowers people against ideology-supported violence of the state.”
And, “If #Bitcoin is bad for #US#Monetary #Policy this is a good thing.”
And this, in sequential Tweets: “Bitcoin makes the 85 people who own the world’s wealth not so wealthy. I think their money should value to nothing and we start over with a fresh new slate. Take the power away and soon their wealth will amount to nothing JUST LIKE POGS.”
By mid-afternoon, with the firebrand preachers doing their thing, the choir in full force, and The Faithful speaking in tongues, I began asking myself, for the average guy on the street, what problems does bitcoin solve?
That’s when a voice came down from the rafters and spoke to me: These people are their own worst enemy.
I offed on a year’s trek around Planet Bitcoin, where a digital-something pretends to be a currency; that same digital-something is played with like a commodity; a political movement reeks of a delusional cult; and a technology—a peer-to-peer transfer system—happens to be brilliant.
What it all comes down to is this yearlong realization: That if the technology is to survive and prosper, and well it should, then the other three—the pretend currency, the pretend commodity and the anarchist mob—will have to be rudely shoved out of it’s way.
From Bitcon: The Naked Truth About Bitcoin by Jeffrey Robinson. Reprinted with permission of the author.