During the past few months, Bitcoin has consistently hit new all-time highs against the US dollar and gold. Reasons include declining trust in politicians and central banking in the midst of the Covid-19 pandemic, inflation, but also remarkable Bitcoin breakthroughs and advancements.
While the volatility in relation to fiat currencies is still high (a deterring factor for newcomers and outside observers), the phenomenon will only diminish over time. Speculators might sell their bitcoins at a higher price in USD, but at the same smart investors buy and accumulate in order to escape inflation and taxation for an extended period of time.
Today, Bitcoin is better understood by institutional investors and we are no longer dealing with the same retail players who expect to use it primarily as a mean of payment. Driven by provable scarcity and increasing demand, Bitcoin has truly become digital gold. And even around the momentary all-time high of $41.000, BTC’s market capitalization represents only 6.4% of gold’s.
Given Bitcoin’s consistency across 12 years of existence, it has become synonymous with hard internet money. And thanks to the many technical breakthroughs and improvements, which get accompanied by unfortunate political events, it’s very likely to see it become a major asset whose value exceeds $100.000.
Before you laugh at this statement or dismiss it, here are 10 reasons why I think this is going to happen in 2021. And no, this is not financial advice and you are the one who knows best what to do with your own money.
1. Historically, Bitcoin is a better-performing store of value than gold
If gold is a really great option when you want to preserve your purchasing power over extended periods of time, then Bitcoin is more effective at increasing it. The fact that we know that there will never exist more than 21 million bitcoins and we can also approximate the mining schedule with great accuracy is very valuable.
See, we don’t know how much gold exists in the world. And if the price of gold suddenly increases, then the demand for mining it is also going to follow the trend. This means that new mines will be found across the world to effectively inflate the supply and therefore lower the cost. If it becomes profitable, we might even mine gold from outer space – but that’s a different discussion that we can have in another article.
But with Bitcoin, intensifying the mining activity only affects block discovery on the short term. Every two weeks there’s a mining difficulty readjustment which makes sure that the schedule for minting new coins works as designed.
Adding more hashing power to secure the Bitcoin network does increase your chances to find blocks, but it simultaneously diminishes everybody else’s chances. It’s a zero-sum game for a provably-scarce digital resource. And all of this makes Bitcoin really attractive.
2. Bitcoin is easier and less expensive to transfer than gold
Consider this: you have $100.000 worth of gold. How are you going to move it to the other side of the world? You need to insure it, have it weighed and verified by certified experts, and then deliver it with the proper amount of security. Each step along the way is costly and slow. This is why people came up with gold certificates (banknotes), only to take advantage of people’s blind faith with the creation of fractional reserves.
In comparison, Bitcoin can be transferred to the other side of the world in a matter of minutes, and transaction fees are negligible in relation to the costs of handling gold bars. You’re very likely to pay less than the equivalent of $5 for a speedy transaction which moves the bitcoin equivalent of dozens of gold bars.
Furthermore, you can track Bitcoin transactions during every step. Since the network picks them up, everything is visible on the public blockchain. So you know when the first validation comes and you can verify both the amount and the “purity” of the coins yourself. A gold verification device can be very expensive, but a full validating Bitcoin node costs less than $200 and you can also set it up on your home computer.
3. Bitcoins can be carried across borders a lot easier than gold and cash
The argument is similar with the one from the previous section, but the context is very different: let’s say that your government becomes authoritarian and you’re getting oppressed for the views you expressed in the past on social media. At this point, you just want to move somewhere else so you can live a peaceful and fulfilled life outside of the violence of the current regime.
You can’t load up your bags with gold bars or piles of cash, as it’s very likely that they will get confiscated at the border. However, you can take bitcoins with you by writing your private key or BIP39 seed phrase on a piece of paper, you can load wallet files on any electronic device (watch, phone, laptop, hardware wallet) and you can also memorize 12 words so that nobody suspects anything.
Bitcoin is freedom in lots of ways that don’t just involve censorship resistance. Speaking of which…
4. Bitcoin transactions cannot be censored
One of the first use cases of Bitcoin involved donating to Wikileaks and purchasing items on black markets. As long as you pay the right fee, there’s going to be a miner who picks up your transaction and writes it into a block. And for as long as coins can get mixed and every user can generate lots of addresses without revealing their identity, there’s a lot of privacy and plausible deniability involved.
In comparison, your transfer of gold bars needs to be certified by an institution, while your bank account can censor any fiat money transaction. You don’t have to do anything illegal or immoral to get blacklisted: sometimes even exercising your free speech can get you into unnecessary trouble. And with Bitcoin, you can defeat this Big Brother mechanism.
5. The Bitcoin network defends your property rights
If you hold a private key which grants you access to any Bitcoin amount, you can be sure that as long as you take good care of your keys and never share them with anyone you can use your funds for any purpose. That’s not something you can say about any other form of money, which is subjected to the policies of governments.
When trying to move gold from one vault to the other you can face restrictions, while your bank account can get frozen or become subjected to state confiscation. The Bitcoin network is objective and respects a clear set of protocol rules without caring about politics or the greed of human intervention. We like to say that Bitcoin is “unconfiscatable” (not subjected to the governmental decisions to confiscate).
As long as you have the private keys, the coins are only yours to use. But this also comes with the responsibility of proper custody, as nobody else keeps a copy of your keys to save you in the event that you lose them. Read more about how Bitcoin protects your private property better than your government in this article.
6. With second layers and sidechains, Bitcoin beats Visa and Mastercard
Mainstream media journalists and politicians really enjoy reminding everybody about Bitcoin’s long confirmation times and limited block space, which only enables a few transactions per second. They’ll compare the situation to the existing banking infrastructure and come to conclusions such as “Bitcoin will never work as money” and “Bitcoin can’t scale”.
This kind of criticism was pretty reasonable until about 2016, when the SegWit soft fork became a reality thanks to Pieter Wuille, Luke Dashjr, Greg Maxwell, and other contributors. Not only that a workaround was found to boost scalability while keeping the Bitcoin base layer decentralized and accessible to any participant using affordable computer hardware, but the groundwork was laid for building stacks on top of the main chain.
Today we have sidechains and second layers which make Bitcoin transactions instant, confidential, and fungible. The Lightning Network is capable of handling more transactions than Visa without resorting to trusted third parties, while Blockstream’s Liquid sidechain helps unclog the main chain from some big settlements between exchanges and traders.
Right now, Bitcoin has other sidechains which attempt to add layers of interesting and useful complexity. For instance, RSK is building interoperability with Ethereum smart contracts, so everything taking place on altcoin networks can migrate towards Bitcoin for better security. Also, Paul Sztorc’s DriveChain suite of projects aims to add scalability, privacy, and fungibility to Bitcoin transactions. Similarly, Ruben Somsen has developed StateChains, SoftChains, and SpaceChains – transaction-compressing two-way pegged sidechains which reduce the amount of data that’s being stored.
There’s a lot going on in the world of Bitcoin, and soon enough it will become a seamless and instant payment method which far exceeds the limitations of its base layer.
7. Bitcoin is easier to use than ever
Since the 2017 bull market, Bitcoin developers have made significant improvements in making wallets and software clients a lot easier to use. While the previous section of this article sounds really technical and using Bitcoin seems to require a degree in computer science, the user interfaces have become a lot friendlier.
Take for example Wasabi Wallet, one of the simplest yet most feature-rich desktop wallets. It has excellent connection privacy and also manages to boost your transaction privacy with UTXO management without requiring any kind of prior knowledge or understanding of what’s going on. It all happens in the background so you don’t even need to think about what you’re doing. Not only that, but it’s available on all major operating systems (Windows, MacOS, Linux).
For mobile, Blue Wallet is hard to beat. I’d argue that it’s even simpler to use than your banking app, and it manages to include advanced features such as Lightning Network integration, full node connectivity, and complete encryption. Blue Wallet offers a great experience all across the board, and it’s one of the best Bitcoin wallets on Android and iOS.
Want to run your own full validating node to better protect your privacy and financial sovereignty? You don’t have to type into a command line. You simply download Bitcoin Core on your computer, ABCore on your Android phone, or get a dashboard such as MyNode or Umbrel on your Raspberry Pi. It’s inexpensive, it’s fast, and anyone can do it. And if you’re too lazy to do it yourself, you can buy a device which comes with everything preinstalled – myNode and Fulmo’s RaspiBlitz are both great options.
And if you want to get into Bitcoin mining, the software has also become more user-friendly. For instance, EasyMiner features a graphic user interface and an extensive documentation that you can use to troubleshoot any issue. But if you want to make it a lot simpler and also become part of a mining pool, Braiins and Slush Pool offer all the tools that you need to get started. All you need is the proper ASIC mining hardware and the motivation to get involved.
8. Bitcoin has become a global brand
Back in January 3rd 2009 when Satoshi Nakamoto launched the Bitcoin network, very few would have guessed that in only a decade some of the most influential people in the world will be talking about Bitcoin. In the beginning, it was only cryptographers, computer science nerds, and libertarians. Afterwards, it was the media and politicians who came after it. And after the phenomenal 2017 bull run, Bitcoin became a mainstream brand that’s recognizable by hundreds of millions of people across the world.
In early 2018, Twitter and Square CEO Jack Dorsey has openly expressed his advocacy for Bitcoin. Two years later, Harry Potter writer JK Rowling tweeted “I don’t understand Bitcoin. Please explain it to me”, and then the goblins of Gringotts Wizarding Bank have never been the same again.
Investing entertainers such as Dave Portnoy have also gotten involved for a while and started talking regularly about the decentralized currency since the Winklevoss brothers introduced him into the space. Even YouTube influencer Michelle Phan (one of the oldest and most consistent content creators on the platform, as she joined in 2006) enriched her repertoire with a routine about how Bitcoin helps everyone preserve their purchasing power.
And we can’t possibly forget about Elon Musk, who commented that he would never refuse a bitcoin payment around the same time that mainstream media declared him the wealthiest man in the world.
The critics aren’t very silent either – from Donald Trump to Peter Schiff and Christine Lagarde, they are all indirectly promoting Bitcoin to all of those who distrust their authority. Unwillingly, they are doing a service to the growth and expansion of the Bitcoin network.
All of the people mentioned in this section have millions of social media followers and possibly billions of people who read news about their major accomplishments and statements. The fact that they talk about Bitcoin only helps the brand get stronger and more recognizable on a global scale.
9. Bitcoin is becoming more private
Good money must be fungible – which means that any unit (coin or bill) can be exchanged with another one of the same value without any issues. But the design of the Bitcoin blockchain allows anyone to track every coin from creation to its most recent holder. So transactions are only pseudonymous, but not completely anonymous.
In comparison, gold can be melted and nobody will be able to determine its origins. And paper money can change a million hands, and it still won’t matter that one bill was previously held by Justin Bieber and the other was used by drug cartels – they are both accepted as having equal value.
But in the age of internet banking and digital transactions, fungibility for fiat currencies is lost. Banks are gatekeepers of “clean money” and it’s up to them to determine who is allowed to make transactions and which money transfers are fraudulent. If you’re dealing with a service such as PayPal or Patreon, you can get deplatformed and have all of your money frozen and/or seized even for expressing political opinions.
So right now Bitcoin isn’t completely private and some actors may distinguish between black market coins and newly-minted ones, but it’s only getting better. On the base layer, Bitcoin is scheduled to undergo the Taproot soft fork – this upgrade will increase the privacy of contracts and also add a few extra scalability benefits.
Furthermore, innovations in CoinJoins (equally tainting bitcoin amounts to obscure the link to previous transactions) and Pay to End Point (P2EP, a way of bypassing altogether the addresses which are being tracked) will bring more fungibility.
Bitcoin sidechains (parallel networks on which you can move your coins to gain some advantages) are more confidential by default. And the Lightning Network is the most private way of transacting BTC. In the future, as these networks get more traction, Bitcoin is going to become a lot more private.
10. There will only be 21 million bitcoins and each one can be divided in 100 million units
Scarcity and divisibility are the most important qualities of the Bitcoin monetary system. And if scarcity is pretty straight forward and easy to understand (fixed supply, programmed issuance via mining until the year 2140), then divisibility seems to create confusion among most people (even mainstream economists don’t seem to get it).
Just like one US dollar has 100 cents, 1 bitcoin has 100 million satoshis or 1 million bits. As of 2021, even a person who lives in poverty (earns less than 1 US dollar per day) can afford to get a few hundred satoshis or a bit every day.
Today, a dollar can buy you ~2700 satoshis. Which means that a US cent will get you 27 satoshis. At $100.000 per BTC, one US dollar will buy 1000 satoshis. So one US cent will still get you 10 satoshis, which means that bitcoins are still accessible for accumulation in developing parts of the world.
Many people feel like they’ve missed the Bitcoin train because they can’t afford to buy a whole unit. But as soon as they realize that any amount of cash can be converted into a subdivision of a bitcoin, they will become more open to the idea of accumulating over time.
Billions of people can join the Bitcoin network and participate in global finance with nothing but a mobile phone and an internet connection. And when this kind of global adoption happens, the project is going to truly reach its potential. Also, great demand will increase the price.
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