By now, almost everyone has heard of Bitcoin. But for many people, especially those who didn’t grow up with the internet, Bitcoin can be a difficult idea to wrap the mind around. The mystery surrounding its creator and the decentralized nature of its network make Bitcoin even more difficult for many to come to terms with.
However, for those familiar with their history, the inability of society to grasp and embrace new ideas is not a new phenomenon. A short list of inventions that were criticized as too complex or inefficient to ever be used by the common man include: the telephone, the airplane, the computer, the TV, the internet, the automobile, and even the bicycle.
A British Parliament Committee in 1878 called the lightbulb, “unworthy of the attention of practical or scientific men."¹
Upon the advent of the phonograph, a Yale professor told the New York Sun, “The idea of a talking machine is ridiculous.” ²
Many of the most brilliant ideas throughout history were at first mocked or underestimated by society. Today we see a similar sentiment regarding Bitcoin. Among those who have been critical of Bitcoin include: Warren Buffett, Bill Gates, Jamie Dimon, as well as bipartisan opposition from Presidents Trump and Obama.
Is history repeating itself? Will Bitcoin critics end up looking as silly as those who criticized the internet or the lightbulb? Before we can answer this question, it is first necessary to understand why revolutionary ideas are so often attacked by society to begin with.
On this topic, we need look no further than Renaissance Italy.
Transcending an Antiquated Paradigm
Gaspare Vanvitelli - View of Venice from the Island of San Giorgio (1697)
A paradigm shift is defined as “a fundamental change in approach or underlying assumptions.” There is perhaps no clearer example of a paradigm shift than the Copernican Revolution.
From the time of the Ancient Greeks to the dawn of the Renaissance, it was accepted that the Earth sat stationary in space. The celestial bodies – the sun, moon, and stars – were understood to circle the Earth. The common man, the early scientific establishment, and the most powerful institution in Europe, the Catholic Church, all agreed on this ‘geocentric’ – Earth centered – model of the universe.
These assumptions wouldn’t be seriously questioned until the 16th century, when Nicolaus Copernicus began to have suspicions. Based on naked eye observations, as well as modern and ancient astronomical literature, Copernicus concluded that a geocentric model was unlikely to be correct. Instead, he privately developed his own 'heliocentric' model in which the Sun sat at the center and was orbited by the planets. As his life approached its conclusion, he was forced to make a decision: either discard his ideas completely or publish his work and defect from the 2,000-year-old agreed upon model of the universe. After much apprehension, and some encouragement from his friends, he decided to publish De Revolutionibus Orbium Coelestium (On the Revolutions of the Heavenly Spheres) in 1543. He describes this difficult decision in a dedicated preface to Pope Paul III:
Those who know that the consensus of many centuries has sanctioned the conception that the earth remains at rest in the middle of the heaven as its center would, I reflected, regard it as an insane pronouncement if I made the opposite assertion that the earth moves… When I weighed these considerations, the scorn which I had reason to fear on account of the novelty and unconventionality of my opinion almost induced me to abandon completely the work which I had undertaken. - Nicolaus Copernicus, De Revolutionibus ³
This quote provides great insight into what was going through the mind of Copernicus as he made what was likely the most difficult decision of his life. By moving forward with his ideas, he was essentially telling everyone else that their view of the world was wrong (most bitcoin holders have experienced something similar). Despite his apprehension, he would never get a chance to observe the feedback of his work as he died shortly after its publication. During the next few decades De Revolutionibus did not garner much controversy. The Catholic Church did not see heliocentrism as a threat. At least not yet.
The Desperation of a Dying Worldview
Although Copernicus was able to largely evade controversy regarding his heliocentric model, Galileo would enjoy no such fate. Galileo was less reserved than Copernicus regarding his unorthodox views, and by the early 17th century he found himself enemies with the most powerful man in the world, the Pope. In 1616 an Inquisitorial Commission declared heliocentrism to be, “foolish and absurd in philosophy, and formally heretical.”
Galileo claimed that his views did not contradict Scripture. The Church disagreed, and laid this punishment upon him:
1. He was ordered to “curse and detest” his opinion that the Sun sat at the center of the universe.
2. He was sentenced to house arrest for the remainder of his life.
3. Publication of any of his works was forbidden.
It is important to note that it was not just the Catholic Church who opposed the new heliocentric ideas, but the early scientific establishment as well. Tycho Brahe, one of the leading astronomers of the 16th century, rejected heliocentrism on the basis of physics. He did not believe that the Earth was physically capable of movement, calling it a “hulking, lazy body, unfit for motion.” Brahe developed a geocentric model in which the Sun orbited the Earth, and the remaining planets orbited the Sun. Brahe’s model was popular among 16th and 17th century astronomers. The geocentric model was just ‘common sense’ for everyone in early modern society.
It’s significant to realize that those among the establishment were completely oblivious to the, now obvious, facts and evidence that Galileo presented. They truly thought their ideas contained the truth, and that the ideas of Copernicus and Galileo were false. Why? Because once entrenched, a worldview is extremely difficult to displace. The idea had taken root and grown mostly unchallenged in the minds of western civilization for nearly 2,000 years. It was going to take a lot to displace it. This episode of history was an unfortunate one for Galileo, but the resulting paradigm shift is indeed one of the best allegories we have at our disposal to interpret the emergence of Bitcoin.
A New Copernican Revolution
Bitcoin is overlooked by most people today, simply because it does not fit the established worldview of what money is supposed to look like. At first glance, Bitcoin is considered irrelevant. In fact, it is almost immediately dismissed by nearly everyone the first time they hear about it. Even many of the biggest bitcoin bulls today admit to overlooking it at first. Michael Saylor, who is responsible for opening the floodgates to corporate treasury adoption of bitcoin, tweeted this in 2013:
Fast forward 8 years and his company now owns the largest stash of Bitcoin in the corporate world. He also played no small part in encouraging fellow CEO Elon Musk to follow suit. Musk, who had always been neutral to slightly negative on Bitcoin, has since announced he is "a fan of Bitcoin,” and orchestrated Tesla’s massive 1.5 billion dollar BTC purchase in January.
It is very rare for someone to immediately recognize the significance of Bitcoin. And this is to be expected. According to the government, academia, and mainstream economists, bitcoin does not fit the proper description of money. Everyone knows what money is: green pieces of paper decorated with the faces of presidents. This idea has permeated society to the point of subconscious acceptance. Therefore, when most people, especially Americans, think of money they think of physical notes issued by the government. Any type of money that does not fit this description is subconsciously labeled as wrong and is likely to be rejected by the brain. Combine this with the fact that most people tend to find Bitcoin a confusing topic, and it's easy to understand why so few people have taken the time to truly study it.
As discussed in my last post, twelve years have passed since the conception of Bitcoin, and it is estimated that about 2% of the global population holds the asset. An even smaller percentage of the population (probably less than 0.2%) believes Bitcoin to be the type of revolutionary innovation that will change the course of history. Holders of bitcoin who share this view are akin to the ‘holders’ of the heliocentric model in the 1500’s.
In 1591, proclaiming that ‘the Earth revolves around the Sun’ would have likely been met with laughter and ridicule. Today, proclaiming that ‘Bitcoin will be the next global reserve currency’ would probably receive a similar reaction.
The loudest criticism of Bitcoin tends to come from academia and mainstream economists. No evidence seems to be able to change their minds, because their minds have already been made up. The existence of a successful, decentralized, purely free market form of money simply does not exist as a possibility within their worldview. Just as the 16th century establishment denied heliocentrism on the basis of heresy, so too do the modern deniers of Bitcoin.
Galileo was met with laughter and hostility. Fast forward a few hundred years, and today the vast majority of people, either explicitly or tacitly, accept the heliocentric model. The Catholic Church has since admitted its mistake and no longer sees heliocentrism as contradictory to Scripture. Just as the Copernican Revolution forced our ancestors to question their assumptions about the Earth’s place in the universe, the emergence of Bitcoin is poised to force our generation to question our collective beliefs about economics, money, and even value itself.
Transcending the Fiat Model
The funny thing about the geocentric model is that it was actually quite accurate in many ways. For example, it was able to predict, with great precision, the positions of the planets as well as the occurrence of eclipses. The model also allowed for the practice of celestial navigation. Imagine for a moment, a hypothetical, rugged 16th century sailor who relies on his astronomical knowledge to navigate his ship. Then all of the sudden someone comes along and tells him that his astronomical beliefs are all wrong. Good luck changing his mind. This is an accurate representation of the modern state of affairs in the realm of economics.
Just as it was impossible to recognize the reality of heliocentrism while mentally operating within the geocentric model, it is impossible to recognize the seismic implications of Bitcoin while operating within today’s standard economic model, which shall henceforth be referred to as the “Fiat Model.” Fiat, meaning ‘by decree’, is the term used to describe the status of the US dollar since its peg to gold was removed in 1971.
In the Soviet Union, the government held a monopoly over the creation and distribution of legal currency. Interest rates and currency supply levels were manipulated by a central authority in order to achieve specified targets in regard to consumer prices and private employment. The methodology used to determine inflation levels was altered by the government over the years so that accurate and consistent measures of price increases could not be determined by the public. ⁴
Just kidding. Replace ‘Soviet Union’ with ‘United States’ and you’ll be left with an accurate description of the American monetary system of the past 50 years. How can a people who pride themselves on liberty support a monetary system that sounds like it came straight out of Marx’s Communist Manifesto? The answer is simple. The American population has been conditioned to believe that this is just the way money is, and always has been.
But this is not how money has always been. And money certainly won’t look this way in the future. Just as the collapse of the Soviet Union was inevitable due to the inherent inefficiencies brought about by the abandonment of free market principles, so too is the demise of the Fiat Model.
There are three core assumptions that the Fiat Model is based on:
1. Money is a government/central bank creation.
2. Constant inflation is necessary.
3. A central authority is required to oversee and dictate interest rates.
Bitcoin is heretical all three.
1. Bitcoin is a free market creation.
2. Bitcoin has a fixed total supply of 21 million.
3. Bitcoin’s monetary policy is algorithmic and relies upon no central authority.
To someone who has accepted the three assumptions of the Fiat Model as dogmatic truth, Bitcoin appears nonsensical. But to those born in the ilk of Copernicus, who possess minds open enough to question what society deems unquestionable, a new economic horizon awaits.
The Truth Prevails
Raphael - The School of Athens (1509)
In retrospect, it was inevitable that heliocentrism would eventually displace geocentrism as mankind’s standard cosmological model. Given enough time, the truth always prevails. The ideas of Copernicus, followed by the advent of the telescope, marked the beginning of the end of the geocentric model's influence on the world. In precisely the same way, the emergence of Bitcoin has numbered the days of the Fiat Model’s relevance in the modern economic world.
Despite what you're expected to believe, the Fiat System is hanging on by a thread. Debt to GDP levels have exceeded 100% in the US, UK, and Japan. Central banks have artificially suppressed interest rates to the lowest levels in recorded history. But the central banks are running out of tools. In an act of desperation, many countries have even begun to confiscate savings through the mind-numbing concept of negative interest rates. As politicians and central bankers attempt to prop up the system by delivering a continuous flow of QE and stimulus checks, they will simultaneously be exposing the flaws of their system. As everyday citizens watch trillions of new dollars enter circulation at the click of a button, many are beginning to question the system itself.
People are no longer forced to participate in a monetary system that relies on market manipulation and an ever-expanding balance of public and private debt for survival. The advent of Bitcoin provides humanity a decentralized, transparent, simple alternative to the centralized, bureaucratic, and convoluted Fiat System.
In order for Bitcoin to succeed over the coming decade, all that is necessary is for humans to act in their own self-interest. Bitcoin has no marketing team, no advertising budget, and no leader. Yet the value of the network has risen from nothing to $1 Trillion in just 12 years. This is the definition of organic growth. As more people learn about Bitcoin, more people buy bitcoin.
Millions of people have already come to the realization that Bitcoin is simply a more rational way to store value over time, and it won’t be long until billions arrive at the same conclusion.
There is a reason why it took almost two centuries for Copernicus’s astounding discovery to become mainstream. And that reason is this: most people do not think for themselves. Did millions of people believe in the geocentric model because they studied Astronomy intently? No. They believed in the geocentric model because that’s what they were told was true. And when they glanced up into the sky, they didn't ask questions. Only when people started to question authority, question assumptions, and dare to think for themselves, did the truth begin to reveal itself.
History doesn't repeat itself, but It often rhymes – Mark Twain
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¹ Knowledge Management in the Sharing Economy: Cross-Sectoral Insights into the Future of Competitive Advantage, by Vătămănescu Elena-Mădălina and Pînzaru Florina Magdalena, Springer International Publishing, 2018, pp. 5–6.
³ Preface to De Revolutionibus Orbium Coelestium
And of course: Wikipedia
- Cover image adapted from Dana Berry/Nat Geo Creative