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Why Bitcoin Debates Are Binary

I don't own any Bitcoin. Never have. I tried to acquire some a few years ago, when my fellow Facebooker John Yi was working for Coinbase. Alas, Coinbase was in the midst of some early growing pains and verification was broken. No Bitcoin for me.

I do, however, know a lot of Bitcoin owners. Some bought it. Some harvested it. A few spun up Crypto Trading platforms (like this one). A few used to own Bitcoin. They sold it, at a profit, and were treated to immediate feelings of FOMO, regret, and wanting to buy back in.

Like more traditional asset classes, Bitcoin tugs at the heartstrings. It'll make you or break you.

Hence the never-ending debate about how useful it is, how "real" it is. Warren Buffet said Bitcoin is “probably rat poison squared.” He called it a "mirage." Elon Musk said "Bitcoin is almost as bs as fiat money." Now, you can buy a Tesla with Bitcoin. No doubt Elon will love it more, the more he owns it.

Bitcoin debates tend to be completely imbalanced, for one simple reason. You either own it or you don't. If you own it, you have to be bullish on it. It's an invisible, completely intangible asset. Back when we relied on the gold standard, at least we could maybe go and see some gold bullion.

With Bitcoin, there's nothing to see. There's no unit of anything that it's pegged to. So, if you don't own it, you - quite literally - have no way to reason about the value of it. If you own Bitcoin, in a Coinbase account, you can at least log in and see a number with some profit/loss attached to it.

There is, however, one asset Bitcoin relies on that's pretty tangible - electricity. We burn tangible assets - like fossil fuels - to create it. Elad Verbin makes a pretty compelling argument for why we should be worried about this. In his own words:

"Bitcoin incentivizes the development of cold fusion and more efficient solar panels in exactly the same way that it incentivizes more aggressive fracking in the global south."

It's easy to forget that everything we own, eat, or look at was - in some way - created by the sun. The fossils that became fuels came about because the sun fed them. The computer I'm writing this on was designed by humans fed - indirectly - by the sun, and plastics fed - indirectly - by the sun.

No doubt, as we directly harvest more electricity from the sun, turning that energy into Crypto assets like Bitcoin will become more efficient. We won't "waste" energy on creating intangible assets. At some point we'll create our own energy in our own homes. An energy creation cost of close to zero.

Which begs the question: if the cost of Bitcoin's key input asset - electricity - drops to zero, what might that do for the price of the output asset over the long term?

Only time will tell.