What You Will Learn from Bubble or Revolution?

Join Ashto and Jonesy this week as they review Bubble or Revolution, a comprehensive book that delves into the topic of blockchain and cryptocurrencies. Written by Silicon Valley leaders from Google, Microsoft, and Facebook, Bubble or Revolution provides a balanced, comprehensive, and accessible analysis of these technologies.

While the Harvard Business Review and venture capitalist Marc Andreessen has hailed the blockchain as a disruptor and revolutionary invention, there are also concerns about the darker side of cryptocurrencies. They have been linked to drug peddling and hacking, making it difficult for law enforcement to track down criminals. In another instance, the hype around these technologies has reached extreme levels, with companies like Long Island Ice Tea changing their name to add the word blockchain and seeing their stock prices skyrocket. So, are blockchain and cryptocurrencies a legitimate revolution or just a hyper-fueled bubble waiting to burst?

In this thought-provoking episode, we’re taking a closer look at both sides of the argument and examining the potential use cases and drawbacks of these technologies. Tune in to gain a better understanding of blockchain and cryptocurrencies and decide for yourself if they are a bubble or a revolution.

Bitcoin Economies

“There are 3 eras of currency: commodity based, politically based and now, math based” – Chris Dixon

Intersubjective realities

Most of the money we use today has the same philosophical problem as bitcoin. If you’re stranded in a jungle or on mars, a $20 bill is just a useless piece of paper. But if you’re in a store, you can get pizza, socks can openers, and all sorts of stuff with paper. In fact, people will drive you around town, mow your lawn, or watch your dog for this paper. How did the paper get such a value? It boils down to what Yuval Noah Harari calls an intersubjective reality. You think it has value because you know that other people think it has value.

Money supply

Intersubjective reality explains why bitcoin has value in the first place. But the question now is why bitcoin has achieved its multimillion-fold price jump. Like many economic questions, it comes down to supply and demand.

The ease of use theory

What are the factors driving bitcoin demand? One theory is that bitcoin is an alternative to the stock market. Investors will flock to bitcoin when the stock market falters. But the truth is bitcoin is totally uncorrelated with the stock market. One driver is the ease of use theory. You can buy them on a sleek website with a debit card, or you can buy and send them with an app. Popular trading apps let you buy bitcoins just like you would with stocks. Lowering the barrier to entry has removed another cap on bitcoin demand.

The speculation theory

The other factor and a more powerful one is plain old speculation. The majority of bitcoin users are speculators hoping to make a buck. Bitcoin’s highly volatile price, lack of regulation, and newly lowered barrier to entry make it an exciting and relatively easy investment for speculation – especially for young people.

Inflation proof

Bitcoin fans like to assert that bitcoin is immune to inflation because the money supply is capped and controlled by an algorithm, not people. The argument is that when given total leeway to print money and adjust interest rates, national governments can create massive, crippling inflation – either out of malice or incompetence.

Shrinking supply

Bitcoin’s money supply is decreasing potentially (30% of bitcoins have been lost). A study in 2020 found that 60% of bitcoins haven’t been touched in a year. Bitcoin’s scarcity can increase its value for investors, but it can also discourage spending and investment in the economy, leading to potential negative effects. Therefore, it’s important to weigh the pros and cons of Bitcoin’s deflationary nature.

Investments or currency?

The things that make an investment good are different from things that make a currency good. The thing that makes currencies good is stability, While the thing that makes investments good is growth. These are mutually exclusive; a financial instrument can’t be both growing and stable at the same time.