How to make Bitcoin great again

I bought my first Bitcoin in 2011. At the time, the price was below $10. I was intrigued by the use of it for cross border payments, as I had subcontractors working for me on software programming work that resided in places like Bangladesh, Vietnam, Mexico, etc. I was being extorted by the likes of Western Union to just simply pay them.

The subcontractors were too. Not only did the combined fees we were all sharing equal about 27% of their entire payment each week or so, but they had to travel miles to get to a payment pickup location in their region. This was pure extortion and we were not going to stand for it.

The original promise of the Bitcoin White Paper

I found out about Bitcoin from one of my subcontractors who suggested it as a better way to pay him. Although at the time it wasn't easy to get money into BTC, by using the exchange Mt Gox, I was able to buy a substantial amount of Bitcoin and kept it for future subcontractor payments. It was still easier for me to wire money to Japan to get BTC than it was to deal with the stupid Western Union payment point in my home town, and the delays to get the money to my subcontractors.

The thing is that I wasn't initially captivated by BTC. It was a vehicle to simply pay my guys. I had seen similar vehicles before. I got into playing MMORPGs in about 2007 or so, and one of the games I found myself addicted to play was Dungeons & Dragons Online (DDO).

DDO had this alternative world thing going for it, and one day I was in a virtual tavern in the game and another player's avatar comes up to me and offers to sell me a ton of Platinum. "Plat" as it was called was the currency of the game, and it was the first time that someone interacted with me that involved the payment of actual money to them. They were obviously in China and they had these guys over there that were called "Plat farmers". They would play 24 hours a day, to generate virtual goods & wealth, and then sell them for real money to other players. It really peaked my interest because here I could see the virtual world and the physical world economies meeting. I had always been intrigued of how we perceive value in things - and in the case of digital goods like this, I didn't see it anything different than buying a MP3 file on iTunes. You were paying real money for virtual money. I spent $10 by PayPal or some other form I can't remember, and a few hours later, the same avatar meets me in the tavern in game, and gives me the virtual goods I purchased.

Sure, it was risky. I mean this guy could have taken my money and absconded with it. But he didn't. Probably because he realized that there would be more to come if this transaction goes well.

I started to get it. There would be huge demand for virtual goods in the future. The biggest obstacle was how to "on ramp" and "off ramp" the $USD. I remember in my travels seeing those foreign exchange booths at airports where they would charge ridiculous fees for money exchange and I tried to avoid them. Eventually the banks were doing the same thing, and you always felt that you were getting ripped off in the conversion between currencies. Seems that the digital world may be subject to the same process. We needed a way to get money from party A to party B without some greedy leech sitting between the two parties.

I guess I wasn't alone to realize this. In 2009, this white paper was released. Bitcoin White Paper. The rest is history.

The thing here is that there was a real requirement for it. A real need. A need that was important to society. Sure, it was something that all the anarcho-capitalists embraced. That the Libertarians loved. That freedom loving individuals saw as a technical solution to a real world problem. In the computer industry, we call that a "killer app". Those that fell prey to being excluded from the economies of the world, were able to finally fight back. I remember reading about Julian Assange of Wikileaks.org who was being targeted by all the banking sectors and trying to have his servers shut down by cutting off all funding. He was able to survive because of Bitcoin donations. The irony here, is that years later with the massive rise in value, he probably walked away from that as a wealthy millionaire, despite his exile in the Ecuadorian embassy.

Then we lost the plot

After I "got it" with Bitcoin, I spent the next few years trying to evangelize all my friends about it. Some understood what I had experienced. Others had no idea. They didn't play MMORPG games, or pay subcontractors from around the globe, or had personal experience of how immoral and wrong the banking industry were for extortion. They just lived their regular lives and I was just some crazy whack-job that was going on about this thing like I had found a new messiah or something. It was complex, involved them risking some money (not much, but still) and it was a topic that you either made friends with, or friends would keep their distance.

Feeling a bit left out, I started to attend the early Bitcoin conferences - just to find like minded people who believed in this. They were not well attended in the early days, but they were at least something where I felt that I wasn't an outcast.

Little by little, I saw it gaining some momentum. I went to the 2013 CES convention in Las Vegas and met the guys from the French company Ledger who had this little hardware wallet, and I bought one. After I realized that I could get my BTC off any hosted exchange, I was able to move my funds from the Internet to my little wallet. I had previously moved the BTC I had from Mt Gox to another exchange, because they were one of the first to announce that they had an upcoming Mastercard Debit card that would allow you to link to your BTC holdings. Thank god I did, because shortly afterwards Mt Gox got hacked and the rest is history. A year later at the 2014 CES convention, they had this big Bitcoin stand in one of the exhibition halls, and I managed to speak to a lot of the original founders of companies that today are huge in the Bitcoin space. Again, it was a bunch of naive computer nerds all trying to rally around a common cause.

But there was still the naive idea that this could change the world. That putting ownership of money back with the people was a noble cause.

In 2015 and 2016, the banking industry started to take notice of Bitcoin and started to unleash their negative attacks on it. They would try and lobby governments to ban it. That didn't work. So they went to the media and tried to scare people out of it.

That didn't work. If anything, it raised more and more awareness. About this time, Bitcoin started to trade higher and higher. Hitting about $1,000 a BTC in early 2017. This is when it all started to go wrong.

People saw Bitcoin and crypto-currencies as a way to make a quick buck

Money can be an evil thing. Just as the banksters used it as an extortion and weapon to further divide those that have it with those that don't, and the 1% keep getting richer, the psychology of people saw Bitcoin as the magic lottery ticket to wealth. It wasn't about how it could be used. It was how it could he HODL'd. Rather than spending it, people hoarded it. The $1,000 price went up and up and up. 2017 ended with Bitcoin reaching all time high prices of over $19,000 each.

At this point, I stopped enjoying it. Prior to this it was an experiment and it had it's purpose. But through this roller coaster ride, the amount of money just got too heavy a burden. I sold off most of my holdings. Paid off the house mortgage, invested it in more boring investments, etc. and basically looked upon the experience as something that probably would only happen once in my lifetime.

But the crazy, Bitcoin evangelist that I was prior now became the "go to guy" for all my friends who now found themselves in the FOMO (Fear of Missing Out) camp, and wanted to get in. My standard response - "Why the hell didn't you listen to me a year ago?". It was too late for them to get in. Some tried getting in when it was $15K or higher, and got their asses handed to them in the markets. Most tried to get in not realizing what it truly was. Scams emerged everywhere. Seems that anyone lucky enough to buy some in 2016, now was a financial guru and had their own YouTube channels talking about charts, trends, "candles", etc. and were quick to buy other alt-coins that might do the same. None of these people had any financial backgrounds.

The funny thing is that those that were trained economics were the first to be naysayers to Bitcoin and now had to admit that they made a huge mistake not buying it, and were left with egg on their face. Many clung to their statements while reality cast a shadow on their credibility. When the markets went down, they were the first to do the "I told you so" dance.

You see, people are greedy. That's the problem. 2017 showed people turning on people. With 90% of the all the public faces of the crypto-currency community not being knowledgeable at all and parroting the same phrases that the enlightened would say. The old guard that I hung with back in the early days were now the exalted ones.

Then the crash happened

In early 2018, the price of Bitcoin crashed. $19K BTC became $6K BTC. The late arrivals to the Bitcoin roller coaster got "REKT" as was the common statement at the time.

Those that invested in sophisticated mining hardware lost their shirts. Bitcoin scalability took a huge hit, as the exchanges had been enjoying massive mining fees and exchange fees as the herd all tried to get on Coinbase and buy BTC. Sites went down, sites were congested, exchanges took hours to process transactions. People "forked" BTC in an attempt to try and resolve this problem, only creating a further mess.

Governments started to implement regulations in earnest. Although the US government had been "light touch" when it came to regulations of this new market, they eventually had to get serious. The IRS began a legal fight with Coinbase to get them to disclose their customers and as a result scared the hell out of US BTC investors. Other countries followed suit. Eventually the regulations started upping the price of doing business with BTC and more left the BTC space than entered it. Pretty much calamity in the streets.

What didn't get much press

There were two things, however, that had been invented and were starting to gain traction. I remember on one of my long drives back from the CES convention in Las Vegas, I listened to an episode of the "Let's Talk Bitcoin" podcast, and they were talking about this new concept of "Sidechains". It was really technical and hard to understand, even with the five hours of drive time and nothing else to think about. But this thing called "Segregated Witness" (SegWit) got my attention. The idea that you could move transactions from exchange to exchange at almost $0 cost by batching things together. It reminded me of the way that the banks did wire transfers. You initiated a transaction, but it didn't get processed until the afternoon of the business day, where the banks would batch together all the transactions and push them through clearing houses. It didn't work that well, but it did allow the fees to be reduced.

But in 2017, despite this being rolled out and used successfully the big exchanges (Coinbase, etc.) didn't want to touch it. Why? They were making way too much money with their current business model, even though the whole point of BTC transactions being a real threat to the banks money transfer model was obvious. At some point, they pretty much degraded what the whole point of the original Bitcoin white paper was - a "Peer to Peer electronic cash system". And what was criminal is that they could have adopted Segwit to avoid this. But they purposely didn't. I believe this resulted in some of the initial price crash because BTC didn't fulfill its original intended purpose.

Around early 2018, most of the exchanges gave up the fight and finally adopted SegWit. We can now do transactions inexpensively. But the damage was done. Between the "hard fork" wars of Bitcoin Cash vs. Bitcoin, and new comers seeing the high cost and slow speed of transactions, and then losing their shirt, they didn't want to touch it. Finally the banksters could laugh in the face of Bitcoin as "Nerd Money" and "It will never work". But of course they wanted to look like they knew something, so they would brandish the phrase, "We hate Bitcoin but we love the Blockchain" heralding in a new IT market that was poised to make as much money as the "Millennium Bug" did with consultants in 1999.

While all the attention was focused on those that were charting price futures, I went back to the roots of the promise of Bitcoin. I started to see real killer app opportunities that most didn't want to see. The biggest one was the Lightning Network.

The Lightning Network

The way I see it, if BTC peer to peer transfers won't scale well, it means you can't buy a cup of coffee with Bitcoin. The banks allow you to do this with your bank account through the use of a Debit Card. Or you can use someone else's money with a Credit Card. Either way, the banks charge the merchant upwards of 2.5% to process the transaction. They batch things up so that 3 business days later, the merchant gets a deposit of their sales into their bank account. But the transaction you have is instantly approved or declined. This is done using a "sidechain" to banking called merchant processing.

It is because of merchant processing that banks are still relevant. These days no one writes checks anymore. You can pay with your credit or debit card. Or ACH. Your choice. But you have the choice if you have a bank account. Of course this is a western economic thing - many countries that don't participate in the global banking system as much as USA, and other western economies still do things by cash. It is slower, and doesn't allow them to leverage off credit as much. But their economies tend to be less vulnerable to massive swings. That said, merchant processing really makes banking work - particularly at the retail level.

So what is this Lightning Network thing? Basically it is merchant processing for Bitcoin. The most prominent face of the Lightning Network is a lady by the name of Elizabeth Stark.

She represents Lightning Labs, a consortium that have developed this technology that allows peer to peer payment channels to be built that, like merchant processing, batch up the transactions and remit at a less frequent level, thereby not overburdening the Bitcoin network. This is the key to making Bitcoin real, in my opinion.

If the banks are going to charge vendors these enormous fees to sell their wares, then the vendors will look for cheaper alternatives. It is that simple. Small businesses are being squeezed at every opportunity and they are decentralized and want some autonomy to their operations. This means they want something like Lightning Network.

But they don't know about it. The press focus on the calamity of Bitcoin and how people got REKT'd. They don't talk about the original promise, and how this could democratize money. So your average family owned store doesn't realize that there are better ways to maximize profit. Lightning network is the key.

Build it and they will come

If you walk into your local coffee shop (not some corporate chain, but a family owned and operated one), or your hairdresser, or your auto mechanic, etc. and right at the counter you see their credit card swiping machine, you see that you can pay that way and probably take advantage of it.

But imagine if that store had this sign on the window as well....

Would you not be interested? And if the vendor encouraged you to use your phone to pay for their products or services, it might be more convenient than you having to carry your wallet AND your phone? I realize that with things like ApplePay, SamsungPay, AndroidPay, etc. that these things have been tried before. They probably are too complex to have massive impact, but if you had a BTC wallet on your phone and you could just pay with it, everyone would win. You would avoid the banksters, so would the vendors.

The thing is that this completes the circle. This is the original promise of the Bitcoin White Paper. You could transact with it. Make it a part of your normal economic day. You could buy stuff online or offline. You would break free of the banking industry entirely. Maybe if you were a freelancer, you could get asked to be paid in BTC. Then you could spend it on the goods & services you needed. The local community and local small businesses would benefit. Eventually this move would weigh on the corporations who would have to acknowledge that their customers want a different way to pay for things.

Will it ever happen?

Who knows. The fact is that the BTC price seems stuck right now, and that is probably because society is at a stalemate on it. They don't know whether the gains of 2017 will recur. Or whether it was just a failed experiment and the price will collapse back to $1000 or so. No one knows. It really comes down to the masses showing either some faith or abandoning that faith.

When you listen to those that talk about charts, etc. you are really following what Wall Street would commonly refer to as "Day Traders" and if you look at the statistics of how many day traders actually make money vs. those that lose their shirts, the latter seems to be the overwhelming majority. So don't be a day trader with crypto currencies. That's my advice. You might make money, but you might also make money buying a lottery ticket.

You have to understand something for what it is, and what its potential is. You want to be ahead of the wave and ready for it, before it happens. This is pure speculation, but you can reduce your personal risk by studying its original purpose and tracking just how close to realizing that it is. If you see things clearly that way, you might determine when to get in or get out. That choice is up to you. But don't do it on someone else's recommendation without you first doing your own research.

I got lucky. I don't consider myself an economic genius. I am just a guy on a quest for freedom and independence. Banks are one of the worst enemies to my cause and therefore Bitcoin resonates with me. Maybe it does for you. Maybe some other crypto currency like Steem or Ethereum or Monero or whatever does. But you have to study what its intended purpose is and bet on whether it will fulfill that mission. If not, you are just another day trader and there is a 90% chance you will get REKT'd by it all. Never invest more money into something than you are prepared to lose.