Does Bitcoin wear many hats 🎩 🪖 or have we changed Satoshi's OG vision?

Composed by Emanuele Marabella, Building Engineer, $BTC HODLer, $MSTR and $TSLA shareholder.

Published on December 18, 2021


Satoshi Nakamoto the pseudonym creator of Bitcoin (BTC), released his original 9 page white-paper on November 1st, 2008. His original intent was to create a "peer-to-peer electronic cash system."


In 2021, with rising inflation rates, Bitcoin, with its limited 21 million coin supply, is now often referred to as a store of value, and has unofficially adopted the title of "Digital Gold." Many Bitcoin maximalists await for the moment where Bitcoin's current 1 Trillion Dollar Market Cap will completely replace Gold's 11 Trillion Dollar Market Cap.

"Bitcoin is scarce, durable, divisible, verifiable, portable, and transferable, all of which protect from the threat of centralization" - Ark-Invest white-paper, part 2

However, 13 years after its creation, significant global adoption and Bitcoin's major value increase (10,000% in the last 6 years alone), the peer-to-peer transactions have been relatively few and far between considering its relatively large Market Cap. This fact begs the need to ask some questions:

  • Have we lost sight and misinterpreted Satoshi's original intent?

  • Have we taken the wrong path or was this meant to be?

  • Was the world actually in greater need of a store of value than a payment system?

This piece intends to address these questions.


Satoshi's Original Intent

Below are some key excerpts from Satoshi's 2008 white-paper.


A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network.


What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.


The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone.

Elon's Take

In February of 2021 Tesla Motors officially announced their adoption of Bitcoin for transactions and confirmed its place on their balance sheet after acquiring 1.5 Billion USD worth of BTC. Published 1 month prior to this announcement, Elon Musk, Tesla Motors CEO, explains his view on money in the following tweet:

The transactional aspect of Bitcoin took the biggest step back in May of 2021, when Elon sent out the following tweet, published only 3 months after Tesla's February announcement. Within 6 weeks, Bitcoin's price tumbled 40% from 49K to 30K.

It was made public that Tesla sold 10% of their original BTC purchase in order to prove its liquidity as a cash alternative. The purchase and sale were done in Q1 of 2021, netting a 100 million USD profit for Tesla.

Elon elaborates his views in this highlight taken from "The B Word" conference held in July 2021. To this day, Elon, Tesla and SpaceX all hold Bitcoin.

At the end of this clip, Elon references Bitcoin's Lightning ⚡️ Network which is making progress although still in a state of immaturity. Lightning is an overlay network which sits on top of Bitcoin's layer 1 and allows people to transact in a much faster and less frictional way. Jack Mallers from Stripe rants more about the Lightning Network here:


Bitcoin's Opportunity as seen by Ark-Invest

Ark-Invest's white-paper Bitcoin as an Investment (part 2) published on September 17, 2020. states the following 4 potential use cases for Bitcoin's potential opportunities:


A. Bitcoin As A Global Settlement Network

B. Bitcoin As Protection Against The Seizure Of Assets

C. Bitcoin As Digital Gold

D. Bitcoin As A Catalyst For Currency Demonetization In Emerging Markets


The following text has been extracted from Ark's September 2020 white-paper with minor adjustments.


A. Bitcoin As A Global Settlement Network

We believe Bitcoin could become a settlement system for banks and businesses. Unlike traditional settlement systems, the Bitcoin network is global, it cannot censor transactions, and its money cannot be inflated by institutions like central banks.


If Bitcoin were to capture 10% of those settlement volumes at a similar deposit velocity, Bitcoin's price per coin would exceed 70,000 USD.


B. Bitcoin As Protection Against The Seizure Of Assets

Bitcoin enables personal sovereignty, a useful - if not crucial - characteristic in jurisdictions where property rights are not recognized or enforced. With good public and private key management, we believe bitcoin cannot be seized. In our view, a sensible allocation to bitcoin would approximate the probability that a corrupt or misguided regime will confiscate assets - whether by fiat money inflation or by outright seizure - during an individual’s lifetime.


This opportunity could realistically lead to a price per coin which exceeds 200,000 USD.


C. Bitcoin As Digital Gold

Economic history suggests that an asset accrues value as the demand for it increases relative to the supply. Demand is a function of an asset’s ability to serve the three roles of money: store of value, medium of exchange, and unit of account. While gold has maintained its status as a store of value, its limitations to serve as a medium of exchange and unit of account began to surface in the 20th century. Supporters often refer to bitcoin as digital gold because it improves upon many of physical gold’s characteristics.


If Bitcoin were to take only 20% share of the physical gold market, the price per coin would exceed 85,000 USD.


D. Bitcoin As A Catalyst For Currency Demonetization In Emerging Markets

During a spike in inflation, not to mention hyperinflation, the loss of confidence in monetary authorities typically encourages investors and savers to adopt hedges to cash and bonds like physical gold and, now, Bitcoin. Not subject to capital controls, Bitcoin could become an important savings vehicle in emerging markets, to such an extent that businesses might demand payment in Bitcoin instead of fiat. As a result, the velocity of fiat currencies would accelerate, further exacerbating inflation. Taken to the extreme of hyperinflation, fiat-denominated debt would become worthless and dollar-denominated bonds unpayable. Drained of deposits and unable to custody Bitcoin, the banking systems would collapse.


If only 10% of the M2 money supply would be transferred to Bitcoin, the price per coin would exceed $100,000 USD.


Bitcoin offers one of the most compelling risk-reward profiles among assets, as our analysis suggests it should scale to roughly 50,000-250,000 USD per Bitcoin during the next five to ten years.


At the time this white-paper was published in September 2020, the BTC price was ±11,000 USD. At this current moment in December 2021, the BTC price is ± 50,000 USD. BTC has already seen highs of ±68,000 USD in November 2021.


🇸🇻 El Salvador's Adoption of BTC as Legal Tender 🇸🇻

Ark-Invest's Case D: Bitcoin As A Catalyst For Currency Demonetization In Emerging Markets, has come to fruition in El Salvador. In July 2021, El Salvador, led by President Bukele, approved Bitcoin as legal tender along side the USD.

El Salvador now holds ±1120 Bitcoin and impressively have begun to use geothermal energy from volcanoes in order to sustainably mine Bitcoin. This initiative was a great response to Elon's earlier sustainability criticism.

Case D has also shined its light in Miami Florida as the mayor has embraced Bitcoin. Mayor Francis Suarez speaks of becoming the city "that focuses on the next series of technological advances" in this clip from June 2021:


MicroStrategy's Adoption of BTC as a Primary Treasure Reserve Asset

Ark-Invest's Case C : Bitcoin as Digital Gold, has been applied by MicroStrategy. As of December 9th 2021, MicroStrategy holds122,478 coins.

In the video below taken from MicroStrategy's Investor Day on December 16, 2021, MicroStrategy ($MSTR) CEO, Michael Saylor, explains the advantages of owning MSTR stock over holding shares in a Bitcoin ETF and actual Bitcoin. MicroStrategy has every intention of purchasing more Bitcoin in the future :

  • using excess operating cash flows from the business intelligence sales, and ;

  • competitively borrow cash in order to purchase more Bitcoin using leverage.


Therefore, it can be argued that in addition to the case of "Bitcoin as Digital Gold", MicroStrategy have created a 5th use case, "Bitcoin as Digital Property." In this case the BTC owner can receive a type of mortgage loan against their BTC holdings.


The way is hard that leads to life, for the gate is narrow, those who find it are few - Matthew 7:14 on #Bitcoin

Have we lost sight of Satoshi's original plan, misinterpreted his vision, lost our way and entered through the wrong gate?

Possibly.

However, it is also possible that Satoshi's cryptographic creation is so exceptionally revolutionary that the adoption of the supplemental use cases were inevitable or perhaps intended.


Is Satoshi's creation a failure since his intent to scale and facilitate peer-to-peer transactions has not been accomplished after 13 years?

Possibly.

However, it is also possible that Satoshi's creation was and is so ahead of its time that it has managed to solve the more prominent and complex issue of inflation mainly caused by the mismanagement of government controlled fiat currencies. Furthermore, it is possible that we are witnessing the infancy stages of a cryptographic creation which was built to last through the centuries.


References:

https://ark-invest.com/white-papers/bitcoin-part-two/

https://bitcoin.org/bitcoin.pdf

https://www.youtube.com/watch?v=Zwx_7XAJ3p0

https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/events-presentations/microstrategy-virtual-investor-day-presentation_12-16-2021.pdf

https://www.youtube.com/watch?v=cBR8484YuBo&t=235s

https://www.youtube.com/watch?v=j0L8rtUwPqo

https://www.youtube.com/watch?v=6sPR0O7issU