Is Bitcoin Even Bitcoin?

One thing I hear people saying is “it’s not Bitcoin it’s Blockchain.”

This saying has two facets. One facet is to understand that yes, Bitcoin is an expression of blockchain and there are many cryptocurrencies that also use blockchain. So we absolutely should value other cryptoassets. I believe natural Bitcoin dominance should be 50% based on the power law distribution. However, I don’t ascribe any magic properties to the word Bitcoin. In fact, the word Bitcoin is not trademarked, which explains the flood of the Bitcoin Forks: Bitcoin Gold, Bitcoin Cash, Bitcoin Diamond etc.

The big thing that the “It’s not Bitcoin it’s Blockchain” people are missing is that a subset of those people are anti-cryptocurrency. Cryptocurrency is the killer app of blockchain. Anyone who tells you that Cryptocurrency is not doesn’t understand either cryptocurrencies or blockchain. The Bitcoin blockchain in particular is a grossly slow and thermodynamically and ecologically perverse database that you only use because you don’t trust anyone.

The value of Bitcoin is that today it occupies the “Iron Throne” of cryptocurrency. Being the dominant cryptocurrency today is hugely valuable and it is indeed the oldest of this particular lineage of blockchain based cryptocurrencies (yes, hashcash and earlier forms existed, but none with the complete set of design innovations within Bitcoin).

So Then What is the Value of Cryptocurrency?

I assert that the value of cryptocurrency as a whole is tied to two things. One of them is the total amount of trust available in the financial system. The Federal Reserve bought a Trillion dollars worth of toxic assets during the bank collapse of 2008. I understand why they did this. The collapse of Lehman brothers created a terrible impact to the economy, and the alternative was to allow Goldman Sachs, JP Morgan, Bank of America, Wells Fargo and others to collapse, taking all of their non FDIC insured holders with them — and of course also forcing the FDIC to pay out all of the insured holders. A completely apocalyptic scenario for our world economy. So to be fair, they had no good option. But if you can imagine the loss of trust in centralized banking

https://en.wikipedia.org/wiki/List_of_largest_banks

As you know, Bitcoin’s design aesthetic is to eliminates the dependence on trusting any third party. If you consult the list of the world’s largest banks, you can conclude that the top 50 banks of the world are in aggregate worth about 70 Trillion USD.

One way of thinking about the value of the entire cryptoball at around $300B is that you could see it as a conversion of 0.43% of the trust in banks. So by buying 1T dollars of toxic assets, the banking system lost 0.43% of their trust which was transferred into cryptocurrency.