Bitcoin makes even smart people dumbfounded

Bitcoin forked last week. If you know what that means, congratulations! I’m just about to do, after reading multiples explanation to labor to makes sense of the event.

The understanding of Bitcoin’s mechanism is still lacking. Even the most enlightened laypeople regarded Bitcoin and its relationships as the “these are monsters” area of ​​the ancient map. The freak is happening out there! But the complexity of this system is even harder to avoid by the insiders. I bet only a small fraction of the people who currently own more than $ 50 billion in digital currency can easily understand what happened last week, when Bitcoin split a kind Its own mutant star is called Bitcoin Cash.

Warren Buffett famously advised us never to invest in anything that we don’t understand. Bitcoin investors are paying Buffett.

Of course, it doesn’t sound like ordinary money (what crypto devotees call “fiat money”) It is also commonly understood. How many people who spend their lives buying and spending US dollars understand the logic of the Federal Reserve’s interest rate policies or the dynamics of the interbank exchange rate?

The deeper you look into Bitcoin, the better you understand the essential fragility of all money – the “illusion of consensus” lies at the foundation of civilization. Money only stores value because others agree to treat it that way. (You are precious metal believers, who are about to sound, don’t crow – gold also has no intrinsic value, other than the value that others covet.) If the deal falls apart, value too so.

But people who are betting on their wallets – and in many cases, their hearts – on cryptocurrencies aren’t just betting that belief in these assets will be solid over time. They’re also betting that it’s 1994 again – that the sluggish popularity of the Internet will repeat itself with Bitcoin, Ethereum and the rest of the crypto stream, unleashing a stream of creative energy, New innovation and investment will create Bitcoin rich investors like the foresighted entrepreneurs of Web 1.0.

Maybe it will. However, all the nostalgia of the 1990s that Bitcoin’s rise kicked off easily overlooking a huge difference between the Netscape era and today. At the dawn of the internet era, it was also seen as “too complicated for the average person” and getting connected can sometimes be a technical hurdle. But once you’re there, it’s easy to get into the fun of the web. You can learn HTML code by reading a few tutorial pages and using the “view source”. You can build your own website in the time of drinking a cup of coffee. That sparked an impact popularity wave that we’re still feeling today.

Bitcoin and its blockchain-based platforms are not. They resemble the original web in that anyone can play and no one owns or operates the store. But their difficult complexity limits participation. Their populist, decentralized tendencies were overwhelmed by the concentration of their power on a contingent of technical experts. “View source” only works if you can understand the source.

Cryptocurrency believers praise “distrust” in their systems – how they don’t rely on your willingness to put your trust in others. But they’re really just shifting the need for trust down to the institutional platform, from the banks and governments that provide weird old-fashioned finance to wallet companies, developers and miners who keep Bitcoin active. nowadays.

For many enthusiasts, that’s enough: They’re delighted that the new paradigm is relatively open and they prefer technology over bureaucracy. But there is no guarantee that such enthusiasm will be enough to bring Bitcoin over the barrier of uncontrollable and widely accepted. When events like the fork that took place last week reminded people how little they understand when it comes to how Bitcoin actually works, Bitcoin doesn’t have much to come back to. The spirit of the year 1994 may not comfort investors who are facing losses they may not even understand.

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