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Intro to Bitcoin - Part 2 - The Future: Investing & Altcoins - YouTube
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Cryptocurrencies are something brand
new in human history.
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In the first video, I talked about why
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triple-entry accounting is something so revolutionary,
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and gave you some of the basics of Bitcoin,
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the first major implementation of this
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new kind of accounting.
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In this part two, I'll tell you about
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some of the other kinds of cryptocurrencies
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and talk about whether you should buy some.
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I like to use the analogy of the beginning
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of the Internet in the 1990's as
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an instructive example of
where we could be now,
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and what the future might look like.
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[music]
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Does Bitcoin even have any real value?
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Remember from part one, Warren Buffet
said it's value is
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>> WARREN BUFFET: But in terms of value:
You know, zero.
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>> MATTHEW: But Michael Saylor,
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the CEO of Micro Strategy,
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which holds more Bitcoin than
any other public company, says this:
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>> MICHAEL SAYLOR: Bitcoin is the apex
property of the human race.
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There is no property invented in the
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history of mankind that is better than Bitcoin.
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Not land, not gold, not silver,
not stocks, not bonds, nothing.
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So, who's right?
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What gives Bitcoin value?
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Really, that's a philosophical question
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we could ask of all money.
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Just like Paris Hilton is
famous for being famous,
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money is valuable for being valuable.
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Bitcoin, dollars, gold, or euros,
and even those giant stone coins
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of the Yap people are all valuable
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because people believe them to be valuable.
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Scarcity also influences value.
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Gold and silver are rare and hard to mine.
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Dollars and Euros are also scarce,
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but governments can create more.
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The inherent value of Bitcoin comes from
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its mathematically verifiable
proof of digital scarcity.
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As a Reddit user RIP King puts it:
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"Verifiable proof of its digital scarcity
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creates a foundation for the inherent value.
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The blockchain makes that possible.
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And people are willing to pay a certain
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price for that proof of digital scarcity.
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Current price is largely driven by speculation
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that this particular digitally scarce protocol
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will become some sort of base layer for
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world commerce or storage of
value, now or in the future."
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You can't know how scarce dollars
or euros will be in the future,
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or even gold and silver, I guess,
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but with Bitcoins and many
other cryptocurrencies,
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it's built right into the protocol,
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and you can mathematically verify it.
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Bitcoin is just one of a bunch
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of different cryptocurrencies,
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maybe you've also heard of
Ethereum or Dogecoin or others.
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Let me outline several broad
categories for you.
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Bitcoin is a store of value.
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In that sense, it's like a bar of silver or gold.
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It doesn't do anything other than be valuable.
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And really, all of these currencies
can store value.
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But some can also do more,
like run smart contracts.
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Ethereum, Cardano, Binance Coin
and Polkadot are examples.
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This is sort of like oil,
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it's valuable because it's useful
for doing something,
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in this case, for doing decentralized finance,
or DeFi, using digital contracts.
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Making payments is another purpose for currency,
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if you need to pay for things at the
store or give money to a friend.
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This is how we use paper currency
and metal coins.
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Nano is the best example of this:
there are no transaction costs,
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and it's almost instantaneous,
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kind of like handing you
a twenty dollar bill,
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except that I can do it electronically
from a different continent.
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This was an original goal for Bitcoin,
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but transaction costs are currently
too high and wait times are way too long,
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no one wants to spend five extra dollars
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and wait up to an hour for
the transaction to happen.
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Now, if you're transferring four
million dollars of Bitcoin,
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maybe that's acceptable,
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but not really for small amounts.
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Speaking of small amounts,
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micropayments are another possible
use of cryptocurrencies,
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and this will become more important
as the "Internet of Things" grows.
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Nano could be used for this,
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and also Iota because they have
zero transaction fees.
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Imagine paying car insurance by the mile,
or getting paid a tiny little amount
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each time someone watches your
video on Facebook or listens
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to your song on Spotify,
or likes one of your Instagram post.
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Another category is running exchanges.
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Binance Coin, Uniswap, and Chainlink
are examples of this.
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They facilitate automatic trading
between different currencies,
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usually with no middleman required.
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And then there are coins
that are used for speculation,
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like the meme coins
Dogecoin or Shiba Inu.
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There are a lot more coins,
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but I think those are the
main, broad categories.
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There are so many!
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Which one should you invest in?
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Which coin is going to 100X to
the Moon for your Lambo money?
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Well.
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The good news is that there
is a crypto that will go up
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ten thousand percent in the next
five years, guaranteed!
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The bad news is that no one
knows for sure which one it is,
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unless you're watching this five
years from now in the future,
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you know what it is.
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But today, in July 2021, I have no idea.
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I like to use the analogy of
what it was like in 1998,
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which I'm old enough to remember.
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It was the early years of internet companies.
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Let's say that you truly believed in
the power of this new thing
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called the internet to transform the world,
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and you would have been right.
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But if you had a pile of cash back then,
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which company should you have
invested in, back in 1998?
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Maybe Yahoo! or Netscape, or Cisco,
or Amazon.com, or Excite.com.
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Some of those did do well in the short term.
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We all know now that the right answer
long term would have been Amazon,
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but it wasn't super clear back then.
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And in fact, Amazon didn't even
report a profit until 2003,
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eight years after it started.
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Well, the same thing is true now.
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Let's say you see huge possibilities
in these ideas of triple-entry accounting,
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smart contracts, decentralized finance,
and provable digital scarcity,
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and you think this just could be
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the future of finance for humanity.
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Unfortunately, it's not super clear
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right now which assets and which
systems will be most successful,
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so I don't think I can give
you any specific advice.
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Back in the mid-1990's,
we could see the potential
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of this new thing called the internet.
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It had been around two or three decades,
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and more and more people
were starting to use it.
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But we didn't know exactly
what it would look like.
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Some people were predicting that
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it would change the world,
and it sort of did, but slowly.
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I love the way Kevin Kelly puts it:
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"Not only did we fail to imagine
what the Web would become,
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we still don't see it today!
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We are blind to the miracle
it has blossomed into.
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The accretion of tiny marvels
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can numb us to the arrival of the stupendous.
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I love that phrase "the arrival
of the stupendous."
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And he said that way back in 2005,
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before iPhones and mobile devices.
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Since then, we have had an accretion
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of even more tiny marvels.
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And not so tiny marvels.
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Streaming movies, maps on our phones,
online shopping, online school.
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I think the same kind of thing
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could be happening right
now with digital currencies.
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It's not just the newest fad,
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it really is something fundamentally different,
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and none of us have any idea
what the future will look like,
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but it will probably be similar
to the beginnings of the internet.
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Slowly we'll find more and more
uses for this technology,
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and one day, in a few decades,
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we'll look back and realize how much has changed.
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But today, in 2021, we're
still at the very beginning.
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In the early 1990's some people
said the Internet was a big deal,
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and was here to stay.
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They were right.
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Others said it would be
the CB Radio of the 90's.
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And they were wrong.
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What hardly anyone foresaw was
the mobile phone revolution,
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just fifteen years away at that point.
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So we got some things right,
other things wrong,
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and just didn't see other things coming.
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The same was true with the
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arrival of personal computers in the 1980's.
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And you could probably tell similar stories
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with the inventions of the automobile,
of radio, and of TV.
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So probably it'll be the same
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with Bitcoin and other cryptocurrencies.
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The libertarian anarchist vision of
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completly anonymous monetary freedom
probably won't happen for everyone.
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Just like the internet makes
it possible for everyone
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to have their own printing
press and TV station
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in the forms of a blog and
a YouTube channel,
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but not everyone does.
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In the same way, cryptocurrencies
will make it possible
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for everyone to be their own bank,
but not everyone will.
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But maybe, partially, on the small scale,
things will move in that direction.
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And it'll probably be different
in the USA versus India, versus
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Mexico versus Venezuela.
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The naysayers like Warren Buffet
are probably wrong, too.
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Just like the people back in 1995 who said
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"why would you ever want to order a book
online, pay five dollars shipping
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and then wait a week or two for it to arrive?
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You can drive to the neighborhood
bookstore and have it in ten minutes."
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Well, they're right.
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No one wanted that back then,
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and we don't now.
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In fact, you can still
drive to a bookstore.
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But it's probably not in
your neighborhood anymore,
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it's probably twenty minutes away.
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And they only have the most
popular ten thousand books,
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not pretty much the entire
catalog of all books, ever.
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And I said no one wanted to
pay five dollars for shipping,
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then wait a week, but that's
not quite true, either.
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Not no one.
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If you were looking for
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a particular obscure book,
or it was worth it to you
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to not have to drive to the bookstore,
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ordering on Amazon in 1998 was a good solution.
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But that's not our experience today.
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Amazon has consistently reduced
the friction and perceived price
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with a Prime subscription,
so that when you buy a book,
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it feels like a good price,
and it feels like free shipping,
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and then it arrives in a day or two.
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Or even later that night.
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Same with Bitcoin or cryptocurrencies.
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It's a bit inconvenient now,
kind of a hassle.
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I mean, who wants to diligently memorize
a twenty-four-word phrase,
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keep their coins on a multi-sig
hardware wallet, and pay five dollars
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every time you transfer funds?
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No one.
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Well, not exactly no one.
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If you're transferring huge amounts,
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or if you're a crypto-libertarian
anarchist-whatever, maybe you do.
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But that's not likely to be
our experience in twenty years.
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Just like the experience of buying
a book online has changed,
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Our experience of using cryptocurrencies
will likely get much easier.
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Today, if someone wants to send one
thousand dollars from New York City
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to their grandmother in Mexico City,
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it costs a thirty dollar fee at
Western Union and takes a day or two.
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In twenty years, it will cost
less than five cents.
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Or may even be free, and will
happen within ten seconds.
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In fact, I can do that today,
right now, with Nano.
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But Grandma doesn't use Nano yet.
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Not yet.
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And even if she did, she'd still
have to convert it into pesos.
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Of course, even with Western Union,
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there's a conversion from dollars to pesos.
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But once the demand starts to be there,
there will be solutions.
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Yes, Western Union will still
exist in twenty years,
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and people will still use them,
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just like brick and mortar
bookstores still exist today.
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But I think we're going to start
seeing a slow shift from
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that old way of using money
to this new way of using money.
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So, I still haven't directly answered your
question about what you should invest in.
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Honestly, I don't know.
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But I will say you should only invest the
money you can afford to completely lose
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in case that happens.
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Maybe the big two: Bitcoin and Ethereum.
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Buy some and leave it there for several years.
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For example, you could take some money
that you don't need for a long time,
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and then put half of it into Bitcoin
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and half into Ethereum, and then just wait
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ten years and see what happens.
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For context: right now in July 2021
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one whole Bitcoin is worth
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about thirty two thousand US dollars,
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which means one satoshi is worth
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point zero three two cents.
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In other words, one US Dollar can buy 3100
satoshi.
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Satoshi is kind of like the Bitcoin cents,
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except there are 100 million
satoshi per Bitcoin,
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instead of 100 cents per US dollar.
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And the current price for Ethereum
is about 2000 dollars per Ether.
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What's it going to be worth
in ten years?
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No one knows.
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So Bitcoin and Ethereum are currently dominant.
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But I will tell you what I
hope wins: I really like Nano.
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I want to be able to pay
someone instantaneously,
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with no fee, from my cell phone.
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If I send my friend twenty dollars,
or twenty Nano,
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I don't want them to receive 19.999,
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I don't care how many nines are on the end,
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I want the number to start with a two,
not with a one.
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So I want zero fees.
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And I don't want to wait,
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especially if I'm standing
in line at a grocery store.
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I really do think that someday soon,
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it will be quick, easy, and free
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to send currency that people use
to someone online, with no middlemen,
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no banking institutions authorizing
it, anywhere in the world.
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Unfortunately, there's no guarantee
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we'll get everything right,
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just like with the beginning of the internet.
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We got email right: you can send email
from any address to any other address,
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across all these different kinds of systems.
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But I think we got instant
messaging slash texting wrong.
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There are all these separate systems:
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Facebook, WhatsApp, Signal, texting.
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I'm still not a hundred percent
sure if I text a picture to
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a group of people who are
using Android and iOS,
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if it will really go
through to all of them.
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And it's 2021!
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This should be working.
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Same with social media.
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It has the potential for great good,
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connecting people, sharing pictures,
sharing ideas, posting events.
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But when profit gets mixed in,
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we get weird results like accidentally
moving people towards extremes.
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See "The Social Dilemma" documentary
for more about this.
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Probably we'll have all the same kinds
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of opportunities and perils
with cryptocurrencies.
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Same with any new technology,
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the advent of personal computers, or even
the beginning of the printing press.
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And I should warn you that
with cryptocurrencies,
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the markets are currently
susceptible to manipulation,
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since it's still a relatively small market
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and not regulated like stock markets,
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but it's likely to even
out in the future.
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So, I don't know what's going to happen,
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but it should be interesting,
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and we're fortunate to be living
through this time in history.
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I just hope we get things right.
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I'm going to make a note to myself
to make a follow-up video
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exactly five years from now
and ten years from now
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after this one is posted,
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to see how things turned out.
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I guess that's assuming
YouTube still exists,
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and that we haven't had
the zombie apocalypse,
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and should the Lord tarry, etc, etc.
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Ten years is actually both a
long time from now,
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and surprisingly soon
paradoxically, once we get there.
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So, before I go, a quick PS.
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For the sake of making a
big, quick overview,
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I've glossed over a lot of detail,
and may have gotten some things wrong.
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I'm neither a financial advisor
nor the son of a financial advisor.
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So feel free to correct me in
the comments below,
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and I'll make a pinned comment with any
major errors that need to be corrected.
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But I hope I've at least given you
the big picture and gotten that right.
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Okay, thanks for watching.
I appreciate it.
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Take it easy,
Have a good day.
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