Who wants to be a millionaire?

 4 minute read

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           A thought crossed my mind so I had to check it - and I found a list of top Bitcoin accounts. I discovered that only Satoshi owns a million Bitcoins. No one else is even close. If Bitcoin manages to make all other currencies obsolete and we get a world where bitcoin is the sole currency -  then we get the world without millionaires (aside Satoshi, if he decides to keep his "dragon’s hoard").

Don't get me wrong, you could be incredibly rich but you could not actually call yourself a millionaire.

Laissez faire

​            Volatility of the Bitcoin at this moment represents the biggest obstacle for achieving its ultimate goal. The irony lies in the fact that the system without regulations, the financial market where the price of the Bitcoin is determined by supply and demand only - is not controlled; in other words, the financial system that is core idea of the Bitcoin – is, for now, Bitcoin’s biggest problem. If Bitcoin does not find stability, I doubt it will have a chance of becoming preferred online payment method, let alone world's sole currency.

If you take a closer look at it, you may find the problem that is causing all this volatility. Governments don't trust it, because it's not regulated; so they will accept Bitcoin only as an asset, not as a currency. As such, Bitcoin has only two uses. To be used, by some, for online payments. And by many others, as an asset that is easily traded on the market for profits. To me, it looks like speculative trading is dominant use of the Bitcoin, so the volatility on such market should not be a surprise.

Without the tools that could rein the price and bridge the gaps between supply and demand (it is something that creator of the bitcoin wanted to avoid at any cost), only other solution would be if the whole world decided to shut down all national currencies and accept only Bitcoin. That way the Bitcoin would become the only currency in existence. In that case, supply and demand would be determined by the overall need for the functional currency in world's economy and not just by speculative transactions.

Value of paper

             Four main theories of money are not entirely exclusive towards one another: it's more like a system of upgrades where new theories set new definitions and make parts of old theories obsolete as the money continues to evolve. With all the new reasons we use money for today, we should not forget the old uses.

Looking at the Bitcoin, I get the feeling that there is too much focus on the bad examples of government interventions and central banks. Don't get me wrong, I am aware that these problems are real and serious. I live in a country with high levels of corruption, where the government doesn't care about public interests. The Bitcoin is too much focused on resolving only parts of a more complex problem, and casually overlooks the problems it creates.

Let’s go back to one of the older theories about money- the one that states that money should represent value of goods and services that are available in the economy. Amount of money in such system should facilitate smooth trade of those goods and services among people. And as production grows, amount of money should change accordingly. I know that in modern economies, the amount of money required for the system to work is determined by numerous complex factors. That does not change the fact that, fundamentally, we need money so we could easily exchange our work for the goods we need.

Creator of the Bitcoin decided, right from the start, to put a cap on amount of Bitcoin that will enter circulation. It is a solution for inflation and meddling central banks. Users embraced the idea full heartedly. I saw many comments saying that Bitcoin is so amazing for creating a system that can’t have inflation.

All this fear of inflation…. Where is it coming from?
I have a feeling that people do not understand what inflation actually is. Do they know that not all of the rates of inflation are dangerous? Rise of prices in small annual rates can cause faster economic growth.

Let’s imagine the future where Bitcoin is the only currency that we use. As the world’s economy grows, what would happen with value of Bitcoin? Wouldn’t we have deflation of Bitcoin?

            And I almost expect the question: “Deflation? What’s the problem with rising value of my currency?”. Nothing - if you don’t mind having gradually reduced salary. Because that’s what the deflation is. It can slow the economic growth, cause recessions, and if left unchecked it could be as devastating, just as inflation can. Inflation will give you prices where 1 is followed by many zeros, but the Bitcoin will give you prices where you have to go through many zeros before reaching 1.

Trust (?)!

             I’ve heard that Satoshi has one million Bitcoins on accounts that are under his control. If this story is true, I don’t understand how can somebody say that there is no need for trust with Bitcoin. At this point, Satoshi is the only entity in the world who controls a vast amount of Bitcoin. What would happen if he decided to sell it all?

Only a rumor that Satoshi is starting to sell his stash could drive the Bitcoin owners to sell- let alone if he actually flooded the market with his own Bitcoins. Could the Bitcoin survive such an event?

We can argue whether Satoshi would do something like that, but we still have to trust in him not to make irrational decisions the same way we have to trust central banks.

What are the chances that Satoshi had lost his “private keys”?

So, who wants not to be a millionaire?





Author: Miloš Milić

Datum objave: 10.01.2018