Brief weekend update on BTC. Network Hash has collapsed by 30+% resulting in high fees and very slow transactions. The reason for the hash collapse? Chinese miners who rely on hydro power are no longer receiving plentiful cheap energy as China enters the dry season. The increase in energy cost results in less profitable miners shutting down and a collapse of hash rate. This seasonal adjustment recurs every year although you can see the cycle is more dramatic each time.
If miners turn their machines off because electricity is more expensive this results in less processing power, delayed transactions and higher fees. Examples below:
BTC vs BSV fees. While BTC fees are over $8 for a 20 minute transaction BSV is running zero confirmation instant transactions for less than a penny.
While this issue on BTC is temporary and relief should come in ~3 days when the network adjusts for the new lower hash rate the problems shows the precarious nature of the BTC network and small blocks. Any increase in transactions or reduction in hash results in a slow and expensive network that is unusable for all but the super rich or super patient.
Shockingly, the BTC team thinks this is what Satoshi intended when he designed Bitcoin.
Never interrupt your enemy when he is making a mistake.
Finally, here is a rich bit of comedy gold showing how disconnected the BTC crowd is from Bitcoin.
12 years ago, Satoshi Nakamoto dropped a 9-page bomb on the global financial system.
If you had 1 billion dollars how much due diligence would you do before opening 8 or 9 figure positions?
I’m curious because some of the largest investments I see in BTC defy logic. Sure, if you’re a crypto kid in your mom’s basement YOLO’ing BTC is fine, but if you have 9 figures in a public company’s treasury I think *some* caution would be in order.
The quickest way to become a millionaire is to start with a billion dollars and invest in BTC.
Let’s start our examples with quotes by Michael Saylor and Raoul Pal.
Some have asked how much #BTC I own. I personally #hodl 17,732 BTC which I bought at $9,882 each on average. I informed MicroStrategy of these holdings before the company decided to buy #bitcoin for itself.
That’s $175M in personal money put into BTC. But this investment is based on what?
#Google is what happens when we pool information energy on a software network. Everyone understands this. #Bitcoin is what happens when we pool monetary energy on a software network. Few understand this.
Ah, the classic “Few understand this” ending to a crypto tweet. Very sage. This guy must really know what he’s doing and is definitely not succumbing to meme cults!
But wait, let’s do a few minutes of due diligence on this “monetary energy on a software network”. Let’s start by taking a look at BTC and it’s 1MB blocksize capping throughput at 7 transactions per second.
At 7 transactions per second the maximum number of transactions per year is: 220,752,000
7 x 60 x 60 x 24 x 365 = 220,752,000
Between his personal and business holding Saylor has ~$600M invested in BTC. So, Saylor has nearly $3 invested for every transaction that could possibly be transacted on BTC operating at maximum capacity in an entire year! If 1 billion people wanted to make one BTC transaction it would take almost FIVE years. I guess he must really understand network effects! Maybe I am not included in the “few understand this” group, but I’m trying!
Which scenario has a greater network effect:
One person sending $1 billion for a $3 fee
One billion people sending a penny for 1/1000th a cent each?
Contrast 7 transactions per second BTC with BSV’s unlimited scale. Two different models, two very different futures.
Despite my being confused by Saylor’s love of BTC I like Saylor’s style. He’s all in on BTC between 9800 and 11,100 with a big stack and he is a relentless shill. I don’t think his investment will last long but I give him style points aplenty.
Let’s see what Raoul Pal at RealVision has to say:
Bitcoin's performance is SO dominant and SO all-encompassing that it is going to suck in every single asset narrative dry and spit it out.
Never before in my career have I see a trade so dominant that holding any other assets makes almost no sense.
I like Raoul. He’s a smart guy and I agree with most of what he says about Bitcoin, except that he thinks BTC is Bitcoin. Has he not done his homework? He’s a Macro guy, shouldn’t he have a full picture before diving in and advising his clients to be committed to BTC?
Maybe some due diligence into this area and how to reconcile the problem with mass adoption would be in order before dropping your entire portfolio into BTC?
~ The Mempool ~
The Bitcoin Mempool has been a hot topic of discussion lately, as transaction volumes have been increasing, causing congestion in the network, and driving fees higher.
Bitcoin was designed with a very specific economic model. Mess with Bitcoin, as BTC had done, and that model breaks. If these money guys don’t get the technical aspects I’d assume they’d at least understand the economics.
But let’s give these Billionaires some more time to get the big picture. They are early. They’re completely wrong, but early, so they’ll be fine. Bitcoin is a complicated subject. It draws on many areas of expertise. I had the technical background to get the gist of Bitcoin from the start and I spent over a year in 2012 ridiculing Bitcoiners before I saw the bigger picture. There is a steep and never ending learning curve to Bitcoin and IMHO Saylor and Raoul have a lot to learn.
I am a contrarian on BTC. I’ve been unabashed about this for 2 years. It’s not easy being the contrarian when I wake up and BTC has gone up the entire market cap of BSV, times two, overnight. But there’s nothing about BTC that makes sense as a dominant world currency. It’s crippled.
As a comparison, from my view most of the world is holding NKLA while I’m sitting on a bag of TSLA.
Let’s turn to Mike Novogratz:
On a risk adjusted basis, $BTC is an easier bet today than it has ever been. It’s being de-risked daily.
Is that so? BTC just implemented Schnorr signatures and Taproot to increase “privacy” and scaling. But in reality this adds more technical debt to BTC and takes it further away from the genius design of the original Whitepaper. The BTC devs took a once in a lifetime invention and turned it into a Frankenstein so they could force your transactions through their second layer transports (for a small fee of course).
There is mounting legislation addressing privacy and money transfer. Just about any “privacy” feature runs afoul of these regulations. How does a money guy like Novogratz not know this? It beats me.
Satoshi saw all of these pitfalls and designed Bitcoin to be publicly traceable, pseudonymous, honest money.
But I digress.
Let’s address the popular Store of Value argument:
Oh boy, this is a good one. Let’s take all of the features and advantages of digital money and smart contracts and NEVER use them. Thinking BTC becomes more valuable because no one uses it is a special kind of logic. And guess what, BSV has the same scarcity features as BTC plus scalability/usability.
BTC may have a great bull run to finish the year but it’s not a long term solution. It doesn’t scale.
With these institutions and billionaires lining up behind BTC you’d think it’s game over for BSV, right? Probably.
Oh, and one more thing…. Peter McCormack, who was sued for libel for calling Craig Wright a fraud, has declared intent to stop defending his case. What did his legal team see that had them drop their vigorous defense?
“SCA ONTIER LLP, Dr Wright’s solicitors, have confirmed that Mr McCormack’s legal representatives have informed them of their client’s intention not to continue defending the libel proceedings, which proceedings will now continue to their natural conclusion.”
Fri Oct 9, 2020 11:47am ESTComments Off on One Chart
This chart presented by TAAL’s Jerry Chan at last week’s Coingeek conference sums up the investment thesis for Bitcoin SV. Full presentation here.
This chart represents the point when the BSV mining network is being sustained by transaction fees rather than by block rewards. Keep in mind, the block rewards in Bitcoin are programmed to decrease every four years. Sustaining the network with a massive volume of low fee transactions is crucial to the design of Bitcoin.
This moment when transaction fees exceed block rewards underpins the entire economic model of Bitcoin. If the network cannot be sustained by transaction fees it is doomed to fail. There can be two models for this: low transaction volume and high fees or high transaction volume and low fees. Which of those two models do you think has a future?
In a few decades when the reward gets too small, the transaction fee will become the main compensation for [mining] nodes. I’m sure that in 20 years there will either be very large transaction volume or no volume.
– Satoshi Nakamoto
There were several businesses at the Coingeek event that shared their views on running BSV as their global database due to scalability. Here’s one example:
Note the chart above indicates the crossover happening in Q1 2021 at roughly 75 million daily transactions. That’s ~100x the daily transactions on BSV today. Is this foreshadowing something we don’t know?