Bitcoin for Boomers: The problem, the solution and how to get started.
This is my attempt to “orange pill” those who know there is a problem, but don’t understand the solution
What is the Problem?
If you are reading this, you probably already have a good idea what the problem is. Society over the last century has re-defined what money means, and we live in a world where it is completely misunderstood — by design. It has been redefined so that all of our aggregated wealth is in a communal pot called fiat currency (dollars are money because they say it is) — where it can be manipulated at will, reallocated at will, devalued/inflated at will, confiscated at will — all by unelected individuals whose interests most certainly do not align with yours. You want to preserve your wealth, they don’t care what you want.
Money is nothing but a medium of exchange, invented (discovered?) by humans to allow us to exchange our time and energy with other people whose wants and needs may not coincide with our own wants and needs. In other words, we need money to allow us to exchange our time and energy across both space and time. I want a new jacket next week, but Johnny wants my pastries today. Johnny gives me “money”, and I accept it because I know it will get me the jacket I want next week.
Ok, so if money is a battery that stores my wealth (time and energy) until I need or want to use it, what must it do to be effective and efficient?
It needs to be durable to store my wealth through time
It needs to be divisible so it can be used for exchanges of different magnitude (coffee, car, house, etc)
It needs to be portable so I can use it anywhere in the world
It needs to be recognizable so others will know it stores their wealth and can be used to meet their own wants/needs.
It needs to be fungible/interchangeable (one unit is the same as the next — one Bitcoin is the same as the next Bitcoin)
It needs to be sound (hard) … difficult or impossible to counterfeit.
What’s important is that money has value not because we want the money itself, but because we want what the money can get for us and our families. When people use money, they will inevitably use the money that best achieves that goal, even if they don’t realize it.
For millennia, money has evolved from shells and beads, to gold and silver, and now finally Bitcoin. Dollars are not what you were taught at school. Certainly, they aren’t what I was taught. Dollars aren’t money, they are a receipt (an IOU) for money. Worse still, they are not durable, they are easy to counterfeit (and are being regularly counterfeited via inflation) and they are storing your wealth the same way an ice cube stores water on a hot summer day; very poorly. But wait, there’s more! When you deposit your dollars in a bank, they don’t stick them in a shoe box and have them ready for your use on demand. Nope, they invest and lend them out however they want, and all you have is an IOU for the IOU. You can only use it during business hours, you must follow the bank’s rules and restrictions, sending money is expensive and slow, borders are a costly obstacle, currency exchange is expensive, and so on. The legacy financial system combined with Fiat money are like building a house with duct tape and sticks.
Here’s a quick thought experiment to illustrate the absurdity of Fiat money, which we have come to accept as normal. In 1971, the average new home in the US was $25,200, rent was $150 per month, a car was $3,560 [1]. Since that time, computers have become a household item, everyone has a smart phone, technology has accelerated beyond what anyone from 50 years ago could have imagined, and therefore productivity (and efficiency) have increased exponentially. You can achieve the same output today ( a house), with a fraction of the input (work) you would have had to put in in 1971. So surely the cost of the average US home has decreased over the last 50 years, no? In fact, the average US home price in 2021 was $453,700 [2], an 18 fold increase. The average rent was $1,124 [3], a 7.5x increase. The average car was $43,072 [4], a 12x increase. Not only did the prices of these cars and houses not decrease in step with technological and efficiency advancements, they INCREASED substantially. That’s because the amount of time and energy stored in each of your dollars has melted away with time, because they printed more dollars to represent the same amount of time and energy you put into the pot, but didn’t give you those dollars. Instead, they used them on wars, on lobbyists, on state sponsored media, on god knows what. They stole your wealth not by reaching into your front pocket and taking it like they do with taxes, but by shaving it off of each dollar you earned or saved without you ever seeing it … without your consent — AFTER tax. They fiddled with the measuring stick
But how does this affect ME?
It’s YOUR money, right? If it’s in the bank, all you have is a promise and a digit on your screen. And to join modern society, you need a bank … to invest, buy a home, buy a car, and much more.
Try wiring money. It better be during business hours, you better have 5 business days for it to get there and settle. You better be ok with spending $30 to send it, and explaining to the bank why you need to.
Donated to a cause your politicians don’t like? Hope you don’t mind them freezing your accounts arbitrarily and without due process (eg Canada in 2022). Has your country run afoul of the global powers that be? Hope you don’t mind having your access to SWIFT payments, Mastercard, and Visa revoked. (Eg Russia in 2022).
Perhaps you want to send money to a family member back home in Costa Rica or Kenya … hope you don’t mind paying 15–30% of the money in fees (foreign exchange, western union, local bank, etc).
Want to move to another country in pursuit of freedom and opportunity? Or do you NEED to leave for safety and security? Good luck taking your wealth with your in gold or cash, or getting our of your local currency.
Or maybe none of that bothers you. Maybe you just want to take the money out in cash one day. Not if it’s more than a few thousand dollars, the bank wont allow it and doesn’t have the cash.
My point is that ALL of that is easier and safer with Bitcoin. When your money is in a bank, you have to trust them, and their regulators and political overlords. When your wealth is in Bitcoin, It is yours and yours alone; permissionless, decentralized and censorship resistant. It doesn’t care who you are, what you like, what gender you are, what your politics are, where you live, how much you have, or ANYTHING at all. If you have the keys to your Bitcoin wallet, you have the power to control your wealth unconditionally, without having to trust increasingly untrustworthy third parties.
Bitcoin: The Solution …
Historically, Gold has been the best escape mechanism from fiat wealth manipulation and confiscation. It couldn’t be printed, was difficult to discover and mine, and was generally the most sound form of money available over the last few thousand years. That is precisely because it was the hardest form of money best able to satisfy the previously mentioned necessary characteristics of money.
However gold had and has limitations. It tends to centralize in banks and vaults, leaving it vulnerable to confiscation. It is costly and difficult to transport, it is relatively difficult to verify and not particularly divisible. On the plus side, you cannot just counterfeit it or print it as you can dollars.
Fiat currencies (aka dollars), are the exact opposite. In fact, Fiat literally means “because I say so” (by decree). In other words, Fiat only has value because the central authority (government) says it does, and because we believe them. What most of us haven’t learned in school is that with minor historical exceptions, fiat is a recent invention and until 1971 the USD was not a fiat currency, it was gold-backed. It acted only as a receipt for your gold, and the US government was legally obliged to maintain enough gold to back it’s currency. Sadly (though predictably), they inevitably printed more receipts (dollars) than they had gold to back those receipts. Eventually, in 1971 Nixon defaulted on that obligation and “temporarily” removed the US from the gold standard.
In 2009, Bitcoin was born. Created by a pseudonymous individual(s) named Satoshi Nakamoto, Bitcoin was a discovery/invention that solved the need for trust in a third party.
OK, BUT WHAT IS IT? It is very simply a digital medium of exchange built on blockchain technology, which allows you to self custody your money, is capped at 21M coins, is 100% permissionless, decentralized, transparent, and secure. It is effectively a distributed ledger (spreadsheet) hosted on 10’s of thousands of computers (nodes) around the world, protected by cryptography and the combined computing (hash) power of all of those computers (miners).
Without getting technical, Bitcoin is a means of storing value on the blockchain, in which you are able to transact 24/7/365, which cannot be confiscated or restricted, is borderless and can be sent anywhere in the world, is very liquid and very importantly can be stored with a simple 12 or 24 word seed phrase. Using this seed phrase will give you access to your Bitcoin anywhere in the world at any time.
Bitcoin is the first and only money that is fully peer to peer, not beholden to a third party custodian or any government or central authority. Many think of it as Gold 2.0, but it is that and more.
Money is very much like a battery, and Bitcoin is simply the best and most efficient one in human history. If you charge your fiat dollars with wealth energy from your hard work or investments, you can expect it to lose the stored energy regularly at the reported rate of 7.9% at the time of writing [5]. (Realistically closer to 20% when adjusted for housing, gas and rent). This means that you will have lost 50% of the stored value after 3 years. Said more simply, at current inflation rates, in 3 years your money will buy you half what it does today. And that does not account for taxes, increasing inflation, and the questionable property rights that come with fiat money.
How do I get started?
Ok, so Bitcoin stores your wealth better than any money in history, and out of the grubby hands of governments and greedy third parties with questionable motives. When I first found Bitcoin, I wanted to understand why it had value, was it safe, how could I get some in a safe and cautious way. Let me explain why Bitcoin is in fact safer than any other form of money, why it has value, and how you can acquire some and start your journey down the Bitcoin rabbit hole.
Bitcoin is for storing value, both through space and time. There is no better way to store wealth for yourself, your kids, your grandkids, and the many generations to follow. Bitcoin has value because it is the most sound form of money in existence. It can’t be counterfeit, it can be audited by anyone anywhere at anytime, it requires no permission to use, is borderless and very liquid. Bitcoin is NOT for buying your daily morning coffee (although that is evolving), or for speculating in a monthly timeframe. It is volatile (though less so as time goes on) because it is so new, and this is a feature rather than a bug.
Buying Bitcoin now is capturing your wealth, capturing the productivity increases from current and future technological advancements, capturing the unrealized value of it’s nascent and poorly understood revolutionary technology … all protected from outside theft and manipulation. It is trading your leaky rotting dollar-based battery for a pristine digital battery that increases the amount of wealth it stores over time. It is a generational opportunity that will certainly be a roller coaster ride in these early days, but for those that take the leap will be a means for them to become independently wealthy for generations to come.
Super, so now you understand WHY it has value. But is it safe? The short answer is absolutely. However, Bitcoin is not the experience you are used to with your bank. It has no head office, there is no CEO, no one to contact if you make a mistake or observe poor security and custodial practices. In simple terms, there are two obstacles to understand in starting your Bitcoin journey. The first is how to acquire your Bitcoin, and the second is how to store them.
Acquiring your Bitcoin is fairly straight forward. The infrastructure of the crypto world has advanced substantially in the last few years, and buying Bitcoin is easy and safe and not much different from your typical brokerage experience. In simple terms here are the main steps to acquiring your first Bitcoin:
Find a reputable crypto exchange in your country (In Canada, where I am, exchanges such as crypto.com, Binance.com, SwissBorg.com, Kraken.com, etc)
Open your account and provide some basic ID and info.
Deposit money (typically wire transfers for larger sums, e-transfers or credit cards for smaller sums)
Purchase the Bitcoin within their APP or web-based platform
Once you have acquired enough of it, buy a hardware Wallet and send your Bitcoin there for self-custody. (More on this later, as it requires careful security and a basic understanding of how these wallets work)
The purpose of this “Bitcoin for Boomers” article is really to give an overview of the problem that exists, the solution that is Bitcoin, and the basics on how to begin the journey into self sovereignty and protection of your hard-earned wealth. The most important aspect of the dive into the Bitcoin rabbit hole is to learn as much as you can, and continue learning. We are still at the early stages where the infrastructure and user interfaces are clunky and overly complex, but this is precisely why there is such an asymmetric opportunity. In the next decade, as the world of crypto becomes mainstream and the UI’s so smooth that people do not even know they are using crypto, the asymmetric opportunity will be largely diluted. We are in the midst of the perfect storm for Bitcoin … rising inflation and currency debasement, authoritarian controls, record global debt levels, withering GDPs (production), centralization of everything. Take the leap!
I hope to see many of you take the uncomfortable first step off the sinking Fiat Titanic and join us in the Bitcoin lifeboat.
Until next time!
Sovereign Crypto
[2] Www.statista.com/statistics/240991/average-sales-price-of-new-home-in-the-us
[3] Www.statists.com/statistics/1063502/average-monthly-apartment-rent-USA
[5] US Consumer inflation — Reported by Federal Reserve Mar 10th, 2022)