Future of Money P6

In her fascinating TED Talk The Future of Money, Neha Narula describes how money has transformed throughout the centuries. Thus far we’ve been through two phases of money: physical money (gold and silver, which move at the pace of humans), and digital money (1’s and 0’s, which moves at the speed of banks).

Money emerged as something tangible which possessed intrinsic value (the commodity itself, such as livestock) and matured to the thing we trade for what we want (gold in exchange for livestock). Throughout history money has simultaneously become less concrete, evolving from collectibles and livestock to coins and paper, and finally to digits on a screen and code on the blockchain.

This evolution takes time because people are resistant to change. Imagine trying to convince the first merchant that instead of giving him two cows for five sheep – was that the appropriate exchange rate? – you’re going to trade him a shiny metal coin instead. Gradually gold became accepted as money as people realized they can still trade the bullion to get livestock. Over time they came to prefer it as coins are a far more efficient form of money than cattle and collectibles.

We repeated this transition from gold to paper and again from paper to numbers on a screen. We’re about to enter the third phase of money, (piggy backing off the internet and blockchain), which is programmable, that will move at the speed of technology. (For a fascinating talk about what this new world may look like, listen to this podcast by Andreas Antonopoulos).

In short, we’re moving from digits to code. Change brings resistance. For example, in 1970 only 16% of the population carried a credit card whereas today that number is nearing 80%.12 With each iteration, once people see the money works, they not only come to accept it as normal, but they favor it. Eventually, one can’t imagine returning to the inefficiencies of the past (would you ever write a check or pay in cash when purchasing a new mattress?).

Crypto currencies are designed to work as the programmable money of the future, the most prominent of which is Bitcoin. These forms of payment exist purely in digital form, furthering the inevitable evolution of money and a logical next step in our increasingly digital world.

What Is Bitcoin?

I’ll (attempt) to briefly describe Bitcoin, but, as Parker Lewis astutely notes, it’s something one ‘gets’ gradually, then suddenly. It took me hundreds of hours to ‘get it’, and I’m still learning every day.

You may have read something like, Bitcoin is a trustless, permission less, borderless, distributed ledger technology that runs on an innovative technology called ‘blockchain’ and was invented by an anonymous person or group of people under the pseudonym Satoshi Nakomoto.

And that’s precisely when you close the article.

I feel you. One of the problems with the blockchain space is pundits begin by explaining the technology instead of focusing on its implications. I’ll aim to keep the former brief while focusing on the latter.

How Does Bitcoin Work?

Bitcoin has no owner nor central authority. It exists as a decentralized entity that can be run across any computer on the network. Decentralized means that unlike a corporation, no one person owns nor controls the network. Lacking single point of failure, Bitcoin cannot be shut down as to do so would require the entire world wide web to go offline. (Even then, the network can still function).x As of this writing, there are over 10,000 hosts, (called nodes) running Bitcoin software, each with independent incentive to keep the network running.

Bitcoin is revolutionary because, for the first time in history, two people from anywhere in the world can instantly send value to one another without the need for an intermediary. This transaction cannot be stopped or censored. The implications of this are not yet fully understood by the masses, but one immediate win is for the billions of people with no access to the legacy banking system who can now store their wealth and transact with one another.3 Bitcoin will also serve as an off ramp to those whose currencies are the victims of hyperinflation, as we’re already seeing record adoption rates in Venezuela, Argentina, Brazil and Turkey.567

Bitcoin and the Blockchain

Traditional banking uses a centralized intermediary for every transaction. For Alice to send money to Bob they must go through a bank.

Bitcoin allows one to send money directly to someone else directly. It does this by using a distributed ledger called a blockchain. That sounds more confusing than it actually is.

Each Bitcoin transaction is stored on a publicly available database. The cumulation of these transactions over a set period of time (roughly 10 minutes) forms a block. The chain refers to the cumulation of blocks that are linked together. Hence the name blockchain.

The ledger is made available to everyone in real time. People running highly powered computers solve extremely complex cryptography to verify the validity of transactions. Whoever solves this cryptographic problem first gets rewarded in Bitcoin. Consensus much be reached by the majority of the network in order for a transaction to be verified. Incentives are created for each independent verifier (called ‘miners’) to update the correct version of the blockchain, and a monetary penalty occurs when they don’t. The incentive of every validator of the network to accurately update it in real time is what secures the Bitcoin blockchain.

The result of this is, with tens of thousands of independent economic actors, each with incentive to only verify actual transactions, the Bitcoin network is virtually impossible to hack. To do so would require the cooperation of thousands of computers simultaneously, each with competing economic incentives. The most knowledgeable experts believe this is impossible.8

Why You Don’t Need to Understand How Bitcoin Works

You’re probably confused and have tons of questions. Accept now that if you don’t speak tech, you’ll never fully comprehend how Bitcoin works. And that’s okay. Just like with other technology you use on a daily basis; you don’t need to know every detail about it to use it effectively. Stop trying. For example, I’d wager you have no idea how an email actually get sent from you to your colleague and you don’t care. You just care that it works.

Bitcoin has achieved what no other technology in history has been capable of, digital scarcity. It solves the ‘double spend problem’, which simply means that the same Bitcoin cannot be spent twice. If Alice sends one Bitcoin to Bob, she cannot resend the same Bitcoin to Charlie. In short, the network can verify with 100% accuracy whether a Bitcoin is actually a Bitcoin.

Again, how exactly this mechanism works is only worth your time if you truly want to go down the rabbit hole and don’t mind spending hours reading about engineering and code. In the end you’ll either a) discover that it works or b) accept that those whom are qualified to know are in consensus that it works.9

We operate this way with most aspects of our society, such as when we use email, enter our credit card into a web browser or when we hand a check to the teller, who then types digits into a screen and magically credits our bank account with currency.

We trust the prescription our doctor prescribes, but unless we have a PhD in medicine, have little idea about its efficacy. We trust the legacy banking system and countless websites with our financial information, all while having little to no understanding ourselves of how they function. The reason we trust these things is consensus amongst those whom are qualified to know. Not being able to personally prove something doesn’t stop us from trusting and using it, and Bitcoin should be no exception.

John Sculley, former CEO of Apple famously stated, technology needs to be beautiful or invisible. To someone whom speaks the language, every aspect of Bitcoin is verifiable through its code. For them, it’s beautiful. Will we ever personally know that this is true? Not unless we speak code. For us, it must simply remain invisible. And just like everything else we use on a daily basis, that’s perfectly sufficient.

The Current Bitcoin Conversation

On January 9th, 2009 the first Bitcoin was produced or ‘mined’ on the blockchain. Since then, roughly every 10 minutes, the Bitcoin network has continued to function seamlessly. It has never been hacked or been down for maintenance. (The hacks and scams you hear about surrounding Bitcoin are from centralized third parties and are not affiliated with the network itself, analogous to a bank being convicted of fraud having no bearing on the underlying efficacy of the U.S. Dollar).

In the early days of Bitcoin, the conversation was centered around its security and whether the protocol works properly10, much like the Internet in the 1990’s. Today, over a decade after the invention of Bitcoin, few debate whether the protocol works. How can they? It’s never not worked. And since the functioning of the Bitcoin network is binary, any breech of it working could destroy the entire network. Therefore, its mere existence is sufficient proof that it works.

There are still plenty of debates centered around Bitcoin such as if it’s too slow to serve as a viable payments processor or whether it consumes too much energy.1011 These criticisms, while fair, are analogous to the critique of email being too slow in the early days. In both instances it’s important to acknowledge that people accept the underlying technology works.

With Bitcoin, the conversation has shifted from whether the protocol works to whether Bitcoin is money, and more broadly, if it will replace fiat as the global reserve currency. Moving forward, I’m going to take the former for granted and explore the latter. Namely, I’ll focus on what it would take for Bitcoin to deliver on its promise of disrupting the global monetary system.

But, I’m getting ahead of myself. To better understand whether the future of money is programmable, it helps to take a brief look into the past.

The History of the Internet

Blockchain and the internet are two very different technologies, each with unique potential. The success of one by no means guarantees that of the other. Still, I believe it’s worth looking at the history of the internet as a means of understanding where we are on the adoption curve of blockchain, why so many fail to see its potential and what’s likely to transpire.

The current state of Bitcoin has often been compared to the internet in the early 1990’s. In being an active participant in the bitcoin community and learning about the history of the web, I find the similarities fascinating. Most notably, there’s a small group of people who believe in the disruptive potential of the technology whom are largely unable to explain this to the public.

Just look at this 1994 episode of ‘The Today Show’. Nobody had a clue what this ‘Internet’ thing was, and few believed it would amount to anything.

Here’s another one where ABC tries to ‘explain’ the internet. Experts predicted a billion people would be using it by 2000, an idea that seemed as radical as the value of Bitcoin reaching $500,000 by 2025 (which we’ll discuss in a future post).

The parallels to what happened with the Internet and what’s currently happening with Bitcoin are strikingly similar. History may repeat itself, and, just like the Internet silenced the skeptics, Bitcoin may indeed change the world in ways we cannot even imagine.

What’s Taking So Long?

The Internet was invented in 1989, but it’s really been in the last decade that it has completely transformed our way of life. You’ve probably seen a social media post about the list of companies that weren’t around ten years ago, and can hardly recall what life was like without them.

Most people overestimate a technology’s impact in the short term and underestimate it in the long term. We’re still at the nascent stages of Bitcoin and blockchain, and the long-term implications are not yet fully understood. (For perspective, the market cap of the entire cryptocurrency market is a mere 550 billion, of which Bitcoin is 360 billion. By comparison, the amount of currency in circulation is 80x that amount.)

Today, some of the most brilliant minds (many of whom had the same foresight about the disruptive potential of the internet) are proclaiming the same inevitable future for Bitcoin and blockchain (Andreas Antonopolous being the among the most prominent).

Look at this talk between Naval and the journalist discussing how Bitcoin will change the world. Can’t you just see us looking back in 20 years and, just like we did with the internet, laughing at how obvious it all seems now, yet how few actually saw it at the time?

Finally, I’ll leave you with this parting comment from a nightly news segment in 1993. ‘For any of our viewers who have access to the internet, we invite you to send us an email.’10

Look at his use of wording. We’d laugh if someone said that now. Is this where we are at with Bitcoin?

In researching both fields, one comes to find that the people whom know the most are the most confident. It reminds me a lot about my time spent learning about Covid-19 in February; a small circle of experts shouting from the rooftops waiting for the rest of the world to catch on.

Is it possible that, just like the internet before it, the small expert minority see something that the rest of the world does not? There are only two possibilities: the wrong or they’re ahead of the curve. You’ll have to decide which side you want to bet on.

Is Bitcoin the Future of Money?

Just like the internet was in the early 1990’s, Bitcoin and blockchain technology are nascent.

What’s important to understand is that a) the technology works and b) the same group of experts who saw the disruption of the internet see the potential in Bitcoin. History is littered with countless examples of early adopters being ahead of the curve waiting for the lagging majority to catch, from the adoption of coffee to tractors in farming to the internet.1415

Calestous Juma, a professor in Harvard University’s Kennedy School of Government, explains this phenomenon in his latest book, “Innovation and Its Enemies: Why People Resist New Technologies.’ His conclusion is, ‘the biggest lesson from the coffee story is if a new technology has superior properties, overwhelmingly superior to its predecessors, chances are that technology will get adopted no matter what.”

The real and only question therefore becomes, does Bitcoin have overwhelmingly superior properties of money relative to its predecessors (gold and fiat)?

In other words, in to evaluate the future of money, we only need to assess the first principle questions: a) is Bitcoin money? and b) is Bitcoin the most efficient money?

If the answer is ‘no’ to either of the above, then nothing else about its functionality (or lack thereof) matters. It’s why I decided the entire first part of this series to exploring the philosophy, properties and history of money. In short, it’s only through a deep understanding of what money is that one can ultimately come to determine whether or not Bitcoin is money.

Because if the answer to both is in fact yes, then Bitcoin may be destined to disrupt the biggest industry in the world, money itself.

Because if the answer to both is ‘yes’, then the implications are profound. Could it be possible that we’re living through a once in thousand generation change in society, where we fundamentally change what we believe money is?

We’ll be exploring this more in the next part of this series. Subscribe to know when it becomes available.


Carry a credit card 1970: https://www.federalreserve.gov/pubs/bulletin/2000/0900lead.pdf

Carry a credit card today: https://www.crnrstone.com/insightvault/2018/03/04/many-americans-credit-card/

1.7 billion unbanked: https://www.forbes.com/sites/niallmccarthy/2018/06/08/1-7-billion-adults-worldwide-do-not-have-access-to-a-bank-account-infographic/#6734ab8a4b01


Bitcoin in Venezuela: https://qz.com/1300832/bitcoin-trading-in-venezuela-is-skyrocketing-amid-14000-inflation/

Bitcoin in Turkey: https://cryptopotato.com/bitcoin-price-hits-ath-against-the-turkish-lira/

Bitcoin in Brazil and Argentina and Turkey: https://www.ibtimes.com/bitcoin-breaks-all-time-high-against-argentine-peso-turkish-lira-brazillian-real-3026066

Why Bitcoin Cannot be Hacked: https://www.youtube.com/watch?v=ncPyMUfNyVM

(Note: This video is from 2015. Since then, Bitcoin has become exponentially more decentralized, thereby reducing the probability of a hack even further).

Bitcoin for Beginners: https://www.youtube.com/watch?v=UlKZ83REIkA

Bitcoin Is Not Too Slow: https://unchained-capital.com/blog/bitcoin-is-not-too-slow/

Bitcoin Does Not Waste Energy: https://unchained-capital.com/blog/bitcoin-does-not-waste-energy/

Bitcoin History: https://coingeek.com/bitcoin-history-part-1-the-early-days-satoshi-no-limits-184b-bitcoins-and-on-chain-poker-game/

What The Internet Looked Like In The 1990s | Flashback | NBC News https://www.youtube.com/watch?v=h8TQ75dRalE

Why do people resist new technologies: https://www.weforum.org/agenda/2016/07/why-do-people-resist-new-technologies-history-has-answer/

Humans once opposed coffee and refrigeration: https://www.washingtonpost.com/news/innovations/wp/2016/07/21/humans-once-opposed-coffee-and-refrigeration-heres-why-we-often-hate-new-stuff/
x. Bitcoin functioning if internet is shut down: https://themerkle.com/what-would-happen-to-bitcoin-if-the-internet-was-shut-down/

y. How the winkelvoss twins store their bitcoin fortune.


I’m confident that if you choose to go down the rabbit hole of the inner workings of Bitcoin and blockchain, the revolutionary technology upon which it operates, you’ll discover for yourself. In the footnotes, I’ve included some resources for those that want to dig deeper.

This is largely how the conversation around the internet evolved as well. After it was clear that the technology worked people shifted the debate to whether it would have any utility in society.

This represents where we are right now in the Bitcoin and Blockchain space. Bitcoin working merely means I can send value from one person to another without the need for an intermediary and whose transaction cannot be stopped or censored. This alone isn’t sufficient for Bitcoin to function as money.

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