What Many Christians Misunderstand About Bitcoin

bitcoin, cryptocurrency
A worker demonstrates how the Bitcoin ATM works at the BitBase Store on August 09, 2021 in Palma de Mallorca, Spain. |

There are many misconceptions about Bitcoin among Christians and unfortunately they continue to persist. In this article, I hope to dispel many of the misconceptions that disproportionately affect older people, who have trouble with mental models around Bitcoin.

Perhaps the most common misconception is that digital objects have no value and that only physical objects held in the hand can have value. This is a strange statement for Christians in particular to make, because we confess in our beliefs our need for redemption, which is metaphysical in nature. To say Bitcoin is worthless because we can’t hold it in our hand is like saying MP3s are worthless because unlike a tape or CD, you can’t hold it in your hand. Digital goods like e-books, movies, and music have value, and they don’t need to be in physical form. The value lies in our ability to read, watch or listen to what we want, when we want.

Plus, there are other non-physical things we pay for, like memberships, intellectual property, subscriptions, and mining rights. Obviously, non-physical things can have value. “But money is different!” They say. Why is silver excluded? Usually the claim is made because intuitively they know that money should be both decentralized and scarce and for many people this is not intuitive.

The reason Bitcoin is so difficult for people to understand is because it breaks the mental model of digital things. There are two digital asset models that people have in mind. The first type of digital assets are infinitely copyable digital items, such as MP3s, Word files, and web pages. Each can be duplicated with perfect fidelity at near-zero marginal cost. Such items are not uncommon, so they are hard to imagine as having value.

The second type of digital goods are strictly controlled items in a centralized service. For example, a Netflix membership is controlled by the company and cannot be copied like a Word file. The company can restrict membership if they wish. There are also gift card codes on various e-commerce websites. These codes are checked by the company issuing them. They are rare, but also centrally controlled. A Netflix subscription may change in price at any time and new gift card codes may be issued by Amazon whenever they choose. Scarcity in a centralized context is fully controlled by the central entity.

Until 2009, computer scientists believed that these were the only categories of digital goods. Decentralized but not rare and rare but centralized. The third category of decentralized and rare was a huge innovation and completely unexpected. Bitcoin is digital, decentralized and rare all at the same time. This is achieved through very clever uses of cryptography and computer structures. The result was one of the biggest disruptions in finance we have ever seen.

An important distinction to make at this point is that decentralization is very difficult to achieve. Alternative cryptocurrencies, such as Ethereum, Ripple, and Solana, have not achieved decentralization and are truly the second category of rare, but centralized, digital things. Unfortunately, altcoins have been used by unscrupulous people to scam many people in retail out of their money. The speculative and gambling sensation of altcoins has unfortunately damaged Bitcoin’s reputation.

The digital nature of Bitcoin is treated with suspicion by older people, due to the old mental model. Many have already completely rejected it. They think digital things are hackable, hard to secure, and easily traceable, and so Bitcoin must be too.

In reality, the possession of Bitcoin depends on a secret, which can be stored digitally or physically. This means Bitcoin can have the same security properties as gold, without weighing as much. The secret can even be memorized, giving it greater ownership than any physical object. Many people think that Bitcoin is easily hackable and some internet thieves might take your coins by tapping on their keyboard for a few seconds like in the movies. The reality is that the computing power required to crack the crypto in Bitcoin would require far more energy than exists in the Milky Way and far more time than the age of the universe. This type of security is not available in the physical world.

Bitcoin is also much more private than other digital or even cash transactions. The tools available for Bitcoin privacy are plentiful, and a few well-executed transactions make Bitcoin really hard to trace. This contrasts with physical item transactions, which always require the transportation of physical goods. Physical transport is much easier to track than privatized Bitcoin transactions.

Another common misconception regarding Bitcoin’s digital nature is that Bitcoin can be “turned off” via the power grid. This is the case of centralized services like Google or Twitter, whose servers can be shut down by depriving them of power. This is not the case with Bitcoin, which is run by many people who run Bitcoin software. Of course, many users operate on the power grid, so they may be off, but users are literally all over the world, and many are off the power grid. A single copy of Bitcoin data is enough to keep it running, and there are literally tens of thousands of such copies. Generators of different types can power computers running Bitcoin software, and connections between users’ computers can become very creative. Internet service providers are by far the most popular, but there are other means of connection, such as satellites, radio waves and Starlink. Bitcoin, being decentralized, can essentially survive any huge disruption to the energy grid and internet infrastructure and, more importantly, everyone on the network has an incentive to maintain those connections.

The last misconception I want to cover is that Bitcoin is too volatile to be considered money. This is not so much a technical error as an economic error. Most of the world’s currencies are “stable” thanks to central banks and only to a certain extent. There is certainly a lot of volatility in the Turkish lira right now, for example, but few would argue that disqualifies the lira as a currency. The reason most currencies are relatively stable against the dollar is because of central banks. They manage their own currencies by keeping them within a certain peg range against the dollar. When the cost of their currency is too low compared to the dollar, they buy their currency on the market using the dollar reserves. When their currency is too high against the dollar, they print more of their own currency to drive it down. Central bank manipulation is the reason currencies remain relatively stable. Of course, whenever dollar reserves are depleted, these currencies rapidly devalue against the dollar, sometimes even causing hyperinflation.

Bitcoin has a fixed supply of 21M, which means such machinations are impossible. It has no central bank, so volatility is entirely determined by the market. This is why there is so much short-term volatility. However, this is also a very good thing because in the long term, the fixed supply and the increasing demand make the price the only release valve. Bitcoin has done wonders against the dollar over the past 10 years precisely because of this dynamic. Finally, risk and reward are two sides of the same coin. Either there is volatility and a big upside like with Bitcoin, or there is no volatility and little upside like with many bonds. There is no free lunch without volatility and high potential.

Bitcoin breaks our mental models because we are so used to thinking about digital things in a particular way. The fact that it is digital, decentralized and rare is a true innovation, the likes of which we have never seen before. The result has been that we are able to store value without state interference, which in a world of financial censorship is very valuable.

Jimmy Song is a Bitcoin developer, educator, and entrepreneur. He is a programmer with over 20 years of experience, an open source contributor to many different Bitcoin projects, and the author of Programming Bitcoin from O’Reilly, The Little Bitcoin Book, Thank God for Bitcoin and BItcoin and the American Dream. Jimmy has been a lecturer at the University of Texas, an expert witness in legal cases involving Bitcoin, and an advisor to several companies. Jimmy writes a weekly newsletter, Bitcoin Tech Talk and has a Bitcoin Fixes This podcast.

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