![Croesus_BTC's tweet photo. Everyone learns the hard way. I certainly did. When we first take interest in cryptocurrencies, we naturally explore whatās out there. Everything sounds exciting, some of it even compelling.
So we diversify, thinking thatās the prudent thing to do. But, invariably, the more you proactively learn or the longer you stay in the market, the stronger your understanding grows that thereās only one asset here worth holding: Bitcoin.
If you are new to cryptocurrencies, a lot of pain and heartache can be spared if you lean in to understanding why.
Here are the three key reasons why Bitcoin is the only cryptoasset worth holding:
ā¢ Digital scarcity is a one-time phenomenon
ā¢ Money is the mother of all network effects & tends to one
ā¢ The Crypto Catch-22 precludes any genuine competition to Bitcoin
Considering these topics could be the difference between cementing a Bitcoin fortune or squandering the massive opportunity before you. Letās dig inā¦
Digital scarcity is a one-time phenomenon
You canāt store value on the internet. The internet is just information - expressed as 0s and 1s - translated by your computer into words and images. The problem with information is that it can be copied & pasted. Thatās the defining attribute of information ā it is dematerialized, which grants it the incredible dual characteristics of speed-of-light transmission & infinite replicability.
But this replicability doesnāt work for value.
For value to exist natively on the internet, there needed to be a finite system within the unbounded internet expanse, one whose architecture tamed informational replicability in order to create a system of digital scarcity.
And that was the breakthrough invention of Bitcoin.
The reason you canāt copy and paste Bitcoin is that a Bitcoin is not a jpeg made up of 0s and 1s. Instead, when you own a Bitcoin, what you really own is the consensus view of every computer on the Bitcoin network that you have authority over 1/21M of the Bitcoin supply.
In that sense, you donāt own anything tangible; you own an inalienable property right. And ultimately, that is the essence of value ā unilateral control over something finite.
This system of value consensus comes with a minor problem. Although it is impossible to copy value within the confines of this walled-garden system, it is still possible to copy & paste the entire system.
And of course, information that can be copiedā¦ can be replicated infinitely. There is minimal marginal cost to spinning up a brand-new copy of the original system. And thatās what weāve seen in digital assets.
Bitcoin is the original instance of a system of digital scarcity. Every other cryptocurrency is a copy of this system of digital scarcity, dressed up with various bells and whistles to make it seem different, new, and better.
When I first made this graphic in 2021 to highlight the endlessly replicable nature of cryptocurrencies, there were ~7,000 total cryptocurrencies. Now, there are ~30,000. 4x more in just 2 years.
In that sense, if someone purchased a fixed % of a new cryptocurrency in 2021 that featured no supply dilution over timeā¦ their % ownership of the total supply in the ācopy of digital scarcityā market has still been diluted 4x. Thatās 75% debasement in just 2 years.
Granted, this assumes that all crypto projects are equally valuable. Now letās consider the realities of valueā¦
Money is the mother of all network effects and tends to one
Network effects apply whenever the value of a system increases as the number of users increases. (Telephones, the internet, Facebook, etc.) Metcalfe's Law describes the value of a network as proportional to users^2.
Money is the mother of all network effects ā we gain wealth by choosing to value the form of money that others value, and we lose wealth if we choose wrong. (Beanie babies, tulips, NFTs.) Because of this pressure, money tends to one.
That is why gold emerged as the singular worldwide monetary standard after 70,000+ years of free market experimentation with various commodities as money. It was the hardest commodity to make more of and therefore the most reliable store-of-value for hard-earned wealth.
The result of this is that humans store ~40x more wealth in gold (~$12T total value) than the #2 store-of-value commodity, silver (~$300B total value).
This is called a Schelling Point, a game theoretic focal point. When humans store wealth, they intrinsically select a store-of-value that they anticipate others will value in the future.
With that in mind, letās update our graphic above to show the relative valuation of existing cryptocurrencies, represented by the size of each circle.
Consider what would happen if you showed the graphic above to 100 people and asked them to pick which circle was most valuable. Better yet, which circle they thought the other 99 people would pick. Thatās the Schelling Point, whether or not market participants have realized it yet.
The Crypto Catch-22
Aside from Bitcoinās strengths as the singular digital scarcity & dominant network effect, itās worth reflecting on the weakness of Bitcoinās competition.
While the marketing for any particular cryptocurrency will highlight its feature set and flashy specs, these all amount to bells and whistles. What matters is a simple question: which asset do people choose to hold as a store-of-value? Bitcoin has a big lead.
As such, every altcoin created since Bitcoin has been playing catchup. And yet, what is required in order to catch up precludes any altcoin from being a genuine competitor to Bitcoin.
In the celebrated satirical war novel, Catch-22, the protagonist wrestles with an air-tight paradox of military policy: if a soldier has gone crazy, he doesnāt have to go on missions; but, a crazy soldier has to request to be excused, and this request demonstrates that he is not crazy.
Well, every upstart project in the crypto landscape faces their own impossible paradox as they attempt to catch up to Bitcoin ā the Crypto Catch-22:
ā¢ You canāt catch Bitcoin without a leadership team and a marketing budget
ā¢ With a leadership team and marketing budget, you are a company masquerading as a decentralized protocol
The end result of this is quite clear: almost every one of the 30,000 crypto projects trying to get a foothold in the market is, to use SEC Chairman Gary Genslerās pet term, a DINO project (ādecentralized in name onlyā). They have leadership teams working to guide the project with the objective of delivering an investment return for holders of their crypto token. By the unambiguous definition of the Howey Test, this means they are companies offering unlicensed securities.
This violates securities law, and in all of these casesā¦ thereās a centralized leadership team that the SEC can hold responsible.
And indeed, we have now entered the era of enforcement. Just this week, the SEC sued the exquisitely obnoxious founder of HEX for 3 counts of securities fraud & told Coinbaseās CEO that āevery [crypto] asset other than Bitcoin is a security.ā
To summarize:
ā¢ Bitcoin is the invention of digital scarcity & every cryptocurrency since is a replica copy of that system
ā¢ Money is the mother of all network effects & Bitcoin has already won
ā¢ All challengers to Bitcoin are ultimately companies promoting unlicensed securities offerings & the SEC is coming after them
Now, with your hard-earned money at stake, pick which circle others will value most. But donāt take too long, because 99% of the world is currently making the same decision.](https://pbs.twimg.com/media/F2ni628asAAVOZt.jpg)
![Croesus_BTC's tweet photo. Everyone learns the hard way. I certainly did. When we first take interest in cryptocurrencies, we naturally explore whatās out there. Everything sounds exciting, some of it even compelling.
So we diversify, thinking thatās the prudent thing to do. But, invariably, the more you proactively learn or the longer you stay in the market, the stronger your understanding grows that thereās only one asset here worth holding: Bitcoin.
If you are new to cryptocurrencies, a lot of pain and heartache can be spared if you lean in to understanding why.
Here are the three key reasons why Bitcoin is the only cryptoasset worth holding:
ā¢ Digital scarcity is a one-time phenomenon
ā¢ Money is the mother of all network effects & tends to one
ā¢ The Crypto Catch-22 precludes any genuine competition to Bitcoin
Considering these topics could be the difference between cementing a Bitcoin fortune or squandering the massive opportunity before you. Letās dig inā¦
Digital scarcity is a one-time phenomenon
You canāt store value on the internet. The internet is just information - expressed as 0s and 1s - translated by your computer into words and images. The problem with information is that it can be copied & pasted. Thatās the defining attribute of information ā it is dematerialized, which grants it the incredible dual characteristics of speed-of-light transmission & infinite replicability.
But this replicability doesnāt work for value.
For value to exist natively on the internet, there needed to be a finite system within the unbounded internet expanse, one whose architecture tamed informational replicability in order to create a system of digital scarcity.
And that was the breakthrough invention of Bitcoin.
The reason you canāt copy and paste Bitcoin is that a Bitcoin is not a jpeg made up of 0s and 1s. Instead, when you own a Bitcoin, what you really own is the consensus view of every computer on the Bitcoin network that you have authority over 1/21M of the Bitcoin supply.
In that sense, you donāt own anything tangible; you own an inalienable property right. And ultimately, that is the essence of value ā unilateral control over something finite.
This system of value consensus comes with a minor problem. Although it is impossible to copy value within the confines of this walled-garden system, it is still possible to copy & paste the entire system.
And of course, information that can be copiedā¦ can be replicated infinitely. There is minimal marginal cost to spinning up a brand-new copy of the original system. And thatās what weāve seen in digital assets.
Bitcoin is the original instance of a system of digital scarcity. Every other cryptocurrency is a copy of this system of digital scarcity, dressed up with various bells and whistles to make it seem different, new, and better.
When I first made this graphic in 2021 to highlight the endlessly replicable nature of cryptocurrencies, there were ~7,000 total cryptocurrencies. Now, there are ~30,000. 4x more in just 2 years.
In that sense, if someone purchased a fixed % of a new cryptocurrency in 2021 that featured no supply dilution over timeā¦ their % ownership of the total supply in the ācopy of digital scarcityā market has still been diluted 4x. Thatās 75% debasement in just 2 years.
Granted, this assumes that all crypto projects are equally valuable. Now letās consider the realities of valueā¦
Money is the mother of all network effects and tends to one
Network effects apply whenever the value of a system increases as the number of users increases. (Telephones, the internet, Facebook, etc.) Metcalfe's Law describes the value of a network as proportional to users^2.
Money is the mother of all network effects ā we gain wealth by choosing to value the form of money that others value, and we lose wealth if we choose wrong. (Beanie babies, tulips, NFTs.) Because of this pressure, money tends to one.
That is why gold emerged as the singular worldwide monetary standard after 70,000+ years of free market experimentation with various commodities as money. It was the hardest commodity to make more of and therefore the most reliable store-of-value for hard-earned wealth.
The result of this is that humans store ~40x more wealth in gold (~$12T total value) than the #2 store-of-value commodity, silver (~$300B total value).
This is called a Schelling Point, a game theoretic focal point. When humans store wealth, they intrinsically select a store-of-value that they anticipate others will value in the future.
With that in mind, letās update our graphic above to show the relative valuation of existing cryptocurrencies, represented by the size of each circle.
Consider what would happen if you showed the graphic above to 100 people and asked them to pick which circle was most valuable. Better yet, which circle they thought the other 99 people would pick. Thatās the Schelling Point, whether or not market participants have realized it yet.
The Crypto Catch-22
Aside from Bitcoinās strengths as the singular digital scarcity & dominant network effect, itās worth reflecting on the weakness of Bitcoinās competition.
While the marketing for any particular cryptocurrency will highlight its feature set and flashy specs, these all amount to bells and whistles. What matters is a simple question: which asset do people choose to hold as a store-of-value? Bitcoin has a big lead.
As such, every altcoin created since Bitcoin has been playing catchup. And yet, what is required in order to catch up precludes any altcoin from being a genuine competitor to Bitcoin.
In the celebrated satirical war novel, Catch-22, the protagonist wrestles with an air-tight paradox of military policy: if a soldier has gone crazy, he doesnāt have to go on missions; but, a crazy soldier has to request to be excused, and this request demonstrates that he is not crazy.
Well, every upstart project in the crypto landscape faces their own impossible paradox as they attempt to catch up to Bitcoin ā the Crypto Catch-22:
ā¢ You canāt catch Bitcoin without a leadership team and a marketing budget
ā¢ With a leadership team and marketing budget, you are a company masquerading as a decentralized protocol
The end result of this is quite clear: almost every one of the 30,000 crypto projects trying to get a foothold in the market is, to use SEC Chairman Gary Genslerās pet term, a DINO project (ādecentralized in name onlyā). They have leadership teams working to guide the project with the objective of delivering an investment return for holders of their crypto token. By the unambiguous definition of the Howey Test, this means they are companies offering unlicensed securities.
This violates securities law, and in all of these casesā¦ thereās a centralized leadership team that the SEC can hold responsible.
And indeed, we have now entered the era of enforcement. Just this week, the SEC sued the exquisitely obnoxious founder of HEX for 3 counts of securities fraud & told Coinbaseās CEO that āevery [crypto] asset other than Bitcoin is a security.ā
To summarize:
ā¢ Bitcoin is the invention of digital scarcity & every cryptocurrency since is a replica copy of that system
ā¢ Money is the mother of all network effects & Bitcoin has already won
ā¢ All challengers to Bitcoin are ultimately companies promoting unlicensed securities offerings & the SEC is coming after them
Now, with your hard-earned money at stake, pick which circle others will value most. But donāt take too long, because 99% of the world is currently making the same decision.](https://pbs.twimg.com/media/F2ni6YObEAA7DYU.jpg)
![Croesus_BTC's tweet photo. Everyone learns the hard way. I certainly did. When we first take interest in cryptocurrencies, we naturally explore whatās out there. Everything sounds exciting, some of it even compelling.
So we diversify, thinking thatās the prudent thing to do. But, invariably, the more you proactively learn or the longer you stay in the market, the stronger your understanding grows that thereās only one asset here worth holding: Bitcoin.
If you are new to cryptocurrencies, a lot of pain and heartache can be spared if you lean in to understanding why.
Here are the three key reasons why Bitcoin is the only cryptoasset worth holding:
ā¢ Digital scarcity is a one-time phenomenon
ā¢ Money is the mother of all network effects & tends to one
ā¢ The Crypto Catch-22 precludes any genuine competition to Bitcoin
Considering these topics could be the difference between cementing a Bitcoin fortune or squandering the massive opportunity before you. Letās dig inā¦
Digital scarcity is a one-time phenomenon
You canāt store value on the internet. The internet is just information - expressed as 0s and 1s - translated by your computer into words and images. The problem with information is that it can be copied & pasted. Thatās the defining attribute of information ā it is dematerialized, which grants it the incredible dual characteristics of speed-of-light transmission & infinite replicability.
But this replicability doesnāt work for value.
For value to exist natively on the internet, there needed to be a finite system within the unbounded internet expanse, one whose architecture tamed informational replicability in order to create a system of digital scarcity.
And that was the breakthrough invention of Bitcoin.
The reason you canāt copy and paste Bitcoin is that a Bitcoin is not a jpeg made up of 0s and 1s. Instead, when you own a Bitcoin, what you really own is the consensus view of every computer on the Bitcoin network that you have authority over 1/21M of the Bitcoin supply.
In that sense, you donāt own anything tangible; you own an inalienable property right. And ultimately, that is the essence of value ā unilateral control over something finite.
This system of value consensus comes with a minor problem. Although it is impossible to copy value within the confines of this walled-garden system, it is still possible to copy & paste the entire system.
And of course, information that can be copiedā¦ can be replicated infinitely. There is minimal marginal cost to spinning up a brand-new copy of the original system. And thatās what weāve seen in digital assets.
Bitcoin is the original instance of a system of digital scarcity. Every other cryptocurrency is a copy of this system of digital scarcity, dressed up with various bells and whistles to make it seem different, new, and better.
When I first made this graphic in 2021 to highlight the endlessly replicable nature of cryptocurrencies, there were ~7,000 total cryptocurrencies. Now, there are ~30,000. 4x more in just 2 years.
In that sense, if someone purchased a fixed % of a new cryptocurrency in 2021 that featured no supply dilution over timeā¦ their % ownership of the total supply in the ācopy of digital scarcityā market has still been diluted 4x. Thatās 75% debasement in just 2 years.
Granted, this assumes that all crypto projects are equally valuable. Now letās consider the realities of valueā¦
Money is the mother of all network effects and tends to one
Network effects apply whenever the value of a system increases as the number of users increases. (Telephones, the internet, Facebook, etc.) Metcalfe's Law describes the value of a network as proportional to users^2.
Money is the mother of all network effects ā we gain wealth by choosing to value the form of money that others value, and we lose wealth if we choose wrong. (Beanie babies, tulips, NFTs.) Because of this pressure, money tends to one.
That is why gold emerged as the singular worldwide monetary standard after 70,000+ years of free market experimentation with various commodities as money. It was the hardest commodity to make more of and therefore the most reliable store-of-value for hard-earned wealth.
The result of this is that humans store ~40x more wealth in gold (~$12T total value) than the #2 store-of-value commodity, silver (~$300B total value).
This is called a Schelling Point, a game theoretic focal point. When humans store wealth, they intrinsically select a store-of-value that they anticipate others will value in the future.
With that in mind, letās update our graphic above to show the relative valuation of existing cryptocurrencies, represented by the size of each circle.
Consider what would happen if you showed the graphic above to 100 people and asked them to pick which circle was most valuable. Better yet, which circle they thought the other 99 people would pick. Thatās the Schelling Point, whether or not market participants have realized it yet.
The Crypto Catch-22
Aside from Bitcoinās strengths as the singular digital scarcity & dominant network effect, itās worth reflecting on the weakness of Bitcoinās competition.
While the marketing for any particular cryptocurrency will highlight its feature set and flashy specs, these all amount to bells and whistles. What matters is a simple question: which asset do people choose to hold as a store-of-value? Bitcoin has a big lead.
As such, every altcoin created since Bitcoin has been playing catchup. And yet, what is required in order to catch up precludes any altcoin from being a genuine competitor to Bitcoin.
In the celebrated satirical war novel, Catch-22, the protagonist wrestles with an air-tight paradox of military policy: if a soldier has gone crazy, he doesnāt have to go on missions; but, a crazy soldier has to request to be excused, and this request demonstrates that he is not crazy.
Well, every upstart project in the crypto landscape faces their own impossible paradox as they attempt to catch up to Bitcoin ā the Crypto Catch-22:
ā¢ You canāt catch Bitcoin without a leadership team and a marketing budget
ā¢ With a leadership team and marketing budget, you are a company masquerading as a decentralized protocol
The end result of this is quite clear: almost every one of the 30,000 crypto projects trying to get a foothold in the market is, to use SEC Chairman Gary Genslerās pet term, a DINO project (ādecentralized in name onlyā). They have leadership teams working to guide the project with the objective of delivering an investment return for holders of their crypto token. By the unambiguous definition of the Howey Test, this means they are companies offering unlicensed securities.
This violates securities law, and in all of these casesā¦ thereās a centralized leadership team that the SEC can hold responsible.
And indeed, we have now entered the era of enforcement. Just this week, the SEC sued the exquisitely obnoxious founder of HEX for 3 counts of securities fraud & told Coinbaseās CEO that āevery [crypto] asset other than Bitcoin is a security.ā
To summarize:
ā¢ Bitcoin is the invention of digital scarcity & every cryptocurrency since is a replica copy of that system
ā¢ Money is the mother of all network effects & Bitcoin has already won
ā¢ All challengers to Bitcoin are ultimately companies promoting unlicensed securities offerings & the SEC is coming after them
Now, with your hard-earned money at stake, pick which circle others will value most. But donāt take too long, because 99% of the world is currently making the same decision.](https://pbs.twimg.com/media/F2ni5xAb0AAGs3l.jpg)
Olivia
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Joined February 2015
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The digital gold rush ends ~January 7, 2035. Get your Bitcoin before there is no Bitcoin left for you.
What the Night Sky on Mars may look like...
Stop it š¤£š¤£
think of it as an infinite game: Hodlers who cooperate through volatility are rewarded over time, while non-cooperation (staying out) carries massive opportunity costs
transparency of the protocol (fixed supply, visible metrics) creates clear "rules of engagement" - exactly what made successful strategies work in Axelrod's tournaments
@SufiyanSIshaq oh yeah! i am all in!
the real example of communication failure! š¤£
We shall remember this legend
The 4th turning explained.
https://t.co/arqPInXeZZ
Next, letās add Bitcoin. As you can see below, itās in a different universe. /3
You are not ready for this.
Classical wisdom - Charlie Munger āļø
Everyone learns the hard way. I certainly did. When we first take interest in cryptocurrencies, we naturally explore whatās out there. Everything sounds exciting, some of it even compelling.
So we diversify, thinking thatās the prudent thing to do. But, invariably, the more you proactively learn or the longer you stay in the market, the stronger your understanding grows that thereās only one asset here worth holding: Bitcoin.
If you are new to cryptocurrencies, a lot of pain and heartache can be spared if you lean in to understanding why.
Here are the three key reasons why Bitcoin is the only cryptoasset worth holding:
ā¢ Digital scarcity is a one-time phenomenon
ā¢ Money is the mother of all network effects & tends to one
ā¢ The Crypto Catch-22 precludes any genuine competition to Bitcoin
Considering these topics could be the difference between cementing a Bitcoin fortune or squandering the massive opportunity before you. Letās dig inā¦
Digital scarcity is a one-time phenomenon
You canāt store value on the internet. The internet is just information - expressed as 0s and 1s - translated by your computer into words and images. The problem with information is that it can be copied & pasted. Thatās the defining attribute of information ā it is dematerialized, which grants it the incredible dual characteristics of speed-of-light transmission & infinite replicability.
But this replicability doesnāt work for value.
For value to exist natively on the internet, there needed to be a finite system within the unbounded internet expanse, one whose architecture tamed informational replicability in order to create a system of digital scarcity.
And that was the breakthrough invention of Bitcoin.
The reason you canāt copy and paste Bitcoin is that a Bitcoin is not a jpeg made up of 0s and 1s. Instead, when you own a Bitcoin, what you really own is the consensus view of every computer on the Bitcoin network that you have authority over 1/21M of the Bitcoin supply.
In that sense, you donāt own anything tangible; you own an inalienable property right. And ultimately, that is the essence of value ā unilateral control over something finite.
This system of value consensus comes with a minor problem. Although it is impossible to copy value within the confines of this walled-garden system, it is still possible to copy & paste the entire system.
And of course, information that can be copiedā¦ can be replicated infinitely. There is minimal marginal cost to spinning up a brand-new copy of the original system. And thatās what weāve seen in digital assets.
Bitcoin is the original instance of a system of digital scarcity. Every other cryptocurrency is a copy of this system of digital scarcity, dressed up with various bells and whistles to make it seem different, new, and better.
When I first made this graphic in 2021 to highlight the endlessly replicable nature of cryptocurrencies, there were ~7,000 total cryptocurrencies. Now, there are ~30,000. 4x more in just 2 years.
In that sense, if someone purchased a fixed % of a new cryptocurrency in 2021 that featured no supply dilution over timeā¦ their % ownership of the total supply in the ācopy of digital scarcityā market has still been diluted 4x. Thatās 75% debasement in just 2 years.
Granted, this assumes that all crypto projects are equally valuable. Now letās consider the realities of valueā¦
Money is the mother of all network effects and tends to one
Network effects apply whenever the value of a system increases as the number of users increases. (Telephones, the internet, Facebook, etc.) Metcalfe's Law describes the value of a network as proportional to users^2.
Money is the mother of all network effects ā we gain wealth by choosing to value the form of money that others value, and we lose wealth if we choose wrong. (Beanie babies, tulips, NFTs.) Because of this pressure, money tends to one.
That is why gold emerged as the singular worldwide monetary standard after 70,000+ years of free market experimentation with various commodities as money. It was the hardest commodity to make more of and therefore the most reliable store-of-value for hard-earned wealth.
The result of this is that humans store ~40x more wealth in gold (~$12T total value) than the #2 store-of-value commodity, silver (~$300B total value).
This is called a Schelling Point, a game theoretic focal point. When humans store wealth, they intrinsically select a store-of-value that they anticipate others will value in the future.
With that in mind, letās update our graphic above to show the relative valuation of existing cryptocurrencies, represented by the size of each circle.
Consider what would happen if you showed the graphic above to 100 people and asked them to pick which circle was most valuable. Better yet, which circle they thought the other 99 people would pick. Thatās the Schelling Point, whether or not market participants have realized it yet.
The Crypto Catch-22
Aside from Bitcoinās strengths as the singular digital scarcity & dominant network effect, itās worth reflecting on the weakness of Bitcoinās competition.
While the marketing for any particular cryptocurrency will highlight its feature set and flashy specs, these all amount to bells and whistles. What matters is a simple question: which asset do people choose to hold as a store-of-value? Bitcoin has a big lead.
As such, every altcoin created since Bitcoin has been playing catchup. And yet, what is required in order to catch up precludes any altcoin from being a genuine competitor to Bitcoin.
In the celebrated satirical war novel, Catch-22, the protagonist wrestles with an air-tight paradox of military policy: if a soldier has gone crazy, he doesnāt have to go on missions; but, a crazy soldier has to request to be excused, and this request demonstrates that he is not crazy.
Well, every upstart project in the crypto landscape faces their own impossible paradox as they attempt to catch up to Bitcoin ā the Crypto Catch-22:
ā¢ You canāt catch Bitcoin without a leadership team and a marketing budget
ā¢ With a leadership team and marketing budget, you are a company masquerading as a decentralized protocol
The end result of this is quite clear: almost every one of the 30,000 crypto projects trying to get a foothold in the market is, to use SEC Chairman Gary Genslerās pet term, a DINO project (ādecentralized in name onlyā). They have leadership teams working to guide the project with the objective of delivering an investment return for holders of their crypto token. By the unambiguous definition of the Howey Test, this means they are companies offering unlicensed securities.
This violates securities law, and in all of these casesā¦ thereās a centralized leadership team that the SEC can hold responsible.
And indeed, we have now entered the era of enforcement. Just this week, the SEC sued the exquisitely obnoxious founder of HEX for 3 counts of securities fraud & told Coinbaseās CEO that āevery [crypto] asset other than Bitcoin is a security.ā
To summarize:
ā¢ Bitcoin is the invention of digital scarcity & every cryptocurrency since is a replica copy of that system
ā¢ Money is the mother of all network effects & Bitcoin has already won
ā¢ All challengers to Bitcoin are ultimately companies promoting unlicensed securities offerings & the SEC is coming after them
Now, with your hard-earned money at stake, pick which circle others will value most. But donāt take too long, because 99% of the world is currently making the same decision.
![Croesus_BTC's tweet photo. Everyone learns the hard way. I certainly did. When we first take interest in cryptocurrencies, we naturally explore whatās out there. Everything sounds exciting, some of it even compelling.
So we diversify, thinking thatās the prudent thing to do. But, invariably, the more you proactively learn or the longer you stay in the market, the stronger your understanding grows that thereās only one asset here worth holding: Bitcoin.
If you are new to cryptocurrencies, a lot of pain and heartache can be spared if you lean in to understanding why.
Here are the three key reasons why Bitcoin is the only cryptoasset worth holding:
ā¢ Digital scarcity is a one-time phenomenon
ā¢ Money is the mother of all network effects & tends to one
ā¢ The Crypto Catch-22 precludes any genuine competition to Bitcoin
Considering these topics could be the difference between cementing a Bitcoin fortune or squandering the massive opportunity before you. Letās dig inā¦
Digital scarcity is a one-time phenomenon
You canāt store value on the internet. The internet is just information - expressed as 0s and 1s - translated by your computer into words and images. The problem with information is that it can be copied & pasted. Thatās the defining attribute of information ā it is dematerialized, which grants it the incredible dual characteristics of speed-of-light transmission & infinite replicability.
But this replicability doesnāt work for value.
For value to exist natively on the internet, there needed to be a finite system within the unbounded internet expanse, one whose architecture tamed informational replicability in order to create a system of digital scarcity.
And that was the breakthrough invention of Bitcoin.
The reason you canāt copy and paste Bitcoin is that a Bitcoin is not a jpeg made up of 0s and 1s. Instead, when you own a Bitcoin, what you really own is the consensus view of every computer on the Bitcoin network that you have authority over 1/21M of the Bitcoin supply.
In that sense, you donāt own anything tangible; you own an inalienable property right. And ultimately, that is the essence of value ā unilateral control over something finite.
This system of value consensus comes with a minor problem. Although it is impossible to copy value within the confines of this walled-garden system, it is still possible to copy & paste the entire system.
And of course, information that can be copiedā¦ can be replicated infinitely. There is minimal marginal cost to spinning up a brand-new copy of the original system. And thatās what weāve seen in digital assets.
Bitcoin is the original instance of a system of digital scarcity. Every other cryptocurrency is a copy of this system of digital scarcity, dressed up with various bells and whistles to make it seem different, new, and better.
When I first made this graphic in 2021 to highlight the endlessly replicable nature of cryptocurrencies, there were ~7,000 total cryptocurrencies. Now, there are ~30,000. 4x more in just 2 years.
In that sense, if someone purchased a fixed % of a new cryptocurrency in 2021 that featured no supply dilution over timeā¦ their % ownership of the total supply in the ācopy of digital scarcityā market has still been diluted 4x. Thatās 75% debasement in just 2 years.
Granted, this assumes that all crypto projects are equally valuable. Now letās consider the realities of valueā¦
Money is the mother of all network effects and tends to one
Network effects apply whenever the value of a system increases as the number of users increases. (Telephones, the internet, Facebook, etc.) Metcalfe's Law describes the value of a network as proportional to users^2.
Money is the mother of all network effects ā we gain wealth by choosing to value the form of money that others value, and we lose wealth if we choose wrong. (Beanie babies, tulips, NFTs.) Because of this pressure, money tends to one.
That is why gold emerged as the singular worldwide monetary standard after 70,000+ years of free market experimentation with various commodities as money. It was the hardest commodity to make more of and therefore the most reliable store-of-value for hard-earned wealth.
The result of this is that humans store ~40x more wealth in gold (~$12T total value) than the #2 store-of-value commodity, silver (~$300B total value).
This is called a Schelling Point, a game theoretic focal point. When humans store wealth, they intrinsically select a store-of-value that they anticipate others will value in the future.
With that in mind, letās update our graphic above to show the relative valuation of existing cryptocurrencies, represented by the size of each circle.
Consider what would happen if you showed the graphic above to 100 people and asked them to pick which circle was most valuable. Better yet, which circle they thought the other 99 people would pick. Thatās the Schelling Point, whether or not market participants have realized it yet.
The Crypto Catch-22
Aside from Bitcoinās strengths as the singular digital scarcity & dominant network effect, itās worth reflecting on the weakness of Bitcoinās competition.
While the marketing for any particular cryptocurrency will highlight its feature set and flashy specs, these all amount to bells and whistles. What matters is a simple question: which asset do people choose to hold as a store-of-value? Bitcoin has a big lead.
As such, every altcoin created since Bitcoin has been playing catchup. And yet, what is required in order to catch up precludes any altcoin from being a genuine competitor to Bitcoin.
In the celebrated satirical war novel, Catch-22, the protagonist wrestles with an air-tight paradox of military policy: if a soldier has gone crazy, he doesnāt have to go on missions; but, a crazy soldier has to request to be excused, and this request demonstrates that he is not crazy.
Well, every upstart project in the crypto landscape faces their own impossible paradox as they attempt to catch up to Bitcoin ā the Crypto Catch-22:
ā¢ You canāt catch Bitcoin without a leadership team and a marketing budget
ā¢ With a leadership team and marketing budget, you are a company masquerading as a decentralized protocol
The end result of this is quite clear: almost every one of the 30,000 crypto projects trying to get a foothold in the market is, to use SEC Chairman Gary Genslerās pet term, a DINO project (ādecentralized in name onlyā). They have leadership teams working to guide the project with the objective of delivering an investment return for holders of their crypto token. By the unambiguous definition of the Howey Test, this means they are companies offering unlicensed securities.
This violates securities law, and in all of these casesā¦ thereās a centralized leadership team that the SEC can hold responsible.
And indeed, we have now entered the era of enforcement. Just this week, the SEC sued the exquisitely obnoxious founder of HEX for 3 counts of securities fraud & told Coinbaseās CEO that āevery [crypto] asset other than Bitcoin is a security.ā
To summarize:
ā¢ Bitcoin is the invention of digital scarcity & every cryptocurrency since is a replica copy of that system
ā¢ Money is the mother of all network effects & Bitcoin has already won
ā¢ All challengers to Bitcoin are ultimately companies promoting unlicensed securities offerings & the SEC is coming after them
Now, with your hard-earned money at stake, pick which circle others will value most. But donāt take too long, because 99% of the world is currently making the same decision.](https://pbs.twimg.com/media/F2njIpEaIAAgj0f.jpg)
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