PODCAST: Meltem Demirors on the 3 Things Bitcoin Represents

Published on by Coindesk | Published on

Mentioned in this article
So I think what's challenging when we talk about bitcoin is unlike debt or equities bitcoin represents three different things.

Bitcoin is a network and what's interesting here is bitcoin is kind of a supranational global communication network, and so there are tens of thousands of devices around the world, whether people are running minors, or people are just running full nodes there's this network of computational devices that are maintaining the bitcoin ledger, and engaging the invalidating transactions, and maintaining the integrity of the ledger, and so the bitcoin network is physical in nature.

So I want to pick up on two things that you said, and you said that Libra's, of course, this pool investment, so the incentives of all these parties are definitely for protection fees, but you also mentioned that because bitcoin is only backed by the demand of the user that it really can exist as an uncorrelated asset, because Libra would theoretically be involved in all the ups and downs of a typical economy because the value of bitcoin is only really based on the demand that users and people have for it.

Look, I think through that process I actually think speculation is one of the great drivers of bitcoin adoption, because as people start to speculate, and as people start to interact with bitcoin they start to appreciate some of the principles and social values, what it represents, and I think that leads to people holding bitcoin longer, and viewing it more and more in the context of a form of sound digital money, but I do think we get a little bit overly excited about narratives that aren't really quite supported by the evidence yet.

What I think is more interesting to think about, and one thing we've never seen in how bitcoin behaves in a recession, right? Because bitcoin was introduced to the world in 2009 after the 2008 financial crisis, the bitcoin network launch, and so we've never seen it in an environment like a recession.

You look at what's happening in Chile, you look at what's happening in Argentina, you look at what's happening in Hong Kong, you look at what's happening in the UK. There's only so much you can squeeze that out of a system, so I think there're a lot of fundamental existential questions about the relevance of nation-states, the relevance of currencies generally, and what I think is so interesting about bitcoin if we leave aside sort of the price of bitcoin, and these arguments around bitcoin as sound money, and these things that are very exciting, I think what's even more interesting is the questions that bitcoin introduces to the conversation.

I think there are so many things about bitcoin that can't be replicated, but what you get is you get a bunch of people in the market who are spreading their own narratives around what bitcoin is and why their asset or their project is different, or better, and I think that market confusion is now being reflected at the government level where we see a lot of conversation around central bank-issued digital currency, a lot of fundamental misunderstandings about how bitcoin works, even in US Congress.

At the end of the day I think bitcoin more than anything else represents a social movement and a set of ideas, and I know that sounds very esoteric, and a bit philosophical, but I think what a lot of people are starting to grasp as they go down the proverbial bitcoin rabbit hole, and I love that we call it a rabbit hole, because it's such a strong reference to the movie The Matrix.

There is a fundamental question I have that if we institutionalize and financialize bitcoin, and we take 50% of the world's bitcoin supply, lock it up somewhere with the GTCC, and we start trading paper certificates that represent an underlying bitcoin, and sort of dematerialize bitcoin markets, and detach them from the underlying, what does that really do for us other than to create a new tool for speculation? I'm not really sure.

I do think there's an increasing awareness on the importance of the base currency that's used to sort of shape economic activity around the world, and that's an area I think is really fascinating, because again some of the aspects of bitcoin that make it unique, the fact that it's leaderless, and not controlled by any one entity, and some of these things could potentially also position bitcoin well to be a neutral sort of means of a value transfer.

x