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Is there a future for bitcoin? An investor and a skeptic debate

Is there a future for bitcoin? An investor and a skeptic debate


Today’s episode of Decoder is about a very big idea: bitcoin. The Verge has been covering bitcoin since we launched in 2011. And since then I’ve heard many loud, powerful voices talking about how it’s going to be the future of… something. Everything. Maybe nothing at all.

To be honest, I’ve been a bitcoin skeptic: over the past 10 years we’ve seen the value of bitcoin skyrocket, but very few actual uses for what should be a revolutionary digital currency. But that value keeps going up, and it feels like we might be at an inflection point for the bitcoin story. And there doesn’t seem to be a lot of gray area between the people who think bitcoin is going to change everything and the people who think it’s nonsense.

For this episode, I had two conversations. First I spoke to a bitcoin investor. Then, a few days later, I spoke to a bitcoin skeptic. In each conversation, I tried to play the other role but without the usual yelling and chaos that seems to characterize bitcoin debates.

The investor is Nic Carter. He’s a general partner at Castle Island Ventures, which funds startups that are building on top of the bitcoin infrastructure to make payments more accessible. Basically, making sure bitcoin can function like a currency.

The skeptic is Steve Hanke. He is a professor of applied economics at the Johns Hopkins University and senior fellow and director of the Troubled Currencies Project at the Cato Institute. He has also advised other countries on how to deal with hyperinflation and how to stabilize currencies.

In the end, my biggest question about bitcoin is whether people are interested in it because it’s bitcoin or because it’s worth a lot of dollars.

Here we go.

This transcript has been lightly edited for clarity.

Nilay Patel: Nic Carter, you’re a general partner at Castle Island Ventures. Welcome to Decoder.

Nic Carter: Thanks for having me. I’m really excited for this.

NP: You have kind of an interesting history. You were the first crypto-analyst at Fidelity. Now you manage investments into the bitcoin ecosystem at Castle Island Ventures. I want to start at the very beginning. What drew you to bitcoin and crypto, generally?

NC: It wasn’t anything super dramatic. It wasn’t like my family had our wealth confiscated by some tyrannical government or anything. As much as I, weirdly enough, wish I had a great bitcoin origin story, I don’t, but I just was attracted to the playful community initially on Reddit, believe it or not. And I thought it was really cool to tip people through the internet and do P2P payments that weren’t being cleared through any traditional financial medium.

That was really interesting and exciting to me to have that instant, final settlement on internet payments. And then it was only with time — and it took me a long time — that I came to realize that there was actually a deeper, sort of philosophical underpinning behind the project, that it was a real monetary project, and it was tightly intertwined with some normative views on economics and the role of central banking in society.

NP: I want to pull back out of that. I’m really interested in your perspective on what the normative aspects of central banking are and how they might change with bitcoin. But just help me out from the very beginning. How would you define bitcoin at this moment in time?

NC: So the thing about bitcoin is that we have a bit of a definitional problem because the word bitcoin actually refers to a number of different things, and that causes confusion. So on the one hand, it’s a protocol.

It’s a set of rules that people opt into to send value through a communications medium in a final way so you get final settlement. And on the other hand, it’s also a financial asset, so bitcoin is the name of the monetary unit that circulates within the bitcoin protocol.

That doesn’t make a lot of sense to a lot of people, but the bitcoin network is such that, really, there’s only one native currency that is changing hands on the bitcoin network, and we call that bitcoin.

And as of today, all of the bitcoins are worth about a trillion dollars. So that’s our problem, is that we use the same word to refer to the network itself and to the actual medium of payment on the network.

NP: I think there’s a lot of focus on the dollar value of the outstanding bitcoin right now. But one thing that strikes me is there is the bitcoin network; there’s the Ethereum network; there’s Dogecoin, which Elon Musk just tweeted about, and it spiked in value.

There’s a wide variety of cryptocurrencies and now crypto assets, right? The NBA is selling highlight clips as non-fungible tokens, or NFTs, for a quarter of a million dollars, right?

So there’s all these crypto assets and crypto networks and cryptocurrencies. Bitcoin still seems like the center of that conversation. How do you think it relates to all of the others?

NC: Bitcoin is the alpha and the omega. I mean, it’s the originator of this whole thing. Bitcoin is the reason we have the word blockchain, right? Bitcoin kicked this whole thing off in 2009. It was the first public blockchain, the first cryptocurrency. It wasn’t the first digital cash project, but it was the first successful one; the first decentralized one; the first one that people realized, “Wow, we can actually transact outside of the purview of the state here. We don’t necessarily need financial intermediaries.”

And bitcoin has this great set of embedded values and this commitment to genuine decentralization, and genuine distribution of governance, such that no one individual or entity can co-opt or change the network. And it has this extreme resilience and robustness and this unwillingness to change or be changed by anyone.

That’s what gives it a lot of strength. That’s what a lot of the clones of bitcoin and the competitors and the alternative cryptocurrencies lack, fundamentally. Most of them are set up by corporations, venture investors, that try and own a huge percentage of the initial stake, things like that. And they have CEOs and foundations and leadership. Bitcoin is much more organic, which kind of explains its sticking power. It’s this real phenomenon that people can align with. And all of the competitors, there’s certainly some interesting technology out there. But it’s not surprising to me that bitcoin has endured in the way that it has because it’s kind of unique in terms of its own trajectory, its history.

And I think people really align with that. They align with the unique circumstances of its launch.

They like the fact that it’s pretty decentralized. I think, ultimately, bitcoin is our best shot to basically strip some of the power from governments, in the monetary context, and from large financial institutions for that matter.

NP: Why should we strip the power from governments in the monetary context?

NC: Because they misbehave. Because they mismanage their currencies, and in the US, things seem pretty much okay. Inflation’s not too bad. But the US experience, the experience of Americans, is not the typical experience for people globally, right? We’re only something like 4 percent of the population. Your average person on the planet Earth probably does not have a high degree of trust in their banking sector. They may be living under inflation or conditions of monetary repression.

They might have to deal with capital controls, which exist so that their government can manage exchange rates. So because central banks tend to misbehave, because they tend to plunder the currency of savers in order to achieve their own government aims, we have plenty of reason to be skeptical of monetary authorities.

And I would actually extend that to the Federal Reserve. I mean, the Fed is not behaving in a way that I think is consistent with good objectives for society. My interpretation of what they’re doing is that their actions are actually worsening inequality, but that’s a whole different conversation. I think the very fact that sovereign currencies do fail and you see hyperinflations, I think that justifies the existence of an alternative that’s not state-controlled.

And historically, gold has been that alternative. And it’s actually quite a good alternative, I would say, but bitcoin just improves upon gold’s qualities in some critical respects.

And I think it’s totally valid to propose one alternative which is not state-controlled because ultimately, that’s just a tool for freedom, and you can’t mandate that anyone use it. It’s a free choice to opt into it, but I think it’s really inspiring that probably around 100 million people worldwide have opted into the system so far.

So what does a Bitcoin critic think of this decentralizing potential, specifically in the context of places outside the U.S.?

Now is a good place to bring in Prof. Steve Hanke. As I said at the top, he is a professor of applied economics at the Johns Hopkins University and a senior fellow and director of the Troubled Currencies Project at the Cato Institute.

NP: Steve Hanke, Welcome to Decoder.

Steve Hanke: Great to be with you, Nilay.

I wanted to…



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