Bitcoin Cannot be Replicated
The circumstances of Bitcoin's emergence are not repeatable - this makes Bitcoin an incredibly special innovation.
Bitcoin is the one time discovery of absolute scarcity.
Let us take a journey back in time through the history of Bitcoin. As we’ve discussed before, Bitcoin was created by an anonymous programmer who is only known to us as Satoshi Nakamoto. Satoshi created Bitcoin out of nothing more than an idea. What is amazing about our programming technology is that anyone can sit down at a computer and create something of value for the whole world - if the idea and execution are sufficient, the code will speak for itself. To quote Satoshi - “I’m better with code than with words.”
Bitcoin is a bulletproof idea.
Satoshi’s code is the manifestation of their idea. By making the code for the Bitcoin network open-source and available for anyone at any time to audit, the idea of Bitcoin becomes distributed to anyone looking to join the network.
Consider the first individuals that joined the Bitcoin network with Satoshi. The code for Bitcoin was initially introduced to a very specific community on the internet. These cypherpunks were a group that had been trying to build a decentralized money for the internet for many years. Bitcoin became the greatest innovation in this space as it seemingly solved some of the most challenging programming problems (Byzantine General, double-spend, etc.).
Satoshi created a digital asset with a verifiably fixed supply. No one can create more bitcoins regardless of how much time is allocated toward producing them. I’ve stated this many times and will continue to because of how important it is - no other asset has a mathematically fixed supply that is independent of everything else. Many bitcoiners have come to call this property that is known only to Bitcoin - absolute scarcity.
“Okay, big deal. Bitcoin has absolute scarcity, so what? Someone else will just create another Bitcoin that is better. That new thing will have absolute scarcity too. Bitcoin is just the MySpace of digital currencies.”
False.
Bitcoin is protected from technological disruption because of its unique path-dependence. As we mentioned above, there was a specific and organic sequence of events that led to the idea of Bitcoin diffusing into the global marketplace - this sequence cannot be ignored because it is itself a part of making Bitcoin what it is today.
It is truly fascinating to understand this sequence in its entirety. When Satoshi introduced his code into the cypherpunk community, he didn’t charge any price for it. Anyone was permitted to join the open network to see for themselves if the code really did what Satoshi claimed it did. As more people began to realize that this Bitcoin thing really was a promising invention, the idea spread. As the idea spread, more people wanted access to the asset.
Bitcoin started with a value of ZERO.
For the first couple years that the Bitcoin network existed, the asset had no market price. This is a critical factor in the assimilation of Bitcoin to the world. Clearly, the vast majority of the world did not understand why Bitcoin was so profound as soon as it was created. Otherwise, millions or billions of dollars would’ve been injected into the network by people wanting to claim their stake of the first absolutely scarce asset. Instead, those who first adopted Bitcoin were incentivized to spread their knowledge and access to the asset to others for free. In the early days of the network, websites called bitcoin faucets distributed coins at no cost to anyone interested in joining the network.
Imagine if Satoshi had instead released his invention immediately to hedge fund managers. Perhaps these managers would have put millions of dollars right away into the project. This would have led to near-zero diffusion of the asset because a small group would have had control of the vast majority of the asset. Rather, those who cared for Bitcoin at the very beginning were able to continuously strengthen the network by sharing their knowledge and control of the asset with more and more people. This was the only possible way for Bitcoin to be fairly distributed throughout the world.
It is strange to think about it, but Bitcoin’s success actually depended on not very many people caring about it when it was in its infancy. The real miracle of Bitcoin will not be when the price goes from $50,000 to $500,000 - the incredible fact is that Bitcoin went from $0 to worth anything at all. Over time, as awareness of Bitcoin spread across the globe, people became willing to trade their currencies for this new digital cash.
Now that everyone has the knowledge that digital money exists, the series of events that led to Bitcoin’s growth are not repeatable. We cannot go back to a time where the world has no knowledge of something like Bitcoin.
When we use Bitcoin, we are entering into a social contract with other users whether we know it or not. This social contract is the unstoppable idea behind Bitcoin. Below are the rules we all agree to when using Bitcoin.
The bitcoin tokens themselves have no value. The value exists purely in the network’s social contract.
If people are willing to agree to these rules and join the network, we can use bitcoins as a way to communicate value to other users. Thankfully, those who adopted Bitcoin in its early days saw to it that the network grew and the asset was widely distributed. All of the bitcoins put together in the world today are worth just under $1 trillion. This means that people all over the world are storing $1 trillion of financial energy in a network that derives its value from the power of its social contract.
This is why new forms of Bitcoin-like assets have trouble succeeding. In order for these new projects to accrete value, they would have to alter the social contract of Bitcoin and convince people that the new rule set is better than Bitcoin’s. This is becoming increasingly difficult to do as the Bitcoin network continues to develop into a global value-transmittance system.
Because bitcoins were valueless from their start, internet hobbyists became the first people to interact with the asset. Today, multi-billion dollar companies are using this “magic internet money” as a treasury reserve asset. Bitcoin has a wonderfully unique and special origin story that cannot be replicated. There will only ever be one Bitcoin network, and that is all we need.