The Other Ray
/On January 28th, Ray Dalio released his article “What I Think of Bitcoin,” on the Bridgewater website.
Source: https://www.bridgewater.com/research-and-insights/ray-dalio-what-i-think-of-bitcoin
If you haven’t read this yet, it’s probably worth your time. However, there were a couple things that caught my attention. It seems that Mr. Dalio, and other prominent investors are still struggling with the concept of scarcity, especially as it relates to hard forks and alt coins.
More specifically, the idea of Bitcoin being scarce has been called into question because substitutes exist. But as I hope to illustrate, substitutes, clones, forks, and alternatives are not the original thing that they imitate or stand in for. Think “Dr. Thunder” in the discount soda section, instead of Dr. Pepper for example.
Here’s a thought experiment. If I were to go to one of those t-shirt sites where you can print your own shirt with anything you want on it, I could perhaps create something quite easily that reads “I am Josh Brown.” Shipping is not much, and I can get my creation quickly. Now I put on the shirt, and it’s official. I have become Downtown Josh Brown. I guess my next stop is his house where I might want to raid Josh’s, or wait… MY refrigerator and take my car for a spin. Boy howdy, this is great. So much for scarcity.
Now, some of you may have noticed that there’s a problem with my plan. First of all, how can there be two Downtown Josh Browns? I might have fooled a few people with my shirt, but nobody actually believes there are two Josh Browns, do they? On top of that, I have a red beard and the problems just get worse from there.
Ok, new plan. Better plan! I’m going to clone Ray Dalio. Yep, state of the art science. Now there are TWO Ray Dalios. My clone is genetically identical to Ray Dalio. This one is bound to work. Let’s march our imposter into Bridgewater and claim some of our hard-earned equity. Walking past the guy at the front should be no problem, except for the fact that now I need some kind of an ID badge. And I guess another dude who looks like Ray is already in the building? Gah! This is getting complicated. Even with our genetic clone, it seems that people don’t like the idea of there being two Ray Dalios. Even the people who think our clone is the real one don’t think the original is real. And the real one doesn’t think our clone is real… what a mess.
Ok, third time’s a charm. Let’s dilute the value of Bitcoin now by creating an Altcoin. This should be a breeze because Bitcoin is open source and I even know how to write code. We’re guaranteed billions, can’t lose. Now where do we start? A website, we’ll need that. That’s no problem. Next stop, Github, where I’m going to click “Fork” and copy all the Bitcoin code. Let’s call our new project Bit-Coin-Hans, or BCH for short.
Great, now we’re going to need some miners. We cloned Bitcoin’s code so we need miners with special ASIC chips mining SHA-256. Somehow we have to convince them to mine Bit-Coin-Hans instead. Oh, and we need some software developers. How to attract them? I know, I’ll just spend Satoshi’s coins because the chain is now mine. Wait a minute…. Why can’t I spend them? No matter, but we will need exchange integration. I’ll just set that up with Coinbase.
“Hello, Coinbase? Yes, this is Bitcoin… you know… Bit-Coin-Hans? From the Southern Isles? Ticker BCH? No?”
Now, as ridiculous as all that was I hope my point is clear. There have already been many forks of Bitcoin, so there’s no need to speculate on how it would go. Ultimately some people like the new fork and decide to keep it, use it, or maintain it. But over time just watch what happens. As I write this, Bitcoin Cash (actual ticker BCH) is trading for $435 dollars, and Bitcoin (ticker BTC) is trading at $37,087. Clearly, the market is aware that these two projects are not the same and they’re voting with their dollars.
Additionally, we can see that miners follow market cap more or less. BCH has 1% of the hash power that BTC does.
Source: https://fork.lol/pow/hashrate
This has grave implications for security of the lesser chain. Put simply, if Bitcoin miners wanted to take over the BCH chain, it would only take a tiny fraction of them to do so. By comparison, there simply aren’t enough ASIC machines to perform such an attack on the Bitcoin blockchain.
In fact, some cryptos are small enough that anyone can simply “rent” enough hash power to completely destroy them for a few hundred bucks an hour. Take BitcoinGold, ticker BTG for example. Right now I can rent enough hash power to forcibly rewrite their blockchain for about $329 dollars per hour. Does anyone think the BTG blockchain is as immutable as the BTC blockchain if that’s the case?
Immutability is arrived at through the clever use of data structures that are tamper-evident, backed by mathematical probability and the value that the community places on it. Without any of these three things, immutability is a joke, like most Alt Coins.
The other day someone sent me a video of someone in finance. This person said “Look at this website, there’s a picture of a dog on it. ‘Dogecoin is an open source peer-to-peer digital currency, favored by Shiba Inus worldwide.’ Shiba Inus are dogs! I don’t get this whole scarcity thing.”
In closing, if you think a website with a picture of a dog on it has anything to do with the value of BTC then … you’re actually correct! Dogecoin was created as a joke, as an experiment, and as a light-hearted way to introduce people to crypto. You can still get free Dogecoin from one of the many “doge faucets” on the internet.
But rather than proving that Bitcoin isn’t scarce (and I’m sorry this is such a bad take), how about the fact that Elon Musk had the Twitter bio “CEO of Dogecoin” before it read simply “#Bitcoin?” Maybe Dogecoin was the gateway drug for an entire generation of meme economy participants? Maybe a crypto that trades for pennies, or fractions of pennies is actually useful in some way? This is a free market after all, isn’t it?
Cheers,
