Lamborghinis and Galactic Spaceships: Bitcoin Changes Everything

LFTAnd I’m back in New York City.

By the time you read this, I’ve already checked into my new… and hopefully improved… Airbnb.

This is similar to how I like to imagine the Big Apple before I arrive…

Street Art

Source: ABVH

Why? I have no idea. I’m not a psychologist.

Alas, it’s nothing like that here. It’s too cold for that much fun.

No surprise. It’s no Bangkok.

LFTOne thing’s for sure: I clearly have trouble sitting still these days…

You might’ve noticed.

But my travels, you must know, are all for good reasons.

I’m in NYC this time to take a weekend training course. A course that your fellow LFT readers recommended a while back.

Readers with exceptional memories will remember what I’m talking about. Those who don’t, well…

They’ll just have to wait until Monday.

That’s when I’ll be a mean, lean, fighting machine. (hint, hint.)

[Think you know what I’m up to? Email it: Chris@lfb.org.]

Before I dive any further into that, let’s rewind back to a meeting I attended last week…

This meeting was all about your favorite digital currency. Yep. It was about bitcoin.

Today, you’ll learn why bitcoin isn’t just set to be the future of money… but the future of EVERYTHING.

Everything, you ask?

Benedict Cumberbatch GIF

Come on…

Everything?!

Jennifer Lawrence GIF

One more time…

I think you get the point.

(It’s going to change everything.)

LFT“You know,” Judd Bagley, director of communications at Overstock.com said, “frequently in business, you will make decisions and then go on to encounter hidden costs that you hadn’t anticipated.

Judd Bagley“We found quite the opposite with bitcoin…

“What we’re finding are hidden savings.”

Overstock.com, if you don’t know, is one of the world’s largest online retailers.

On Jan. 9, 2014, the company became the first major retailer to start accepting bitcoin.

That year, it brought in a total of three million dollars in bitcoin transactions. And compared to its conventional transactions, it saved boatloads of money on them too.

“Due to the nature of the bitcoin technology,” Bagley explains, “you cannot have fraudulent transactions. Whereas when you’re operating online retail, we spend an inordinate amount of time and money dealing with fraudulent purchases.

“And this is one of those things where we have zero risk of that with bitcoin.

“Not only that, but we don’t have to pay credit card transaction fees.

“Not only that, but those three million dollars we brought in cost us almost nothing to get.

“And, as it turns out, these are very loyal customers. Not only that, they tend to buy higher margin products…

“Which is not what we were expecting.”

Actually, Bagley explained, they weren’t expecting much. So why, then, did Overstock.com decide to take the bitcoin plunge?

LFT“Our CEO Patrick Byrne,” said Bagley, “is kind of a classical liberal… or you might call him a libertarian…

“And he is a big fan of inflation-proof stores of value, like gold. Gold, of course, is something that’s difficult to transact business with.

“But bitcoin has many of the virtues of gold, in the sense that the addition of new bitcoin into the marketplace takes place in a mathematical constrained manner.

“The same with gold.

“The supply of gold increases at about the rate of 3% per year. And it’s been doing that for hundreds of years.

“So it was initially kind of a philosophical decision. We wanted to support this thing, which seemed worthy. But it’s gone on to be a flat out business decision. And it’s very useful.

“And, yeah, it’s been a great success.”

[A man sitting on Bagley’s left pipes up.]

LFT“Bitcoin was created to be the global digital currency for the Internet,” Sonny Singh, chief commercial officer of Bitpay said.

Sonny SinghBitpay is a payment processor for merchants. Over 50,000 businesses and organizations use its service to process bitcoin payments.

“Last year,” Singh went on, “a lot of speculators got involved.

“And that pushed the price up to $1,200.

“And a lot of our customer merchants were selling Lamborghinis and Virgin Galactic spaceships… and it was great, and everyone was making a lot of money.

“But now a lot of the speculators have been pushed out of the market. They’re just more in the sidelines.

“But yet, when the price still dropped 80%, we’re seeing a record number of transactions now than we ever have before.

“No longer are people buying Lamborghinis… they’re actually buying medium-sized ticket items, which is the value that bitcoin provides.”

[And another voice, to Singh’s left, weighs in.]

LFT“In order for bitcoin to really take off,” Ryan Selkis of Digital Currency Group said, “we need three things.

Ryan SelkisDigital Currency Group is an investment/innovation hub for startups in the bitcoin space.

Here are the three things Selkis said bitcoin needs…

1] We need exchanges to move bitcoin in and out of the dollar, yen, euro, etc.

2] We need merchant processors, that will allow companies to accept bitcoin for payment.

3] And we need wallets that are safe, insured and easy to use.

All three of these things are in place. But they’re not at the level that bitcoin needs to roll it out for mainstream use…

Yet.

“In the past 18 months or so,” Selkis goes on, “we’ve seen an explosion of investment in those three core areas of infrastructure investment.”

Bitcoin is in the “deceptive” stage you learned about yesterday. Meaning, while bitcoin’s growth seems linear from the outside look in, behind the screen it’s growth is exponential.

And the majority of investors won’t realize this growth until it’s too late.

OK. We know what you might be wondering…

What about the price? How will all of this affect the price of bitcoin?

LFTWell, Selkis says, when it comes to the price of bitcoin, one just needs to have perspective…

“There have been three or four boom-bust cycles,” Selkis points out.

“The currency was created in 2009, the technology was released in 2009… [and] it went up to a dollar… from zero.”

And, then, it crashed down to about a quarter.

After that, Selkis recalled, it went from about a quarter to $32.

And then… boom… crash.

But it went down to $3, instead of a quarter. Progress.

“And then, finally,” Selkis said, “we went up to $1,200.

“And now it’s down to $250.”

So, looking at it from that perspective, we can see that in less than six years, we have an idea that went from zero — having no value at all — to being more than 250 times more valuable than one U.S. dollar. (272 times, upon writing, to be exact.)

Not bad.

But here’s the thing…

LFTThe one thing that all the speakers agreed on was this: If you’re paying too much attention to the price of bitcoin, you’re missing the big picture.

The technology behind bitcoin — called the blockchain — is what’s going to change everything.

(Yes… everything.)

Not bitcoin. Bitcoin is a challenge to today’s central-banked currencies, sure. Due to its decentralized nature, bitcoin could, hypothetically, take money out of government’s control.

But the blockchain is capable of so much more.

Allow me to explain…

Let’s first take the Internet as an example.

The Internet is a communications protocol that governs the rules and regulations for information exchange. It’s successful because it’s fast, public, open, cheap, easy to use, transparent, and customizable.

The blockchain is similar. But instead of information, the blockchain is a protocol for value exchange. It’s the Internet of value.

Put simply, it’s a “financial network” of sorts that’s fast, public, open to anyone, cheap, easy to use (once it’s optimized), transparent and customizable. Like the Internet.

And it’s decentralized. So it takes the financial network out of monopolist’s and government’s hands and gives it back to the people.

Bitcoin, you see, is just a product of the amazing technology provided by the blockchain. And bitcoin is only a small part of its capabilities.

“At some point,” Selkis said, “I would say that there’s 99% chance that this blockchain technology — in some way, shape or form — becomes as big, or bigger than the Internet in terms of value creation and in terms of innovation.”

That’s huge.

So what is the blockchain capable of? Here are just a few things…

Smart contracts written into the blockchain have the potential to make the lawyer and the banker obsolete.

It gives anyone the ability to become a Decentralized Autonomous Organization (DAO). As a DAO, all “white collar” jobs become autonomous with no central control. This lowers overhead and gives anyone the power to grow a business quickly and affordably.

Micropayments become possible. Which has the potential to change the way we interact with our money and pay for services. Without transaction fees, it’s clear to see how small entrepreneurs benefit here too. With both of these factors, small businesses can compete more effectively by charging less for their services, thus attracting more consumers.

All the things that currently need centralized control (which is everything) — voting, domain names, financial exchanges, fundraising, intellectual property, etc. — can be automated on the blockchain.

But here’s the point that needs driven home…

LFTCentralized control, as we know, breeds corruption. You know, Dalberg-Acton’s whole “absolute power corrupts absolutely” thing.

The blockchain acts as a truly neutral party.

It takes that power out of the hands of a central figure and makes the process equitable and incorruptible.

And that’s where you should set your sights if you really want to make money in the bitcoin space…

The blockchain.

Our own bitcoin guru and Laissez Faire Letter contributor, Dominic Frisby, agrees. And he wants to show you how you can prep yourself to make money from the blockchain’s rise.

LFT“I may not be especially bullish about the price,” Dominic writes, “but that doesn’t mean you shouldn’t go out and get yourself some bitcoins.

“The reason is because of the “blockchain” technology underlying Bitcoin.

“I’m incredibly bullish about it.

“In fact,” Dominic goes on, “I’m currently in talks to become director and, possibly, chairman of a fund whose sole focus is investing in the companies using this tech.

“So I think it’s in your best interest to get familiar with it. You’ll be well placed to make smart investments when the time comes, because you’ll have firsthand knowledge of how this new innovation works.

“I believe it’s worth expanding on why I’m not so bullish about the Bitcoin price. It will give you some perspective on where we are… and where we may be going.

“My thinking,” he explains, “is based around a cycle known as the “Hype Cycle.

LFT“Despite the Internet having changed the world over the last 15 years,” Frisby goes on, “the Nasdaq is still trading at a lower level than it was back in 2000.

“I believe something similar has happened with Bitcoin, just on a smaller scale.

“The dot-com boom, bust, and recovery played out what research company Gartner has dubbed the “Hype Cycle.”

“It’s the cycle that new tech often goes through, and it works something like this.

“There are five phases.

Hype Cycle

Source: Click here.

LFT“The first is known as the “Technology Trigger.”

“Some new tech is conceived, and it gets people interested. There’s some R&D, some seed money and startup capital, some first-generation products that pique early adopters’ interest, and then suddenly it gets mass media hype. That was dot-com in the 1990s.

“That’s when we move into Phase 2, the “Peak of Inflated Expectations.”

“The tech is amazing. It’s going to change the world. Speculative money starts pouring in, and share prices rocket. That was dot-com in 2000 — and, I believe, Bitcoin in 2013.

“Next, we move into Phase 3. Prices fall a little, there’s some negative press, there are some business failures, less than 5% of the potential audience has fully adopted, and the reality that there is a long way to go settles in. This is the “Trough of Disillusionment.” Before long, prices crash. This is dot-com in 2002 and, I think, Bitcoin now.

“But then we head into Phase 4 — the “Slope of Enlightenment.” Second- and third-generation products come out. Some of them are good. Practices improve, more and more users come on board, and new products are developed.

Slope of Enlightenment

Source: Hitenism.com

“Finally, we head into Phase 5 — the “Plateau of Productivity.”

“That’s where dot-com is now.

“Companies, like Apple, and Google, are making serious money (Apple’s now the biggest company in the world). The Internet has over 3 billion users. It’s finally doing all those things that people were talking about back in 2000.

“Blockchain tech is going to find a host of different applications — in communications and messaging, in social networking, in finance, in law, in auditing and accounting. You name it. Words like “decentralized” and “disintermediation” and, well, “blockchain” — you’re going to be hearing them all the time.

“The problem is it’s still virtually impossible to invest in this sector. Most companies are still private. There are no listed funds. It’s too early.

“But all that will come. Which is why I want you to be ready for it.”

[DISCLOSURE: I own some bitcoin. Surprise.]

Let’s jump right to reader mail.

LFT“Wine is a probiotic, too,” Roger M. writes in response to this week’s quiz. “Recent research shows that bacteria in the gut direct the immune system.”

LFT“Dandelion greens,” Alan G. writes.

“Yes, very good for you, but maybe hard to eat. I thought I’d pass on a trick I heard about.

“Mature dandelions are tough and bitter. Young dandelions are sweet and tender. In the summer or fall, dig up a few of the largest dandelions you can find.

“Save the big roots. Pot these.

“Put these in a window to stimulate growth. Cut the new sprouts for salads. They are wonderful, tender, and full of nutrients.

“The bigger the root, the longer they will last.”

LFT“I believe Tom O. should have the explanation of how one can “love” an inanimate object,” Jack H. writes in response to a fellow LFT reader.

“I can state from personal experience I have “loved” a particular chair, golf club, tennis racket, baseball glove and numerous other inanimate objects.

“Just because it can not love you back doesn’t keep you from “feeling” a particular emotion.

“I can also tell you I’ve “loved” an inanimate object more than I’ve “loved” some of my neighbors!”

LFT: Good tips.

Thanks, guys.

And now I’m off… to drink wine… plant dandelions… and, yes Tom, love it.

Oh yeah, and to train my body for whatever comes.

But I’ll tell you all about that on Monday.

Until then,

Chris Campbell

Chris Campbell

Written By Chris Campbell

Chris Campbell is the Managing editor of Laissez Faire Today. Before joining Agora Financial, he was a researcher and contributor to SilverDoctors.com.