Cryptocurrencies are something brand new in human history In the first video, I talked about why triple-entry accounting is something so revolutionary, and gave you some of the basics of Bitcoin, the first major implementation of this new kind of accounting
In this part two, I'll tell you about some of the other kinds of cryptocurrencies and talk about whether you should buy some I like to use the analogy of the beginning of the Internet in the 1990's as an instructive example of where we could be now, and what the future might look like [music] Does Bitcoin even have any real value? Remember from part one, Warren Buffet said it's value is >> WARREN BUFFET: But in terms of value: You know, zero >> MATTHEW: But Michael Saylor, the CEO of Micro Strategy, which holds more Bitcoin than any other public company, says this: >> MICHAEL SAYLOR: Bitcoin is the apex property of the human race There is no property invented in the history of mankind that is better than Bitcoin
Not land, not gold, not silver, not stocks, not bonds, nothing So, who's right? What gives Bitcoin value? Really, that's a philosophical question we could ask of all money Just like Paris Hilton is famous for being famous, money is valuable for being valuable Bitcoin, dollars, gold, or euros, and even those giant stone coins of the Yap people are all valuable because people believe them to be valuable Scarcity also influences value
Gold and silver are rare and hard to mine Dollars and Euros are also scarce, but governments can create more The inherent value of Bitcoin comes from its mathematically verifiable proof of digital scarcity As a Reddit user RIP King puts it: "Verifiable proof of its digital scarcity creates a foundation for the inherent value The blockchain makes that possible
And people are willing to pay a certain price for that proof of digital scarcity Current price is largely driven by speculation that this particular digitally scarce protocol will become some sort of base layer for world commerce or storage of value, now or in the future" You can't know how scarce dollars or euros will be in the future, or even gold and silver, I guess, but with Bitcoins and many other cryptocurrencies, it's built right into the protocol, and you can mathematically verify it Bitcoin is just one of a bunch of different cryptocurrencies, maybe you've also heard of Ethereum or Dogecoin or others Let me outline several broad categories for you
Bitcoin is a store of value In that sense, it's like a bar of silver or gold It doesn't do anything other than be valuable And really, all of these currencies can store value But some can also do more, like run smart contracts
Ethereum, Cardano, Binance Coin and Polkadot are examples This is sort of like oil, it's valuable because it's useful for doing something, in this case, for doing decentralized finance, or DeFi, using digital contracts Making payments is another purpose for currency, if you need to pay for things at the store or give money to a friend This is how we use paper currency and metal coins Nano is the best example of this: there are no transaction costs, and it's almost instantaneous, kind of like handing you a twenty dollar bill, except that I can do it electronically from a different continent
This was an original goal for Bitcoin, but transaction costs are currently too high and wait times are way too long, no one wants to spend five extra dollars and wait up to an hour for the transaction to happen Now, if you're transferring four million dollars of Bitcoin, maybe that's acceptable, but not really for small amounts Speaking of small amounts, micropayments are another possible use of cryptocurrencies, and this will become more important as the "Internet of Things" grows Nano could be used for this, and also Iota because they have zero transaction fees Imagine paying car insurance by the mile, or getting paid a tiny little amount each time someone watches your video on Facebook or listens to your song on Spotify, or likes one of your Instagram post
Another category is running exchanges Binance Coin, Uniswap, and Chainlink are examples of this They facilitate automatic trading between different currencies, usually with no middleman required And then there are coins that are used for speculation, like the meme coins Dogecoin or Shiba Inu There are a lot more coins, but I think those are the main, broad categories
There are so many! Which one should you invest in? Which coin is going to 100X to the Moon for your Lambo money? Well The good news is that there is a crypto that will go up ten thousand percent in the next five years, guaranteed! The bad news is that no one knows for sure which one it is, unless you're watching this five years from now in the future, you know what it is But today, in July 2021, I have no idea I like to use the analogy of what it was like in 1998, which I'm old enough to remember It was the early years of internet companies
Let's say that you truly believed in the power of this new thing called the internet to transform the world, and you would have been right But if you had a pile of cash back then, which company should you have invested in, back in 1998? Maybe Yahoo! or Netscape, or Cisco, or Amazoncom, or Excitecom Some of those did do well in the short term
We all know now that the right answer long term would have been Amazon, but it wasn't super clear back then And in fact, Amazon didn't even report a profit until 2003, eight years after it started Well, the same thing is true now Let's say you see huge possibilities in these ideas of triple-entry accounting, smart contracts, decentralized finance, and provable digital scarcity, and you think this just could be the future of finance for humanity Unfortunately, it's not super clear right now which assets and which systems will be most successful, so I don't think I can give you any specific advice
Back in the mid-1990's, we could see the potential of this new thing called the internet It had been around two or three decades, and more and more people were starting to use it But we didn't know exactly what it would look like Some people were predicting that it would change the world, and it sort of did, but slowly I love the way Kevin Kelly puts it: "Not only did we fail to imagine what the Web would become, we still don't see it today! We are blind to the miracle it has blossomed into
The accretion of tiny marvels can numb us to the arrival of the stupendous I love that phrase "the arrival of the stupendous" And he said that way back in 2005, before iPhones and mobile devices Since then, we have had an accretion of even more tiny marvels And not so tiny marvels
Streaming movies, maps on our phones, online shopping, online school I think the same kind of thing could be happening right now with digital currencies It's not just the newest fad, it really is something fundamentally different, and none of us have any idea what the future will look like, but it will probably be similar to the beginnings of the internet Slowly we'll find more and more uses for this technology, and one day, in a few decades, we'll look back and realize how much has changed But today, in 2021, we're still at the very beginning
In the early 1990's some people said the Internet was a big deal, and was here to stay They were right Others said it would be the CB Radio of the 90's And they were wrong What hardly anyone foresaw was the mobile phone revolution, just fifteen years away at that point
So we got some things right, other things wrong, and just didn't see other things coming The same was true with the arrival of personal computers in the 1980's And you could probably tell similar stories with the inventions of the automobile, of radio, and of TV So probably it'll be the same with Bitcoin and other cryptocurrencies The libertarian anarchist vision of completly anonymous monetary freedom probably won't happen for everyone
Just like the internet makes it possible for everyone to have their own printing press and TV station in the forms of a blog and a YouTube channel, but not everyone does In the same way, cryptocurrencies will make it possible for everyone to be their own bank, but not everyone will But maybe, partially, on the small scale, things will move in that direction And it'll probably be different in the USA versus India, versus Mexico versus Venezuela The naysayers like Warren Buffet are probably wrong, too
Just like the people back in 1995 who said "why would you ever want to order a book online, pay five dollars shipping and then wait a week or two for it to arrive? You can drive to the neighborhood bookstore and have it in ten minutes" Well, they're right No one wanted that back then, and we don't now In fact, you can still drive to a bookstore But it's probably not in your neighborhood anymore, it's probably twenty minutes away
And they only have the most popular ten thousand books, not pretty much the entire catalog of all books, ever And I said no one wanted to pay five dollars for shipping, then wait a week, but that's not quite true, either Not no one If you were looking for a particular obscure book, or it was worth it to you to not have to drive to the bookstore, ordering on Amazon in 1998 was a good solution But that's not our experience today
Amazon has consistently reduced the friction and perceived price with a Prime subscription, so that when you buy a book, it feels like a good price, and it feels like free shipping, and then it arrives in a day or two Or even later that night Same with Bitcoin or cryptocurrencies It's a bit inconvenient now, kind of a hassle I mean, who wants to diligently memorize a twenty-four-word phrase, keep their coins on a multi-sig hardware wallet, and pay five dollars every time you transfer funds? No one
Well, not exactly no one If you're transferring huge amounts, or if you're a crypto-libertarian anarchist-whatever, maybe you do But that's not likely to be our experience in twenty years Just like the experience of buying a book online has changed, Our experience of using cryptocurrencies will likely get much easier Today, if someone wants to send one thousand dollars from New York City to their grandmother in Mexico City, it costs a thirty dollar fee at Western Union and takes a day or two
In twenty years, it will cost less than five cents Or may even be free, and will happen within ten seconds In fact, I can do that today, right now, with Nano But Grandma doesn't use Nano yet Not yet
And even if she did, she'd still have to convert it into pesos Of course, even with Western Union, there's a conversion from dollars to pesos But once the demand starts to be there, there will be solutions Yes, Western Union will still exist in twenty years, and people will still use them, just like brick and mortar bookstores still exist today But I think we're going to start seeing a slow shift from that old way of using money to this new way of using money
So, I still haven't directly answered your question about what you should invest in Honestly, I don't know But I will say you should only invest the money you can afford to completely lose in case that happens Maybe the big two: Bitcoin and Ethereum Buy some and leave it there for several years
For example, you could take some money that you don't need for a long time, and then put half of it into Bitcoin and half into Ethereum, and then just wait ten years and see what happens For context: right now in July 2021 one whole Bitcoin is worth about thirty two thousand US dollars, which means one satoshi is worth point zero three two cents In other words, one US Dollar can buy 3100 satoshi Satoshi is kind of like the Bitcoin cents, except there are 100 million satoshi per Bitcoin, instead of 100 cents per US dollar And the current price for Ethereum is about 2000 dollars per Ether
What's it going to be worth in ten years? No one knows So Bitcoin and Ethereum are currently dominant But I will tell you what I hope wins: I really like Nano I want to be able to pay someone instantaneously, with no fee, from my cell phone If I send my friend twenty dollars, or twenty Nano, I don't want them to receive 19
999, I don't care how many nines are on the end, I want the number to start with a two, not with a one So I want zero fees And I don't want to wait, especially if I'm standing in line at a grocery store I really do think that someday soon, it will be quick, easy, and free to send currency that people use to someone online, with no middlemen, no banking institutions authorizing it, anywhere in the world Unfortunately, there's no guarantee we'll get everything right, just like with the beginning of the internet
We got email right: you can send email from any address to any other address, across all these different kinds of systems But I think we got instant messaging slash texting wrong There are all these separate systems: Facebook, WhatsApp, Signal, texting I'm still not a hundred percent sure if I text a picture to a group of people who are using Android and iOS, if it will really go through to all of them And it's 2021! This should be working
Same with social media It has the potential for great good, connecting people, sharing pictures, sharing ideas, posting events But when profit gets mixed in, we get weird results like accidentally moving people towards extremes See "The Social Dilemma" documentary for more about this Probably we'll have all the same kinds of opportunities and perils with cryptocurrencies
Same with any new technology, the advent of personal computers, or even the beginning of the printing press And I should warn you that with cryptocurrencies, the markets are currently susceptible to manipulation, since it's still a relatively small market and not regulated like stock markets, but it's likely to even out in the future So, I don't know what's going to happen, but it should be interesting, and we're fortunate to be living through this time in history I just hope we get things right I'm going to make a note to myself to make a follow-up video exactly five years from now and ten years from now after this one is posted, to see how things turned out
I guess that's assuming YouTube still exists, and that we haven't had the zombie apocalypse, and should the Lord tarry, etc, etc Ten years is actually both a long time from now, and surprisingly soon paradoxically, once we get there So, before I go, a quick PS For the sake of making a big, quick overview, I've glossed over a lot of detail, and may have gotten some things wrong I'm neither a financial advisor nor the son of a financial advisor
So feel free to correct me in the comments below, and I'll make a pinned comment with any major errors that need to be corrected But I hope I've at least given you the big picture and gotten that right Okay, thanks for watching I appreciate it Take it easy, Have a good day
