“Reports of the death of Bitcoin Have been greatly exaggerated” (after Mark Twain).
As the price of Bitcoin meanders downwards, some are predicting its imminent demise.
HOLD ON, Folks!
We are dealing with humans here and, as Dan Ariely says, humans are “predictably irrational”, and the science of Behavioural Economics is about to kick in.
First the BTC price will drop but not to zero but will settle at $10, $100 or $1,000 completely unrelated to its ‘real value’ of course, but it was ever thus. This is because people just love round numbers, not surprisingly called ‘round number bias’.
The price will not drop to zero, first because people hate to lose (so-called ‘loss aversion’) and will retain something losing value because it hurts to give up.
Secondly the Bitcoin blockchain is not going away! The exchanges may fail, regulators might start asking questions, tax authorities may demand tax on gains, but the unspent transactions are going to be out there – forever!
One hundred years from now, there will still be archaeological vestiges of today’s blockchain being lovingly maintained by a few priests of the ‘Consensus’ with Nakamoto as their deity. Only those who can speak the ancient C++ or Java will be permitted to join the priesthood. And there will be TV programs being made about the crazy, good old days of the Bitcoin bubble.
The TV documentaries will tell of the people who became fabulously wealthy getting out at the top, and the poor souls who sold all to buy at the top. The former will claim prescience but it’s really just good luck; the latter will claim bad luck but it’s really just greed and stupidity. This is called a ‘choice supportive’ or ‘outcome’ bias.
They will tell of the man who by writing out his private key, putting it a plastic bag, so it didn’t get wet, and storing in his safe. He lost all of his money because he happened to be dyslexic.
And a load of people will end up with fairly worthless BitCoins that they don’t know what to do with. Look in your attic, what do you do with something you don’t know what to do with. Put it away in the sure knowledge that one day it will be useful. This sometimes called the ‘availability heuristic’ or ‘ostrich effect’.
So, what do we have? We have a few bits of paper (private keys, public keys, block numbers, hashes etc) with 32 or 64 characters printed on them that may or may not be of value to someone else.
It’s a bit like cigarette cards. By the way, did you know that a single cigarette card was reportedly sold a few years ago for $2,350,000 – makes Bitcoin valuations chicken feed?
People love numbers- so entrepreneurs will create transactions that have magical meaning. For example, block number #508329 has a hash of 0000000000000000004dfba718131a21c91a7e89be8949aa588de57d333e19af
Note the ‘88’, which is a Chinese lucky number, anyone with a transaction in such a block could sell it to someone who would want to give it as a present for Chinese New Year. Can you image what a hash with 8888 or 888888 would sell for?
People could also create transactions with ‘magical’ properties such as exactly 8888 satoshi or 88888888 satoshi or 16081977 (Elvis’s Death) or 0801935 (Elvis’s Birth). 1776 satoshi would appeal to American patriots and 1789 to the French. Couples could create transactions specially for their wedding and their first born.
Soon the value of the numbers associated with a transaction, block or hash will exceed the value of the transaction itself. Then the numbers rather than the Bitcoins will be exchanged.
What does one do with something that is almost worthless? Give it to your grandkids of course.
It will become a ritual for grandfathers to take their grandsons aside and initiate them into the Consensus by handing them a private key, not to be used until they reach 21, when it will be just as worthless as today but will have emotional value. Grandmothers will do something similar with granddaughters, by jointly crocheting a cushion cover with the pattern of a private QR code.
Lovers will tattoo half of a private key onto their arms or even more private parts, only to lose the Bitcoins when they split up acrimoniously. Wives who have been cheated will, rather than chop up their husband’s suits, put their husband’s stashes of private keys in a liquidiser with some tomatoes and serve it to them as cold Gazpacho.
New hereditary titles, such as Keeper of the King’s (private) Keys will be created in monarchies. And in republics, each year a private key will be buried in the Tomb of the Unspent Bitcoin.
New games will be created. Instead of colours, Rubik’s cubes will have numbers one each face, the game is to arrange into a private key for a particular transaction – might take a long time to unlock. Monopoly will be reconfigured to play with crypto-currencies (e.g. Ripple, Monero and Ethereum) and new games like ‘Create your own ICO’, will be developed. Piñatas and Christmas puddings will have pieces of paper in them that may or may not be real private keys. It will give a new meaning to the popular game – Craps.
Bitcoin exists and will continue to exist for a very long time, only its economic purpose will change. It will go from a joke – to a … joke.