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Hey everybody, welcome back to TCB for another TCB short. For the short today, we're gonna be tackling the question, what if someone creates a better digital currency? So what if someone creates something better than Bitcoin? And let's start with, I think, is probably one of the most strong or strongest arguments against Bitcoin. Not government regulation, not energy consumption, not volatility, not even quantum computing. It's simply, what if somebody invents something better? So what if tomorrow someone creates a digital currency that is faster than Bitcoin, cheaper than Bitcoin, more private than Bitcoin, more scalable than Bitcoin, or easier to use? Why wouldn't Bitcoin eventually just become the Myspace of digital money? And I think that's a legitimate question, and I think it's something we should be willing to ask because if Bitcoin is valuable simply because it was the first cryptocurrency, then Bitcoin has a problem because technology doesn't work that way. Better technologies replace older technologies all the time. So I don't think the interesting question is necessarily can someone create another cryptocurrency? Obviously, they can. Thousands have been created, if not millions, at this point. The interesting question is, can someone create a better monetary network? And that's a much harder problem to just kinda try to copy and paste overnight. So when it comes to kinda Bitcoin or cryptocurrency, what does better even mean? Better how? When someone says, "What if they build something better than Bitcoin?" My first question would be, better how? Uh, you mean faster? 'Cause Bitcoin can be made faster. Cheaper? Bitcoin transactions can be made cheaper. More private? Bitcoin's privacy can be improved. More scalable? Bitcoin can be layered and optimized. More energy efficient? Obviously, that's a, that's a concern for, for many. But here's the problem. Money isn't a single feature. It's a system of trade-offs. So if I make a cryptocurrency more d- more centralized, I might be able to make it faster, but I've sacrificed decentralization. If I make it easy to change the supply, I might gain some flexibility, but I've sacrificed scarcity. If I make validation more computationally demanding, I might increase some security properties but make independent participation more difficult for nodes to run on their own. So the question isn't can we make Bitcoin better at something? Of course, we can. The question is, can we make the entire monetary system better without sacrificing the properties that make decentralized money valuable in the first place? And that's a much higher bar. So I think people kind of fail to appreciate just how unlikely Bitcoin's success was in the first place. Bitcoin should have failed And before we ask whether something can replace Bitcoin, we should ask how unlikely was it that Bitcoin would succeed at all? If we really think about where Bitcoin started, you go back to October 31st, 2008, Satoshi Nakamoto publishes a nine-page paper describing a peer-to-peer electronic cash system that could operate without a trusted financial intermediary onto a crypto message board. Then July 3rd, 2009, Satoshi mines the genesis block, and essentially nothing happens. There is no company. There is no CEO. There is no marketing department. There's no venture capital round. There's no established customer base. There isn't even a functioning market price for Bitcoin at the time. It's just some software and a handful of people that are willing to run it. The first recorded Bitcoin transaction was Satoshi sending ten Bitcoin to Hal Finney in January of 2009. And for a long time, Bitcoin wasn't really money in any conventional sense at all. It was an experiment. So the first recorded exchange rate offer didn't happen until October of 2009, nine months after the network launched, and at that point, somebody offered one thousand three hundred and nine Bitcoin were offered for one dollar. And then May 22nd, 2010, someone paid ten thousand Bitcoin for two Papa John's pizzas. This was famously known as Bitcoin Pizza Day, and at the time, those ten thousand Bitcoin were worth roughly twenty-five dollars. Needless to say, they're worth far more now Uh, but that's not actually the remarkable part. The remarkable part is that someone was willing to exchange real-world value for an entirely new digital asset at the time that had no established monetary history at all. So the point of all this was Bitcoin had to bootstrap itself from essentially zero. So how did it do that? 'Cause unlikely, as, as improbable as this was, it doesn't mean that it was accidental, and that's an important distinction I'd like to make. So Bitcoin's success was very improbable, but that doesn't mean it succeeded entirely by chance. Th- those are two totally different things. So imagine you just shuffle a deck of cards. The act- the exact order the cards end up in is extraordinarily improbable. It would be almost impossible to guess beforehand. But you don't need to explain it as a miracle in order to know that it came out that way. It was just a natural result of the process, and Bitcoin is similar. I think Bitcoin put certain incentives into motion, and the exact circumstances that produced Bitcoin were extraordinarily unlikely. The timing was unusual. The technology had finally reached the point where all of the different pieces that kind of Bitcoin put all into the same protocol could be assembled. Satoshi, the creator, developed the system, kind of putting all these pieces together. And then there were early participants that were willing to experiment with it, and the network survived. More people discovered it, markets emerged, infrastructure developed, and the network continued operating, and that sequence was never inevitable. In fact, it was quite improbable. But once Bitcoin existed, its success, I would argue, wasn't simply random. 'Cause Bitcoin embodied a set of monetary properties that addressed a real problem. Born out of that financial crisis of '08, where they were just printing infinite money, Bitcoin o- k- offered a solution to a real-world problem. So for the first time, people could participate in a monetary network where the rules for the supply and transfer of the asset weren't dependent on a central issuer and their discretion. So you could hold the asset without needing permission from a bank. You could verify the monetary rules yourself. You could transfer value across the network without relying on any central clearing institution, and the supply schedule was defined by the protocol rather than being discretionary policy by an institution that would abuse that supply. So whether you think any of those properties are necessarily important or not to you, they did address a real-world problem, and that's why Bitcoin continued and continues to attract users. The technology created the possibility, but it was the monetary properties and the incentives that actually created the demand So it had a real bootstrapping problem in the beginning, 'cause how do you start a new money? Even though we know our money is kind of fundamentally broken, how do you start a new one? Like, it seems like a very difficult problem. Imagine I tell you today, "I've created a new currency," and you'd probably say, "Great. Who accepts it?" And I'd say, "Well, almost nobody, if anybody." You'd say, "Then why would I want it?" And I would say, "Well, because other people might eventually accept it." And you'd say, "Why would they?" And so that's the bootstrapping problem. It's hard to argue exactly why somebody would accept a brand-new monetary asset. So money is valuable partly because other people are willing to accept it, and if people are willing to accept it, it's partly because it already has value of some kind. So it's kind of a chicken and an egg problem when you're trying to create a new money out of nowhere, and Bitcoin had to somehow get from zero users to users, from zero value to value, from zero liquidity to liquidity, from zero security to security, and from zero credibility to credibility. And it had to do this without any central institution forcing people to participate or any advertising department pleading its case, and that's extraordinarily difficult. So, Bitcoin wasn't launched with government or corporate support. It had to provide an incentive structure capable of bootstrapping an entire monetary network from scratch, and that's pretty miraculous that that occurred. So when it comes to can you create a new digital currency, you can copy the code of Bitcoin. Bitcoin is open source code. Anyone can copy the code. Anyone could change the parameters. Anyone can launch a new blockchain. So technically, Bitcoin is incredibly easy to copy. You could change some things. You could change the block time or the supply or the consensus mechanism, the name, the logo, and just launch a new one tomorrow. That's actually really easy. But the distinction is you can copy the software, you can't copy the history, you can't copy the years of accumulated security, you can't copy the existing liquidity and infrastructure, you can't copy the monetary credibility that's accumulated through years of its operation without failure. You can't copy the participants that have come to the network. Uh, you can create something. It's creating it's not that hard, it's getting people to use it that's difficult. And you can't recreate the exact circumstances under which Bitcoin emerged, kind of that, like, very improbable conception of Bitcoin. So you can launch another cryptocurrency, but launching another cryptocurrency isn't the same thing as creating another Bitcoin. And that brings us to probably the biggest misconception about this entire discussion, and people often use the analogy, but Bitcoin isn't MySpace. People often think of Bitcoin as a technology, and that's not quite right. Bitcoin uses technology, but Bitcoin itself is better understood as a protocol, and that distinction changes the entire argument. So if you think about the internet, you can replace your computer, you can replace your phone or your browser, you can replace Facebook or Google or Amazon, but replacing any of those things isn't the same thing as re-replacing the entire internet itself. Because the internet isn't one company, and it isn't one application. It's a collection of protocols that allow an enormous network of independent participants to communicate with one another across the globe. And Bitcoin is similar. Bitcoin isn't Coinbase, Bitcoin isn't your wallet, Bitcoin isn't your hardware. Those are applications and infrastructure built around the underlying protocol of Bitcoin. So the protocol defines the rules. What is a valid transaction? How is consensus established? How are new bitcoins issued? How is the ledger maintained? What constitutes ownership? What rules does the network enforce? And that's why this is where the MySpace analogy breaks down. So replacing MySpace with Facebook was relatively straightforward. You just built a better application, you attracted users, people migrated, and the old service just became obsolete. That's a technology replacement. But replacing Bitcoin would be more like saying, "Let's replace the entire internet itself." You don't just build a better website, you have to replace the underlying protocol, and now you're talking about something much larger and much more difficult. You need independent participants to adopt your rules. You need developers to build on them. You need infrastructure to support them. You need users to trust them. You need liquidity, you need security, and you need the ins- economic incentives for all of that to grow. And you need the network to reach consensus without relying on any kind of central authority, not a government, not a company. So that's a very fundamentally different problem. So in this case, the protocol is the product, and this is why copying Bitcoin's code isn't particularly impressive. You can copy the code or you copy the implementation over- implementation overnight, but you haven't copied the protocol's social and economic history. You haven't copied its participants. You haven't copied the security and liquidity and the infrastructure. You haven't copied the credibility, and you haven't copied the years of people kind of independently deciding that these are the rules I'm gonna use and enforce. That's the part that's really difficult to reproduce. So when someone says, "What if someone creates a better cryptocurrency?" My response is that they probably will. The, the harder question is: Can they create a better decentralized monetary protocol? So what would actually replace Bitcoin? What would it take? So let's imagine we really do get the Bitcoin killer. What would it have to accomplish? First, it would need to offer a meaningful improvement, not just it's faster or it's cheaper or it's greener. It would have to improve the overall monetary proposition that Bitcoin addresses. Second, it would need to remain genuinely decentralized, and not merely decentralized in, like, a brochure marketing material sense, but actually decentralized in the way that Bitcoin is. And third, it would need to bootstrap an entire monetary network from scratch. So from scratch, it would have to get... have to pull users, get liquidity, create infrastructure, security, attract developers and credibility. And then fourth, it would need to survive, because one of Bitcoin's biggest assets is something that you can't manufacture overnight, and that is time. It has this Lindy effect of when something's been around, it's more likely to continue to be around. So Bitcoin has withstood the test of time since 2009, and the longer a decentralized system operates without any kind of catastrophic failure, the more information the world has about its resilience. And finally, it would have to convince people to adopt it instead of or to migrate from a monetary network that already exists, already is addressing the problem, and is already working. So that's incredibly high hurdle. So now Bitcoin doesn't get a free pass here. I think people sometimes treat Bitcoin as if it has some kind of divine right to survive forever. Bitcoin isn't valuable because we like it, it isn't valuable because we own it, and it isn't valuable because Satoshi created it. If somebody creates a genuinely superior decentralized monetary system, Bitcoin should lose, and that's not a failure of the idea. That's the market working as intended. Bitcoin doesn't need to be protected from challenge. It just needs to keep earning its place, and that's a very different claim. So the real Bitcoin bet here, it's not that nobody will ever invent something better. That's an impossible claim, and technology is ripping at a amazing pace, so something could be around the corner. The Bitcoin bet is closer to this. The combination of Bitcoin's monetary properties, decentralization, security, network effects, liquidity, and history will be extraordinarily difficult to improve upon without sacrificing something equally important. And that's why I think the question, what if someone creates a better digital currency It might be one of the best questions you can ask about Bitcoin, but the answer shouldn't be that they can't. The answer should be, let's see it. Let's see it, prove it, show me something that is more decentralized, more secure, more resistant to censorship, more resistant to monetary manipulation, more credible, more liquid, more resilient, and then show me how you bootstrap it from zero without a company, without a central issuer, without any kind of trusted third party, and without inheriting Bitcoin's existing network. So if someone can actually do that, then great, we should use it, because the goal isn't to preserve Bitcoin specifically. The goal is to find better money. So the remarkable thing about Bitcoin that nobody could ever invent is, isn't that nobody can invent something better than Bitcoin. It's that creating the first decentralized digital monetary protocol that survived long enough to become valuable was it- itself an extraordinarily difficult problem. And so its emergence may have been improbable, but its persistence isn't simply luck. It's surviving because it solves a specific money problem that we all have, and that is ultimately what any successor would have to do as well. Not merely build better technology, not build a faster blockchain, not merely copy the code. It would have to solve the monetary problem better. So we know that Bitcoin can be copied. We know that technology can be improved. We know that new cryptocurrencies can be created and are being created every day. What we don't know is how many times the entire combination can be recreated. A decentralized protocol, a credible monetary policy, a secure network, a functioning market, a global liquidity layer, and millions of independent people voluntarily choosing to participate. Bitcoin did that once. It was very unlikely. I think akin to catching lightning in a bottle once. So can someone do it again and do it better? Again, let's see it. So in the meantime, let's not take the opportunity to restore sound money for granted. Bitcoin is our best hope to do so, and until proven otherwise, it may be our last chance to do so. So I hope that helps you all. Take care till next time.