'Satoshi Nakamoto' Is Why Bitcoin Will Never Be Money
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“They’re on track to becoming the richest person on earth eventually.” Those are the words of Cullen Hoback, creator of a new HBO documentary (“Money Electric: The Bitcoin Mystery”) which purports to having perhaps uncovered the actual person behind “Satoshi Nakamoto,” creator of Bitcoin.

To be fair to Hoback, he’s not offering certitude, rather he speculates that the real Nakamato is a Canadian by the name of Peter Todd. Is Hoback correct? This opinion piece won’t presume to even speculate, nor does it matter if Hoback is right as is.

What matters is Hoback’s observation that assuming Nakamoto is Peter Todd, or someone else entirely, this individual (with a personal Bitcoin stash of the 1 million variety) is already a multi-billionaire, and could eventually ascend to trillionaire status. It’s in the ascension that we see why Bitcoin will be many things, none of them a widely circulated medium of exchange.

Misunderstood by cryptocurrency-as-the-future proponents to this day is that money is quiet, while wealth creation is loud. As argued over and over again in my 2022 book The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage for the Crypto Revolution, money is the quiet measure that facilitates the exchange of wealth.

Which is a hint that once what’s supposed to be quiet is the story, it ceases to be money. The previous truth neatly explains the big problem with Bitcoin.

To see why, simply ask a question: would anyone care who Nakamoto is if Bitcoin were a constant measure of value? Hopefully the question answers itself.

What makes Bitcoin and Nakamoto the story is similarly what disqualifies Bitcoin as the eventual replacement for the dollar or any other government currency. Think about it, and in thinking about it, stop and ask what frustrates holders of dollars, pounds, euros, Swiss francs, yen, and any other globalized monetary form at present? The answer is the instability of each.

No doubt the currencies mentioned well exceed the vast majority of country currencies in terms of trustworthiness (think the Argentine peso, Lebanese pound, Venezuelan bolivar, etc.), but they’re also not constant as measures of value. What’s important is that the turbulence surrounding Bitcoin makes dollars, pounds, euros and the rest appear positively golden by comparison.

If “Nakamoto” is worth $65 billion today, but could be a trillionaire tomorrow, that’s all the evidence we require to know that Bitcoin is many things, none of them money. Really, who would transact with Bitcoins so prone to wild swings in value? Lest readers forget, the “Nakamoto” worth $65 billion today was worth $16 billion in 2022, $61 billion in 2021, $10 billion in 2020, and $4 billion in 2018.

How to transact in what’s so volatile? The answer is that there’s no realistic way to do so absent buyers and sellers in Bitcoin winning or losing over and over again, thus depriving trade of its singular purpose: mutually enhancing exchange. With Bitcoin as the currency meant to facilitate exchange, every transaction is highly risky as the wild swings of Bitcoin indicate.

Looking into the future, Hoback once again speculates that Nakamoto’s coins could “eventually” make him the world’s richest. Maybe, maybe not. Which is the point. Seriously, who would borrow Bitcoin if the value of them is set to soar? To do so would be to set oneself up for disaster as the size of the loan that must be paid back grows. Just the same, and assuming Bitcoin falls from its highs as it’s occasionally done, who would lend Bitcoin the value of which some expect to plummet?

It’s just a reminder that what Bitcoin proponents view as its best quality (limited supply) is actually its greatest demerit, and the one that ensures it always be nothing more than a speculation. The problem is that what exists as a speculation isn’t any way money, and Bitcoin won’t be.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, released on April 16, 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership


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