The path to bitcoin adoption

Legal disclaimer: he who lives by the crystal ball will eat shattered glass

At a certain point during your journey down the bitcoin rabbit hole it hits you that you have entered a one-way street.

Not in the sense that there is only one possible path you can take – because there are endless sub-rabbit holes to explore – but a one-way street in the sense that you will never leave this new and enchanting subterranean kingdom that you have been blessed to discover.

The door to the rabbit hole only opens one way, like a valve in a complex engineering system, or a sinister trap designed to ensnare its victim. What you have seen cannot be unseen. In this respect bitcoin is actually like a cult: you can’t leave, unless you are willing to accept significant risk and personal cost.

Certain things follow from this realization that you have embarked on a one-way journey: it dawns on you that other people – when they finally come to understand bitcoin – will also be on a one-way train to Bitcoin Central. You then start to wonder how the masses will come to enter into the rabbit hole. What will prompt them to take that very first step? What happens when the masses take that first step?

This seems to be a common theme in discussions on bitcoin podcasts and at bitcoin conferences. At this point there is an emerging consensus that bitcoin will almost certainly win, and win big: if we are right then we are really right. There is perhaps even a consensus that bitcoin has already won, given how long it has survived and the significant attacks it has already successfully thwarted, such as the China mining ban and the blocksize wars, and given how seducing and inescapable bitcoin’s game-theoretic incentives are.

Sensible bitcoiners will always try to temper these assumptions of inevitable victory with humility, skepticism and constant vigilance as to attack vectors. But even accounting for that it is really hard to see how bitcoin fails.

The question then becomes not so much “Will bitcoin win?”, but rather, “What does the path to mass adoption look like?”

It is here that views tend to vary significantly amongst bitcoiners. Will the US dollar die next year, or will it stumble along for another few decades? Will bitcoin adoption take an S-curve path, like regular technologies, or will it be even quicker, or slower? Will bitcoin shortly start to fulfill the medium of exchange and then unit of account roles of money, or will it just continue to occupy the store of value role for a few more years – or decades – before muscling in on those other monetary functions? Will there be an insanely accelerated game-theoretic scramble amongst nation states to acquire and mine bitcoin, or will they just steadily do that at a calmer and more sober pace?

As I have noted before, predictions are very hard, especially about the future. So, here I am not really going to make any predictions in terms of what things will happen by which dates. I will just set out some thoughts around the kinds of things we might come across during the path to widespread adoption.

Larry Fink might become the biggest ever dispenser of orange pills

Larry Fink is the CEO of Blackrock, the world’s largest financial institution by assets under management. Blackrock has an active application for a spot bitcoin ETF that is almost certain to be approved by the SEC in the next few months.

Fig. 1: there is no second-best dispenser of orange pills

There are obvious concerns about an ETF, such as the risk of rehypothecation and not owning your own keys. And there are obvious benefits, too, such as number-go-up and the widespread acceptance of bitcoin as an asset class.

I think bitcoiners underestimate the strength of Fink’s conviction and also his actual understanding of bitcoin.

In 2017 Fink described bitcoin as an “index of money laundering”. He said “Bitcoin just shows you how much demand for money laundering there is in the world…That’s all it is.”

In 2018 he told us that Blackrock clients had no interest in crypto. He said, “I don’t believe any client has sought out crypto exposure…I’ve not heard from one client who says, ‘I need to be in this.’”

That was then. This is now: Fink is personally fronting Blackrock’s efforts to launch a spot bitcoin ETF. He has said that “crypto is digitising gold in many ways” and that it is a “flight to quality” (he has also said that the reason he uses the generic term “crypto” is because of Blackrock’s pending spot bitcoin ETF application).

He has even equated bitcoin to human freedom.

If Fink had only spoken about bitcoin in financial terms, that would have been perfectly acceptable and understandable, and very significant in and of itself. It’s literally his job to make money for Blackrock and for Blackrock’s clients. However, he seems to have also grasped the freedom-go-up aspect of bitcoin. He has also made the decision to say that openly.

Now, you might be skeptical as to whether Fink genuinely cares about freedom; none of us knows whether he does. But the point is this: you only grasp the freedom aspects of bitcoin if you have gone down the rabbit hole and seen that bitcoin is about much, much more than merely number-go-up. And as I have said, once you are in the rabbit hole you don’t get out.

Larry Fink has done a complete 180 on bitcoin from where he was a few years ago. There is no way he would risk his personal reputation, and also Blackrock’s reputation and financial survival, without first taking the time to really, really understand bitcoin.

There is no single path to understanding bitcoin because everyone is different, and certain aspects of bitcoin resonate with different people depending on what their background and personal situation is. All that is necessary for someone to be orange-pilled is for them to have an open mind, and to study bitcoin in depth. Once that happens orange-pilling is inevitable. I believe that is what has happened to Larry Fink.

What does this mean for widespread adoption? Yes, there are concerns about rehypothecation and custody, but put that to one side. Overall the implications are positive. It will ultimately prove to be an example of “everything is good for bitcoin”. Given Blackrock’s influence and reach they are in a unique position to bring bitcoin awareness, and therefore bitcoin adoption, to the masses.

Blackrock will de-stigmatize bitcoin for countless financial institutions and regular corporations by removing the career risk associated with bitcoin (“Well, Blackrock says bitcoin is good, so what are we waiting for?…”) This will in turn de-stigmatize bitcoin for countless individuals.

For some institutions and individuals that will be the beginning and end of their journey of discovery. They will purchase the ETF and that will be that. But for many others that initial de-stigmatization and awareness-raising by Blackrock will prompt them to take the time to fully understand bitcoin, and to go down the rabbit hole. Hence the Blackrock ETF will be the starting gun for wave after wave of financial institutions, corporations and individuals to eventually go on their own rabbit hole adventures. Some will go down the rabbit hole immediately, some later on. But the ETF will be what brings bitcoin to their attention and makes it impossible to ignore.

As for freedom-go-up, the more people who understand this, the better. Because if and when nation states really ramp up the “Then they fight you” stage, the more people and institutions that they have to fight against, the better. Blackrock are more powerful and influential than many nation states. We should never rely on a CEO of Blackrock, or on any financial institution, to fight for our freedoms, but if Blackrock and their CEO understand the freedom-go-up implications of bitcoin that can only be a good thing.

Why? Ask yourself this: would you rather nation states have to fight just an army of orange-pilled plebs, or an army of orange-pilled plebs and orange-pilled powerful financial institutions?

The impact of halvings

There is an ongoing debate as to whether the impact of halvings is already priced in, and also whether the impact of halvings will diminish over time.

My gut feeling is that, at present, given the relatively miniscule overall adoption of bitcoin (perhaps 0.5% to 1% global adoption), the halvings are not priced in. If we do ever get to a point where halvings are priced in I believe that would only coincide with a point at which there is very widespread adoption of bitcoin. Even then, there is nothing to stop a particular halving coinciding with a separate demand-led event, which might accentuate the effect of that particular demand-led event.

The upcoming halving in April 2024 will only be the fourth halving to date. Plus, that halving is likely to coincide approximately with the approval of multiple ETFs. Perhaps Blackrock deliberately timed their ETF application so that its likely approval would coincide approximately with the 2024 halving. Perhaps 2024 will be something akin to a “double-halving”.

Fig. 2: April 2024 halving, meet spot bitcoin ETF approval

We have never had a halving during mainstream adoption so we’re probably due at least one major halving impact from that. If the 2024 halving is too soon for ETF approvals to really spark or coincide with mainstream adoption, then the 2028 halving is likely to be that halving.

Being conservative, and even assuming the impact of halvings will indeed diminish over time, I believe we still have a few crazy halvings before their impact starts to diminish significantly.

Typical path to individual adoption

In these early years of bitcoin those who adopted it were initially the cypher-punks and libertarians, then perhaps those with a general interest and understanding of technology and software, and then perhaps those with a generally independent frame of mind who were willing to go against the tide and withstand ridicule and risk.

In all cases those who have adopted bitcoin up to this point have tended to have a fairly deep understanding of it. They have needed to, because all the supposedly trustworthy sources of financial information such as governments, central banks, financial institutions, and mainstream financial media have done their very best to discredit bitcoin and discourage its adoption.

As we approach mass adoption the typical individual’s understanding of bitcoin is likely to be less intense, and less necessary. In the same way that early users of the internet were those with a more technical/ideological/free-thinking bent, those who came later just wanted to be told what practical problem the internet fixed for them and they wanted it to be easy to use.

So it will be with bitcoin. As people see more and more people around them adopt bitcoin, and as they see bitcoin legitimized and de-stigmatized by “trustworthy” financial institutions and other corporations, they will adopt it too. They will take the path of least resistance, in the shape of the ETF.

Sure, over time, many of these less technical/ideological/free-thinking users of bitcoin may well go on their own rabbit hole adventures (just as regular late adopters of the internet might have subsequently become more fascinated by the internet only once they started using it), and they will custody their own real bitcoin rather than purchase the ETF, but the typical bitcoiner of the future is unlikely to be the typical bitcoiner of today. It will not be someone who has spent hundreds and possibly thousands of hours studying bitcoin. Bitcoin will just be the money that people use, and that will be that. The majority of people will trust bitcoin not necessarily because they understand it, but because the people and institutions they trust, trust bitcoin.

I have mentioned before the irony that most people are only likely to trust bitcoin when it is legitimized by inherently untrustworthy actors who are responsible for the broken money we have today: governments, central banks and financial institutions.

A typical entry point for a new bitcoiner in the (very near) future might look something like this: in a post-spot bitcoin ETF world, an average individual has his regular annual check-in with his financial adviser. They discuss the individual’s pension and whether they should make any changes for the forthcoming 12 months.

The financial adviser explains that as a matter of policy they are now recommending all their clients have some small exposure to bitcoin in their retirement account, say 0.5% for those with low risk tolerance, 1% for average risk, and 1.5% for high risk. The individual takes the advice and opts for the middle-of-the road approach of a 1% allocation. After the phone call the individual goes on YouTube to find out more about bitcoin, maybe. And then, later that evening in the pub with their friends, they mention it and end up having a discussion about bitcoin, maybe. That individual may or may not explore bitcoin in any depth. But that’s besides the point. The point is that millions and millions of individuals may have an entry point to bitcoin in this way: through a flaccid, run-of-the-mill conversation with a low-ranking nobody in legacy finance.

Fig. 3: future hard-core bitcoin maxi anarchist. Note the absence of laser eyes

Bitcoin won’t be banned

I recall one interesting thought from when the flood of ETF applications started some months ago. I can’t remember who it was, but someone posed the question: did we just skip the “Then they fight you” stage?

My feeling is that major nation states will not attempt to ban bitcoin. Not because they don’t want to, but because they have probably already concluded that they can’t, and that to attempt to ban it would probably only hasten its mass adoption and demonstrate how powerless and vulnerable nation states are in the face of bitcoin.

Again, the wider internet offers a parallel here. Perhaps with the exception of North Korea, even tyrannies do not ban the internet. They regulate it. China has its Great Firewall but even supposedly liberal democracies like the UK and the US have an endless stream of regulations, dressed up in such a way as to supposedly protect us (from “misinformation” or “online harms”, etc.).

So it will be with bitcoin. There will be numerous attempts to slow down adoption and to place roadblocks in our way. These will be marketed as consumer protections, or to preserve nation state security, or whatever narrative fits the prevailing political climate for that particular regulation that a government is trying to implement. Some attempts will be successful and some won’t. We have already seen examples of this and it is something we will have to live with for some time.

So long as there are nation states there will always be laws saying what we can and cannot do with our money – even when bitcoin has achieved a degree of mass adoption.

But as bitcoin penetrates ever deeper, the role of the nation state, and its ability to regulate anything other than what is justifiably essential, will diminish.

Curveball: wearable mining tech?

As bitcoin becomes hyper-valuable and not one single sat is wasted, any source of stranded or wasted energy will be seen as an affront to sanity and common decency.

So how about this: wearable tech which harnesses the generation of personal energy and converts it to sats.

Going for a run? Don’t waste that energy of your moving body. Going for a walk? Don’t waste that energy. Watching Netflix? Don’t waste that energy of your heartbeat. Sleeping? You get the idea.

On a long enough timeframe wearable mining tech might be an inevitable no-brainer.

Fig. 4: ASICS s-19000

What’s the worst case?

I believe the very worst case at this point is that bitcoin “only” fulfills a store of value function, and replaces gold. Even that will be a significant achievement.

Gen-B: bitcoin natives

As older generations leave the population and new ones enter it, an “orange-pilling” will become less and less common, and less and less necessary.

Like fish who have only ever known water, new generations will never have known a world where bitcoin was not money. Like Bruce Wayne being told by his tormentor in The Dark Knight Returns that he wasn’t born in the dark, but that he merely adopted it, new generations will be like Bane. But instead of being born in the dark like Bane, Gen-B will be born in the light. That light will be a bright orange one.

Bitcoin natives won’t need to be orange-pilled. Their voyage of discovery won’t be trying to understand bitcoin. It will be trying to understand just how humans managed to survive for so long with such a useless, worthless and corrupt monetary system.

Gen-B won’t go on a journey exploring an enchanting bitcoin rabbit hole.

Gen-B will go on a journey exploring a rancid fiat shit hole.

Fig. 5: bitcoiner of the future being fiat-pilled

You can follow me on Twitter @OnlyBitcoiner.