Bitcoin: the psychology of getting rich

Are cryptocurrencies really about the technology? David Gerard doesn't think so.....
06 April 2021

Interview with 

David Gerard, Cryptocurrency Journalist

FINANCE

Financial imagery - a young man with glasses behind a rising graph.

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Many are sceptical about the benefits - and the functions - of cryptocurrencies. Phil Sansom and Eva Higginbotham heard from cryptocurrency journalist David Gerard...

David - A lot of it is based on contradictory ideas that make no sense. So you hear how it works and people go, "oh, that's stupid. You must be explaining it wrong." No, a lot of it is actually quite silly. Bitcoin is not a technology story. It's a story about psychology. And then the psychology it's a story of is getting rich for free. If you tell someone that they could possibly get rich for free, they will do anything, say anything, believe anything if they'll get that goal.

Phil - There's all this technology underlying it though, there's various cryptographic types of algorithm, and you've got your blockchain technology and all this stuff.

David - Yeah, some of that stuff's impressive and interesting; none of it's new. The Bitcoin market or crypto markets in general, they work like thinly traded commodity markets, right? Where you have, say, a rare metal or something. There's supply and demand, but there's also people who basically own that market and manipulate it, regulators might have a hard time regulating it, and so on. Except there's no use case for Bitcoin except trading it. It's just the digital token that you can try to get someone to give you money for. It doesn't do anything. All of this stuff is a smaller version of stuff that happens in the world of real trading as well. And now the regulators are finally sort of catching up to it a bit.

Phil - When you sort of cast your eyes away from Bitcoin, do you see a world of ways of doing decentralised finance and having control over the way you govern organisations, that kind of thing? Or do you see more of the same, but just on a smaller scale?

David - So a lot of the ideals were a bunch of promises that were made to Bitcoin early on that didn't really work out for Bitcoin. Promises of "trustless", "decentralised", and "be your own bank". You don't want to be your own bank. Why the hell would I want to be my own bank? Who thought that was a good idea? It's a really, really stupid idea! I'm not able to run a bank; I pay a bank to do that for me! You know, it's civilisation, it's division of labour.

Phil - This is kind of a bitter pill to swallow if you're a big crypto enthusiast.

David - None of this stuff makes sense on so many levels! The only consistent ideology I've seen is “number go up”.

Phil - Number go up.

David - Number go up. It's the driving force. Now this is understandable. In finance there is no more interesting story than number go up. I mean fine, it's called business. But it doesn't go with all the other ideals.

Eva - Number go up. It's certainly an interesting story. One thing I'm still not too clear on: apart from the fact that there are people mining it, where does it actually come from?

Phil - Oh, that's a great question.

Eva - Did we start with one, and now we have five? Do you know what I mean?

Phil - In the paper that Satoshi Nakamoto first wrote that defined all this stuff, he said there is going to be 21 million that will ever exist. And this mining process will generate new ones. The first block gave him the first 50 Bitcoins, and once we've reached 21 million, that's it.

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