The Troubl with the Hodl
I attend a lot of cryptocurrency conferences and go to a lot of meetups and I invariably run into folks that stick out their chest and say they are hodlers. They say it with the religious fervor and self righteous pride of true believers.
Some are long time believers others are recent converts but they all carry the burden of protecting the way of the coin, the bitcoin.
They treat bitcoin as a fragile particle that should be held with care. It should never be passed back and forth between unworthy beings.
They will never sell their bitcoins. If the price keeps falling, they will keep buying. If the price keeps rising, they will keep hodling. To sell is to sell out on their belief in the true essence of their bitcoin.
The troubl with the hodlers, is that they are in conflict with the bible on which they built their church.
“ A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
Those are the words of the elusive Satoshi Nakamoto in his seminal bitcoin whitepaper, the bitcoin bible. In fact, that is the very first sentence of the whitepaper. Bitcoin was never meant to be a “store of value” or an asset to hodl. I wouldn’t go into the technical details here, but if you were looking to develop an electronic store of value, there far better designs than the bitcoin blockchain.
Besides the technical reasons, there are many financial reasons the bitcoin blockchain will disintegrate as purely a store of value. By definition, you don’t trade or transact frequently with whatever assets you purchase as a store of value. If you do then you are clearly not “storing” anything. You are simply making use of a medium of exchange.
What happens when all 21MM bitcoins have been mined and very little transactions are going on because it’s a store of value? The fees the miners earn on those low transactions will not be enough for them to keep mining and a lot of them will depart. Their departure will compromise the integrity of the blockchain. A compromised blockchain will rapidly lose its function as a store of value.
Unable to find food, the blockchain will eat itself.
Another financial reason why bitcoin sucks as a store of value is security. Lose your private key or someone steals it and you will be SOL. I’m not talking about the .sol file extension for the solidity smart contract scripting language. This is the Shit Outa Luck that births widows. It’s one thing losing $100k or less in bitcoin. You will feel bad and it will truly suck. When you’ve worked hard to finally get that $100MM fortune, and some pimply kid hacker steals it in a combination of technical and social engineering hacks, you’ll have second thoughts about that bitcoin store of value stance. The US treasury bond that you laughed at and were so quick to disparage as a lousy store of value will suddenly start laughing at you.
I’ve read several postings on reddit and telegram where folks were saying bitcoin is a better store of value than treasury bonds because in the event of a collapse in USD or a massive increase in inflation in the US, the bonds value will trend towards worthless. Trust me, should the USD trend towards worthless, bitcoins isn’t what you want to hold. Better put you money in livestock as trade by barter will be the order of the day.
I can’t say it better than Satoshi. Bitcoin was meant to be a purely peer-to-peer version of electronic cash. Essentially a currency. For a currency to be useful, it has to be available. Hodl is the opposite of availabl[sic]. Hodling restricts supply. Lack of supply reduces the transactions that could have been made with bitcoins.
We need transactions and loads of it to make this cryptocurrency blockchain work.
If you are a hodler, thanks for being the protector of the realm. Your service and staunch support of the bitcoin price has been one of the main reasons it has held up as a potential means of exchange. However, your hodling really should be ephemeral. When the value drops, please step in to pick up some coins and when the value rises, open up that cold storage and let some bitcoins go.
Why do you have to listen to me? You don’t. Simply go read Satoshi’s white paper, the bitcoin bible and understand what he wrote. As the song goes, for the bible tells me so.
