What is a Bitcoin Miner?

Once Bitcoin adoption reaches a global scale, there will likely no longer be a need for Bitcoin Podcasts, Bitcoin Conferences, and, unfortunately, Bitcoin Magazine. However, those who are interested in Bitcoin by this point will be distinguished from those who have not yet begun the journey down the Bitcoin rabbit hole. The question then arises: How do Bitcoin miners explain themselves to others, which could help bridge the gap between their own understanding and that of being still connected to the Matrix?

Considering the inflationary policies of successive governments around the world (see Rune Östgarde For more details (see the great book Fraudcoin), almost anyone with the resources had to become an “investor” simply to keep their purchasing power working overtime.

People who want to own where they live, be able to personalize where they spend their time, and (mostly) not have to worry about eviction or incur excessive rental costs do not need to see themselves as investors. . However, due to the financial premium that real estate dominates, people danger by uses If you have equity (via a mortgage) to purchase a home; Guess In the future, the value of your home will likely increase enough to offset the costs of purchasing, moving, and servicing the debt.

Coupled with the need to build wealth through “hard assets” such as real estate, non-Bitcoin users are guided and often supported with future planning through additional investments in the form of pensions. For those fortunate enough to be tax efficient, additional employer contributions can help increase benefits but reduce the risks associated with investing. However, these benefits must be understood in the context of the relevant counterparties, including changes in government policy, changes to pension schemes or, in the worst-case scenario, the pension provider company experiencing financial difficulties. It is truly heartbreaking to find out that the pension you have been paying for 30 years is worthless through no fault of your own.

Bitcoin is increasingly being accepted as an investment grade asset following Blackrock’s public admission that Bitcoin may not actually be “money laundering index”. This could mean that Bitcoin could be viewed alongside stocks, real estate and pensions as a means of planning for the future while maintaining purchasing power. But in retrospect, this perception may also be just one point in an ever-changing journey, from the origins of obscure cypherpunk mailing lists that were considered collectibles, through the medium of exchange of the Silk Road, to where we are today. Looking to the future, it may be wise to consider what the next explanation may be for those who own Bitcoin. This will make more sense in the future than for “investors.” Additionally, the nature of Bitcoin suggests that it is different from other assets (commodities or securities), meaning that viewing Bitcoin as one or the other may be wrong.

Unfortunately, consistent with the perception that Bitcoin is not evenly distributed, public views on the asset are also somewhat inconsistent. As recently as May 2023, Harriet Baldwin, a member of the UK Parliament’s Finance Committee, recommended that “unbacked ‘tokens'” (including Bitcoin) should be regulated as “gambling, not financial services.” This is true for “crypto assets” more broadly, but when it comes to Bitcoin, this is simply wrong. That’s because Bitcoin is backed by the world’s largest computer network, which runs a protocol that is highly resilient to change. The nature of the Bitcoin protocol means that, unlike real estate or pensions, changes in government, organizational policy, or organizational performance cannot affect its future operations or usefulness. At the same time, given the fixed supply of Bitcoin, the value of Bitcoin will not decline through inflationary policies that affect the units of account of other assets.

As a result, historical data shows that while the dollar value of Bitcoin is highly volatile (affected by demand dynamics), the risk associated with the asset itself is actually very low. When this is combined with the ability to self-storage assets at low costs, this eliminates additional risk compared to the need for company shares or certificates to be held by a brokerage firm.

The standard definition of investing focuses on the expectation that the money invested will grow. Although even informed investors do this by balancing potential growth and associated risks. From the Treasury Board’s perspective, the risks and returns associated with gambling are likely to place Bitcoin beyond the top right of the figure below.

In light of how buying Bitcoin is akin to gambling, selling fiat currency for Bitcoin with the opportunity rather than the expectation of growth may suggest that Bitcoin may not actually be classified as an investment.

To further question the above figures, it appears that times have changed since the time this well-established idea was developed, prompting the need for reflection on previously held assumptions. Treasury bonds are no longer “risk-free.” This is explained by the sharp decline in the value of government bonds in 2022 due to rising global interest rates. This situation has affected the risks associated with bank deposits, leading to the recent failure of a large bank. USA. Compared to government bonds and bank deposits, Bitcoin’s security is not subject to central bank interest rate policy risk or third-party risks associated with government bond holders (even though their short-term value may change). Given Bitcoin’s fixed emission schedule, it is also immune to “money printing” and government deficits that reduce the purchasing power of the base currency, as argued by Modern Monetary Theory.

Interestingly, a recent document from Blackrock supports this contrarian view, suggesting a Bitcoin allocation of 84.9% within its investment portfolio, indicating a very different risk profile compared to other assets (Thanks Jo). In addition to the volatility associated with markets trying to price new assets, this suggests that Bitcoin is where Blackrock recommends holding the majority of your wealth. Therefore, the figure below suggests an alternative framing that draws attention to the risk of the underlying unit of account (fiat currency) against business risk, rather than presenting the return on investment when comparing Bitcoin to other assets.

Currency and business risks are increasing in the current high inflation environment. History provides a sobering view of the impact of inflation on the well-being of a population (see When Money Dies). Those who invested during Germany’s Weimar period due to currency problems experienced positive returns but were later ruined by hyperinflation. In this context, people who simply save in gold rather than invest in it can ride out volatile price fluctuations. In a fascinating echo, the same phenomenon has been demonstrated today in Argentina with Bitcoin. The investor or trader would likely have lost money, but in the long run, saving in Bitcoin would have been a much better option for the average Argentinian.

That’s right. I am a Bitcoin miner. But that doesn’t mean I’m an investor, speculator, gambler or criminal. I’d like to be, but I’m not a cypherpunk either. I’m just a person working towards a better future for myself, my family, and maybe their families. Bitcoin appears to offer a means to transfer the value of current work into the future without the risk of being mismanaged (stocks), regulated (pensions), influenced by central bank policy (treasuries and fiat currencies), or struck. With lightning (real estate). As a result, Bitcoin cannot be an investment and is merely speculation or gambling. Live without understanding.

Going back to the subject, when asked about themselves and what they plan for the future, Bitcoin investors can simply say: “I have a lot to learn, but I am grateful. Saving best Legacy I can find” (see Mickey’s work on the macro perspective). Hopefully, this will pique their interest and lead to a follow-up question: “Can you tell me more?” At some point, orange peeling may begin.

This is a guest post from . Rupert Matthews. The opinions expressed are solely personal and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.