I was wrong about Bitcoin

2022-04-11

Introduction

Welcome to my blog, I'm Vladimir Fomene, a Bitcoin/Lightning developer in training at Qala Africa. This is going to be one of many blog posts from me as I share my learning about Bitcoin and Lightning.

Today, I'm going to tell you why I didn't initially adopt Bitcoin even though I heard about it in 2014. Then, we will talk about events that led to changing my mind and finally why I decided to adopt it. These opinions are just my thoughts about Bitcoin after spending some time researching it, it is not investment advice.

What was your previous stance on Bitcoin

Despite knowing about Bitcoin's existence since 2014, I never really gave it enough thought. In 2014, it was the medium of exchange used by drug dealers and buyers on the Silk Road. For some reason, most of the people who were using Bitcoin on the Silk Road thought that it was completely anonymous (which is not true). In 2017, the narrative in my circle was that Bitcoin is an asset whose price keeps rising and if you had the fortune to buy it when it was low, you will make a lot of money reselling it. At the same time, there was also the fear of the price of this technology going very low and people losing their hard-earned money in the process.

Fast forward to 2019, I'm travelling to India and I have to change money from franc CFA to US dollars because no one in India will accept my franc CFAs. I spend a lot of time on the plane wondering why we always had to do this whenever we were travelling to a new country (financial jurisdiction). The US dollars I had while in India were not enough for my purchases, so I had to withdraw more money from ATMs. Each time, I withdrew from an ATM, I was charged a huge fee. This experience intrigued me and pushed me to research more about this problem.

While looking into a solution to this problem, I realized that cryptocurrencies and Bitcoin because of their global nature (they are not tied down to any financial jurisdiction) could be accepted in every country when they become wildly adopted. Hopefully, this will solve this money conversion issue. One of the issues I saw with most of the layer 1 blockchains (Bitcoin and Ethereum) was the high fees for transactions. Though layer 2 technologies like Lightning solves the high fee problem, I thought we needed a Lightning-like technology for all currencies in the world, almost like a payment network for the internet. With such a great technology, why are the builders only focusing on Bitcoin, I thought.

What event/person made you change your mind

Back in 2019, I could not tell that life's events were about to show me that my stance on Bitcoin might be wrong. At the end of 2019, the Covid pandemic hit the world and will produce a couple of events that will change my mind about Bitcoin. The first was the Nigerian central bank blocking bank accounts of protesters who were raising funds to organize protests against police brutality in the country. Shortly after this incident, protesters started accepting funds in Bitcoin. Suddenly after this event, there was a violent crackdown on the protesters from the Nigerian authorities. The EndSARS protest and 2018 highly contested elections in Cameroon made me question the power we as citizens have given to our respective governments. I felt that certain aspects of society like elections need to be out of government control.

In 2021, the GameSpot stock story which was happening the US pushed me to research the best investment/saving strategies for my earnings. While doing this research, I learned you should not save fiat currencies because it loses their value over time as central banks increase circulating supply as time goes on. After doing this research, it became clear to me that I should rather put my money in commodities such as gold or invest in real estate or buy stocks. The issue with buying gold in a country like Ghana (which is where I currently reside) is that although it is a gold mining country, you can easily get defrauded of your money by someone who is selling fake gold. Due to this, many people don't usually advise you to buy gold locally. As an African, it is not easy to get access to foreign stock markets where people make a lot of gains. Companies like Bamboo which was only accessible to Nigerians at the time was giving them purchase access to US stocks, but this solution was not widely available in Africa. The issue with real estate is usually that it requires a lot of capital to start investing in it. In the end, our options for investment as Africans are really limited.

Still during the pandemic, there was a resurfacing of the fight against the francs CFA. Most people no longer want to use this currency but our governments in Africa are not making any effort to cut ties with the French and create our currency. Just like the EndSARS protest, the expectations of the people are at odds with the actions of their governments. What other options do citizens have? I thought to myself. In case you want to learn more about the unfairness of this francs CFA system, you can read more here

Why do you now believe in Bitcoin

With the unfolding of the events above, it became clear to me that we had given governments too much power and they could abuse it through their misactions or actions. The people must take back some of that power or have systems that can keep their governments in check.

Cypherpunks had been trying to reduce government control over citizens by building a digital currency that was not controlled by a central entity. Bitcoin was only a product of past failed attempts at this.

What is even more interesting is that Satoshi Nakamoto, the creator of Bitcoin put a supply cap on the currency at approximately 21 million coins. So unlike Fiat currencies (currencies controlled by the power of the government) which are losing value as the result of inflation, the value of Bitcoin goes up with an increase in adoption. This quality has made Bitcoin a better store of value thus far compared to other assets/currencies. As a consequence, it is now being used a saving technology by most of its users. Why is this important you might think? When I came to Ghana in 2014, one US dollar was 3.20 cedis (Ghanaian currency), today one US dollar is 7.57 cedis. If you were saving the cedi, you will have lost close to 37% of your wealth in eight years.

In addition, there has also been the realization that Bitcoin is part of the evolution of money. We used precious metals like Gold and Silver as a medium of exchange. Then we transitioned to bank notes backed by Gold and controlled by central banks. Now we are moving to digital money secured by computational power and not controlled by anyone.

Bitcoin's decentralization (not controlled by any central party) buys it qualities like seizure/censorship resistance which has become very helpful for activists or people living under authoritarian regimes. That is, 54% of the global population according to the Human Right Foundation. This decentralization also makes it hard for any actor or state to take down the network. Late last year, the Ghanaian and Cameroonian decided to pass a tax on mobile money transactions despite strong pushback from its citizens. Due to its seizure resistant nature, Bitcoin could be used by citizens to push back on this government tax. One inconvenience here is Bitcoin's volatility. Nevertheless, there are proposals in the community to have stablecoins on Lightning. I imagine a future where people could use these technologies as a form of peaceful protest against irresponsible government actions.

You might be thinking, is this thing even secured or reliable? First and foremost, Bitcoin has some pretty smart engineers in the world working on it. They have been able to develop an ethos which forces any engineer like me entering the space to think about the technology from an adversarial perspective and not to trust anyone or any piece of software you run. This ethos is usually summarized in the phrase, "Don't trust, verify". These engineers are constantly updating the software and protocol behind Bitcoin to improve its security and reliability.

Last but not the least, Bitcoin is building a fairer financial system as it is an open system in which anyone can participate so long as they have a computing device and internet. Even more important was my realization that value is subjective and Bitcoin has value because people find its values (security, decentralization, permissionless, censorship/seizure resistance, fairness) valuable. So if you identify with these values, do more research for yourself on Bitcoin.

What are you doing with this new knowledge?

With this newfound knowledge, I decided to quit my job to take part in a three months developer training program organized by Qala Africa. I will love to contribute to projects trying to stabilize Bitcoin because I think this has the potential of increasing adoption in Africa.

Conclusion

In this article, I have explained why I didn't initially adopt Bitcoin, despite having known about the technology for a while now. Then, I dived into events that led me to reconsider my stance on Bitcoin and finally gave reasons why I think Bitcoin has a lot of value to offer to the world. If you found this interesting, you can continue learning using one of the links in the resources section.

Resources

Buycoins' Bitcoin course. Hello Bitcoin learning resources Stablecoins on Lightning