Bitcoin: Medium o̶f̶ for Exchange
Introduction
Trying to explain what bitcoin is to someone unfamiliar with financial and computer science terms is usually pretty difficult and nearly impossible when the definitions are not clear. There are typically a lot of words like money, bearer asset, trust minimized, network, protocol, as well as many others being used to describe bitcoin. So, to say someone can get lost in translation is an understatement as it can be a frustrating experience for either party. Given that every human on the planet from almost our earliest days has participated in the exchange of goods and services, it is fair to say that there is an inherent understanding of money and why it is useful. This basic premonition follows that money facilitates the exchange when you want to buy a house, a car, or food at the grocery store to alleviate the coincidence of wants problem (i.e. having to barter). Today’s money and all the historical iterations (transition states) can therefore be thought of in a broader approach as mediums *for* exchange. Thus, it can be understood that the advent of money indicates the purpose of an environment for exchange to occur. Bitcoin is simply the end state digital transformation of money from the shared physical environment to a shared digital environment. An openly accessible digital environment without barriers to entry or seigniorage creating conditions that are better described as a medium *for* exchange. What could be brushed aside as a simple change in wording is actually a fundamental shift on how to grasp and explain what bitcoin is.
Medium
A medium is defined as the substance that transfers the energy from one substance to another substance or from one place to another, or from one surface to another.
surrounding objects, conditions, or influences; environment.
Of
expressing the relationship between a part and a whole.
For
used as a function word to indicate purpose
used as a function word to indicate an intended goal
Through this lens, Ten31 sees companies operating at today’s transition point as creating new technologies that will accrue outsized value facilitating commerce in different and innovative ways leveraging a new medium for exchange. These bitcoin technology companies are allowing their customers to interact within the environment of bitcoin in such ways as for the visualization of the environment (Mempool.Space), entrance to a global marketplace for the environment (Strike), and many others Ten31 has supported over the last five years.
Visualizing Transparency
Historically, money has been understood through its functions as a medium of exchange, a unit of account, and a store of value, among other characteristics. However, when we adjust our viewpoint and look at money as a medium for exchange then the nature of the characteristics imbue money with an alternative framework affording for transition/upgrade from one environment to another. For example, if gold were thought of as an environment to facilitate trade then some basic characteristics of that environment are: divisible, durable, portable, verifiable, and irreproducible. The second order effects of those characteristics create the historic concept that money is a store of value, unit of account, and medium of exchange. Money should be thought of as being in a transition phase or evolution from physical to digital since man was able to write a numeric (digital) representation of money. From Mesopotamian Cuneiform to Flying Money of the 7th century to the first electrons creating wire transfers to the fiat US Dollar of the last fifty years, monies have been in a continuous transition state leading towards a medium for exchange natively embedded with superior characteristics (inclusive, auditable, finite, weightless, proof-of-work): bitcoin.
This new, electrical, digital money opens up the aperture and creates kaleidoscope visualizations on the network of users interacting in this shared bitcoin medium. Mempool.Space affords anyone anywhere utilizing its free and open source code the ability to see the bitcoin mempool of pending transactions and the confirmed transactions in each block of the blockchain. For the first time in history the totality of the money’s past, present, and future is readily viewable/auditable to all. Mempool.Space has a dominant market share for transaction analytics and current business lines are for transaction fee estimations, transaction explorer, and a transaction accelerator. As more entrants continue to enter this medium for exchange the demand for improved transaction analytics and acceleration for accessing blockspace, Mempool.Space’s market power will expand.
Global Access
Entering bitcoin’s environment requires energy and computation as proof of work or trade to purchase bitcoin, and Strike is the leading global bitcoin access point for buying and selling bitcoin in over 100 countries. Unlike gold’s weight standardization of Avoirdupois, bitcoin’s numerical standardization provides the divisibility in a Base Ten Format like the fiat US dollar. Base Ten Format provides a universal acceptance for the unit of account in both mediums for exchange. However, unlike the US dollar which has an increasing supply leading to perpetual debasement bitcoin is juxtaposed with a finite supply of 21 million. Strike provides its global users with the ability to seamlessly trade their local currencies for bitcoin. We are witnessing first hand Gresham’s Law play out as Strike’s users exchange their local debasing currency for a fixed supply asset. People are organically choosing to transition away from inferior mediums to the end state medium for exchange as they store value from today into the future. The transition has been and will continue to be volatile across liquidity horizons. As the distortion of more and more fiat continues to press up against the inelastic supply of bitcoin, volatility will not just persist but at times increase. For, the total value being absorbed by the end state medium includes past, present, and future resulting in an unbounded amount bitcoin will ultimately draw in.
Strike, operating in over 100 countries and counting, provides a low friction ability to access a global standardized medium for exchange that is emerging and will compete with legacy payment networks worth $1 trillion (Visa & Mastercard). As more countries are incorporated into Strike’s global offering a Schelling Point will occur where consumers and businesses will organically migrate towards a simplified global value exchange. Instead of the slow correspondent banks and other intermediaries trading liabilities, a Strike user in America with US dollars will purchase a stein from a German craftsman who will receive Euros in final settlement. There are only three hops as value is transferred between three different mediums, and eventually in the decades to come there could only be one. Natural selection will continue to occur for global market participants seeking out the most efficient medium for exchange.
Occupying the Transition State
At Ten31 we have partnered with over thirty bitcoin technology companies operating in the transition state between different mediums for exchange. From Fold allowing their users to transition their fiat rewards into bitcoin to Unchained facilitating a transition between US dollars and bitcoin all while in a long term security structure. The companies accrue value from the transfer between the legacy medium for exchanges to the end state medium. One could envision these businesses at the intersection of a broadening landscape being carved out today as extremely valuable real estate. With this real estate in a purely digital medium connecting all participants (business and consumers alike) in an interoperable base layer protocol the power of density unlocks new portfolio network effects accelerating collaboration among all businesses. A key insight about portfolio network effects (we are witnessing in real-time) on an interoperable base protocol is how the Ten31 Tribe is an emergent middleware self-reinforcing value accrual across the entire portfolio and new connections hypostatize between what would be considered non-adjacent businesses to materialize new business ventures.
Cyberspace Native Future
The march forward towards growing up with a purely cyberspace native childhood is complete with the acceptance of global interconnections occurring through a screen is an experience babies now have building relationships with distant relatives. Yesterday’s youth collected and spent Rupies in The Legend of Zelda, and today's youth buy Minecoins and build in the virtual worlds of Minecraft with their grandparent’s birthday money locked in cyberspace environments. This native familiarity with digital assets and online transactions is shaping generations that view bitcoin not just as an abstract concept but as an integral part of their financial lives.
As cyberspace natives mature, their comfort with and reliance on bitcoin will continue to drive broader adoption and integration of bitcoin into the mainstream economy. Because, they will demand a more efficient, transparent, and secure medium for exchange, which bitcoin and its supporting technologies are solely positioned to provide. The barriers that once hindered the transition to bitcoin are being dismantled by intuitive interfaces, robust infrastructure, and a growing ecosystem of services that make interacting with bitcoin as easy as using a smartphone app. In this cyberspace native future, the potential for innovation is boundless. We will see new business models, financial products, and services that leverage the unique properties of bitcoin to offer unprecedented value and equitable opportunities for generating, storing and transacting value.
At Ten31, we are committed to supporting the pioneers of the bitcoin frontier. By investing in and partnering with visionary technology companies carving out their prime real estate at the intersection of bitcoin and human ambition, we are helping to build the infrastructure and applications that will define the future.