Does Bitcoin need to be sanitized and separated from its anarchist, black-market roots in order to become acceptable to the general population? Must Bitcoin become an upstanding citizen and saddle itself with KYC requirements and capital controls? Absolutely not! Those making this argument totally misunderstand the way that Bitcoin adoption will proceed and are consequently wrong-headed about how to market it. The most important rule of the economics of Bitcoin is that investment creates liquidity, and liquidity creates value. The more liquid that Bitcoin becomes, the more trade it can absorb, the more it can be used as a medium of exchange, and the easier it will become to profit from a Bitcoin-based service.
There, is that clear? Bitcoin becomes more useful the more people invest in it. This is the key to understanding the economics of Bitcoin. If this insight was understood, then I would not need to write another article.
From a marketing perspective, this means that Bitcoin becomes easier to market the bigger it gets, because the bigger it gets, the more people can benefit from it. Someone who needs Bitcoin a little bit now will need Bitcoin a lot in the future. People who don’t need Bitcoin at all right now may soon start needing it. And people who already need bitcoins are going to be desperate for it in the future.
Furthermore, there is no end to this process. Bitcoin investment necessarily comes at the expense of other currencies, so even as Bitcoin gets better, its competitors get worse. It does not matter how much or how irrationally someone hates Bitcoin; eventually it will become so much more useful than the currency he normally uses that he will have to switch, right up to the day that Paul Krugman demands to be paid in Bitcoin to write another article denouncing it. Bitcoin will force people to love it.
Thus, Bitcoin need never seek mass appeal. To do so is to waste resources on people who are not yet ready for it. There is always someone out there who so obviously needs Bitcoin that it is a no-brainer to get on board. Anyone not desperate can be ignored until they become desperate. There may not be many people like that at any given time, but they will never run out.
Mycelium recently released a commercial called Mycelia in Wonderland which is pretty much my favorite commercial in history. It is so obviously not trying to appeal to normal people. I love everything about it, especially the way that it likens entering the Bitcoin world to a psychedelic experience or going through a portal to another universe, because that’s exactly how I feel. This cartoon is exactly what the Bitcoin world is like. It was great because I was just writing this article when it came out and it was about the most perfect Bitcoin commercial that I could possibly imagine and I almost died laughing.
Mycelium in Wonderland is clearly aimed at people who want to buy drugs, which is good because Bitcoin’s success on the black market is more meaningful and a more significant test of Bitcoin’s viability. The more that Bitcoin handles illicit activity, the better. People need illicit stuff a lot more because the more you tell someone that something he wants is evil or that he doesn’t deserve to have it, the more desperate he is to get it. Someone who wants Bitcoin for drugs or porn will tend to be a more loyal and committed Bitcoin proponent than someone who uses it to buy shoes.
Therefore, Bitcoin should not be shy about the black market. Black market businesses should be seen as potential early adopters. I will be more convinced that Bitcoin’s place is secure when drug cartels start using it than when Amazon.com starts accepting it. Use on the black market does nothing to change the pattern of Bitcoin adoption I described above. The people who most need Bitcoin at each stage of adoption will not care about its association with illicit activity; they will care about how it improves their profits.
There is no reason to treat the black market as something shameful. It is a source of wealth that we all depend on, directly or indirectly. If you love Bitcoin and foresee yourself growing rich off of it, then you should love its black market uses as well. If you cannot bring yourself to embrace the black market, then perhaps Bitcoin is not for you. Every time I hear someone complain about Bitcoin’s black market uses, I feel a twinge of pain. I want only to nurture Bitcoin and I love everything that makes Bitcoin good as an investment, not only that which is considered socially acceptable.
Furthermore, Bitcoin the value proposition cannot be separated from Bitcoin the black market currency. Anything that is good at being money is good on black market and anything that makes Bitcoin less useful on the black market makes it less useful, period. That is because the black market is just the market. Good money doesn’t know the difference between the white and the black market. All of the traditional properties of money that Bitcoin embodies so well—divisibility, portability, fungibility, and scarcity—make no reference to state law.
This is why Bitcoin should not seek regulatory approval: regulation would certainly tend to reduce without any corresponding benefit. Making Bitcoin less useful on the black market would require making it less decentralized, less anonymous, or grant its users less control over their money—yet these are the very features that attract people to it. Bitcoin’s great value is its individualism, which is indivisible, and until the Bitcoin community frankly recognizes this and wholeheartedly strives to nurture both its white and black market uses, then Bitcoin will always be ambivalent about itself and at risk of self-harm.
The solution to Bitcoin’s regulatory issues is simple: ignore the entrepreneurs who are complaining about it. They are just trying to earn dollars. Someone who is trying to earn bitcoins will be much more interested in the long-term future of Bitcoin and would prefer that Bitcoin not seek mainstream approval so as to achieve a more stunning victory later.
It should never be expected that Bitcoin will have approval from government and the banking industry for long. If Bitcoin continues to grow, then eventually Bitcoin will threaten the dollar itself and then a government attack is inevitable. Regulation will only make Bitcoin more vulnerable when that times comes. However, because Bitcoin can resist all regulation no matter how draconian, it has no need to make compromises.
Moreover, Bitcoin cannot compromise without risking its future: because competition between currencies is never stable, a successful free-market currency must be good enough to defeat all the rest. If Bitcoin is ever less competitive than the dollar, it will die. Otherwise, it will destroy the dollar. Thus, there is no way to avoid a confrontation with the US government no matter how many regulations Bitcoin obeys. Bitcoin investors had better be willing to see Bitcoin through to its total victory because if it does not accomplish this, they will lose everything. Anyone who thinks this is impossible might want to sell out now.