Chamath Palihapitiya is a former Facebook executive, founder of venture capital firm SocialCapital, and one of the owners of the NBA team Golden State Warriors. He also has another little-known identity: the Bitcoin Millionaire.
As Bitcoin hits a new all-time high today, Palihapitiya once again commented on Bitcoin:
When asked why he didn’t choose Ethereum or another cryptocurrency, Palihapitiya responded:
As early as October 2013, technology media Techcrunch reported that Palihapitiya held $5 million worth of Bitcoin. At that time, the price of Bitcoin was only around 200美元. However, as an avid Bitcoin enthusiast, Palihapitiya was not satisfied with this. At that time, he revealed that he would buy more Bitcoin (worth $10 million to $15 million).
Why is Palihapitiya so bullish on Bitcoin? An article published in May 2013 explained the reason. He wrote:
“This week, the speculation game over whether Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., would be forced to give up his title ended. I stayed out of the fight, probably simply because I couldn’t get past the threshold question: “Why would anyone care? Why would we believe that we would still be subject to someone like this?”
We have seen a massive decline in trust in the financial services industry since the 2008 financial crisis: Lehman Brothers, Bear Stearns, AIG, the London Whale, Cyprus, and a host of smaller scandals have caused consumers to say loud and clear: “We don’t trust you,” “You’re only doing this for yourself,” or “Who made you king?” … and the best response from the financial services industry seems to be, “Trust me, I went to Harvard Business School.”
The key point is that this basic trust no longer exists, and Bitcoin, which solves the trust problem, began its rise.
Bitcoin was born during the 2008 financial crisis and is a growing phenomenon. In short, it is a completely electronic, peer-to-peer cryptocurrency that is not regulated (or incapable of regulation) and controlled by any government or institution. Bitcoin is just a long string of numbers and letters, but each is uniquely identifiable. Bitcoins cannot be copied or tampered with, they do not exist in the real world, only on your phone, computer or tablet, but like physical currency, they have value.
Today, there are only 11 million bitcoins in circulation, and a total of 21 million bitcoins will be created. Similar to gold, bitcoin is produced through mining. But gold is pulled out of the ground by bulldozers, while bitcoin is produced by computers solving complex math problems. Every time you get a correct answer, you get a bitcoin and enter the Bitcoin economy.
These oddities would seem to cause many people to question, dislike, or fear this new currency. On the contrary, they are exactly what makes everyone want it to become a permanent part of the financial services fabric.
Why?
When the Defense Advanced Research Projects Agency first implemented a working version of the internet in the 1960s, it looked like a fringe experiment, not unlike Bitcoin today. It wasn’t until the advent of a protocol called TCP/IP in the 1970s that the internet became commercially viable and began to take off. In short, the protocol allowed each website and service to be set up and have its own “address” and way of communicating information. This avoided chaos, allowed users to find what they were looking for, allowed sites to work together, and brought order and predictability to the network. Without TCP/IP, the internet as we know it would not exist.
Bitcoin is at roughly the same stage of development today. Rather than IP addresses and websites, Bitcoin has a unique string of characters that represents money, and a mechanism for sending that string securely. It's a protocol that allows money to flow around the world, just as TCP/IP allows information to flow in an orderly, predictable way.
This is not a theory, but something that is happening every day. The Bitcoin economy is still in its infancy, with a market cap of just $2 billion and rising. New services are popping up every day, including exchanges, digital wallets, payment processors, and companies that accept Bitcoin. In addition, more and more technologists are supporting the currency, allocating time and money to build a strong ecosystem.
Bitcoin is already being used around the world: to avoid high Visa card fees in Sao Paulo; to buy a million-dollar house in Buenos Aires; to pay a mechanic in Lagos for his services; to provide liquid money to Egyptians. The list goes on.
Bitcoin provides a secure way for anyone, anywhere, to send or receive his or her money. In contrast, consumers realize that the traditional banking system cannot be trusted. Why keep my money with strangers who might bet wildly on derivatives (JPMorgan Chase)? Why keep my money with a bank that might go bankrupt (Cyprus)? Why keep my hard-earned money in a currency that is constantly depreciating due to an incompetent government (Argentina)?
That being said, a healthy Bitcoin economy is not all positive, bad actors use Bitcoin for drug dealing, pornography, and terrorist financing. However, these are phenomena that exist in gold, the US dollar, and other currencies, and this is not a reason to knock Bitcoin.
There is no central server, no central authority or owner. Bitcoin can be slowed down, but it cannot be shut down. Even if the US government decides to crack down on Bitcoin, many other countries will tacitly or explicitly support it. For example, China, Russia, Switzerland, Iceland, Singapore. Suffice it to say, the geopolitical impact of a strong Bitcoin economy is incredible, starting with a completely peer-to-peer banking system where people will no longer rely on the US dollar as a reserve currency for all assets.
This assumes a world where money flows are more transparent (bitcoin), easier (bitcoin), more economical (bitcoin), and more secure (bitcoin). Does the Bitcoin economy need regulation? Maybe. Just as virtual guardrails allowed the Internet to thrive, the Bitcoin ecosystem may need something similar to rebalance the financial services landscape.
With the current price of Bitcoin at around $130, some people believe that Bitcoin will never be a useful currency, but will instead be a better version of gold or a gold substitute (Gold 2.0). If this is what Bitcoin is going to be, a good question to ask is: “How much will Bitcoin be worth?” Well, the total value of all the gold in the world is about $8 trillion. Assuming Bitcoin can replace gold and become a more useful store of value, then each Bitcoin would be worth $400,000 ($8 trillion / 21 million).
If Bitcoin grows into a more useful reserve currency, it will be worth far more than $400,000, and I personally think Bitcoin is already superior to gold. But its role as a currency has yet to be determined, but in the next decade, becoming Gold 2.0 is enough for it to bring me more than 3,000 times the return.
I tell my friends that it is perfectly reasonable to put 1% of their assets into Bitcoin, and that is what I do. It is called stupid insurance. The 2008 financial crisis has proven that stupid people can bring about global destruction.
There is a famous scene in The Matrix where Morpheus asks Neo if he takes the blue pill, life continues as before, or the red pill, choosing the truth. Neo takes the red pill and begins to explore human nature, hierarchies, rules, etc. Bitcoin is a red pill, and there will be some bad and embarrassing moments, but a lot of good, useful, and powerful things will come out of it. It will redistribute money and power to those who oppose centralized authority.
I hope Bitcoin prevails, and the world needs more red pills.
