Bitcoin, Not Digital U.S. Dollars
Understand The Major Differences Between The Two
Most people don’t know what differentiates bitcoin from the U.S. dollar or any other form of currency for that matter.
One difference is that the U.S. dollar has lost well over 95% of its value over the last 112 years, while bitcoin continues to gain value as the years roll on.
Another difference is that the U.S. dollar requires permission to use in just about all of its digital forms, whereas bitcoin doesn’t require any permission to use.
And there are a number of differences between the latest iterations of digital dollars, stablecoins like Tether (USDT), and bitcoin.
Let me start with some background on Tether, though.
Tether issues digital dollars (USDT) across various blockchains. It’s often used on Tron, because fees on that chain are low.
But recently, Tether announced that USDT will now run on Bitcoin’s Lightning Network, the fastest payment network in not only the broader crypto space, but in the world.
Some in the Bitcoin and crypto space are excited about this, because it will bring both more users and more bitcoin liquidity to Lightning.
One of the people who’s excited about that is Jesse Shrader, CEO and co-founder of Amboss, and from a business perspective he has good reason to be.
I outlined those reasons in a piece I published on him for Bitcoin Magazine this week, if you’re interested to learn more:
Again, I think it’s perfectly logical on many levels for someone like Shrader to like that USDT has come to Bitcoin and Lightning.
However, the point I wanted to make in this edition of the newsletter is that I’m not excited about USDT coming to Bitcoin and Lightning (though, my reasoning is only half based on logic).
I wrote about this on Wednesday:
Here’s an excerpt from the piece:
“I do believe that bringing USDT to Bitcoin and Lightning comes at a price.
One dimension of that price is technical, while the other is philosophical.
On the technical level, running USDT over Bitcoin and Lightning potentially puts Bitcoin’s security at risk.
If we see another Bitcoin hard fork comparable to the one we saw during the Blocksize War, larger economic nodes on the Bitcoin network, like the one operated by Coinbase, which manages much of the bitcoin that backs the U.S. spot bitcoin ETFs, may opt to support the “Tether fork” of the network, which could also include other changes to the network that could jeopardize Bitcoin’s security in the long run.
In other words, if the likes of Coinbase, Tether and some other major players in the Bitcoin space support and push for the “Tether fork,” other major economic nodes will likely follow suit.
What is more, everyone using USDT on Bitcoin and Lightning would also likely support that side of the fork, because the USDT that remains on the chain of the non-”Tether fork” will likely be nullified.
Lyn Alden wrote about this in her essay “Proof-Of-Stake And Stablecoins: A Blockchain Centralization Dilemma.”
In the piece she stated “custodians can nullify the value of all stablecoins on whichever side of the fork they don’t view as the correct one.”
Granted, Alden was referring to smart contract blockchains like Ethereum and Solana that rely heavily on DeFi, which stablecoins are a major component of, when she wrote this, but the same would apply to Bitcoin. (Alden was correct in this claim, as we saw when Ethereum shifted from a Proof-of-Work to Proof-of-Stake consensus mechanism during 2022’s “The Merge.”
Post-Merge, stablecoins issuers like Circle and Tether only continued to back the tokenized U.S. dollars on Ethereum, and not EthereumPoW (ETHW), the older chain that continued running the Proof-of-Work consensus algorithm.)
The same type of scenario could play out with Bitcoin in the event of a chain split, giving Tether an inordinate amount of power over Bitcoin.
My other reason for not liking USDT on Bitcoin is a philosophical one.
Bitcoin, which was released into the world in the wake of the Great Financial Crisis of 2007-2009, was created as an alternative to the U.S. dollar.
At the time, the dollar was being printed en masse (i.e., devalued) to bail out the same banks that caused the crisis.
Bitcoin, money that can’t be printed at the whim of a government or central bank, was created to compete with the U.S. dollar, not to help buoy it.
Bringing USDT, a mechanism the U.S. government uses to prop up U.S. dollar hegemony around the world, to Bitcoin feels morally wrong to me — and I’m not here for it.”
To add to the point I made in the final paragraph above, not only does the U.S. government use USDT to support U.S. dollar hegemony, but it also uses Tether to help prop up the U.S. Treasury market, which is a Ponzi scheme (I’ve never heard of a logical scenario in which the U.S.’s $36 trillion in debt — which inflates at about $1 trillion per every 100 days — can be paid back).
Tether is one of the largest buyers of short-term U.S. debt, which it uses to back the tokenized dollars it issues. (The company also now holds over $100 billion in U.S. Treasuries and it was more profitable than BlackRock in 2023.)
ADVERTISEMENT
Store the keys to your bitcoin — and not USDT — with a TREZOR SAFE 3, a bitcoin-only wallet.
Click image below to buy one today.
Tether helps perpetuate the U.S. dollar, the current design of which is based on theft (it’s constantly devalued by the powers that be).
Bitcoin can’t be devalued by any central authority and has proven to be a better way to store your wealth over time.
Final thought: I don’t care if people use USDT if that’s what they prefer to use; I’d just like for them to know the different between it and bitcoin.
Hyper-inflating Goats In Malawi
An aspiring writer based in Malawi who I met on my recent trip to South Africa recently published one of the most fun-to-read pieces on money/inflation/Bitcoin that I’ve come across in quite some time.
The piece, entitled “Hyper-inflating the goat,” is about how goats are being used as a store of value in Malawi because the country’s currency is depreciating so quickly.
The twist to the story, though, is that the goats are eating/destroying everything in their paths, creating other types of economic hardship as a result.
And the author’s point is that it would be much easier the Malawian just adopted bitcoin as a savings tool instead.
(Yes, I know I just gave some of the story away, but it’s the author’s dry sense of humor that really makes the story shine.)
I highly recommend giving this piece a read!
Markets
Bitcoin continues to trade in the range it’s been in since the end of last year.
Now, seems like a semi-okay time to buy (not financial advice, nor is anything in this newsletter), though I’m not buying right now, because I don’t really feel like I’m getting much of a discount.
“HOW DARE YOU, FRANK?!?! THE TIME IS ALWAYS RIGHT TO BUY BITCOIN.”
If you hear people saying stuff like this, be careful. Keep in mind that bitcoin’s price has historically moved in cycles. And, if history repeats, we’re in the latter part of the uptrend portion of the cycle.
Bitcoin was trading at about $52k about 5 months ago. And it was trading at about $26k about 13 months ago.
Do with that information what you will.
Also, please know that I acquire bitcoin every day of my life with apps like Fold just for making everyday purchases and paying my bills (and spinning a virtual wheel).
You can do the same if you’d like to passively accumulate bitcoin and not think too much about timing the market.
Be sure to use my referral link if that interests you: https://use.foldapp.com/sign-up?referral=3PEVHXNX
Alright, Frank the Tank is off to soak in some NYC winter sun.
Big love to everyone, and here’s to a fantastic week ahead!
Best,
Frank
X | LinkedIn | YouTube | Instagram | Spotify | Apple Podcasts | Fountain | Wavlake
Nostr: npub1dnzzyhmewrzkh862z7z2shwmhh5htx0rvkagepj2fkgst9ptwg3qj4x52h
