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Epoch Five — Big League Bitcoin

Block 840,000 has come and gone. With it, came Bitcoin’s fourth halving, cutting the issuance of new coins to 3.125 per block. Welcome to Epoch V. What awaits us?

Tomer Strolight
Tomer Strolight
May 15, 2024May 15, 202422 min read22 minutes read

Looking Back to See the Future

Each of Bitcoin’s epochs provide it sufficient time to go through a phase of growth in which it can achieve something substantially different than what it had prior to that epoch.

Epoch I

The first one was Bitcoin’s genesis epoch — its birth. It was “baby Bitcoin.” During that time, it built awareness in niche communities, worked out some significant bugs, lost its creator, and found its first uses as both a currency and a digital commodity to be exchanged for traditional fiat money. It was chapter one of Bitcoin’s coming-of-age story. Its most remarkable achievement, given how strange and new it was, was surviving to reach its first halving event. Both Forbes and Wired magazine had taken note of it during this epoch and written it off for dead. This finance-and-tech-chimera with the catchy name, Bitcoin, however, surprised them both. It pleasantly surprised its supporters, too.

Epoch II

During its second epoch, Bitcoin experienced several great shocks. It witnessed the death of the very entities that made it appear useful during its first epoch. The online marketplace that used it as a currency, The Silk Road, was shut down — its owner being arrested, convicted, and condemned to two consecutive life-sentences. The online exchange where people were trading their fiat money for bitcoins also collapsed, and its owner imprisoned too. Bitcoin was associated with the underground, the unscrupulous, and the incompetent. As such, it was declared dead many more times — by Wired, Slate, Salon, Business Insider, NY Mag, so many more, and even some guy named Michael Saylor:

Remarkably, it did not die. Instead, during this epoch, the idea of scaling it up, speeding it up, and improving its privacy with the Lightning Network protocol was born. Websites may die, and people may die, but already, Bitcoiners have learned that protocols can’t be killed off so easily. And Bitcoin was not a website, person, or corporation — it was a protocol. The world was catching on that whatever else it was, one thing about Bitcoin was that it was an unstoppable idea.

Epoch III

Bitcoin’s third epoch was filled with fireworks. Thousands of competing cryptocurrencies were launched. A (cyber) war was fought over, making the changes needed to implement the Lightning Network (see the book The Blocksize War by Jonathan Bier), and a spectacular bubble inflated and popped. By the end of this epoch, almost everyone had heard of Bitcoin and blockchain, but few knew what either meant, and many had lost interest in “crypto” if not also some of their money.

Epoch IV

And then came this fourth epoch, which just concluded on April 19th, 2024. The Lightning Network was born, and it, too, had its moments of doubt. However, the Bitcoin ecosystem flourished during this epoch.

That guy, Michael Saylor, who had predicted Bitcoin’s demise in December 2013, had a change of heart. He did more than just call for its survival, though. He pioneered the idea of using Bitcoin as a corporate balance sheet reserve asset for the publicly traded company he founded and led. Despite heavy criticism from the media and other investors, MicroStrategy’s conviction never wavered. The company’s value increased roughly twenty-fold during this epoch! But MicroStrategy was by no means a Wall Street titan.

Nevertheless, the success of its strategy could not be ignored forever. By 2023, Wall Street’s largest asset manager, Blackrock, wanted in on Bitcoin and applied to launch a Bitcoin ETF. Many others followed suit.

 Earlier in the epoch, a nation, El Salvador, shocked the world when it made Bitcoin legal tender and gave some to each of its citizens. That nation’s fortunes began a positive turnaround, and it, too, did not back down despite international criticism. 

Unlike its second epoch, when businesses involved in Bitcoin met their demise, during this epoch, many thrived. Some miners and exchanges even went public, and many other companies were formed. 

Bitcoin also survived its first economic downturn and also a worldwide pandemic that saw many smaller enterprises fail. It was no longer a small or vulnerable enterprise. It even briefly attained a $1 trillion dollar valuation during this epoch.

Dozens of books were published about Bitcoin, and thousands of podcast episodes and videos were released. Dozens more conferences took place all over the world. What had been merely broad but vague awareness of its existence in the prior epoch now became a growing understanding of its true nature and potential. Now, questioning its survival became not the norm but a fringe idea largely held by those deemed to not have studied Bitcoin well enough to realize it wasn’t about to die.

But it was also clear that Bitcoin would not stand still, either. It was growing. It had shown that it both wanted to and was claiming to be ready to play in human civilization’s “big leagues.” And then, at the end of the fourth epoch, Bitcoin got its first chance to do so. It was called up to Wall Street with the launch of Bitcoin ETFs in January 2024. It’s safe to say that this was a successful first appearance.

Where Do We Go From Here?

The question remains, though — “What is Bitcoin’s role in this world?” There are different theories and visions. These are not necessarily mutually exclusive of one another. One theory holds that it will become the world’s greatest store of value. Another sees it becoming the world reserve currency — the base layer of the world’s economy. Another sees it becoming the actual currency used by everyone in the world. There are also more modest theories that see it carving out significant niches but living alongside many currencies. And then there are also the theories about what it will change beyond merely changing the money. Will it reduce international conflict and war? Will it transform our political systems and politicians? Will it change the architecture and sources of the worldwide energy grid?

Will it spawn further ideas for decentralized protocols that are equally robust and transformative? Like it or not, Bitcoin is clearly seen as a big deal by just about everyone—even those rooting for it to lose.

Epoch V — What Might We See?

Epoch V will be a pivotal one in Bitcoin’s story. It may well be the epoch in which Bitcoin largely provides answers to the questions posed above, giving Bitcoin the chance to show what it is (and isn’t) made of.

During its first dozen years of existence, Bitcoin was a grassroots, peer-to-peer movement that eschewed institutions. Some nations banned certain aspects of it, while Bitcoin’s community simply laughed at those bans, finding paths around regulations and growing independently of the need for governments to embrace, let alone even permit, Bitcoin’s use.

One way to look at it was that Bitcoin was its own fledgling “nation-in-cyberspace” — the first of its kind: A new frontier in which pioneers settled into and developed the land, disregarding the traditions and norms of other lands. Sometimes those pioneers fought over key policies in this new land. There were splits and setbacks. But these were dwarfed by the growing number of people who recognized the advantages Bitcoin offered and who came to it, many choosing to remain in the new land through its ups and downs during its developmental stage.

Whereas Bitcoin then was largely something that the old world of finance and government could dismiss, in this fifth epoch, it is now too big to ignore. The reason for this isn’t that it has grown to its full potential. Rather, it is that Bitcoin has shown just how big its full potential can be.

What if not just one company but many, or eventually even most, begin to use Bitcoin as a balance sheet reserve asset?

What if not just one tiny struggling nation but perhaps a BRICS nation, a G20 nation, or several nations start to permit or even endorse its use as currency or legal tender?

What if Bitcoin mining, the process of securing Bitcoin’s records, increasingly gets woven into the worldwide power grid?

What if it becomes normal and safe, rather than fringe and risky, to hold some Bitcoin?

A Revolution Like the Internet, But On the Internet

 It’s worth recalling that the Internet went through a very similar transformation from a weird, hardly-heard-of technology to something everyone was hearing about but few were using, to something that people started dabbling in, to something everyone everywhere uses all the time for everything. The Internet, an open source protocol built to survive almost anything, found that survival and openness was all it needed to replace almost all the media and telecommunications infrastructure that preceded it.

Not only did the Internet replace the substrate of media and telecom, but it also fended off imitators and alternative networks. Its first-mover advantage, combined with the fact that its protocols were free to use, prevented competitors and private networks from being able to offer a compelling alternative to it as the base layer of networking. Towards the end of the 20th century, it was becoming normal for most American households to use a phone landline to have a computer with a dial-up connection to the Internet. And only a decade later the norm was to have an always-on, high-speed connection in a household, with multiple devices connecting constantly to the Internet: computers, video game consoles, sound systems, security systems, televisions, and more. And then a whole new class of devices, like the iPod, came out, enabling us to do previously unimaginable things like carrying our entire music collections in our pocket. Not long after came the smartphone, which was so much more than a phone and put the whole world’s information in our pockets.

But during its early days, many questioned what the Internet was good for besides electronic mail. And the responses they received were remarkably tame or, at the very least, vague. There was talk of an “information superhighway, ” but few could elaborate on what that actually meant.

This time around, though, we recognize that we live in a time when dramatic, even unimaginable change can happen in a relatively short time. Not only did we observe this with the Internet, but we recognize that the Internet itself accelerates the nature of this change—especially for things built atop the Internet.

Thanks to Bitcoin, the Internet now has an open, unkillable protocol for exchanging and storing value. This should lead to epic changes. After all, we don’t have expressions like “money talks, ” “money is power, ” or “money makes the world go round” for nothing. Replace the word money in each of those expressions with Bitcoin, and you start to get an idea of what the future may look like.

Let’s take a look at a few possibilities.

Energy

Our modern world is built on energy. One could argue that the energy industry began when people first discovered fire, but let’s fast forward a few hundred thousand years past that, too, when we began to use the energy from fire to power machines so that it wasn’t human or animal labor that got work done, but instead, the amazing ability to use combustion to do mechanical work. In the year 1698, the first “steam-powered” water pump was invented. Now, people didn’t have to manually pump water. But it wasn’t just a convenience. Steam power could scale up to the strength of hundreds or thousands of individual men without any men needing to be present. It didn’t just reduce the amount of physical work a man needed to do; it massively increased the amount of work that could be done. In a positive feedback loop that ultimately redefined civilization, steam power could be used to extract and ship tremendous amounts of coal, which could then be used to create more steam power. The age of energy and industry was thus born. Steam locomotives — portable machines powered by coal — could eventually generate as much as 7500 horsepower each (and one horsepower is roughly equivalent to the strength of ten men)!

Eventually, we largely replaced coal with liquid fossil fuels for portable needs. We also learned how to use energy (from fire, flowing air and water, and splitting uranium atoms) to generate electricity — which is transmissible energy. That transmissible energy idea, too, was first laughed at as impractical and inefficient. Its famous first use case, the light bulb, paved the way for electrification of cooking (stoves), cleaning (vacuums, washers, dryers), food preservation (refrigerators), entertainment (radio and television), and countless other electronic devices, leading eventually to the invention of computers and the Internet, and, now, Bitcoin.

Bitcoin is an invention that has descended down a long line of inventions that use energy. But it also represents an innovative use of energy. It turns energy itself into money and uses energy itself to secure money: No more digging money out of the ground and transporting it on train cars, ships, or armored trucks. That was a dangerous, slow, inefficient way of making money. And no need then to rely on a substitute for hard money that lost its value over time, was prone to outright collapse, and led to all kinds of distortions of the proper function of government and banks.

What does this mean for our future now that we have money that is made of and secured by pure energy?

For one, it means energy is even more valuable than before — and it was already so valuable to begin with that our whole civilization depended on it. But maybe it was the abundance and ubiquity of energy and the machines that depend on it that made us take this value for granted. Few people, however, take for granted the value of money. Earning, saving, investing, and spending money are top-of-mind matters for nearly every adult human being on the planet. Money is not taken for granted.

Perhaps we will come full circle with Bitcoin to a re-awakening of the importance of energy, not necessarily because we appreciate the full importance of it in every aspect of our lives, but because we simply recognize that it is essential for making, saving, and spending money.

Already, we can observe the value Bitcoin puts on energy. The Bitcoin mining industry is a huge consumer of previously wasted energy. It is a customer of previously stranded energy. That energy which humans did not find usable or valuable is now recognized as having value by Bitcoin.

Yet, we are only at the start of this transformation.

Throwing energy away — wasting energy — which most “base-load” power generation does, is now literally “throwing money away” or “wasting money.” How much longer can this go on? 

This fifth epoch of Bitcoin will challenge the very idea of waste energy. Why waste it, after all, when you can use it?

It won’t only focus on utilizing already wasted energy. Energy generation projects that are being planned will be able to include in their calculus the potential of using that energy to mine Bitcoin. This will change the models of demand, payback period, and value. It will also change the view of where and at what scale to build out energy.

Energy build-outs are slow, though. It takes a lot longer than an epoch (nowadays, at least) to build a hydroelectric or nuclear power plant. So this transformation, which will lead to more, cheaper energy and wider availability of energy, will only show its potential in this epoch in the form of proposals, tests, and perhaps some ground-breaking projects that do get approved.

Finance

One of the most negative effects of the debt-based money system that Bitcoin is set to replace is captured in the word “financialization.” Put briefly, financialization is the overtaking of an industry by the finance sector. It’s most easily observed where it is most dramatic — in areas where money can be loaned or printed in great quantities for long durations. Consider a house. It lasts a long time, is located on land that lasts even longer and is necessary. So, it’s easy to justify making its purchase a long-term commitment. If money can come into existence without requiring work or energy, it will, especially when its creation comes in the form of debt that will be paid back over very long periods of time.

And this is exactly what has happened with housing. It has become the norm to create money out of thin air to bid up the price of houses, leaving homebuyers in lifelong debt and the banks who create the money in unprecedented and ever-growing profit. This not only inflates the price of housing, it also turns houses into financial assets, adding a further financial premium.

Today, houses are so financialized that they are unaffordable to the younger generation. Yet, they are the main store of financial wealth for the older generation. This problem shows no signs of abating within the traditional finance system.

And it is not just housing that has become financialized. Education is financialized in the same way — loaning out hundreds of thousands of dollars to young people who lack the experience and financial acumen to understand what they are getting themselves into. Cars, too, are financialized.

Pretty much the entire government is financialized, with the government relying on money printed out of thin air to pay for services of ever-decreasing quality. Yes, financialization not only increases prices, but it also decreases quality. It turns everything into a number, and that number is almost never a qualitative set of attributes because numbers are quantities, not qualities.

This epoch of Bitcoin will call into question the wisdom of financialization — and probably also its morality. Perhaps Bitcoin will do so with the similar but less widely known term, “Bitcoinization.” If we begin to see a rise in houses paid for in Bitcoin, or education, or privatized services replacing the inability of governments to provide sufficient quality of service anywhere in the world, it will be an indication that the era of financialization of these things has peaked and will decline as Bitcoin becomes a more sensible approach to the way these things are bought and sold.

Most of all, the thing that has been most financialized is nothing other than money itself. The need to invest money into something other than money is not fundamental to the nature of money. Money that holds its value and even appreciates purchasing power, along with the increase in society’s productivity, now exists (again). And this is evident to those people who have been using Bitcoin as, ironically, an investment. Bitcoin is not a traditional investment, after all. It does not produce a product, a profit, or a dividend. It is simply good, hard money. Bitcoin has already made it easier to store, preserve, and grow wealth without needing to undertake the strategies of diversification, sector rotation, company analysis, or any of the other complex, expensive, and unpredictable tools of the investment industry. This epoch is bound to see many more people become aware of and exercise the option of exiting the investment industry, at least in part, to instead rely on money that doesn’t deteriorate as a form of savings. Again, we should not expect Bitcoinization to be completed this epoch — it will take time — but like the Internet in its stages when more people were using it, the number of people and extent of adoption are both likely to accelerate to the point where the writing will clearly be on the wall.

Politics

Perhaps politics has always been somewhat of a mess. It undoubtedly is a mess now. Fifty years of fiat money has completely diluted and distorted politics, penetrating and weakening every political institution’s ability to deliver the goods expected from good government. It is now too tempting and easy for politicians to promise money to win elections because they can, in fact, conjure that money up without having to work for it or collect it. Deficits and debts continue to reach new highs that would have seemed ludicrous and impossible only a couple of decades ago. In the 1997 comedy Austin Powers, the villain, Dr. Evil, asks for a ransom of “one hundred billion dollars” and is laughed at for stating such an absurdly inconceivable amount of money. Today, the U.S. government borrows nearly that much every ten days.

This amount of money that is spent but unearned creates a huge distortion in our civilization. It draws massive attention and effort to obtaining it since it is so much more easily obtained than through actual work that is of value to other people. It creates incentives that lure people away from being actually productive through exchanging valuable work for money. It creates a political class that benefits at the expense of the working class. This is a terrible condition that has been a prelude to the collapse of many empires and nations throughout history. Yet, having lived all their lives in a system where the government can borrow indefinitely, few people can imagine anything different.

Bitcoin allows people to reimagine this reality. It allows people to see a government constrained in its spending. Thus, they can see the increased incentive to dedicate their time to earning money through work rather than politics. It quells and, perhaps even eventually, extinguishes the distorting incentives that fiat money fueled. Had Dr. Evil been on a Bitcoin standard, he might have laughingly demanded twenty-two million Bitcoin, a joke that would be as funny twenty-five years from now as it is today.

How might we see Bitcoin’s impact on politics play out during this Epoch? There are two avenues: one outside politics itself and the other within it.

Outside politics, the adoption of Bitcoin, even solely as a savings instrument, will encourage more people to be drawn away from seeking easy-yet-inflating fiat currency. The exchangeability of work and earnings into hard money awakens people to the reality that money needs to be a representation of actual work or value created. Bitcoin offers not only the awareness but also the instrument to escape that system of broken incentives. It just takes a few years of observing and, ideally, holding Bitcoin to make the mental shift to desiring and choosing hard money. Again, in this Epoch, with Bitcoin being so widely covered and increasingly available as even just a holding vehicle, we’ll see its value (both financial and motivational) increase — and it will increase even more if governments accelerate their abuse of the power to print money.

Within politics, we will see a growing battle of philosophies. It won’t be the usual one we’ve become used to, with one party promising money to some constituency while the other party promises money to another. It will be a new breed of entrants into the political realm preaching sound policies. But politics, too, is very slow. The election cycle itself is four years long — a full epoch. So, we are only likely to see the sprouting of such ideas within politics itself this time around. Nevertheless, it will be an important development to begin to see entrants into the political sphere who are serious about sound, sustainable practices for civilization.

Other Fields of Improvement We’ll Start to See 

Bitcoin is by no means limited to impacting only these three broad categories of our civilization.

When you think about it, energy, money, and government are huge pillars that our civilization rests upon, and strengthening or rebuilding these pillars represents a huge improvement at its very base. Since practically everything sits upon these pillars, we can eventually expect changes in nearly every aspect of our lives. Perhaps everything will become not only less financialized but less politicized, too.

That would be very refreshing — a media industry, for example, that did not feel a need to incorporate politics into everything it produced.

Perhaps an increasing abundance of energy will see the expansion of energy-intensive inventions now beyond the reach of the average person — maybe we’ll finally get the flying cars that we were promised way back when science fiction also predicted video-calling, something we finally got from the Internet. Bitcoin is also not the only dramatic technology that is changing our civilization at present. There is, for example, there is a great deal of speculation about what artificial intelligence will also bring out in the coming years.

Regardless, this epoch for Bitcoin sees it playing an increasingly important role in all the major foundational pillars of 21st-century human civilization. How far and how fast it progresses is what we’ll simply have to leave to speculation for now. However, the future looks brighter thanks to Bitcoin. While the path to getting there will not likely be a smooth one, there’s nothing new about that. Every major historical progression was disruptive and not without fear. But for those who embrace Bitcoin’s advantages, many of its rewards will come sooner and abate the consternation that often accompanies dramatic change. Bitcoin is taking its time to allow for a smooth transition, an evolution rather than a revolution for those who embrace it early enough — and we are still rather early.


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Tomer Strolight

Tomer Strolight

Tomer Strolight is Editor-in-Chief at Swan Bitcoin. He completed bachelors and masters degrees at Toronto’s Schulich School of Business. Tomer spent 25 years operating businesses in digital media and private equity before turning his attention full time to Bitcoin. Tomer wrote the book “Why Bitcoin?” a collection of 27 short articles each explaining a different facet of this revolutionary new monetary system. Tomer also wrote and narrated the short film “Bitcoin Is Generational Wealth”. He has appeared on many Bitcoin podcasts including What Bitcoin Did, The Stephan Livera Podcast, Bitcoin Rapid Fire, Twice Bitten, the Bitcoin Matrix and many more.

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