What the Hell Is Bitcoin? A Useful Explainer for Beginners

Longform

LOL just kidding, I don’t understand it. Probably because it’s pretend money.


Illustration by Woody Harrington

In last month’s issue of Philly Mag, my good friend and colleague, Christy Lejeune, wrote about how the pandemic is the perfect opportunity to embrace a new hobby for the sake of one’s general mental health. Christy was so convincing that I promptly went out and found myself a hobby. My hobby is asking people whether they understand bitcoin. So far, no one does. And, I regret to report, this includes some people who have invested money in bitcoin­ — invested fairly heavily, IMHO, for people who have no clue what bitcoin is.

But that’s okay, because somebody must know, right? I mean. Just the other day, I was in Redner’s supermarket and saw a new advertisement printed on the conveyor belt that carries your butter and eggs up to the cashier. “Buy $10 Get $10,” it proclaimed. “Get $10 FREE Bitcoin when you buy $10 worth of Bitcoin at the in-store Coin Cloud DOM.” What a country, right? Now you can use your hard-earned cash to buy imaginary money right from a machine at the grocery store!

I know what you’re going to tell me here, especially you smart-ass young people who think you know everything just because you actually remember to try turning it off and then turning it on again when your computer malfunctions. You say you know people who have gotten rich buying bitcoin. No, you don’t. You only think you do. Do you know who Jamie Dimon is? The billionaire CEO of JPMorgan Chase. The Economist has called him “Wall Street’s most celebrated boss.” And Jamie Dimon recently declared, in the midst of a bitcoin run-up, that the stuff is worthless. That’s the word he used: worthless. He doesn’t think people should buy it, he said, and then added: “I don’t think people should smoke cigarettes, either.” Nor do I.

And Dimon and I aren’t alone. Back in October, New York magazine ran an article about how all the “Big Short” guys who successfully predicted the collapse of the real estate bubble in 2008 think cryptocurrency is … well, let me quote them directly. Hedge funder John Paulson also chose the word “worthless” to describe it. Investment strategist Mike Green predicted that bitcoin “will ultimately end up going to zero” and said the fad for it is based on “cult-like behavior.” Universa Investments founder Mark Spitznagel opined that it “looks like a Ponzi scheme.” But you go ahead and believe what your 23-year-old nephew who flunked out of college says you should do with your retirement savings, hon. After all, just today an email landed in my inbox that quoted one Nigel Green, the CEO of something called the deVere Group — its Facebook page says it “provides digital currency custody,” whatever that means — listing­ numerous reasons I should sink my savings into bitcoin, including this: “Only last month, El Salvador became the first country in the world to adopt Bitcoin as legal tender.” You know what Mike Green says about that? That El Salvador is “trying to make money-laundering­ the national business.” Whoopee!­ Meanwhile, China has outlawed cryptocurrency trading altogether out of concerns regarding “illegal financial activities.”

Bitcoin isn’t the only imaginary money that’s been in the news of late. Did you know there’s now such a thing as “theoretical currency”? Apparently, some financial geniuses are proposing that we solve the debt crisis­ by — are you ready? By minting a one-trillion­-dollar platinum coin and depositing it with the Federal Reserve. It has to be platinum, it turns out, because there are actual laws about making bogus coins out of silver and gold and copper. Treasury Secretary Janet Yellen says the idea’s a “gimmick,” but some House members are advocating for it. Which actually makes sense. Who would know more about theoretical currency than our federal lawmakers?

It’s no skin off my back if the government wants to fool around with Monopoly money. But I do find myself concerned that the line between reality and fantasy is becoming increasingly blurred. Businesses supposedly valued at billions of dollars — WeWork, Ozy Media, Elizabeth Holmes’s Theranos — are turning out to be nothing but twaddle, hyped and inflated by smooth-talking, unprincipled shysters who bleed investors dry and then stroll away. Holmes brought some of the supposedly finest minds in the world onto her board: Henry Kissinger, David Boies, George Shultz, James Mattis. (I said supposedly.) How did she convince them all to buy into her chimera? She … invited them to. NYU marketing prof Scott Galloway explains the rise of such phony business enterprises as “a consensual hallucination.” When asked on the Today Show whether he’d paid for digital hits on his company’s sites instead of earning them, Ozy CEO Carlos Watson said unabashedly: “Like everyone, 100 percent.” There’s not even any shame in concocting pure crap anymore.

The latest hot thing I’m supposed to pretend exists is something called the metaverse, which is — say, do you understand bitcoin? Then you’re gonna love the metaverse, which, hoo-boy, Facebook is willing into existence in order to “deepen that human connection,” the company now known as Meta says, because hell yeah, Facebook is just so darned good at that. (News flash: Your Facebook Friends are not real friends.) Facebook describes the metaverse as “a set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you.” In other words, it’s not real. It’s like the Simpsons’ living room.

But! You can pay real money for stuff there, like non-fungible — from the Latin “fungi”; who writes this stuff? — tokens, a.k.a. NFTs. What are NFTs? They’re, um, “virtual goods.” Which is weird, because “virtual” comes from the same Latin word as “virtue,” which makes virtual goods sound wonderful instead of like completely imaginary things. For instance, Nike is now out to sell you digital sneakers. (Hey, one size fits all!) A blockchain (don’t ask me!) called Solana was offering a virtual condominium building that you could buy space in via NFTs. You’d be able to make money off your investment in the condos, too, Solana Towers said! The project launched on a Tuesday in October; by Wednesday, it was kaput — poof! — along with more than $282,000 from gullible investors. That was soon followed by the Squid Game crypto-scam implosion, in which players lost a cool $3.38 million in less than a week. You guys must all have a lot more disposable income than I do, because there are people out there selling NFT clip-art pictures of rocks with pretty colored backgrounds for 1.3 million bucks apiece. You don’t actually get a picture, mind you. You get an online link to a virtual picture. As Bilbo Baggins explains to Gollum sitting at a computer in an Adam Sacks New Yorker cartoon, “So you can’t own the Precious physically, but you can pay to have your name listed as its owner in an online distributed database.”

My poor head aches just trying to wrap around it all. Still, I have to think it’s not that hard, because do you know who’s into cryptocurrency in a big way? Former U.S. senator and general brickhead Rick Santorum, that’s who. Back in 2019, he announced he’d joined the board of Cathio, the special cryptocurrency just for Catholics — intended, Rick the Brick said, “as a universal solution that makes it easy for younger generations to engage with the church.” Sure, why not? Virtual church, dude! You don’t even have to go! Oh, and you’ll be pleased to learn there’s a patron saint of bitcoin — unofficial, granted, but duly anointed by Catholic Blockchain, an org dedicated to promoting the use of that technology by the Catholic Church. (Really, what goes better with imaginary things than religion?) So, who’s the lucky winner? Why, it’s Padre Pio! And we’re not talking some stodgy Dark Ages scribe. Born in 1887, Padre Pio was an Italian mystic and healer who fought with Satan and his demons and supposedly received the stigmata. Repeatedly. He also, true believers believe, was able to bilocate, or be in two places at once, which apparently bitcoin can do, too. Even the pope at the time was skeptical of Padre Pio. If you’d like to learn more, there’s a shrine to the good father in Barto, in Berks County, that’s seen some controversies of its own. Shia LaBeouf is set to star in a movie about him, if that gives you any idea.

I may not understand bitcoin, but I do know this: If you’re any sort of faithful Philly sports fan, you’ll steer way, way clear of cryptocurrency, seeing as former Patriots and current Buccaneers quarterback Tom Brady and his lovely wife Gisele have an equity stake in crypto exchange FTX, for which they’re serving as “ambassadors.” I think we can all agree on how honest Tom Brady (did someone say Deflategate?) is.

Incidentally, in case you somehow haven’t noticed, the Sixers now have an official jersey patch sponsored by Crypto.com, a “global cryptocurrency company.” (The team is offering NFTs, too.) The only people you should trust less with money than that dropout nephew of yours are the folks who brought Ben Simmons into our lives.

Don’t believe me? According to the FTC, between October of 2020 and May of 2021 — way before the Squid Game and Solana debacles — U.S. consumers had already reported losing more than $80 million to cryptocurrency investment scams. There were 7,000 victims. (Or, rather, that many were willing to complain to the government that they’d been bamboozled.) That loss was a tenfold increase over the same period the year before. (Scamming — it’s a growth industry!) And thanks to commercials by the likes of Megan Thee Stallion and Spike Lee claiming that cryptocurrency is the perfect investment for Black people, 44 percent of all cryptocurrency is owned by POC. New School economist Darrick Hamilton, himself a Black man, in discussing bitcoin with Time magazine, said, “In the end, it’s a casino.” You know what happens at casinos? The house always wins.

Speaking of houses, the nice young couple in the other half of our twin installed a Nest Cam on their front porch when they moved in, to keep track of all the cardboard boxes they have delivered almost every day. I was interested to see, over the summer, that a pair of actual (not virtual) birds built a nest right on top of it. There’s something about this that I find symbolic of the growing confusion between what’s virtual and what’s real. Consider, if you will, the Internet of Things. That sounds sort of useful, right? Well, it turns out the Internet of Things is what enables my husband to take photos with his wristwatch of the nutrition information on the packaging of everything he ingests. The wristwatch then interfaces with his fancy bathroom scale and various apps on his computer and phone to make sharing meals with him about as much fun as a colonoscopy.

My point is, you can learn a lot of things without learning anything. It’s like the 36 percent of Americans who, the Pew Research Center says, now regularly get their news via Facebook. C’mon, folks. You don’t get news from Facebook. You get made-up, unedited, unfiltered, un-fact-checked spew that’s being shared by your slacker nephew’s mom.

I’m antisocial, so I don’t really do social media. Nor do I spend time watching videos on TikTok; I have bathrooms to clean. But I gather that a lot of the “real people” so many of you are watching on TikTok are turning out not to be real after all — to be characters who are just invented and scripted to tug at your heartstrings (and pocketbooks). Real influencers are gross enough, but fictional influencers? That takes it right through Alice’s looking glass. At least nobody will get hurt when the fictional influencers’ old tweets show up and they get publicly shamed.

And speaking of TikTok, the Wall Street Journal had a truly frightening article not long ago about how young people today are getting their information on financial investing from … TikTok, also known of late for videos of schoolkids ripping soap dispensers off bathroom walls. (Nothing says “freedom” like a good case of E. coli, amirite?) Why would anyone get investment advice from some twit on TikTok? Because young people today are so much smarter than everyone else! The story quotes a “social media consultant” named Sarah Petite as saying, “This generation is looking at their parents and saying, ‘The way you thought about money? That isn’t how it works anymore.’” How does it work these days, pray tell? Young people, according to the article, “don’t care much about the qualifications of who’s giving the advice. … Many of these influencers have no formal training as financial advisers and no background in professional investing, leading them to pick stocks based on the whims of popular opinion or to dispense money-losing advice.”

In other words, you might as well take investment advice from a hamster. No, really, from one particular hamster: Mr. Goxx, who spent last summer and fall making cryptocurrency decisions by running on a wheel and then entering one or the other of two tunnels in his cage, marked BUY and SELL. (You could, of course, watch a livestream on Twitch.) As of November, Mr. Goxx’s portfolio was outperforming bitcoin. And he wasn’t requiring more energy than the entire nation of Finland to keep him going, just a couple of spoonfuls of kibble a day. (Alas, after this issue of the magazine went to press, we learned the sad news of Mr. Goxx’s demise.)

In an opinion piece about NFTs in the New York Times in September, Jay Caspian Kang wrote that what draws investors into that space is “a stubborn refusal to believe anything they’ve been told about how the world works.” That’s the same instinct that marched thousands of Americans to the U.S. Capitol a year ago, waving Confederate­ flags and champing at the bit to piss on Nancy Pelosi’s desk. When nothing’s real, you may as well believe that JFK Jr. is alive and well and planning a political comeback. Sure, why not? This is all just one big metaverse we’re living in, a vast multi-player online game.

But it’s not. There are some things that can’t be decided by consensus. Sorry, Aaron­ Rodgers and Kyrie Irving; we don’t all get to vote on whether COVID vaccines are safe and the Earth is round. No amount of Tucker Carlson’s pontificating will make Donald Trump the winner of the 2020 election. There aren’t any lizard people. The moon landing wasn’t faked.

You know what else? I’ve got grandkids now. They’re real; they have fingers and toes and heartbeats. I hope they’ve got brains. Maybe by the time they have money to invest, cryptocurrency will have gone the way of tulip bulbs in 17th-century Holland­. Or maybe, at least, they’ll be able to explain it to me.

Published as “Reality? Check!” in the January 2022 issue of Philadelphia magazine.