I'm of the sort that if you're going to talk about some (let alone invest in something), then you should be educated about what it is you're talking about. So with that said, I wanted to say a few things about bitcoin.
Full disclaimer, I've been involved with bitcoin for over half a decade now. I've mined bitcoin, I run a full node on the network, I run a lightning node, I've built tools for bitcoin, and have collaborated with many developers in the space to help further the technology.
Bitcoin is simply an amalgamation of several technologies, many of which have been around for decades. The way in which it combines these technologies and how it came about is what makes it unique. Central to these technologies is the blockchain. A blockchain is simply a type of database. It is not an efficient database. What does that mean? It means it is designed to be immutable. Unlike traditional relational database where data is stored in rows and columns and data stored within it can simply be changed on command, a blockchain database is built in blocks one by one and each additional block makes data in the previous blocks immutable.
Why run an inefficient and immutable database?
Well its sole benefit comes in the form of decentralization. If you're not going to run a blockchain database in a way that is entirely decentralized in all facets, then you might as well run a relational database that would be much easier to maintain. Furthermore, since a blockchain needs to be completely decentralized in order to maintain its sole benefit, then it much be extremely inefficient. What do I mean by inefficient? A decentralized database needs to be maintained on thousands of nodes all geographically dispersed and capable of running on easy to acquire hardware and cheap internet that is available in most places in the world. This means that the database must be maintained and synchronized across this very disperse network of database nodes.
So to accommodate this, database updates must be very slow (to allow for block propagation). The size of these database updates (blocks) must also be very limited in size. Since a blockchain database is immutable, in order to fully synchronize a new database node on the network, you must start with block 1 and download the entire blockchain database and verify its integrity. So to allow for a fully decentralize network of nodes that can be run without requiring massive expensive datacenters with large internet pipes, the blockchain MUST be limited in growth size (small blocks) and slow propagation of blocks (slower transaction speeds). If a blockchain is unlimited in growth, then massive numbers of transactions would cause the blockchain to grow in size exponentially which means that it could only be hosted by large datacenters with massive internet pipes and if database nodes are only located in large datacenters then it isn't decentralized and thus you lose the only benefit of running a blockchain to begin with.
All this is to simply say that there is an inherent trade off when using a blockchain database. Speed versus decentralization is an inherent trade-off when using a blockchain database. It is not a problem that can simply be fixed with "better blockchain tech". I started off with this slight technical introduction because blockchain has become a way overly hyped buzzword since bitcoin's price has risen and it seems like technologies and companies are using the word just to capitalize on the hype without actually understanding what the technology is and what value it serves. Any time you hear someone say that they have a "faster" bitcoin and it is the next best thing, what they're really telling you is that they're sacrificing decentralization (a blockchain's sole benefit) in favor of speed.
For a more detailed and technical breakdown on how bitcoin works, I suggest watching this video:
https://www.youtube.com/watch?v=bBC-nXj3Ng4I started of my post with this information because since bitcoin came about, there have been thousands of new cryptocurrencies, many with wild promises of changing the world, most of which are small projects with almost no liquidity, with slight iterations on what came before them, almost none of them are decentralized, little testing or resiliency, and since there is almost no regulation in the space they're ripe with pump and dump schemes where the little guy ends up getting hurt in the end.
It is important to understand what bitcoin is and isn't and I wanted to make this distinction first because the cryptocurrency market is really a dumpster fire of mal-investment, but I really want to do my part in differentiating bitcoin from the rest of the market that has come to be.
Bitcoin is decentralized to almost the fullest degree at which it can be. It has no leader and no one knows who its creator (Satoshi Nakamoto) is where he disappeared to. There are thousands of nodes running copies of its blockchain database across the world today and can be run on small computers that cost as little as $50 and with common broadband internet access. Anyone is free to run a node. The network itself has resisted numerous attacks both large and small. There is no single entity in control of the network, it can't be sued, its token issuance was public and fair, there are numerous software implementations that can be utilized and many open source wallets that can be used, and the blockchain's history has never been rewritten which is a continuous testament to the resiliency of the network itself.
So with all this technology jargon said, what benefit does bitcoin actually provide society? After all, isn't the point of technology to benefit humanity and the world? Well a majority of the world lives under some sort of authoritarian or non-democratic regime. Many of these countries face harsh economic realities that are hard for those of us in a free nation to understand. While we're all able to work or our daily wages and save money up to retire early, many people are simply working to feed their families worried about whether yesterday's wages will still by them the same amount of food today. Economic sanctions (a war crime if you ask me) isolates off millions of people from the global economy while the regimes they're intended to hit continue to use their resources to access and traditional financial markets without any problem. Citizens are then left in poverty as a result. Grassroots charities hoping to reach these desperate places face an uphill funding battle because of the lack of financial infrastructure in place. Refugees hoping to flee these places have no hope of carry what little wealth they have with them to wherever it is they decide to go. Starting over from scratch is their only option which puts additional strain on those nations that do choose to accept them with open arms.
Regardless of your macro-economic viewpoints (and if you hold gold then you likely even somewhat agree here), government controlled central banking is a big problem in much of the world. Vast sums of money are printed at whim which exacerbates wealth inequality. It is easy for Americans to sit in our ivory towers with easy access to financial institutions and say this isn't a problem facing the world. But the reality is that it is.
Bitcoin, being our only truly scarce, truly global, and truly decentralized monetary asset, is one of the only options that is positioned well to solve many of these problems I mentioned (and more). People think bitcoin's purpose is to allow people to pay for their morning lattes from their phones and to do away with the likes of PayPal and banking. Paying for retail goods with some form of digital technology was never a technological hurdle for humanity. But its true purpose is to compete with central banking to give people at least the OPTION of being able to store some of their wealth into something other than whatever centralized authority they happened to be born under created, hoping it doesn't destroy their hard-earned livelihood.
Is there a ton of speculation taking place today with bitcoin? Absolutely, but there is simply no way you can have a digital asset like bitcoin be bootstrapped from a valuation of $0 without there being speculation involved along its way to being adopted. That just comes with the territory. What I do know is that bitcoin is our ONLY chance at hoping for something that will compete with central banking and offer the world that option. If bitcoin fails, there won't be a successor, at least not within our lifetimes. Will it do away with the USD or other fiat currencies? No, not at all, and again certainly not within my lifetime nor does it need to in order to serve its purpose. Bitcoin is global, so if it serves a purpose ANYWHERE, it will have value EVERYWHERE.
Companies today (a lot of which has to do with macro monetary policy) are sitting on hordes of cash. Real world inflation rates are much higher than what CPI claims it to be. These hordes of cash will be/are losing massive amounts of value on an annual basis. Companies don't have many options on what to do with these reserves. You're going to see more and more companies looking for alternatives for their reserves. MassMutual, an insurance company that has been around for almost 200 years, who's sole business is to manage risk, can look at bitcoin and decide to put $100 million of its reserves into bitcoin. If that isn't a signal of what the macro economic landscape looks like and where bitcoin sits in that landscape, then I don't know what is.
What I am not saying is that bitcoin isn't without risk or that you should sell everything and buy bitcoin. But what I am saying is that it is risky to NOT hold any bitcoin in your portofolio at all. This forum is all about diversification and talks all about holding index funds and passive investing and yet I find it funny that many don't see the forest from the trees in the greater macro-economic picture that all these assets' valuations are tied to currencies that are being massively inflated.
I've already rambled for far too long, so I'll end with the usual don't invest money in bitcoin that you aren't OK with losing, but at the same time realize that having a 1-5% allocation in bitcoin will minimize your losses, while giving your portfolio access to a diversified upside that could be a once in a lifetime opportunity. And finally, as always, research as much as possible before putting your hard earned money into anything.
If anyone has any questions, I'll gladly answer them as well. Cheers.
