Hodler: the people of the future

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On the importance of the role of hontarov in the development of Bitcoin and other cryptocurrency networks.

“In the beginning of the changes the patriots always rare. They are hated and despised. But when the patriots succeed, the timid join him willingly, because then it costs nothing to be a patriot” – mark TWAIN.

Satoshi published the Bitcoin white paper 31 October 2008 – a month after the bankruptcy of Lehman Brothers has shaken the entire financial system. Bitcoin came when it was sorely needed – at a time when the world is built on trust, the ability to trust had been lost.

“The main problem of traditional currency is trust, without which it cannot exist. The Central Bank is entrusted with the task of maintaining currency, but the history of Fiat currencies there are many cases where banks could not cope with this task. Trust banks to keep our money and conduct electronic payments, but they give out loans, leaving in reserve practically nothing, causing the emergence of credit bubbles and feeding them” – Satoshi Nakamoto.

Due to the intervention of Central banks during the financial crisis markets are strongly deformed, and the ratio of risk/benefit was the most asymmetric in history. Over 9 trillion of bonds traded at a negative yield curve.

The time in which we live is unique, because never before have so many countries did not exist so long without a budget surplus. For example, the U.S. deficit for 40 of the last 44 years (including 2012).

Until the beginning of XX century ordinary people could always switch to hard currency (gold) to protect themselves from the consequences of the disastrous inflationary policies of the Central Bank. Most countries stopped this practice in the twentieth century. Never before have so many countries did not abandon currency based on precious metals for such a long time. The law on the gold standard, adopted in 1971, helped to create the conditions for an almost unlimited potential of credit and debt that economic history was an unprecedented phenomenon.

After 41 years of using Fiat currency, with an unprecedented amount of debt that is very difficult to pay off, we are entering uncharted territory.

Top: global average inflation of 1209 (left) and 1900 (right). Since 1933, was not observed global decline in prices. Bottom: the Yield on 10-year bonds of the Netherlands (left) and U.S. (right) over a period of several centuries, a historic low.

Bitcoin was created to build a new financial system that would not require trust and would adhere to the principles of sustainable money. Why stable hard currency so important?

Money is a tool we use to measure consumer preferences. Having a targeted and effective means to meet consumer demand, manufacturers can focus their efforts on the products and services that are most demanded in the market. Sustainable money accelerate this process. Because of the unstable money market may lose the ability to signal to producers about their needs. That’s why socialism and Central planned economy is not viable concepts. The mechanism of the “invisible hand” of the market is impossible to recreate artificially – it is too complex and powerful. Stable money is the catalyst for maximizing the division of labor with the most effective financial communication.

“Again, the financial system was discredited … but the rebellion of American youth against the money culture never happened,” – Michael Lewis “the Big short. Secret springs of financial catastrophe”.

Satoshi created Bitcoin for those who believe in the necessity and possibility of building a new financial system for hontarov for revolutionaries. For those who are disappointed in the existing financial system. For those who are attracted by the prospect of sudden and dramatic changes in their lives.

“It’s more like the situation with precious metals. Instead of changing the number of the produced money to maintain their value, the amount of produced money is known in advance and the cost varies. The growth in the number of users grows and the cost of all coin. This creates the potential for a feedback loop; increasing the number of users, the cost increases, which may attract more users who want to benefit from the growing value” – Satoshi Nakamoto.

Satoshi wanted to launch the network with a mechanism for encouraging network members – a reward for a block. Such encouragement would help (a) to control the volume of supply tokens Bitcoin, and (b) to create incentives for users to participate in the network.

“Hodling helped bitcoin to be born. Hodling increases the value of all coin, which increases demand for them, hash rate and network security, which in turn attracts new hontarov and developers. This self-fulfilling feedback enables network effects, security and value of Bitcoin”, – @TobiasAHuber

Early Hodler believed in Bitcoin, despite the large number of negative reviews and misinformation (in particular, Bitcoin is called the currency for money laundering and drug trafficking and pointed to large price fluctuations). Hodler had a strong enough risk appetite to become the first Bitcoin users. They were willing to take the risk.

“Don’t tell me what you think better just show me your portfolio”, – @nntaleb

“Possession bitcoins is the exact opposite of speculation. Trade can be called speculative, where the incentive for buying and selling based solely on market sentiment. You hope to sell the product, despite the fact that he has not gained any intrinsic value to society for a while, until you own it. The possession of money is not the drawback, rather the contrary. Owning the money you invest in the economy as a whole. Every time you decide to save money, you reduce the available in circulation money supply … This leads to an increase in the purchasing power per unit money. As a result, prices in that currency fall, and all the participants of this economy are getting richer. By holding bitcoin, you are increasing their price. The more people will invest in Bitcoin for the long term, the more its volatility will give way to a gradual increase in price. This trend towards a steady increase in the cost of tokens makes Bitcoin more attractive to new users, creating a feedback loop”, – Willem_VdBergh.

“The increase in the value of Bitcoin leads to more active proliferation. And as it spread hodling becoming popular also among people with lower risk appetite, which provides for greater Bitcoin network effect”, @robustus

With each rise and fall we saw bitcoin passed in the trade – from old to new hontarov that contributed to the decline of the Gini coefficient. For one in 2017, we saw that 15% of all bitcoins ceased to belong to the old hodlers.

“Slowly but surely, Bitcoin is more and more penetrates into the psyche of those in power” – Vijay Boyapati.

Thanks to the Lindy effect, the longer Bitcoin exists, the more the society is confident that it will exist in the future.

“Protocols die when they no longer believe” – Naval.

Faith in the new financial system is what ties it all together. Bitcoin is not just a project. It is a way of coordinating for a large group of people who are faced with powerful opponents. Bitcoin is not only a technological but also a social break.

“Stable and sustainable ideology should be the basis of all cryptocurrencies. No cryptography or the development of a consensus Protocol will not help cryptocurrency with unstable or untenable ideology. The stable ideology contributes to the prosperity of community”, K. Kurokawa.

Money is based on network effects of technology, working on the principle “winner takes all”. Thus, the cryptocurrency with the highest number of hontarov will be most in demand among consumers and will be the winner.

“Bitcoin is digital gold in the eyes [hontarov]. To some extent, this group already thinks Bitcoin standard: investments are evaluated by their ability to generate income in bitcoins”, – @TuurDemeester.

Owning bitcoins, you become like a Central Bank, through the financial system. Hodling is not finding a buyer that will offer the best price sometime in the future – if there is gipersalivacia, you will never have to sell their coins.

“Hodler will change the capital market. Annual rate of return of your bitcoins is a risk-free bet with additional levels of profit per unit of risk. For example, chain Lightning provides the possibility of measuring the value of Bitcoin in different periods of time in the Lightning Network Reference Rate or “LNRR”, – Nick Bhatia.

Bitcoin promises to citizens around the world the opportunity to keep their savings in the form of money that cannot be confiscated and will not lose value. The sharp rise in Bitcoin can abolish the government, turning them into the volunteer organization. Hodling will help us to gain freedom.

Those who choose Bitcoin (red pill), let go of something that is in abundance, in favor of the fact that there is only limited access, abandon the past in favor of the future, abandon the financial dependence in favor of fiscal sovereignty.

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