Fun Fact: Bitcoin is Actually a Demo System

Imagine this: a programmer designs an accounting program to show how it works. To make the demonstration interesting, they invent fake items: "ABC" with a quantity of 5 and "XYZ" with a quantity of 10. These items don’t exist outside the program. They’re just demo data, placeholders. But let’s say someone decides to pay 50,000 dollars to “own” item "XYZ." The system would record the transaction as real, even though it’s based on entirely imaginary assets. Absurd, right?

This, fundamentally, is what Bitcoin is. The Bitcoin blockchain is a system that tracks transactions of tokens; tokens that are just as fictional as "ABC" and "XYZ." When Bitcoin was created, its inventor, Satoshi Nakamoto, decided to cap these tokens at 21 million and called them “coins.” That’s it. Out of nowhere, 21 million units of a made-up digital currency came into existence. They have no connection to real-world assets. And yet, people are now willing to trade actual money, sometimes hundreds of thousands of dollars, for these demo tokens.

To grasp why this is so absurd, let’s look at how real financial systems work.

When a bank creates a loan, it adds money to a person’s account, let's say, $10,000. This isn’t pre-existing money; it’s new money created as debt. The borrower is now obligated to repay the $10,000 plus interest over time. As payments are made, the bank records negative entries to offset the loan. When the loan is fully repaid, the money initially created effectively disappears. It’s a closed system, where the created money is tied directly to the borrower’s obligation.

Similarly, central banks create money through actions like purchasing government bonds. For example, when the Federal Reserve buys a bond, it creates dollars and records them as an asset in its database. But this isn’t random; the created money represents a real-world obligation. When the government pays off its debt, the central bank cancels the created money.

In these systems, the numbers in the database reflect real-world relationships: debts (obligations) and assets (one party's obligation is another party's asset). Fiat money is backed by these real-world dynamics. It’s not just numbers but a complex system connected to something real, which gives it value. Meaning, the fact of it being debt forces debtors to work for fiat money holders or sell them goods and services. Otherwise they cannot meet their obligations towards banks. If your neighbor has a dollar loan and you hold dollars you can save them from bank's foreclosure on their house, which makes dollars very valuable.

Bitcoin, on the other hand, is divorced from any real-world obligations or assets. Its blockchain is a ledger of transactions involving entirely fictional tokens. These tokens are not tied to debts, goods, or services. They’re just digital entries. Owning a Bitcoin token is like owning the "XYZ" item from the programmer’s demo, as it exists only within the system, not in reality.

The absurdity becomes clearer when you consider Bitcoin’s price history. At its inception, one Bitcoin was worth virtually nothing. Over time, as people started buying it, the price rose. Today, a single Bitcoin can cost a hundred thousand of dollars. Yet, nothing about the token has changed. It remains as fictional and unbacked as it was at the beginning. The only thing that’s changed is people’s willingness to trade real money for it.

This phenomenon is akin to paying hundreds of thousands of dollars for the "XYZ" demo item. The Bitcoin system has no mechanism to tie its tokens to the real world. It’s a closed-loop system of imaginary assets.

Here’s the twist: blockchain technology itself isn’t inherently useless. It has potential real-world applications. For example, blockchains could track real-world assets like property deeds, inventory in a warehouse, financial contracts, or CBDC (central bank digital currency) backed by debt. In these cases, the blockchain would function as a ledger for real-world transactions. But Bitcoin isn’t that.

Bitcoin’s blockchain tracks nothing but its own demo tokens. Instead of tying the system to real assets or obligations, it’s simply a game of trading imaginary units. The tragic irony is that people are treating this demo system as though it’s a revolutionary form of money.

Bitcoin has managed to achieve something incredible: it’s the most expensive demo system ever created. The system consumes vast amounts of electricity, equivalent to that of small countries, to maintain its illusion. And for what? So people can trade tokens that are no more real than the "ABC" or "XYZ" items in a programmer’s demonstration.

The entire Bitcoin phenomenon is a misunderstanding. It’s the equivalent of mistaking a training simulator for an actual vehicle. By treating a demo system as if it were a real financial innovation, people have created an economic bubble based on nothing but belief. Bitcoin is not money, not an asset, and not a revolution. It’s just the most elaborate demo in history.