Is Bitcoin The Model-T Of Money?

Model T Ford with Bitcoin Wheels

Launched in 1908, the Model-T was the world’s first-ever mass-produced car. It completely reinvented transportation, replacing horse-drawn carts and ensuring the development of road networks across the US and abroad. When it was first released it retailed for $835, slightly more than the average industrial wage.

At the time, other car manufacturers took days to build competitive cars, yet Henry Ford was able to build the Model-T in only 93 minutes by reimagining and reinventing the factory line. With economies of scale, he further reduced the cost to just $250, making it vastly affordable and thus an instant success. The car went on to be produced 15 million times before production ceased in 1927.

The Model-T’s success was attributed to its “reliability, ruggedness, utility, and economy -- all in one machine that was eminently affordable.” Its price point was also no doubt a huge factor in ensuring its massive adoption.

Throughout history, breakthrough technologies have created paradigm shifts and changed the market landscape in profound ways. Assessing these entrants and understanding the questions they pose and the degree of change they present is an industry unto itself. Get it right and you ride the coattails of the next big thing, get it wrong and you risk owning the ‘Betamax’ of all investments. 

The Model-T changed Ford’s fortunes and for many years after its launch rewarding it with massive market share. However, that leading edge was eventually surpassed by Ford’s competitors. Why, because the real development of note of course was not simply the Model-T, but the birth of mass production and its impact on all heavy industry since.

Today, many investors seek to understand if Bitcoin (BITCOMP) is valued correctly and if it represents a good investment opportunity. No one really knows the answer to this question. I believe that Bitcoin represents enormous success as a real-world example of a distributed ledger in actual practice. I am a huge advocate of the power of blockchain and its ability to positively alter every facet of human industry.

Bitcoin has demonstrated that such ledgers can be built and developed and perform useful functions. As a case study, it has been a tremendous success. Yet I also believe that it may prove ruinous for many investors. It is plagued with enormous problems, many of which may never be addressed in time to justify its value. Let me explain why.

You see Bitcoin is to money what the Model-T was to the car industry. On launch, it was revolutionary, thought-provoking, and capable of delivering profound efficiencies. But in time, it was surpassed by new and improved versions which delivered advanced features and better user outcomes.

The Challenges facing Bitcoin

Let’s talk about some of the challenges facing Bitcoin and why its true market value is severely constrained. We’ll also discuss why, ultimately, its legacy will not be as a moon-shot investment, reaping early hoarders enormous windfalls, but as a technological waypoint to a world where data science, technology, and the physical world form a singularity at last.

Innovation requires skilled visionary leadership and Bitcoin, unfortunately, has none. The old adage goes that ‘a camel is a horse design by committee’; Bitcoin is revealing more than a few humps in the form in ‘forks’ or divergent versions which, while innovative, detract and compete from the core service in equal measure.

In abstract terms, Bitcoin is a purely a peer-to-peer version of electronic cash, allowing online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.

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Flat Broke 1 month ago Member's comment

If you think "cash is trash," I'm happy to take all of yours off your hands! ;-)

Dick Kaplan 1 month ago Member's comment

Very interesting analogy.