Bitcoin's Greatest Test

Fifteen years after Satoshi Nakamoto dropped a nine-page white paper on an obscure email list sketching out an idea for a new peer-to-peer digital currency, bitcoin has become a global phenomenon. And nowhere is its pomp and promise more on display than at the blockbuster annual conferences put on by Bitcoin Magazine in Miami Beach.

But it's also had a disappointing couple of years.

Bitcoin was supposed to be an inflation hedge. But after the Fed fired up its money printer during the pandemic and the dollar lost value, bitcoin went in the same direction.

Bitcoin was supposed to be a way to transfer money "from one party to another without going through a financial institution," to quote Satoshi. But 15 years later, a lot of users are still trusting regulated financial institutions to manage their holdings.

Bitcoin was supposed to be above politics, but the community around it has seen bitter in-fighting, and some worry that bitcoiners' intolerance of dissenting ideas has turned it into something akin to a cult.

"It's certainly not the only secular religion out there, but it's a particularly pernicious breed," says Nic Carter, a writer and crypto investor who cited security concerns as his reason for not attending the conference. 

But despite the disappointing price drop and ongoing internecine squabbles, the bitcoiners Reason talked with in Miami seemed convinced that its value proposition—a decentralized money that governments can't censor or destroy—is as strong as ever.

Are bitcoin's troubles a sign that the project is failing, or just the inevitable bumps on an upward trajectory that will one day result in monetary freedom for the entire world?

Reinventing the Financial System

This year's conference attracted about 15,000 attendees, a drop from more than 35,000 in 2022, according to the organizers. One attendee described a "noticeable, dramatic difference" in the energy and crowd from the previous year, during which bitcoin's price was about $15,000 higher.

Those in attendance this year were more likely to be bitcoin's true believers.

"I'm not a fan of the mania bull run phases because of the type of people that it attracts," says Jameson Lopp, a developer who co-founded the bitcoin storage company Casa. "We might call them the tourists or the LARPers or, in many cases, the scammers." 

Caitlin Long, founder of a bank aiming to serve bitcoin-holding customers, agrees with Lopp that "scammers" and "grifters" pervade the space, saying: "There's a big chunk of crypto that needs to burn on a raging funeral pyre."

Just a few miles away from this year's conference is home court for the Miami Heat. The venue changed its name to FTX Arena after the crypto platform paid $135 million for the naming rights back in 2021. In January, when FTX collapsed into bankruptcy and its founder, Sam Bankman-Fried, was charged with fraud, the signage was removed.

Many bitcoiners believe that any cryptocurrency other than Satoshi's original creation should be referred to as a "shitcoin," and that the "crypto industry" is a cargo cult run by scammers, who have the mainstream media and much of Silicon Valley fooled.

Exhibit A: Sam Bankman-Fried.

"He's a criminal. He should go to jail," says Peter McCormack, host of the What Bitcoin Did podcast. "People who conflate what [FTX] did with bitcoin have got it entirely wrong." 

Bitcoiners also see the FTX collapse as a reminder that you can't trust bankers or tech-founder media darlings, like Bankman-Fried, to take care of your savings, whether they're outright scammers or not.

"Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve," Satoshi wrote in 2009.

The message: Trust nobody, and become your own bank—which bitcoin makes possible.

Another reason to be your own bank is to avoid financial censorship, so that everyone from third-world dictators to D.C. regulators is prevented from telling you how you should spend your money. The fall of FTX precipitated a crackdown in Washington that was meant to send a "very strong anti-crypto message," in the words of former Rep. Barney Frank (D–Mass.).

"FTX certainly gave [financial regulators] political cover to do this," says Nic Carter, who coined the phrase "Operation Chokepoint 2.0," a reference to the Obama-era policy of bullying banks into denying accounts to payday lenders, pornographers, firearms dealers, strippers, and other fully legal industries that regulators would rather see disappear.

"They opened up the toolkit and they went to their favorite tool, which is politicizing the instruments of finance."

Operation Chokepoint 1.0 was carried out by the Consumer Financial Protection Bureau, which was the brainchild of Elizabeth Warren—and now she's become the Senate's most vocal bitcoin critic.

"Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism," Warren said in December when promoting a bill that would extend the state's power to surveil people's finances.

Warren "doesn't understand bitcoin," says McCormack. "She's part of the corrupt political structure you have in the U.S., and she's anti-human. She's anti-freedom."

Caitlin Long, who spent 22 years in corporate finance, says she's been "trying to clean up" the crypto industry because it's full of "affronts to private property rights." She founded Custodia Bank to be the antithesis of the company run by Sam Bankman-Fried, whom Long clashed with onstage at the same bitcoin conference back in 2021.

FTX allegedly squandered a lot of its customers' deposits by leveraging it to make risky crypto investments. Custodia, in contrast, plans to go a much farther than even a regulated retail bank by keeping 108 percent of its customers cash and bitcoin on hand at all times as a "full reserve" bank. Thus, it won't have any need for federal deposit insurance.

"Leverage is never good in crypto. Period," says Long. "All of those crypto lenders, I knew were going to fail. Why? Because there's a finite number of bitcoin. All you're doing is creating fractional reserve bitcoin, and that's all going to come back to haunt you when inevitably there's gonna be a price correction and everybody wants the real thing."

And yet the Federal Reserve rejected Custodia's application to become a member of its network, on the grounds that its "crypto activities are highly likely to be inconsistent with safe and sound banking practices."

"So the crypto industry was proposing a solution to the inherent instability of the banking sector, and yet that solution was denied because the Federal Reserve didn't want to give a crypto-focused bank access to the payment system," says Carter. "It's extremely perverse."

Long is suing the Federal Reserve to force it to reconsider. But part of Satoshi's vision was to create a system in which regulatory approval wasn't necessary. Bitcoin is the first digital currency you can hold yourself, so why do we "need to trust a third-party middleman" at all?

"Read what Satoshi said: Trusted third parties are security holes," says Lopp, whose company Casa helps customers safely self-custody the secret passwords, or keys, necessary to spend their bitcoin. If you lose them, the money is as good as gone. But if you're not holding them yourself, are they really yours?

The bitcoin writer and evangelist Andreas Antonopoulos coined a popular saying in the space: "Not your keys, not your bitcoin."

Lopp acknowledges that because of the work and risk involved "most people don't want to be their own bank." But he insists that it's crucial for anyone worried about financial censorship to "self-custody" their bitcoin.

"If you want to be able to operate in such a way that you don't have to ask permission from a third party, then you do have to take on some responsibility," says Lopp.

Self-custody especially appeals to bitcoiners worried about Operation Chokepoint 2.0 and the plight of the Canadian truckers who occupied Ottawa last year to protest a cross-border COVID vaccine mandate.

Prime Minister Justin Trudeau responded to those demonstrators by using emergency powers to force financial institutions to freeze all funds sent to support the cause.

So a group of activists used bitcoin as it was meant to be used, getting the equivalent of about $630,000 to the truckers. Since the funds didn't go through the traditional banking system, they were hard for Trudeau to stop. An activist filmed himself handing out seed phrases—the code words used to access self-custodied bitcoin. This grassroots solution was imperfect, laborious, and in need of improvement, but in the end…it worked.

A world where most people hold their own bitcoin keys would be a world far more resistant to financial censorship and surveillance, but is it really possible? Lopp says universal self-custody is unlikely and unnecessary for bitcoin to succeed.

"I think we will have a diverse ecosystem and range of custody," says Lopp. "What really worries me is if too much of the Bitcoin goes into too few hands, especially if they're, like, regulated companies that can be easily targeted by nation-states."

And that, for many at this conference, is the entire point of bitcoin: effective resistance to authoritarian government action.

The Bitcoin Religion

Walking around the conference, all of the elements of the bitcoiner's creed were on full display, a creed which Carter says has turned into a religion with its own heroes (Ross Ulbricht), doctrines ("bitcoin, not crypto"), saints (Satoshi Nakamoto), and heretics.

Carter was in Miami this year during the conference but says he didn't attend any of the sessions because of safety concerns. Much of the community turned on him when it was revealed that his investment fund had a stake in cryptocurrencies other than just bitcoin. So he penned a "eulogy for bitcoin maximalism," declaring that "there's an awful sickness pervading" the space.

"I have been full-time bitcoin for 10 years, and I've dedicated my professional and personal efforts to the sector tirelessly that whole time," says Carter. "And yet, because I'm more of a bitcoin moderate, a lot of the hardline bitcoiners don't like me. But I think what we need to realize is our enemy is not inward." 

Carter was also troubled by bitcoin maximalists he's seen praising Securities and Exchange Commission chief Gary Gensler for cracking down on crypto exchanges that offer so-called "shitcoins" as he parroted one of their favorite lines.

"Bitcoiners should be trying to win in the free market," says Carter. "They should not be trying to utilize instruments of state power to suppress their perceived adversaries."

Lopp has also been on the receiving end of bitcoin-maximalist rage, after Casa made the business decision to expand its service to help owners of the cryptocurrency ethereum self-custody their holdings.

And in 2019, a teenager called in a SWAT raid on Lopp's home, according to Lopp, because the kid didn't like his opinion about how the bitcoin protocol should function. In response, Lopp shared a video of himself firing an AR-15 on Twitter. Then he took extraordinary steps to make himself practically invisible, impossible to track down in meatspace.

"It's a result of social media," says Lopp. "You can instantly go from being essentially a nobody…to being someone who has attracted the ire of millions of people."

An art gallery at the conference displayed work demonizing Bill Gates, Anthony Fauci, and the World Economic Forum's Klaus Schwab. Most of the religious imagery present in the gallery was shrouded in irony, but as with so much of digital life, it was hard to tell where the joke ended.

"I don't believe that there's any moral status in your portfolio. And there is a faction within bitcoin that believes that the only moral asset to hold is bitcoin itself," says Carter. "The bitcoin religion is not a universalizing one. It actually just concentrates the membership and they become increasingly radical and disconnected from the real world."

Lopp isn't so sure that bitcoin's increasingly strident subculture is entirely negative.

"There are certainly a lot of people who get turned off by some of the vitriol, whereas other people get interested and sucked into it," says Lopp. "But if anything, I think it may be overblown. The vast majority of people who use bitcoin don't know about any of that. They just see bitcoin as a thing that they're using. It's not something that they have adopted from a cultural standpoint." 

As the quasi-religious fervor around bitcoin has grown, so too has the potential for a bitcoin voting bloc that could help counter Operation Chokepoint 2.0 and other government attacks on the industry. Ronald Reagan once courted the religious right; in 2023, a parade of once and future presidential contenders made the trek down to Miami to pander to the bitcoiners. Tulsi Gabbard, the former Hawaii congresswoman, showed up, as did longshot presidential candidate Vivek Ramaswamay.

Perhaps nobody better captured the mood than Democratic presidential candidate Robert F. Kennedy, Jr., who in his keynote speech repeated the anti-elite, populist messaging that's central to the bitcoin creed.

"Control of the population starts perhaps as a means but becomes an end: perfect control over society," says Kennedy. "Bitcoin is a bulwark against this expansion and intrusion."

Is It Money?

"Bitcoin has many purposes, but to me the simplest is the most basic, which is that it's an honest ledger," says Long. "Why do people save? They want a store of value that's honest and cannot be manipulated."

In the original white paper, Satoshi described bitcoin as "a peer-to-peer electronic cash system." But 15 years later, it still isn't widely used as a medium of exchange. At first, the problem was technical; the network couldn't process more than about seven to 10 transactions a second. Now a decentralized payment technology called the Lightning Network is endlessly scalable and has made paying for a cup of coffee with bitcoin fairly seamless—but not a lot of people are doing it yet.

Chris Hunter is the founder of Bitcoin Beach Wallet, a Lightning-based wallet that launched in El Salvador shortly before another politician who's capitalized on his association with this community—President Nayib Bukele— announced here at the 2021 conference that his country would become the first in the world to adopt Satoshi's invention as legal currency. Hunter says the implementation was rushed, leading to a bad product launch that left many Salvadorans suspicious of bitcoin.

"There [were], understandably, technical missteps, and that was quite unfortunate because the average person in El Salvador or anywhere around the world doesn't really understand Bitcoin," says Hunter.

Salvadorans—like the residents of most poor countries—prefer to hold and spend the U.S. dollar, which despite the recent spike in inflation still has a much more stable value than bitcoin. Hunter says it's unlikely that a government will be able to mandate bitcoin use from the top down, as El Salvador's government attempted.

"In terms of adopting bitcoin as legal tender, what really matters is: Do we get bitcoin in the hands of people? Do they use it as everyday money?" says Hunter. "The only way that bitcoin is going to move forward and get mass adoption is through bottom-up, grassroots movements."

So will bitcoin ever become a commonly accepted medium of exchange? That's partly a bet that technologies like the Lightning network will continue making it easier and easier to use—and it's also a bet against the dollar, as exploding U.S. debt puts increasing pressure on the Federal Reserve to inflate the money supply.

For 15 years, bitcoin has been eulogized hundreds of times by mainstream journalists, and yet it has always come back, surviving exchange collapses, government antagonism, and bitter wars within the community. As the drama unfolds, roughly every 10 minutes a new block of transactions is broadcast to this decentralized, unstoppable, censorship-resistant, global software network that anyone can use. Which is just as Satoshi envisioned it.

"This is really supposed to be a neutral technology and platform where anyone who follows the rules can use it regardless of if anyone else disagrees with who they are and what they're doing," says Lopp. "There is a saying, which is, 'Bitcoin is for enemies.'"

Photo Credits: Silas Stein/dpa/picture-alliance/Newscom; Camilo Freedman / SOPA Images/Si/Newscom; Camilo Freedman/ZUMAPRESS/Newscom; Michael Debets/ZUMA Press/Newscom; Chedly Ben Ibrahim/ZUMAPRESS/Newscom; Camilo Freedman/dpa/picture-alliance/Newscom; John Lamparski/ZUMAPRESS/Newscom; Ryan Walter Wagner/ZUMAPRESS/Newscom; Tom Williams/CQ Roll Call/Newscom; Ken Cedeno/UPI/Newscom; Rod Lamkey - CNP / MEGA / Newscom/RSSIL/Newscom; Tom Williams/CQ Roll Call/Newscom; rollcallpix152307; Olivier Douliery/ABACAUSA.COM/Newscom; OwenDB/Black Star/Black Star/Newscom; Graeme Sloan/Sipa USA/Newscom; VENEZUELA'S PRESIDENCY / Xinhua News Agency/Newscom; Graeme Sloan/Sipa USA/Newscom; Kevin Dietsch/UPI/Newscom; Michael Brochstein/ZUMAPRESS/Newscom; Chris Kleponis - Pool via CNP/Newscom; MIGUEL LEMUS/EFE/Newscom; Danita Delimont Photography/Newscom; Matias J. Ocner/TNS/Newscom; MATIAS J. OCNER/TNS/Newscom; Omar Marques / SOPA Images/Sipa/Newscom; MEGA / Newscom/TANAS/Newscom; Andre M. Chang/ZUMAPRESS/Newscom; Tom Williams/CQ Roll Call/Newscom; John Angelillo/UPI/Newscom; Louis Lanzano/UPI/Newscom; MICHAEL M. SANTIAGO / GDA Photo Service/Newscom; AP Photo/Ira Schwarz

Music: "El Monte" by Luke Melville via Artlist; "Still Need Syndrome" by Yarin Primak via Artlist; "Out of Flux" by PUNKD via Artlist; "Notize" by Density Wave via Artlist; " Elevation" by Stanley Gurvich via Artlist; Vuelta al Sol by Tomas Novoa via Artlist; Civilization by Icarus via Artlist; "All STar" by ANBR via Artlist; "Ultra Light" by The Cliff via Artlist

• Video Editor: Justin Zuckerman
• Graphics: Isaac Reese
• Audio Production: Ian Keyser
• Additional Graphics: Regan Taylor
• Camera: Jim Epstein