Ben Horowitz’s Bitcoin Bet

Today in bitcoin ephemera I present this interesting bet between VC Ben Horowitz of Andreessen Horowitz and Felix Salmon, noted bitcoin curmudgeon. Ben has invested in multiple bitcoin startups while Felix has a really cool name and is a well-known economics writer.

The bet is simple: in January, 2019 the folks at Planet Money on NPR will poll a sample of Americans. “If 10 percent or more say they have used bitcoin to buy something in the past month, Ben wins. If it’s fewer than 10 percent, Felix wins,” Planet Money host Jacob Goldstein wrote. The idea came to the pair when Horowitz annotated Salmon’s writing on RapGenius.

The winner gets a pair of alpaca socks, the first item ever paid for in bitcoins.

Salmon believes that Bitcoin’s volatility and rise to prominence makes users think they’ll make more money by sitting on the currency rather than spending it. He brings up the example of the original pair of Alpaca socks bought for bitcoin – that person is probably upset he sold all those bitcoins for some socks. While the original sock purchase is lost in the veil of time, it should be noted that someone paid 10,000 BTC for a pizza in 2009. That pizza would be worth $7,280,000 today.

The potential for profit from sitting on the currency, then, will discourage growth argues Salmon. Horowitz is far more bullish, expecting bitcoin to become the de facto payment mechanism for the Internet by 2019.

“There’s no way that bitcoin is going to be a common payment mechanism in five years’ time. It probably will not even exist. It’s just going to be a vague memory,” grumbled Salmon.

How would I bet? I think Salmon is right, to a degree. I think what we know as bitcoin will be subsumed by the general Internet, and recreated a way to trade value that has little to do with bitcoin as it exists today. Bitcoin is too wasteful, too slow, and still in its beta stag. Just as Windows 3.1 is distant memory in this era of Windows 8.1 so will this early bitcoin be immensely different from bitcoin in half a decade. I’m not BTC bull but I’m not a bear, either. The world needs bitcoin, just not in its current form.