E04 - Dealing with Bitcoin's "Weakness"

As a known bitcoiner in my circles I get questions, articles and debates about the state of Bitcoin forwarded to me all day, every day. One of the most frequent points I have to address is the difference between Bitcoin, bitcoin and bitcoin-enabled technologies. This shows up most clearly in discussions around the PRICE of the asset at any time.

“Bitcoin is dead” is a FUD (fear, uncertainty & doubt) headline that has been published over 600 times in mainstream media since the 3rd of January 2009. It almost always refers to the price of bitcoin on the market - in other words how much fiat or how many dollars it will cost to buy a whole unit of this commodity.

The more recent confusion is around how “bitcoin has deviated from its mandate” by being adopted as a treasury asset by companies such as MicroStrategy (Ticker: MSTR) and our own Africa Bitcoin Corporation. I do not own ABC, nor am I involved, but I have spent some time with the team and believe in their vision.

Then there is the “bitcoin can’t be used as money” argument. This was initially driven almost entirely by FUD leaders trying to convince everyone that their new token or blockchain was better, faster or more scalable than the bitcoin blockchain. Bitcoiners quietly built Lightning, which outperforms all of these alternative pre-mined, centralised tokens, while also matching and, in practice, exceeding Visa and Mastercard’s transactions per second in live environments.

The last big attack I hear is that “bitcoin is not suited for private transactions”. That criticism is mostly true of an immutable and transparent monetary network at the base layer, but that is not where the story ends.

So with this in mind I thought it worth making this newsletter about the complexity of bitcoin being different things and how the different implementations of the asset and protocol actually make the whole system stronger over time.

What Satoshi Actually Shipped

Satoshi Nakamoto did not conjure Bitcoin out of thin air. He drew on decades of work in digital cash and cryptography, picked up ideas others had written off as inefficient and combined them into something that actually worked outside of a lab.

The white paper described “peer to peer electronic cash” and focused on a clear problem. How do you move value between two people without trusting a central financial intermediary. How do you do that in a world where some participants may be dishonest.

The result was not a company, a website or a new bank. It was a protocol. A set of rules that any computer can run to join a global monetary network and independently verify the entire history of that network.

Satoshi did not claim to be a lone genius. The breakthrough was in how he combined proof of work, a public time stamped ledger, difficulty adjustment and incentives for miners into one coherent system. Everything else sits on top of that.

The Base Layer: Rules Without Rulers

At the bottom you have the Bitcoin protocol and the timechain. Roughly every ten minutes miners propose a new block. Every honest node checks that block, links it to the previous one and stores the updated chain.

There is no head office. No CEO to blame. No helpline to phone. There are just rules. Blocks either follow those rules or they get rejected.

Hal Finney, one of the earliest cypherpunks, initially dismissed Bitcoin because he realised each participant would need to keep a full history of transactions. On the hardware of that time it sounded unrealistic. After thinking about how quickly storage and computing power were improving he came back, ran the software and received the first transaction from Satoshi.

Since then the base layer has simply kept going. Blocks arrive. Transactions confirm. Nodes enforce the rules. No rescue package. No reset day. No planned downtime.

Inside that protocol is the asset itself, bitcoin with a small “b”. New coins are issued to miners on a predictable declining schedule with a hard cap of 21 million. That cap is not a marketing slogan. It is something every honest node enforces by refusing to accept blocks that violate the supply rules.

The price of bitcoin in rand or dollars is volatile. It moves more than people are used to and that leads to confident statements that it is “useless as money”.

Yet if I send you bitcoin from here on the Garden Route it will settle worldwide in around 10 to 30 minutes with no reversals. No bank manager needs to approve it. No clearing system needs to wake up after a public holiday. Try doing that with a bar of gold. Try doing it with a large transfer through the traditional banking system on a Sunday night.

So when the price falls and the headlines roll out “Bitcoin is dead”, the protocol does not notice. Nodes keep running. Blocks keep arriving. Scarcity keeps being enforced. That is the first piece of clarity.

Scaling For Real World Use

As adoption has grown a new critique repeats itself.

“Bitcoin will never scale. Transactions are too slow, too expensive and too limited.”

There is a useful truth hidden there. The base layer was never designed to carry every coffee purchase, every tip and every micropayment on earth. It behaves more like a high assurance settlement layer or digital vault.

On top of that settlement layer you build tools that handle speed and convenience then anchor back into the base chain when needed.

Lightning Network

The Lightning Network is the most mature example. It uses payment channels between participants to enable instant, low cost transfers that do not hit the base chain for every hop.

In practice you lock some bitcoin into a channel, transact as often as you like within that channel or across the network and only touch the timechain when you open or close it.

In daily life Lightning feels very similar to using a card or instant EFT, except settlement is direct and final in seconds. Here along the Garden Route we have used Lightning to pay for coffee and groceries without a card machine or a bank sitting in the middle.

Sidechains Like Liquid

Next to Lightning are sidechains like Liquid, developed by Blockstream. Liquid is run by a federation, settles faster than the base chain, supports confidential transactions and allows tokenised assets and securities.

Liquid is intentionally more centralised. It is a tool for exchanges, institutions and more complex settlement flows. It does not try to replace Bitcoin any more than a payments app replaces a central bank. It plugs into the base layer and extends what can be done with it.

Once you include Lightning and similar tools the blanket line “bitcoin cannot be used as money” starts to ring hollow. People are already using it as money. They are simply not forcing the base layer to do a job it was never designed for.

Privacy, Identity And How We Talk To Each Other

The next objection comes more from early users and adopters, or from proponents of “privacy coins”. The claim is simple: “Bitcoin is not private.”

Every base layer transaction appears on the public timechain. Addresses are pseudonyms not names, but careful analysis can often link patterns over time. Chain surveillance is a real concern and people who grew up with cash feel that gap.

Bitcoin chose transparency at the base layer so that anyone can verify the rules. That does not mean privacy is impossible. It means privacy has to be built and chosen at the right layers with the right tools.

Nostr And Lightning

Nostr is one of the more interesting developments here. It is a simple protocol for publishing events through relays using public and private keys instead of usernames and passwords.

Because Nostr integrates with Lightning, users can send small payments called zaps directly to creators and friends. Identity, communication and payments all tie back to keys instead of central platforms. There is no account manager to deplatform you. No ad algorithm deciding what you should see.

Fedimint And Community Custody

Fedimint explores community based custody. A group of guardians run a federation that backs e cash tokens with bitcoin. Users gain strong privacy and good usability while the federation still pegs into Bitcoin at the base.

These tools are early and details matter. The direction is clear. Privacy and usability are being added at the edges, close to the user experience, while the base layer continues to act as a clear auditable global record that nobody can quietly edit.

If all you ever see is a block explorer screen it is easy to say “there is no privacy”. Once you look at where the ecosystem is going that statement becomes weaker.

Treasury Bitcoiners And Balance Sheets

Corporate and institutional adoption attracts its own set of worries. The common objection is that “Bitcoin has been captured by corporates”.

You see companies like (Micro)Strategy issuing debt to buy bitcoin. You see local products that give investors exposure to bitcoin held in treasury or in custodial structures. Some of these strategies use real leverage and the price action can be violent.

It helps to see this as more than a punt. A disciplined Bitcoin treasury that treats bitcoin as its central reserve asset starts to look less like a trade and more like early monetary infrastructure. These companies sit in the listed world with boards, auditors, disclosures and capital markets access, yet they are quietly rebuilding their balance sheets around a hard money standard.

Self custody remains the base case. Buy bitcoin, secure it in your own wallet, and sleep well. That is still the cleanest expression of what Bitcoin makes possible.

Bitcoin treasuries sit alongside that, not above it. They are a separate, higher risk experiment in answering a different question: who will run the balance sheets and credit lines of a more Bitcoin anchored financial system.

In that context the mechanism starts to make sense. As listed entities they can issue equity and debt, raise soft fiat and convert it into hard sats. Managed with discipline, the key metric becomes bitcoin per share rather than only earnings per share. Over time successful treasuries grow that figure and give long term holders a form of intelligent leverage on the underlying asset, while using that reserve to build services like liquidity, credit and settlement on top.

None of this removes risk. Companies can still misjudge cycles, stretch leverage or face regulatory and governance problems. A permissionless network does not guarantee that every business built on top of it will succeed. What it does allow is a new class of balance sheet to emerge where the reserve is absolutely scarce, visible on chain and independent of central bank promises.

Seen that way, treasury bitcoiners may not be the betrayal of Bitcoin that I hear about so often. They are one of the ways the market is experimenting with how banking, credit and financial services might look on a Bitcoin standard. Our jobs as investors is to keep self custody as the foundation and decide carefully whether, and how much, you want to allocate to those who are trying to build the banking layer of the future.

Why The Layers Matter

Once you separate these pieces a lot of noise fades.

• “Bitcoin is dead” usually means the fiat price is down. The protocol does not do drama. It keeps producing blocks.

• “Bitcoin cannot be used as money” usually ignores Lightning and live real world usage.

• “Bitcoin is not private” usually only looks at the base chain and not at the tools being built for users.

• “Bitcoin has been captured” usually confuses balance sheet decisions with protocol ownership. A permissionless (proof of work) network does not get captured by someone choosing to use it.

You do not have to like every product or agree with every use case. You do not have to be comfortable with every use of leverage. It is still worth arguing about the right thing at the right layer.

Seeing The Full Stack

Here is how I see it.

• Bitcoin is a protocol that keeps time and enforces rules.

• bitcoin is a scarce digital asset that trades in open markets.

• Bitcoin is a settlement rail that clears value globally without a central operator and which allows you to use it as long as you follow its rules.

• Bitcoin is the foundation for a payments and identity stack that is proven, although still early in global adoption.

Each piece answers a different fear. Together they create something very hard to switch off.

So next time someone asks you “what is going on with Bitcoin” start by asking which part they mean. The protocol. The asset. The payments. The privacy. Or the way companies and institutions are choosing to hold it.

Once you can see the full stack you stop asking whether Bitcoin still “works”. The better question is what will be built on top of it, who will own those rails and how you plan to position your own strategic reserve while this system quietly keeps ticking in the background.

James Caw

Founder and Bitcoin Strategist | SimplB www.simplb.co.za

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SimplB (Pty) Ltd is a Juristic Representative and James Caw is a supervised Representative of CAEP Asset Managers (Pty) Ltd FSP No: 33933 - an Authorised Financial Services Provider. Nothing in this newsletter should be construed as financial advice. Before taking any action speak to your financial advisor.