The parable of the lost bitcoin

Once there was a man who had many bitcoins. He believed that cryptocurrencies were the future and invested in them. But as time went by and bitcoin’s promise of decentralized, democratized financing did not materialize, he threw them away. Great was his shock and dismay, however, when bitcoin’s value rose astronomically, but by then, it was too late for him. Today he is still searching for the bitcoins even though they are gone forever.

This is a true story—the man’s name is James Howells of South Wales, United Kingdom, and in 2009, during the cryptocurrency’s early days, he “mined” bitcoins in his laptop (“mining” means running a program that makes complex calculations that process transactions in the bitcoin ledger of “blockchain,” for which Howells was rewarded with bitcoins). He ended up accumulating 7,500 bitcoins—worth $375 million today—but accidentally threw away the hard drive containing them in 2013.

Howells is not alone in losing bitcoin throughout the 10 years it has been in existence. In fact, it is estimated that 20 percent of the existing 18.5 million bitcoins are “lost”—and there is no shortage of other tales, apocryphal or otherwise, of missed opportunity. And maybe this is the easy lesson of these accounts: to have faith in radical ideas that can have radical returns, and to persevere in such faith. “I was so close to buying bitcoins just for fun back in 2011,” a friend told me, uttering what so many people today say. “Had I known, I would have been a millionaire today.”

Such sentiments emerge whenever conversations with friends turn to bitcoin, especially when we look back to the yearend of 2017, when some of us bought cryptocurrency amid feverish excitement over bitcoin’s then all-time high of $20,000. And they resurface again today, as bitcoin scales new heights. (Interestingly, Howells is trying to retrieve his lost bitcoin again, this time offering the town $70 million for permission to excavate the landfill where his hard drive was dumped.)

Financial pundits suggest the recent hype over bitcoins and “altcoins” like Ripple and Cardano has been stoked by various factors, from growing demand from hitherto skeptical institutional buyers who see bitcoin as a possible hedge against inflation (famously, Elon Musk’s Tesla announced that it had bought $1.5 billion worth of bitcoin) to the rise of “retail investors” seeking a slice, no matter how small, of the cryptocurrency trend.

Perhaps another, more pragmatic factor is the fact that it is now much easier to buy cryptocurrency through digital payment systems. With smartphone apps, for instance, it’s just a few clicks from your bank account to a bitcoin wallet.

Likely, the milieu of our overlapping crises—the COVID-19 pandemic, climate change, political uncertainty—has also set the stage for bitcoin’s renewed rise: Better to have some cryptocurrency now, so the thinking goes, than a long-term investment in a world that may not even exist as we know it; in nations whose governments have betrayed our trust.

But, beyond concerns about the immense energy demands of mining cryptocurrency and its use in money laundering, there are grave warnings about the “bubble” nature of bitcoin, and the fact that it has no intrinsic value, certainly less than the stock of Gamestop or the famed tulips of the Dutch golden age. “Bitcoin’s price could be anything or nothing at all,” the economist Willem H. Buiter averred. While there are success stories like that of Erik Finman, the 18-year-old “bitcoin millionaire,” there are also reports of life savings, and even lives, lost after a bad bet on bitcoin.

Which hints at a deeper truth that we can find in the story of the lost bitcoins, making it a parable for our time: Unlike in the biblical account in which the coin’s value was a known, unchanging quantity from the very beginning, cryptocurrencies can vary from worthless to priceless, rendering the rightful objects of our stewardship unknowable.

Indeed, the fact that one could make—or lose—so much money in “speculative assets” while others toil in physical markets, trading actual goods and braving viruses and people alike, takes us back to the landfill in which the products of capitalism—physical and virtual, imagined and real—end up. What counts as a “good investment” if our very way of life is itself a bubble that can burst anytime?

And how do we become good stewards in and of a world not so much where meaning has lost its value, but where value has lost its meaning?

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glasco@inquirer.com.ph