The Wrong Lessons of Pizza Day

6 months ago 2

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Pizza Day is often viewed with a sense of regret.

The well-known story goes like this: many years ago, Laszlo Hanyecz bought two Papa John’s pizzas, and in return, some fortunate person received 10,000 BTC.₂₃₆ This tale resembles that of Peter Minuit purchasing Manhattan Island for a mere $24. It’s hard to believe such a transaction took place, considering the current value.

The story has several intriguing aspects. It marked the first real-world good or service purchased with Bitcoin. It also established Bitcoin’s price; since the two pizzas cost around $41, one BTC was approximately $0.0041.

Another aspect of this narrative is Laszlo, a pioneer in mining Bitcoin using GPUs (graphics processing units).₂₃₇ He spent around 100,000 BTC on pizzas, as he made similar deals multiple times throughout the month. In a way, he’s the Santa Claus of this story, giving away value almost flippantly.

Rent-Seeking Fantasies

Pizza Day often triggers daydreams of becoming a Bitcoin billionaire through a single brilliant trade. Many people don’t fantasize about being Laszlo, as they aren’t GPU programming experts. However, they can easily imagine being the person on the bitcointalk forums offering to buy Bitcoin for a couple of pizzas.

The idea of having made such a trade sparks envy, as we all secretly resent the person who actually executed it. We perceive them as lucky, as if they had won the lottery.

These fantasies stem from a fiat mentality, where the value hierarchy is rooted in fiat money. The desire is to be lucky rather than skilled. People would prefer making money without working, versus earning it by providing valuable goods and services.

It’s revealing that the regret lies in missing out on luck rather than innovation. In a fiat-driven world, it’s easier to dream about being the person who sold the pizza, rather than the one who had the skill and foresight to mine with GPUs. This mindset prioritizes fiat accomplishments—getting lucky with money—over real achievements, which involve earning money by providing value to the market. Most people would rather ride the coattails of an innovator than be one themselves.

Bitcoin Regret

We all have our Bitcoin regret stories. I remember learning about Bitcoin in February 2011. I tried to find a way to buy it using a credit card, but I couldn’t. I attempted mining on Amazon Web Services and didn’t find any blocks solo-mining for two days. I began the process of moving dollars into Mt. Gox, but when the price dropped from $1 to $0.90, I decided it was too much of a hassle to set up. I could have bought Bitcoin at $0.90, but I didn’t. It’s one of the biggest regrets of my life.

Everyone has different regret stories. Perhaps you heard about Bitcoin back in June 2011 when it ran up to $30 and regret not buying it then. Maybe you discovered Bitcoin in April 2013 when it reached $266, or later that year in December 2013 when it soared to $1,100. Or perhaps it was in 2017 when it hit $2,500, $5,000, and then $19,000. Or even more recently, in March 2020 when Bitcoin crashed to under $4,000, or later that year when it was breaking $10,000. Anyone who’s heard about Bitcoin at any point in its history has a regret story.

Bitcoin regret stories are like bad-beat stories in poker. Everyone has them, and they are fantasies about different, luckier outcomes. They are unproductive stories because the feelings of regret come from a fantasy that assumes virtues that are not common.

The Challenge of Holding

In these regret stories, we often overlook something. What if we had bought Bitcoin when we first heard about it? How would we have handled the subsequent challenges? Would we have had the diamond hands to hold through the 85% drawdowns in 2011, 2013, 2014, and 2018?

When you fantasize about the Pizza Day story, do you ever consider the difficulty of holding during the tough times in 2011, 2013, 2014, and 2018? There’s a tendency to assume that we would have had the conviction that we possess now, like how a time traveler might feel. I’ve experienced those drawdowns firsthand, and let me tell you, most people didn’t have that conviction, and they sold. Many believe they would have held strong through all the difficult times, but like the original O.J. Simpson verdict, that assumption goes against all evidence.

Holding 10,000 BTC wasn’t uncommon back in 2010. Many people had a significant amount of Bitcoin because they were worth pennies at the time, but where are they now? Most of them sold when the Bitcoin price doubled or tripled and never looked back.238 They viewed Bitcoin as a plaything and didn’t grasp its revolutionary nature. So, they sold it to buy a new computer, a new bike, or a new car.

Shattering Your Dreams

Had you sold Laszlo two pizzas for 10,000 BTC in 2010, you probably would have sold them in the new few years. To think otherwise is hubris. Most people back then didn’t understand what Bitcoin was, and there were no educational resources explaining why you should hold. We now have an abundance of resources for understanding Bitcoin.₂₃₉ In 2023, it’s much easier to comprehend that Bitcoin is a better form of money than anything that came before. Back in 2010, it was much more difficult. Do you still think you would have had diamond hands?

To hold Bitcoin is to have a deep conviction about what it is. There are necessary virtues to be a long-term holder. Holders understand the fundamental value of Bitcoin being sound money and can thus withstand the 85% drawdowns that occur regularly. Only the truly extraordinary managed to hold from 2010, and you likely would not have been one of those people.

But suppose you beat the odds and had conviction. You held through 2011 and even the first bubble in 2013. Would you have had the foresight to withdraw to your wallet before Mt. Gox collapsed in 2013?₂₄₀ Or if you used another exchange before then, would you have gotten out before they exit-scammed?₂₄₁ We say “not your keys, not your coins” now, but back then, this was not common practice. Many people had to be burned for that lesson to become a meme. Even with conviction, there’s a good chance you would have been one of the many who suffered.

There were also other dangers, like the advent of altcoins starting in 2011. How many Bitcoins would you have lost in Geistgeld,₂₄₂ Feathercoin,₂₄₃ and MasterCoin?₂₄₄There were also numerous scams, including Pirate40245 and others who promised high returns by running Ponzi schemes. Would you have avoided those? There were also several ASIC startups that sold machines that weren’t built yet. Would you have avoided getting duped by Butterfly Labs₂₄₆ or TerraMiner?₂₄₇ How about the cloud mining services₂₄₈ that took your Bitcoin and paid out only a fraction over the next 12 months? Would you have avoided these tempting offers that ended up diminishing many Bitcoin stacks? You would have needed the instinct to get in on Bitcoin early while not falling for these similar-sounding investments, which frankly is not an easy needle to thread.

Looking back on those dangers, it’s a miracle that people made it past those years with any Bitcoin at all. Many OGs are like Vietnam veterans, reflecting on the times when they were fortunate to escape the numerous hazards.

Building Conviction Is Challenging

Developing deep conviction is not easy, and for early adopters, it was especially difficult. Remember, everyone was calling Bitcoin a scam back then. Even now, it takes years of study and unwavering resolve to develop that conviction. Back in 2010-2013, having Bitcoin conviction was as rare as a physically-fit government health official.

Going against conventional wisdom and following your convictions requires a great deal of courage, which many people lack. Consider what happened during COVID-19. How many people had the conviction to voice opinions against the mainstream narrative in March 2020? That’s the level of conviction you had to possess to hold Bitcoin through those early years.

In 2023, we have numerous resources that help us save in Bitcoin. Podcasts, books, and videos are available to help us navigate this space, not only to develop the conviction but also to adopt best practices for holding. The early years were a minefield of traps to lose your Bitcoin. It’s much easier these days to avoid those traps, but back then, there weren’t OGs who could warn you about them. The resources that exist now and the Bitcoin memes we have today (“Not your keys, not your coins.”) are not propaganda. They are the fruit of hard-earned experience.

Bitcoin Derangement

Studying the early individuals in the Bitcoin space reveals a troubling pattern. Almost every non-technical Bitcoin advocate pre-2013 is now promoting an altcoin. Why have so many early adopters become Bitcoin-deranged?

We can find some answers by looking at the fiat world of lottery winners. Years after winning, numerous lottery winners end up worse off than before they won the lottery. They are ill-equipped to manage the windfall, and many find themselves with greater debt, damaged relationships, and a worse life. Some even commit suicide. While not everyone experiences such negative outcomes, enough do that many lottery agencies proactively offer assistance.

Unfortunately, bad outcomes have been the fate of many early Bitcoin adopters. At some point in the last decade, they either fell victim to scams or became scammers themselves. As a result, many of them have turned against Bitcoin.

So, to further shatter your daydream, there’s a good chance that if you had gotten in early, you would be an altcoin scammer or would have been scammed by an altcoin. These are serial scammers with no qualms about lying, cheating, or stealing their way to wealth. They exist in a rent-seeking nightmare of shattered dreams. That’s not a desirable fate, and it’s something I wouldn’t wish on my worst enemy.

Level Up Your Convictions

For many, Pizza Day is an opportunity to indulge in time-traveling fantasies where they daydream about being wealthy. This mindset often leads people to explore altcoins, as it stems from the fiat money mentality. Essentially, Pizza Day is a fantasy about being lucky and not having to work. In other words, it represents a rent-seeking desire on a grand scale.

Fiat money has fostered a consumerist mentality, which exacerbates the urge to rent seek. Governments capitalize on this desire through lotteries, profiting from the allure of easy wealth. Altcoins exploit the same yearning. Unfortunately, Pizza Day often reinforces this mentality, focusing on the desire to be fortunate rather than skilled.

Instead, Pizza Day should serve as a reminder that forming conviction is no easy task. True conviction demands knowledge, wisdom, and courage—virtues that require time, energy, and effort to develop. Rather than envying early adopters and fantasizing about joining their ranks, we should strive to cultivate the conviction needed to hold through challenging times and provide value in the process. As the saying goes in the Bitcoin community, “It’s still early.”

On Pizza Day, commit to leveling up your convictions.

TEN THINGS YOU BOUGHT INSTEAD OF BITCOIN

- 1-

That sleek, irresistible Apple gadget you just had to have, only to replace it two years later with an even shinier, more irresistible version.

- 2 -

Green gems in Clash of Clans, because clearly, the defense of your virtual village was of greater importance than securing your financial future.

- 3 -

A college degree with about as much relevance to your current job as a penguin waddling through the Sahara Desert.

- 4 -

Litecoin, the less secure, less functional cousin of Bitcoin— because who needs the real deal when you can settle for something much worse?

- 5 -

A dating app subscription that merely solidified your status as forever alone.