Read now to learn how physical Bitcoin are one way that Bitcoin can be used without the need for any connectivity to the blockchain.
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In last Tuesday’s newsletter, we reviewed how users and the Bitcoin blockchain itself are much less reliant on the internet than most people believe. Critics want us to think that Bitcoin could never work without the internet, making the internet a potential chokepoint for attacking Bitcoin. But Bitcoin could still work, albeit more slowly, even if the internet went down globally.
That said, for the average user, it can be difficult to imagine a world in which you don’t use your internet-connected phone or computer to initiate a Bitcoin transaction. So in today’s newsletter, we’ll look at a method of Bitcoin usage that doesn’t actually require any connectivity to the blockchain at all.
But First: Casascius Coins
For thousands of years, the monies that humanity has used have all been physical, even though money went through quite an evolution during that time. Its final physical manifestations, which still exist today (for at least a few more years anyway), are fiat bills and coins.
Did you know that users have minted physical versions of Bitcoin too? A few different types have existed throughout Bitcoin’s history (Bitbills anyone?), but the most widely known physical Bitcoin were Casascius coins.
Casascius coins were minted to look much like everyday currency coins and contained a private key that could eventually be revealed so that the Bitcoin could be sent on-chain. Several thousand Casascius coins were minted before the creator, Mike Caldwell, shuttered his operations after the United States Treasury Department ordered him to register as a money transmitter.
No Internet? No Problem
In today’s world, physical currencies are quickly becoming relics of the past. And yet, there’s a simple elegance in a system designed with physical Bitcoin, and it has some clear advantages:
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Transactions can be completed as quickly as the physical Bitcoin can be handed over.
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Transactions are costless since the blockchain isn’t involved in processing the transaction.
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Any number of transactions can be completed before the physical Bitcoin gets redeemed on-chain.
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Transactions are private since they aren’t recorded to the public blockchain.
Physical Bitcoin offer another method for accessing Bitcoin’s hard money qualities without needing to connect to the internet, but they certainly wouldn’t be a perfect fit for every scenario.
For starters, more and more transactions these days happen remotely rather than in person. If you buy something over the phone or over the internet, you’ll find it difficult to use physical Bitcoin to complete the transaction without revealing and sharing the private key with the person on the other end of the transaction. And once the private key is used, the physical Bitcoin is no longer physical.
Secondly, I stated before that physical Bitcoin don’t require any connectivity to the blockchain in order to operate, but that’s only true to a certain degree. For example, in order to verify the balance of the physical Bitcoin still matches its face value, the holder would have to look at the blockchain itself. In other words, using Bitcoin “offline” reintroduces trust into your transactions, specifically trust that the underlying Bitcoin haven’t already been spent.
As with any off-chain Bitcoin solution, the pros and cons must be sufficiently weighed by each potential participant before use.
Building A Better Bitcoin
Bitcoin is a nearly perfect payment system, in my opinion. Anyone can access it, it’s always on, and it can transfer any amount of value. However, finding new ways to transfer Bitcoin between parties is an important step in ensuring Bitcoin continues to be the open, accessible system the community is trying to build.
While physical Bitcoin may not be the most orthodox next step for Bitcoin transactions, their existence is further proof that Bitcoin can survive just fine with or without access to the internet.
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This is not financial or business advice. This newsletter and related content are for informational purposes only. Cryptocurrencies and digital assets can be risky. Always do your own research before making any sort of investment.
