If you haven't read, or listened to Robert Breedlove's Money, Bitcoin, and Time essay, it is a must. It is simply the most comprehensive and cohesive framework for conceptualizing what impact Bitcoin is having on the world. Episode 23 of the Go Full Crypto podcast covers some of the topics in the essay, in a much more condensed fashion. Specifically, we talk about the many definitions of money, and the problems that money solves. It is very evident from the nature of the article that the author is Bitcoin Maximalist of sorts. While this label may carry negative connotations for some, Robert is extremely tactful, persuasive, and reasonable in his articulation of why Bitcoin will outcompete every single currency out there.
The Many Definitions of Money
Money has several definitions, each of which are worth exploring in depth. In general, money needs to have the following three properties. Unit of Account, Store of Value, and Medium of Exchange. If you've ever read a blog post on money, then you've come across these three concepts in depth. Just in case you haven't I've included I short descriptions of these features, as they relate to Bitcoin. Yes, to one degree or another, most cryptocurrencies contain a mixture of these three properties, with the store of value being by the most difficult to attain.
Unit of Account
Having a money be a unit of account is relatively straight forward. It needs to be divisible, and fungible. That is, it needs to be able to be subdivided into many little parts, where each part is indistinguishable from the other. Bitcoin does this well, as each coin may be subdivided into 100 million pieces called Satoshi's, named after the founder of Bitcoin.
Medium of Exchange
The ability for money to be used as a medium of exchange is entirely dependent on how easily it is transferred. When it comes to bitcoin, the transactions travel at the speed of light, and can be conducted from anywhere on the planet. The only barrier to it becoming a better medium of exchange, is how widely accepted it is as a money in general. A good medium of exchange is universally accepted by everyone. Gold and the US Dollar are the only two things on the planet that have that kind of recognition at the moment. Bitcoin is giving both of those things a run from their money.
Store of Value
As mentioned earlier, having something be able to retain its value over long periods of time is actually quite difficult. For starters, the thing (money) needs to be able to gain widespread acknowledgement as something that is valuable in the first place. Then, it needs to satisfy some fundamental requirements in order to retain value across vast spans of time. Gold does this better than anything else that has come before bitcoin. You may not know this, but gold is a metal that doesn't tarnish. Bitcoin is just data, and data like gold, doesn't degrade.
Perhaps one of the more important aspects of a money storing its value, is how its supply is managed. Gold is one of the hardest monies ever to exist partially due to its finite supply on the planet. It has become increasingly difficult to pull it out of the ground. As the value of gold increases, more expensive methods of mining are justified to obtain smaller amounts of it. Bitcoin manages to mimic this almost perfectly in the way that its mining algorithm is designed. The supply of bitcoin leaks into circulation through its mining process. The rate that new bitcoin enter circulation is reduced in bitcoins quadrennial inflation rate adjustment commonly known as halvings. Ensuring that the scarcity of a money is ensured is essential, if not THE cornerstone of how a money retains value across time. There has never been a money as hard as bitcoin on the planet before.
The Problems that Money Solves
In this episode of the podcast, Mrugakshee and I discuss the various problems that money solve. The one we are going to mention in this post, is the coincidence of wants.
The Coincidence of Wants
The problem of having a coincidence of wants goes like this. The example is rather trivial, but it illustrates the point quite well. Imagine you are a pencil salesman, and you wish to purchase a home. Without money, you are forced to try to buy a home with the only thing that you own, or can produce; pencils. I've never tried it, but I'd be willing to guess its very tough to come find a seller of a house, willing to accept payment in pencils. You see, in order for a pencil salesman to obtain anything else, they need to run into the coincidence where someone else, who has exactly what the salesman needs, is looking for pencils. This is the coincidence of wants. Two people, having exactly what the other needs, in the exactly quantity that is required. Money solves this problem by providing the society with an inherently valueless item to be used as a medium of exchange to facilitate the transaction. The pencil salesman is then free to sell individual pencils, save their money (because money is a good store of value), and then spend it when they have accumulated enough to buy a house.
The Go Full Crypto Vision
We want to help people opt-into the world of cryptocurrency, one dollar at a time. In order to do this, people must need a reason. They need their own "why" behind discarding their government currency for the world currency of the future. Go Full Crypto is putting out content to help people discover the reason why they want to get involved in cryptocurrency.
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