Why Bitcoin Works

Inflation Factors in Heavily into Time Preference

Time preferences are critical to how a society functions. A high time preference person wants things now or as soon as possible. A low time preference person is willing to forego things now for something better later.

Effort Will Always Go Into Increasing Money Supply

One of the most enjoyable parts of the book is the discussion of the various mediums that were used as money in the past. These include wampums, rai stones and of course, precious metals. What killed most previous mediums as money is technology. Specifically, people figured out a way to produce a lot of the same medium, inflating the supply to no longer make the medium scarce.

Fiat Money is Not Yours

One of the most eye opening parts of the book is the discussion of what happened in WWI. What started as a small war between Serbian separatists and the Austro-Hungarian empire became a global war that exhausted the coffers of nearly every country involved in the war. The difference between this and previous wars was the presence of central banking.

Sound Money Allows for Planning

There are a lot of reasons why sound money is important for society, but the biggest one that I learned from the book is that sound money allows people to plan effectively. Fiat money is generally pretty good at being divisible or transmitting across large distances (exceptions being foreign remittances or micropayments). What fiat money is not good at is being able to store value for the future (In the book, this concept is called salability across scales, distance and time).

Conclusion

Bitcoin’s main benefit to society can be understood as bringing back sound money. Sound money allows for capital accumulation which allows for investment, leading to better goods and services for less effort. This, in turn, benefits all of civilization. We’re not there yet, but this is the main value proposition.

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Jimmy Song

Jimmy Song

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Bitcoin Educator, Developer and Entrepreneur. Book: https://amzn.to/2RSlnTb PGP Fingerprint: C1D7 97BE 7D10 5291 228C D70C FAA6 17E3 2679 E455