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by exelib
1329 days ago
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> What you're also missing out is on how the current monetary system and monetary base work, and why central banking is problematic. And why central banking is problematic? > You've lost probably more than 10% of your own buying power over the last year at no fault of your own, and you never questioned it. And how the blockchain resolves this issue? > this is what blockchains are looking to solve. ... how? |
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The process of any "thing" organically becoming money looks like the following: 1) Collectable 2) Store of value 3) Medium of exchange 4) Unit of account
Gold followed this path over 8000 years as it emerged as the strongest money through international trade. Societies in many places used different kinds of money at different points in times: feathers, gems, giant immovable boulders, etc. But those monies were always displaced by technology, when they could be collected or mined faster or more efficiently, resulting in debasement. Gold was the best store of value because it could not be rapidly debased; its scarcity allows it to only inflate by a few percent a year, and it maintains a pretty constant stock-to-flow ratio.
And so being common enough to be popular, but rare enough to be difficult to obtain, gold became the world's "money". Ironically central banks still hoard gold, with the US having the largest storehold in the world. However the US and world powers would terminate the gold standard, unpegging dollars to redeemable gold, allowing for government control over the creation, distribution, and management of money. Historically, ancient fiats have failed, and I suspect with a long enough time horizon, 100% of all fiat currencies will fail. But we now run an experiment in which the ability to grow unlimited debt is a "feature", where central banks determine the cost of money for society, where the creation of new money or its policies is easy, and decided by a few.
Bitcoin is a decentralized, censorship resistant, permissionless network. It acts a ledger, a way of keeping track of nominal value in a way where anyone can participate (send/receive, create addresses) from anywhere in the world. It is open source programmable money. Compared to gold, it is magnitudes cheaper to transmit, store, and secure. The protocols are defined and transparent which makes its creation rate predictable. The supply is finite, and so it cannot be easily debased, making it a powerful store of value.