"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."- Henry Ford
Without the freedom to transact, there is no freedom at all. Every day, we all transact to some capacity. Whether we are exchanging favors, bartering goods/services in exchange for other goods/services, or more commonly, trading some form of money for a good/service. If we, the people, lose our ability to freely transact with one another, we lose our freedom. It becomes nearly impossible to facilitate trade outside of a local community and even then, we may run into the problem that money was created to solve in the first place, known as the coincidence of wants. The coincidence of wants is a common issue that was faced while we were still in a barter economy. Imagine this scenario:
- Alice bakes bread.
- Bob grows vegetables.
- Charlie has apples.
- Danny has peaches.
Alice wants vegetables from Bob, but Bob doesn't want bread. Alice needs to find someone willing to accept bread. Luckily, Charlie is willing to exchange his apples for Alice’s bread. Unfortunately, Bob prefers peaches over apples, and Danny wants vegetables over bread. See the problem with trying to barter? Money was an innovative tool that solved this problem.
“Who controls the food supply controls the people; who controls the energy can control the continents; who controls the money can control the world” – Henry Kissinger
What is Money?
The question, ‘What is Money?’, has been a transformative question to ponder on my journey to pursuing a more prosperous life. Exploring the answer to this complicated yet simple question has proven to make my brain go on some wild detours again and again. The reason being is that I can't grasp the fact that so few people in this world, or at least who I've come across, can define the very thing they spend the majority of their time pursuing and thinking about. When you take a step back to think about it, that is absolutely wild. People are willing to miss birthday parties, weddings, sporting events for their children, or never speak to friends or family again over a dispute involving something they can't define. Once happily married couples get divorced over this thing called money, yet neither party can properly define it. The worst tragedy of all, and something that is very dear and near to my heart, is that people will actually go to the extreme of taking their own lives as a result of experiencing monetary issues. So how is it that we, as humans, let something we don't fully understand become so powerful that it controls and consumes just about every minute of our everyday life?
"Permit me to issue and control the money of a nation, and I care not who makes its laws." - Mayer Amschel Rothschild
Anything can serve the role of money. It just happens to be that some forms of money are better than others and some forms of money are required by law to be used. In its simplest form, money is a communication technology that allows two consenting parties to communicate value amongst one another. It serves as a way to express the abstraction of value across time and space. In this way, it serves as a tool that facilitates trade between individuals and helps us create a more efficient and prosperous society.
I like to think of money as a representation of a receipt of human time and energy because for most people, outside of the government, you must sacrifice time and/or effort to acquire money in which you hold in hopes of exchanging for something you deem valuable at a later time. Throughout history, various items have been used as money, from seashells to gold to credit, but as our society has evolved, so has the concept of money.
Money has three main functions, store of value, medium of exchange and unit of account. Government issued money has a fourth function, system of control. There are also seven properties that are used to measure how good or bad something serves as money, scarcity, durability, acceptability, portability, divisibility, fungibility and immutability.
Today, we mostly use fiat currencies as our form of money. These currencies are issued by governments and central banks and have value because the government says they do. They are not backed by any tangible asset, such as gold, and their value is subject to inflation and other economic forces. Furthermore, we are forced to accept this government issued money via legal tender laws. As time goes on, these government-issued forms of money all decline in purchasing power. It should be noted that fiat currencies have had a failure rate of 100% in the past. The 'rules of the game' are subject to change without any vote by the people and, conversely, are up to the decision of those in charge, most of the time by unelected bureaucrats. Just look back to President Roosevelt's Executive Order 6102, where he made it illegal to own or possess physical gold, which at the time was the main commodity used as money. Or consider President Nixon in 1971, when he shockingly took the U.S. off the gold standard because we had printed more paper currency than we had gold. These are the dangers of having the government in control of money.
“If the American people ever allow banks to control the issue of their currency, first by inflation then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered… I believe that banking institutions are more dangerous to our liberties than standing armies…The issuing power should be taken from the banks and restored to the people, to whom it properly belongs” -Thomas Jefferson
This is where Bitcoin comes in. Bitcoin is a decentralized digital currency that operates on a peer-to-peer network without any central authority. It is not controlled by any nation state and cannot be issued by any government entity. It was created in 2009 by an unknown individual or group using the pseudonym "Satoshi Nakamoto" and has since become one of the most popular and valuable assets and currencies in the world. Many people like to claim that Bitcoin was invented, while others say it was discovered. In reality, it is a combination of both. Prior to Bitcoin, it was unknown how to attain digital scarcity. The discovery of how to achieve absolute digital scarcity through consensus on a decentralized digital network is what led to the creation of Bitcoin.
In short, Bitcoin is a platform that guarantees certain trust functions. Built on top of this platform is a currency (bitcoin the token) and a payment network (Bitcoin). The digital currency aspect (Bitcoin) is only the first application that has been built on this distributed consensus system. As more and more people adopt Bitcoin and develop new applications on top of it, the potential for this technology to change the world is limitless.
One of the key features of Bitcoin is its limited supply. There will only ever be 21 million bitcoins in existence, making it a deflationary asset. This means that, unlike fiat currencies, which can be printed in unlimited quantities, the value of Bitcoin will increase over time as its supply becomes scarcer.
Bitcoin operates on a blockchain, a decentralized digital ledger that records all transactions made on the network. This blockchain is immutable, meaning that once a transaction has been recorded on it, it cannot be altered or deleted. This makes Bitcoin transactions more secure and transparent than traditional financial transactions, which can be subject to fraud and other types of malfeasance. Also, in a world of censorship, Bitcoin’s transactions are censorship resistant meaning despite your values, beliefs or views, NO ONE can stop you from sending value to anyone, anywhere at anytime. As long as you take self-custody of your bitcoin, which is to possess the actual asset, no one can confiscate that from you. Bitcoin held on an exchange or in an ETF is an IOU for actual bitcoin and should not be confused with the physical asset. Bitcoin is freedom money. It’s a tool that mirrors the values in which this beautiful country was built upon. Freedom, power in the hands of the people, preservation of private property rights and decentralized power. No matter how much bitcoin you own, all users of the network possess the same amount of power in terms of the rules of the network. It is a system of rules, not rulers and you can choose to participate in the network or you can choose not to. If you value freedom, private property rights and preservation of wealth, I highly recommend learning more about Bitcoin. Some of my favorite books that helped me get started are the following:
- The Bullish Case for Bitcoin by Vijay Boyapati
- The Bitcoin Standard by Saifedean Ammous
- The Fiat Standard by Saifedean Ammous
- Layered Money by Nik Bhatia
- Broken Money by Lyn Alden
If you enjoy listening to podcasts more than reading, check out these podcasts:
- What Bitcoin Did with Peter McCormack
- What is Money with Robert Breedlove
- Mark Moss on Youtube
Bitcoin is the greatest teacher to those who are willing to study and learn about this technology. It teaches one about economics, monetary policy, importance of decentralization, technology, energy, agriculture, incentives and so much more. There’s a reason it’s called the “Bitcoin rabbit hole” and everyone who has entered continues to fall deeper and deeper because one realizes there’s so much more to learn about the world, they are living in. It’s a very humbling experience, as Socrates once said, “One thing only I know, and that is that I know nothing”. Most people come for the monetary gains but stay for the revolution.
“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government. That is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something they can’t stop.”- Friedrich Hayek
