Why Bitcoin is the Juggernaut of Currency ✊
Exploring money from first-principles: the 5 fundamental requirements.
📍 Coordinates: Black Ristretto Café, Palermo – Argentina.
🎧 Music Pairing: Tarlabasi Remix – Be Svendsen.
📖 Reading Time: ~6 minutes.
We’re going to explore Bitcoin a lot here…
… but hear me out. This has nothing to do with price, investing, or “making mad gains bro”.
It has everything to do with separating the money from the state.
This is about the freedom and sovereignty of the individual. About creating the conditions for radically re-architecting global culture. As we’ll see, Bitcoin is one of several key factors in making this happen.
For the past year, I’ve gone deep down the Bitcoin rabbit hole.
I’ve sold all other crypto, loaded up on hardware wallets, started running my own node, began gifting it to friends and family, and inhaled everything I can about sound money and the core operating principles of Bitcoin.
In order to fully explore Bitcoin, we need to start from first principles.
We need to get a grip on what money is, why it’s used, and what the desirable properties of money are. That’s what this piece is.
We’re going to explore the 5 fundamental properties of money and why Bitcoin is the best contender, by far, in all of humanity’s history.
The 5 Essential Properties of Money
I’ve heard many people (myself included!) babble out “money is just a construct man, anything can be money, it’s just paper… like, I could use this mango as money.”
No.
We’ll save the eradication of the abomination that is fiat currency (traditional, state-backed & issued money) for another post. Instead, let’s look at the most recent money humanity chose naturally to be its global currency: gold.
When the global population was left to its own devices to choose what it preferred to transact and save with, it chose gold. Gold has a 5000-year history as the dominant global currency.
For good reason! Gold satisfied—better than any other material—the 5 fundamental properties of money:
Divisibility: it can be subdivided into units of various sizes.
Durability: it can endure/stay functional over extended periods of time. This is the material as well as its value.
Portability: it can be easily transported so that you can transact with or store it safely.
Recognizability: wherever you go, it is recognized as money and accepted as currency.
Scarcity: it is extremely difficult to quickly increase the supply.
Returning to the mango: they have horrific durability. They rot after a week or two! Not good for your life savings. Its recognizability is debatable, would an Inuit in the arctic recognize and accept this as money?
This is just to illustrate that not everything “can just be money bro.” At least at the scale we are discussing.
You can see why the precious monetary metals won as the free market choice for the global monetary base currencies.
And of these, gold excelled far beyond bronze or silver.
Enter Bitcoin
Bitcoin is pure information. It is nothing more—and nothing less—than digital information.
Bitcoin is pure information to such an extent that there is no such thing as a real ‘bitcoin’.
All that exists is a shared ledger—a complete copy of which is stored on every single node in the network—that denominates some addresses as having some amount of satoshis, the singular units of Bitcoin.
Every ~10 minutes, without fail, for 13 years, Bitcoin does one thing: establish the Truth of the collective ledger by publishing new transactions and updating existing balances.
For convenience, when one address has 100,000,000 satoshis, we say that they have one Bitcoin. But in reality, there are no bitcoin. They do not exist anywhere. There are no ‘wallets’ where ‘Bitcoin’ are stored.
There is only a globally-distributed, fraud-resistant shared ledger, updated every ~10 minutes.
What is important here is that pure information—which Bitcoin is—is the category winner by orders of magnitude across 4 of the core properties of money: divisibility, portability, durability, and recognizability.
Information is infinitely divisible. It is infinitely portable. It is infinitely durable, and it is extremely recognizable. Do you have any difficulty recognizing the words in this sentence? Do you know what this symbol ‘$’ is? That’s information.
Far superior to any of the precious metals—gold included—pure information is vastly superior across every core principle of money.
The only thing that was missing, until Bitcoin, was scarcity. Information is infinitely copyable by nature.
“As bitcoin approaches infinite stock to flow ratio it will be the soundest money in existence. Infinite soundness is hard to beat.” ― Gigi, 21 Lessons
Bitcoin literally invented absolute digital scarcity.
Other than time itself, Bitcoin is the only thing in existence that is absolutely scarce.
Bitcoin Dominates the 5 Properties of Money
For over 5000 years—without exception—humanity has freely chosen the hardest, soundest money available to it.
For millennia these were precious metals. At the top, gold became the world's reserve currency.
Even governments recognize the fundamental inferiority of their own fiat currencies and continue to store and acquire gold and precious metals.
This went on for thousands of years… until government intervention.
‘Fiat’ literally means ‘by decree’. Traditional national currencies only have value and are only recognized as money because the government FORCES it upon you.
“[…] a money that is easy to produce is no money at all, and easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard-earned wealth for sale in exchange for something easy to produce.” ― Saifedean Ammous, The Bitcoin Standard
Given free market opportunity, humanity for thousands of years selected gold as the best money. Now, a better contender in every aspect has arrived.
Divisibility: Bitcoin is near-infinitely subdividable, down to a single satoshi (1 hundred millionth of a bitcoin). Gold has physical limitations and pragmatic constraints to how subdivided it can be and still be accepted as money. No one wants minuscule gold nuggets as payment.
Durability: Gold won over other monetary metals because it doesn’t corrode over time, like bronze or silver. Bitcoin is pure information. Every 10 minutes this information is renewed and broadcast throughout the world. Bitcoin is protected by the largest forcefield of source energy and computing power in existence. It is infinitely more durable than physical material.
Portability: Gold—due to size and weight—is inconvenient at best to transport. Try carrying your net worth around in gold, you’ll see. Bitcoin is infinitely portable; it can be sent at the speed of light via the Lightning network, and you can carry billions of dollars with only 12 words memorized in your head.
Recognizability: Gold, while recognized as money globally, can be faked. Bitcoin is increasingly recognized globally as valid money while being fundamentally impossible to fake (being scammed is not the same as faking a Bitcoin).
Scarcity: While gold is the most scarce precious metal, if we turned the entire global workforce into gold miners, we would drastically and rapidly increase the total supply of gold, devaluing the worth of all existing supplies. Bitcoin is absolutely scarce. No matter how hard you try, you cannot increase the available supply. You cannot increase how quickly they are released due to the difficulty adjustment in the proof-of-work mechanism, nor can you increase the total supply of the 21 million Bitcoin that will exist.
When global market actors are left to their own devices (without coercion from the government), humanity selects the hardest, soundest money available that best fulfills all 5 of the fundamental properties of money.
Money over time converges on a winner-take-all outcome.
Bitcoin fundamentally surpasses gold in every single property of money.
This is the absolute dominance of Bitcoin.
With love, EB. 💛
Another great read. Definitely interested in seeing more of this in future posts please. Thank you Eric!
Please share any avenues of Bitcoin investment counselors with me. I am retired and I’m interested in protecting the wealth I have from the corrupt banking establishment. Thx.