Annabel

@annabelatloft

Bitcoin is better than the money we know because…

December 7th 2017

An explanation in tweets

Photo by NeONBRAND on Unsplash

Bitcoin has no intrinsic value and neither does fiat money (government printed money that you and I use everyday)!

The only difference between Bitcoin and fiat is that the former is decentralized and cannot be manipulated by a centralized group of administrators while the latter is centralized and can be manipulated by a centralized group of administrators.

So… what is fiat money anyway?

But… at least fiat money can be exchanged for the goods and services produced in the country where it is legal tender.

Now, check this out:

Compare it to this:

Remember Venezuela?

Compared to government backed money, where supply is driven by an inflationary monetary policy, the desire for economic stability and geopolitics, the supply of bitcoin is capped at 21 million.

Bitcoin’s supply and security is guaranteed by math and economic incentives.

Math: The same type of cryptography that secures the internet secures bitcoin. If this is compromised, so will your internet banking, nuclear codes, etc. The security of the bitcoin network would be the least of your worries.

Economic Incentives: Without going into things like Nash Equilibriums and 51% attacks, the use of game theory to secure the network can be easily summarised as relying on the fact that every player who has a stake in the ecosystem doesn't trust each other and that any player powerful enough to disrupt the existing system wouldn’t want to because they would have too much skin in the game.

More importantly, bitcoin is a better version of money based on historical evidence that money has always been a system of recording of IOUs in society (instead of a more convenient form of barter).

Around 700 to 1,000 years ago the Yapese’s ancestors traveled via bamboo canoe and raft some 300 miles to Palau island where limestone is abundant.
The Yapese then bartered with the locals and gave them beads, coconuts and other goods for the privilege of quarrying their limestone. Commodity-money was exchanged between the two tribes and the giant discs were brought back to Yap and eventually became a store of value…
Ownership of Yapese’s rai stones can be transferred through public acknowledgement and validation. Let’s say you wanted to buy a nipa hut. You could verbally transfer ownership of a rai stone without having to move the disc’s location.
As long as fellow villagers know about the transaction, your purchase is legit. Kind of like crowdsourced recordkeeping.

In its purest form, money can be understood as a language of expressing value.

Andreas Antonopolous: I started thinking of currency as a means of expression. Money, at the very root of it is a language. It is a language we use to express vlue to each other. When I give you a dollar bill, I am saying that I want to hand you the equivalent value. I am communicating my desire to exchange value with you because I appreciate something you can do or something you can give to me. so I’m using this as a token of language. And this thing happens in human societies whether you have currency or not.

And what is code but… a form of speech!

Essentially, the best form of money is the one that the community believes to be the most trusted system of recording. What do you think that means for bitcoin?

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