In order to understand what bitcoin is, you have to understand what money is.
Money is a technology to move value across space, time and scales. Money stores your time and energy to be used in the future.
For example you can build cabinets and trade that for a day at a spa.
Money allows for complex exchange, trade specialization, and is fundamental for civilizations with advanced economies.
Money is in fact one of the oldest inventions of civilization itself, it even predates writing. In fact the first forms of writing were credit spreadsheets, of who owed what to whom. Money was so important in society we had to invent writing to keep track of it! It’s such a primal tool that we have even taught animals how to use it.
And it’s so ubiquitous that many of us take it for granted.
Money is by far the most important good in an economy. It’s half of every single transaction. Not only is it extremely important on an individual level, but it’s one of the fundamental technologies in the development and sustainability of society itself.
Everyone intuitively understands that it’s always about the money. Always has been.
Money isn’t Real
Because the value of money derives not from it’s consumption, but for the use to trade it for something later, money really is completely made up. It’s an abstraction, it’s a shared hallucination, it’s not real.
Money is a shared cultural hallucination. It’s a shared delusion. We walk around and associate with other people on the basis of germ-ridden pieces of cotton printed with green ink…just by exchanging these pieces of cotton, you could create social relationships, transactions and trade– you could feed yourself, shelter yourself, etc. It’s based on the assumption that if you give me a dollar today, someone else will accept that dollar in exchange for something of value tomorrow. Value comes from the assumption that I can use it again.
Andreas Antonopoulos
Without the shared belief that something is money, it no longer becomes money. Money is the belief itself.
The real question is, why do people believe in certain monies over other ones? What makes a good, trustworthy money?
Bitcoin prioritizes trust and security for this reason. As you’ll soon understand, bitcoin was designed to be superior to all other forms of money so that it will be chosen voluntarily by the market in the long run.
The Textbook Definition of Money
The textbook definition of money is that it serves three functions: as a store of value, a medium of exchange and a unit of account. i.e. you save dollars in your wallet to buy something for dollars which has it’s price listed in dollars.
This definition is good for telling us which things are used as money currently, but it doesn’t tell us anything about how to judge new monies. What’s often overlooked in this definition is the spectrum of moneyness.
For one, money is location dependent. Just because you can’t buy a soda in Pittsburg with Mexican pesos doesn’t mean pesos aren’t money.
Additionally, money sometimes specializes in one of the three functions (think of gold as a store of value and Pesos as a medium of exchange). This is because even though gold has served as money and a store of value for thousands of years, it’s heavy and not easily accepted by merchants.
All money throughout history has taken one of two forms – either physical, like a coin, seashell, salt, cigarette, necklace bead, or paper bill. Or as information in the form of a list of transactions and debts owed. A spreadsheet if you will, like a bank account, clay tablet, or credit card.
On the internet, money HAS to be information, since it’s the informational realm, and therefore money has to be a spreadsheet/ledger. This was the great challenge in creating commodity money within cyberspace, and why it took so long for bitcoin to be created.
Bitcoin is Digital Commodity Money
The very nature of information is that it can be copied indefinitely, and before bitcoin there was no way to limit someone from just counterfeiting digital money without repercussion.
Sure you could just use fiat currency or trust a 3rd party like a bank or a corporation to keep track of your digital money, but debasement/counterfeiting of money has always been commonplace…and it’s the reason bitcoin was invented in the first place.
The true innovation of bitcoin was inventing a way to prevent digital money from being spent twice in an automated system without human control. Replicating the scarce nature of physical matter within cyberspace. Creating a new commodity that has limits on its supply, and can’t just be infinitely printed at the push of a keystroke.
This makes Bitcoin the invention of digital property. A scarce resource which is also digital.
The cool thing about digital property though is that you can build applications with it because it’s programmable. Property where you don’t need permission to launch a new tool or application, where there are no gatekeepers or barriers to entry, and where an open market of ideas can flourish.
Bitcoin is programmable money with so many use cases we haven’t even thought of yet. Due to its open source, permissionless nature, it will inspire innovation at the edges and the free marketplace of ideas can foster innovation.
Bitcoin is Designed Money
Not only is bitcoin digital, decentralized, programmable, commodity money, but it is also designed money.
Designed from the ground up with Austrian Economic sound money principles. Designed to have all of the best monetary properties, and designed to fix all of the shortcomings of gold.
Bitcoin isn’t just any money, it’s the best money ever made.
It’s sound money, it’s unstoppable money, it’s portable, verifiable, divisible, durable, fungible, and easily verifiable money.
You see, these qualities of money are extremely rare in nature. Gold was the best money for 5,000 years and yet it doesn’t even fulfill all of the traditional properties of good money.
(Which by the way, is why there was often a bi-metallic standard where silver fulfilled some of the divisibility and portability shortcomings with gold.)
Also unlike digital fiat money, bitcoin is borderless, permission-less, peer-to-peer, resistant to censorship, pseudonymous, extremely secure, and settles with cash finality.
Not only does bitcoin perfectly fit all of the traditional properties of good money, AND vastly improve on digital fiat, but bitcoin also has additional properties that were never before possible.
Bitcoin has perfect supply inelasticity, it’s programmable, it’s fully transparent, it’s unforgeable, unconfiscateable, trustless, and immutable.
Bitcoin isn’t just money, it’s the reinvention of money itself.