Smart People’s Guide to Bitcoin

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The following is a response to Professor Fabrizio Carmignani’s interview titled “Dummy’s Guide To Crypto,” which I found genuinely written by a model, for Dummies.

It’s always fascinating when experts of the old comment on the new paradigm that makes their old paradigm obsolete.

The classic meme that comes to mind is Paul Krugman, who said that in 2005 the internet won’t have more of an impact on the global economy than the fax machine, and who also told people that bitcoin was a bubble at $ 1, $ 10, $ 100 and since.

Source

Trying to make sense of the new using the lens of the old one is about as effective as having an auto mechanic perform heart surgery or having a heart surgeon fix a car. They are both operators of some sort, but the domains are different.

So let’s take a look at Bitcoiners’ point of view on Bitcoin. Notice I said “Bitcoin”, not crypto. Why? Because crypto is much more like the old financial system, while Bitcoin is a whole new beast.

But that’s another conversation, and you can find it out here.

What is Bitcoin?

It is a superior form of currency that does not depend on a central authority for the issuance or maintenance of the ledger. It is a currency anchored in the second law of thermodynamics, which transforms energy into a fixed and incorruptible unit of account. It is an immutable network implemented by hundreds of thousands of nodes across the world, simultaneously. It is a set of rules without rules in which any human being can voluntarily participate and apply at the level of the individual. It is a substance that embodies each of the attributes of money (divisibility, portability, knowability, fungibility, divisibility and scarcity), and thus perfectly fulfills the three functions of money:

It is the perfect store of value because I know exactly how much I have compared to the whole, and I know it cannot be diluted or altered. It is the perfect medium of exchange because I can send what I want, to whom I want, when I want and there is no power in the universe that can stop me. It is the perfect unit of account because it is infinitely divisible and I can thus measure all the other goods and services it contains. As its purchasing power increases, one can continue to subdivide units to measure small goods and services, forever.

In other words: money is the technology that a sentient species uses to transmit information about energy, time and matter. Bitcoin is a perfect monetary and monetary network.

Why are some people drawn to this?

While I agree with Professor Carmignani that crypto is just about playing blindly, in the hope of making more fiat money, those who understand the rationale behind Bitcoin are drawn for reasons. much deeper.

Not only is the old financial system a disaster, but more importantly, the old monetary system is completely broken and thermodynamically fraudulent.

Money basically measures three things: time, energy and natural resources. Three fixed quantities that we cannot create out of nothing. Participants in an economy (a closed system) perform work (which is derived from time and energy) and, depending on the subjective value of their labor product in the market, exchange it for something called money. that they can either save for future transactions or use today.

Therefore, for money to work properly and accurately measure the product of our labor, it needs to represent time, energy, and natural resources as closely as possible. This primarily means that it should be a fixed amount that cannot be changed or adjusted at the will of a “ruler”. Changing the quantity moves the goalposts and distorts the game right in the middle of the game.

Moreover, because the old financial system assumes that money equals wealth, it only inflates the total amount of “money” without there being an equivalent increase in productive output or capital. . As a result, we have a lot more money for the same output and the same capital, thus diluting the purchasing power of everyone’s money.

Their policies impoverish anyone who is prudent enough to work hard and save, and make anyone with any form of durable asset the illusion that they are getting richer.

Savings being the lifeblood of civilization, when you discourage it you start to break the foundation upon which individual humans build.

This has dire consequences and this is the real reason people who deeply understand it are drawn to Bitcoin (not crypto).

Are you investing?

You don’t “invest” in a superior form of money.

In the same way that the person who holds the Zimbabwean dollar or the Zimbabwean bolivar does not “invest” in the USD, but flees to it as a superior currency that has a better collateral, people who understand Bitcoin exit traditional currencies. issued by the government. not as an investment but as a migration to a higher currency.

Traditional fiat currencies are as good as the promise and military might of those who “back” them. The world changes. I will trust the immutable laws of mathematics and universal physical laws long before I place it in a bureaucrat’s promise.

Mining

Mining is the name given to the nodes of the validation process on the Bitcoin network that serve both to validate transactions and, more broadly, to thermodynamically secure the network.

Anyone Can Do It. You just need access to electricity, internet and a computer. Yes, to produce a significant amount of bitcoin you will need a more powerful or specialized computer, but that’s perfectly fine. The network is built on a “proof of work” and the output is proportional to the input.

This is actually the great equalizer. You cannot pretend to ‘work’.

Why is Bitcoin valuable?

For all the reasons I mentioned above. And that’s just the beginning.

Gresham’s Law states that good money repels bad money. Every sane human saves the good money while spending the less money. As more and more people understand what money is (it is sorely lacking in the world) and then discover that bitcoin is not just the best money humanity has ever had. , but perfect money, they too will want to protect their wealth and measure the product of their work in bitcoin.

This will continue for decades and the purchasing power of bitcoin will continue to increase.

A good way to think about it is:

Money is the biggest market. It represents everything. Bitcoin is perfect money. On a long enough timescale, everyone will use it. Bitcoin will represent not only all there is, but all that there will ever be.

So technically speaking, the equation for the value of a single bitcoin is “infinity divided by 21 million”. It is much more than the $ 30,000 today.

Should I invest?

As mentioned earlier, it is your responsibility to understand money first and then Bitcoin.

This is a subject that will take you at least 1,000 hours, and probably the 10,000 hours of classical study in mathematics, physics, economics, human action and praxeology, philosophy, anthropology and human evolution.

And that doesn’t include the technical side.

Once you have acquired the basics of the philosophy and history of money and understand the purpose of Bitcoin, you will no longer ask yourself this question. You will have answered it yourself.

The inconvenients

The only real downside that exists is the one that holds the equivalent of “seashells” while everyone else uses gold.

From an evolutionary standpoint, Bitcoin will do to fiat money what gold has done to all other currencies, including seashells, rocks, stones, and salt. Except that it will compress 5,000 years in a few decades.

There is a lot of talk about “poor energy use”, and while I would like to demystify that here, I don’t have room. So I hope the following will suffice:

Money is central to the functioning of civilization and to the ability of free individuals to perform work and store the product of their labor. As humans, we have built huge buildings to make money work, so society can work. The latest incarnation is the fiduciary system which requires the collective use of the energy of the military-industrial complex, the entire global banking system, payment systems, legal systems, courts, buildings and infrastructure, occupied by millions of people just to maintain.

Bitcoin can do the same job, in a way that is orders of magnitude, and with the same rules for everyone, for the same energy consumption as what we humans collectively use for washing machines. , dryers and toasters.

I strongly suggest reading this recent article by Hass McCook, an Oxford MBA engineer, who explains this in great detail.

There is nothing more important today for the environment, equal global economic opportunity, the transformation of the economic system and the cleaning up of the financial system that impacts us all, than the switch to Bitcoin.

Human action is the basis of speech. I’ve said this on many podcasts: “Don’t tell me what you believe, show me your bank account and I’ll tell you what you believe.” In a world where money is controlled, there is no freedom of speech, nor individual freedom of action. It is not a world that we want to leave to our loved ones.

So, yes, you will get rich by being in Bitcoin early on, the same way anyone who found gold early and held onto it saw their purchasing power increase. But more importantly, you will be performing historic good and moral duty in moving towards better, fairer, and healthier currency.

This is a guest post by Aleks Svetski, Founder and CEO of www.amber.app and on Twitter @GhostOfSvetski. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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