The Bitcoin Standard

The Bitcoin Standard uses the history of money and gold to explain why Bitcoin is the way to go if the world wants to stick to having sound money and why it’s the only cryptocurrency to be focusing on right now.

Early money wasn’t very much like the paper you keep in your wallet today. Money has been different all over the world in the past. People have traded everything from stones and shells to livestock.

What makes good currency is that it is salable or easily sold. With the technology of smelting metals, early pre-Christian civilizations could make highly salable coins that were also extremely portable.

The preferred type of coin was gold. It has a few unique qualities. First, it’s almost impossible to make or destroy. It also is fairly hard to retrieve from the ground, so you need to mine to get it, and the more you get, the deeper you have to mine. So even as technology has improved for gold mining, the supply of gold grows both slowly and predictably.

When transportation and communications boomed from the eighteenth to the twentieth centuries, nonphysical forms of payment like paper bills and checks became justified. The way they convinced people to trust these pieces of paper was by backing them with gold.

Britain led the way with this standard to back bills with gold, known as the “gold standard.” Soon countries all across the world followed suit, making this period the time of sound money. This introduced an era of great prosperity.

After the First World War, financial deficits forced European powers to drop the gold standard. They introduced fiat money, which was backed by decree instead of gold. This switch led to an age of unsound money where governments could intervene in the economy to stabilize the value of their currencies. Unsound money causes a myriad of problems, like recessions and debt. Interventions of governments distort markets and cause boom and bust cycles. The only solution would be establishing a new gold standard. This is where Bitcoin comes in. Like gold-backed money, Bitcoin has a fixed supply— there will never be more than the 21 million in existence. They also have a stable supply because, like gold, bitcoins are mined. The computers across the Bitcoin network use their combined processing powers to solve increasingly complex math problems, and once they are cracked, the “miner” receives bitcoins as a reward. Bitcoins are the only good defined by absolute scarcity, which makes them immune to manipulation. It’s also incredibly secure. The public ledger, known as the blockchain, keeps a record of all recent transactions. Everyone can see it, and it is backed by every computer on the network,…