The Truth about Bitcoin, Can BTC be The Future of Money? What is money? It is an interesting question .In 2021 money is neither a commodity backed or a total state fiat medium of exchange. Most of the “money” that exists today is credit. Credit is money. Credit vis a vis fractional reserve banking .I deposit 100 dollars into the local bank and the bank then loans out not 90 dollars if the reserve requirement is 10 percent but rather 900 dollars and keeps your 100 dollars in reserve. Credit from the central bank of which there is a monopoly that serves the interests of the banks, and so on... Don’t overlook the fact that it is the credit creation process that controls the money supply and that whoever controls the credit creation process controls the empire. Credit that is used “productively” likely can generate enough demand to offset a rise in inflation. Credit that is not used for increasing the size of the pie or productively and is used for things like speculation (buying and selling Bitcoin in its current iteration, real estate bubbles, etc ...) will lead to inflation. In 2021,money is simply credit and the lever of power that generates credit (banks, central bank) is the hegemon that controls the economy. Whoever controls the credit creation process controls the money supply, pure and simple. The current system runs on credit payable in currency. The number of actual notes in circulation is very small compared to the amount of outstanding credit. Some people like Bitcoin because they can make a lot of money off other people who want to buy it.This is where 95% of Bitcoin holders are at. Some people like Bitcoin because they see it as a hedge against inflation from central bank credit creation. In this context it's akin to "electronic gold" Once a society embraces the division of labor, direct exchange becomes increasingly infeasible. Without money, specialization is constrained; without money, dreams of constructing an advanced society are merely a utopian pipe dream. At its core, money is the lubricant for human relations. It simultaneously solves many problems of cooperation while serving as the basis for economic calculation. As awareness of nonsovereign cryptocurrencies has risen dramatically, questions about the history of money have gained salience. How does money arise? From where does it derive its value? The following sections will expound upon the cumulative development of money, from livestock to bitcoin, by infusing the concept of legitimacy into Carl Menger’s theoretical framework as outlined in On the Origins of Money. Welcome back to The Atlantis Report. You are here for your daily dose of the truth, the whole truth, and nothing but the truth. Please take a second to hit the like button, hit the subscribe button, and don't forget to also hit the notification bell.Thank You. According to ethereum cocreator Vitalik Buterin: Legitimacy is a pattern of higher-order acceptance. An outcome in some social context is legitimate if the people in that social context broadly accept and play their part in enacting that outcome, and each individual person does so because they expect everyone else to do the same. From Buterin’s perspective, legitimacy operates as a hidden force that guides coordinated behavior. Legitimacy manifests itself through numerous avenues. These include brute force, continuity, fairness, process, performance, and participation. In addition to serving as an intrinsic component of blockchain technology, the concept of legitimacy can be applied as a mediating variable to explain the evolution of money. From Protomoney to Store of Value. Barter societies revolve around economic actors who exchange goods and services directly, without a monetary medium. The impracticality of direct exchange ultimately inhibits societal prosperity and economic progress. Livestock and other agriculture products arose as protomoney within barter societies as early as eleven thousand years ago. In 1200 BC, cowry shells filled the role of a primitive money. Bronze and copper coins did the same two hundred years later in China. Furs, teeth, and wampum were utilized in a similar manner by Native American tribes for centuries. An axiom within the marketplace is that not all goods possess the same saleability (i.e., the facility of disposing of said good at a convenient time, while it retains its purchasing power). Among modern foragers, ornamentation has been shown to be universal. The practice of collecting rare items, art, and jewelry remains prevalent worldwide today. Collectibles such as those aforementioned nonperishable commodities were not merely symbolic, however. They served a dual purpose, providing a way to transmit value through time and space, thus presenting individuals the ability to hoard value if desired. As Mises wrote in Human Action: But one must never forget that the characteristic feature of human society is purposeful cooperation; society is an outcome of human action, i.e., of a conscious aiming at the attainment of ends. A commodity’s transition into a store of value occurs spontaneously, driven by human action, without central planning. In terms of legitimacy, this shift is mainly facilitated through the avenue of participation. Paralleling an exhibition of “dollar voting,” members of barter economies actively participate in elevating the saleability of certain goods. From Store of Value to Medium of Exchange. Over time, a commodity that achieves store-of-value status can evolve into a medium of exchange. A commodity that becomes a medium of exchange is able to procure any other good or service on the market. This monetary transition is aided by the legitimacy that coincides with the passage of time. If it’s generally accepted that a good has value at time T, through the phenomenon of continuity, one’s confidence grows that it will have value at time T + 1. To illustrate how legitimacy mediates the first two monetary transitions, imagine a village housing Alice, a potassium-deficient pig farmer, and Bob, a vegan with a banana tree. Without a third party, Alice is unable to strike a deal with her neighbor. As the village expands, more goods enter the scene, and a gold mine is discovered. Gold quickly becomes fashionable for ornamental purposes. In this scenario, it would behoove Alice and Bob to exchange their less saleable goods for those possessing higher saleability. All in the village are individually incentivized to recognize the rising saleability of gold, for doing so would provide a tremendous benefit. Aided by the legitimacy that accompanies participation, gold becomes a store of value. Gold’s portability, divisibility, durability, recognizability, and scarcity boosts the yellow metal’s legitimacy from a performance perspective. With the passage of time, gold’s saleability forms a reinforcing feedback loop wherein legitimacy is further established by continuity. At the end of the second phase, gold fulfills the role of a store of value and a medium of exchange within this village. Medium of Exchange to Unit of Account. A commodity that transitions into a unit of account has reached a rarefied position. At this stage, all other goods in the market are priced in terms of said unit of account. Per Menger, “Money has not been generated by law. In its origin it is a social, and not a state institution.” Governments in the past piggybacked on the medium-of-exchange status of precious metals and then established minting monopolies with the intention of instilling confidence in regard to the genuineness, weight, and fineness of the money supply. Through the stamping of coinage, governments were able to supply different denominations as well as more efficiently collect taxes. Regretfully, per Rothbard, “the emergence of money, while a boon to the human race, also opened a more subtle route for governmental expropriation of resources.” The state’s monopoly on the use of violence is an ever-present threat. Legitimacy by brute force allows governments to engage in seigniorage. It similarly gave the US government the power to abandon the gold standard in 1933. Today, the enforcement of legal tender laws by governments stifle competing currencies. The legitimacy that coincides with the ability to incarcerate people facilitates the reckless monetary policies employed by central banks worldwide. Since bitcoin’s genesis block on January 3, 2009, we’ve been witnessing the evolution of a decentralized digital asset. While Bitcoin has been on the receiving end of condemnations for failing to be useful as a medium of exchange, it’s imperative to recognize that this process takes time, just like it did ages ago with gold. Only recently has bitcoin transitioned from a protomoney into a store of value. If Bitcoin becomes entrenched as a store of value, its volatility will decrease, and it will begin its transformation into a medium of exchange. As a decentralized protocol, bitcoin has already earned legitimacy through participation and fairness. In the case of the latter, bitcoin has an open-source codebase, along with a transparent immutable ledger. Bitcoin’s participation legitimacy is evidenced by its liquidity, the size of its developer community, and its number of active addresses. With every passing year, confidence in bitcoin’s battle-tested peer-to-peer protocol grows and its brand awareness strengthens. If the Lindy effect is correct, bitcoin’s life expectancy increases proportionally with its current age. Thus, over time, Bitcoin’s legitimacy will be further enhanced through the avenue of continuity if current trends continue. Participation, fairness, and continuity, are not enough alone, however. Bitcoin’s transition to a medium of exchange will require legitimacy by performance. This ultimately will depend on the implementation and adoption of scalability solutions (e.g., the Lightning Network). Transactions using layer-two solutions do not occur directly on the base layer (blockchain). If perfected, this technology would exponentially increase the number of transactions per second on the bitcoin network. The final stage in bitcoin’s evolution would necessitate a bitcoinization of our world. In this hypothetical future, large swathes of the population would transact in Bitcoin, with no concerns for fiat exchange rates. For these individuals, the preference for sound money over inflationary fiat would be self-evident. Only time will tell if this revolutionary asset can overcome the higher-order acceptance afforded to the state by brute force legitimacy. Unrestricted currency competition opens up the possibility of bitcoin becoming a unit of account, and potentially a global reserve currency. Bitcoin has been on the receiving end of condemnations for failing to be useful as a medium of exchange. It's not a condemnation so much as a plain fact. And so it is not money as such, but is as described, "a decentralized digital asset." Any asset can become "a store of value." Not many of those stores of value can become money. If we look at the evolution of commodity money, it makes perfect sense that shiny metals came to be used for exchange and then as standard units of account. How does the evolution of Bitcoin into a standard global unit of account make sense? It doesn't. That doesn't mean it couldn't happen. It just means: why would it? Two conditions are both required, namely 1) "the people" prefer it, and 2) "the governments" allow it. Even if condition #1 comes to pass, and that seems unlikely, how does condition #2 seem possible? What seems most likely is that Bitcoin will evolve from "a decentralized digital asset" into "a decentralized digital asset." Bitcoin pushers of today are fearful that they'll become the "greater fool" and lose a ton of money on their positions. Billionaires and investment banks aren't pushing crypto just because they think it's a better alternative to fiat. No one looks at crypto as a stateless currency which would liberate man from the leviathan of central banking and the arbitrary auspices under which it acts - interest rate control, price stability, maximum employment, window dressing, picking winners and looters etc ... Most investors want to make more state fiat money off of Bitcoin speculation. But realize that investing, stocks, etc ... don’t increase or decrease the money supply they simply redistribute it. Today money is credit generation from Banks and the central Bank. Money is not a commodity it is not a fiat piece of paper with a persons mug shot on it - it is credit. It’s worth delving into what lies behind the human action required for a commodity to be considered a store of value. “A commodity’s transition into a store of value occurs spontaneously, driven by human action, without central planning.” Clearly central planning is not involved. Nor is it the commodity that “transitions” into a store of value. I also don’t think that there is anything “spontaneous” in this process, if the inference is that it happens automatically. Human beings have to observe, then conceptualize the notion of bartering … or not. If they do, their conceptualization leads to the formation of a division-of-labor society, which leads to a flourishing increase in value production. It is an observable fact that most basic goods are perishable. If and when human beings conceptualize that a non perishable and easily divisible commodity can be used for exchange, they discover a way to facilitate more value production. If they don’t, they remain at the subsistence level. The above is a shorthand description of the evolutionary process - a process of natural selection as it relates to conceptualization. The primacy of the conceptual process is ignored when we are constrained to consider action as a starting point. My point is that the phrasing “… spontaneous, driven by human action … ” ignores the conceptual process that lies at the root of the good ideas that evolved (including money). Even if Bitcoin is better than fiat, there does not seem to be the same logical evolution possible for Bitcoin that got us to where we are with fiat. The fiat dollar came to be through a long evolution, from silver, to gold, to backed-promises of gold, to empty-promises of gold, to derivative-of-USG-debt. The next natural step in that FRN evolution is currency collapse. But would the logical step AFTER that be Bitcoin, instead of something else? I don't see why it would be. This was The Atlantis Report. Please Like. Share. Leave me a comment. Subscribe. And please take some time to subscribe to my backup channels, I do upload videos there too. You'll find the links in the description box. You will also find a PayPal link if you want to make a donation. 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