Money explained:
Many people don’t have enough extra time in the day to read or educate themselves about money and finances. Financial education is not offered in most schools.
If it was offered, I would imagine that the first class would include the very basics. What is money? How it came to be? Why we use it? etc. Everyone that I’ve ever talked to usually agrees that it should be taught in school because we are forced to use it and pay taxes.
It really sucks that schools don’t teach financial literacy and taxes, but luckily we live in the technology age where we have access to free learning online. One of the best things about learning about bitcoin, is that it forces people to learn about money in the process. This is because it is an engineered form of money and to engineer something, you must understand how it works. The book, The Bitcoin Standard by Saifedean Ammous is well worth reading for this reason alone. Here is a YouTube summary:
Financial literacy is essential for success in life. The average person will spend 90,000 hours of their life working for money (without ever taking the time to understand the thing that they are working for). People will also spend an average of 227,760 hours sleeping.
The average lifetime is 692,040 hours. That means over 13% is spent working for money, about 33% is spent sleeping, so only 53% of your life remains for whatever else. Most of this time will get sucked up, fulfilling obligations (shopping, cooking, cleaning, schooling, etc.). Many of these extra obligations can be avoided with extra money. Time spent working can be avoided with extra money as well. You may not have a choice about how much you require sleep, but everything else is optional.
The only way to have extra money is by learning about it so you can save it better, or learn how to get more of it. The world has been shifting from analog to digital at an alarmingly fast rate. The only thing we can do is embrace it, or get left behind.
Here is an engineer (Spencer Krebs) talking about how bitcoin and money works in 8 small instructional videos:
If you compare stores of wealth around the world, you will notice that over time monetary energy or capital, moves from lower stock-to-flow storage, into higher stock-to-flow storage. People like to save money with the best method over time so they don’t lose purchasing power. They flock towards scarcity in demand. As long as demand remains stable or increases, and the flow decreases, the price increases.
As bitcoins’ stock-to-flow increases, all of the worlds’ capital moves into it (like gravity, with stock-to-flow as density). This is the reason why storing your savings in bitcoin is becoming mainstream. Stock-to-flow is a correlation to supply and demand (the determining factor of price). All governments print excessively more money, which makes cash worth less over time.
Bitcoin isn’t really going up in price as much as everything else is just becoming worth less, because its’ stock-to-flow is decreasing while bitcoins’ is increasing. If I’m holding my savings in bitcoin and you hold yours in cash, I’m not really getting any richer, you are just getting more poor because of government money printing.
The dollar value is just a representation of uniformity (I can trade 100$ bill for another, but if one coffee costs one 100$ bill, you won’t feel very rich). When this happens because of inflation, the coffee will still cost the same amount of bitcoin (after bitcoins’ true value is determined according to its’ supply and demand). The only difference between these three things is that the 100$ bill is worth less than the coffee and the bitcoin. A good way to observe its’ value trend, is by its’ stock-to-flow.
The market is a way of finding the value of something, as it’s only worth what someone else will pay for it (supply and demand). Sometimes price discovery takes time and that’s how investors make so much money (by “front running” the market).
Bitcoin price has followed its’ stock-to-flow model very accurately since its’ origin (because of its’ known production or flow, it’s easier to determine its’ stock-to-flow value by estimating which coins are not lost). This is why all estimates of bitcoins’ price is close to the stock-to-flow ($100,000 US near the end of 2021). An even simpler way to think about value is in regards to energy. Humans want to channel as much energy as possible. Everything uses energy to produce, which determines it’s ability to flow into the market. Higher energy to produce flow means more scarcity (harder to get). People want what others want and that’s usually more energy (represented by its’ value, as money is a measurement of energy). This creates a positive feedback loop as long as the cost of production increases. This has been seen with gold for thousands of years.
Most things in life work in reciprocals.
Being kind to people ends up creates more kind people. Educated people are often successful because being successful requires education. Overweight people enjoy eating unhealthy foods and unhealthy foods cause obesity. The government prints money to fund wars and printing too much money inevitably causes wars.
One thing that is often not considered about the future of bitcoin is its' capability of improving the money that we already use today. Most people are too busy thinking about the profit to be made from early adoption.
The Bitcoin network has a secondary layer called the lighting network that creates fast and next to free transactions. Jack Mallers (mentioned in “Why does bitcoin have intrinsic value?”) Is using the Bitcoin networks to allow customers to use his phone application to make transactions between all types of currencies all over the world, instantly, for free (to the customer).
The network is already working many places and is in the process of going global this year. As bitcoin becomes the best store of value, the Bitcoin network will disrupt banking and foreign currency exchange. These industries are costing the world trillions (forex markets are around 5 trillion per day) of extra dollars that could be directed towards something like climate change. Between the Bitcoin networks and bitcoin (the medium of exchange), they have the solution to solve over 400 trillion dollars worth of problems. The amount of freed up man hours and money to put towards the real world problems is astonishing.
This doesn’t even include the further long-term after-effects. Over time it would shrink the wealth gaps, align incentives, allow for tracking government spending, make markets incredibly efficient, clean up wasted energy, and more. Most people can only imagine short term outcomes, but fail to see potential and effects of good incentives. It’s often easier to doubt potential and that’s why only few people become successful.
