by Saifedean Ammous is a book I’m glad I read. As someone with a very basic understanding of economics, delving deeper and deeper into it as I explore the rabbit hole, I believe I’ve avoided wasting considerable time by reading this. It has been said, the best way to spot a counterfeit is to know the real thing. As Saifedean points out, the education system has been monopolized by the same people that pull the strings of our centrally manipulated economy. As the economic theories taught in schools and universities seem to have gotten it all wrong, I feel like I got a good head start with this book.
Not only have I gained what I consider a sounder grasp of economics in general, but my confidence in the transformative potential of has been strengthened. Once read it becomes one of those books you wish everyone could read, especially your loved ones, and even your not-so-loved ones — like the bankers. Knowing that if I eagerly asked 100 friends to read this I’d be lucky to find 1 who actually did (as we all lead busy lives), I thought it would aid us all in putting together a summary of some of Saifedean’s main points. Besides, not having a photographic memory, it will help me cement this information in my brain.
Saidedean begins by explaining the properties of sound money and why people chose different forms of value exchange throughout history culminating in the dominant form of gold. Gold is valued as money not because it’s shiny or has any intrinsic properties or use cases but because of its properties as sound money, which are plainly spelled out.
He paints a stark contrast between Roman rulers who debased their coins and Constantine, who did not and points out how certain coins through the centuries, when their gold content was kept unmolested, would stand the test of time as a of value and medium of exchange.
With advances in technology such as the printing press and railroads the world became ever more connected and during periods of peace and prosperity sound money is shown to have played a crucial role. When gold was centralized and then debased by inflating the paper currency it became subject to manipulation, overspending and government agendas for power and wealth.
Governments have accepted and promoted Keynesian economics knowing that it does not bid well for the future but it helps them stay in power today and as long as they get elected now tomorrow will suffer the consequences, after they are long gone. Addicted to the high printing money brings those tightly connected to the money faucet, like a drug addict, they are unwilling to suffer the withdrawals necessary to bring the economic reform needed.
Government organizations attempt to keep economies in balance and exchange rates stable while each is using its own currency with different monetary policies and individual inflation rates, making such a task impossible — yet they continue to pretend to try.
He explains several reasons modern economies are a house of cards waiting to be toppled and paints a vivid picture of the potential presents us all as the most superior form of sound money yet realized, thanks to advances in modern cryptographic technology by its anonymous creator Satoshi Nakamoto.
The Foreword
The book opens with a foreword by famed statistician and distinguished professor Nassim Taleb, author of The Black Swan. He asserts that markets are rational even if people aren’t and are better off without the most intelligent kind of people trying to control them.
“Banks control the custodian game and governments control banks (or, rather, bankers and government officials are, to be polite, tight together). So has a huge advantage over gold in transactions: clearance does not require a specific custodian. No government can control what code you have in your head.”
“[’s] mere existence is an insurance policy that will remind governments that the last object the establishment could control, namely, the currency, is no longer their monopoly. This gives us, the crowd, an insurance policy against an Orwellian future.”
I’ve highlighted 20 of the main points in the book. I will summarize each critical point with a brief commentary and provide a supporting quote or two.
1. What makes for an ideal form of money?
The soundness of money (how good money actually is at being money) is determined by two factors, its salability and its resistance to being controlled by a sovereign. Salability is “the ease with which a good can be sold on the market whenever its holder desires, with the least loss in its price.”
In other words, the best kind of money retains its value over a long period of time and is easy for a person to sell at any time without affecting its value. It is also difficult or impossible for a central sovereign entity to control it.
“While it is widely recognized that the rise of the city‐states dragged Europe out of the Dark Ages and into the Renaissance, the role of sound money in this rise is less recognized. It was in the city‐states that humans could live with the freedom to work, produce, trade, and flourish, and that was to a large extent the result of these city‐states adopting a sound monetary standard. It all began in Florence in 1252, when the city minted the florin, the first major European sound coinage since Julius Caesar’s aureus. Florence’s rise made it the commercial center of Europe, with its florin becoming the prime European medium of exchange, allowing its banks to flourish across the entire continent. Venice was the first to follow Florence’s example with its minting of the ducat, of the same specifications as the florin, in 1270, and by the end of the fourteenth century more than 150 European cities and states had minted coins of the same specifications as the florin, allowing their citizens the dignity and freedom to accumulate wealth and trade with a sound money that was highly salable across time and space, and divided into small coins, allowing for easy divisibility. With the economic liberation of the European peasantry came the political, scientific, intellectual, and cultural flourishing of the Italian city‐states, which later spread across the European continent. Whether in Rome, Constantinople, Florence, or Venice, history shows that a sound monetary standard is a necessary prerequisite for human flourishing, without which society stands on the precipice of barbarism and destruction.”
2. Paramount Features of Sound Money
Three of the primary qualities of sound money are salability, acceptance and its stock-to-flow ratio.
Salability: It must be saleable across time, space and scales. In other words, the best kind of money holds value over time, is able to be transferred globally and can be easily measured.
Acceptance: It is accepted by a large network of users, ideally internationally.
Stock-to-flow ratio: The amount of a good in existence is large compared to how much of it’s produced annually. It should be rare enough and difficult to produce to keep the cost of producing it high so its supply cannot be easily inflated. This makes its scarcity and difficulty in production two extremely important factors.
“Initially, metals were bought and sold in terms of their weight, but over time, as metallurgy advanced, it became possible to mint them into uniform coins and brand them with their weight, making them far more salable by saving people from having to weigh and assess the metals every time. The three metals most widely used for this role were gold, silver, and copper, and their use as coins was the prime form of money for around 2,500 years, from the time of the Greek king Croesus, who was the first recorded to have minted gold coins, to the early twentieth century. Gold coins were the goods most salable across time, because they could hold their value over time and resist decay and ruin. They were also the goods most salable across space, because they carried a lot of value in small weights, allowing for easy transportation. Silver coins, on the other hand, had the advantage of being the most salable good across scales, because their lower value per weight unit compared to gold allowed for them to conveniently serve as a medium of exchange for small transactions, while bronze coins would be useful for the least valuable transactions. By standardizing values into easily identifiable units, coins allowed for the creation of large markets, increasing the scope of specialization and trade worldwide. While the best monetary system technologically possible at the time, it still had two major drawbacks: the first was that the existence of two or three metals as the monetary standard created economic problems from the fluctuation of their values over time due to the ebbs of supply and demand, and created problems for owners of these coins, particularly silver, which experienced declines in value due to increases in production and drops in demand. The second, more serious flaw was that governments and counterfeiters could, and frequently did, reduce the precious metal content in these coins, causing their value to decline by transferring a fraction of their purchasing power to the counterfeiters or the government.”
3. Some Historical Examples of Money
Several historical examples are given in the first part of the book of different kinds of money societies used which met specific criteria. Cattle was used, which was easily portable and kept its value over time but not very divisible. Later salt was used which was highly divisible and durable, albeit had to be constantly weighed, and not the most convenient to transport in large quantities.
Rai Stones were used on the island of Yap. The inhabitants had no limestone so they had to be quarried from nearby islands, making them scarce and difficult to acquire. These large stones would remain in one spot and ownership would be transferred by an announcement made to the community. This made them impossible to steal or counterfeit as everyone knew who owned what, sharing some similarities with . However, a traveler would arrive and bring new tools to mine the stones much easier, which brought their value way down.
Aggry beads were used in Africa as glass was not able to be made there, only found. Once Europeans, who had the technology to make glass, discovered this they flooded the African market with glass beads causing inflation and destroying the value of their monetary medium.
Prisoners have used cigarettes as currency, as they are scarce behind bars and their supply difficult to inflate.
“…an Irish‐American captain by the name of David O’Keefe was shipwrecked on the shores of Yap and revived by the locals.1 O’Keefe saw a profit opportunity in taking coconuts from the island and selling them to producers of coconut oil, but he had no means to entice the locals to work for him, because they were very content with their lives as they were, in their tropical paradise, and had no use for whatever foreign forms of money he could offer them. But O’Keefe wouldn’t take no for an answer; he sailed to Hong Kong, procured a large boat and explosives, took them to Palau, where he used the explosives and modern tools to quarry several large Rai stones, and set sail to Yap to present the stones to the locals as payment for coconuts. Contrary to what O’Keefe expected, the villagers were not keen on receiving his stones, and the village chief banned his townsfolk from working for the stones, decreeing that O’Keefe’s stones were not of value, because they were gathered too easily. Only the stones quarried traditionally, with the sweat and blood of the Yapese, were to be accepted in Yap. Others on the island disagreed, and they did supply O’Keefe with the coconuts he sought. This resulted in conflict on the island, and in time the demise of Rai stones as money.”
4. People will gravitate towards one (or two) dominant currencies.
The larger the network of people and nations using the same currency the greater the benefits become of sharing in that network. Using the same currency internationally reduces costs and inefficiencies. As one money proves itself to be more sound than others it naturally attracts the most users, rendering less ideal forms of money no longer necessary. This increases the likelihood for one currency to ultimately be either, the sole, or dominant form, used by the world.
“The more people accept a monetary medium, the more liquid it is, and the more likely it is to be bought and sold without too much loss. In social settings with many peer‐ to‐peer interactions, as computing protocols demonstrate, it is natural for a few standards to emerge to dominate exchange, because the gains from joining a network grow exponentially the larger the size of the network. Hence, Facebook and a handful of social media networks dominate the market, when many hundreds of almost identical networks were created and promoted. Similarly, any device that sends emails has to utilize the IMAP/POP3 protocol for receiving email, and the SMTP protocol for sending it. Many other protocols were invented, and they could be used perfectly well, but almost nobody uses them because to do so would preclude a user from interacting with almost everyone who uses email today, because they are on IMAP/POP3 and SMTP. Similarly, with money, it was inevitable that one, or a few, goods would emerge as the main medium of exchange, because the property of being exchanged easily matters the most.”
5. Sound money is important for trade.
Sound money is important for international trade as it makes a free market more clearly able to be analyzed and responded to, increasing economic efficiency for all parties. When two different countries engage in trade, each with their own fluctuating currencies and monetary policies, it makes maintaining an efficient balance of exchange rates impossible. Nothing else we measure in the world by time, degrees or weight fluctuates as the value of different monies do, making our international trade system vulnerable to many weaknesses.
Thanks to “Austrian economics, the importance of sound money can be explained for three broad reasons: first, it protects value across time, which gives people a bigger incentive to think of their future, and lowers their time preference. The lowering of the time preference is what initiates the process of human civilization and allows for humans to cooperate, prosper, and live in peace. Second, sound money allows for trade to be based on a stable unit of measurement, facilitating ever‐larger markets, free from government control and coercion, and with free trade comes peace and prosperity. Further, a unit of account is essential for all forms of economic calculation and planning, and unsound money makes economic calculation unreliable and is the root cause of economic recessions and crises. Finally, sound money is an essential requirement for individual freedom from despotism and repression, as the ability of a coercive state to create money can give it undue power over its subjects, power which by its very nature will attract the least worthy, and most immoral, to take its reins.”
“The track record of the 46‐year experiment with unsound money bears out this conclusion. Savings rates have been declining across the developed countries, dropping to very low levels, while personal, municipal, and national debts have increased to levels which would have seemed unimaginable in the past.”
6. Technology influences levels of scarcity, therefore what currently comprises the most sound money at a given time can change.
The type of money people have used throughout time has not remained static because what was once scarce is not always scarce due to advancements in technology. Native Americans once used Wampum shells, which in their isolated world were scarce and hard to dig up on the beach. Technology later made shells much easier to dig up. With metallurgy coins of precious metals were easier to produce, with railroads gold was easier to transport and with innovations in telecommunications banks could communicate much faster regarding long-distance transactions, and so forth.
“While people are generally free to use whichever goods they please as their media of exchange, the reality is that over time, the ones who use hard money will benefit most, by losing very little value due to the negligible new supply of their medium of exchange. Those who choose easy money will likely lose value as its supply grows quickly, bringing its market price down. Whether through prospective rational calculation, or the retrospective harsh lessons of reality, the majority of money and wealth will be concentrated with those who choose the hardest and most salable forms of money. But the hardness and salability of goods itself is not something that is static in time. As the technological capabilities of different societies and eras have varied, so has the hardness of various forms of money, and with it their salability. In reality, the choice of what makes the best money has always been determined by the technological realities of societies shaping the salability of different goods.”
7. Gold was compromised once it became centralized.
Gold, having the best features of sound money, being much harder than silver to produce, has a large steady supply with a good stock-to-flow ratio. Additionally it was less corrosive, so once it was mined and refined it would always exist as a medium of exchange. Prior to WWI gold served as the world’s best and most widely used form of money to date. While storing it in banks made it easier for people to transact with paper currency backed by gold this would centralize it all in central banks, which would come to be ran by politicians. This would become too tempting for the banks which could too easily inflate the supply of banknotes. Post WWI the Federal Reserve of the United States would wind up with the lion’s share of above ground gold.
“The gold standard allowed for unprecedented global capital accumulation and trade by uniting the majority of the planet’s economy on one sound market‐based choice of money. Its tragic flaw, however, was that by centralizing the gold in the vaults of banks, and later central banks, it made it possible for banks and governments to increase the supply of money beyond the quantity of gold they held, devaluing the money and transferring part of its value from the money’s legitimate holders to the governments and banks.”
“The twentieth century began with governments bringing their citizens’ gold under their control through the invention of the modern central bank on the gold standard. As World War I started, the centralization of these reserves allowed these governments to expand the money supply beyond their gold reserves, reducing the value of their currency. Yet central banks continued to confiscate and accumulate more gold until the 1960s…”
“Tragically, the only way gold was able to solve the problems of salability across scales, space, and time was by being centralized and thus falling prey to the major problem of sound money emphasized by the economists of the twentieth century: individual sovereignty over money and its resistance to government centralized control.”
8. Abandonment of the gold standard — big oops!
Governments found they could fund wars by detaching paper currency from gold and printing more. After the war, keeping fiat pegged to gold would mean making the inflation experienced during the war obvious to the public. They avoided this admission by simply removing the gold standard. Once currency was removed from the gold standard the government could freely engage in inflation, price fixing, overspending, manipulating interest rates and/or taxing the public.
“In retrospect, the major difference between World War I and the previous limited wars was neither geopolitical nor strategic, but rather, it was monetary. When governments were on a gold standard, they had direct control of large vaults of gold while their people were dealing with paper receipts of this gold. The ease with which a government could issue more paper currency was too tempting in the heat of the conflict, and far easier than demanding taxation from the citizens. Within a few weeks of the war starting, all major belligerents had suspended gold convertibility, effectively going off the gold standard and putting their population on a fiat standard, wherein the money they used was government‐issued paper that was not redeemable for gold. With the simple suspension of gold redeemability, governments’ war efforts were no longer limited to the money that they had in their own treasuries, but extended virtually to the entire wealth of the population. For as long as the government could print more money and have that money accepted by its citizens and foreigners, it could keep financing the war.”
9. Sound money helps all areas of civilization flourish.
Saifedean teaches the importance of having a high time preference. In other words, if people are going to delay having an immediate good or benefit it will be because they can have more of the same benefit or good in the future. When people have a stable and efficient economy, as opposed to one that is driven by debt and consumerism it enables a society to invest in the production of things with longer term benefits. They will build tools for more efficiency in business, they will save to pay for a house, they will spend a lifetime perfecting a skill, and architecture, music and art will be masterpieces which may take decades to create.
“Sound money is a prime factor in determining individual time preference, an enormously important and widely neglected aspect of individual decision making. Time preference refers to the ratio at which individuals value the present compared to the future. Because humans do not live eternally, death could come to us at any point in time, making the future uncertain. And because consumption is necessary for survival, people always value present consumption more than future consumption, as the lack of present consumption could make the future never arrive. In other words, time preference is positive for all humans; there is always a discount on the future compared to the present.”
“In a free market where people are free to choose their money, they will choose the form of money most likely to hold its value over time. The better the money is at holding its value, the more it incentivizes people to delay consumption and instead dedicate resources for production in the future, leading to capital accumulation and improvement of living standards, while also engendering in people a low time preference in other, non‐economic aspects of their life. When economic decision making is geared toward the future, it is natural that all manner of decisions are geared toward the future as well. People become more peaceful and cooperative, understanding that cooperation is a far more rewarding long‐term strategy than any short‐term gains from conflict. People develop a strong sense of morality, prioritizing the moral choices that will cause the best long‐term outcomes for them and their children. A person who thinks of the long run is less likely to cheat, lie, or steal, because the reward for such activities may be positive in the short run, but can be devastatingly negative in the long run.”
10. is the best form of money to date meeting the criteria of sound money.
is superior to gold in salability in space, time and scales. It can be sent around the world in seconds and is highly divisible, up to 100,00,000 fractions of a . It is resistant to any centralized sovereign control as it does not have any one known figurehead in charge and the of transactions is decentralized across thousands of nodes.
“The ability of any individual to run a node and send his own money without permission from anyone, and without having to expose his identity, is a noteworthy difference between gold and . does not have to be stored on a computer; the private key to a person’s hoard is a string of characters or a string of words the person remembers. It is far easier to move around with a private key than with a hoard of gold, and far easier to send it across the world without having to risk it getting stolen or confiscated. Whereas governments confiscated people’s gold savings and forced them to trade with money supposedly backed by that gold, people are able to keep the bulk of their savings in storage away from government’s hands and only use smaller amounts to transact through intermediaries. The very nature of the technology puts governments at a severe disadvantage compared to all other forms of money and thus makes confiscation much harder. Further, the ability of holders to track all holdings of on its makes it extremely impractical for any authority to play the role of a lender of last resort for banks dealing with . Even in the heyday of the international gold standard, money was redeemable in gold, but central banks rarely had enough to cover the entire supply of currency they introduced, and thus always had a margin for increasing the supply of paper to back up the currency. This is much harder with , which brings cryptographic digital certainty to accounting and can help expose banks engaging in fractional reserve banking.”
11. Education is monopolized.
The same central entities which control our money supplies write history, fund and control our education systems. Because of this, people are growing up thinking the government manipulating monetary policies is normal.
“With government increasing its meddling in all aspects of life, it increasingly controlled the educational system and used it to imprint in people’s minds the fanciful notion that the rules of economics did not apply to governments, which would prosper the more they spent. The work of monetary cranks like John Maynard Keynes taught in modern universities the notion that government spending only has benefits, never costs.”
“In a free market economic system, no self‐respecting university would want to teach its students things that are so patently wrong and absurd, as it strives to arm its students with the most useful knowledge. But in an academic system completely corrupted by government money, the curriculum is not determined through its accordance with reality, but through its accordance with the political agenda of the governments funding it. And governments, universally, love Keynesian economics today for the same reason they loved it in the 1930s: it offers them the sophistry and justification for acquiring ever more power and money.”
12. A few things aid government money’s salability and keep it the primary money of our day:
· Government taxes necessitate being paid in government currency
· Banks are only allowed to transact in government sanctioned money
· Legal Tender laws make it illegal in many countries to transact with other forms of payment
· All government monies are still backed by gold (in part) or backed by currencies backed by gold. (central banks house 33,000 tons of gold)
“Only through redeemability into salable forms of money did government paper money gain its salability. Government may issue decrees mandating people use their paper for payments, but no government has imposed this salability on papers without these papers having first been redeemable in gold and silver. Until this day, all government central banks maintain reserves to back up the value of their national currency. The majority of countries maintain some gold in their reserves, and those countries which do not have gold reserves maintain reserves in the form of other countries’ fiat currencies, which are in turn backed by gold reserves. No pure fiat currency exists in circulation without any form of backing.”
13. Prices communicate much needed information.
In a free market economy the prices of goods communicate valuable information for making an economy work. The task of accurately analyzing a myriad of statistics and gathering all the information for how consumers will behave in the future is impossible, yet this is exactly what those running our economies try to do. Price fixing does not allow businesses to know what goods are in demand or what forms of production of certain goods should be exchanged for others. People’s desires are not static, neither is the production of certain goods with advances in technology. People desire variety and the need to create and experiment. A centrally planned economy does not allow us the information we need from prices to make necessary adjustments as needs and demands ebb and flow.
“In a free market economic system, prices are knowledge, and the signals that communicate information. Each individual decision maker is only able to carry out her decisions by examining the prices of the goods involved, which carry in them the distillation of all market conditions and realities into one actionable variable for that individual. In turn, each individual’s decisions will in turn play a role in shaping the price. No central authority could ever internalize all the information that goes into forming a price or replace its function.”
“…nothing is static in human affairs, as humans are eternally seeking to improve their economic situation, to produce new goods, and find more and better ways of producing goods. The ever‐present human impulse to tinker, improve, and innovate gives socialism its most intractable problem. Even if the central planning system succeeded in managing a static economy, it is powerless to accommodate change or to allow entrepreneurship. How can a socialist system make calculations for technologies and innovations that do not exist, and how can factors of production be allocated for them when there is yet no indication whether these products can even work?”
14. Sound money prevents unnecessary wars.
If the ability to inflate the money supply is taken from governments they can’t just fire up their printing presses and go to war. The most cost-efficient form of war is a defensive one, one citizens of a country are going to be more willing to pay taxes for. When a country wants to go to war on the offense people will be less prone to fund such a war and leaders will be encouraged to find more peaceful methods of diplomacy.
“The nationalists are fighting the gold standard because they want to sever their countries from the world market and to establish national autarky as far as possible. Interventionist governments and pressure groups are fighting the gold standard because they consider it the most serious obstacle to their endeavours to manipulate prices and wage rates. But the most fanatical attacks against gold are made by those intent upon credit expansion. With them credit expansion is the panacea for all economic ills…People fight the gold standard because they want to substitute national autarky for free trade, war for peace, totalitarian government omnipotence for liberty.” — Mises
“With sound money, the government’s war effort was limited by the taxes it could collect. With unsound money, it is restrained by how much money it can create before the currency is destroyed, making it able to appropriate wealth far more easily.”
“It is no coincidence that when recounting the most horrific tyrants of history, one finds that every single one of them operated a system of government‐issued money which was constantly inflated to finance government operation. There is a very good reason that Vladimir Lenin, Joseph Stalin, Mao Ze Dong, Adolf Hitler, Maximilien Robespierre, Pol Pot, Benito Mussolini, Kim Jong Il, and many other notorious criminals all ruled in periods of unsound government‐issued money which they could print at will to finance their genocidal and totalitarian megalomania. It is the same reason that the same societies which birthed these mass murderers did not produce anyone close to their level of criminality when living under sound monetary systems which required governments to tax before they spent.”
15. Unsound money leads to banks and businesses that should have failed but don’t, making for confusing and inefficient economies.
When the government creates money it can fund businesses that would not survive in a free market, which confuses the information we have on what businesses should and shouldn’t exist. Especially big banks or businesses which survive solely on funding weapons and technology for war.
“[Banks] can now take excessive risks knowing that the central bank will be inclined to bail them out to avert a systemic crisis. From this we see how banking has evolved into a business that generates returns without risks to bankers and simultaneously creates risks without returns for everyone else.”
“…the fact that governments have to resort to coercive measures of banning gold as money and enforcing payment in fiat currencies is at once testament to the inferiority of fiat money and its inability to succeed in a free market. It is also the root cause of all business cycles’ booms and busts.”
“In the world of fiat money, having access to the central bank’s monetary spigots is more important than serving . Firms that can get low‐interest‐rate credit to operate will have a persistent advantage over competitors that cannot. The criteria for success in the market becomes more and more related to being able to secure funding at lower interest rates than to providing services to society. This simple phenomenon explains much of modern economic reality, such as the large number of industries that make money but produce nothing of value to anyone. Government agencies are the prime example, and the global notoriety they have earned for their employees’ incompetence can only be understood as a function of the bezzle funding that finances them being completely detached from economic reality. Instead of the hard test of market success by serving citizens, government agencies test themselves and invariably conclude the answer to all their failings lies in more funding. No matter the level of incompetence, negligence, or failure, government agencies and employees rarely ever face real consequences. Even after the rationale for a government agency’s existence has been removed, the agency will continue operating and find itself more duties and responsibility.”
16. ’s edge.
has a major edge on other . It was the first mover and has the largest network of miners, investors and users by far. Its supply and rate of emission is fixed and cannot be changed, keeping its stock-to-flow ratio in check and only getting better as time goes by. It is decentralized so there’s no central figure to control things, for regulators to target, a single point of failure for hackers to target, or its code to be tampered with. Its protocol, once set into motion is an immovable force of code with the perfect incentive structure to keep it rolling and impervious to attacks.
“Until ’s invention, all forms of money were unlimited in their quantity and thus imperfect in their ability to value across time. ’s immutable monetary supply makes it the best medium to the value produced from the limited human time, thus making it arguably the best of value humanity has ever invented. To put it differently, is the cheapest way to buy the future, because is the only medium guaranteed to not be debased, no matter how much its value rises.”
17. is highly resilient.
has been declared dead by the media so many times, but each time it continues to thrive it only goes to show how resilient it is. People thought was doomed when Dread Pirate Roberts, the founder of The Silk Road, was arrested. However, over the next 18 months the price of rose 8 fold never to return below $150 again.
“While attempts to kill have so far failed, many of them have made it stronger by ending up allowing coders to identify weaknesses and patch them up. Further, every thwarted attack on the network is a notch on its belt, another testament and advertisement to participants and outsiders of the security of the network.”
18. Is for criminals?
It’s commonly thought that is primarily used for criminal activity, however is one of the worst ways for a criminal to operate due to it’s publicly verifiable record of transactions.
“When it comes to anonymity, it is useful to think of as being as anonymous as the Internet: it depends on how well you hide, and how well the others look. Yet ’s makes hiding that much more difficult on the Web. It is easy to dispose of a device, email address, or IP address and never use it again, but it is harder to completely erase the trail of funds to one address. By its very nature, ’s structure is not ideal for privacy. All of this means that for any that actually has a victim, it would be inadvisable for the criminal to use . Its pseudonymous nature means that addresses could be linked to real‐world identities, even many years after the is committed.”
19. What’s the best way to kill ?
The best way to kill , as it can’t just be shut down, is to either return to the gold standard or to create a superior . A gold standard as was used in the golden era of civilization is likely not to be returned to, as most politicians are not educated well in economics and it’s not in their best short-term interest. A superior is going to be very difficult to create because it must start out centralized and be run by a known figurehead.
“In a world in which governments’ restrictions and inflationary tendencies are disciplined by the gold standard, it might just be the case that gold’s first‐mover advantage and relative purchasing power stability would constitute an insurmountable hurdle for to overcome, by depriving of the fast growth in users and thus preventing it from reaching a large enough size with any semblance of stability in price. In practice, however, the possibility of a global return to sound money and liberal government is extremely unlikely as these concepts are largely alien to the vast majority of politicians and voters worldwide, who have been reared for generations to understand government control of money and morality as necessary for the functioning of any society. Further, even if such a political and monetary transformation were possible, ’s diminishing supply growth rate is likely to continue to make it an attractive speculative bet for many, which would in itself cause it to grow further and acquire a larger monetary role. In my assessment, a global monetary return to gold might be the most significant threat to , yet it is both unlikely to happen and unlikely to destroy completely.”
20. not .
Some people think is the real innovation and not . What they don’t realize is a is slow and inefficient and its best use case is cash money. While Saifedean does list some potential use cases of other than for money, such as smart contracts or database and record management, he points out that they have serious hurdles to overcome such as costly redundancy of records (which could just be kept on a central database), scaling (the bigger the block size the more prone it is to being centralized), regulatory compliance, irreversibility of transactions and security of the protocol.
“‘ technology,’ to the extent that such a thing exists, is not an efficient or cheap or fast way of transacting online. It is actually immensely inefficient and slow compared to centralized solutions. The only advantage that it offers is eliminating the need to trust in third‐party intermediation. The only possible uses of this technology are in avenues where removing third‐party intermediation is of such paramount value to end users that it justifies the increased cost and lost efficiency.”
Concluding Thoughts
Saifedean provides good details on how could serve as a settlement layer for transactions if 800 central banks were to adopt it as the internationally accepted form of sound money. Everyday transactions could take place off chain and many scaling solutions are being actively developed. being the soundest form of money technology has introduced to our timeline carries with it the potential to reform more than our money and markets but every area of society. It may prosper nations by creating a more measurable and efficient world trade network and help us prevent and save lives by keeping us out of expensive wars. The wisest move for central banks, says Saifedean, is for the central banks to be buying and not telling anyone so as to keep the price down while they accumulate.
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“Sound money, chosen on a free market precisely for its likelihood to hold value over time, will naturally have a better stability than unsound money whose use is enforced through government coercion. Had government money been a superior unit of account and of value, it would not need government legal tender laws to enforce it, nor would governments worldwide have had to confiscate large quantities of gold and continue to hold them in their central bank reserves. The fact that central banks continue to hold onto their gold, and have even started increasing their reserves, testifies to the confidence they have in their own currencies in the long term, and in the inescapable monetary role of gold as the value of paper currencies continues to plumb new depths.”
for a better world,
P.S.
This work was done of my own accord, at no one’s request, with no monetary compensation and simply in hopes of helping a few more people understand how cool this thing is.
Published at Mon, 22 Apr 2019 21:03:13 +0000
