We’ve all seen the bitcoin chart. Zooming out from the past 10 years you see price go up in a very erratic pattern. The trend is obvious. The price might crash, but will still be higher than the previous bear market. It’s going to keep climbing. The provable scarcity, thanks to the elegance of the proof of work algorithm, is part of what keeps it that way.
To many it’s the perfect long term investment. It survives even if governments collapse, some Megatron virus kills everyone, or the Queen of England turns out to be a Lizard. As long as we have the internet, we have bitcoin and cryptocurrency.
What would it look like if, instead of using fiat as the standard, we used Bitcoin? What if, instead of the dollar menu, we had the satoshi menu? Let’s explore a world where we use a currency that isn’t owned by anyone. Welcome to the rabbit hole.
Is Bitcoin actually volatile?
You’re probably thinking “Obviously. Just look at the chart.”
That looks like it was a good investment in the beginning. Now, even though the price is high, you can’t tell if it’s going to go up or down. This doesn’t look like it could be a monetary standard at all. Nor does it look like it could actually be a world reserve currency if the value changes so much, right?
Let’s look again from a different perspective.
The graph above shows the price of bitcoin as it relates to the dollar. What if we inverted that? What does the price of 1 dollar look like as it relates to bitcoin? Obviously that just the above graph inverted. Here’s what that looks like:
Even though it’s basically the same graph, the perspective shift is telling. People aren’t buying Bitcoin, they’re selling their dollars. The US dollar is the worlds most popular shitcoin, and people want out. The only issue is that you need it to but pretty much everything. At least for now.
Real Volatility: Debt and Deleveraging.
Debt is a useful tool. It allows you to afford thing you couldn’t otherwise. You can buy a house for you and your family, a car the helps you get around, or an expensive tractor for your farm that helps you produce and sell more crop. Debt can be good and leads to people buying more and producing more, which helps the economy. It’s not all sunshine and rainbows though. Obviously, all debt needs to be paid back. When there’s too much debt going around, people begin to stop paying it back and the banks that lent to them lose income. The banks will start laying off people in order to cut costs, and everywhere those people shopped at also lose their income. We call this downward spiral a bubble. When this happens, in order to “avoid a disaster” the government prints more money to raise inflation and lower the dollars value. This makes debt cheaper and easier to pay off, at least in theory. If you’re curious about this, check out this video.
The unspoken cost of deleveraging is that inflation is permanent. The dollar is worth less, and it takes a long time for incomes to catch up to inflation. A little too long if you ask me. Incomes have stayed basically the same this whole century. That means we’re still paying for the 2008 crisis. You have a hidden tax on everything you buy. 14 years later, from groceries to gas, we are still paying for the fat cats on Wall Street getting too greedy. The bottom 99 are still working for the 1%, and the poorest among us are those who suffer the most.
Cost of production
We’ve all heard of Moors law, how computing power doubles every two years. This is interesting but So what? What do fancy gadgets have to do with the economy? Just about everything. More computing power means more automation, faster communication and better data modeling. The best part about software is you write it once and then reuse the same code as much as you want. Obviously things evolve and need to be fixed, maintained and updated. This can be done with minimal physical effort. It almost looks like automation is at an arms race against inflation. The winner gets the economy.
In a world of robots, may jobs won’t be necessary and a lot of work will be optional. Thats probably a good thing. How many would be artists are unable to practice their craft because they need to work their day job to put food on the table? How much beauty have we missed out on? We haven’t seen a musician like Mozart for centuries and maybe there have been many, but they’ve all had to spend their time working for the man.
The Bitcoin Standard: Conclusion.
With a bitcoin standard, no one can change how much is printed. Thanks to automation and innovation prices go down and life becomes easier to find your calling earlier. When banks can’t git bailed out with inflation, companies that should die will probably go under, and that’s a good thing. Death is part of life and serves a purpose. That’s why we have elections and term limits. Now seems like a good time for the current economic system to die, and for a new one to be made. This time around, the blue collar have a chance to take the reins and have a say. The world is in our hands now.
Hope you found some value in this post. If you did follow me on twitter @dill_eth and share this article. I would feel like a hypocrite if i wasn’t doing anything that I felt would effect change. I’ll be announcing what I’m building fairly soon, so follow me on twitter if your interested. I’m also on Discord @dill.eth#8402. Cheers and God bless!