The Bitcoin Standard: The Decentralized Alternative to Central Banking

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In a hypothetical economy of a dozen people isolated from the world, there is not much scope for specialization and trade, and it would be possible for individuals to each engage in the production of the most basic essentials of survival and exchange them among themselves directly. For a good to be salable across time it has to be immune to rot, corrosion, and other types of deterioration. Barter has always existed in human society and continues to this day, but it is highly impractical and remains only in use in exceptional circumstances, usually involving people with extensive familiarity with one another.

Bitcoin is a decentralized, distributed piece of software that converts electricity and processing power into indisputably accurate records, thus allowing its users to utilize the Internet to perform the traditional functions of money without having to rely on, or trust, any authorities or infrastructure in the physical world. The Bitcoin Standard analyzes the historical context to the rise of bitcoin, the economic properties that have allowed it to grow quickly, and its likely economic, political, and social implications. Once people figured out you could exchange universally valued objects for goods, everything changed. These three problems make direct exchange highly impractical and result in people needing to resort to performing more layers of exchange to satisfy their economic needs.You can take part in podcast seminars, access Saifedean’s courses – including his ongoing course ECO22: The Fiat Standard – and read his new book available now, Principles of Economics, by becoming a Saifedean. After all, the ostensible hero in this morality play is Rothbard whose ‘Ethics’ (cited by Ammous) ultimately resolve into allowing parents to starve their children to death if they wish (presumably a result of high time preference); a problem of neglect that, Rothbard tells us, could be solved through a free-market in babies. Their highbrow Viennese-cafe-seminar utopianism was ill-prepared for the less-enlightened folk turning towards Fascism, National Socialism and Communism. When economic decision making is geared toward the future, it is natural that all manner of decisions are geared toward the future as well. Any person choosing to purchase something not for its own sake, but with the aim of exchanging it for something else, is making it de facto money, and as people vary, so do their opinions on, and choices of, what constitutes money.

Any expansion of money beyond gold is implied to be fraudulent and, again, destined to end in disaster.By requiring the expenditure of electricity and processing power to produce new bitcoins, PoW is the only method so far discovered for making the production of a digital good reliably expensive, allowing it to be a hard money. The network members face a strong incentive to remain on the consensus rules to ensure they can clear their transactions on the network. But this had little (if anything) to do with Satoshi’s white paper, and was not the problem Satoshi was trying to solve: ‘casual’ transactions (read small and uneconomic for banks) settling with electronic cash without the need for a fiduciary intermediary. It will also address the issue of costly remittance payments from Salvadorans living abroad, making up a fifth of the country’s gross domestic product (GDP). The previous foreword by Nassim Taleb was effectively withdrawn in an angry public disagreement with Ammous, implying he was “crankish” and a “lunatic”: Taleb pulled his endorsement of both the book and BTC as ‘digital-gold.