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How to Understand Why Bitcoin is a Great Innovation!
On the Evolution of Money:
I believe the next evolution of currency is 'big coins' and digital currencies. Things are becoming depersonalized. So, what is money? Money is a technological advancement in commerce.
The Early Barter System:
4000 years ago, you owned a beautiful piece of land with high-quality crops, while I had pigeons and some cows. I wanted your land, but you wanted pigeons. Therefore, I needed to sell my cows to acquire pigeons and then bring them back to you. However, during this process, one pigeon died, and I had to exchange for another. The whole process was very complex and inefficient. This is the problem with barter: it cannot scale, and there is no ability to establish monopolies because there is no medium of exchange that we both recognize.
The Emergence of Money:
Later, money emerged as a technological revolution. This was humanity's first consensus on 'what has value.' Successful merchants and kings began to hoard money, build fiscal reserves, and expand territories through money, no longer constrained by barter. They could carry coins across borders and sell gold to China, India, or Paris, achieving scalability through circulation.
The Manipulation of Money:
However, kings soon realized they could make more coins by shaving the edges of coins or even replacing silver with cheaper metals. Thus, the problem of counterfeiting arose, and people needed a centralized management system to maintain trust, leading to the birth of banks. Banks stored gold while issuing paper money as a representation of gold reserves.
Paper Money and Credit Expansion:
Banks began issuing paper money beyond their gold reserves, and the U.S. started printing more notes. When France noticed this, they demanded the extraction of gold reserves, leading to an economic collapse. This prompted the introduction of the gold standard, but ultimately the gold standard was abandoned, and paper money was no longer tied to gold, ushering in an era of unlimited printing. Following this, credit cards appeared, further advancing the development of digital currencies.
Digital Currency and Decentralization:
Now, we face a crossroads in choosing digital currencies. A new decentralized model has emerged—Bitcoin, which is an open ledger where everyone knows the total amount and its ownership distribution. It is akin to the ancient method of trading with gold bars, but realized in the digital world.
The Changing Role of Banks:
Banks used to hold deposits, but now deposits are merely records of what banks owe you, not real assets. The real business of banks is 'credit creation,' not storage. With inflation brought about by credit creation, money gradually depreciates, putting us in a dangerous situation: when excessive credit leads to the collapse of trust in money, society will fall into chaos.
The Risks of Central Bank Digital Currency:
Central Bank Digital Currency (CBDC) poses significant risks as it not only issues currency but also controls the rules of use. For example, if you exceed a certain spending limit, your bank card may be disabled; if you are unvaccinated or exceed activity limits, payment functions may also be disabled. This centralized control will strip away personal freedoms.
The Significance of Bitcoin:
In this context, Bitcoin, as a decentralized digital currency, offers a way to counteract centralization. Although the struggle surrounding decentralized digital currencies will continue, I believe people will fight for this freedom.
Finally, make sure to hold onto your Bitcoin!
On the Evolution of Money:
I believe the next evolution of currency is 'big coins' and digital currencies. Things are becoming depersonalized. So, what is money? Money is a technological advancement in commerce.
The Early Barter System:
4000 years ago, you owned a beautiful piece of land with high-quality crops, while I had pigeons and some cows. I wanted your land, but you wanted pigeons. Therefore, I needed to sell my cows to acquire pigeons and then bring them back to you. However, during this process, one pigeon died, and I had to exchange for another. The whole process was very complex and inefficient. This is the problem with barter: it cannot scale, and there is no ability to establish monopolies because there is no medium of exchange that we both recognize.
The Emergence of Money:
Later, money emerged as a technological revolution. This was humanity's first consensus on 'what has value.' Successful merchants and kings began to hoard money, build fiscal reserves, and expand territories through money, no longer constrained by barter. They could carry coins across borders and sell gold to China, India, or Paris, achieving scalability through circulation.
The Manipulation of Money:
However, kings soon realized they could make more coins by shaving the edges of coins or even replacing silver with cheaper metals. Thus, the problem of counterfeiting arose, and people needed a centralized management system to maintain trust, leading to the birth of banks. Banks stored gold while issuing paper money as a representation of gold reserves.
Paper Money and Credit Expansion:
Banks began issuing paper money beyond their gold reserves, and the U.S. started printing more notes. When France noticed this, they demanded the extraction of gold reserves, leading to an economic collapse. This prompted the introduction of the gold standard, but ultimately the gold standard was abandoned, and paper money was no longer tied to gold, ushering in an era of unlimited printing. Following this, credit cards appeared, further advancing the development of digital currencies.
Digital Currency and Decentralization:
Now, we face a crossroads in choosing digital currencies. A new decentralized model has emerged—Bitcoin, which is an open ledger where everyone knows the total amount and its ownership distribution. It is akin to the ancient method of trading with gold bars, but realized in the digital world.
The Changing Role of Banks:
Banks used to hold deposits, but now deposits are merely records of what banks owe you, not real assets. The real business of banks is 'credit creation,' not storage. With inflation brought about by credit creation, money gradually depreciates, putting us in a dangerous situation: when excessive credit leads to the collapse of trust in money, society will fall into chaos.
The Risks of Central Bank Digital Currency:
Central Bank Digital Currency (CBDC) poses significant risks as it not only issues currency but also controls the rules of use. For example, if you exceed a certain spending limit, your bank card may be disabled; if you are unvaccinated or exceed activity limits, payment functions may also be disabled. This centralized control will strip away personal freedoms.
The Significance of Bitcoin:
In this context, Bitcoin, as a decentralized digital currency, offers a way to counteract centralization. Although the struggle surrounding decentralized digital currencies will continue, I believe people will fight for this freedom.
Finally, make sure to hold onto your Bitcoin!
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