{"id":15495,"date":"2021-07-26T13:24:33","date_gmt":"2021-07-26T13:24:33","guid":{"rendered":"http:\/\/ci0288d90810002560"},"modified":"2021-07-26T13:24:33","modified_gmt":"2021-07-26T13:24:33","slug":"intelligent-guide-to-bitcoin","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/culture\/intelligent-guide-to-bitcoin","title":{"rendered":"The Intelligent Person\u2019s Guide To Bitcoin"},"content":{"rendered":"
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The below is a response to professor Fabrizio Carmignani\u2019s interview, titled \u201cDummy\u2019s Guide To Crypto<\/a>,\u201d which I found was genuinely written by a dummy, for dummies.<\/p>\n

It\u2019s always fascinating when experts of the old comment on the new paradigm that makes their old paradigm obsolete.<\/p>\n

The classic meme that comes to mind depicts Paul Krugman, who said that, by 2005, the internet will have no greater impact on the global economy than did the fax machine, and who also told people that bitcoin was a bubble at $1, $10, $100 and ever since.<\/p>\n

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Trying to make sense of the new using the lens of the old is about as effective as asking a car mechanic to perform heart surgery, or asking a heart surgeon to fix a car. They’re both operators of some kind, but the domains are different.<\/p>\n

So, let\u2019s get a Bitcoiners view on Bitcoin. Notice I said \u201cBitcoin,\u201d not crypto. Why? Because crypto is far more akin to the legacy financial system, whereas Bitcoin is an entirely new beast.<\/p>\n

But that\u2019s another conversation, and one you can discover here<\/a>.<\/p>\n

What Is Bitcoin?<\/h2>\n

It\u2019s a superior form of money that does not rely on a central authority for issuance or maintenance of the ledger. It\u2019s a money rooted in the second law of thermodynamics, that transforms energy into a fixed, incorruptible unit of account<\/a>. It\u2019s an immutable network enforced by hundreds of thousands of nodes around the world, simultaneously. It’s a set of rules without rulers that any human can participate in voluntarily, and enforce at the level of the individual. It\u2019s a substance that embodies each of the attributes of money (divisibility, portability, cognizability, fungibility, divisibility and scarcity), and thus perfectly performs the three functions of money<\/a>:<\/p>\n

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  1. It\u2019s the perfect store of value<\/a> because I know exactly how much I have in relationship to the whole, and I know that it cannot be diluted or altered.<\/li>\n
  2. It\u2019s the perfect medium of exchange<\/a> because I can send what I want, to whom I want, whenever I want and there is no power in the universe that can stop me from doing so.<\/li>\n
  3. It\u2019s the perfect unit of account<\/a> because it\u2019s infinitely divisible and I can thus measure all other goods and services in it. As its purchasing power grows, one can continue to sub-divide the units to measure smaller goods and services, forever.<\/li>\n<\/ol>\n

    In other words: Money is the technology that a sentient species uses to transmit information relating to energy, time and matter. Bitcoin is a perfect money and monetary network.<\/p>\n

    Why Are Some People Attracted To It?<\/h2>\n

    While I agree with professor Carmignani that crypto is just about blindly gambling, hoping to make more fiat, legacy money, those who understand Bitcoin’s raison d\u2019\u00eatre<\/em> are attracted for far deeper reasons.<\/p>\n

    Not only is the legacy financial system a disaster, but more importantly, the legacy monetary system is completely broken and thermodynamically fraudulent.<\/p>\n

    Money fundamentally measures three things: time, energy and natural resources. Three fixed quantities that we cannot create out of thin air. Participants in an economy (a closed system) perform work (which is derived from time and energy) and, depending on the subjective value of the product of their labor in the marketplace, trade it for a thing called money which they can either save for future transactions or use today.<\/p>\n

    As a result, for money to function properly and to accurately measure the product of our labor, it must represent time, energy and natural resources as closely as possible. This primarily means that it should be a fixed quantity that cannot be changed or adjusted at the whim of some \u201cruler.\u201d Changing the quantity moves the goalposts and distorts the game right in the middle of play.<\/p>\n

    Furthermore, because the legacy financial system assumes money equates to wealth, they just keep inflating the total amount of \u201cmoney\u201d without there being an equivalent increase in productive output or capital. As a result, we have way more money chasing the same output and capital, thus diluting the purchasing power of everyone\u2019s money.<\/p>\n

    Their policies are impoverishing anyone who is prudent enough to work hard and save, and giving anyone who\u2019s holding any form of hard asset the illusion that they\u2019re getting rich.<\/p>\n

    Savings being the cornerstone of civilization, when you disincentivize it, you begin to break the foundation upon which individual humans build.<\/p>\n

    This has disastrous consequences and is the real<\/em> reason why people who understand it deeply are attracted to Bitcoin (not crypto).<\/p>\n

    Do You Invest?<\/h2>\n

    One does not \u201dinvest\u201d in a superior form of money.<\/p>\n

    In the same way that the person who holds the Zimbabwean dollar or bol\u00edvar doesn\u2019t \u201cinvest\u201d in USD, but flees to it as a superior money that has a better guarantee, people who understand Bitcoin are moving out of traditional government-issued currencies not as an investment but as a migration to superior money.<\/p>\n

    Traditional fiat currencies are as good as the promise and military might of those who \u201cback\u201d it. The world is changing. I will put my trust in the immutable laws of mathematics and universal physical laws long before I place it in the promise of some bureaucrat.<\/p>\n

    Mining<\/h2>\n

    Mining is the name given to the validation process nodes on the Bitcoin network that are used to both validate transactions and, more broadly, thermodynamically secure the network.<\/p>\n

    Anyone can do it. You just need access to electricity, the internet and a computer. Yes, to produce a meaningful amount of bitcoin, you\u2019ll need a more powerful or specialized computer, but that\u2019s perfectly fine. The network is built on \u201cproof of work\u201d and the output is commensurate with the input.<\/p>\n

    That\u2019s actually the great equalizer. You cannot fake \u201cwork.\u201d <\/p>\n

    Why Is Bitcoin Valuable?<\/h2>\n

    For all of the reasons I mentioned above. And this is only the beginning.<\/p>\n

    Thier\u2019s law states that good money pushes out bad money. Any sane human saves the good money while spending the inferior money. As more people understand what money is (this is severely lacking in the world) and they then discover that bitcoin is not just the best money humanity has ever had, but perfect money, they too will want to protect their wealth and measure the product of their labor in bitcoin.<\/p>\n

    This will continue for decades to come and bitcoin\u2019s purchasing power will continue to rise.<\/p>\n

    A good way to think about it is the following:<\/p>\n