The Bitcoin Standard" is the book that explains most clearly why Bitcoin was created (which problems it aims to solve) and why it will be the foundation of a new global monetary standard, replacing not only the dollar but also all central banks.

The Origin of Money

Hello! Here's a summary of the book "The Bitcoin Standard," which has just been released in Brazil (written by Saifedean Ammous and translated by myself). This may sound absurd at first glance, but after reading this book, you will be convinced that it is the most likely scenario for the coming years. But how?

The Role of Money

Interestingly, the author only talks about Bitcoin at the end of the book. The first seven chapters focus on the history of money, from its primitive forms (such as shells, cattle, and salt) to precious metals (such as silver and gold) and the creation of inflationary government money.

The Problems With Bartering

The initial question is: What problem does money seek to solve? Answer: Money serves to facilitate exchanges between human beings, enabling trade, task specialization, and prosperity.

The Emergence of Monetary Goods

Without money, we go back to bartering, which creates numerous coordination problems, hindering the production and exchange of goods and preventing their accumulation.

Weaknesses of Monetary Goods

Without money, it is difficult to achieve the necessary double coincidence of wants for exchange. If I specialize in raising chickens and you specialize in rice, we can exchange chickens for rice. But what if I don't want rice in exchange for chickens? What if you don't want my chickens in exchange for rice? And how do I store the rice to trade it later for bread? What if it spoils?

The Rise of Gold as Money

Faced with these problems, a common solution emerged: finding a good that represents a unit of account (1 unit = other goods), a store of value (maintains its purchasing power in the future), and a medium of exchange (easily exchangeable for other goods).

To fulfill these functions, collective choices naturally emerged for monetary goods that were also durable, divisible, scarce, recognizable, and transportable; otherwise, they would not be able to facilitate exchanges.

The Pitfalls of Government Intervention

Historically, various goods have functioned as money, such as salt, cattle, shells, glass beads, and precious metals.

The Gold Standard and Its Benefits

But the story doesn't end here. Once a good is accepted as money in a society, there is a tremendous incentive (almost irresistible) to produce more of that good because it acquires a "premium" for functioning as money.

It becomes valuable for exchange rather than for its use. For example, the value of gold today comes more from its function as a store of value as a monetary good than from its industrial use.

The Downfall of the Gold Standard

The problem of weak money affects all monetary goods to a greater or lesser extent, considering the difficulty with which they can be produced.

This was the case with glass beads in Africa, silver, and even gold.

Fiat Currencies and Their Consequences

Gold was the scarcest good and accumulated for the longest time, which made it excellent for use as money for centuries.

However, given the irresistible urge to produce more goods that function as money, humanity began to face a political situation: ancient tyrants (like Roman emperors) and modern states tried to monopolize the production of money by increasing its supply to finance their expenses, whether they were expenditures for imperialistic wars or expenditures to maintain today's deficit-ridden states.

The Current Monetary System

Until the 19th century, the gold standard had been the best monetary standard in human history because gold is difficult to produce in large quantities considering its existing stock (a high scarcity rate, stock-to-flow in English), which allowed it to maintain its purchasing power over long periods.

However, as most of the gold was held in the vaults of large banks and the states needed financing for the First World War, there was a global confiscation of gold, and currencies lost their backing.

State fiat currencies gained dominance through the force of arms: only "paper" began to circulate as money, and citizens lost the right to redeem the gold that this paper represented, creating inflation and wealth appropriation in the hands of banks and states.

The Birth of Bitcoin

Those who tried to escape weak state currencies began to suffer the harsh consequences of capital controls, which still exist today.

The gold standard previously allowed for a strong currency and prevented states and banks from increasing the money supply, shifting inflation onto the people.

The Advantages of Bitcoin

A strong currency is one that maintains its purchasing power over time. It allows people to preserve the fruits of their labor and save.

Living in a society with a strong currency, people reduce their temporal preferences, begin to defer immediate gratification, and start investing with their savings.

The book presents impressive data showing that the gold standard was one of the pillars of the scientific and industrial advancements of the 19th century.

Bitcoin as Digital Gold

With the end of the gold standard and the beginning of the nationalization of money, it was downhill from there.

Inflation, increased temporal preferences, a culture of consumption, imbalances, inefficiencies in the international market, and severe economic crises became commonplace throughout the entire 20th century.

The result is that we live in an exceptional era where money can be printed at will by central banks, which increasingly seek control over the entire economy.

The Obsolescence of Fiat Currencies

Now they want to digitize their currencies and eliminate the privacy of paper money (the banknote you hand over at the counter to buy candy, which no one knows about). With state digital currencies, everything will be monitored and can be expropriated at the whim of the ruling authority.

It was in the context of the 2008-2009 crisis (when large banks were "rescued" by the US Federal Reserve) that Bitcoin emerged to restore to the population sovereignty over their own money and, therefore, their own wealth.

The Future of Money

Bitcoin is money that cannot be confiscated or censored. Only you can move it, and you don't need anyone's permission to do so. Its system is peer-to-peer and decentralized. There is no "monetary authority" that enables its transactions.

Furthermore, no government can print more of it, meaning its value will not be diluted. Creating new bitcoins (through a process called mining) is very expensive, and its issuance halves every four years.

This makes it extremely scarce. It is impossible to create more bitcoins beyond those authorized by the protocol. Soon, its scarcity rate will be lower than that of gold, making Bitcoin the scarcest currency in the world and also the most transportable, as it can be transferred via the internet, radio, and satellite 24 hours a day, 7 days a week.

Conclusion

It's no wonder they call Bitcoin digital gold. It is superior to gold because gold is heavy and needs to be securely stored in a vault. If you have your Bitcoin private keys, you don't need a vault to store it.

All these characteristics make fiat currencies obsolete. Bitcoin is simply a much better form of money than any other money created in human history.

If this text was useful to you, consider sending some satoshis to the address: guilherme@bipa.app I thank!