May the best money win!

Henry

By Frank Karsten

“Cigarettes are simply bad. This is the stain for your curtains,” Dutch ex-soccer player Willem van Hanegem once joked.

However, they can also be very useful. During World War II, POWs often paid each other with cigarettes because they were in demand and easy to count. But in normal life we ​​luckily have better means of payment.

The ideal money is durable, transportable, uniform, verifiable, divisible and scarce. Moreover, it preferably has a long history of use and is difficult to ban or confiscate.

The rand and dollar are examples of fiat money. They are not backed by anything but declared a medium of exchange by governments. Fiat money is unfortunately bad because it can be printed at will by central bands, with the result that its value continues to fall, which is reflected in higher prices. You can not only máák extra coins with Bitcoin, which already makes it better than fiat money.

And how does Bitcoin compare to gold and silver? These precious metals have been used as currency for thousands of years because they have many of the ideal properties. Still, Bitcoin is better in a number of aspects. It is the first money specially designed as money, it has no other application as such.

In terms of durability, gold, silver and Bitcoin perform well – they don’t tarnish and tarnish at all or barely tarnish.

Unfortunately, precious metals are not so mobile. When Germany decided to recover its American gold reserves in 2013, it was a gigantic undertaking. It took three years and cost millions. With Bitcoin it would be done within an hour, because it is sent electronically.

You also want ideal money to be uniform – all units to be identical and interchangeable. Both gold and Bitcoin get good marks here.

Bitcoin is easier to check for authenticity than precious metals. Because Bitcoin is cryptographically secured and the blockchain is public, anyone can easily prove that it is real. Precious metals, on the other hand, can be counterfeited by mixing them with other metals that require special equipment to verify.

The ideal money is easily divisible. To split precious metals into smaller units, you have to melt, saw or break them. But each Bitcoin is divided into 100 million so-called Satoshis, which makes it easy to pay appropriately.

It is also important for money that it is scarce, so that the value cannot fall quickly and prices remain stable. Gold is difficult to mine and therefore the total amount of gold only grows by about 1.5% annually. The growth in the number of Bitcoin, which is now 1.8% per year, continues to decrease. The Bitcoin software says that the number of new coins halves every four years. With that, inflation will eventually disappear and there will never be more than 21 million Bitcoin in existence.

Gold and silver, and anything tangible, can be stolen or confiscated by the government. Because Bitcoin is cryptographically secured, no one can take it, as long as you don’t share your secret key.

Still, gold and silver also have advantages over Bitcoin. To send Bitcoin you need electricity, a computer and internet. Plus, Bitcoin is only 14 years old, so you can’t really trust it to hold its value as long as gold or silver. Bitcoin’s lack of privacy is also a problem, since the public blockchain, the cash book, is not anonymous.

Bitcoin is therefore not ideal, but it solves a number of important problems. Just as books, music and videos are now digitized and are no longer placed and transported on paper, records or tapes, money will be digitized in the same way.

Bitcoin is money for the internet age. It is more hardened than fiat money, more mobile than gold and silver, better than alternative crypto, and much better than CBDCs. May the best money win.

  • Frank Karsten is the author of The Discrimination Myth (discriminationmyth.com) and co-author of The Democracy Beyond (beyonddemocracy.net).
  • Frank Karsten is the author of The Discrimination Myth (discriminationmyth.com) and co-author of The Democracy Beyond (beyonddemocracy.net).