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Issue #344: Bitcoin's monetary path

Oct 22, 2018
Marty's Ƀent

Issue #344: Bitcoin's monetary path

Here's a thread that caught my attention over the weekend. Our friend Willem shares a few thoughts on where we are on the timeline of Bitcoin going from "zero" to "reserve currency of the world". If we are to believe that Bitcoin will follow the path laid out by Nick Szabo's Theory of Money Origins (collectible -> SoV -> MoE -> UoA), then we are most likely still in the "collectible" phase. In this phase, as we have all witnessed and will continue to witness for some time, Bitcoin's price is extremely volatile as the market sloshes back and forth between euphoria and despair as humanity attempts to digest Bitcoin and determine whether or not it is a viable replacement of our current monetary system.

This volatility will continue until there is enough overall confidence in Bitcoin and it's ability to serve the use case of global money. The funny thing about confidence in a system like this is that it takes a lot of time to accrue, especially when the app is money. As I said last week, we're not going to get every use case and functionality out of the box. Using BTC as a medium of exchange or unit of account only makes sense when the market is so saturated with value that transacting with a large amount of BTC won't affect the purchasing power of others using the network in a material way. Things will be priced in BTC as a result of it accruing so much value.

We should heed Willem's advice and be sure not to market Bitcoin as a currency that is useful/practical as a medium of exchange at the moment as it leaves a bad taste in people's mouths when they attempt to use it as a MoE and have an experience that is orders of magnitude worse than the experience one has when paying with a credit card (don't have to wait for confirms, fluctuating fees, wallet UX, etc.). Marketing Bitcoin as a monetary asset which is still in its "collectible" phase is probably most advantageous for everyone at this stage because it is more indicative of Bitcoin's current state as a technology/money and sets expectations low so people can be pleasantly surprised when Bitcoin improves and becomes a more viable store of value and medium of exchange in the future. Better to under promise and over deliver than promise everyone everything out of the box right now only to have them become completely dismayed when Bitcoin's technical + liquidity issues prevent those use cases from being viable at this point in time.

Honesty and forthrightness with new users are key if we truly want Bitcoin to succeed. Slow and steady.

A lesson in hidden inflation

Over the weekend, Uncle Marty's better half was about to throw some bacon in the oven when she commented on there being less bacon in the package than there typically is. This immediately made me shake my fist at the hidden inflation gods, and then made me think of one of my favorite Internet clips of all time; the Jimmy Dean's Sausage complaint voicemail. This is a great way to teach people about hidden inflation, the act of keeping the price of a good static while decreasing the amount of the good sold per package.

Final thought...

Monday morning acoustic vibes and coffee are a great way to start the work week. Hit em straight this week, freaks.


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