Time, Energy & Space
SALtoshi Whitepaper #106
Understanding money is essential for earning financial freedom. I’m 31 years old, and was born and raised in America, which means I’ve been pushed through the American public education system, and then afterwards paid for some higher education. Would you like to know where I’ve learned the most about the realities of money? Not in any school, but on the internet for free. The only real cost is personal responsibility.
“…the Information Revolution will liberate individuals as never before. For the first time, those who can educate and motivate themselves will be almost entirely free to invent their own work and realize the full benefits of their own productivity. Genius will be unleashed…”
Hopefully more people come to understand what this means. The internet is the foundation of the information revolution, and so much good knowledge and so many useful applications are being built on top of the internet. I truly feel sorry for the people who use the internet exclusively for social media and communication. Those people are missing out on enormous opportunities for personal growth and development. As some Bitcoin Maximalists have been known to say, “have fun staying poor.” Don’t get me wrong, money is not the only opportunity. I’m certainly no genius. However, I’ve become a lot more knowledgable and open-minded since I’ve started utilizing the internet for learning.
Money is an umbrella term with two subcategories — currencies and stores of value. Currencies are payment methods, and stores of value are utilized to preserve and even increase wealth. Some forms of money fall under the category of currency, some fall under store of value (SoV), and some fall under both.
Let’s start by addressing some of the most popular forms of money used today, and briefly determine their category:
Gold — was a very popular currency for a very long time, but not since the discontinuation of the gold standard in America in 1971 (in a sense), and has been a SoV for thousands of years.
U.S. Dollar — most popular currency on the planet, and was not a SoV for most of its lifespan. Feel free to play around with this inflation calculator, and you’ll notice the dollar strengthened from 1921 to 1922, which is very rare.
Bitcoin — not popular as a currency due to temporary factors such as market volatility, and by design, has been a SoV for its entire lifespan of 12 years.
I’ve chosen to focus on gold, the dollar and bitcoin not only because of popularity, but also because all three are global reserve currency material due to their properties. Gold was the global reserve currency, the dollar is currently the global reserve currency, and bitcoin is the next contender. Only logical for the strongest money to be most widely used in the global economy. All other forms of money are competing for inferior markets. Numbers don’t lie.
Money is the lifeblood of any economy, and everybody should know the body cannot survive without blood. Imagine trying to conduct business without money, going back to the barter system. Nobody I know has ever depended on the barter system, and some are in favor anyway, but likely don’t comprehend how much more difficult life would be. In order to conduct trade, we must have what the other person wants. Otherwise, we would need to find another way to trade; probably a middleman, which implies additional time and costs. No thank you, I’d rather have one common currency to trade directly and immediately with anybody.
The quality of the blood is important, because a body cannot survive with weak or incompatible blood. Our most popular money should be strong as both a currency and SoV in order to have the strongest economy. Gold, the dollar and bitcoin are mostly strong, but have weaknesses in certain areas, which prevents them from mastering both currency and SoV status. Gold is a weak currency because its market value is too high to make small purchases, among other reasons. The dollar is a weak SoV because of inflation. Bitcoin is currently a weak currency because of high market volatility, among other reasons.
Begs the question — which factors attribute to the strongest money AKA sound money? Sound money is any form of money which is reliable to obtain, earn or utilize over time, energy and space. First, let’s break down strong currencies. Then, we’ll break down strong stores of value. Finally, we’ll combine everything to identify the strongest money. You already know the answer, but I’ll walk you to the finish line.
Strong currencies are any form of money which are highly recognizable and accepted, censorship-resistant, stable in market value, easily verifiable, fungible, portable, and divisible. The dollar for example — can be spent almost anywhere, nobody can stop us from handing a dollar bill to someone else, somewhat stable in value, mostly difficult to counterfeit, all dollars are treated equally, can be carried and sent rather easily, and each dollar is divided into 100 pennies for small purchases.
Strong stores of value preserve wealth over long periods of time, are anti-fragile, highly recognizable, easily verifiable, fungible, portable, highly liquid, difficult to obtain/scarce, and although volatile, not too volatile. Gold for example — great lifetime investment, cannot be destroyed, mostly easy to identify, somewhat difficult to counterfeit, all gold is treated equally, small amounts of gold are easy to carry, gold’s market is liquid enough to buy/sell any reasonable amount, difficult to mine/limited in quantity, and the market has a long-term trend of going up without many major crashes.
Now let’s dissect each form of money individually to find the best candidate in terms of being most reliable across time, energy and space AKA the strongest money for global economic activity (global trade).
Time — gold does extremely well over time, maintaining a strong market value, consistently increasing, and cannot be destroyed over any amount of time or process.
Energy — extensive amounts of human and machine energy are expended to obtain gold, which is positive, because strong money should not be easy to obtain. Nothing worthwhile comes easy.
Space — gold’s biggest weakness. Handing somebody a piece of gold works very well, but transporting gold can be expensive, tedious, and requires vast amounts of planning and security — does not work well in the digital age.
Time — although the dollar is stable over short periods of time, it’s unstable over long periods of time, because inflation will always decrease our purchasing power. The dollar is great for spending, not saving — by design.
Energy — very little energy is used to create new dollars, because the U.S. Government has complete control over the money supply, and no work (energy) is actually being done to earn the money. R.I.P. gold standard.
Space — the dollar travels well over space, but not well enough. Handing somebody a dollar is effective, and I can easily transfer dollars to another U.S. citizen via a number of applications such as Cash App. However, the same cannot be said to transfer dollars to another country. Global remittances might not be important to most Americans, but very important to others.
Time — although bitcoin doesn’t have centuries of history like gold or a government controlling the market value like the dollar, bitcoin has outperformed gold and the dollar over the past decade, during two economic disasters. Bitcoin is anti-fragile, and similar to the redundancy of the internet, we can trust the Bitcoin network will survive any attack.
Energy — similar to gold, extensive amounts of machine energy is expended to create new bitcoin via the mining process. Nobody (governments) can simply create new bitcoin on demand. Bitcoin must be earned through proof of work, which is good, because we should earn our money, instead of endless handouts.
Space — bitcoin is the winner of the space race, because we can send and receive bitcoin all around the planet, as long as we have an internet connection. The digital age is well underway, and the internet has proven to be a very useful tool for humanity. Bitcoin (digital money) only makes sense.
Note regarding the space race — storing large amounts of gold is difficult due to physical properties. Storing large amounts of dollars is illogical due to inflation. Storing large amounts of bitcoin is quite easy, very secure and worthwhile.
Bitcoin is most reliable across time, energy and space, which means Bitcoin is the strongest money. We are witnessing the internet and internet devices become the foundation of our new global economy. Adopting bitcoin makes sense in our journey through technological innovation. However, too many people still don’t seem to understand modern technology, Bitcoin, or even the concept of money. I’ve been learning for over 4 years, and still don’t consider myself an expert. I don’t expect anybody to blindly agree with me, and move their net worth into bitcoin. In fact, trust in each other is not required for Bitcoin to succeed, which is the greatest feature.
“Digital gold” is a relatively accurate metaphor for describing Bitcoin, but still doesn’t do Bitcoin enough justice, because gold is only a monetary rock, while Bitcoin is a monetary network. All of the non-physical properties which make gold sound money, Bitcoin does better, especially the supply cap of 21 million bitcoin. People have every right to be skeptical about the internet, modern technology, and a new form of money. However, people are open to digitizing many sensitive aspects of their lives — communication, social relationships, entertainment, dating, record-keeping, etc., but reject the concept of digital money, which makes little sense. If the internet is shut down forever, we would have a limitless amount of immediate life-threatening problems to deal with before money becomes relevant for survival.
Until next time,
P.S. — Recently bought my ticket for next year’s Bitcoin Conference in Miami.
Keep falsehood and lies far from me; give me neither poverty nor riches, but give me only my daily bread. Otherwise, I may have too much and disown you and say, ‘Who is the Lord?’ Or I may become poor and steal, and so dishonor the name of my God.
— PROVERBS 30:8-9
I’m not very wise. Never financial advice. Do your research.