Bitcoin: Difference between revisions

There was once a time where, nominally, a banknote was a receipt for something, albeit a something — gold — that was itself an abstract store of value with little intrinsic value. Gold has many of the features of a currency: it is transportable, small (if heavy), it doesn’t go off and, for all the alchemist’s best efforts over the centuries you can’t manufacture it, and, there is a limited supply of the stuff. Unlike money you can go and find more of the stuff, but it's hard. The value of gold is relatively stable — that’s what’s so good about it — and where the cost of finding a troy ounce of gold, exceeds the present value of a troy ounce of gold, people stop mining gold.

But gold, and fiat currencies, have something else that set them apart: a ''history'' in which they gradually evolved into stores of value. Money was not created overnight, out of thin air, at the whim of some anonymous brainbox publishing a white paper. It was not released fully formed onto an unsuspecting world, creating instant gazillionaires of the people who were smart — or lucky — enough to hoard it while the going was good and it was cheap. No-one invented it. Money ''evolved''. You can, and anthropologists do, argue about the emergence of indebtedness , and markets and the significance — or even existence — of [[barter]]<ref>[[David Graeber]]’s magnificent {{br|Debt: The First 5000 Years}} is very good on this.</ref> but it is hard to credit that money arise other than gradually over centuries, as a token representing the worth of a given merchant’s assets. It naturally accrued to people according to their existing ''wealth''. There was no gold rush — another drawback, literally, of gold — and it did not upset the mercantile order. It may well have supercharged it — you can see how a common, imperishable token reliably reflecting the perceived value of tradable goods and services in a community enabled merchants to optimise and finance their businesses — which would obviate the practical drawbacks of [[barter]] — but these arose through application and deployment of money not just by sitting on it. Typically a store of value that you just sit on depreciates — it is a dead weight. (To bank your own cash is not to sit on it: it is to lend it to a bank).  

Creating a transferrable token which people could use to represent their indebtedness and creditworthiness — their worth — to each other turned out to be a good evolutionary trick.  

It is worth running the thought experiment: how would the creator of a brand new currency, from scratch (not one issued to replace an existing currency), solve that initial problem of making the currency worth something?