💰 3.1 What is Money?
- Definition: Money is a medium of exchange, a store of value, and a unit of account.
- Traditional Properties of Money:
- Divisibility: Can be broken into smaller units.
- Durability: Retains value over time.
- Portability: Easy to transport.
- Fungibility: Each unit is interchangeable.
- Scarcity: Limited supply to preserve value.
- Recognizability: Easily verified.
- Fiat Money:
- Issued by governments and backed by trust in central banks.
- Subject to inflation and monetary manipulation.
- Bitcoin as Money:
- Embodies all the key properties of sound money, but in digital form.
- Immune to government manipulation due to its fixed supply and decentralized nature.
🔑 3.2 Bitcoin as a Store of Value
- Digital Gold:
- Like gold, Bitcoin is scarce, durable, and not easily counterfeited.
- The 21 million cap makes it deflationary—its value tends to increase over time.
- Hedge Against Inflation:
- Fiat currencies lose purchasing power over time due to inflation.
- Bitcoin’s fixed supply makes it a hedge against currency debasement.
- Unseizable and Censorship-Resistant:
- Unlike physical assets (real estate, gold), Bitcoin cannot be easily seized.
- Its censorship-resistant nature makes it a safe haven in authoritarian regimes or unstable economies.
- Long-Term Value Appreciation:
- Historically, Bitcoin’s price has trended upward over time.
- Its scarcity and rising demand contribute to value preservation.
⚡ 3.3 Bitcoin as a Medium of Exchange
- Peer-to-Peer Transactions:
- Bitcoin allows for direct transactions without intermediaries.
- Fast and borderless payments, even across countries.
- Global Accessibility:
- Available to anyone with an internet connection.
- Financial inclusion for unbanked populations.
- Low-Cost Cross-Border Payments:
- Traditional remittances are slow and costly.
- Bitcoin enables near-instant and low-cost global payments.
- Lightning Network:
- Layer 2 protocol for faster, cheaper transactions.
- Enables micropayments, making Bitcoin practical for everyday use.
🔒 3.4 Bitcoin as a Unit of Account
- Current Challenges:
- Fiat currencies are still the dominant unit of account.
- Bitcoin is volatile, making it less practical for pricing goods.
- Long-Term Potential:
- As Bitcoin adoption grows, it could become a more stable unit of account.
- Businesses in regions with high inflation are already pricing goods in BTC.
- Satoshis as Units:
- 1 Bitcoin = 100 million satoshis (sats).
- As Bitcoin’s value increases, pricing in sats could become common.
🌍 3.5 Bitcoin’s Advantages Over Fiat Money
- Fixed Supply vs. Inflation:
- Fiat currencies have unlimited supply, leading to devaluation over time.
- Bitcoin’s supply is capped at 21 million, ensuring scarcity and long-term value retention.
- Decentralization vs. Central Control:
- Fiat money relies on central banks and governments.
- Bitcoin operates on a decentralized network, free from political influence.
- Borderless Transactions:
- Fiat payments are slow and costly across borders.
- Bitcoin enables instant, low-cost, global transfers.
- Trustless and Transparent:
- Fiat systems require trust in financial institutions.
- Bitcoin transactions are transparent and verifiable on the public blockchain.
✅ Key Takeaway:
Bitcoin functions as sound money by combining the properties of a store of value, medium of exchange, and unit of account. Its decentralization, scarcity, and censorship resistance make it superior to fiat money in protecting wealth and enabling global, trustless transactions.
(ChatGTP)
Leave a Reply