As both an academic researcher and the founder of an era-defining technology, Satoshi started his presentation of Bitcoin with the problem. By posing the problem first, Satoshi both sets out a research objective of solving ‘the problem with conventional currency, as well as a total addressable market that could be captured should such a solution work. At stake is no less than money, that genius human innovation that allows us to store any surplus wealth and transport it across space and time. 

“The root problem with conventional currency is”, according to Satoshi,  “all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”

By conventional currency, Satoshi is referring to fiat currency, the dollars, euros, and yens we keep in our pockets and in our bank accounts. His creation and its accompanying whitepaper serve as a focal point in the history of money, a moment in time when money adapted itself to the information age. Bitcoin was not born in a vacuum and therefore, it pays to place Satoshi’s creation in the correct historical context by looking at the evolution of money. Only then can you deep dive into the weeds of Bitcoin and how it works to yield fruits of understanding. 

The arc of monetary history is long, and it bends towards centralization. Barter, early forms of commodity money, and gold bullion all served as money despite not having any single, central authority that could mint new money supply at will. At the same time, history is littered with forms of money completely under the control of a centralized power figure, be it Julius Cesar, the Weimar Republic, or the Federal Reserve. You can’t place a spoiler alert on history, which is why I’m ok ruining the ending for you. In both Ancient Rome and early 20th-century Germany, the fall of a currency sounded the alarm bells for the eventual fall of an empire. Both once-mighty empires couldn’t resist the urge to mint new money at a dizzying speed.  Both devalued their currencies, and devalued trust in their jurisdiction, to the point of colossal collapse no less. The functionaries of the Federal Reserve stand to learn a lot from history. But we’re jumping way ahead in the story, aren’t we?

Ask a child ‘What is money?’ and you’re likely to receive a range of answers, many of which reference something physical. Coins, notes, banks, and credit cards are some of the words your young friend might use. Many adults would give a similar response. ‘Seeing is believing,’ and so many have a hard time dissociating the idea of money and the physical manifestation of money. Newcomers especially can find it difficult to ascribe absolute value to an asset that exists in the purely virtual realm. They wish to know what Bitcoin is ‘backed by’, what grants its elusive value outside of speculative demand. They may even tend to agree with Bill Gates who claims that Bitcoin derives its value from ‘the greater fool theory’ of asset bubbles. According to the theory, speculative assets only have value if there’s a greater fool to whom one could sell. But actual, inherent value. No way Bitcoin has any of it, claim the critics. 

In ancient days, humans relied on barter to conduct their business. Take a family who specialized in supplying a specific cut of antelope meat for the tribe, a cut in such high demand that their fellow tribesmen would be willing to kill just for a little piece of meat. They would trade it for berries, fur, some rock painting, or maybe a tasty honeycomb and earn status and the admiration of their fellow tribesmen on the way. part, for example. Barter was the order of the day when our ancestors roamed the savannah in packs, hunting and gathering food for their survival. In fact, some folks even use barter today. Tribes like the Hazda and the Masaai roam across the East of Africa trading goods and services with each other. Meanwhile, one could also make the argument that the crypto market has regressed to barter, trading illiquid commodity coins like $WOOL and $CAKE with one another. 

Eventually, barter runs into a serious problem. Say, for example, that our fictional family finds themselves on the wrong end of a veganism drive. Suddenly, their kinsmen and trade partners decided that the antelopes they cut up for steaks were sentient, feeling creatures and they wanted to play no part in causing them suffering. No one wants steaks anymore, and so the family is reduced to instant poverty. They find themselves up against an economic theory known as the “double coincidence of wants” according to which, a barter transaction can only take place between two parties who both have something that the other desires. In the good old days, any counterparty they would approach for a trade, be he a berry trader, weapons manufacturer, or beer brewer, wanted a slice of antelope meat. Now, they can barely make ends meet. So they did what any astute trader would do and began cultivating plant-based alternatives which soon became a major hit in their tribe. 

As the population growth of homo sapiens continued to explode, so too did the need for a means of exchange that could scale beyond the small confines of the clan. Barter was obviously no good, especially once you consider the sheer number of prices that had to be ascertained for barter to work. For example, a market containing only steak, berries, fur, and plant-based protein would require us to know the following prices:

1)How many steaks can I trade for a single berry? 2)How many steaks can I trade for a single plant-based protein? 3)How many steaks can I trade for a single fur? 4)How many berries can I trade for a single plant-based protein? 5)How many berries can I trade for a single fur? 6)How many furs can I trade for a single plant-based protein?

Now play that game with 50 goods. What about 50,000? Clearly, the barter system isn’t scalable and was destined to be replaced*.*

Stay tuned as the Evolving Money series, um, evolves. Collect my articles for the love of Satoshi

As both an academic researcher and the founder of an era-defining technology, Satoshi started his presentation of Bitcoin with the problem. By posing the problem first, Satoshi both sets out a research objective of solving ‘the problem with conventional currency, as well as a total addressable market that could be captured should such a solution work. At stake is no less than money, that genius human innovation that allows us to store any surplus wealth and transport it across space and time. 

“The root problem with conventional currency is”, according to Satoshi,  “all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”

By conventional currency, Satoshi is referring to fiat currency, the dollars, euros, and yens we keep in our pockets and in our bank accounts. His creation and its accompanying whitepaper serve as a focal point in the history of money, a moment in time when money adapted itself to the information age. Bitcoin was not born in a vacuum and therefore, it pays to place Satoshi’s creation in the correct historical context by looking at the evolution of money. Only then can you deep dive into the weeds of Bitcoin and how it works to yield fruits of understanding. 

The arc of monetary history is long, and it bends towards centralization. Barter, early forms of commodity money, and gold bullion all served as money despite not having any single, central authority that could mint new money supply at will. At the same time, history is littered with forms of money completely under the control of a centralized power figure, be it Julius Cesar, the Weimar Republic, or the Federal Reserve. You can’t place a spoiler alert on history, which is why I’m ok ruining the ending for you. In both Ancient Rome and early 20th-century Germany, the fall of a currency sounded the alarm bells for the eventual fall of an empire. Both once-mighty empires couldn’t resist the urge to mint new money at a dizzying speed.  Both devalued their currencies, and devalued trust in their jurisdiction, to the point of colossal collapse no less. The functionaries of the Federal Reserve stand to learn a lot from history. But we’re jumping way ahead in the story, aren’t we?

Ask a child ‘What is money?’ and you’re likely to receive a range of answers, many of which reference something physical. Coins, notes, banks, and credit cards are some of the words your young friend might use. Many adults would give a similar response. ‘Seeing is believing,’ and so many have a hard time dissociating the idea of money and the physical manifestation of money. Newcomers especially can find it difficult to ascribe absolute value to an asset that exists in the purely virtual realm. They wish to know what Bitcoin is ‘backed by’, what grants its elusive value outside of speculative demand. They may even tend to agree with Bill Gates who claims that Bitcoin derives its value from ‘the greater fool theory’ of asset bubbles. According to the theory, speculative assets only have value if there’s a greater fool to whom one could sell. But actual, inherent value. No way Bitcoin has any of it, claim the critics. 

In ancient days, humans relied on barter to conduct their business. Take a family who specialized in supplying a specific cut of antelope meat for the tribe, a cut in such high demand that their fellow tribesmen would be willing to kill just for a little piece of meat. They would trade it for berries, fur, some rock painting, or maybe a tasty honeycomb and earn status and the admiration of their fellow tribesmen on the way. part, for example. Barter was the order of the day when our ancestors roamed the savannah in packs, hunting and gathering food for their survival. In fact, some folks even use barter today. Tribes like the Hazda and the Masaai roam across the East of Africa trading goods and services with each other. Meanwhile, one could also make the argument that the crypto market has regressed to barter, trading illiquid commodity coins like $WOOL and $CAKE with one another. 

Eventually, barter runs into a serious problem. Say, for example, that our fictional family finds themselves on the wrong end of a veganism drive. Suddenly, their kinsmen and trade partners decided that the antelopes they cut up for steaks were sentient, feeling creatures and they wanted to play no part in causing them suffering. No one wants steaks anymore, and so the family is reduced to instant poverty. They find themselves up against an economic theory known as the “double coincidence of wants” according to which, a barter transaction can only take place between two parties who both have something that the other desires. In the good old days, any counterparty they would approach for a trade, be he a berry trader, weapons manufacturer, or beer brewer, wanted a slice of antelope meat. Now, they can barely make ends meet. So they did what any astute trader would do and began cultivating plant-based alternatives which soon became a major hit in their tribe. 

As the population growth of homo sapiens continued to explode, so too did the need for a means of exchange that could scale beyond the small confines of the clan. Barter was obviously no good, especially once you consider the sheer number of prices that had to be ascertained for barter to work. For example, a market containing only steak, berries, fur, and plant-based protein would require us to know the following prices:

1)How many steaks can I trade for a single berry? 2)How many steaks can I trade for a single plant-based protein? 3)How many steaks can I trade for a single fur? 4)How many berries can I trade for a single plant-based protein? 5)How many berries can I trade for a single fur? 6)How many furs can I trade for a single plant-based protein?

Now play that game with 50 goods. What about 50,000? Clearly, the barter system isn’t scalable and was destined to be replaced*.*

Stay tuned as the Evolving Money series, um, evolves. Collect my articles for the love of Satoshi