GM

GN and remember:

🎶Starting with some pizzas, now we’re here ! 🎶

@paul keating Orange pilling the ocean ! Nice 🧡🧡

Who attempts to be "good" or "clean" at all times in a world where most people are not good will inevitably face ruin - Niccolò Machiavelli

Some people take longer to realize than others.

What’s wrong with economists?

Undoubtedly, Bitcoin operates in the economic domain—though not exclusively there. How is it possible that something of such significance has escaped their theorists? “It’s a bubble! Digital tulips!”, with the slight difference that tulips multiplied their price by 22 while Bitcoin has multiplied it by 60 million. “It can’t be; the market must be wrong in valuing it,” they probably think.

But what exactly are they missing?

Bitcoin manages to solve a series of historical problems in the digital world. In this realm, by default, we lack privacy because there always has to be a service provider. Privacy means revealing information selectively. You have to choose whom to reveal your information to (a service provider).

And that provider will always have the ability to override your decision not to share your data. When you hand someone a physical letter, the contents of that letter are private. However, when you send an email, that privacy can be violated by the service provider, so by default you lack privacy.

The same thing happens with physical cash.

If you pay in a store with a physical banknote, the shopkeeper has no need to know who you are or the origin of that money, nor does the issuer of the note need to know what you buy, when, from whom, or where that money came from. However, when we move into the digital world, that privacy is lost.

Your service provider—your bank—does know, and that information can reach many other parties.

Electronic cash

The first step is to understand that Bitcoin is essentially that “electronic cash” that Satoshi described in the whitepaper. However, these two words have led to a series of assumptions—in my view completely mistaken—that are what prevent economists from understanding it. Bitcoin is not an alternative to fiat money and central banks, as proposed in Saifedean Ammous’s book The Bitcoin Standard. Let’s see why.

The two problems that Bitcoin solved in the digital world are the following: the double-spending problem and the problem of the trusted third party that provides a digital service. In this digital realm, it is easy to multiply units at almost no cost. For example, we can send the exact same image to multiple people through a messaging app. But the fact that it can be replicated endlessly prevents it from being a scarce good and, therefore, from being worth hoarding.

Dependency on a third party

Moreover, for an asset that aspires to become an economic good, unlimited reproduction is equivalent to counterfeiting. Imagine if 100 monetary units from our bank could be sent to many people at once (double-spending problem). This could be solved by introducing a third party that acts as an intermediary and guarantees that the image or those 100 monetary units cannot be forwarded again, as streaming platforms or banks do with our digital currencies.

But if you have to depend on a third party, there are considerable risks, starting with the loss of privacy; you depend on their diligence, you are subject to their rules, if they have technical problems your service suffers, they can implement censorship mechanisms, they can be attacked, go bankrupt, be intervened by the state, etc. (trusted third party problem).

Solving double-spending and the trusted third party

Bitcoin is the first and only digital asset that manages to solve both the double-spending problem and the trusted third party problem, making it the only real digital asset, a digital commodity. Yes, Bitcoin is a real asset; it is not anyone’s liability, it has no issuer, nor a company that controls it or focuses on generating value around it. Understanding Bitcoin as a real asset is the first difficulty.
The second difficulty is the comparison with payment media.

Bitcoin is not a great medium of exchange—not because of technical problems, but because it was not primarily designed for that. Nor do we generally have trouble making day-to-day payments in most cases, so its demand for that purpose isn’t particularly relevant.

Moreover, it significantly increases transaction costs (R. Coase) for making payments. On top of that, Bitcoin has a deterministic supply, so any change in demand is reflected through price; there is no way to adjust supply to demand to stabilize it, making it inherently volatile. Mediums of exchange and units of account require stability to enable economic calculation, but that very stability is achieved by sacrificing long-term appreciation of the asset. So what value does Bitcoin actually provide?

Redefining property rights

First, it is a redefinition of property rights. Until now, all our property depended on the order established by coercive power.

Since Bitcoin eliminates the trusted third party and creates a global autonomous system where one can own and transfer control of a real asset—Bitcoin—it actually resembles a global system of absolute private property rights.

The change is of historic proportions because, by making ownership of an asset depend on knowledge of certain words, it allows you to hold your wealth and conduct your transactions privately on a global scale thanks to being digital.

For the first time, every human being has the possibility of accessing property to save, exchange, and bequeath to whomever they choose, without censorship, with total accessibility, and without anyone being able to dilute it. That doesn’t seem trivial to me.

Deterioration, divisibility, custody costs…

Second, if it is a real asset, it must possess certain properties X, since it is not anyone’s liability; its value will depend on the demand for those properties.

By not depending on anyone, it becomes the first and only censorship-resistant asset, extremely difficult to confiscate.

It also dramatically reduces transaction costs for saving and transmitting value over time.

With a deterministic—and in practice deflationary—supply due to custody errors, over time your share of the total keeps increasing, eliminating dilution risk and boosting your concentration.

It also requires no asymmetric information to decide where to deposit your savings.

It’s like buying gold: you don’t have to choose among thousands of companies or between one fund or another. However, gold is expensive to divide, custody, verify, and transport.

And it suffers 1.6–2% annual dilution, which is significant over the long term.

Bitcoin not only doesn’t deteriorate; it also has low custody costs. It is easy to divide, verify, and transport. Its divisibility, lack of deterioration, and absence of regulatory risks also make it attractive compared to real estate, where you need part of your savings upfront, you have to liquidate the entire asset, it incurs many associated costs from deterioration, and exposure to higher taxes, regulations, or squatting is significant.

Bitcoin’s superiority

When compared to the assets we use to park wealth and transport value over time, Bitcoin has properties far superior to most of them.

Bitcoin is designed for hoarding, and with a fixed supply, that is precisely what gives an asset real value: being demanded for holding, not for spending or making payments.

Moreover, as a real asset, it has no counterparty risk, doesn’t need to be backed by anything, and there is no possibility of anyone defaulting on an obligation.

What are the chances that states will stop devaluing their currencies? What are the prospects that regulations won’t increase? What can be expected from taxes on all assets, especially the less liquid ones? Will politicians leave private pension funds untouched when there is accumulated money there? Has a bank ever gone bankrupt and failed to return money to depositors? Has a state or company ever defaulted and failed to meet its obligations?

Bitcoin can be an answer to many of these questions.

Economists still have homework to do. It’s not about thinking about Bitcoin through the preconceived categories and beliefs we already hold, but about rethinking all those beliefs, theories, and categories in light of Bitcoin.

Just notice the past couple of times I’ve being to the supermarket most of the items cost £2.

Has anyone else noticed that ?

Why Economists Are the Ones Who Understand Bitcoin the Least

“There is no choice but to admit that opinions about money are harder to pin down than clouds deformed by the wind.”
—J. A. Schumpeter, History of Economic Analysis

I often share a meme that reads: “Economists have the worst understanding of Bitcoin. Change my mind.” Over and over again, I find this to be true. Economists, as a group, consistently have the poorest grasp of Bitcoin. And it doesn't matter what school they come from, whether they’re professors or banking executives, whether they lean left or right, whether they follow the Austrian School or Modern Monetary Theory. After four years immersed in Bitcoin —conducting hundreds of interviews, attending conferences, and participating in debates— I can count on one hand the economists who truly understand it.

Bitcoin Challenges Beliefs
Bitcoin confronts deeply held beliefs, and as Ortega y Gasset observed, we are held by our beliefs, we interpret the world through them and instinctively reject ideas that contradict them.

What’s Wrong with Economists?
Undoubtedly, Bitcoin operates in the economic realm —though not only there— so how is it possible that something so economically significant could go unnoticed or misunderstood by economic theorists?
“It’s a bubble! Just digital tulips!” they say, ignoring the fact that while tulips went up 22-fold, Bitcoin has increased over 60 million times. “That can’t be right,” they think, “the market must be wrong.” But what are they missing?
Bitcoin solves a set of long-standing problems in the digital world. In the digital realm, we lack privacy by default, because every interaction requires a service provider. Privacy means the ability to reveal oneself selectively, but this becomes impossible if you're forced to share your data with someone who can betray your trust.
If you hand someone a letter, the contents remain private. If you send an email, that privacy depends entirely on the provider, who can access or leak the contents. The same is true with physical cash; when you pay with a banknote, the shopkeeper doesn’t know who you are, nor does the central bank know what you bought, where, or when. But in digital transactions, that anonymity disappears. Your bank knows everything, and that data can spread far beyond.

Electronic Cash
Bitcoin, as described by Satoshi in the whitepaper, is “electronic cash.” However, this phrase has led to a series of mistaken assumptions, assumptions that are at the core of why economists fail to grasp Bitcoin. It’s not, as Saifedean Ammous suggests in The Bitcoin Standard, merely a better alternative to fiat or central banking. The misunderstanding goes deeper.
Bitcoin solves two core problems in the digital world: the double-spending problem, and the trusted third-party problem.
In the digital space, duplication is easy and nearly free. You can send the same image to ten people at once. That ability to replicate means digital items can’t be scarce or worth storing.

The Trusted Third Party
Moreover, to prevent this duplication from corrupting a monetary system, a third party is typically used to ensure that a transaction happens only once. Just as streaming platforms prevent you from endlessly sharing content, banks prevent digital money from being “double-spent.” But this introduces massive dependencies and risks: loss of privacy, censorship, reliance on the provider’s competence, exposure to attacks, regulatory compliance, and the risk of collapse or state seizure.

The Breakthrough: Solving Double Spending Without Trust
Bitcoin is the first and only digital asset to solve both double spending and third-party dependency, making it the world’s first truly digital, real asset, a digital commodity. Yes, Bitcoin is a real asset. It is nobody’s liability. It has no issuer, no company managing it, no one generating value on its behalf. Recognizing Bitcoin as a real asset is the first stumbling block for economists.

The second difficulty is understanding its role relative to payment systems. Bitcoin is not a great payment method, not due to technical limitations, but because that’s not what it’s designed for. Most of us already have easy ways to pay for things, so its use in day-to-day payments isn’t especially compelling. On top of that, it increases transaction costs —as Ronald Coase would note— for regular payments. And since its supply is fixed, any change in demand reflects directly in the price. There is no way to adjust supply to stabilize it, so Bitcoin is inherently volatile.

Payments and units of account require stability to enable economic calculation. But stability comes at the cost of long-term asset appreciation. So what value does Bitcoin actually offer?

A Redefinition of Property Rights
The most important thing Bitcoin does is redefine property rights. Until now, property has always depended on systems upheld by coercive power. Bitcoin removes the need for a trusted third party and creates a global, autonomous system where people can own and transfer control of a real asset, digitally. In this way, Bitcoin functions as a global system of absolute private property rights.

This is a historical shift. Ownership becomes dependent not on institutions or governments but on knowledge, knowing a set of words. For the first time, people anywhere in the world can own assets, store value, and pass on wealth privately, without censorship, and without dilution, with unprecedented accessibility.
That’s no small feat.

Deterioration, Divisibility, and Custody Costs
If Bitcoin is a real asset, then its value depends on the demand for the properties it possesses. Since it’s not anyone’s liability, it cannot be censored or easily confiscated. It also drastically reduces the cost of saving and transferring value over time.

Its deterministic supply schedule, which is essentially deflationary due to lost coins, means your share of the total supply grows over time. There's no risk of dilution, and your wealth concentration increases naturally.
Moreover, Bitcoin avoids the information asymmetry involved in choosing where to invest. It's like buying gold, you don’t have to pick the right company or fund. But unlike gold, Bitcoin is easy to divide, verify, and transport. Gold is costly to store, verify, and protect. It deteriorates slightly each year through dilution—about 1.6 to 2%. Over time, that’s significant.

Real estate has similar issues. It deteriorates, has high custody and maintenance costs, carries legal and regulatory risks, and is difficult to liquidate. Bitcoin doesn’t have those problems. It’s durable, portable, divisible, and not subject to location-based taxation or expropriation in the same way.

Bitcoin’s Superior Design
Compared with traditional “store of value” assets, Bitcoin’s design is superior in nearly every way. It is built for hoarding, not spending. With a fixed supply, it gains value the more people want to save it, not spend it. And as a real asset, it carries no counterparty risk. It doesn’t need to be “backed” by anything, and it cannot default.
Ask yourself: What are the odds that states will stop devaluing their currencies? What are the chances that regulation will loosen in the coming years? What’s the likelihood that taxes on illiquid assets like property won’t increase? Will politicians leave private pension funds untouched? Have banks ever failed to return depositors’ money? Have states or companies ever defaulted?
Bitcoin may not answer all these questions, but it changes the context in which we ask them.

Economists Must Do Their Homework
Economists still haven’t done the necessary work. The task is not to interpret Bitcoin through the lens of existing theories or beliefs, but to rethink those theories and beliefs in light of Bitcoin.

That’s where the work begins.

#POW ₿

Funny how people say 'I'm buying a house so I don't have to pay rent.'

You're just swapping your landlord for a bank and signing up for a 50-year rent contract called a 'mortgage.