The Bitcoin Standard

Saifedean Ammous

This book makes a compelling case for Bitcoin, not Gold, as the ultimate reserve currency. I tend to agree with this thesis and look forward to seeing the future of cryptocurrency.


  • But its mere existence is an insurance policy that will remind governments that the last object the establishment could control, namely, the currency, is no longer their monopoly. This gives us, the crowd, an insurance policy against an Orwellian future. Nassim Nicholas Taleb
  • with the exchange rates of national currencies. Bitcoin can be best understood as distributed software that allows for transfer of value using a currency protected from unexpected inflation without relying on trusted third parties. In other words, Bitcoin automates the functions of a modern central bank and makes them predictable and virtually immutable by programming them into code decentralized among thousands of network members, none of whom can alter the code without the consent of the rest.
  • Sound money allows people to think about the long term and to save and invest more for the future. Saving and investing for the long run are the key to capital accumulation and the advance of human civilization.
  • A good that assumes the role of a widely accepted medium of exchange is called money.
  • It is common sense, and age‐old wisdom in virtually all human cultures, for individuals to want to store some portion of their wealth in the form of money, because it is the most liquid holding possible, allowing the holder to quickly liquidate if she needs to, and because it involves less risk than any investment.
  • of the key property that leads to a good being adopted freely as money on the market, and that is salability—the ease with which a good can be sold on the market whenever its holder desires, with the least loss in its price.2
  • period. The ratio between the stock and flow is a reliable indicator of a good's hardness as money, and how well it is suited to playing a monetary role. A good that has a low ratio of stock‐to‐flow is one whose existing supply can be increased drastically if people start using it as a store of value. Such a good would be unlikely to maintain value if chosen as a store of value. The higher the ratio of the stock to the flow, the more likely a good is to maintain its value over time and thus be more salable across time.3
  • the ones who use hard money will benefit most, by losing very little value due to the negligible new supply of their medium of exchange. Those who choose easy money will likely lose value as its supply grows quickly, bringing its market price down.
  • Austrian economists are rarely dogmatic or objectivist in their definition of sound money, defining it not as a specific good or commodity, but as whichever money emerges freely chosen on the market by the people who transact with it, not imposed on them by coercive authority, and money whose value is determined through market interaction, and not through government imposition.4
  • There is no need for government to impose the hardest money on society; society will have uncovered it long before it concocted its government, and any governmental imposition, if it were to have any effect, would only serve to hinder the process of monetary competition.
  • Having a single medium of exchange allows the size of the economy to grow as large as the number of people willing to use that medium of exchange. The larger the size of the economy, the larger the opportunities for gains from exchange and specialization, and perhaps more significantly, the longer and more sophisticated the structure of production can become.
  • Of all the historical forms of money I have come across, the one that most resembles the operation of Bitcoin is the ancient system based on Rai stones on Yap Island,
  • The owner of the stone could use it as a payment method without it having to move: all that would happen is that the owner would announce to all townsfolk that the stone's ownership has now moved to the recipient. The whole town would recognize the ownership of the stone and the recipient could then use it to make a payment whenever he so pleased. There was effectively no way of stealing the stone because its ownership was known by everybody.
  • A one‐time collapse in the value of a monetary medium is tragic, but at least it is over quickly and its holders can begin trading, saving, and calculating with a new one. But a slow drain of its monetary value over time will slowly transfer the wealth of its holders to those who can produce the medium at a low cost.
  • a money that is easy to produce is no money at all, and easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard‐earned wealth for sale in exchange for something easy to produce.
  • For copper and almost every other commodity in the world, this dynamic has held true for most of recorded history, consistently punishing those who choose these commodities as money by devaluing their wealth and impoverishing them in the long run, and returning the commodity to its natural role as a market good, and not a medium of exchange.
  • For anything to function as a good store of value, it has to beat this trap: it has to appreciate when people demand it as a store of value, but its producers have to be constrained from inflating the supply significantly enough to bring the price down.
  • two unique physical characteristics that differentiate it from other commodities: first, gold is so chemically stable that it is virtually impossible to destroy, and second, gold is impossible to synthesize from other materials (alchemists' claims notwithstanding) and can only be extracted from its unrefined ore, which is extremely rare in our planet.
  • Britain was the first to adopt a modern gold standard in 1717, under the direction of physicist Isaac Newton, who was the warden of the Royal Mint, and the gold standard would play a great role in it advancing its trade across its empire worldwide.
  • This is a historical lesson of immense significance, and should be kept in mind by anyone who thinks his refusal of Bitcoin means he doesn't have to deal with it. History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.
  • With the majority of the world on one sound monetary unit, there was never a period that witnessed as much capital accumulation, global trade, restraint on government, and transformation of living standards worldwide.
  • This world came crashing down in the catastrophic year 1914, which was not only the year of the outbreak of World War I, but the year that the world's major economies went off of the gold standard and replaced it with unsound government money.
  • There was never an example of hyperinflation with economies that operated a gold or silver standard,
  • the importance of sound money can be explained for three broad reasons: first, it protects value across time, which gives people a bigger incentive to think of their future, and lowers their time preference. The lowering of the time preference is what initiates the process of human civilization and allows for humans to cooperate, prosper, and live in peace. Second, sound money allows for trade to be based on a stable unit of measurement, facilitating ever‐larger markets, free from government control and coercion, and with free trade comes peace and prosperity. Further, a unit of account is essential for all forms of economic calculation and planning, and unsound money makes economic calculation unreliable and is the root cause of economic recessions and crises. Finally, sound money is an essential requirement for individual freedom from despotism and repression, as the ability of a coercive state to create money can give it undue power over its subjects, power which by its very nature will attract the least worthy, and most immoral, to take its reins.
  • Human beings' lower time preference allows us to curb our instinctive and animalistic impulses, think of what is better for our future, and act rationally rather than impulsively.
  • While microeconomics has focused on transactions between individuals, and macroeconomics on the role of government in the economy, the reality is that the most important economic decisions to any individual's well‐being are the ones they conduct in their trade‐offs with their future self.
  • Tax rates will also adversely affect time preference: the higher the taxes, the less of their income that individuals are allowed to keep; this would lead to individuals working less at the margin and saving less for their future, because the burden of taxes is more likely to reduce savings than consumption, particularly for those with a low income, most of which is needed for basic survival.
  • As people start spending more and saving less, they become more present‐oriented in all their decision making, resulting in moral failings and a likelihood to engage in conflict and destructive and self‐destructive behavior.
  • Observing prices of agricultural commodities in the Roman empire in terms of grams of gold shows they bear remarkable similarity to prices today.
  • Had government money been a superior unit of account and store of value, it would not need government legal tender laws to enforce it, nor would governments worldwide have had to confiscate large quantities of gold and continue to hold them in their central bank reserves.
  • Sound money is money that gains in value slightly over time, meaning that holding onto it is likely to offer an increase in purchasing power.
  • The well‐known phenomenon of the modern breakdown of the family cannot be understood without recognizing the role of unsound money allowing the state to appropriate many of the essential roles that the family has played for millennia, and reducing the incentive of all members of a family to invest in long‐term familial relations.
  • Many studies also show that rates of depression and psychological diseases are rising over time as the family breaks down, particularly for women.15
  • What is astounding is not just the preponderance of garbage like Rothko's in the modern art world; it is the conspicuous absence of great masterpieces that can compare with the great works of the past.
  • The fatal flaw of socialism that Mises exposed was that without a price mechanism emerging on a free market, socialism would fail at economic calculation, most crucially in the allocation of capital goods
  • The central bank's meddling in the capital market is the root of all recessions and all the crises which most politicians, journalists, academics, and leftist activists like to blame on capitalism.
  • There is therefore no societal benefit from any activity which increases the supply of money.
  • The triumph of bland, mass‐produced junk food cannot be understood outside the great benefits that large scale affords to producers.
  • Bitcoin is the hardest money ever invented: growth in its value cannot possibly increase its supply; it can only make the network more secure and immune to attack.
  • the bitcoin supply will increase by 27% in the coming 25 years, whereas the supply for gold will increase by 52%, the Japanese yen by 64%, the Swiss franc by 169%, the U.S. dollar by 272%, the euro by 286%, and the British pound by 429%.
  • of the national currencies of most countries. If Bitcoin were a country, the value of its currency would be the 56th largest national currency worldwide, roughly in the range of the size of the money supply of Kuwait or Bangladesh, larger than that of Morocco and Peru, but smaller than Colombia and Pakistan.
  • Not only have we not run out of raw materials, the proven reserves that exist of each resource have only increased with time as our consumption has gone up.
  • Bitcoin is the cheapest way to buy the future, because Bitcoin is the only medium guaranteed to not be debased, no matter how much its value rises.
  • Bitcoin's value comes from it having an immutable monetary policy precisely because nobody can easily change it. Any coin that begins with a group of individuals changing Bitcoin's specification has with its creation lost arguably the only property that makes Bitcoin valuable in the first place.
  • In my assessment, a global monetary return to gold might be the most significant threat to Bitcoin, yet it is both unlikely to happen and unlikely to destroy Bitcoin completely.
  • It was only ever possible to develop one currency based on this design, because once it became obvious that it is workable, any attempt at copying it will have been a top‐down and centrally controlled network which will never escape the control of its creators.
  • There is a reason real‐world businesses don't issue their own currency, and that is that nobody wants to hold currency that is only spendable in one business. The point of holding money is holding liquidity which can be spent as easily as possible.
  • The highly vaunted decentralized applications of the future never seem to arrive, but the tokens that are supposedly essential to their operation continue to proliferate by the hundreds every month. One cannot help but wonder if the only use of these revolutionary currencies is the enriching of their makers.
  • all the “blockchain technology” applications being touted as revolutionizing banking or database technology are utterly doomed to fail in achieving anything more than fancy demos that will never transfer to the real world, because they will always be a highly inefficient way for the trusted third parties that operate them to conduct their business.
  • A blockchain that is alterable is a functionally pointless exercise in engineering sophistry: it uses a complex and expensive method for clearance to remove intermediaries and establish immutability, but then grants an intermediary the ability to overturn that immutability.
  • There cannot be wide adoption of blockchain technology in industries reliant on trust in intermediaries, because the mere presence of intermediaries makes all the costs associated with running a blockchain superfluous.

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