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Looking forward to Matthew Mežinskis‘s presentation on Bitcoin as base money.
If you don‘t know his excellent podcast show @crypto_voices (shout out to co-host @fernandoulrich as well!), make sure to give it a listen.
#bh2019
If you don‘t know his excellent podcast show @crypto_voices (shout out to co-host @fernandoulrich as well!), make sure to give it a listen.
#bh2019
First, some terminology: there are many names + buzzwords for base money, but they all mean the same: the monetary base.
#bh2019
#bh2019
What forms can base money take?
- Commodities (shells, beads, precious metals)
- Paper: physical cash
- Digital: central bank reserves, Bitcoin?
- Commodities (shells, beads, precious metals)
- Paper: physical cash
- Digital: central bank reserves, Bitcoin?
The monetary base of today‘s fiat system has two components:
1) Physical: bank notes and cash
2) Digital: central bank reserves held by (commercial) clearing banks at — you would have guessed it — the central bank.
1) Physical: bank notes and cash
2) Digital: central bank reserves held by (commercial) clearing banks at — you would have guessed it — the central bank.
Comparing characteristics of different base monies.
The defining property of base money is its use as the medium for final settlement. It doesn‘t constitute a claim on some underlying.
The defining property of base money is its use as the medium for final settlement. It doesn‘t constitute a claim on some underlying.
(Apologies for the low resolution pics — I‘m sitting in the back) 😉
What‘s unique about Bitcoin in the history of monetary economics is that its supply is fixed and known in advance.*
* Personal note: That is unless the social contract changes.
#bh2019
* Personal note: That is unless the social contract changes.
#bh2019
M1 also exists in Bitcoin: coins held at custodial exchanges and wallet service providers. You hold a depository receipt that is effectively an IOU.
Not the way that most Bitcoiners would like to scale the system, but nevertheless has helped a great deal.
Not the way that most Bitcoiners would like to scale the system, but nevertheless has helped a great deal.
Personal note: I have been saying this for years — glad to see that Matthew brings up this very important point that many Bitcoiners seem unaware of.
The monetary base of the USD has *decreased* over the last five years — the Fed has not been “operating the printing press“ as reported by many.
This doesn‘t mean that the total monetary supply hasn‘t changed, though.
This doesn‘t mean that the total monetary supply hasn‘t changed, though.
If you want to learn more about how the current fiat monetary system works, have a look at this great thread: .
@PositiveMoneyUK has also published good resources on this topic: positivemoney.org/publications/
@PositiveMoneyUK has also published good resources on this topic: positivemoney.org/publications/
What about layering (e.g. Lightning)?
It‘s a very interesting middle state: not really an IOU, but not really base money either.
#bh2019
It‘s a very interesting middle state: not really an IOU, but not really base money either.
#bh2019
And this shows once again why Bitcoin is such an interesting idea worth studying, even if you don‘t believe in memes and 🚀🌕.
