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What does Bitcoin have to do with climate change?

As #Bitcoin nears $10,000, treat yourself to a deep dive into some of the further reaching implications of BTC.

Friday Thread 🚀
Money used to have intrinsic value. It either was, or was backed by, gold.

You could go to a bank and exchange your notes for their equivalent in gold.
Throughout the 20th century, the biggest economies unpegged their currencies from gold.

Since then, governments have had complete control of the money supply.

Now our currencies float freely in value, fluctuating against one another.

This is called fiat money.
The value of a currency is no longer guaranteed by the gold in the Central Bank’s vaults.

They’re now guaranteed by ‘national decree’.

This essentially means our currencies are guaranteed by things like the government’s reputation and the strength of the national economy.
Every year the government prints more money, reducing the value of the money already in circulation and therefore the value of their debt.

Fiat money therefore allows governments to run large deficits, helping them to spend more on social programs, hospitals, wars etc.
Over a period of decades, fiat money is a powerful tool for governments, but it’s bad for individual savers.

Printing money destroys the value of salaries and savings, while driving up the price of assets.
Fiat money forces individuals to either:

1. Spend their money
2. Take on risk by investing
3. Watch the value of their savings diminish

Therein lies the character of fiat money, and a lot of the weirdness we see in the world today.

Let’s pick them apart.
1. Fiat forces people to spend

The era of fiat has been one of mass consumption, increasing carbon emissions and environmental degradation.

You cannot separate climate change from fiat money.

If people had a simple, reliable savings vehicle they would not consume as much.
2. Fiat forces people to take on risk by investing

Leave your money in a savings account for more than a few years and watch its value disappear.

To even keep up with inflation you need to take on risk, often via the stock or housing market.
We have to invest our money, or our savings will disappear.

This means taking on risk with our hard-earned cash - the money we’d like to start a business with, put away for retirement or pass onto our kids.

If we’re going to take on such risk, we’d prefer to pay a professional.
The need to invest our money creates a need for an industry of professional money managers.

But wait a minute, that industry now has power over the money we need to start a business with, put away for retirement or pass onto our kids!
This is the financial sector.

It wields supreme power over our lives and the economy.
An industry which represents all of our pension funds simply cannot be allowed to fail, as we saw in 2008 when taxpayers bailed out the banks.

When govt cannot allow a sector to be punished by natural market forces when it behaves like the banks did.

Something is very wrong.
The financial sector would not be as big, intrinsic to the economy or immune from natural market forces if it weren’t for fiat money.
Fiat money influences what individuals do with their money.

Therefore it influences EVERYTHING in our society, from the bottom up.

But Bitcoin will disrupt fiat money, restoring individuals’ incentive to save and limiting the excesses of financial institutions.
Unlike fiat money, Bitcoin has a predictable inflation schedule.

12.5 new bitcoins are released every 10 minutes. This number will halve every 4 years, until 21M have been released. After that there will be no new bitcoins.

No third party or government can change this.
Unlike fiat money, Bitcoin incentivises saving.

Bitcoin’s deflationary supply schedule creates upward price pressure.

As Bitcoin becomes increasingly accepted and adopted it will change people’s behaviour, since they’ll finally have access to a safe place for their savings.
Unlike fiat money, Bitcoin gives power to individuals.

With fiat money, governments have power via control of inflation.

Banks have power because we’re forced to seek their products and expertise.

Bitcoin will move power from governments and banks to individuals.
You cannot overstate how influential Bitcoin could be.

It could change humans’ relationship with money, discourage overconsumption and shift where power resides in our society.

Money is being reinvented before our eyes.
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