Thread by @JohnCantrell97

To truly understand why we need Bitcoin it’s important to understand money itself.

What is money?
Why do we need it?
Why Bitcoin?

There’s many books written on these topics but let me try to break it down for you:

At the core of any economy are people who perform work that produces value for other people.

A farmer grows food for us to eat.
A painter creates art for us to enjoy.
A mechanic fixes our car so we can travel.
A teacher educates our children so they can prosper.

Without money the mechanic can only eat if the farmer needs his car fixed.

Each person needs to want what the other is producing at the same time.

A teacher only needs their car fixed so often but the mechanic needs his children educated all of the time.

In addition to having what each other wants at the same time, they need to value each thing roughly the same.

This is very difficult to do in practice.

How do you value fixing a car against a teacher educating children?

There’s not an easy way for them to trade.

Money solves this problem by having something that can store the value being created by the worker to use at a later time and in amounts that make sense.

So what should we use as money?

Well some things are obviously not good choices.

If we tried to use grains of sand as money it would definitely help us keep track of how much value each person has and let us use amounts that make sense.

However, there is so much sand all over the Earth that it is very easy for people to get sand for work they didn’t do.

If we tried to use something like cars for money we’d run into the problem that they are not easy to divide into the right amounts.

We’d also see that not all cars are the same and some people would value certain cars more than others.

We can start to see what makes good money.

Good money is divisible so we can use exactly how much we want at a time.

It is fungible meaning each unit of the money is no different than the other.

It is limited in supply in that people can’t just go find more of it without doing the work first. It’s easy to carry around.

We might settle on something like gold or other metal coins.

These can be melted down and divided into specific sizes.

Each coin can be made the same size and likeness.

If we pick the right metal there is fairly limited supply on Earth. Coins are also easy to carry around.

Metal coins are decent money and were historically used for these reasons.

One of the problems is that while it’s easy to carry around a small amount of coins it’s still difficult to carry, store, or move large quantities of these coins.

How can we make this easier?

Let’s introduce a trusted community member (e.g a bank) that will hold all of our coins and will give out paper money for each coin we store at the bank.

This paper money is much easier to store and carry around.

We can always redeem the paper at the bank for our coins, right?

This paper money appears to work well, for a while.

It introduces a big problem though.

There’s a single trusted entity that is both creating the paper and holding all the coins.

There’s nothing stopping them from creating more paper than coins they have.

If they do this slow enough then no one will notice.

They can create more paper and slowly give it to themselves, their friends, their family, and certain businesses.

Everyone close to them loves it.

When they see how easily they can print they quickly get addicted to it.

Before too long the people who think they are storing the value produced from all of their hard work in this paper money realize that the paper money is not getting them as much as it used to.

It seems to be losing purchasing power.

What once got the mechanic three bushels of corn from the farmer is now only getting him a single bushel.

The more paper that is printed the higher the prices of the goods and services go.

The more value the people doing the work are losing.

This is the problem Bitcoin solves.

It is similar to the metal coins in that it’s divisible, fungible, and limited in supply.

However, it doesn’t have the problem that metal coins have of being hard to carry, store, and transport in large quantities.

Bitcoin is digital money.

You can carry, store, and transport large amounts of it just as quickly and easily as you can small amounts.

It doesn’t need a trusted party or bank to hold it for you.

Everyone can hold and transact the value they produced without anyone else.

All of the value their hard work produces can safely be stored in Bitcoin without the worry of some bank or government inflating the supply.

The supply schedule is known in advance and has a fixed total supply.

It’s the best form of money to ever exist.

I hope this helped you understand a bit more about why we need Bitcoin.

This information is extremely important for the world to understand so please share this post if you found it informative.