These are some of my notes/musing that I scribbled down during the midst of the BTC craze of 2020/2021. Suffice to say, I am a BTC HODLER and believe in some of the ideological reasons for holding some stake in the cryptocurrency. At some point in the future, I might write a proper review of the Bitcoin Standard.
Easy money trap - if you increase monetary demand for a commodity( as medium of exchange or store of value) that also has a market demand, then the increase price causes supply to increase, eventually reducing prices and wealth transferrin from investors to producers of that commodity.
The stock to float ratio is critical for determining whether a commodity is a good store of value for wealth.
The rai stones on yap island in Micronesia - good example for rise of bitcoins . Also on how beads were used as store of value in west Africa and it was exploited by colonizers/
Decline of Roman Empire was also due to devaluation of currency - led to rise in feudal lords and serfdoms. Islamic dinar Countries such as India and China that conveyed to gold back later suffered
Time preference - how much individuals value immediate gratification vs investing in future. Animals have very high time preference, Individiauls with low time preference have more propensity to invest. The Stanford marshmallow experiment. Accumulating capital shouldn’t be the goal, but effective accumulation of capital allows society to progress and after meeting base needs, allows humans to explore more complex questions Lot of factors affect time preference, one of the biggest ones is whether money is sound or unsound, and whether it loses its value over time. Government issued money also leads to artificially low interest rates, which end up influencing societies to consume and spend more instead of i vestminh and saving , which also has long term consequences
The diatribe on modern art being funded by government money and not by low time preference money and how that’s affecting the quality of art was a bit too much lol. The link between zero to 1 and all technological advancements being made in the 19th century - very exaggerated.
The use of knowledge in society b Hayek - economic problem is not just allocation of resources, but allocation of resources in the face of incomplete knowledge .price is the information that allows people to effectively allocate resources. It also allows people to specialize in their own industry/vertical leading to reduction in prices.
Socialism’s problem isn’t the incentive problem(govts can force people to work), but it’s more about how do govts decide what goods and services to prioritize, and how might entrepreneurship rise
Capital markets in modern govts and how they operate - as interest rises, lending reduces leading to a reduction in money supply
In a capital market, opportunity cost of capital is foregone consumption, and opportunity cost of consumption is foregone capital investment. As people demand more investments,. Interest rate rises. As interest rate drops, it incentivized people to engage their savings in capital to produce more goods.
When central banks lower interest rates and increase money supply, they increase amoun of loan able funds available instead of incentivizing people to save more. Malinvestments - causing recession
Impossible trinity - no central bank can achieve all of fixed exchange rate, free flowing capital and independent monetary policy
Switch from liberalism to liberality after First World War - govts role to allow individuals to indulge but protect them from consequences
When deriding the cost of Bitcoin mining, an analogy can be made to Friedman and Keynes opposition to the resources gone into gold mining. However, the opportunity cost of money that is easy to print is far greater, since it diverts resources from productinh goods services that are actually off value
Banks role in sound and unsound money. In sound money, bank will always only face solvency issue and no liquidity crisis, but in unsound money, bank can be solvent but still cafe liquidity crisis. Fractional reserve marchingaturity mismatching
Difficult adjustment mechanism in Bitcoin makes the computations more difficult, thereby makin it more difficult to produce more bitcoins as price increases
Mises’ theory of regression states that a monetary good starts as a market good and then becomes a medium of exchange - happened with bitcoins too
Julian Simon- “hysteria” around world runnin out of resources etc
Michael kremer - technology is non excludable and non rival.
Bitcoin would be used as a settlement for digital currencies - allow financial institutions to back their assets in Bitcoin tokens that can be verified and prevent fractional reserve banking - would also allow people to circumvent the high transaction costs of Bitcoin while transferring transactions etc Most transactions are not recorded on -chain.
Bitcoins uses :
- store of value
- Individual sovereignity -
- Stttlememt of international transactions
- Unit of account
Dismissed off all other altcoins as malinvestments.
Blockchain tech can’t help the intermediates that it replaces.
DAOs implementation on ethereum, the hack and how ethereum was able to reverse.also smart contracts benefit people with know how about smart contracts