What went wrong with money in the past? Why were some goods chosen to become money over others? In this unit, we explore how money serves as a coordination tool for society and how it arises in a bottom-up, spontaneous order. We also explore government intervention in the market for money. We will also discuss monetary history, what makes a good money, and why Bitcoin is well-placed to supersede prior forms of money. We will also talk about deflation and "hoarding", and Bitcoin's environmental impact.
Completing this unit should take you approximately 3 hours.
Explore Bitcoin in this seminal article by Vijay Boyapati. Many of the key value propositions and ideas of Bitcoin are discussed in this article. Why does Bitcoin not need "backing"? What are the origins of money? What are the attributes of a good store of value? What are the stages of evolution in a money?
Read this article by Dan Held. Proof of work might seem "inefficient" on its face, but in reality, it is what enables Bitcoin to be what it is and do what it does: enable a decentralized network of Bitcoin nodes to agree on the state of the ledger. Ultimately, it comes down to subjective valuation of what you believe the energy is "worth". Since energy is available and priced on the market, the fact that miners are able to use it cost-effectively is an indicator that it is not wasteful. What makes proof of work efficient?
Listen to this podcast episode (or read the transcript) with Dr. Philip Bagus, which explains the problems with the typical misconceptions about deflation. Listen out for the explanations around why deflation must be separated and understood in separate components. Growth deflation is beneficial to humanity, while "credit deflation" is typically feared and covered in mainstream news articles. Why is growth deflation good, but credit deflation feared?
Though some might critique the energy expenditure required for Bitcoin mining, the real comparison is against other monetary standards. Read this article to understand more about what is enabled by easy money standards. Also, note the parallels the article makes with gold mining and living under a gold standard.
Read this section on the West's monetary breakdown by Murray Rothbard. Are the monetary standards we live under today the result of free voluntary choice? If not, what were the government monetary interventions along the way?
Take this assessment to see how well you understood this unit.