Welcome to ECON105: Hard Questions on Hard Money. Applying the framework of Dr. Ammous' book "The Bitcoin Standard", this course takes the analytical framework of The Bitcoin Standard and applies it to related concepts such as the economics of fiat food.
In the first unit of this course we focus on analyzing banking in a Bitcoin economy, in particular, whether a fractional reserve banking system can be developed on top of Bitcoin or not. Is fractional reserve banking necessary for a growing economy? Can fractional reserve banking survive in a free market? In unit 1 you will explore the answers to these questions. This course examines how Bitcoin’s monetary properties behave in various types of financial crises.
In units 2 and 3 we discuss environments where Bitcoin can continue to grow as it is further monetized. If Bitcoin were to indeed become a global money, how would that come to be? These units argue that Bitcoin is unlikely to cause hyperinflationary collapse in credit money because its continuous growth would likely reduce the creation of credit. We will consider the possibility that Bitcoin’s growth would be a more orderly technological upgrade that allows for the demonetization of debt and widescale reduction of indebtedness.
In units 4 and 5, we explore Bitcoin mining, its role in securing Bitcoin, and its impact on energy markets. Mining difficulty adjusts based on network hash power, and miners can source electricity globally, which encourages the development of off-grid energy and likely leads to cheaper energy production. These units explain how difficulty adjustments price out miners with high electricity costs, making Bitcoin mining profitable at lower electricity costs.
In unit 6, we study the link between fiat money and food quality. We explore how the shift to centrally-planned money in the twentieth century impacted food standards and how interest rate controls incentivize industrial agriculture for short-term gains but deplete soil over time. Government policies have also driven mass production of industrial foods to combat price increases, often at the cost of nutrient content and safety.
In the course’s seventh unit, we explore Bitcoin’s chances for survival. We examine scenarios that could cause its destruction, such as software bugs, government bans, or insufficient fee-generated security. Unit 7 argues that Bitcoin is difficult to destroy without undermining the economic incentives for using it, discussing two scenarios: improved government monetary policies or a hyperinflationary collapse of national currencies before Bitcoin achieves significant liquidity.
In units 8 and 9, we examine how Bitcoin might aid poorer countries. Beyond small payments, Bitcoin’s real impact for the developing world lies in providing a non-political, technical solution for building a global financial system. Persistent balance of payment issues and hyperinflation in many developing countries may be tied to relying on national currencies as global reserves.
Custody and credit allocation are essential services in most financial systems and will likely remain so in a Bitcoin economy. The demand for Bitcoin as hard money may exceed its on-chain transaction capacity, making second-layer solutions necessary. Unit 10, the course's final unit, expands on layered scaling, focusing on the economics of second layers like the Lightning Network and factors driving its growth..
