One of my favourite articles about bitcoin is Robert Breedloves’ “The Number Zero and Bitcoin”. There is one aspect in particular that I’m intending to focus on and explore as a concept. The idea is that bitcoin is not simply an invention by Satoshi, but it actually marks the discovery of absolute scarcity.
Nothing in this world is truly finite. Not land, as we will eventually be a space faring civilization, and not gold as there is tons of it in asteroids. So when bitcoin came into existence on January 3rd, 2009, not only did it mark the start of the experiment of decentralized money, but it marked the discovery of absolute scarcity.
This is all well and good to think about from a philosophical perspective, but what are the societal, and macro-economic implications of this discovery?
A Foundational Layer for Value
What is the world’s economic operating system? If you ask me, we’re currently running on USD 2.0. It’s a centralized, proprietary monetary operating system, much like Windows or Apple Operation Systems. These computer operating systems are in use in offices, governments, and personal computers, but neither one of them run the majority of the internet.
The dominant operating system for running the internet is Linux based. Linux is an open-source operating system that forms a foundational layer for the internet itself.
I would make the argument that bitcoin forms the foundational layer for value itself. Countries are free to select their monetary operating system, may it be EURO 1.0 or USD 2.0, but at the end of the day, bitcoin is the operating system that is going to knit together the internet of value.
Why is it important to talk about foundational layers? It is because foundational layers underpin the rest of our reality.
We’re lacking a fundamental unit of value
We have a fundamental unit of length - 1 Planck Length
We have a fundamental unit of time - 1 Planck Time
We have a speed limit of the universe - 299,792,458 m / s (Speed of Light)
Plank Time / Length named after Quantum Physicist Max Planck
These are all static, unchanging, units of measurement. Because they are static and unchanging, we can predict the outcome of dynamic systems using the math derived from these fundamental units.
But we have no fundamental unit for measuring value.
If such a unit were to exist, what properties would it have to have?
We would want the fundamental unit of value to be unchanging over time with respect to its total supply. The reason why we would want this is so we can peg the rest of our economic calculations to something concrete, tangible, and reliable.
Can you imagine what physics would look like if the speed of light changed over time? We wouldn’t be able to use physics to land lunar rovers, launch rockets, or calculate when an airplane will reach its destination. Einstein’s theory of relativity is entirely based on the speed of light not changing.
In contrast, our fundamental unit for measuring value (The Dollar) changes all the time. As more money is printed, the value of each unit goes down. It becomes difficult to get an accurate reading of value in general when the value of the units (dollars) themselves are unable to be determined. We need a static supply of money to reliably calculate the value of everything. In other words, we need a “Planck Value”.
1 Planck Value = 1 Satoshi
When scientists came to the agreement that the speed of light is 299,792,458 m / s, they simultaneously (but not until later) discovered irreducible fundamental units of length and time.
So when Satoshi Nakamoto found bitcoin, and set the total supply of bitcoin to 21 million tokens, they simultaneously discovered the irreducible unit of value. In keeping with terms used in physics,
I suggest that 1 Planck Value is equal to 1 Satoshi.
Economic Implications
If what I am suggesting is remotely true at all, then the implications are unlikely to be fully known or understood in the near future. It took centuries for the theory of relativity to emerge after the discovery that the speed of light is static. Similarly, it may take decades for us to properly reconcile what a fundamental unit of value means for economics.
Formally speaking, economics fits into the same category of mathematics as the movement of water, or the formation of complex weather systems. That field of mathematics is called chaos theory.
The price of goods in a marketplace is a constantly fluctuating set of numbers that is the result of millions, if not billions of actors each individually influencing the price. Having a static unit of value be at the centre of our economic models and theories would be useful, as it would turn what was previously a variable (value of a dollar), into a constant (value of a satoshi).
Keep in mind I’m speaking about the values of these units with respect to their total supply. The value of money will always fluctuate with respect to other goods. A unit of money, in my opinion, should never fluctuate relative to itself.
Measuring Net Worth
When you have an unchanging cap on the number of monetary units in existence, your net worth can only increase or decrease from your actions. That is, there is nothing anyone else can do (other than physically rob you) that would reduce your net worth in terms of bitcoin.
Another cliche way of saying this is 1 BTC = 1 BTC. This statement holds true regardless of whether we’re in the year 2010, or the year 2050. Compare this to the statement $1 = $1 and we get a different story depending on when that statement is made. Truly, $1 in 1903, is not equal to a dollar in 2021. This makes the dollar unideal for
Consistently measuring value
Accurately measuring net worth
Reliably determining the price of goods and services
Bitcoin is Becoming Money
I’ll end this letter with an acknowledgment that we’re still in the early stages of bitcoin. Bitcoin is in the process of becoming money, but it isn’t there yet (at least not for all of us).
Just like it took several centuries for the theory of relativity to be conceptualized, developed, and integrated into society, I do believe that it will be decades before the true gravity of the discovery of absolute scarcity is integrated into our economic and financial systems.
Let me know your thoughts on this piece in the comments.
Regards,
Keegan
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