The fact that Bitcoin has succeeded is beyond dispute. Bitcoin has lasted 9 years. Bitcoin has a $100B+ market cap. Bitcoin has had better uptime than almost anything else and has spawned a pretty large ecosystem of businesses, open source projects and investors. Perhaps most tellingly, Bitcoin has also spawned a large number of imitators that compete against it.
What’s not obvious is why Bitcoin works or has value in the first place. We know that Bitcoin has value, but what gives Bitcoin value? We know that Bitcoin acts like money but why does it act like money? We know the mechanics of how Bitcoin works, but why does Bitcoin work?
As far as what I thought of the book, it’s very entertaining, and the book is worth buying just for the history of money alone. The thoroughly researched and logical explanations of what makes money useful were very insightful and the second and third order effects of monetary policy were well explained. This book is joining the select books that I reread every couple of years such as Taleb’s Antifragile.
If you don’t like spoilers, please stop here, read the book and come back. If you like reading about my take on some of the ideas as a way to evaluate whether you should read the book or not, please continue. With that out of the way, let’s take a look at some of the really powerful ideas from the book itself.
Inflation Factors in Heavily into Time Preference
Time preferences are critical to how a society functions. A high time preference person wants things now or as soon as possible. A low time preference person is willing to forego things now for something better later.
A bunch of high time preference people will not think very much about the future. Instead of saving for tomorrow, they’ll spend now, consume and not be very productive. They won’t be saving for tomorrow, starting businesses or building large scale projects as they all require a lot of planning.
As they say, Rome wasn’t built in a day. Building civilization with all the systems and large capital projects require lots of people that have a low time preference.
Source/More: Why Bitcoin Works – Jimmy Song – Medium