Episode notes
Location: Skype
Date: Monday, 6th January
Project: Unchained Capital
Role: Head of Business Development
Welcome to The Beginner's Guide to Bitcoin
Bitcoin can be intimidating for beginners. The protocol is complicated, the community can be aggressive and unforgiving, silly mistakes can lose you money, and it is easy to succumb to altcoin marketing.
Bitcoin does though, offer you the opportunity to hold a new type of monetary asset, one which can't be seized by the government and is censorship resistance and It has the potential to change the way the world.
The goal of What Bitcoin Did has always been about making things simple; there are no stupid questions, and the show is here to help beginners navigate this new world. To kick off 2020, we are launching a special series to help beginners understand Bitcoin. We will be looking at the basics from breaking down the protocol to explaining the economics and discussing the potential societal shift.
Part 2 - What is Money with Parker Lewis
As the old adage says: money makes the world go round, but why? Money allows for free trade between people, solving the double coincidence of wants problem.
To facilitate trade, early money took many forms: from Rai stones to salt to shells. The characteristics of base metals quickly led them to become the dominant form of money once introduced, with gold being the most valued.
In the 1800s, both the UK and the US, as well as many other countries, implemented a gold standard, allowing banks to issue paper money to represent the gold that they held in reserve. The gold standard maintained gold as a hard currency but with paper bills solving the problem of transporting heavy bullion and divisibility.
In the 1930s, during the depression, the US government devalued gold and made it illegal to own privately. In 1931 the UK abandoned the gold standard, and in 1971 the US severed any remaining ties to it. This marked the beginning of the current era of money.
Whereas gold has the characteristics of sound money - it is durable, divisible, fungible and scarce, the new fiat monetary system didn’t and therefore was open to abuse by government. With its infinite supply, it misses the key characteristics of sound money, scarcity and cost of production.
Bitcoin has all the characteristics of sound money; however, in one key area, it far exceeds gold - transferability. In a digital age, Bitcoin is sound money that can be sent over the internet and has the potential to change the nature of money for everyone.
In part 2 of The Bitcoin Beginner’s Guide, I talk to Parker Lewis head of business development at Unchained Capital. Parker answers the question, what is money? We also discuss the history of money and the characteristics of sound money.
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Glossary
- Block time - A block that contains Bitcoin transactions is produced on average every 10 minutes.
- Block reward - Each time a miner solves a block they receive a block reward. Currently 12.5 BTC
- Halving - Every 4 years the block reward halves. The next halving is due in May 2020
- Fungibility - The ability to divide something and each of its parts is indistinguishable from another part.
- Stock to Flow - The ratio between the current supply and the production of new supply
- Gold standard - When the central banks issued paper money to represent the gold that they held in reserve.
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