Add Lecture 01: What's money and why it breaks#1
Add Lecture 01: What's money and why it breaks#1edilmedeiros wants to merge 9 commits intomasterfrom
Conversation
In which we discuss what's money and why it breaks. It's not intended to be a historically accurate account of money development, but to provide some intuition of problems related to money that Bitcoin tries to address.
| their acceptance does not depend on knowing or trusting the previous holder. | ||
| Furthermore, because their value is based on general expectations of future acceptance rather than personal obligation, they become more universally recognizable as mediums of exchange. | ||
| Throughout history, societies discovered that natural goods such as shells, stones, cattle, salt, and beads could serve this role. | ||
| Over time, precious metals like gold and silver emerged as especially favored intermediaries, particularly in ancient Greece. |
There was a problem hiding this comment.
Maybe add that while there was no coinage back in 3500 BC Mesopotamia, silver was used as a UoA. From Debt: The First 5000 Years, p39:
The Sumerian economy was dominated by vast temple and palace
complexes. These were often staffed by thousands: priests and officials,
craftspeople who worked in their industrial workshops, farmers and
shepherds who worked their considerable estates. Even though ancient
Sumer was usually divided into a large number of independent citystates,
by the time the curtain goes up on Mesopotamian civilization
around 3500, temple administrators already appear to have developed
a single, uniform system of accountancy-one that is in some ways
still with us, actually, because it's to the Sumerians that we owe such
things as the dozen or the 24-hour day. The basic monetary unit was
the silver shekel. One shekel's weight in silver was established as the
equivalent of one gur, or bushel of barley. A shekel was subdivided
into 60 minas, corresponding to one portion of barley-on the principle
that there were 30 days in a month, and Temple workers received
two rations of barley every day. It's easy to see that " money" in this
sense is in no way the product of commercial transactions. It was actually
created by bureaucrats in order to keep track of resources and
move things back and forth between departments.
There was a problem hiding this comment.
That would be a nice addition, but I'm not trying to be historically precise or comprehensive on the text. Can't see how more details will add to the story that money is a human technology that assumed many forms and to the problems of the current fiat form.
|
I believe this is ready for review and I'll start to integrate suggestions made here as commits on top of d16f466 |
Co-authored-by: Luis Schwab <97608688+luisschwab@users.noreply.github.com>
| Imagine two individuals, Alice and Bob. | ||
| Alice is an electronics teacher, offering specialized lessons to those interested in learning about circuits, semiconductors, and signal processing. | ||
| Bob, on the other hand, is a farmer who grows carrots. | ||
| One day, Alice goes to Bob in a fair and offers an introductory lecture about the problems of money and how Bitcoin addresses them in return for a some carrots. At first glance, the exchange seems promising. |
There was a problem hiding this comment.
| One day, Alice goes to Bob in a fair and offers an introductory lecture about the problems of money and how Bitcoin addresses them in return for a some carrots. At first glance, the exchange seems promising. | |
| One day, Alice goes to Bob at a fair and offers an introductory lecture about the problems of money and how Bitcoin addresses them in return for some carrots. At first glance, the exchange seems promising. |
| The inefficiency is so profound that Alice might eventually abandon teaching altogether, turning instead to a more commonly needed activity, such as growing vegetables herself. | ||
| Society, in this way, does not benefit from specialization: | ||
| individuals are pressured to conform to more universally tradable goods and services rather than developing and offering unique talents. | ||
| We would not have the complex information-driven society if not for more powerful economic tool on our belts. |
There was a problem hiding this comment.
| We would not have the complex information-driven society if not for more powerful economic tool on our belts. | |
| We would not have the complex information-driven society of today if not for a more powerful economic tool on our belts. |
| Inflation is not neutral: | ||
| those who first receive new money can purchase goods before prices adjust, gaining an unfair advantage. | ||
| This is called the Cantillon Effect. | ||
| Since governments always tried to control currency, they were always in a privileged position when we talk about inflation. |
There was a problem hiding this comment.
| Since governments always tried to control currency, they were always in a privileged position when we talk about inflation. | |
| Since governments have always tried to control currency, they were always in a privileged position when we talk about inflation. |
|
|
||
| While IOUs improve barter by introducing an intermediate good, they still rely on the trustworthiness and future actions of specific individuals. | ||
| This dependence limits their usefulness, especially across broader communities where personal reputation cannot be easily verified. | ||
| A natural solution is to adopt "neutral" goods—objects that are not promises of future action but tangible, transferable items. |
There was a problem hiding this comment.
| A natural solution is to adopt "neutral" goods—objects that are not promises of future action but tangible, transferable items. | |
| A natural solution is to adopt "neutral" goods—objects that are not promises of future action, but rather tangible and transferable items. |
| In that sense, money is part of human nature: | ||
| not because it is biologically programmed, but because it emerges wherever humans trade, plan, and specialize. | ||
| It is a natural consequence of living in a society where cooperation and temporal deferral of value are essential to progress. | ||
| Wherever people act under scarcity and seek to improve their condition though trading, money—or something like it—will arise. |
There was a problem hiding this comment.
| Wherever people act under scarcity and seek to improve their condition though trading, money—or something like it—will arise. | |
| Wherever people act under scarcity and seek to improve their condition through trading, money—or something like it—will arise. |
|
|
||
| Nick Szabo, "Shelling Out: The Origins of Money," 2002. | ||
|
|
||
| (The Cantillon Effect: Because of Inflation, We’re Financing the Financiers)[https://fee.org/articles/the-cantillon-effect-because-of-inflation-we-re-financing-the-financiers/] |
There was a problem hiding this comment.
| (The Cantillon Effect: Because of Inflation, We’re Financing the Financiers)[https://fee.org/articles/the-cantillon-effect-because-of-inflation-we-re-financing-the-financiers/] | |
| [The Cantillon Effect: Because of Inflation, We’re Financing the Financiers](https://fee.org/articles/the-cantillon-effect-because-of-inflation-we-re-financing-the-financiers/) |
2 participants
In which we discuss what's money and why it breaks. It's not intended to be a historically accurate account of money development, but to provide some intuition of problems related to money that Bitcoin tries to address.