We Never See Nothing

On the Futurati Podcast we recently interviewed rising star Eric Yakes, and much of the discussion centered around this question. He thinks that there are plenty of major challenges to overcome, but Bitcoin is a better form of money and has at least some chance of displacing the dollar.

Other Questions Covered

What makes bitcoin a good store of value?

• First, we must understand what money is. Money is a commodity that is scarce, durable, divisible, and fungible, and compared to other goods it has the lowest diminishing marginal utility. A good money is salable across time, space, and distance, and these dimensions correspond to money’s role as a store of value, medium of exchange, and unit of account, respectively. The fact that bitcoin is scarce and durable means that it is likely to hold its value over time, and it is therefore a good store of value.

Even if Bitcoin is a superior money, doesn’t the fact that the dollar has a vast network of users mean that bitcoin will struggle to displace it?

• It’s certainly true that the dollar is backed by the largest military in the world and used nearly everywhere. But in recent decades multiple countries have noticed that the prevailing dollar-focused monetary order has not benefited them, and have begun looking for alternatives. This has only accelerated with the weaponization of SWIFT in light of the recent Russian invasion of Ukraine. None of this guarantees that Bitcoin will be what replaces the dollar, but it does represent an opening of cracks in its otherwise unchallenged dominance, creating opportunities for some alternative to begin establishing a parallel network of users. If Bitcoin can first become one of the options, then outcompete the others, there’s at least a plausible pathway to its becoming a global reserve currency.

What is the 7th property of Bitcoin?

• Immutability. Bitcoin has the other properties of money, but it would the first immutable currency. This would reduce important forms of moral hazard and make Bitcoin a nearly ideal base layer money.