IS BITCOIN SOUND MONEY?

by birtanpublished on October 4, 2020

What's up crypto gang welcome back to another episode if you guys are new to the channel this is a channel where we hack our cryptocurrency education and we do a giveaway in the beginning of every single episode and today's winner is Sergey our thanks so much for commenting and liking the previous video Sergey just sent you some crypto on this episode I go through if Bitcoin is sound money after dozens of comments from you guys over the past couple of months about sound money economic theory Karl Marx all these different types of economic theories that have been coming up in the comment section because you

Guys figured out that I was an econ major in college I wanted to talk more about what sound money is the origin of sound money and what Bitcoin can do for us in the future and also a little tidbit about the classical gold standard the origin of money goes back a very long ways so I wanted to start with some simple examples for example there are two people one person has a chocolate chip cookie and one person has a peanut butter cookie those two people exchange at the same time neither or buyer or seller and they actually both walk away from that transaction with something

That they feel is more valuable this is more of the modern way of looking at economics where you have both parties walking away with something that they see more valuable than when they started in traditional economics there was Karl Marx's theory which was that when you put a certain amount of labour behind the product that was how it was priced in value so for example a deer would be priced differently if I were selling it compared to a beaver he's a beaver took four days to capture and a deer only took one day to capture so the cost of labor of that beaver was higher to get

So therefore the value in the marketplace was higher than the deer but things have changed substantially since Karl Marx came out with that concept of the cost of Labor going into different goods in the marketplace to show its value and things are more look now as far as the value leaving a transaction in both people how they view what they came out with so where it gets a little complex is when there are multiple people in a transaction that need different things so for example I'm teaching an economics course let's say to someone's daughter or son and that

Someone is a carpenter and that someone needs to figure out a way to supplement my ability to teach a course to their child and in exchange they will go to another party that needs woodwork done because I don't need any woodwork done right now from a carpenter so they would go to let's say a butcher because I want some canburger meter steaks or something like that so they would go to the butcher and they would say hey if I remodel your entire porch can you give me some hamburger meat that person would say yeah sure I need my porch remodeled and here's some hamburger meat it would

Go to the carpenter the carpenter would then pay me that hamburger meat and I would teach his child so incomes money and that is the equalizer across the board where if I'm providing value to the marketplace and I have this course that I'm trying to teach the carpenter's child then he can just pay me in money and I can pay for my hamburger meat people buying it with one method of exchange amongst all three parties involved is just a way better method of transfer in that comes fiat money and fiat money is something where each nation-state has a currency that they

Can use in amongst their citizens and everyone agrees upon accepting this because the next person next to them will agree to accept it for valuable goods now one of the most interesting things about money that I like to think about is around the fact of who invented it because it would be something that would be so earth-shattering when you remember back and you think oh that person invented money but in reality you just can't really think of who invented money and that's because it's a social construct amongst all the people in a nation-state that have agreed to accept

These little green pieces paper in exchange for their goods because someone else will accept that from them we look at this dollar bill what you're actually thinking about is will someone else take this dollar from me in exchange for goods so now from the psychological perspective what happens when you rip that dollar bill will that person next to me actually accept this dollar even when it's ripped so when a society agrees to actually use these pieces of paper for the exchange of goods and services amongst the marketplace what is backing these little

Pieces of paper this is when we dive into the classical gold standard and the classical gold standard if you guys aren't familiar with it is basically just the backing of the dollar to gold and that is gold that is mined out of the earth once upon a time people were just basically chopping gold in half they were divvying it up into pieces and they were using it to exchange in the marketplace it was a very sleek easy-to-use way of exchanging in the marketplace for your different goods when you have a currency that is backed by gold you are effectively preventing

The government or the regulating body that is controlling that currency from debasing or adding a tremendous amount of inflation to that currency so what I mean by inflation and by debasing the currency is that when for example in the 1920s if the price moved on the value that you could purchase in gold for US dollars if the price moved what would happen is that there were pounds also compared to gold because it's a gold standard and what would happen is there would be an arbitrage opportunity where you can purchase gold the United States ship that gold to the let's say London

And you could just exchange for pounds and that would debase the value of the US dollar that brings us up to 1971 when we decided to remove the classical gold standard and now the Fed prints off this money moves it in through the banking system people are able to get access to credit it the appearance of a flourishing economy and then you have this massive reception that keeps consistently happening like 2008 when a currency isn't backed by gold anymore you run the risk of having it be debased and these are not the things that you would think are fairy

Tales when you look at things like Zimbabwe and you look at things like Venezuela you look at these countries that have been absolutely devastated where for example today I sell my car for ten thousand US dollars and tomorrow everybody says hey this is actually not valuable anymore I'm stuck with this cash that is invaluable and I don't have a car anymore and everyone has agreed to not accept my currency anymore and I'm just out of luck I got a walk so to recap when it comes to the method of exchange money was implemented so

That the transactions of goods and services in the marketplace could be quantified and when we talk about quantifying these different goods and services for example Karl Marx he talked about the value going into a good was determined by the labor that went in to create that good and nowadays when we talk a lot about economic theory and for example the school the Austrian School of Economics we really determine a lot of the goods in the marketplace determined by the value that it creates for the person during the transaction and it also allowed for us to delay our

Transaction so for example if I sold you this econ course send me this money and I could not make a decision in my next buying decision for a week a month a year 10 years I can hold on to it so it's basically like a credit to society when you purchased my value that I put into the marketplace I then get money that I can hold for a longer period of time and have the ability to wait to make decisions and that's extremely attractive I've been passionate about economics for many years now and I love the idea of sound money coming into the

Marketplace and that's why when we talk about Bitcoin it is in fact something that can replace the gold standard it is something that people can rely on it is something that people can fully control and it does allow for everyone internationally to be involved we live in a digital world and paper money is definitely going away and psychologically we all need to come to terms with that the magic about Bitcoin is that for example you can send me a transaction today and I can keep it for a long period of time so it actually achieves that psychological barrier of

Making my transaction later I can put my value into the marketplace I can create my money from that value and I can hold it as credit to society all the people that are accepting this Bitcoin in this cryptocurrency I know that I can actually hold and wait and I can use it to exchange with different people in the marketplace one of the most interesting things that makes Bitcoin sound money is in fact it goes back to the traditional economic theory of the value of labour that you are putting in with the mining rigs you are actually expelling labour from your goods you are putting in labor

To redeem your value from the marketplace getting past that psychological barrier of the regular social construct that is money it takes everyone to get involved and the reality is is when small groups get involved and they get passionate about a sovereignty aspect of money you're going to see this network effect that ripples outward where when I was talking earlier about the transaction that took place between three people that transaction starts taking place with more and more people and it creates this metcalfe type network where you can literally transact

With anyone all across the world and you're not dealing with arbitrage opportunities because fiat currency being controlled and pushed through the banking system you really don't have to worry about that money losing value bitcoin is built-in with inflation and you're all set you know everything is transparent as possible and there's no one there that's printing off money without providing value to the actual marketplace a carpenter doing work and gaining value in the form of US currency whereas someone sitting there that has

The ability to just print that money there's a psychological barrier there that is a really big issue Bitcoin is sound money to review we went through how money was created to serve the marketplace we went through a little bit about the classical gold standard and we also went through the psychological aspect of money so that's it for this episode I hope you guys like it I'm gonna be doing a couple more crypto economic type videos around not only sound money but also around political aspects to money because there's a lot of really interesting pieces there

Around socialism but that is it for this episode I hope you guys liked it if you did please slap a like so that you let me know that you want to see more of these episodes and don't forget to leave a comment below with your thoughts and I will see you guys on the next episode of hack crypto

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