Bitcoin is the best sound money (#cryptoeducation)

Throughout history there have always been various iterations of sound money, from the Rai stones of the Yap islands to the gold standard.

However, sound #money has lost its meaning in the last century since #USDollar lost his peg to gold in 1971. What we have seen since then is unbelievable credit expansion through central banking fractional-reserve policies that lead to endemic inflation.

But I need to put myself in the box now as this article is about explaining to all of you what the sound money is and why #Bitcoin is the the best #soundmoney out there and not another cry-out of my about the irresponsible actions of the central banksters.

What Defines Sound Money?

Let me start from giving you a definition of #money and then I will explain what the sound money is and what characteristics money should have to be sound.

Investopedia defines money as: a medium of exchange; it allows people to obtain what they need to live.

So what is sound money?

Sound money is money that is not prone to sudden appreciation or depreciation in purchasing power over the long term and its purchase power is determined by a free-market.

Money to be sound, it needs to be 'hard' rather than 'easy'.

Easy money is what constitutes national fiat currencies today as their supply can easily be expanded, drastically reducing their value over time and making them a highly ineffective store of value.

I will give you an example:

The #USD is ‘easy money’ because the Federal Reserve (#fed) can expand the money supply through inflation as the government sees fit, to expand credit for public spending or bail out industries e.g. in global financial crisis of 2008 or during the recent crisis in 2020 - trillions with the big T (not billions) USDs have been printed and circulated to the #economy.

The result?

Well refer to my other articles where I talk about inflation and irresponsible actions of government & central banksters.

Hard money e.g. #gold has a high stock-to-flow?ratio, meaning that the supply of the value in existence is significantly higher and consistently maintains a high ratio of how much is in circulation compared to how much can be injected into the circulation over any given period.

Historically, gold was the most well-established sound money not solely because it is rare, but because of the time and effort that is required to mine it is profound, making the introduction of more gold into the global gold supply relatively consistent and very low compared to the overall amount already available. As such, gold cannot be easily inflated and subsequently devalued.

The gold standard provided a stable price mechanism for international trade to function without the incessant need for competing devaluation of nationalized currencies that is so prevalent today.

Without sound money, people’s savings, consumer prices, and the overall economic direction of a country are at the whims of the entity that controls the money supply, meaning it is in the hands of central banksters.

How Bitcoin Is Sound Money?

Bitcoin (#btc) represents sound money for the #digital age and while it is still very young, presents an undeniably fascinating case for a new form of value that is resistant to #inflation, outside of the control of any single entity, highly divisible, and transferable to nearly anywhere on the globe with wifi connection or not.

The amount of Bitcoin is capped at 21 million and is governed by an algorithm that cannot be altered to inject more Bitcoin at a rate more than the elegant and predetermined value that is built into the protocol, which halves the supply roughly every 4 years.

As such, Bitcoin’s stock-to-flow ratio gradually increases, meaning that its stock-to-flow ratio will eventually reach an immense level once the last bitcoin is mined.

That is the definition of ultimate hard money.

Bitcoin is also #decentralized, meaning that it is not subject to arbitrary policy decisions or needs of governments, third-parties, or malicious actors intent on destroying it as there is no single point of failure.

Further Bitcoin is governed by a social consensus layer, where the users determine what Bitcoin is, and the protocol just enforces the abstractly agreed-upon rules of the community sentiment.

Bitcoin as a means of value exchange is unprecedented. There has never existed a mechanism for transferring sums of value (large or small) to other parties across the world with settlement in minutes (now with Lightening Network the settlement is instant - yes INSTANT).

Moreover, if you retain control of your private keys, the available funds are instantly yours, and there is no need to deal with trusted intermediaries, mitigating any capacity for censorship.

This is the primary advantage that Bitcoin holds over gold as it is divisible into a satoshi unit that can be transferred without custodial services at the discretion of the users through the disintermediation of trust.

Conclusion

Sound money has evolved throughout history. To view government issued fiat as the final destination of what constitutes value is to ignore the dynamic nature of technology and the willingness of people to protect the fundamental principles that they strongly believe in.

Bitcoin meets all of the prerequisites for sound money and is built for the digital age of the Internet, a vast improvement in transferability and personal sovereignty of value.

As a side note, if you have a chance to read The Bitcoin Standard?by Saifedean Ammous, I would highly recommend it, no matter what your background is, as it provides some crucial context on sound money and Bitcoin's?place in monetary history.

Ok that is it for today. If you managed to get to this point, first of all, congratulations! secondly please let me know in the comment section if own Bitcoin as part of your investment portfolio?

My aim is to have these articles short and sweet so I am deep diving into the topics I write about BUT I am always happy to connect and discuss them in more depth.

So if you want to know more feel free to use the comment section below or just DM me if you are shy.