Q&A series on basic concepts of Bitcoin (Part 8)

8. Flaws and Innovations of Currency

1. Three application characteristics of currency

stored value

medium of exchange

scale of value

2. The above definition cannot accurately measure economic growth

The ruler requires the scale to be constant

The ruler itself is objective to the measured object

3. The rules of currency issuance

Currency issuance must equal economic development

4. Both the gold standard and the fiat currency do not meet the requirements of currency issuance

5. Currency is not a means for the government to develop the economy

5.1 Employment is not a monetary matter

5.2 Currency is neutral

5.3 Currency life-saving

5.4 How to respond to the Great Depression

5.5 The state borrows money directly from the people

6. Reconstructing the social theoretical system after the Bitcoin standard

written in the back

In “Questions and Answers on Basic Concepts of Bitcoin IV,” the currency concept of Bitcoin was discussed. The reader pointed out that I only talked about the currency characteristics of Bitcoin. Still, the concepts of air currency, credit currency, token, and virtual currency involved in the article are not defined, which is confusing to read. I was teasing out the concepts used for Bitcoin, citing other people’s stuff wherever you can find it. Based on reader feedback on whether the underlying concepts are further explained. This section will focus on currency, introduce the questions not covered in this chapter, and expand to the answers to the basic concepts of finance, which will be used as a further supplementary answer to ” Bitcoin Basic Concepts IV.”

 I did the same as Satoshi Nakamoto putting the cart before the horse. First, put forward the Bitcoin standard scheme and then explain the basis for the formation of the scheme step by step. Then, like Mises’ regression law, it returns to the initial state step by step.

1. Three application characteristics of currency

Currency evolved from bartering. So there are many types, and the definition is very broad. Currency has many characteristics, such as subdivision, preservation, scarcity, etc. The purpose of money is to measure value. What is value? Do not discuss this here.

In modern times, from the perspective of being conducive to social development, the definition of the narrow function of currency must have at least three functions:

(1) Stored value: It measures the value of durability, scarcity, convenience, non-wearability, etc. All items that can store value and trade have stored value. In the era of barter, this function is enough. However, it is very difficult to conclude a transaction, that is, lack of versatility and convenience. When society progresses, and more things are exchanged, bartering cannot meet the requirements.

(2) Trading medium: the measure is versatility and convenience. Gold has high versatility, but the convenience of trading is not enough. A currency with only these two characteristics is a failure. Because of the accelerated pace of modern times, there is a contradiction between convenience and volatility. In the blockchain, bitcoin and Ethereum trading pairs are gradually eliminated because of too much volatility.

(3) Value scale: its volatility should not be felt by traders. That is the real-time correction of the scale, achieved through the futures trading of currencies. The power of the market guarantees the fairness of transactions in the short term.

The above is the definition agreed upon by most scholars in economics and finance. very sorry,

2. The above definition cannot accurately measure economic growth

As a ruler, there are two basic requirements:

(1) The ruler requires the scale to be constant.

(2) The ruler itself is objective to the measured object.

Regardless of the legal currency or the gold standard, the measurement of the economy obviously does not meet these two measurement conditions.

Human beings have come to this day, and the definition of currency function is not accurate and perfect. All the financial chaos is born from this. The ruler can only do the work of the ruler. The decision-maker makes the ruler longer for a while and shortens it for a while, which is just juggling. Juggling has a theory labeled as orthodox through the Nobel Prize.

It is easy to agree that measuring by modifying the scale is nonsense and the work of a liar. However, isn’t it nonsense to revise the monetary scale so it can be enlarged by 2% yearly? Not a liar?

The practice has proved that, so far, no monetary system can meet the requirements of the above two goals.

Is there any objective thing that can measure the economy? Satoshi Nakamoto tried to create a ruler to measure economic development. It is what Bitcoin is about.

3. The rules of currency issuance

Currency issuance must equal economic development

The value of this currency system is only when currency issuance must be equal to economic development. Through blockchain stable currency, human beings finally found the bitcoin dollar standard solution.

On the Bitcoin-dollar standard, Bitcoin is an objective object to measure the economy, which meets the requirements for a ruler as an objective object. Because it is different from the gold standard and legal currency and does not participate in the economic transaction process, it grows naturally with the economy. It relies on market regulation to maintain synchronous growth with the economy. Measuring economic aggregates, Bitcoin rises with the total economy. The U.S. dollar is immutable as the yardstick of Bitcoin endorsement. Scale stabilization by the Federal Reserve meets the requirements of the scale unchanged. Solve the defect of the gold standard and legal currency as one currency and two uses.

4. Both the gold standard and the legal currency do not meet the rules of currency issuance

Gold as a currency subject to the constraints of mining equal economic development is impossible. The issuance of legal currency is mediated according to the feedback of economic data, which is constrained by the principle of uncertainty, which often leads to overshooting. The number issued itself is a 2% inflation model. That is a model that exceeds economic growth by 2%.

Inflation lowers the real income of those on fixed money incomes, lowering their actual standard of living. Inflation will reduce long-term savings’ real value, harming depositors’ interests. It is an obvious fact.

Keynesian theory has a positive significance in solving deflation. However, the economic crisis that broke out in many countries in the late 20th century showed that Keynes’s theory had oversimplified and underestimated factors, forming theoretical loopholes. It also gave birth to Bitcoin.

Currency issuance must be equal to economic development, which is impossible under the gold standard and legal currency mechanism. Only when Bitcoin is regulated by the market, while the central bank regulates stablecoins, can the problem of inflation be solved and currency issuance equal to economic development.

5. Currency is not a means for the government to develop the economy

It is wrong for governments to use monetary policy as a tool for economic development. The use of money by the government should be the same as the financial operation of the family, based on the principle of living within one’s means. Excessive borrowing is a risk for households. Why can countries borrow excessively?

5.1 Employment is not a monetary matter

The employment problem is not a financial problem but a problem to be solved by the government. Inflation should not be used to solve the employment problem. Economic development should develop naturally while the monetary scale remains unchanged. There should be legislation prohibiting the government’s power to move the scale.

5.2 Currency is neutral

Because monetary policy is not a panacea. Monetary policy can solve the liquidity crisis in the financial market, but it cannot cure the problems of the real economy. Just as Friedman said when explaining stagflation, in the long run, money is neutral.

5.3 Currency life-saving

Under the conditions of the Bitcoin standard, currency can only be used as a life-saving medicine and cannot be used as a convenient means of regulating the economy.

5.4 How to respond to the Great Depression

The most classic of this problem is that the Japanese economy does not grow. If the population is deflationary, should the economy grow or shrink? The liquidity crisis is a financial problem; it is in accordance with the method of Article 5.3.

The economy grows naturally, just like the natural growth of enterprises. A country, like a family, will go bankrupt, and the failure of a government to operate will bear the same consequences as a business. There will be mergers and acquisitions to the country, just like corporate mergers and acquisitions. The great unity of humanity is through mergers and acquisitions rather than wars.

5.5 The state borrows money directly from the people

In the Bitcoin standard, the country directly borrows money from the people and pays interest directly to the people. The Fed is no longer buying U.S. Treasuries.

6. Reconstructing the social theory system after the Bitcoin standard

In the eyes of Satoshi Nakamoto, the current financial and economic theory is ridiculous. However, since Bitcoin was not invented, the legal currency is the optimal solution for human beings. There will be no monetary theory in the future, and both economics and financial theory will be rewritten.

The most important thing is to restore currency neutrality. Do we humans have a theory about rulers? There are only different forms of rulers, tape measures, rulers, etc., and the skills to use them. Scholars who study numismatics are also among the ranks of unemployment.

written in the back

This series provides the conceptual explanations and summaries needed to read chapters 10-13 of the article “Invite Satoshi Nakamoto to welcome the new world” and the previous article Q&A 1-10. This article further answers “Questions and Answers on Basic Concepts of Bitcoin IV.”

1. Full-text links

This article was published in Bitui Serial.

Chinese link:


English link: https://en.bitpush.news/?s=Weisha+Zhu

2. Supplementary video explanation (over the wall in China)

This series of articles has been explained on Sun TV, and the articles and TV explanations are complementary.

The TV show is the interpretation of the point of the article. Broadcast schedule: The broadcast schedule is as follows:

Every 1, 3, and 5, Beijing time noon.

Sun TV’s link is as follows:

The whole program is divided into two parts. The first part proves who Satoshi Nakamoto is, and the second part is about the Bitcoin standard. The program will continue, followed by discussions and Q&A, hoping to form a Bitcoin-based theoretical system. Users are welcome to leave messages in the TV comment area, and viewers will be selected to participate in the conversation.

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