I’ve been thinking about bitcoin off and on since approximately 2017. More intensely since about Dec 2020. Here is a short distillation of my thoughts. 

My main interest in bitcoin is not bitcoin itself but its characteristics of being “hard” currency. Currency that can not be debased or inflated for use by a central authority. Beyond that, bitcoin itself has very few special properties. Any economic research that is interested in sound monetary policy applies to bitcoin, of which there has been much. 

But Bitcoin does have a few key properties that give it great benefits as a sound monetary unit. 

Bitcoin is much better than gold, the historical hard currency, as a hard currency. 

It has 3 key features. 

One. It can be purchased or transacted from your home, or anywhere else with internet access, to anywhere else with internet access. I can send bitcoin to anyone in China, Haiti or Argentina, or next door. 

Two. It can be split into much smaller pieces than gold. The smallest unit of a bitcoin is a Satoshi. With $1 you can buy ~ 2100 satoshis today (when 1 full bitcoin is worth $~$46,000)  whereas transacting in gold in small useful units is basically impossible. You cannot really buy $1 worth of gold or even $100. 1 oz of gold is nearly $1k. 1 gram of gold is still ~ $60. That is not a useful transaction unit at all. 

The third is that bitcoin has a hard fixed amount that will ever be created. Gold is not truly scarce in the universe. While mining gold is difficult and allows a relatively fixed amount. There is still growth in the total gold supply each year and potential to find new deposits at any time or get a massive amount from asteroids in space. In contrast, Bitcoin is capped at 21 million bitcoins that will ever exist, providing ultimate scarcity. 

For a primer on bitcoin, I recommend the Fidelity Paper “Bitcoin First”. 

“Sound money not only imposes fiscal discipline upon government, impeding reckless federal spending and imprudent warfare, but it also provides a stable unit of account, store of value, and medium of exchange for entrepreneurs, businesses, and individuals.” 

If you have any interest in talking about bitcoin let me know!