This blog is all about Bitcoin.
I can tell you two things for certain about Bitcoin:
It's not going away.
You are better off understanding it sooner rather than later.
So what is Bitcoin?
It’s a peer-to-peer electronic cash system launched in 2009. It represents an entirely new form of money — one that operates outside of governments and central banks, and is governed by software and mathematics instead of committees and policies.
But to understand Bitcoin, you first need to understand money. What it is. How it works. And how it's changed over time.
That’s where we begin.
The problem of coincidence of wants
Money is the solution to a problem: the coincidence of wants.
Imagine living in a world without money. You want to trade your apples for someone else's bread — but what if they don't want apples? This is the "coincidence of wants" problem: two people must each have something the other wants, at the same time, in the right amount. It's a three-part problem.
Coincidence of things: You must want what they have, and they must want what you have.
Coincidence oft time: The wants must align at the same time — if someone wants your apples next week but you want bread today, the trade fails.
Coincidence of amounts: The trade must make sense in scale and value — what if your apples are worth more or less than their bread?
These mismatches make trading unlikely and inefficient, limiting economic activity and cooperation.
Money is a civilizational-level technological innovation — a shared tool that solves these problems by acting as a universally accepted medium of exchange. It allows people to transact freely, without needing their wants and offers to perfectly align in item, time, and value.
To understand how money works in practice, it helps to break down the roles that money plays in an economy.
The three functions of money
While money has taken many different forms across cultures and centuries, it always serves three key functions:
Store of value: It holds purchasing power over time.
Medium of exchange: It can be used to buy and sell goods and services.
Unit of account: It provides a standard way to measure and compare value.
A common definition of money is as a Generally Accepted Medium of Exchange — or G.A.M.E.
Money can be anything – shells, beads, metal coins, paper notes, digits in databases – so long as it gains general acceptance. To gain general acceptance, it must first demonstrate some minimal store of value properties. If money doesn't hold value at all, people won’t accept it for payments or be willing to hold it. Once something has gained general accepted for trade, it naturally starts being used as a way to measure prices — becoming a unit of account.
In this way, money is whatever achieves general acceptance as a medium of exchange, demonstrating sufficient store-of-value characteristics to be held between trades, which naturally leads to its use as a pricing benchmark — a unit of account.
Different forms of money have risen and fallen through history. Sometimes, gaining or losing acceptance can take decades, whereas other times, it happens almost overnight — especially during crises or when a new, superior form of money emerges.
Money isn't fixed. It evolves. It can be anything, as long as enough people accept it as money.
The properties of money
If money can take many forms and evolve over time, what drives the transition from one form to another? Why does one type of money outcompete another?
The answer lies in the properties of money. Some items are simply better suited to serve as money based on specific traits. These six properties help explain why certain forms of money survive and spread, while others are abandoned:
Durable: It must last over time and not degrade easily.
Fungible: Each unit must be the same as every other unit.
Portable: It must be easy to move around.
Verifiable: You should be able to tell the real from the fake.
Divisible: You must be able to use small and large amounts easily.
Scarce: Its supply must be limited to preserve its value.
You can use these properties to evaluate any historical money system — from beads, shells, and livestock to iron, copper, silver, and gold coins. Over time, money tended to converge toward metals, especially gold and silver, due to their superior performance across all six properties.
Among these properties, scarcity is especially critical.
Scarcity can be measured as a ratio comparing the total inventory (stock) relative to the new inventory added per year (flow), hence it's called the "stock-to-flow ratio".
For money to retain value over time, its scarcity must be preserved. Once something becomes generally accepted as money, there's a natural incentive to produce more of it — whether through mining, minting, or printing — in pursuit of profit. If new supply can be easily increased faster than demand, the money's purchasing power will decline.
This is why money that can be produced at will tends to lose value quickly. In contrast, gold's scarcity is intrinsic. It's physically limited on Earth, costly to extract, and impossible to synthesize — which helps keep its stock to flow ratio stable and its monetary integrity intact.
Among all known monetary metals, gold stands out with the highest stock-to-flow ratio: a large existing stockpile relative to a very low annual rate of new supply. That ratio has remained remarkably stable over time, reinforcing gold's reputation as the most reliably scarce form of money in history.
The idea of stock to flow is wonderfully explained in Saifedean Ammous' The Bitcoin Standard.
A brief history of money
People naturally choose to save and earn in money that best preserves value over time — typically the more scarce and reliable option, often called hard money. Meanwhile, they tend to spend and borrow in more abundant and easily produced soft money, which tends to lose value. This pattern plays out over millions of transactions. Gradually, the harder moneys displace weaker ones. Not through mandate, but through market choice — people simply prefer what works better.
Gold rose to global monetary dominance because it excelled across all key monetary properties — especially scarcity. It couldn’t be easily created, its supply growth was slow and predictable, and its stock-to-flow ratio remained persistently high. That stability made gold an ideal long-term store of value.
But gold wasn’t perfect. It was heavy, hard to divide, and difficult to transport in large amounts. These physical limitations gave rise to a more practical solution: gold-backed paper money. Banks began storing gold in vaults and issuing paper claims that represented redeemable amounts of that gold. These notes were far easier to carry, exchange, and transact with. This gave rise to a two-layer monetary system — physical gold as the base layer, and circulating paper notes as the second layer, a system known as the "Gold Standard"
As trust in this system grew, banks realized they could issue more notes than the gold they actually held, assuming not everyone would demand redemption at the same time. This model, known as fractional reserve banking, added convenience and liquidity — but introduced fragility and trust-based risk.
The invention of the telegraph in 1837 marked a turning point. For the first time, financial information — including transactions, payments, and account balances — could be transmitted instantly across vast distances. This sped up commerce, enabled long-distance financial networks, and shifted money further away from its physical base. While business moved at the speed of light, gold still moved at the speed of ships. As a result, the market increasingly relied on abstract representations of money rather than the underlying scarce asset itself.
Over the following century, the gold standard was gradually eroded. Amid two world wars and the Great Depression, governments increasingly restricted or suspended the convertibility of paper money into gold. Then, in August 1971, U.S. President Richard Nixon formally ended the dollar’s convertibility to gold — and with it, the global gold standard. The world entered the fiat era.
The term "fiat" comes from Latin and means "by decree." It describes a system where money is created by government order, without being backed by any scarce asset and without a persistent stock-to-flow ratio to maintain its value.
Lyn Alden's book "Broken Money" provides an excellent breakdown of money's evolution.
Fiat money
Today, the world uses fiat money — dollars, euros, yen, pesos, and so on. Unlike commodity money, fiat wasn’t chosen by the market. It was imposed by authorities through legal tender laws and the suppression of alternatives.
Fiat money has no built-in scarcity. It’s not backed by any physical asset and has no natural constraint on its supply. Central banks can expand the money supply at will by printing it or allowing it to be lent into existence. This is central planning in action — a committee deciding how much money should exist, rather than letting the market self-regulate.
Why do central banks expand the supply of money? Typically to:
Cover government deficits
Bail out financial institutions
Stimulate politically favored sectors of the economy
But creating money out of nothing has a cost: it reduces the purchasing power of all savers and earners of that money by diluting their holdings.
Since the creation of the Federal Reserve in 1913, the U.S. dollar has lost over 96% of its purchasing power — a trend that has only accelerated over time. Unlike earlier eras when money was a stable store of value, today’s fiat currencies are designed to lose value continually and compoundingly.
This shift has real cultural and behavioural consequences:
Saving is discouraged, because money loses value
Consumption is encouraged, because spending now is better than holding devaluing cash
Debt is incentivized, since future repayments are made with weaker fiat money
Over decades, this changes how people behave: don’t save — spend. Don’t earn — borrow. Money is no longer a neutral store of value. It has become a tool for shaping human behavior and advancing government objectives.
Final thoughts
Why is all this important?
Because money affects everything — your spending, your saving, your wealth, and the decisions you make every day. Understanding the nature of money gives you the tools to navigate the system you're living in.
And here's the key point: money isn't static. The money of a century ago was very different from the money we use today — and the money of tomorrow will almost certainly be different again.
Money is a technology: It adapts to better serve human needs across time and cultures.
Money can be anything: As long as enough people agree to accept it, it functions as money.
Superior money prevails: Over time, better forms of money naturally outcompete weaker ones through everyday use.
Scarcity is essential: Without a limited supply, money loses its ability to store value and to properly function, allowing for superior alternatives.
Bitcoin is a new form of money — one that excels across the six properties of money, and most importantly, is immune to government-led money supply expansion. With a fixed supply and decentralized design, it offers a stark contrast to inflationary fiat systems.
If you don't yet understand how it works or why it's relevant, now is the time to learn. Bitcoin isn't going away — and the sooner you understand it, the better positioned you'll be in the years ahead.