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August 26, 2021
I'm often engaged in discussions about bitcoin with people in my social circle. Most of the time they just want to understand what it is and how it works. There are times, however, when I'm having a discussion with someone who has a basic understanding of bitcoin and we have differing opinions about its various properties.
One of the primary arguments I hear in opposition to the bitcoin standard is bitcoin's perceived instability. There are plenty of instances where world events have dramatically fluctuated the fiat price of bitcoin. For example, when China decided to crack down on bitcoin mining, the fiat price of bitcoin took a nosedive. This is because a large portion of bitcoin mining took place in China. Before those miners relocated to other parts of the world, a significant percentage of the world's mining capacity going offline caused a natural response in bitcoin's fiat value.
Commerce is a method of communication between two parties through the exchange of value. One medium used in this exchange is currency. As with everything, commerce does not occur in a vacuum. The context will always be within the very tumultuous world we live in. Now, if we have to decide between engaging in commerce through fiat or bitcoin, we must examine the context within each lives. Fiat lives in a world of centralized control and production. If we examine who controls the fiat system, we find it's a small group of wealthy individuals who live lives detached from the ebbs and flows of the real world. If we then take a closer look at how these individuals control the fiat system, we find they manipulate the fiat system through ever-changing monetary policy towards their own gains.
Now, let us take a look at bitcoin. Examining who controls bitcoin, we find a state-less, decentralized network. The 'how' is also very different from fiat. With bitcoin, there is a set monetary policy that will never change, no matter what fiat value fluctuation, political landscape, or level of adoption. There will only ever be 21 million bitcoin, and the block reward will be halved approximately every 4 years. With a monetary policy set in stone, bitcoin becomes just another system that interacts with our world and as such changes with it. No system on planet earth is unchanging. Every system is influenced by other systems working with or against it in complex and sometimes imperceptible ways.
In the end, I feel more comfortable communicating through an independent, state-less system with wild fluctuations like bitcoin than centralized, artificially stabilized fiat.