The shortest explanation of Bitcoin

I typically don’t have the time to read hour-long articles about Bitcoin even if they are extraordinary and I believe that’s the case for most people, so I made my best effort to condense the shortest Bitcoin pitch ever.

Please let me know if you think it’s good enough!

This is based on my regular conversations with the two people I keep learning the most from about Bitcoin, Fernando Nieto and Manuel Polavieja.

Brief background

Humans are the only species where what they individually consume is very different from what they individually produce.

This is the reason why we need to cooperate and the reason why we need indirect exchange as a way to minimize the cost of that exchange. We basically want to get from production to consumption at the minimum cost.

Szabo has given a lot of examples on how so many different civilizations have used a wide variety of items to minimize that cost of exchange.

For example, the more standard a medium of exchange is, the easier that exchange will be, since it is “mentally cheaper” to do economic calculations of the value of one good against all other goods vs every good against every other good (as it happens in barter).

But the cost of exchange with a medium of exchange also includes its cost of acquisition, the cost of selling it, as well as the cost of carrying or holding it over time, measured as a function of its dilution (inflation), cost of maintenance/storage and deterioration.

Also, another “very hidden cost of storage” is the need to trust 3rd parties in order to operate with that money.

For example, if in order to operate with gold on a large scale you have to:

  • divide it to pay smaller amounts,
  • preserve it in physical vaults or aggregate it in bank accounts so that costs of transaction are smaller,
  • validate it with the help of others

then, it means you are trusting not only your bank, but also central banks and ultimately people whose incentives are not necessarily alligned with yours.

These people you are trusting, have absolutely no problem in going after your savings whenever shit hits the fan either via taxes or “official inflation”, which at the same time, hides the “actual inflation” that should include productivity increases.

We are witnessing the end of a system that has managed to perform the biggest theft in history, a theft that most people are not even aware of.

Now imagine someone creates an asset where this cost of carry or storage would be close to zero by minimizing inflation, cost of maintenance, deterioration or the need to trust a 3rd party.

Enter Bitcoin

Although the cost of a transaction in Bitcoin is still negligible, it is only a matter of time until it grows so that everyone is able to include their transaction into a block.

What is definitely not going to change (we know that because Bitcoin is the only cryptoasset where you can credibly say nobody is in charge, nobody has actual ability to change stuff), is its near zero cost of storage.

While volatility makes Bitcoin a bad idea in the short run, Bitcoin is perfectly suited for long-term hodling. There is no asset even getting close to minimizing so much inter-temporal cost of exchange. It is also the reason why believing a defi/worldcomputer is any kind of competition for bitcoin is utterly ridiculous and a complete misunderstanding of what makes hodling an asset ultimately attractive.

Every other asset with a large market value will suffer as a result of the market understanding this.

But the one which will suffer the most will be public debt that would otherwise condemn the entire western world to constant zombification and nationalization of the economy dividing the world in two social classes, those who do never pay the consequences of their mistakes and those who pay them for everyone.

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