Bitcoin: The World's First Regulated Currency

For millennia, people have struggled with a certain aspect of exchange commodities (a.k.a. money). Certainly, exchange commodities have been an important part of what makes civilization today. They enable trade and via price discovery help organize human behavior. However, the supply of these exchange commodities or monetary units has never been regulated, something which has caused great market imbalances, inefficiencies and human suffering. Until now. Lets do a brief review of the problem and solution.

Example 1: Cowrie Shells

For centuries certain shells were legal tender across much of the world. They have various properties that make them useful as exchange commodities: scarcity, fungibility, ease of use, and others. However there is one problem: the users of the shell as currency have no way to know if an explorer has recently discovered a vast hoard of shells on some newly discovered tropical island. When such a discovery is made, the discover will bring his new money to market and buy up everything she can. Prices will rise, and people who were in perfectly acceptable situations economically will suddenly find themselves without a house or means of survival. They sell their house for what seems like a good price, and then in a few years it becomes clear that it wasn't really a good price as all other prices have gone up due to all the new shells on the market.

Eventually the discoveries of Cowrie shells became numerous enough, and the criteria for a monetized shell became broad enough, that the value of a shell went to zero, and that was the end of that. The problem was that the number of shells in circulation was not regulated, it was not verifiable, and hence those capable of issuing new shells (by virtue of finding them) were heavily favored in this economic system. This kind of favor led to wasteful spending of resources, inequality, and poverty for those who were not part of the business of new shell discovery.

The biggest losers of this system may have been the Africans whose leaders traded them as slaves to ship captains who had either found shells themselves or done business more closely with those who had discovered the shells.

Example 2: Gold

Many economists and philosophers speak very highly of the golden age. When gold was our money, there were centuries of a global economy without that many shocks and depressions, in which people could bring their gold anywhere in the world and know something about what to expect in return.

However, there is no public regulation of the world's gold supply, and there were several notable shocks which did what unregulated supplies often do: cause economic devastation, human suffering, and market inefficiency.

Two common examples of this are the voyages of Mansa Musa, and the discovery of gold in the New World by Iberian Conquistadors, although countless other examples exist as well.

The problem is very similar to that of the cowrie shell: there is no way for an individual to know with certainty how much gold has been discovered recently and is about to be dumped on the market, which makes it very hard to discover a reasonable price. When Mansa Musa, who had become very rich through his control of West African gold mines, traveled to Mecca, the cities he passed through became economically devastated. He simply had too much gold, and those who were able to do business with him directly had such a financial advantage that the balances of the local marketplaces were completely thrown off, and it is said that it took years to recover. Similarly, when ships came back from Peru and other South America ports laden with gold, the economies of Europe were devastated by the sudden imbalance, inflation, and resultant "business cycle".

Example 3: Fiat Currency

In 1971, the United States government announced and made official what most people already knew: we were not using gold nor silver as our most common exchange commodity. Instead we had entered a pure fiat system. Most historians will tell you that this kind of system was invented in China under Mongolian kings, and that the western world learned of it first from the writings of Marco Polo. Indeed, this two page description is still one of the most common introductions for students to read in understanding what a fiat currency system is.

Today's fiat currencies are mostly digital, so it is even easier for currency issuers to "find" (create or issue, an ability known as seigniorage) than it was for the gold miners or the shell collectors to find more. But how much is being created, and for what purposes? Unfortunately there is once again no way to verify or regulate the answers to these questions. The result is that the issuance class puts trillions of dollars annually (in the USA alone, according to the St. Louis Federal Reserve) into the marketplace, leading to great imbalances such as real estate bubbles, stock market bubbles, and today crypto bubbles. This also creates the inequality of interest rate apartheid, as those who are well connected with the issuance class or favored by them are able to get financial resources very easily, while others pay exorbitant interest rates and generally have "woken up homeless on the continent their ancestors conquered", as Thomas Jefferson paraphrased when describing what would happen if a fiat currency were to be used later in the United States.

The effects of an unregulated money supply are also referred to as the "Cantillon Effect" in honor of a French/Irish economist who wrote about these problems long ago, even before the fiat era began. They can also be seen around the world in over-construction and over-investment in those activities which enable people to get access to newly issued currency, leading to environmental devastation in some areas. Also visible due to our use of unregulated currencies is the wasteful lifestyles of those who have been blessed (or cursed, depending on your viewpoint) with 关系, connections to the issuance class. So -called "laundering" of this newly issued currency has become one of the largest businesses around,, and those with more standard occupations such as farmers, manufacturers, and service industry, who are willing to accept these unregulated coins, are left with a massive economic handicap.

Enter Public Coin

Public digital currencies, of which bitcoin was the first, allow for the first time in our history the use of a regulated currency. The money supply is regulated and verifiable by any party, as the ledger of all existing currency is public. This does not mean that the regulation is necessarily wise, or fair, as public coins can have any monetary policy that the creators wish, as long as people are still willing to use them. For example, USDT tokens have a monetary policy in which certain key holders are able to issue currency at any time they wish. However, the issuance is regulated in that it is visible on a block chain to anyone who cares to look. Other coins like BTC do not allow keyholders any seigniorage but instead pursue an algorithmically regulated money supply. In the case of BTC this forms a geometrically growing money supply; in the case of LOG forming a logarithmically growing money supply. In all cases, public coins or "cryptos" as they are known today are defined by having a public ledger and hence a regulated money supply.

Whatever the opinions of economists may be on the virtues of this or that monetary policy, there is one thing we can all agree on: the mere possibility of a currency with a regulated money supply has potential to vastly increase the efficiencies of all human endeavor, to eliminate unnecessary human suffering and eliminate much of the gross mis-allocation of resources which has plagued humanity ever since we began to use exchange commodities.

This is the story of bitcoin, the first regulated currency. As unregulated currencies do not allow anything better (regulated currencies still have freedom of monetary policy) and unregulated currencies only allow for corruptive and chaotic influences on the economy, it is only a matter of time before political, religious, and academic leaders all unanimously demand we abandon unregulated currencies and move to a new era of regulated money supplies.

In hindsight, it appears that accepting unregulated currency like the US Dollar in exchange for valuables and services is direct treason against the United States government - as it allows foreign currency issuers to take control of our nation. In fact the crime is much worse, as allowing the imbalances of an unregulated money supply can lead to problems not just in a nation but in management of the entire ecosystem of the planet.


It's hard to conclude anything else than that we need to immediately start using regulated currencies. Unregulated private issuance needs to be illegal to use as money, due to the gross suffering and inefficiencies it allows with no benefit. Within a few decades, people will look back on those who accepted unregulated fiat currencies as barbarians as bad as the slave dealers of the 18th century. And indeed, similar economic influences are at play between these parties.

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