Cardano (ADA) Charles Hoskinson on 3 Properties of Money Before Exploring the level 2 stuff leading to BitcoinMay 17, 2020
Charles Hoskinson, in a video, provided an introduction to Bitcoin and the Blockchain Industry. What is the point of the blockchain industry? This video was made in response to why should we care about Bitcoin, what is the point of it, what is the purpose of it. Is it real? Or Is it not real? So, that was her call to action. And I have answered that call to action, and I decided to make a video.
Sydney Ifergan, the crypto expert tweeted: “Cardano (ADA) Charles Hoskinson makes it an easy deal to understand the 3 properties of money and further on to the coming of Bitcoin in his video. Worth knowing.”
Let us talk a little bit about the 64,000 dollar question. I started in this industry in late 2010, early 2011, as an investor and a miner. And, then professionally, I quit everything I was dealing in life in 2013, and entered this space as a full-time vocation. So, I have been in the cryptocurrency space now for about 7 years, and I founded many projects in this space.
And, I started with Bitcoin. And, I started with something called the Bitcoin education project. And, the goal there was to talk to as many people as possible into our ecosystem. And, also to dispel a lot of common myths, fear, uncertainty, disinformation, misnomers, and things that have been cropping up.
In 2013, there were certainly a lot of them. And, unfortunately, today, there is even more. The reality is, despite the fact that Bitcoin is pervasive with millions of people in our ecosystem and mainstream knowledge of it, very few people understand what Bitcoin actually is. The point of where it came from, why it was created, and where this industry is going and why we exist and what is the relationship, for example, between Bitcoin and blockchain.
Something that not many people in the public and mainstream understand. So, the purpose of this video is to start from the first principles to work our way up to what is Bitcoin and then work out a little bit about what the blockchain industry is as a whole and why it is such an exciting industry, and I have chosen and then spent seven years of my life in this industry.
And, I hope that many other of the leaders in my industry can also make explainer videos to explain what they entered and what they feel so special about what they do. As well as giving a shot at defining Bitcoin.
In 2009, Bitcoin was created. And, Bitcoin was created by an unknown person or persons referred to as Satoshi Nakamoto, basically a pseudonym. And, the creator remained anonymous. In fact, the anonymity of the creator is so strong that even after the e-mail account that the creator used for compromised and e-mails were revealed to the general public, no one has since been able in eleven years to learn who Satoshi Nakamoto is. So true to form, Bitcoin has always had a bit of mystery from the very beginning, but really what the point of Bitcoin was to be an experiment.
Basically, it is an experiment for frustration and passion. The passion component of Bitcoin was really about an exploration of what is money, and can we create better money. Bitcoin has always had a bit of mystery form the very beginning.
It is important to understand the context from where Bitcoin came from. If we look at 2009, this was right at the back of the 2009 financial crisis. This was the worse financial crisis for the world since the great depression.
And, as a consequence, people were going back to first principles and asking fundamental questions like are central banks creating good money? Can we create better money? Does money need to be controlled by centralized power? Do we need banks? Or can you be your own bank? What is the influence of the internet on money? These types of questions. So, if we deconstruct money much the same way as Satoshi Nakamoto did, and the people in our industry did, we could look at a very nice economic definition that existed pretty much every textbook. And we see that there are three properties that money has. One, it is a unit of account. Two, it is a means of exchange. Three, it is a store of value. It is kind of a funny thing that most of us spend at least 40 hours a week working and making money.
We have jobs, we chase it, lot of people dream of becoming millionaires, but then when you try to deconstruct actually what are those silly pieces of paper in your pocket and what are those numbers in the bank ledger, Chase App, or Wells Fargo App, ATM receipt or anything nobody really seems to think a lot about what are these things, what do they mean, why do we use them. And, then, we can hopefully build our way up to where Bitcoin came from.
So, let us explore this and then a little on the passion side of things, and then we can perhaps learn a little bit more about the frustration side of things.
So, first off a unit of account, what does that mean? Well, it is so ingrained into our culture now that we tend to miss this. But, what if we actually did not have the ability to measure prices in Dollar, Euro or Pound Sterling.
So, what if instead of saying my service is 30$, the couch is 300$, and when in a different store it actually charges different prices for different things. Like, I need 45 packs of green tea for this and like I would like 50-pound bags of sand, and it would be pretty chaotic, and it would actually be difficult to have price discovery, and you will never know if something was expensive or cheap. Everything will be relative.
It will almost be like a barter system. The point of the account is this point of standardization. It gives you a sense of understanding of how expensive things are and how cheap things are relative to some standard that you know or are familiar with. Have a relative sense of whether million dollars is a lot of money or a little bit of money, relative to the things that you can buy and trade with it and other properties.
Means of exchange is just that. You have two or more parties you want to conduct the commercial activity with each other. They have something, whether it be a product or service that you want, whether you are trying to acquire it from me. Basically, money is that middleman that allows you to exchange that value with your counter party efficiently.
And finally, a store of value is this concept that when you get this money, it does not deteriorate or disappear. So, as soon as you put it in your pocket, it evaporates in 24 hours or spoils or rots.
For example, could you imagine food as money, you might be able to standardize it, you might be able to use it for commerce, and certainly people will be able to value it, but food does tend to rot. Especially, food or other commodities like that. So, the store of value is the concept of the durability of value over a period of time. And, does it hold it, does it lose it. So, these are the three fundamental properties that anything that inspires to be money must-have. Every sovereign currency, whether the US dollar or Yen or some other currency, has these properties at least arguably has these properties. And, for the most part, they allow a sustainable, stable economy.