A great way to get a handle on Bitcoin is to see it not as a “coin”
or as code, but as a nation. Framing it this way helps us better
understand its more abstract concepts like: How is its value
calculated? Does a high price mean the “land” is expensive? Or is
it based on GDP?
Seeing it as a nation gives you the insight to see that Bitcoin is not
just a random invention, created out of nothing by time traveling
aliens, but instead a very well-designed implementation of the most
successful economic system ever conceived. Any fear of uncertainty
evaporates because you already know how it all works, and history is
your proof of concept.
In his book “An Inquiry into the Nature and Causes of the Wealth of Nations” Adam Smith explains how Bitcoin works:
Proof of Work
Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour therefore, is the real measure of the exchangeable value of all commodities.
Proof of Work Maximalism
Labour, therefore, it appears evidently, is the only universal, as well as the only accurate, measure of value, or the only standard by which we can compare the values of different commodities, at all times, and at all places. We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were given for them. We cannot estimate it from year to year by the quantities of corn. By the quantities of labour, we can, with the greatest accuracy, estimate it, both from century to century, and from year to year.
The Invisible Hand and the “Game Theory” of Bitcoin
He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
Capitalism vs. Socialism
By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
“Store of Value” as Mercantilism
Labour was the first price, the original purchase money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.
Mining Reward, Transaction Fee, and other Business Models
Wages, profit, and rent, are the three original sources of all revenue, as well as of all exchange-able value. All other revenue is ultimately derived from some one or other of these.
Whoever derives his revenue from a fund which is his own, must draw it either from his labour, from his stock, or from his land. The revenue derived from labour is called wages; that derived from stock, by the person who manages or employs it, is called profit; that derived from it by the person who does not employ it himself, but lends it to another, is called the interest or the use of money…..The revenue which proceeds altogether from land, is called rent, and belongs to the landlord.
How “Collaboration”, “Community”, “Proof of Stake”, all lead to Collusion
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in conspiracy against the public, or in some contrivance to raise prices. It is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law . cannot hinder people of the same trade from sometimes assembling together, it out to do nothing to facilitate such assemblies, much less to render them necessary.
A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it.
Bitcoin is the ONLY “stable coin”
The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity; but it is their value which varies, not that of the labour which purchases them….Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.
There can be only one King
The superiority of coin above bullion would prevent the melting down of the coin, and would discourage its exportation. If, upon any public exigency, it should become necessary to export the coin, the greater part of it would soon return again, of its own accord. Abroad, it could sell only for its weight in bullion. At home, it would buy more than that weight. There would be a profit, therefore, in bringing it home again.
