Why is Bitcoin?
“I’m going to take you into our conference room, seems more seemly a setting for what I have to say to you.”
Today is September 25th, 2025. Bitcoin is worth 109,659 United States Dollars. And most people, even people who own it, still have no idea why.
If you don’t already know the answer to “What is Bitcoin?”, I will not be discussing it at length here. The most beginner-friendly answer as to how the underlying technology (blockchain) works can be found here:
“I started as a salesman, Mr. Beale. I sold sewing machines and automobile parts, hairbrushes and electronic equipment. They say I can sell anything. I’d like to try to sell something to you.”
On October 31, 2008, Adam Back released the Bitcoin whitepaper under the pseudonym Satoshi Nakamoto. 64 days later on January 3, 2009, he mined Genesis Block, the first Bitcoin block, and thereby set in motion the fastest appreciating multitrillion dollar asset in the history of the world. In the years and months leading up to this, Back and a small group of cypherpunks set their minds upon a problem that had plagued humanity since before the birth of Christ: “What is the perfect form of money?”
The Single Entry Ledger
There are three eras of monetary technology, each with their own paradigm. Someone once said a paradigm is what you think about something before you think about it. A paradigm is a mindset, one that is almost impossible to escape during the period in which it exists, because the mindset is born from a set of incentives which seem inviolable and irrefutable, right up until the day that a better paradigm is found. The primordial monetary paradigm is the single entry ledger. It is over 7,000 years old.
Why is Money?
In 1776, Scottish economist Adam Smith published The Wealth of Nations, which argued that money developed from the practice of barter. This was an interesting idea at the time, and many people took it as fact. However, he was wrong. Archeologists have found no evidence of barter-based markets in almost any ancient or current societies. The evidence shows that money pre-exists markets, and in fact, pre-exists writing itself. The first examples we have of writing are single entry ledgers. A single entry ledger can be as simple as a tally system, it is a record of transactions where each is listed once. Since money began in prehistory we will never know its true origin, but the prevailing anthropological theory is that it was invented by early forms of government as a tool to manage increasingly complex social relations. In 2011, David Graeber wrote a book titled Debt: the first 5,000 years, in which he argues:
“the term “primitive money” is deceptive for this very reason, since it suggests that we are dealing with a crude version of the kind of currencies we use today. Often, such currencies are never used to buy and sell anything at all. Instead, they are used to create, maintain, and otherwise reorganize relations between people: to arrange marriages, establish the paternity of children, head off feuds, console mourners at funerals, seek forgiveness in the case of crimes, negotiate treaties, acquire followers – almost anything but trade in yams, shovels, pigs, or jewelry.”
The Silver Standard
The silver standard predates the gold standard by thousands of years, beginning in Sumerian Mesopotamia somewhere between 3100 - 2500 B.C., and was a common form of currency for most nations until the 19th century.
Aristotelian Money
The earliest philosophers to meditate on money were Plato and Aristotle. Plato is less concerned with money as such, he primarily describes its use as a tool to maintain social order. The closest he comes to describing an ideal currency is in The Laws, Book V, where he writes:
“Further, the law enjoins that no private man shall be allowed to possess gold and silver, but only coin for daily use, which is almost necessary in dealing with artisans, and for payment of hirelings, whether slaves or immigrants, by all those persons who require the use of them. Wherefore our citizens, as we say, should have a coin passing current among themselves, but not accepted among the rest of mankind; with a view, however, to expeditions and journeys to other lands,—for embassies, or for any other occasion which may arise of sending out a herald, the state must also possess a common Hellenic currency. If a private person is ever obliged to go abroad, let him have the consent of the magistrates and go; and if when he returns he has any foreign money remaining, let him give the surplus back to the treasury, and receive a corresponding sum in the local currency. And if he is discovered to appropriate it, let it be confiscated, and let him who knows and does not inform be subject to curse and dishonor equally him who brought the money, and also to a fine not less in amount than the foreign money which has been brought back. In marrying and giving in marriage, no one shall give or receive any dowry at all; and no one shall deposit money with another whom he does not trust as a friend, nor shall he lend money upon interest; and the borrower should be under no obligation to repay either capital or interest. That these principles are best, any one may see who compares them with the first principle and intention of a state.”
By contrast, Aristotle dwells more on the origin and qualities of money as such, and his ideas of an ideal currency laid out the architecture of Monetary Theory which is still being refined to this day. On the origin of money, Aristotle writes in Politics, Book I:
“But this barter introduced the use of money, as might be expected; for a convenient place from whence to import what you wanted, or to export what you had a surplus of, being often at a great distance, money necessarily made its way into commerce; for it is not everything which is naturally most useful that is easiest of carriage; for which reason they invented something to exchange with each other which they should mutually give and take, that being really valuable itself, should have the additional advantage of being of easy conveyance, for the purposes of life, as iron and silver, or anything else of the same nature: and this at first passed in value simply according to its weight or size; but in process of time it had a certain stamp, to save the trouble of weighing, which stamp expressed its value.”
During Aristotle’s lifetime, silver coins called drachma were the standard currency of daily use, with gold beginning its slow evolution into a global reserve currency. (Side note: If we take gold to be of constant value, and assume a gold:silver ratio of between 10:1 to 13:1 in ancient Greece, one silver drachma would be worth between $40-$50 today.)
Aristotle had just as much contempt for usury as Plato, writing in Politics, Book I:
“Now money-making, as we say, being twofold, it may be applied to two purposes, the service of the house or retail trade; of which the first is necessary and commendable, the other justly censurable; for it has not its origin in nature, but by it men gain from each other; for usury is most reasonably detested, as it is increasing our fortune by money itself, and not employing it for the purpose it was originally intended, namely exchange. And this is the explanation of the name (TOKOS), which means the breeding of money. For as offspring resemble their parents, so usury is money bred of money. Whence of all forms of money-making it is most against nature.”
Aristotle also spoke on the Greek etymology of money in Nicomachean Ethics, Book V:
“And money has come to be, by general agreement, a representative of Demand: and the account of its Greek name νομισμα is this, that it is what it is not naturally but by custom or law (νόμος), and it rests with us to change its value, or make it wholly useless.”
“So money, like a measure, making all things commensurable equalises them: for if there was not exchange there would not have been dealing, nor exchange if there were not equality, nor equality if there were not the capacity of being commensurate: it is impossible that things so greatly different should be really commensurate, but we can approximate sufficiently for all practical purposes in reference to Demand. The common measure must be some one thing, and also from agreement (for which reason it is called νόμισμα), for this makes all things commensurable: in fact, all things are measured by money.”
Building on Aristotle’s philosophy of money, later thinkers such as John Buridan and William Stanley Jevons sought to distill money into its major qualities, eventually resulting in the six that economics recognizes today: Durability, Portability, Divisibility, Uniformity, Scarcity, and Acceptability.
“You have meddled in the primal forces of nature, Mr. Beale, and I won’t have it.”
The Double Entry Ledger
The first recorded use of the double entry ledger was by Amatino Manucci at the end of the 13th century, and the technology wasn’t formalized until 1494 by Luca Pacioli in Venice. Double entry ledgers are a record where each transaction is listed twice, once as debit and once as credit. The advantage of the double entry ledger over the single entry ledger is that inputs and outputs can be more easily tracked and categorized, and it is more robust in terms of error-correction, fraud detection and scalability. This was a major technological revolution which birthed modern capitalism, and set the paradigm in which we live today. Like all truly great technologies, it was primarily a breakthrough of the mind, a new discipline of thought, the raw data remained virtually the same, but its interpretation opened up like a flower for those who could see its utility. What was once a simple record of transactions became an information system with almost infinite depth and utility. It enabled strategic analysis, informed decision-making, calculations of efficiency, quantification of capital, profit maximization, and precise risk management. Its effects are almost impossible to overstate, and the paradigm it set is so ubiquitous that it is almost invisible, and it is hard to imagine a world before it existed.
“Whilst I could not think of any man whose spirit was, or needed to be, more enlarged than the spirit of a genuine merchant. What a thing it is to see the order which prevails throughout his business! By means of this he can at any time survey the general whole, without needing to perplex himself in the details. What advantages does he derive from the system of book-keeping by double entry? It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy.”
Usury Ascendant
In the 16th century, John Calvin, a prominent figure in the Protestant Reformation, was a key proponent in the destigmatizing and legalization of usury, which had previously been outlawed and declared as sinful by nearly every major religion up until that point (with the exception of Judaism which permitted usury, but only when lending to non-jews). His writing would later be referenced by others to normalize usury even further, leading to its central and seemingly unavoidable role in global finance today.
The Gold Standard
In 1717 the renowned alchemist Isaac Newton used his position as Master of the Royal Mint to set Great Britain on the gold standard. The gold standard played a key role in making the British pound sterling the world's primary reserve currency, and amplifying Britain’s position as a major economic powerhouse during the 19th century. As a result many other nations adopted it, including the United States in 1900. Isaac Newton also invented coin reeding, which are the narrow ridges on the edges of coins. No reason, he just did it randomly because he felt like it.
Electric Currency Theory
In a 1921 interview published in the New York Tribune, Henry Ford described an energy currency system of the future.
“Under the energy currency system the standard would be a certain amount of energy exerted for one hour that would be equal to one dollar. It’s simply a case of thinking and calculating in terms different from those laid down to us by the international banking group✡️ to which we have grown so accustomed that we think there is no other desirable standard.”
Keynesian and Austrian economics
The Great Depression catalyzed a longstanding rift among economists, highlighting the divide between the emerging Keynesian and established Austrian schools of thought. Generally speaking Austrians were non-interventionist, had a long time horizon, and took inspiration from Aristotle, while Keynesians were interventionist, had a short time horizon, and took inspiration from G.E. Moore. The US government adopted Keynesian monetary policy during the Great Depression because classical monetary policy, for variously debated reasons, had failed to resolve the crisis. During this time in 1933, the United States left the gold standard domestically and later in 1944 adopted the Bretton Woods Agreement, which was a modified international gold standard, and established the United States Dollar as the global reserve currency. Austrian economists like Ludwig von Mises and Friedrich Hayek had much to say about these developments.
"The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion, policemen, customs guards, penal courts, prisons, in some countries even executioners, had to be put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done and hailed the dawn of the fiat-money millennium."
- Ludwig von Mises
"Money hasn’t improved, money has rather become worse in the course of time. Governments said it must not develop any further, and what we have had since in development are matters of government inventions, mostly wrong, mostly abuses of money, and I have come to the position of asking, has monetary policy ever done any good? I don’t think it has. I think it has done only harm, that’s why I’m now pleading for what I’ve called denationalization of money. I don't believe we shall ever have a good money again before we take the thing out of the hands of government, because we can't take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can't stop."
- Fredrich Hayek
“You are an old man who thinks in terms of nations and peoples. There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems. One vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars.”
The Efficient Market Hypothesis
In 1970, Eugene Fama wrote an influential paper titled Efficient Capital Markets: A Review of Theory and Empirical Work, which formalized the term “efficient markets” which had been coined by Harry Roberts three years earlier, and described them in theory and practice. Fama defined an efficient market as such:
“In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on all relevant events which, the market expects to occur in the future.”
The first thing that anybody needs to know about the efficient market hypothesis is that it is true. The second thing that anybody needs to know about the efficient market hypothesis is that it is false. What that means is, markets are not efficient, but they want efficiency and they conspire to achieve efficiency, in exactly the same way that you need air, water and shelter. This framework is foundational to all modern finance, and this article could be many times longer if I were to dwell on the various implications of it, but suffice it to say that with this framework we can observe that money itself is a superconductor of information, and the price of any asset is striving to reflect the totality of all information about that asset, of which the "inherent value" of the asset may be only a small portion. Any information about an asset which is not reflected in the price is an inefficiency, and every time someone uses information to profit from the market, they take part in the process of bringing the market from less efficient to more efficient, and they can extract profit in direct proportion to how much inefficiency they can subtract from the market.
Fiat Ascendant
On August 15, 1971, Richard Nixon ended the gold standard, which had already been on shaky ground since the late 1950s, and the US dollar became a fiat (Latin for “let it be done”) currency. While direct causation is debated, virtually every useful metric of household financial success has either stagnated or declined after the end of the gold standard. After the US ended its gold standard in 1971, many other nations switched to fiat currencies in the 1970s.
“It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and sub-atomic and galactic structure of things today. And you have meddled with the primal forces of nature, and you will atone.”
The Triple Entry Ledger
The triple entry ledger was first conceptualized in 1982 by Yuji Ijiri in Triple-Entry Bookkeeping and Income Momentum to address limitations in double entry ledgers. In 1997, Todd Boyle proposed the idea of a shared ledger, which allowed two parties to communicate transactions in a single shared transaction repository. In 2005 the idea was reimagined and popularized by Ian Grigg in Triple Entry Accounting where he proposed the idea of integrating digitally signed cryptographic receipts. Finally, it was put into practice on January 3, 2009 by Adam Back with the invention of Bitcoin.
A triple entry ledger extends the double entry system by recording each transaction not just twice within private books, but with a third, shared entry: a cryptographically secured, immutable record that is simultaneously held and verifiable by all parties involved. The advantages of the triple entry ledger over double entry are profound, addressing the vulnerabilities of trust, intermediation, and opacity inherent in the double entry ledger system.
Many technological advancements were required, many long-standing problems had to be solved, for the invention of the triple-entry ledger to take place. I will not be going over them, as I said in the beginning this article is not interested in what Bitcoin is, but why it is. Suffice it to say that the implications and applications of this technology are only barely beginning to take shape.
“Am I getting through to you, Mr. Beale?”
Interlude
Now that I’ve taken you on this abbreviated tour of the history of money, you may think you have a pretty good idea of how money works today. Unfortunately you are mistaken. There are many different overlapping paradigms of money, and more than one way to split the history into different eras. We’ve looked at single, double, and triple entry ledgers, which is one set of paradigms, but we could also look at pre-usury and post-usury, and most importantly we could look at pre-1971 and post-1971, which drastically changed the traits of the technology we call money. For the sake of completeness I will discuss pre-usury money, and then move onto the finale where I’ll describe how 1971 completely changed the structure of money, which is the financial world that Bitcoin was born into.
“What do you think the Russians talk about in their councils of state - Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do.”
The Usury Age Mindset
Usury has existed since before Christ, before Plato, and probably before the invention of writing. Therefore we cannot meaningfully say there was a time where usury did not exist in known financial history, however we can say that there existed a time where it was not normalized and legalized on the scale we see today. As we’ve already covered, this era began with John Calvin in the 16th century. It bears repeating that usury had previously been outlawed and declared as sinful by nearly every major religion up until that point, with the exception stated previously.
Economists will typically view this prohibition as supremely irrational behavior by our ancestors, and even opponents of usury will struggle to articulate what benefit would be gained in economic terms with such a policy, and usury is such a foundational pillar in our economy that banning it would supposedly cause an economic collapse greater than the total global GDP. However I categorically reject the claim that such a widespread and enduring prohibition was the result of simultaneous fits of insanity by men across the world for thousands of years, and therefore the burden falls on me to try to explain what utility was gained from it.
The Usury Age Mindset can be easily laid out as such: if you loan someone money without interest, you do not have the money you loaned during the period in which you loaned it, and if you had used that money yourself instead of loaning it, it would have compounded in value, and therefore you have participated in an economic behavior which at best results in no benefit and at worst results in paying an opportunity cost. From this perspective it is easy to see why a prohibition on usury is irrational.
The most common justifications for the banning of usury are that it exploits the financially vulnerable, that it violates natural law, that it is injurious to the soul. I will let the people who are inclined to make those arguments lay them out as they see fit. I have a completely different argument, one which is coherent in purely economic terms.
In a world without usury, the lender is not getting any direct financial compensation for his loan. If we are to assume he is not insane for such a behavior, we must assume he is gaining something else from it. What he gains from it, I will argue, is the cultivation of men. Unlike in a usurious system, he cannot abstract away his losses in the aggregate if a loan is not paid back. Every one matters, and this constraint means every loan he writes represents a risk which must be evaluated carefully, and the primary way he will evaluate this risk is by evaluating the character of the man he’s loaning money to. Unlike in a usurious system, he also has a much greater incentive to make sure that man is in a position to succeed. We can go further and say that interest-free loans represent an investment in the borrower themselves, and only secondarily an investment in the borrower’s business or farm or other engine of productivity. Such a loan represents the binding of fates between men, the interests of the lender become the interests of the borrower, and vice versa. If a lender loans money to even a small portion of his community, this binds his fate to the success of the community as a whole, and to the extent that he can, he will take action to strengthen the community, and to the extent they can, the community will take action to strengthen the position of the lender. The entire argument from economists in favor of usury is founded on the premise that interest creates a feedback loop of economic activity, that one dollar loaned at interest creates more than one dollar of economic value. We can just as easily say that under a non-usurious system, interest-free loans create a feedback loop of social (and therefore necessarily economic) activity, that one dollar loaned without interest creates more than one dollar of social (and therefore economic) value. If any economists dispute this, remember that under standard economic theory, if the social value of this loan was worth less to the lender than the value of the money he loaned, the transaction would not occur. It is loaning itself then that creates this feedback loop, and we can observe that the difference between interest and interest-free loans determines the details of how exactly the lender benefits from the loan, and then it is simply an issue of evaluating whether the profit the usurious loan provides is of greater value than the increase in prestige, power and influence that the interest-free loan provides to the lender. It is a cliché that money doesn’t buy everything, but many people who have not been in such a position sometimes have a hard time appreciating what constraints are not alleviated by wealth. Under a non-usurious system, lending money allows the wealthy to buy something that is exceedingly hard to buy otherwise. Indeed, some Christians could argue that interest-free loans are a form of charity both to the rich and to the poor, as both have an incentive to increase the character and standing of the other, a much greater incentive than under a usurious system.
You should be reminded that any economist who reads all this and sneers, “what good is any of this in the world of finance?”, remember that he also sneers at cultural and racial homogeneity, at national borders, at manifest destiny. Therefore let us say he understands less about the necessary conditions which produce the emergent properties of the system by which wealth arises than he thinks.
In the Usury Age, the usurer does not need to know anything about the person he loans money to, only whether he is paid back or not. That problem is easily abstracted away by treating it as a probability to be calculated and accounted for by actuarial systems. Karl Marx thought of money as an Alkahest, a universal solvent of social bonds, a “jealous god of Israel”, and in the Usury Age he is somewhat correct. The borrower frequently does not know the name of the man who lends him money, and the only reason the lender knows the borrower’s name is for the purpose of finding his credit score. Both the lender and the borrower have become accustomed to this cold indifference, and any abdication of responsibility from either side is precisely calculated and integrated seamlessly into the system. Some might argue that this indifference is more “fair” than a world where a person is loaned money by the judgement of his superiors on his character. I have no opinion on the matter, as this is simply an evaluation of what we would like to incentivize. The prohibition or the integration of usury in the financial world has drastically different effects on the incentives of the system, and it is essential to understanding the traits of money as a technology today. The Usury Age can therefore be considered one of the key developments and transformations of money as a technology in European and world history.
I do not claim that the benefits of banning usury I’ve laid out here outweigh the trillions of dollars of utility that economists claim usury has, nor do I advocate for any such ban, however I will insist that I have shown here as well as throughout this article that the structure of incentives which define money have a titanic influence on how money behaves, and many things which economists take as an inalienable fact are emergent properties of a system which has changed in the past and may change in the future.
Final note: I could write at length about how the invention of the double-entry ledger was a paradigm-shattering force multiplier for the practice of usury, creating something thousands of times more powerful than anything Aristotle or early Christians could've ever imagined (a claim that even economists would agree with), but I will leave that as an exercise for the reader.
“The world is a college of corporations, inexorably determined by the immutable bylaws of business.”
The Fiat Age Mindset
So now we finally arrive at the Fiat Age, which dawned in 1971 when America abandoned the gold standard. Fiat currency had existed since ancient China, however it was not the dominant global form of currency until now. The natural first question to ask after such a paradigm shift is “Where does fiat money come from?” The answer you will get from economists is that the Federal Reserve creates money, and then they will elaborate with a straight face that The Federal Reserve is not federally owned, nor does it have any reserves, nor does it create most of the money. If any economists are reading this, here’s a useful tip for basic social interaction skills: if you answer anyone’s question about anything like this, it makes you look fucking retarded. The truth about where fiat money comes from is that when someone goes to the bank and asks for a loan, the bank creates that money out of thin air and loans it to them. This is where the majority of money comes from, and physical currency manufactured by the privately owned central bank known as the Federal Reserve is only a small exception, as physical currency represents about 25% of the total money supply, depending on what definition of money supply you use.
Off to a great start. Later, when you start asking them about government monetary policy, economists will talk about how the Federal Reserve manipulates interest rates to control the economy, and this is called Quantitative Easing and Quantitative Tightening. The simplified explanation of this is that QE is when the Federal Reserve pumps extra money into the economy with the intended effect of boosting economic growth during tough times like recessions, and QT is when the Federal Reserve pulls money out of the economy with the intended effect of controlling inflation and preventing speculation-driven bubbles in the economy. Then you investigate further into it and discover that this may not be true at all.
Even if QE/QT works exactly the way economists think it does, the rest of what mainstream economists believe would make that irrelevant. Since the Great Depression the primary monetary policy of the US government traces its roots back to Keynesian economics, and the Fiat Age has been defined by their ideas. So, what are they? What is the Fiat Age Mindset?
THIS IS WHAT ECONOMISTS ACTUALLY BELIEVE
To be fully transparent, I came into this topic without prejudice towards either Austrians or Keynesians, but upon hearing Keynesians clearly state what they believe, almost everything about the economy becomes instantly demystified. They have their reasons for believing each of these things, and when you listen to the full explanations you could even come to the conclusion that they’re reasonable, but when you view what has happened to the economic prospects for the average person in the United States since 1971, it becomes clear that the Keynesian Fiat Age Mindset is either useless or wrong. These axioms and the conditions they produce make it hard to avoid the conclusion that the system is working exactly as intended, and this is not helped by the fact that whenever anyone has complaints about it they're told that the issues are too intellectual and complex for the ignorant masses to understand, and that if the problems do exist it is because of insufficient adherence to Keynesian economic theory.
Let’s suppose I’m wrong about everything I’ve said about Keynesian theory, let’s say that all their observations are correct, the proposed mechanisms are correct, let’s even say that they are correct that all the economic problems we face are because of a deficit of Keynesian theory, not a surplus of it. Their theory only functions in a world without free choice of currency. Keynesians admit this. The fiat system's value is fundamentally enforced by the barrel of a gun. Keynesians admit this. If the market is allowed to choose a currency which is resistant to inflation and holds its value over time, the market will choose that currency, and that currency will become more valuable and the fiat currency will become less valuable. Keynesians admit all of this. Only now, finally, can we answer the driving question of this article.
“The world is a business, Mr. Beale. It has been since man crawled out of the slime.”
Why is Bitcoin?
The principles which underlie and define Bitcoin are not a new anomalous development of modernity, but are indeed long-standing and well-developed, and it is current United States monetary policy which is the anomaly which needs to justify itself in the history of man. If Keynesians are right, Bitcoin breaks their theory by outcompeting it. If Keynesians are wrong, Bitcoin breaks their theory by outcompeting it. Their saving grace of government enforcement by the barrel of a gun never arrived, and it is now far too late for them to try that even if they wanted to.
When Adam Back and his network of cypherpunks were designing Bitcoin, they were aware of all these things I have laid out here and much more, and as their thinking developed the design became more crystallized. Their goal was an alchemical pursuit of the forging of a perfect superconductor of information and capital, and Bitcoin’s success is directly proportional to how well they were able to satisfy that pursuit. Global capital has been hungering for such a metamaterial for millennia, and the depths of this vast appetite is just beginning to be appreciated today.
The technology that is now called Bitcoin needed to have a specific set of traits, laid out long ago by philosophers.
Durability: The Bitcoin network is distributed, decentralized, and grows every day, making it one of the most anti-fragile systems ever invented.
Portability: Bitcoin’s portability is limited only by the speed of light.
Divisibility: Each Bitcoin is divisible into 100 million satoshis.
Uniformity: Each Bitcoin is identical and interchangeable.
Scarcity: Only 21 million Bitcoin will ever exist.
Acceptability: Bitcoin is already accepted by millions of merchants, and the majority of 401(k)s now own Bitcoin in some form.
Austrian economists might claim that all this is irrelevant, that gold is the perfect currency, and that Bitcoin is an approximation of gold. They are wrong. Bitcoin is not an approximation of gold. Gold is an approximation of Bitcoin. Gold is an imperfect form of money, it is not a precisely designed superconductor of information and capital. The utility that gold brings to the global market as a risk-off asset is currently valued at over $25 trillion, and the utility that Bitcoin brings to the market will one day dwarf that of gold. Ironically, Bitcoin’s market cap is still far too small for its eventual utility as a risk off asset that the financial institutions desperately need it to be. For now, for smart investors, Bitcoin is a hybrid of both, it functions as a risk-on asset for buyers with short time horizons and a risk-off asset for buyers with long time horizons.
The traits listed above are all necessary but not sufficient conditions to explain Bitcoin's success. (There is another trait that is necessary, but not sufficient, for Bitcoin’s success, and that is Proof of Work. The technical details of why that is are too lengthy to include here.) The only sufficient condition for Bitcoin's success is exactly the set of incentives that have existed in the global financial markets since 1971. This set of incentives, as laid out by the same people who designed them, and the same people who consider Bitcoin’s mere existence a threat to their theory, dictate that global capital flows easily into Bitcoin, and does not easily flow out.
Why is Bitcoin? Why was Bitcoin invented? Why is Bitcoin successful? Perhaps the best answer to all these questions is to ask the question "Why was the United States Dollar successful?", and the answer to that is because for almost a century it was the only option available, and during that time superstitions have developed about money which have no basis whatsoever. Money is not thought of as a technology subject to change, it is not thought of as a medium for information to act upon which can be perfected, it is not thought of as a tool to facilitate social relationships on a civilizational scale. As we have established, money is all of those things, and it has been all of those things for thousands of years, and it is subject to the same evolutionary pressures as all life on this planet. In the dense information jungle that is the global financial market, a niche has been left unexploited, invisible and impossible to the eyes of the entrenched economic theory, waiting for an apex predator with a specific combination of traits to develop which would one day devour, assimilate and organize hundreds of trillions of dollars of capital. Bitcoin’s price goes up year after year, with few exceptions, for the same reason water flows downhill, because energy is simply taking the path of least resistance.
“I have seen the face of God.”
“You just might be right, Mr. Beale.”
If you liked this article and you want to learn more, I recommend watching this episode of The Physics of Bitcoin with two PhD physicists, Giovanni Santostasi and Stephen Perrenod.