How to Measure Value
Bitcoin allows the world to speak the same language of value because of how it is designed.
Our globally-connected, digital society enables us to communicate and cooperate with people all over the world. By accessing the internet, we can participate in different markets like never before possible. Users can interact with people they’ll never meet in-person and who may not even speak the same language as them - the internet goes beyond national borders.
Today, depending on different definitions, there are about 180 different national currencies around the world. Also, there are about 4.6 billion internet users (60% of the total population) across the globe - eventually, everyone in the world have internet access.
Bitcoin is an internet-native money.
It seems like an inevitability that the world will unite to create one standardized system for value transfer. Consider the increase in efficiency that Bitcoin enables for exchange on the internet. The Bitcoin network is accessible to anyone with an internet connection - there is no need to have a bank account or trust any third-party to manage wealth using bitcoin. The same cannot be said for national currencies. Sure, for those wanting to trade in US dollars the system is efficient enough, but many do not have the capability to use reliable banks or don’t live in favorable jurisdictions.
Bitcoin is perpetually available to anyone that wishes to use it. Connecting to the network permits users to exchange with anyone else on the network without any other party involved. This decentralization makes bitcoin the obvious choice for the money of the digital age.
Under a Bitcoin Standard, everyone’s metric for value is the same. Bitcoin is designed to be a perfect pricing mechanism. Since Bitcoin is so easily accessed by anyone and its supply is mathematically capped, it serves as a wonderful tool to compare to any other good or service.
Think about other measuring systems we use. We have units for time, weight, length, temperature, and other things we want to quantify. Does anyone disagree on how long a foot is? How about an hour? Bitcoin applies this idea to value.
You cannot disagree or have an opinion on the total supply of bitcoins. It is fixed beyond means of being changed by anyone. There will only ever be 21 million. It’s an unchangeable and objective fact that no one can dispute. Everyone lives in a world where there can only ever be 21 million bitcoins whether they like it or not.
With that in mind, consider Bitcoin to be a rule set that all people can agree upon before going out to play the game of life.
Who sets the rules to the US dollar/fiat currency game? Certainly not you or me. Who sets the rules to the Bitcoin game? We all do, collectively.
If you think that there should be more bitcoins, say 22 million, you can go out and campaign people to change which rules they’re going to play by to your newly proposed rule set. If you get enough people (node operators) to agree to your rule change, there will now be 22 million bitcoins.
In 2017, this sort of thing (a hard fork) happened. Some individuals in the community wanted to increase the size of the blocks on the Bitcoin blockchain in order to increase the transactional throughput of the network. The free market properties of Bitcoin allows node runners to decide which rules they want to play by - they could’ve stuck with the current rules or changed to the increased block size. Over time, the market has clearly chosen that smaller blocks (the original ruleset) are more desirable because they enable the decentralization of the network to remain intact. The increased block size version of Bitcoin is called Bitcoin Cash and it has significantly lost value relative to Bitcoin over the course of its existence.
It is very difficult to successfully change the rules of Bitcoin. Why?
To answer this, let’s take a look at shipping containers.
Standards for the measurements of large shipping containers are based on the ISO - International Standards Organization. They are 8 feet wide, 8.5 feet tall, and come in two standard lengths of 20 and 40 feet. With only a few exceptions, nearly all shipping containers in the world follow these measurements.
Think about all the machinery and infrastructure necessary to transport these large containers. Ships and lifts and trucks all have to be capable of working with these specific standards. The standards make it easy for everyone involved in the shipping container world to cooperate with one another and effectively make use of the containers like they want to.
What if I came up with an idea that changed the shipping containers’ dimensions but made the containers 2X stronger. Would this 2X difference cause everyone to switch to my new containers? Highly doubtful.
All current infrastructure is built around the fact that shipping containers are going to be measured based on standards that everyone agrees upon. It’s extremely unlikely that my 2X improvement would cause everyone to take on the cost of changing all of their equipment to match my standards.
The same thought can be applied to electrical outlets - would thousands of companies who build products based on a three-prong electrical outlet really change everything they do just for a marginal improvement?
Bringing this back to Bitcoin we can see that changes to the rule set are unlikely to be useful for anyone to update to. Here are the current rules of the Bitcoin network that all users are playing by - no confiscation, no censorship of transactions, no unexpected inflation/only 21 million, and the final rule is that anyone can verify the rules for themselves.
Bitcoin doesn’t leave much room for design improvement.
Just like the shipping containers or electrical outlets - there simply isn’t a need or really any room to improve the current design.
Bitcoin brings this concept to an asset for the first time. We now have a decentralized, theft-proof, censorship-resistant, and absolutely scarce asset that anyone on the internet can take or transfer ownership of.
What more can you ask for if you are looking to store value, finally settle with someone, or price any other good or service?
Bitcoin is proving that our current method of transferring value is outdated and unnecessary. We now have a better way of doing things and it is only a matter of time before all people use Bitcoin as a tool to speak the same language of value.