The Bitcoin Standard Book Summary

Book Summary

15 min

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Brief Summary

The gold standard has been the most effective sound money system throughout history. Backing money by gold enabled prosperity and allowed individuals to prioritize long-term savings and investments. However, after the world abandoned the gold standard in the twentieth century as a result of two World Wars, the global economy has been subjected to boom and bust cycles caused by unsound money and the resulting government interference in the markets. Bitcoin, a new cryptocurrency, is a stable unit of value that could serve as the new standard of currency. The bitcoin standard faces some challenges, especially because it is still new, but it has the potential to bring in a new era of sound money and economic growth.

About the Author

Saifedean Ammous is an economist and Assistant Professor of Economics at the Lebanese American University. He is also a member of The Center on Capitalism and Society at Columbia University. He researches and writes on bitcoin, monetary economics, and his work is featured on his website https://saifedean.com.

Ammous obtained a Bachelors of Mechanical Engineering from the American University of Beirut and earned an M.Phil and MA in Sustainable Development from Columbia University. He holds an MSc in Development Management from the London School of Economics, and a Ph.D. in Sustainable Development from Columbia University.

Topics

Money & Investments

The Bitcoin Standard Book Summary Preview

What You’ll Learn

Why gold served as the standard of currency for hundreds of years
The difference between sound and unsound money
How unsound money policy can disrupt economic growth and lead to recessions and debt
How cryptocurrency could become the new standard of currency

Who Is This For

Individuals interested in the growing cryptocurrency trends
Economists who want to explore alternative systems of monetary policy
Anyone interested in monetary economics and digital currency

Key Insights

Money is a globally accepted standard of value that is accepted in exchange for goods and services. Before the system of money was invented, people used the bartering system, but that is an impossible system to implement on a global scale.

Paper currency backed by gold became the first globally accepted system. People had confidence in gold because precious metals retain their value, and this allowed the economy to prosper and grow. However, in the early 20th century, the “gold standard” was dropped and governments began printing paper money that was not backed by anything of real substantial value. This led to an era of economic boom and bust.

In today’s digital age, Ammous suggests that we return to the system of backing currency with something of value, but it shouldn’t be gold. These days, bitcoin, a cryptocurrency that is a stable way of storing value, can serve as the new financial standard and help bring about a new century of economic prosperity.

Direct Vs. Indirect Exchange

Before money, the economic system was based on bartering or direct exchange. Person A had one good or service, that they exchanged in return for a good or service Person B had. However, this system does not work if there is nothing Person A has that Person B wants or vice versa. Money solves this problem. Everyone wants money because it can be exchanged for any good or service. This is a system that is called an indirect exchange.

Money used in ancient times was nothing like the paper money used today. In the beginning, it could be anything that the whole population acknowledged had value and could be exchanged. For example, on Yap Island in the Federated States of Micronesia in the 19th century, the population used stones called “Rai Stones” to trade with each other in exchange for goods and services. All transactions were performed publicly, so the whole community could acknowledge the trade had taken place. Rai Stones varied in size, from small pieces all the way up to four-ton stones. The large stones would be dragged to the center of town, where everyone could see the exchange. The stones worked well as a currency because everyone on the island knew they could sell them to anyone else on the island, and because they were divisible, so their value could vary. Smaller stones or pieces could be sold for smaller, less valuable goods, while large stones could be exchanged for more valuable items.

However, the value of the Rai Stones decreased over time until they stopped working as a currency. At first, they had value because the act of quarrying...