Reading further the Fiat Standard book by Saifedean Ammous, one of the eye-opening things is about the distinction between monetary and payment systems – and its exactly not understanding these things why people wrongfully compare Bitcoin to VISA and conclude that Bitcoin is slow, thus it can't have any impactful role in a global scale.
In the gold standard the monetary system was based on gold. When gold coins were used, they were analogous to final settlements. The trading of notes – paper claims with x amount value in gold – was a payment system in the gold standard and also a means of scaling.
In today's fiat standard, the monetary system is based on the rules of government with central banks in charge of the money supply. VISA is a digital payment system in the fiat standard. When VISA processes a payment, no actual fiat money is moved, the actual money moves later in a final settlement where the payments are added together.
Bitcoin as a final settlement layer
The important thing to understand that in a global Bitcoin Standard, bitcoin network functions as a final settlement layer which means that it's not even supposed to record every single payment that happens, because if it could, the blockchain size would be so bloated that it would be impossible for any regular person to run a node. Nodes ensure the integrity and decentralization of the bitcoin network and if they would get expensive to run, it would centralize nodes and expose the network for exploitation.
Similarly to other systems, scaling solutions – like Lightning Network – will process most of the payments. Then bigger institutions and banks will use the base layer for final settlements. Yes, banking could and probably will exist in a Bitcoin standard, but the key difference to today's banking is that commercial banks will provide a service, whereas now they are involved with processing payments and increasing money supply by creating debt.
In a Bitcoin standard banks would only process payments and not be involved in money creation. In a Bitcoin standard if a bank gives out "bitcoin claims" more than what Bitcoin they hold in reserve, this can be seen because Bitcoin is a public ledger, thus such banks would run out of business, because people wouldn't deposit their money in such a bank.
Bitcoin would hold banks and institutions accountable similarly how you and me as regular people need to balance our incomes and outcomes. In a bitcoin standard banks can't create money out of thin air with debt to finance their unproductive spending and export the cost of it to the holders of the money via inflation.
So by holding Bitcoin, you actually have stake in a future settlement layer of a global monetary system that can't be inflated by any entity for their own benefit, should that happen. By holding fiat money in a bank account, you hold monetized debt. Central banks hold the base layer money, and you (most likely) don't have access to that.
That's what I've been saying for some time in discussions. Bitcoiners like over-explain Bitcoin's function. Simple: Bitcoin is money; its the backing. All the rest is currency. And currencies can be backed by Bitcoin -- just like you pointed out. Just like Gold, Bitcoin's known inflation rate keeps capitalism in check.
People are too "idiotized" to realize this. Unless they understand the function of money, they won't get to this enlightenment. I go even further and say that most people are completely sold to the State "taking care" of their money. I'm afraid we're on the path to more and more control, my friend.
Yeah, governments have been able to incrementally increase their control over money since taking control of the gold to eventually monopolize money. And then when the centrally planned monetary system doesn't work, they blame it on whatever makes a good scapegoat at the moment to justify even more centrally planned control measures in whatever. Covid lockdowns were a good showcase, and some people even begged for it. This trend might continue for a while, but there's hope though, because bitcoin can't be stopped. A lot of damage has been done, unfortunately, and will be done before people start to understand these things.
What's mindblowing, is that centrally controlled monetary system is Marxist ideology working in plain sight: a centralized entity knows better than the people know themselves how to organize and economize their lives, thus they arbitrarily manipulate incentives. End result: everything goes to shit – energy markets get manipulated, food markets get manipulated etc. The implications are crazy wide. Understanding money properly really does feel like opening the matrix.
It's mind-blowing! I remember the first time I watched "Hidden Secrets of Money" by Mike Malony. I just think the most influential Bitcoin fellas focus too much on the tech (and we know it's complicated for the mainstream people). My approach for when friends ask me about Bitcoin is asking them questions like: Do you know what money is? We gotta go back to basics.
I want to read What Has Government Done to Our Money?, by Rothbard. Have you read that?
Seems interesting, might take a look of it.
Yeah, people ain't that interested on technical details, me neither. That's the way to go.
No, haven't heard of it.
Thanks @celestal for putting this in easy words. I can explain my friends better now how things work and what bitcoin really is.
I'm really becoming passionate about it, understanding money is opening the matrix, and understanding bitcoin is like opening a keyhole to the future!
You're welcome! Writing is also an exercise for myself to internalize these things, I'm glad it helps others, too.
You might have swallowed the orange pill, it'll be quite the ride :D
Cheers for the tip :)
🍻
Did you make that Bitcoin token at Heuraka? :D
Yup ;)
Dear @celestal, sorry to jump in a bit off topic but may I ask you to support the HiveSQL proposal?
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You can do it on Peakd, Ecency,
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