The Pre-Bitcoin History You Should Know: Basic Cash Versus Fiduciary Media

This is an opinion editorial by Matthew Mezinskis, creator of the “Crypto Voices” podcast and Porkopolis Economics.

Take a moment to reflect on how long you’ve been in Bitcoin. Now take another to ask yourself how many articles on money you’ve read along the way; And not just those medium-of-exchange or store-of-value pieces. Think about the philosophizing diatribes which purport to identify the mysterious meanings of what “money” is. And then the ultimate twist, how does Bitcoin fit in? Many words have been written by Bitcoiners, many by its detractors. From the “social contract theory” and “something we all agree on,” to the “transactional currency” and that ever-important “cup of coffee” metaphor, everyone always has something to say about money, and thus why or why not Bitcoin.

published quarterly, which tracks the supply and growth of base money in the world.

bitcoin, equaling any number of UTXOs, have no reliance on any fiduciary whatsoever. It is a base asset that you can acquire and hold by yourself, Requiring no permission, no intermediary. What about the big miners? Miners do provide a service in producing blocks, and their costs in the aggregate are expensive today, but this expensiveness shouldn’t be thought of as “required” by the system. If all miners left, difficulty would adjust, and obtaining new bitcoin would be a less “expensive” proposition than it is today.

cowrie shells and wampum) came close in certain times and places, but didn’t make it worldwide, nor prove long-lasting. Nick Szabo has written wonderfully about the history of beads and shells as primitive money, highlighting the important role these collectibles played for millennia.

Gold and silver are the deepest, most balanced, and most documented instances of base money that achieved worldwide adoption. As far as coinage goes, silver has long been historically documented as the first mover from ancient times, and gold rose to prominence later, roughly from medieval times.

episode on our podcast with Dr. George Selgin covers this phenomenon well.

simply observed, “Money is one-half of every transaction.” It’s impossible that the state would not ogle and then move in on the money market.

I’ll also put a little more color on this term “moneyness.” Money is a word that straddles “basic cash,” “currency,” and “fiduciary media,” often without a second thought by its speaker, so we need to do some work there.

The rise of the modern central bank will be impossible to ignore as well. I always say I’m not sure which is the husband, and which one is the wife, but it is undeniable that the most profitable marriage of all time is that between a nation-state’s treasury, and its central bank.

And that will bring us to the modern, fiat monetary base. And certainly not just a passing description of the lazy economist, I’ll show you exactly what it means, and exactly what it looks like.

And then of course we’ll see how all roads lead to Bitcoin. Why bitcoin is basic cash like that of yore, and why this time, it may be different.

This is a guest post by Matthew Mezinskis. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.