The Bitcoin Standard Book Summary

BITCOIN STANDARD – Slovene translation

In December 2022, a translation of Saifedean Ammous’ The Bitcoin Standard is published. An event was organised on this occasion, which was virtually attended by the author, who presented the main themes of the book. In this blog, we will briefly review the contents of the book.

The book is divided into three parts:

1. Monetary terminology

The author starts by explaining the basic terms of the monetary vocabulary used by Austrian economists. This describes how we started trading through the direct exchange of goods, which we call barter. This is still used today, but very rarely, as it is extremely impractical. In a trade, we need to find a buyer who wants to exchange exactly what we want for something they want. Here, Dr Ammous highlights problems such as consistency of size classes, time frames and location. Because our goods may not be divisible into small enough units, are perishable, or are very expensive and impractical to move through space, we have created a technology called money to facilitate the exchange process.

Money, as the author intuitively describes it in the book, is a tradable commodity which, because of its properties, best serves the role of a medium of exchange. The key feature in this role is marketability, i.e. how easy it is to find someone who wants to exchange our money for other goods. The tradability of a good can be divided into three parts: tradability over time, over space and across size classes.

The rarity of the good makes it marketable over time, and this ensures a low inflow compared to the existing stock. The harder a good is to produce and the larger its stock, the better it will maintain its value over time. The saleability through space is made possible by the high value for weight of the good. This allows us to move goods around the world at the lowest possible cost. Inter-unit tradability ensures that the good is divisible into the smallest possible units. This means that we can buy both very expensive and cheap goods with the commodity. These characteristics provide the commodity with a monetary function, which has three dimensions: medium of exchange, store of value and unit of account. This concludes the chapter on the properties of money and sets the scene for understanding the rest of the book.

2. Monetary history

In this part of the book, the author describes in detail the monetary history, using examples of primitive forms of money that led to the use of monetary metals and, at the end of the 19th century, to the use of coins. have set the whole world on the gold standard for centuries. It first collapsed at the outbreak of the First World War, and in 1971 the authorities finally established a fiat monetary system based on the dollar as the universal reserve currency of central banks.

With illustrative examples, Dr Ammous takes the reader through the ups and downs of different civilisations and shows how it is no coincidence that they were characterised by the soundness or reliability of the money they used. The forms of money listed include specie, stones, coins, silver coins, the gold standard and modern sovereign debt. Exploring these types of money gives the reader a good overview of the most important characteristics of the money commodity that allow civilisation to flourish through social orientation towards the future, savings and capital accumulation, trade, peace and culture.

3. Bitcoin

Through an extensive explanation of Austrian economic theory and monetary history, the author introduces a new money technology called Bitcoin. Dr Ammous presents its origin and then explains its technical characteristics in general terms. He points out that it is a form of money that will ultimately have a fixed quantity of units issued, which means that its inflation will be zero.

Using economic theory, the author supports his argument that Bitcoin is the most adequately developed monetary technology in history, and that the free market will adopt it as its own money, just as it did with gold. Because Bitcoin has the lowest inflation and thus the highest saleability over time, while having no physical form, it allows us to send it around the world both today and thousands of years from now without any loss of value or trusted third party.