Crypto Unplugged with Jonathan Chester
What is Money?
Doc:
Okay, excellent. Now, Jonathan, the concept of money, what exactly is money? We use money. What is money to you?
Jonathan:
I actually think about money. It's really just a debt. It's really just a system to help people understand how much they are owed for what they've given. Money came about. There's actually this thought process that before there was money, there was barter, right? Like, people had goods and other people had goods, and they would trade those goods for one another. But the reality is that it wasn't a direct trading of goods between one another. It was one person had a good he gave it, and he remembered sort of the debt that people owed to him, right? Maybe it wasn't exact, maybe it was just something that he or she vaguely remembered, but it was this idea that you give something and people then will give something back to you, and you have to remember what that debt is. Money really came into existence as a way to not have to rely on your memory to keep track of that debt. So some physical thing was then being used as a way to track that. And really that physical thing in tracking that debt ended up having three functionalities, right? There are three functionalities being a store value, a medium of exchange and a unit of account, store value, meaning it's able to hold that value and maintain that value. You don't want to measure your debt in something that is going to be drastically different over time. You want it to be relatively the same. Meaning of exchange being that it's interchangeable between different goods and services and unit of account, meaning that it's able to be priced those goods and services are able to be priced in. That right. So you have money being this physical object that's representing debt and really being a store value medium exchange, unit of account. And I think it was something like 5000 years ago that there was what was found a universally good money. Not anything can be money. There are various key attributes of having good money, right? Divisibility, portability, durability, recognizability, fungibility, and most importantly, scarcity, right? Needs to have all those things, but also needs to be scarce. And so when people were doing commerce within their tribes, there would be things that are scarce for that tribe. Maybe it's seashells, maybe it was bags of salt, right? But when doing cross tribe commerce, there wasn't really very good scarcity among these kinds of items. And what there was a universal scarcity was gold. And so 5000 years ago we saw gold come up and about as this universally scarce object that was divisible, portable, durable, recognizable, and fungible. And that's how gold became money.
So that's how I look at money. And it's also why I'm so bullish on bitcoin today. And fundamentally because if you kind of look into where we are today, gold is still a very, very powerful store of value. Maybe not necessarily a powerful medium of exchange and it tends to not be a unit of accounts, but it is still one of the best stores of value that we see today because of its scarcity and the fact that these other key attributes are still very strong. So when you look at, when you look at bitcoin and you compare bitcoin on these key attributes to gold, you basically see that bitcoin is better than gold in all of these key attributes. Perfect scarcity, much more divisible, way easier to divide, much easier to move to store, it's perfectly durable, it's so easy to recognize that you can't counterfeit it. And in terms of budget, a bitcoin is always a bitcoin, right? So when I think about money, and when I think about how and why money exists and why fundamentally we're still in a good place, this is how I think about it.
Doc:
Have you spoken to any Gold Maximalists like Peter Schiff or what are your experiences with discussing with Gold maximalists?
Jonathan:
Yeah. So I haven't personally debated Peter Schiff. Of course, I know his stance. Obviously when someone has a really strongly held position or belief like a gold maximalist, it's going to be hard to dissuade them. But there are plenty of people who were pro gold who then moved over to the Bitcoin standard that I know about. And I think that the key thing that people always point to is that gold has this underlying value to it, intrinsic value to it. And there are two levels of it. One is like it can be used in computers and electronics, which is really not something that mattered 5000 years ago.
How was it money then, if that's the core belief? And then the other piece is jewellery, right? And that people are always going to value jewellery and that creates value there. And to some degree that does create value. But does it really create $11 trillion of value? What creates $11 trillion of value is that people see gold as a hedge against government printed currency. And it is that way because of its scarcity. The market cap of gold for use of machinery is low. The market cap for gold is jewellery. I haven't actually done the analysis of the market caps of the jewellery market in general, but again, we're not talking about the same value as the market of the store value as the hedge against government printed currency. And so when we think about gold as this great hedge against government printed currency, you can come to realize that Bitcoin is better than gold in that fashion. One area where maybe Bitcoin is not as good as gold, the one scenario, maybe there's two, but they're kind of related would be, I can't think of the word. These supercomputers, what are they called? Again?
Yeah, I'm trying to remember the terminology for the supercomputer. Quantum computing. Yes, bitcoin computing can become quantum computing resistant. But you could potentially have like a zero day attack where someone gets access to quantum computing and breaks the Bitcoin system. In this theoretical scenario, which is not very likely, that technically couldn't happen to gold. So gold does have this level of resistance of like it's physical. So if something were to completely destroy all of the internet or all of our electronics, gold would prevail. But the chances of that happening are much lower than governments having terrible fiscal policy and printing away our life savings to oblivion.
Doc:
Like you mentioned, the supercomputer thing. Looking at the whole crypto market, do you believe that there is a purpose for a lot of these cryptocurrencies that are around at the moment and the rate of survival? Do you believe that they could survive? Or do you have a more laissez-faire approach to the rest of the cryptocurrency market?
Jonathan:
Yeah, the way that I view it is that I'm confident…….
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