Bitcoin Is Backed by Time Itself
One of the most commonly heard criticisms of bitcoin is that it is not backed by anything nor is it intrinsically valuable. The pundits who make this claim, also state that the USD has no intrinsic value, gold has no intrinsic value, and now, likewise, bitcoin has no intrinsic value. It seems as though a concept economists have been debating for centuries has suddenly gone out the window as we have collectively realized that there is simply no such thing as intrinsic value.
The utter misconception of this economic principle as it relates to bitcoin is too large, and too important to ignore. Everything from Dutch tulips in the 17th century to stacks of paper USD notes have had some degree of intrinsic value. What we need to debate is the quality of intrinsic value attributed to each.
What bitcoin investors and enthusiasts must understand, is that it is not only a financial asset with considerable intrinsically valuable, but it is regulated by a universal constant unlike any man-made money system which has come before it – time itself. This universal construct allows us to plot the supply schedule of bitcoin in a manner where it is highly predictable while simultaneously being uncheatable through manipulation found in traditional monetary policies.
If the USD is backed by the authority of its government and the largest force of military might on the planet – then what is backing bitcoin? Even if programmable, digital money brings intrinsically valuable capabilities, how can we have faith in it if there is no core party which oversees its acceptance and adoption?
At the very root of what makes the bitcoin network tick, is a regulatory algorithm which determines that new blocks of bitcoin will be mined on average every 10 minutes. These ‘uncheatable’ maths which are intelligently constructed by system design, ensure that nothing can alter the predetermined issuance rate, nor the block size halving rate, of bitcoin.
Every 10 minutes, more bitcoin become available at a disinflationary rate. That mathematical guarantee formulated by a crude form of artificial intelligence is the backing of a system which boasts remarkable intrinsic value.
Friedman’s k-percent Rule
American economist, statistician and writer Milton Friedman once posed the idea of replacing central banking institutions with a computer capable of mechanically managing the supply of money. He proposed a fixed monetary rule, called Friedman’s k-percent rule, where the money supply would be calculated by known macroeconomic and financial factors, targeting a specific level or range of inflation. Under this rule, there would be no leeway for the central reserve bank as money supply increases could be determined “by a computer” and the market & its citizens could then anticipate all monetary policy decisions.
Will we ever see Friedman’s computerized banking institution put into action? Considering the mining network of cryptocurrencies are the closest thing to an authority, and mining will only get more specialized and thus centralized in the future, we may well already be on the path towards it.
Bitcoin boasts the economic backing of a force magnitudes more intelligent and pervasive than the promise of men & military might: an uncheatable, highly predictable, chronological supply schedule enabled by Friedman’s k-percent rule. Friedman predicted the rise of a computer capable of automatically adjusting the inflation rate of money, and this is precisely what we see in the case of bitcoin, as a regulatory algorithm intelligently adjusts the mining difficulty to make the issuance of blocks more or less easy depending on the demand for network hashing power. The computerized function of the bitcoin system boasts intrinsic value which will continue to grow as more users join the fold and the network becomes more valuable for every participant. No money system we have seen to date can claim it is chronologically regulated. The universal construct of time is the backing of the bitcoin digital economy.
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