My new book “Bitcoin Nation” was published on the 15th anniversary of the Bitcoin Whitepaper, October 31, 2023. You can read it below, one chapter per week. Or buy it here:
To recap, so far, we have learned, why money works optimally when it has a constant supply. We then discovered that gold had been the best technology for money during the last 5000 years and that Bitcoin now mitigates the key downsides of gold.
The obvious next question is:
What will be the next money after Bitcoin?
As you may have guessed from the title, of this book, the author’s position is that there will not be a better Bitcoin for millennia to come. I do not want to just postulate this; however, I want to give you a few key arguments for why I think this is the case.
As history shows, besides brief transition periods, every local economic system tends to use one single money only. This is due to the strong network effects money has. To be the optimal medium of exchange and unit of account, it’s best to not have to convert between different moneys. And since network effects grow exponentially with the number of users, once a certain user threshold has been passed, any new monetary technology has to be significantly better than the dominant one to replace it. A little better is not enough.
This is why platinum couldn’t challenge gold as money and why copper was always only used as a sneaky replacement for gold and silver, not a market choice.
Now, you may think:
“Gold and silver were two competing moneys for thousands of years.”
This is a fair, yet incorrect point. Silver was just a substitute for gold on small transactions due to gold’s lack of divisibility. The truth is, it was merely one bi-metallic money standard.
Countries like China, who tried to remain on a silver standard, when the rest of the world was on a bi-metal standard, got wiped out economically for using inferior money.
The economic ping-pong between the gold standard and Fiat money is not a free market phenomenon, but has always been one of manipulation and force, which was possible due to gold’s monetary flaws.
Thus, the question you need to answer, when wondering whether Bitcoin will succeed, is:
Is it better enough to overcome the power of incumbency in gold?
It is a moot point, though, since we are currently in a global Fiat standard. So, even if you are unsure, if Bitcoin could have outcompeted the network effect of gold 100 years ago, today it just has to outcompete Fiat.
Bitcoin will succeed if it’s better money than gold, which I think I have argumentatively proven in the previous chapters. And since Bitcoin is already dominant in the cryptocurrency space and has amassed an estimated 200+ million users worldwide, it is larger than most Fiat currencies already.
I think it is thus fair to say that the next Bitcoin would have to be significantly better money than Bitcoin. And such a money is unlikely for two reasons:
The primary reason is that Bitcoin maximizes the security of its stable monetary supply, so a better money on the key parameter is not even theoretically possible.
A money that is not only better on other monetary parameters, while simultaneously as secure in its scarcity as Bitcoin is hard to imagine. One that is so much better on these parameters to overcome Bitcoins network effect is getting exponentially less likely with every new Bitcoin user.
On top of this problem, any next-gen money would have the issue that Bitcoin already happened. While Bitcoin could grow into scale in a decentralized way, it was possible only because those in power didn’t take it seriously.
Any money trying this now would not have this benefit of flying under the radar, and would thus likely be usurped by centralized powers.
Far more futile to such a money would be if it was successful, however. Because if money became a technology replaced every couple years by a better one, it would mean that it lacks the properties of transposing a transaction over time.
Digital scarcity can be discovered once and implemented in a technology once. Every copy must necessarily just be a copy, and as such subject to being copied itself. If it can be copied, it is not scarce.
Bitcoin is the one shot we have. If we screw Bitcoin up, there is little hope that we will ever have sound money again.
Luckily,I think the chances of Bitcoin succeeding are excellent, as long as all Bitcoiners stay vigilant and informed. Bitcoin truly is hope. Not just for a better money, but for a better, more sustainable society.
If you don’t believe this, yet, I hope to convince you of this vision in the next couple of chapters.