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@ Fiat Shenanigans 🤡🌎
2024-01-15 19:50:42"If Bitcoin can be divided into 2.1 quadrillion satoshis, then how is it scarce?"
"Economists say we need a little bit of inflation"
A lot of people seem to have trouble understanding how Bitcoin is different, and why the difference is so important. I'm going to try to spell it out in plain enough terms that even your Uncle Jim will get it. I know they teach fractions in elementary school, but a lot of adults seem to forget this immutable law of mathematics.
There will only ever be 21 million Bitcoin. Bitcoin is currently divisible to the 8th decimal place. 0.00000001 Bitcoin is called a satoshi, currently the smallest divisible unit of a Bitcoin, and in a supply of 21 million Bitcoin, there are 2.1 quadrillion satoshis available.
Let's say that you own 0.1 Bitcoin, or 10,000,000 satoshis. That means that you own 0.1/21,000,000 of the money supply, or 10,000,000/2.1 quadrillion of the money supply. You see, when we divide it into smaller pieces, both the numerator and the denominator of your fraction increase proportionally, and the size of your fraction of the money supply doesn't change. The total of the money supply also doesn't change. It's just divided into smaller pieces of value.
Now let's contrast that with another example. Let's say you have $10,000 in your savings account. That means you have about 10,000/20.7 Trillion of the USD money supply. Now lets suppose that the Federal Reserve pumps an additional $10 Trillion into the banking system over the next decade, a likely scenario given how things are currently going. That means that 10 years from now you have 10k/30.7T. You see, your fraction just got smaller, (about 50% smaller), because the denominator of your fraction increased and the numerator did not.
Now this next part is really important to understand: money has NO intrinsic value, BUT we use it as a placeholder for the value of goods and services so that we don't have to barter with each other. All the money in the world should be roughly equal to the total value of all the goods and services in the world at all times. It's not exact, but it's always a roughly 1:1 ratio. So if your fraction of the money supply is made smaller, then the fraction of the total goods and services that you can buy is also made smaller.
This is how inflation steals from you. They increase the denominator of everyone's fraction, and your fraction gets smaller.
Now in a productive society, the total of goods and services increases over time, because people are working to extract resources from the earth and produce more things. This is why economists argue that it's OK to increase the money supply a little over time. If the money supply increases at the same rate as the increase in goods and services, then the fractions on both sides of the ratio change at the same rate: YourMoney/TotalMoney : ThingsYouCanBuy/TotalThings It's only when they increase the money supply faster than the increase in goods and services that we get inflation. So, they think a little increase in the money supply is OK, or even good, but is it really?
Let's contrast that with Bitcoin money that has an absolutely fixed money supply: If your fraction of the money stays the same over ten years because nobody is increasing the denominator of your fraction against an unchanging numerator, and a productive society increases the total supply of goods and services over the same time period, and money:stuff is always 1:1, then your fraction of things you can buy actually gets larger. This creates a world where you are actually rewarded for saving some of your money for the future. The money that you traded your time and effort for, that represents the value of your work, actually gets better with time.
If you understood all this, then maybe you will finally understand why people are so excited about Bitcoin, and why they are so confident that Bitcoin is the superior placeholder for the value of our goods and services, and will end up replacing all other monies in time.