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The Bitcoin Standard Summary, Notes, Lessons & Quotes

By March 6, 2022October 26th, 2022No Comments

The Bitcoin Standard Summary

This is The Bitcoin Standard Summary by Peter Conley. It is a review of the book, The Bitcoin Standard by Saifedean Ammous.


  • Money serves three main purposes for humans and has from the start of civilization: a store of value, a medium of exchange, and a unit of account
  • Barter economies are limited in scope and power; you need to abstract value into a common exchangeable good (indirect exchange), like money, in order for society to advance and markets to grow
  • Better money is more saleable i.e. accepted in as many markets as possible, without losing price. In other words, universal money is the best form of money
  • There is nothing in principle that should or shouldn’t be used as money. Sometimes, in certain environments like Prison, cigarettes are the best form of money
  • Hard money refers to the difficulty to produce more of that type of money
  • Stock-to-flow is a term that calculates the ratio between the existing quantity (stock) of money compared to the incoming quantity (flow). The higher this ratio the “harder” the money
  • Human history has seen various degrees of hardness and soundness of money, all of which have had massive impacts on the civilizations that have chosen to use them


  • Humans have used countless forms of money throughout time including salt, tulips, limestone, cattle, gold, and many other forms
  • The closest form of historical money the author saw to bitcoin was the use of Rai stones (made of limestone) used on the island of Yap (modern-day the Federated States of Micronesia)
  • Many societies collapse when the debasement of their currency happens due to outsiders with more advanced technology producing more of their local money at a cheaper cost i.e. destroying the stock-to-flow ratio
  • The scarceness of money is what gives it value, if you pollute that characteristic nothing else matters


  • The advancement of metallurgy made monetary metals more salable across space
  • Copper and iron were poor use cases of money due to ease of corrosion, relative abundance, and ease of production
  • The free market, not one group of people, eventually agreed upon gold as the best good for money due to its rarity, salability across time and space, uniformity, and indestructibility
  • Gold had the highest stock-to-flow ratio, around 1-2% historically plus the above-mentioned properties that made it the best form of money
  • Once the earth had a universal standard for money this allowed for unprecedented capital accumulation
  • The “golden years” of the roman empire occurred when the standard coin (the aureus) was its heaviest weight of gold (8 grams)
  • The clipping of this coin (reducing its weight of gold) coincided with the decline of The Roman Empire over many years
  • Feudalism was a result of the debasement of the gold coin, essentially you have to focus on land, food production, security, and nothing else when there is no a form of hard money i.e. bringing you back to a form of the barter system
  • The Renaissance sprouted out of Florence Italy, in part due to the city minting the florin coin, which was adopted as the most common form of money due to its hardness and recognizability
  • That gold coin contributed to Europe being dragged out of the Dark Ages
  • The nature of gold’s difficulty in being moved over space led to its centralization i.e. central banks holding it, which in turn led to the abstraction of the gold into paper money creating it more salable across space.
  • The gold standard (gold being the universal form of money) reigned throughout parts of Europe for a century
  • The author argues this was the golden age of hard money and free trade, which led to the most productive and prosperous global economy humans have ever seen at that point in history


  • WWI resulted at the end of the gold standard and shifted to fiat money due to governments inflating their supply to pay for a very costly war that their citizens did not want to fund through war bonds
  • This money was no longer redeemable for gold, it is fundamentally different even if it was represented by the same paper bills and backed by the same institutions
  • It is likely that WWI & WWII would have been settled much quicker if the gold standard held, due to countries running out of “war chests” much quicker
  • After the war, all major currencies saw a decline in purchasing power due to the de-pegging of gold
  • Removing common hard money as the foundation of government currencies led to an extremely complicated and inefficient currency market that had massive ramifications; i.e. currency wars, bloated and parasitic forex markets, etc
  • Keynesian economics argues that top-down government management of the money supply is a net positive and leads to quicker economic recoveries from recessions
  • Austrian economics argue the exact opposite, that unsound money forced upon the people prolongs recessions and depressions because it allows for the debasement of the currency and inorganic credit markets with artificially low-interest rates which pervert the ability for capital to make proper investments
  • The metrics of a healthy economy changed under Keynesian thought; from wealth being calculated from the abundance of productive goods and services with increasing efficiency to aggregate spending being the main metric for a healthy economy, no matter what we were spending on
  • After WWII an international conference was called (Bretton Woods) to determine global monetary policy. What was settled was the American dollar being set as the reserve currency, backed by gold, to be held in all central banks across participating countries
  • As gold continued to remain the hardest money around and we shifted to government-based money (fiat) we saw the price of an ounce of gold go from $35 to $1,200 relative to the American dollar
  • The challenge with government money is that the hardness of it solely relies on politicians’ inability to inflate the supply all the while all personal incentives point them to doing so
  • Fiat money stored in banks can be seized at any moment’s notice, just look to countries like Greece and Lebanon


  • High-time preferences mean that humans value immediate satisfaction and use of their money and tend to think in the short term
  • Low-time preference leads to humans extending their thinking to many decades in the future and leads to building more durable and longer-lasting structures, institutions, goods, and services
  • Unsound money leads to price elasticity and distorted price signals. It’s like trying to build a house with measuring tape that constantly changes the size of a meter
  • Low-time preference money and societies don’t have to worry about spending time and effort on investment strategies like 401k’s because they know their savings account will maintain its integrity.
  • High-time preference money and societies thrust the job and worry of investment onto average citizens which leads to unfair extra effort and competition with market actors i.e. it increases the cost of preserving your wealth, even after you fairly earned it from your labor
  • Low-time preference societies allow for investment in innovation and capital that may take decades, like fishing boats, but in the end lead to more production and prosperity for their fellow citizens on the whole
  • The marshmallow experiment is the perfect portrayal of high-time vs. low-time preference individuals. Those that can wait through immediate reward are in turn rewarded with a greater reward. This doesn’t apply just to individuals, its implications radiate into all of civilization
  • A low-time preference society capital levels continue to increase, which increases productivity, which delivers a higher quality of life in the long run
  • When the rewards for producing more of the money supply (be it gold, fiat, or something else) is greater than the reward for producing actual goods and services that contribute to civilization, the money expansion will occur, and will ultimately lead to the collapse of the civilization on a long enough time scale
  • Economists conflate the rise in the value of gold or equities with the decreasing purchasing power of fiat money. It’s not that the stock market is getting more valuable since the dot com bubble, it’s that the dollar is becoming less and less valuable
  • Unsound money leads to a direct incentive structure of devaluing saving. Why hold onto dollars when they’ll only serve me less and purchase me less in the future. It’s a simple incentive structure that leads to a shallow consumer based culture and economy that produces less durable and useful products for the good of civilization
  • Savings and capital accumulation is essential for economic growth, the harder the money, the more we can build with the future in mind
  • Some of the most important innovations in human history were created during the period of the gold standard (hardest money period in history) because they had the proper capital and runway to build for the future


  • “The cause of waves of unemployment is not “capitalism” but governments denying enterprise the rights to produce good money” – Friedrich Hayek
  • Without a fixed frame of reference or an unchanging common “unit of account” it makes it incredibly difficult for free enterprises to make educated and productive decisions
  • There is so much wisdom and knowledge packaged into the price of a good. These prices then bleed into the decision-making of other enterprises which makes the whole system more intelligent and productive
  • If a central planner intervenes in the form of price controls it corrupts that pure form of knowledge of pricing and causes all kinds of undue damage to the system at large
  • No central authority could ever internalize all the information that goes into forming a price or replace its foundation
  • The book Socialism (1922) written by Mises posits that the fundamental reason that Socialist systems fail isn’t the forced labor factor, or even the loss of incentives to work hard due to forced equity, it’s the impact of centralized authorities forcing prices into the whole economic system
  • If price signaling is corrupted, it completely destroys the ability of the executives to produce goods, to accurately calculate ROI, productivity, and quality of their finished product
  • Without untampered prices born from a free market, the system is doomed to fail
  • Governments forcing a fixed price for goods or services ultimately leads to a shortage or surplus, neither of which has positive ramifications
  • The capital of credit markets is one of the most, if not most important markets of the whole economic system. When a government intervenes in this system and forces artificially low rates, therein manipulating the price of capital, it has major 2nd and 3rd order consequences
  • Centralized control of the capital markets eventually leads to these boom and bust cycles that drastically increase the volatility of our entire system


  • Under a sound monetary systems, governments had to function in a fiscally responsible way – something so foreign to the current generations
  • The idea that the government needs to manage the money supply, or that it’s a function that is the best system is a lie – a flat-out scam
  • The market has dictated the best form of money for thousands of years prior to fiat, this monetary experiment we’re doing is the anomaly, not the standard procedure for human civilization
  • The most common schools of economic thought: Keynesian & Monetarist have been taught in the schools, almost as a form of propaganda for over 100 years
  • Under Keynesian economics; by constantly expanding the money supply, central banks’ monetary policy makes savings and investments less attractive and thus encourages people to become avid consumers instead of savers
  • The Austrian Economic school of thought argues that utilizing a form of hard money leads to a greater focus on saving and investment, which in turn leads to more productivity and more prosperous society with higher utility goods and services
  • Unsound money leads to incentivize perpetual war, even if the constituency is constantly against it
  • The larger the population who buy into a universal sound form of money leads to greater specialization and a greater variety and diversity of products and services that can benefit mankind
  • The sounder the money, the less control the government has over its expansion, which in turn gives more power to the individual
  • Unsound money, on the other hand, allows governments to buy allegiance and popularity by spending on achieving popular objectives without having to present the bill to the people directly


  • All government money is now “digital money”; around 8-10% of actual USD is in its physical form of cash. So we’re already in a world where money is purely digital, it’s just the nature of how that money works on the digital network that makes Bitcoin so unique and radical
  • Bitcoin has essentially turned cash (direct peer-to-peer swapping of money for goods) onto a digital network that needs no trusted third party to oversee it
  • All forms of USD-based digital money have some sort of intermediary that ensures honesty in the system whether it be your local bank, the SEC, central banks, or companies like PayPal
  • Bitcoin was able to do the nearly impossible; it made a digital asset truly scarce, and it solved the “double spend” problem
  • Bitcoin’s core properties cannot be altered by any outside party. No many how many people have tried, you can’t create more bitcoin, alter the issuance schedule of the future bitcoins to be mined, or increase the size of the transaction ledger (block size)
  • Bitcoin’s structure is built entirely on the mantra of 100% verification and 0% trust between its nodes
  • Bitcoin is the hardest money ever to be invented because no more of it can ever be produced, there is a hard cap at 21 million bitcoins, until the end of time
  • Bitcoin is also highly divisible, each single bitcoin is divisible into 100,000,000 units called satoshis
  • No single entity is responsible for maintaining the ledger and no single entity, or group of entities can even alter the ledger if they tried
  • There are no managers, corporate leaders, or administrators of Bitcoin, there are purely users all tied to the same rules of engagement
  • Bitcoin has seen an annual compound growth rate of 573% each year during the first eight years of its existence
  • Bitcoin is secured and protected by the fact that there are tens of thousands of distributed nodes or hard drives that keep an exact same copy of the ledger across the world that gets updated in real-time every 10 minutes (every new block)
  • The mining design of the bitcoin network ensures that the Proof of Work consensus mechanism is costly to prove, thus creating an economic incentive system to keep all of the miners honest


  • Bitcoin is great as a store of value because it is the only good/resource on earth that has a hard-capped supply. Every share of stock, every commodity, and every previous form of money can be diluted by the production of more. There can and only will be 21 million bitcoins for the entire existence of humanity
  • A bitcoin standard would be good to shift humanity from a high-time preference money system back to a low-time preference one
  • Bitcoin is good for the ability to transmit value from peer to peer without an intermediary
  • Bitcoin is good for its censorship resistance, i.e. no government can shut it down or limit an individual’s ability to transact in it
  • It is good because it is more salable across space than gold. Sending $2 billion dollars worth of bitcoin from New York to Hong Kong can be done in ten minutes for less than $10. Try accomplishing that with gold bars
  • Bitcoins’ stock-to-flow ratio is estimated to overtake that of gold by 2022
  • Bitcoin is good for individual sovereignty, due to its decentralization. Bitcoin can not be seized by central authorities and can be moved at the speed of light if threatened by confiscation
  • Bitcoin is good for creating antifragile money because all it is is a string of numbers and letters that can be stored in any fashion, you can not destroy or eradicate pure information
  • Bitcoin is good for the verification of ownership, we really don’t know how much gold reserves are actually in Fort Knox, but as long as a bank shows their public wallet address they can’t fake how much bitcoin collateral they actually own
  • Bitcoin is good for a global unit of account, seeing that bitcoin can be divided into 100 million satoshis each, it can be used to account for any kind of good or service on a universal scale. You can price a high-rise condo in Tokyo with bitcoin as well as a cup of coffee in Nebraska


  • Is Bitcoin Mining a Waste? – No, bitcoin mining is an essential part of the protocol’s process that ensures miners act honestly and uphold the value of the network and asset. Bitcoin mining ensures a system based on 100% verification and 0% trust
  • Bitcoin’s mining also allows for the cheapest, most isolated forms of energy production to be monetized which will in turn drop energy prices globally and stabilize the current energy grid and market
  • Can anyone change Bitcoin? – No, the current protocol or original chain “bitcoin core” has been set in stone and used as the de facto form of money since its inception in 2009. You can copy or fork bitcoin’s code and start your own form of cryptocurrency but that does nothing to change the current bitcoin core code
  • Can Bitcoin Scale – Yes, although the amount of direct on-chain transactions is limited to about 4 a second, there are many solutions to off-chain transactions for the network that will allow it to scale like bitcoin exchanges and the lightning network
  • Is Bitcoin for Criminals? Yes; so is email, telephones, SMS messages, Facebook, and literally, every other form of communication technology ever invented. Bitcoin is however for everyone other moral and honest citizens on this planet earth. Every technology created is neutral – you can use a hammer to build a house or break someone’s hand. Do we outlaw hammers because of this? Of course not, the benefits to honest users far out weight the negatives of bad actors
  • Are there vulnerabilities that can “hack” the bitcoin network? Yes, these do exist, some of the most common ones are a 51% mining attack on the network to create false transactions, malware embedded into nodes and mining equipment, the breaking of the SHA-256 hashing algorithm, and a few others. However, none of these have come to fruition and become harder and harder to pull off as the network grows in size and antifragility
  • Do “altcoins” pose a threat to bitcoin? No, for the same exact reason a new social network is a threat to Facebook; the network effect. Once a dominant new type of digital network, that solves a specific problem, is established, it is an uphill battle to take it down. There can and have been thousands of imitators of bitcoin but none of them have come close to posing and threat to them and none of them ever will at this point — it is too big to fail

Related Books

The Internet of Money Volume I

By Andreas M. Antonopoulos
Buy It Now

The Internet of Money Volume II

By Andreas M. Antonopoulos
Buy It Now

The Internet of Money Volume III

By Andreas M. Antonopoulos
Buy It Now

Layered Money

By Nik Bhatia
Buy It Now

Digital Gold

By Nathaniel Popper
Buy It Now

The Bitcoin Standard Quotes

“For as long as the government could print more money and have that money accepted by its citizens and foreigners, it could keep financing the war.”

“money that is easy to produce is no money at all, and easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard-earned wealth for sale in exchange for something easy to produce.”

“History has shown that governments will inevitably succumb to the temptation of inflating the money supply.”

“Sound money is also an essential element of a free society as it provides for an effective bulwark against despotic government.”

“Sound money allows people to think about the long term and to save and invest more for the future. Saving and investing for the long run is the key to capital accumulation and the advance of human civilization.”

-- Saifedean Ammous

The Bitcoin Standard Lessons

  1. Money that is inflatable creates high-time preference societies, where we value immediate gains instead of long-term payoffs
  2. Stock-to-flow ratio is the rate at which new money is introduced to the current supply
  3. Money is a tool that serves three main purposes: a medium of exchange, a store of value, and a unit of account
  4. Humans have used all forms of money throughout history: salt, cattle, glass beads, limestones, precious metals, etc.
  5. The free market coalesced on using precious metals as a common form of money due to their innate properties
  6. Fiat money or government money enforced by decree without backing is a relatively new historical norm
  7. Money is an information system. When debasement is possible, it distorts proper signals and creates distortions of all kinds in the economy
  8. All money is now digital money, 90% of all US dollars are entries on some database, not physical dollars

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