Bitcoin

Conceptual explanation
Bitcoin is an encrypted monetary network. It serves as a store of monetary energy across time and space. It is decentralised, operating across the globe through a network of nodes. The number of bitcoin is capped at 21 million, which are being released into the network over time, through the process of bitcoin mining. It is engineered as a thermodynamically sound monetary system, superior to the politically designed and inflationary fiat monetary system.

The Austrian school of economics defines inflation as an increase in the money supply. When central banks issue new currency, the money supply increases. While technology is a deflationary force, keeping prices measured by the Consumer Price Index (CPI) low, inflation is currently happening in stores of value, such as housing prices, precious metals and stocks.

Storing monetary energy in currency means storing wealth in a leaking system, leaking at the rate of the money supply expansion. Storing monetary energy in bitcoin, means storing wealth in an isolated system, increasing in value at the rate of monetary adoption.

The road to serfdom consists of working exponentially harder in order to earn a currency growing exponentially weaker.

Michael J. Saylor

Case study
In March 2020, as the Coronavirus pandemic started wreaking havoc across the world, central banks issued record amounts of new currency into the financial system. While the monetary supply had been growing at around 5% per year before the crisis, the new rate was 15-25% per year. If we define money supply growth as inflation, your investments and stores of value need to appreciate at or above that new hurdle rate, in order not to lose value.

Michael J. Saylor, CEO of business intelligence software company MicroStrategy, realised the problem facing his treasury, studied his options, and landed on bitcoin as the solution. Subsequently, MicroStrategy adopted bitcoin as their new treasury reserve asset – injecting their entire treasury reserve into bitcoin. Other companies have followed. In the following video, Michael Saylor speaks with Galileo Russel of HyperChange on whether Tesla should do the same.

Elon Musk of Tesla listened. Following an exchange with Michael Saylor via Twitter, in January 2021 it was clear to the world he had been convinced. Elon changed his Twitter bio to just read #bitcoin and posted a tweet stating “In retrospect, it was inevitable”. Shortly thereafter, Tesla announced it had updated its policy on cash reserve investments, to include alternative reserve assets – and a $1.5 billion investment into bitcoin. At the time, this represented 8% of Tesla’s cash reserves.

Facebook is what happens when we pool social energy on a software network. Everyone understands this. Bitcoin is what happens when we pool monetary energy on a software network. Few understand this.

Michael J. Saylor