By Teggy Altankhuyag, COO and Co-Director, Coinfloor
There is an old story, in which a master goes off on a long business trip and entrusts all his gold to three servants. Two invested wisely and made a substantial return, but the third buried his coins in the ground rather than trying to grow what he’d been given. When the master returned, he was full of praise for the first two but furious with the other: “Why didn’t you show any initiative? Don’t you realize that you reap what you sow?”
This parable reminds us that money isn’t just for spending. The concept that money’s real value is as a seed for growing new and greater value has been around since the dawn of money itself. This isn’t a secret: detailed guidance on how to multiply your wealth have been around since Babylon times. But before all this we need to remember what the real purpose of money is.
The best way to think of money is not as a token but rather a record of the value that you have generated, i.e. a store of value. There’s no shortage of ways to create value. We do it every time we go to work: we are not remunerated for showing up, but for what we produce. The stock market─when it is functioning properly!─measures the total value generated by the companies listed on it; a bank’s value is determined by how well it helps its customers to manage their money. Even a burglar has a balance sheet, with their wealth increasing in inverse proportion to their victims’.
As an actual store of value, today’s government-issued “fiat” currencies are worse than useless. Every day that money sits in your bank account, inflation diminishes its real value. Storing your wealth in fiat currency is like filling up a bucket with a hole at the bottom. However hard you work, the bucket will empty if you don’t fix the hole. The true ownership of a fiat money is also a problem, but that’s another whole topic of its own.
Bitcoin was born to bring back the real purpose of money and give power to the people. The financial crisis of 2008 led to a huge crisis in public confidence in governments’ ability to deliver reliable money.
We’ve been here before, of course. History gives us lots of lessons about what happens when fiat money goes wrong. From the financial chaos of Weimar Germany to more recent hyperinflation in countries like Zimbabwe and Venezuela, the lessons are clear: when money suddenly sheds most of its value the result is poverty, crime and corruption, shortages, riots and even revolutions.
Like listed companies, Bitcoin’s value is determined by how much value it is adding to the society, which in turn is a function of how useful people believe it to be as a store of value at this stage of Bitcoin’s life. One bitcoin is always worth one bitcoin: today, tomorrow and in twenty years’ time. Since there will always be a finite number of coins, Bitcoin is not just inflation-proof but inflation-impossible. And let’s not forget bitcoin is just starting its journey. It shows us just a glimpse of the brighter future of money, but its full potential is yet to shine.