In The Bitcoin Standard, Saifedean Ammous, Professor of Economics at the Lebanese American University, presents Bitcoin as "an unstoppable and globally accessible hard money alternative to modern central banks." Published nearly a decade after Bitcoin’s inception, this book has become a cornerstone for understanding Bitcoin’s role in monetary history.
Key Details
Title: The Bitcoin Standard
Author: Saifedean Ammous
Publisher: Wiley
ISBN: 978-1-119-47386-2
Blending academic rigor with accessible prose, Ammous excels in tracing the evolution of money—a must-read for Bitcoin enthusiasts and economists alike. Below is a chapter-by-chapter summary.
Chapter Summaries
1. The Nature of Money
Money is a foundational technology enabling value transfer across time and space. Its three critical properties:
- Medium of exchange: Facilitates trade.
- Store of value: Preserves purchasing power (hard money excels due to scarcity and durability).
- Unit of account: Allows precise economic calculation.
2. Primitive Moneys
Early currencies like shells, salt, and cattle failed due to low stock-to-flow ratios—easily inflated by overproduction. The shift to scarce metals (gold, silver) solved this.
3. Monetary Metals
Gold emerged as the dominant monetary metal due to its:
- Scarcity: Cannot be synthesized.
- Durability: Chemically stable.
Historical gold-backed systems underpinned eras like the Renaissance and the Belle Époque. Gold’s flaws? Central banks over-issued notes and deferred settlements, weakening trust.
4. Government Money
Fiat money—initially gold-backed—devolved into unbacked paper, enabling unlimited inflation to fund wars and welfare. Debt accumulation crowds out productivity, favoring financiers over producers.
5. Money and Time Preference
Sound money encourages low time preference (saving/investing). Inflation forces high time preference, eroding long-term productivity and cultural growth.
6. Capitalism’s Information System
Prices signal resource allocation. Central planning (e.g., Cantillon effect) distorts prices, causing inefficiencies. Ammous’s key insight:
"Central bank planning of the money supply is neither desirable nor possible... It is rule by the most conceited."
7. Sound Money and Freedom
Austrian economics advocates sound money to curb government overreach. Liberalism thrives when money retains value, directing capital to productive uses.
8. Digital Money’s Rise
Bitcoin solves the double-spend problem without trusted third parties. Its open ledger ensures transparency. Though volatile, Bitcoin’s market cap follows the S-curve of adoption—poised for exponential growth.
👉 Why Bitcoin’s scarcity matters
9. Bitcoin’s Utility
- Store of value: High stock-to-flow ratio.
- Sovereign money: Accessible globally.
- Frictionless settlement: Fast, cheap, censorship-resistant.
- Unit of account: Potential to unify global pricing.
Post-pandemic, Bitcoin’s role in distrustful geopolitical climates and Eurodollar collateral shortages could accelerate adoption.
10. Bitcoin Questions
Q: Is mining wasteful?
A: No—it converts energy into immutable monetary stock.
Q: Can Bitcoin change?
A: Its antifragility resists manipulation (e.g., failed attacks strengthen it).
Q: Can it scale?
A: Base-layer transactions are limited, but Lightning Network enables Visa-like throughput.
Q: Is it for criminals?
A: The public ledger deters illicit use—transactions are traceable.
Q: Can governments kill Bitcoin?
A: Only via a return to sound money—unlikely given rising debt/GDP ratios (130% in the U.S.).
FAQs
1. Why is Bitcoin called "digital gold"?
Bitcoin shares gold’s scarcity and durability but enhances portability and divisibility digitally.
2. How does Bitcoin combat inflation?
Its fixed supply (21 million coins) prevents debasement, unlike fiat currencies.
👉 Explore Bitcoin’s inflation-resistant design
3. Is Bitcoin too volatile for everyday use?
Yes, currently. But as adoption grows, volatility will likely decrease.
4. What’s the biggest threat to Bitcoin?
A global shift to sound money—though politically improbable.
Final Thoughts
The Bitcoin Standard remains the definitive economic treatise on Bitcoin’s monetary properties. For those questioning centralized banking, this book is the starting point.
"Bitcoin is the answer to a world drowning in debt and monetary manipulation."