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0 sats \ 19 replies \ @kr 21 May 2023 \ on: ∞/21M > $ × ∞ bitcoin
i don’t understand the “∞/21M” equation.
does this imply that all the world’s wealth will be divided by 21 million?
Simple answer, yes.
Infinity divided by anything still equals infinity.
₿itcoin is the thing that pairs the infinite with the finite. Only ₿itcoin guarantees that by obtaining a portion of its 21M supply does one hold a finite quantity of infinite value, that is, a piece of all that is and all that ever will be.
We could write:
₿ = ∞/21M or ₿ = ∞
When thinking of the world’s wealth, we might ask, "What is money?".
As Saylor put it so eloquently, "Money is energy. Energy is life."
When all money is ₿itcoin...
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ok, so if all the world’s wealth is divided by the number of bitcoin in existence, doesn’t that also imply that everything that is not bitcoin (homes, stocks, land, gold, bonds, cars, etc…) is worth exactly nothing?
i think a much more realistic equation is “∞/210M”, where roughly 10% of the world’s wealth is being stored as money at any given point in time… with the other 90% actively deployed as income-generating assets.
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You're clinging to this idea of "income generating assets" as if it's the be-all and end-all.
That's a notion born out of our deeply flawed fiat money system. It's got most people believing that the only way for their wealth to grow or at least maintain its value over time is to hand it over to someone else, like a bank. That's the real trap here.
Why? Because in this scenario, YOU are the real income-generating asset. You dutifully deposit your earnings to a bank every week, and then what? The bank owns your money, and approves or denies what you can do with it and when.
If your money wasn't constantly losing its value at a rate of 5-10% per year, you wouldn't even be looking for these so-called "income-generating assets".
Also, let's not forget that nearly all "income-generating assets" bleed value in some way or another - property taxes, management fees, insurance costs, expense ratios, counterparty risks, you name it. Not to mention, equities are a gamble, dependent on companies consistently outperforming competition and staying relevant in an ever-changing market.
And the whole ∞/210M concept doesn't cut it either. You're accounting for 189M Bitcoins that will never exist. We'll only ever see ~20M in circulation at most. So, your percentage analogy falls flat. Money is indirectly traded for property ownership of goods that we assign costs to consume or costs to utilize.
Look at it this way. In Jan 2012, I couldn't have even bought a $150,000 home with 10K Bitcoin. But if I held onto my Bitcoin and didn't buy the house, even if the home's value increased tenfold by 2023, my Bitcoin would have appreciated even more. This is the true power of Bitcoin and the core of the what it means have a deflationary currency in a future where we will almost certainly be experiencing significant economic deflation due to technology and AI. If the price of everything is going down against bitcoin, and if I already have a home to live in (utilize), and I'm not trading 25 bitcoin for a second property for me to manage and maintain.
People will still need homes to live in, but they will not need or want to have 10 investment properties to maintain and manage to store and maintain their wealth over time. They will store their wealth in their money that works properly. This reduces market for homes down to people who want to live in homes only, not profiteer from land ownership.
Don't even get me started into debt leveraging where they buy up land with money pulled out of thin air, and then rent it all back to you, the income generators, while inflation grows their assets values and shrinks their debts, so the cycle continues.
Here's a hard truth - if you truly believe that you should be storing all your wealth in income-generating assets, then you are an income-generating asset.
In a world dominated by technological innovation, the cost of most things will boil down to production costs. Companies producing low-quality items will vanish because an informed consumer, understanding that their money will increase in value over time, will demand products providing long-term value. So, in essence, cheap money breeds cheap goods, and vice versa. I strongly recommend you check out some of Jeff Booth's work to gain a better understanding of this concept.
I'm sorry if this comes off a bit blunt, but it's a complex idea that's hard to get across. I hope this clears up my stance.
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“fiat mindsets” have nothing to do with the point i’m making.
look at the world on a gold standard… there was a certain amount of gold in the world (ignoring the ~1% inflation), and that gold only represented a fraction of the world’s wealth.
the rest of the world’s wealth was stored in income-generating assets (homes, cars, stocks, bonds, land all had non-zero values 100 years ago).
those assets may have even been denominated in gold… but they weren’t actual gold.
i understand the effect of money printing on an economy, i’m not arguing that though… what i’m arguing is that even on a sound money system, money will only ever represent a fraction of an economy’s wealth.
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Try pricing things in ₿ rather than dollars.
∞ = Homes, stocks, land, gold, labour, etc.
Divide that by ₿itcoin instead of dollars.
For example, my home is not worth $300k, it's worth ₿11.14.
Gold is ₿0.0726 per ounce.
That is in today's prices where ₿itcoin has a dollar value. There will be some point in the future where the last ₿ is exchanged for $ because dollars are no longer accepted as a medium of exchange (think of the highest point on the final wick of that BTC/USD candle chart).
As ₿ adoption increases to the point where it becomes the single global currency, having absorbed all others, the price of goods and services goes down.
In 2012 a pizza was bought for ₿10,000.
Today a pizza costs around ₿0.0005 (50,000 sats).
In the future, a pizza may cost 50 sats.
Think of sats as future dollars.
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yes, i understand that part… but the equation you described doesn’t work.
let’s assume there are 21 million homes in the world, each worth 1 BTC.
for simplicity, let’s say this economy has no other assets… only homes and bitcoin.
since there are 21 million homes (each worth 1 btc) and 21 million bitcoin, the wealth of this fictional economy is 42 million btc. after all, the homes may be “worth” one bitcoin, but they are not a bitcoin in and of themselves… the bitcoin and homes both exist separately.
the money in this economy is only worth 50% of the economy’s wealth, the rest of it is stored in homes.
in reality, the percent of a nation’s wealth stored in money is far below 50%, probably closer to 10% as an estimate.
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In this example, I own a house and you own a Bitcoin. If you buy the house you are giving me your Bitcoin and I give you the house.
Value has exchanged hands but there is there is still the same amount of value in the economy.
Saying something is "worth" something doesn't mean more value has been created because to realise that value you must exchange it for something of equal value.
Unfortunately, this is part of the fiat mindset. If you go to the bank and get a loan in dollars to buy a house, there are now more dollars in the economy. But adding more dollars to the economy doesn't add real value. Hence, why things actually get more expensive in dollar terms.
Another view is to say that getting a loan is borrowing from your future. You're taking the value now and promising to pay it back by working to earn those dollars and return them to the bank. This works on paper, but in reality it's still inflationary because by taking those dollars now, you're actually increasing demand for the houses driving their prices up.
In short, real value cannot be created out of thin air. When there are more dollars, the value is being extracted from somewhere.
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In this example, I own a house and you own a Bitcoin. If you buy the house you are giving me your Bitcoin and I give you the house.
Value has exchanged hands but there is there is still the same amount of value in the economy.
Ok so if 1 BTC is being traded for 1 home, the BTC in the economy represents half of the economy’s wealth… right?
are you saying no value can ever exist if it is not represented by bitcoin?
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If we refer back to the base equation it becomes simple.
∞ / 21M
Everything / ₿
All Assets + Money + Energy / ₿
If it is not ₿itcoin, the only place it belongs is on the left. Part of ∞.
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in the example above, homes are part of the denominator, not the numerator. i believe the same is true for all other assets too.
If there are 21 million homes of equal value in a world with no other assets, then there is no need for a medium of exchange, money.
One home is simply traded for another.
We do not live in this world. People need food, water, energy and many other essentials to sustain life and promote the advance of civilisation and homes are very illiquid.
There are more than 21 million homes in the world, therefore when ₿itcoin becomes the dominant medium of exchange the average home will be far less than ₿1.
What a nice thought for the future.
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this misses the central point of my argument.
money will only ever be used to store a small percentage of the world’s wealth at any given time.
just like the world’s wealth ($500t or so) is 10-100x higher than the number of actual dollars in existence, the world’s wealth on a bitcoin standard will be 10x higher than the total value of the actual bitcoin in existence.
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The world's wealth, as you've defined as homes, cars, stocks, bonds, etc, intrinsically has no value until they change hands.
My home is worth a certain dollar value, but until I choose to sell it, that value is known as "unrealised profit".
Unrealised. Not yet real.
If nobody is willing to buy it, it is not worth anything. Something is worth only what someone willingly paid for it.
The dollars I accept for it come from somewhere, the other side of the equation.
Home = $x or Home = ₿x
Tesla stock is currently US $180.14. If you had some and wanted to sell, that is the amount in dollars you would get.
The stock itself has no value until it is sold.
Then the buyer takes on the unrealised potential of this asset (unrealised profit/loss).
It is good to buy low and sell high, to generate a profit, but that profit has to come from somewhere.
Right now it comes from a supply/demand fiat monetary system, where supply is added now and essential borrowed from one's future, plus interest.
This is an addition to the amount of currency in a closed finite system. Plus the addition of interest.
Every dollar is birthed into existence with the burden of interest. To pay back that interest more dollars must be created. Inflation toward infinity. Hence, price go up.
Supply and demand causes prices of everything to fluctuate, increasing dollars in circulation which are backed by nothing drives prices higher and higher over time.
₿itcoin fixes this system by fixing the supply side of the supply/demand equation.
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intrinsically has no value until they change hands
that’s not how valuations work.
if i start a company, and raise $1 million at a $10 million valuation, the company is valued at $10 million… even though I only received $1 million from investors.
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