The Winner Takes It All, So Does the Winning Currency The concept of monetary competition and its relevance in the context of Bitcoin. It highlights the shift towards digital currencies and the desmaterialization of money, examining how the lack of competition in government-issued fiat currencies has limited choices for individuals. The author discusses the potential of Bitcoin as a decentralized and scarce currency, presenting it as a contender in the revival of monetary competition.

To Prof. Isali Dinaísa It took me a while to develop a liking for literature. Until a certain age, it only came to me accompanied by the tedious Portuguese language textbooks from school, which regurgitated those useless classifications: troubadourism, parnassianism, romanticism, modernism.

The content was supposed to be important because it would "come up in the test" one day, so it was better to take notes not to forget. It's not the best way to cultivate a young person's taste for literature, is it?

Everything changed when I started preparing for college entrance exams with a teacher who was dedicated to teaching the Portuguese language. She was simply the best. She showed me not only the value of literature as art but also the cultivation of the standard Portuguese language.

It was with her that I discovered my favorite grammarian, Napoleão Mendes de Almeida, and with her, I began to enjoy reading novels. Half teacher, half actress, she not only read excerpts from Machado de Assis but also interpreted the characters, bringing the narrative to life.

Her reputation was such that even regular school teachers felt intimidated and tried to give better classes in their respective classrooms. Besides being known throughout the city as the best way to prepare for college entrance exams, her classes were so engaging that they sparked my love for reading, something I still cherish to this day.

But her classes were limited to a few students. She taught them on the second floor of her house, in a room that could accommodate about 40 or a maximum of 50 squeezed students. Like a craftsman, she single-handedly prepared everything, from the teaching materials to the lessons themselves.

In addition to the physical space, another limitation was that she was just one person, with the same 24 hours a day as any human being, and she charged a monthly fee.

On one hand, this provided her with an income to support her entire family with a good standard of living. On the other hand, many people who wanted to take classes with her couldn't secure a spot or simply couldn't afford it.

Dematerialization and Global Competition That was the pre-internet era, or at least, the pre-YouTube era (or any other good video platform). The best classes and courses were usually paid and often taught in person and live. Now, that has changed. Nothing technically prevents the best classes and courses from being recorded with semi-professional equipment at low costs and copied at zero cost for anyone in the world.

If my school teachers felt uneasy about the local competition from that exceptional teacher, I can only imagine how global the competition is now. Before the internet, students were forced to take classes with the teacher chosen by the school administration and with the curriculum approved by the school. There was no escape. The options were very limited and centralized.

But no one wants to take classes with a mediocre teacher. If you are truly interested in knowledge and not just a diploma or some kind of certification, you want to learn from the best in the field.

It doesn't matter if the course will be listed on your resume or not; you want to gain knowledge to use in your life or because it will enrich it in some way. Now, the best classes and courses can be dematerialized and reach the lives of millions of people anywhere in the world, at any time, at marginal cost zero.

We live in a different world. It's incredible the amount of good content we can find on the internet, from short lessons to complete courses. Occasionally, I watch videos from a channel called "What I've Learned," with two million subscribers, consisting of small lessons on a wide range of topics, from egg consumption in Japan to why cows aren't destroying the planet.

Or even better, a channel called "3Blue1Brown," with over four and a half million subscribers, solely dedicated to animated math lessons. Each video is better than any math class I had in school (by the way, the channel has an excellent mathematical explanation of Bitcoin and the security of 256-bit encryption).

And these are just a few examples of free content available on YouTube. There are countless other specialized courses that can be acquired and taught remotely by the best teachers in their respective fields. Competition is now fierce.

The process of dematerialization, whether in education, music, images, or sound, in short, anything that can be transmitted through information channels, has created what economists call the "winner takes all" effect, which is relatively simple to explain: if there is a technological change that exponentially reduces the production and distribution costs of a good or service, the best performers in that activity tend to dominate a large share of the economic niche.

Competition with few entry barriers leads to the dominance of a few actors simply because they are the best at what they do, resulting in the Pareto distribution found in various sectors.

The typical political response to this phenomenon is the imposition of artificial barriers to competition. For example, in the early 2000s, Napster was shut down due to copyright violations.

The journalistic response to the internet is the pathetic attempt by the semi-official fact-checking institution, blue checkmarks on Twitter, or often comical reliance on the authority of experts chosen by the media outlets themselves.

Taxi drivers, for a long time, sought to use government power to prohibit app-based transportation, and in some cases, they succeeded. But what about what is happening right now with one of the most important assets in the economy: money?

Dematerialization of Currency Money has been undergoing a gradual process of dematerialization for a long time, at least since banknotes backed by precious metals began to circulate more frequently in the 19th century. We are witnessing the culmination of this process today.

After the metallic backing was severed by governments in the 20th century, and the purchasing power of the population was practically confiscated, today's fiat currencies are primarily bank records and accounting entries maintained by the financial system.

In central bank accounting jargon, the "currency in circulation" consists of a minuscule part composed of physical banknotes or cash. In Israel, the recent Law to Reduce the Use of Cash prohibited, with imprisonment as a penalty, the use of cash for transactions above certain values.

The problem is that, unlike in other areas, the dematerialization of money has never been accompanied by the free competition of currencies. Government-issued currencies would not exist without strict capital controls and legal tender laws.

This is, and always has been, a gross violation of property rights and contractual freedom. People "accept" to earn and hold Real (or any other weak currency) in the bank because it is prohibited for them to freely hold accounts in foreign currencies at financial institutions in their own country.

This is the only way for different governments to benefit from the unrestricted seigniorage of the fiat currency monopoly, creating a corral where individuals have little choice but to use what their own government calls money.

The Rebirth of Monetary Competition It wasn't like this when money was still a physical commodity, when various metallic coins of different types circulated within the same jurisdiction. For example, there were twenty different Englishcoins in circulation between 1558-1603, with different denominations, weights, percentages of silver and gold, metal fineness, and even nominally identical coins with different percentages depending on the "harvest."

Returning to literature for a moment, Shakespeare alludes to at least 34 different currencies in his plays, both English coins (with their nicknames) and foreign currencies that freely circulated throughout the kingdom: angel, cardecu, copper, crown, dollar, crusade, drachma, ducat, ecu, eight-penny, elevenpence, eleven-pence farthing, French crown, gold groat, half-pence, halfpenny farthing, mark, mill-sixpence, noble, obulus, penny, pound, press-money (prest money), shilling, silver, sixpence, sixpenny, tester, tertern, three-farthing, threepence, twelvepence, twopence, among others.

The angel was an English gold coin introduced by Edward IV in 1465 and featured an image of St. Michael the Archangel slaying a dragon.

In the past, people knew what good money was; the challenge was to have good money. John Locke, in his "Second Treatise of Government," practically replicated what Aristotle wrote in Book One of "Politics" about what makes good money, listing the attributes that we always find: scarce, divisible, portable, recognizable, and verifiable.

But monarchs used to recall coins, reducing their metallic content, and counterfeiting was common. Metallic coins would degrade, be shaved, cut, and easily stolen. All of this made verifying and safeguarding them costly. The problem of good money has always been technological and political. How to prevent counterfeiting? How to prevent improper appropriation by governments or thieves? How to transport them at low cost? These are questions that have always accompanied the history of currency.

It is curious that the technological innovation of Bitcoin has brought back a situation that was common in the past: the free circulation of currencies, with the difference that today they have been dematerialized. It was an innovation but also a revival.

Looking back, it is clear that the brief period between 1971 (when the dollar permanently severed ties with gold) and 2009 (when Bitcoin was created) was a very dark time in human history. There simply were no good currencies available to ordinary people.

Surrounded by prohibitions and controls on all sides, just to preserve the value of their labor to some extent, someone had to take the risk of becoming an investor or had to finance public debt by buying government bonds (this was when we didn't even live in a negative interest rate environment yet).

If Bitcoin thrives as money, it will thrive because of its own attributes. It is absolutely scarce, decentralized, easy to verify, easy to transport, and easy to hold. There are no counterfeit Bitcoins verified by the node.

Crude imitations have been created (Ethereum, Litecoin, Bitcoin Cash, among other shitcoins), but none possess the same attributes. Governments, with their central banks, will start issuing their own virtual currencies. Now, let individuals freely decide which currency will win. I've already made my bet. Alea jacta est.

Text by: Guilherme Bandeira If this text was useful to you, consider sending some satoshis to the address: guilherme@bipa.app

I thank!