What is Money

Money and wealth can be thought of as economic energy.

In order to gain money, you expend effort. In the laws of thermodynamics, energy is never destroyed, it is simply transferred. Energy as work effort results in monetary gain, or a transfer of economic energy.
If you work hard enough and save money, you have simply stored up excess economic energy. In this case it is potential energy as it has not yet been spent. When it is spent it becomes kinetic energy (activated energy)

As economic beings seeking survival and to maximise leisure, how do we manage this?
- we create arbitrary units of economic energy in order to gain a form of measure and a unit of account. This unit of account needs to be transferable and universally acceptable. Countries have sovereign currencies decreed by government.

Money ‘decreed’ by governments as national tender are known as fiat.

How is this system monitored and controlled? Via ledgers.
In their most basic function all banks are simply centralized custodians of ledgers, recording credits and debits.
They operate on the basis of public trust.

In the past all these economic units were backed by a physical substance representative of economic effort (precious metals etc)
In modern times they are not, and supply is entrusted to reserve banks to responsibly manage supply.

However as opposed to being responsible custodians, national annual deficits and aggregate national debt no longer matter much.
Prior presidents ran up huge annual deficits, but at least there were some concessions that the money was real and had to be paid back. Not now.

As the US nears/exceeds $30 trillion in national debt and 110 percent of annual GDP, the elites either believe permanent zero interest rates make the cascading obligation irrelevant, or the larger the debt, the more likely we will be forced to address needed income redistribution through further money printing.

However, now there is an alternative to money by decree (fiat)

Digital Currency.

Bitcoin fits the description of a store on economic energy as work is expended to produce (unlock) Bitcoin.
It can be used as a unit of account and can be stored. Arguably it is a store of value as it increases more than other alternatives.

The BIG difference is that Bitcoin has a predetermined ‘pool’ size and cannot exceed that. This is known as a hard asset. (Vis fiat, where the pool size is being continuously increased at random and on the whim of political sentiment)

Bitcoin on the blockchain simply exists as an alternative type of economic ledger, but in this case control is not centralized around banks, but distributed across multiple nodes and removed from economic jurisdictions.

The nature of Bitcoin is governed by immutable cryptographic computer code built on logic and mathematics vis fiat that has zero technological backing but relies on being counterfiet proof. The interesting paradox is that the security of Bitcoin is based on being open source. Anyone can check the code and test the code. This has been done countless times, with each check and test leading to greater robustness and security.

And yes, anyone can copy (or counterfiet) the code and try replicate Bitcoin, but this is instantly recognized by the entire architecure of the blockchain and all it becomes is a cheap carbon copy that no-one accepts and subsequently fails miserably.

>>>>> More on the nature of money:

MONEY IS A SOCIAL CONSTRUCT:
- it is a creation of rational thinking beings.
By necessity money exists as a layer of abstraction.
It simply is a tool to record and measure economic activity.

MONEY IS A STORE OF VALUE: durability, value dense, maintain purchasing power, difficult to produce, is it liquid

MEDIUM OF EXCHANGE: an intermediary good to facilitate a transaction
- Widely accepted
- Portable
- Divisible
- Common and accessible
- Relatively Stable
- Fungible (one unit here has the same value anywhere else)

UNIT OF ACCOUNT: a measurement tool for wealth.

MONEY IS VALUE TRANSFER — work gives value, this value can be transferred to another person.

MONEY IS A NETWORK: it depends on a buyer and a seller. The more there are the greater the value of the network. It is Metcalf’s Law in action.

MONEY IS LANGUAGE, it bridges the gap between cultures. It wasn’t until the mid-1990s when the Electronic Frontier Foundation successfully sued the US government in Bernstein v. Department of Justice, that computer code was ruled a form of speech and thus was protected by the First Amendment.

MONEY REPRESENTS WORK- used to be paper, now digital(proof of work)

PROOF OF WORK: money represents the work and effort the holder has expended.

Further thoughts:
Understand Public money vs private money

Understand Physical money vs digital money

On a moral note: it is sometimes seen that engaging in cryptocurrencies is akin to gambling. I think that this requires some critical analysis. To the uninitiated and the nescinet paricipants, it is not advisable to try trade or time the market. The impulse to do this would be driven purely from an emotional response and lack all critical analysis and any informed decision making matrix. This is gambling. Rather stick to using the currency in its most basic forms; a medium of exchange and a store of value.

The trickier question comes when comparing fiat and bitcoin side by side. I would suggest that it is willing consent and lack of stewardship to store ones wealth in an asset proven to be devaluing, maniuplated by the few for the control of the many. Cryptocurrencies may be volatile, but this does not constitute a necessary characteristic of gambling. It is the market and the marketplace has been the center of economic activity since man began to trade.