The rise of bitcoin.

Introduction: The rise of bitcoin

There had been only one financial crisis not attributed to external events: the Panic of 1825, where around 70 banks went bankrupt due to risky investments. Furthermore, Gregor McGregor, who had made significant financial commitments to populating a nonexistent country called Poyais, was to blame. If we look at history, what we find out is that this cycle really started about 100 years ago, and there is an important factor to that. It has to do with the fact that, starting in 1914, every major country on the globe began to depart from the gold standard. Now, the gold standard is the fact that all of the money that a central bank has, controls, or produces is that which they hold and the price of gold. That the central bank has, controls, or produces is only based on the amount of gold that they hold and the price of gold. Therefore, the amount of money supply available is relative to the amount of gold that is held. This was dropped.

The rise of bitcoin

This is what led to a lot of financing for the first world war and even following the second world war, because governments realize that they have this huge power: if the gold standard is eliminated, we can simply print as much money as we want. And in fact, this has happened many times in history and was often the reason why governments, countries, or civilizations simply dropped; the Roman Empire is a great example of that. From the moment we dropped this gold standard, around the year 1914, the UK was the first country to do that. These short-term and long-term cycles, especially the short-term cycles, began to appear at this point. We are now over 100 years after leaving this gold standard, and it is a fairly accepted fact that our economy works in a cycle based on a period of inflation followed by a period of deflation. The fact that this only started 100 years ago should tell you that our monetary system has flaws. All while being the reason for the unmatched growth we had as a species in the 20th century.

Something interesting.

This inflation is due to our reliance on depth and credit. According to modern monetary theory, depth is the driver of economic growth, not productivity. Over time, we learn, and that accumulated knowledge raises our living standards; we call this productivity growth. Those who are inventive and hard-working raise their productivity and their living standards faster than those who are lazy and complacent. But that isn’t necessarily true in the short run. Productivity matters most in the long run, but credit matters in the short run. Interest rates are set by central banks, and they set the rules as to what the cost of borrowing money is. If they reduce it, borrowing money will be less expensive. People will therefore be more likely to borrow this money. As a result, because borrowing is so much simpler, people tend to want to borrow more and more.

The additional control central banks get over our monetary system is why they are interested in CBDCs. But CBCDs are not an invention of the central banks. These central banks’ digital currencies are not investigated by the government or central banks. In fact, they are inspired by other digital currencies, like Bitcoin, which was the original one. And other altcoins that have been created after that are, in reality, more similar to other altcoins such as Ethereum or others that simply allow the addition of programming that allows you to add functionality to them. Bitcoin, however, is exclusively used for these types of financial transfers. Bitcoin is a payment network, right? Where this is, think of it as a log of transactions—a transaction that I can do for you. The Bitcoin network will need some information.

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