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Many revolutionary technologies have profoundly impacted humanity’s understanding of the world.
The success of the first computers in the early 20th century forced people to understand that the world was computable. The first steam engines in the 18th century forced people to understand the dynamics of work and heat.
Bitcoin will play a similar role with respect to humanity’s understanding of economics.
For example, there are many schools of economic thought that assert that stateless money is impossible. Such schools also tend to assert that creating new money out of thin air is beneficial to the economy.
Understanding Bitcoin necessarily entails understanding the very nature of money itself and what its actual role is in the economy. The rise of a Bitcoin (BTC) standard will bring about a revolution in humanity’s understanding of economics.
Impossible economics
In the early 20th century, economist John Maynard Keynes developed a macroeconomic theory we now call, ‘Keynesianism.’
The infamous 1929 stock market crash dissuaded Keynes that free market capitalism could not prevent such economic catastrophes, and he set about reimagining the nature of economics, asserting that demand rather than supply is the engine of economic growth.
Keynes put forth that if aggregate demand determines supply, then it follows that aggregate spending determines both the production of goods and the rate of employment.
Since, according to Keynes, demand drives supply, it follows that governments could lift an economy out of a recession by propping up demand. They could do this through deficit spending and/or lowering interest rates.
There are a number of problems with both Keynes’ economic theory as well as his prescriptions, but the mechanics of Bitcoin contradict Keynes’ principle that demand drives supply.
In science, a single contradictory example is enough to refute a theory o it is with Bitcoin and Keynesian economics.
Bitcoin’s supply schedule is not driven by demand. On the contrary, the number of Bitcoin in circulation has been predetermined by math and code. A new block is added to Bitcoin’s blockchain approximately every 10 minutes.
With each new block, a fixed number of Bitcoins are added to the supply. For every 210,000 blocks, this addition is decreased by a factor of two. For example, right now, the ‘block reward’ is 6.25 BTC.
By about March 18, 2024, the next ‘halving…
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