Storing wealth? – Ben Jarvie

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Ben Jarvie
Storing wealth Ben Jarvie


Why do you go to work?

I’m not selling anything, relax, just genuinely curious.

Do you spend those hours because you love your job or is it because you want/need money for the future?

Are you saving for anything in particular? YES.

Then money is essential to you, we don’t need to be an economics professor to understand how fundamental transacting value is to our daily lives.

We go to work to trade our time and skill for money, something we all know little about yet want to accumulate because more is good and buys more stuff or financial freedom.

Learn how to increase your value. You are worth that.

By being more efficient, you will either work less or achieve economic goals faster, either sound good right?

In this article you will learn how to save your future wealth better by understanding what building blocks are needed to create a “sound” money in an easy to read manner.

I won’t use jargon or go in depth to keep it light and easy to comprehend the overview.

If you want to go in-depth, here is a more extensive version.

A good money consists of a few components, in the past different currencies have met each other on different borders.

Generally the two or more currencies will converge to the better currency decided by the market which one has the better qualities. Those qualities, from my understanding, are:

  1. Easy to use as a medium of exchange (easy/safe to store, validate)
  2. Be a reliable store of value (retain or appreciate in value over time from having a fixed or stable supply)
  3. Be able to retain its value over space (worth the same in different countries)

Here’s some examples we’ve had in the past:

Rai stones:

“Well into the nineteenth century, they used “Rai stones” for their trading. These stones came in all shapes and sizes, the largest weighing a staggering four tons! When a new stone was ready, it was dragged up a hill so that everyone could see it. Its owner would then exchange ownership or part-ownership of the stone for goods and services. Every transaction was announced to the whole community, which in turn acknowledged the exchange.

This kind of money worked for so long because it was salable. The Yap Islanders knew that if they owned Rai stones, they could also sell them. The added boon was that they could be used around the whole island since the stones were visible from any point. They were also divisible. If you wanted something small like a basket of fruit, you sold a small part of your stone; if you wanted something bigger like a raft, you sold a larger piece, or even the whole stone.

So if Rai stones worked so well, why don’t the Islanders still use them today? Well, there was a snag: they didn’t retain their value, or salability over time. Initially, that hadn’t been an issue. Quarrying and moving them from nearby islands was such a difficult business that the supply of stones was limited and their value remained stable. That changed in the late nineteenth century with the arrival of David O’Keefe, an Irish-American captain who’d been shipwrecked on the island. O’Keefe started importing Rai stones in large numbers using modern technology to exchange for coconuts. Soon enough, they were so commonplace that they no longer worked as money — they had been transformed back into mere stones!” — Source

There are financial collapses throughout history that share a common, currency debasement, just varying reasons why.

When Rome debased the currency by producing more coins with less silver, collapsing the empire or when Germany hyper-inflated their currency to pay national debt.

One could argue we’re moving into a similar situation, since Nixon took the US dollar off the gold standard, money has lost its store of value component. Store of value being saving money knowing it will be worth the same or more in the future.

Nixon took the US off the gold standard to pay back debts with a unit of account that was no longer pegged to gold. Meaning they could simply print more money rather than risk paying back the countries in gold, the amount the US took off them, stored in the central banks and issued dollars in return.

France was less than happy and sent a warship to get back it’s gold under President Charles de Gaulle.

So if we ignore the debasement and inflation warning signs and just break it down, how does the dollar sit in terms of strength of each building block.

Is it easy to use, store and validate?

USE: You can pay with your phone, card, hell even with your ring these days so yes, it’s accessible and easy to use.

STORE: You have to store through a bank, which incurs annual fees. It’s easy but not that great because you have to rely on a third party which have infamously incurred fines for malpractice.

You also have to deal with inflation, which is the increase of dollars created by another third party. This means your savings is a smaller amount of value because there is more dollars in total.

VALIDATE: X amount of dollars turn up in a bank account which is easy to validate

Number two of the building blocks:

2) Be a reliable store of value (maintain or appreciate in value over time from having a fixed or stable supply)

Quantitative easing is increasing supply of money created, in attempts to stimulate growth, what it does is increases spending because it loses that store of value aspect due to the increase in supply making it less valuable over time.

What it means is the currency that was created to pay whatever it was generated for, takes away your value and purchasing power. It takes away how much your stack is worth.

And the third building block:

  1. Be able to retain its value over space (worth the same in different countries)

The dollar is renowned as a global reserve with currency exchanges at every airport, it retains value across space pretty well.

Okay, Okay, what’s my point?

My point is, we have let the metric in which we are valued be dictated by the same as those who control the supply of it and it doesn’t need to be that way.

We have an alternative that gives us our sovereignty back, it has better building blocks, you have heard it’s name before.

It was probably portrayed negatively in the news and on the radio as some dumb nerd money or drug lords money but it’s here and it’s real.

Bitcoin.

People have tried to debunk it for a fraud and haven’t been able to. There is a lot of misinformed articles out there who promote FUD (fear, uncertainty, doubt)

A university economics professor who tried to debunk it, ending up writing one of the most helpful books explaining it.

Before we debunk it, let’s remember that historically:

  1. Money has always converged to the most salable (best one overall.)
  2. Technological innovations has usually been portrayed negatively. The horse that took the persons farm job, the dangerous car or electricity.

Technology doesn’t have to be feared as it is neutral, it is not inherently good or bad and can be used for both.

Now let’s give it the same break down,

  1. Easy to use as a medium of exchange (easy/safe to store, validate)
  2. Be a reliable store of value (retain or appreciate in value over time from having a fixed or stable supply)
  3. Be able to retain its value over space (worth the same in different countries)

Is Bitcoin easy to use, store and validate?

USE: As a native digital currency, it’s just as easily accessible to use with your phone or setting up a debit card.

STORE: Can be your own Cayman Island bank but better, have higher levels of privacy and security depending on either your technical capability or choice in trade offs with third parties.

VALIDATE: It’s the easiest of all to validate, it’s a public ledger on it’s protocol which was the first ever blockchain and it has not been hacked

Okay, building block two:

  1. Be a reliable store of value (retain or appreciate in value over time from having a fixed or stable supply)

It has a set issuance rate (flow of increase in supply) and fixed supply (21 million) giving us a stock to flow ratio:

This graph’s link shows BTC’s value, measured in varying currencies over time and colour coded to each time the supply rate is halved.

Because of this stock to flow ratio we can have less risk storing value in it because we can see in entirety the supply and its historical and current demand.

With the stock to flow ratio being able to be calculated by a known fixed supply and the network growing causation with the demand for the currency, this asymmetric opportunity proves to be a quality store of value.

Another article here is my favourite outline and does a much better job highlighting the opportunity.

And the third building block:

  1. Be able to retain its value over space (worth the same in different countries)

Unlike fiat, you wouldn’t have to exchange your nations currency to another nations currency, BTC is a global network and the currency is no different.

Different countries would value products in varying amounts of one currency BTC & sats (“Sats” is short for Satoshis, the smallest unit of Bitcoin.)

One Satoshi (sat) is equal to 0.00000001 BTC (one hundred millionth of a Bitcoin)

Growth is obvious with IGA accepting it, Brisbane airport, bars, you get my point.

It’s just over ten years old, it is in its infancy still but has shown enough security and demand to warrant it being part of your portfolio as in my opinion, it is the best asymmetric investment opportunity.

There’s 21 million. That’s it, no more but maybe less.

At the start, the creator who created the core code, had 1 million BTC. Those funds have never been moved from that initial wallet. Not by Craig Wrong or anyone.

Either way that makes fixed supply 20 or 21 million as a known, no if’s or but’s or surprises and because we know the entire amount, when the supply will be increased, we know how much we can determine its scarcity and issuance rate, pair this with the qualities of the building blocks and I need not finish the sentence.

There is no owner, no one to manipulate or corrupt. Just open source code, raw and transparent.

If you want to acquire some sats (bitcoin’s version of cents to the dollar) there’s a few different methods, each with trade offs in either privacy or security.

Learn how to store them, get a cold wallet or if you’re wanting to trust a third party make sure you’ve researched them.

I can recommend Amber, they are a bitcoin business that allows one to set up an automatic payment or one off to buy BTC which can be sent to your wallet or stored offline on theirs.

Want I’ve learnt is time in the market, not timing the market.

Another few interesting effects I’ve stumbled across and some links for who to follow:

The Lindsey effect: The longer BTC is around, the stronger the network grows in reputation, distribution, security and overall strength.

The network effect: BTC being accepted from global vendors, VC, institutional investors, salaries in New Zealand, inevitably a countries national reserve, Microsoft building decentralised identities on the blockchain network. With all of this development and innovation BTC’s web grows, it’s reputation again and amount of people using the network therefore increasing security again and unit value.

If you’re looking to learn more I suggest following me on twitter, I don’t delete tweets and am still learning.

There’s always the more expert influencers, in my opinion:

Saifedean Ammous, creator of the best book (Austrian economic professor breaks down currency and bitcoin)
Stephan Livera, creator of arguably the best podcast (Austrian economics meets bitcoin)
Aleksander Svetski, CEO of Amber

Some good twitter handles in no particular order:

Rhythm

Pierre Rochard

Gigi

Matt Odell

Hodlnaut

Vijay Boyapati

Rory Highside

I hope you enjoyed the article, please give any feedback good or bad so I can carry on stacking sats. This is not financial advice, just a start in the needed discussion defining money and states interaction with it.





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