A History Lesson: Glass beads & Bitcoin.


Lately, I've become quite intrigued with the concept of investing in Bitcoin versus saving in Bitcoin. The difference being that the long-term goal for someone investing in Bitcoin is to acquire more fiat currency (preferably as quickly as possible), while the long-term goal for someone saving in Bitcoin is to acquire more Bitcoin.

Like many here, I've been saving in Bitcoin for quite some time, but it never really dawned on me what this truly means. I had an eye-opener of sorts some time ago I thought would be interesting to share;

I think that a deeper understanding between investing vs. saving in Bitcoin requires taking a step back into history.

Humans have used many different monies throughout history. Salt, shells, Rai stones, glass beads and also rare metals like silver & gold.

Glass beads probably illustrate best how the ease of new money creation for one party leads to exploitation of another party;

Glass beads were introduced by Europeans to many places for trade, but they were probably most successful in Africa. They were able to convince Africans that these beads were quite valuable because not only did they look nice, they were hard to produce (Africans could not produce them), and therefore they were scarce.

European ships used to travel to Africa with these beads used as ballast, and they exchanged these beads for gold, ivory and other goods desired in Europe and the rest of the world. Africans used beads as currency, store of value and status symbol in the form of jewelry for centuries (16th-20th century). They were also used for religious purposes (safe passage to the next life).

Glassmaking was not common in Africa, and of course, it was not common knowledge under the African people that Europeans had technology that allowed them to mass produce these beads very cheaply. Over time, the amount of beads in circulation increased, and eventually became worthless as a monetary tool, as glassmaking became more common in Africa.

This short history lesson illustrates in simple terms what happens when some have the ability to create new money at almost no cost. They keep creating more while hoarding valuable things that are scarcer, until eventually, the currency collapses.

Those who save in Bitcoin view fiat as glass beads; something with infinite supply and therefore without long-term value, while they see Bitcoin as something that is truly scarce, akin to gold. Therefore, they are not interested in trying to buy Bitcoin cheap and sell it for more to acquire more fiat currency.

Because who in their right mind would want to sell his gold just so he could have more beads...?