To understand bitcoin better you need to relate it to money.
Money is, unfortunately, a concept most people are clueless
about, and economists are the most ignorant of us all. Myths and
misconceptions are widespread. Despite this, it is one of those
things we take for granted. Like you don't need to know about
oxygen to breathe, you don't need to know anything about
money to spend.
If you only memorize this simple definition you'll understand
money better than ninety-nine percent of the population:
Money is a matter of functions four, a medium, a measure, a
standard, a store. All four functions need to be met in order to
classify as money.
It is extremely difficult to fulfill all four criteria. Gold, for
example, is convenient to measure, can easily become a
standard, serves as a stable long-term storage, but is not good as
a medium of exchange. First, gold is too valuable to be used in
small transactions. Second, fake gold is easy to mint but hard to
detect.
In this chapter I'll briefly explain money, tell the story about the
US dollar, discuss its current status, and argue how bitcoin
emulates gold's best features, yet improves its downsides.
