Once upon a time

We’ve already seen that money is a technology, and it’s interesting to look at how this technology has evolved over time.
Long ago, money didn’t exist, and it was basically the law of the jungle:

You have a goat, I'm hungry, I’m stronger than you, I kill you and take your goat.

Harsh, but true.

Over time, people started forming tribes and communities, and they needed a way to exchange value. That’s how barter was born: trading one good for another.

But barter had big limitations:

What if I need three eggs but only have one cow? Maybe a cow is worth 300 eggs… do I cut it into pieces? Then I’d basically lose the whole cow.

Barter quickly became a logistical nightmare because of divisibility, fungibility, and the challenge of converting one good into another, without a proper monetary system.
On top of that, many goods weren’t durable: they spoiled fast, being organic or perishable, and were often hard to transport for long distances.

Pay close attention to the bold words above: they’re clues pointing to important properties of money.

Noticing the limitations of barter, people began designating specific goods (with certain objective properties) as money. For example, durable, easily transportable, and divisible goods like salt and honey started being used. Some cultures even used shells or stones as money.

The next step was metals: they were strong, durable, and scarce. Over time, a kind of global distributed ‘game theory’ naturally led to gold becoming the preferred form of money.
Its unique properties made it the ‘king’ of money for over 5,000 years, in almost every region of the world.

At this point, it should be clear that money’s properties can’t be entirely subjective, as some modern economic theories suggest. There are objective properties that really matter and some of these key properties include:

• Scarcity: how limited and available a good is.
• Fungibility: how interchangeable each unit is with any other.
• Durability: how well it lasts and keeps value over time.
• Portability: how easily it can move through space and time.
• Recognizability: how easy it is to verify (and how hard to counterfeit).
• Divisibility: how easily it can be split into smaller units.

By the time you finish reading this site, hopefully youl will understand that Bitcoin surpasses gold (the king of money) in almost every one of these properties.

We can better understand these properties through a practical example:

Let us imagine a country where people are absolutely obsessed with bananas.
The reason is unclear. Perhaps genetic modifications, perhaps something else...but the fact remains: the population loves bananas.
This can be classified as a subjective preference. Neighboring countries do not share this enthusiasm, yet the locals value bananas so highly that they decide to adopt them as a form of money.
However, this collective agreement does not alter the physical characteristics of bananas, which make them poorly suited for this role. In other words, bananas fail to meet the objective properties previously outlined. For instance, bananas are well known for their tendency to spoil within days or weeks. This makes them inherently prone to hyperinflation, understood here as the rapid degradation of the monetary medium itself, one that clearly fails to preserve value over time.

Continue to the next chapter to learn more about inflation!