Securing Tomorrow Today: Why Bitcoin Is the Ultimate Store of Value for Businesses

While there is a lot of information circulating on how businesses can add bitcoin to their corporate treasury, or to integrate Bitcoin payments into their business operations, it’s worth having a conversation on WHY this is even a good idea in the first place.

So, what is the why?

Bitcoin is money. In fact, Bitcoin is the best money we have discovered. This, then raises the question ‘’what's wrong with the current money’’? If it ain't broke, why fix it? Right?

Let’s look at how money works in the business process.

As a business owner, you know that you first have to have a product or service, that somebody else feels will add value to them, before they take out their money and pay you for it.

This is otherwise known as selling.

Once you have been paid, you in return pay off your own production costs and your own living costs and whatever is left is your retained earnings. Retained earnings can be either reinvested or saved.
Savings is what you put away as a safety net against unforeseen problems in the future or new opportunities that may arise, and you need money ready in both scenarios.

Money is not the end goal itself.

It is stored time & energy to be used at some point in the future for something that you need.
To put this process in the simplest possible terms; Build + Sell = Money

In the current world of highly financialized services this unfortunately is not how money works.
When you go to the bank to lend money for a new project the bank is not lending out depositor’s savings that they are holding. They used to do it this way when banks were required to have full reserve banking. Full reserve banking meant that for every R100 a bank lent out they had to first have R100 of a depositor’s money. A one-to-one loan. Over the years this has changed to fractional reserve, and in some cases even zero reserve banking. This means the bank does not actually have the money before the loan is granted, it is created when the loan is issued.
You take this money, you invest it, you create value, and you sell that value for money. One of the production expenses you pay back is the loan. When the loan is paid off that debt is cancelled and the money ceases to exist. Deleted.
Back to simple possible terms; Money + Build = Sell

Contrasting these two processes brings us to the crux of the matter.
In the first process, the work has to be done first (excuse the pun) and money is the result of the value created when the sale takes place and they buyer choses to part with his own savings in return for that value.
In the second process the money is created BEFORE there is value added. Now you have some products to sell, and sell them you better. The perverse outcome of this system is twofold;

You have made products that you may not have a market for, because you got the money first.
This is why stupid things get made and we are bombarded by an ever increasing amount of advertising and selling techniques to buy stuff we don’t need or want.
Money has now entered the market before any value has been created.
This is otherwise known as inflation.

Of the two, Inflation is the real killer.

When banks (both retail banks and central banks) create money through loans which is injected into the economy, but no value has yet been added, the money in the system the money no longer represents the value in the system through the amount of goods and services produced. The extra money in the system chasing the same number of goods and services over time starts to drive those prices up.
This is the fundamental problem with the money printer when people can access money before they add value, they start to make strange investments decisions.

Zombie companies that would otherwise fail are propped up on cheap loans. Dumb investments are made because money can be obtained at unrealistically low interest rates (low risk on money created at the click of the ‘’loan approved’’ button) and something must be done with it. This money has not been earned through real production.

Bitcoin is money that cannot be created from nothing. It is expensive to produce through its mining process. There are energy costs, site location costs, staffing costs, and other real-world inputs that go into Bitcoin mining, which ties Bitcoin into real world physics.

The Bitcoin fundamentals of scarcity, verifiable, secure, transparent and censorship resistant have not changed since inception, and offers certainty in an ever-uncertain world.
Compare this to the money sitting in your bank account. These are not even the same thing and for them both to be called money is laughable.

The only ways to get bitcoin is to mine it, buy it or get paid in it.
Buying bitcoin is to buy some at the current market price. This price is set by thousands of participants in free market dynamics all over the world. It is true price discovery. This makes Bitcoin as different as could possibly be to the current money system.

The best way to get bitcoin is to get your customers to pay you in bitcoin for your goods and services. Setting this up is as simple as downloading an app on your phone and can easily be expanded into existing Point of Sale systems in more complex configurations.

In closing, think about the money you use for daily transactional purposes, and separate that from the money you use for long term savings to secure your future. Saving in money that inflates away is like holding a melting ice cube in your hand.

Choose where to store your savings, its your future.

The Paradox of Money

A paradox is a statement that is self-contradictory or logically untenable, though based on a valid deduction from acceptable premises.

The world of money can be confusing, and two recent discussions got me thinking about how little people understand how money works.

But before that, let’s warm up with a mental exercise: You know Zeno's Dichotomy Paradox? In the fifth century B.C.E., Zeno offered arguments that led to conclusions contradicting what we all know from our physical experience. The Dichotomy Paradox is the one where a person can never actually reach their destination because they must cover half the distance, and then half of that distance, and so on ad infinitum. In other words, they never actually arrive at their destination although they are always getting closer. Now while you can follow this logic and it makes sense, at the same time you know that if you wanted to cross from one side of the street to another, you simply walk across and you have no trouble with half distance’s ad infinitum. And this is the paradox.

Similarly, when it comes to understanding money, our initial assumptions can often be misleading.

Now, back to the two discussions. Firstly, the Trump coin frenzy.

This coin was launched the day before the inauguration of President Trump. The coin's value skyrocketed overnight, only to crash down 40%. A friend asked this question: where does the money come from to pay out people who sell the coin at a higher price? For example, if someone buys the coin for $1000 and sells it for $10,000, where does the extra $9000 come from? This question seems reasonable at first glance, but it reveals a fundamental misunderstanding of how markets work.

The answer lies in understanding how open & free market dynamics work. When more people are buying than selling, the price goes up. When more people are selling than buying the price goes down. For you to buy the coin, you're buying it from someone who's looking to sell it to you at that price. If the price is not agreeable to both of you the sale does not take place.

This is the ‘value for value’ exchange that takes place during every transaction. Neither party is forced to trade with the other. And neither will any trade take place if one party does not value what they receive in the trade. For the trade to succeed both parties need to feel they will be better off after the trade than before the trade. If you later sell it for a higher price, you're finding a buyer who's willing to pay that price. If the price starts to go down, then more people are selling and flooding the market with the coin. If the coins are not selling, then the price will continue to drop until a buyer is found. If no buyer is found at any price then you are stuck with the coin.

So back to the Trump coin and the mystery of the extra $9000 - there's no central pot of money or vault; it's just an open marketplace of buyers and sellers trading with each other.

The second discussion was about interest payments on loans in world with fixed money supply. The question was: In a world with a fixed money supply (unlike what we have at the moment – but that’s for another day), where would the money come from to pay the interest on loans? The assumption here is that you borrow $500,000 to buy a home, and over a period of time you pay back $600,000. Now $100,000 has been created and where does that money come from?

Let’s answer this question by another example.

You go to buy a new car and the car you want is priced at $50,000. This price is made up of the all the costs taken to get the car into your hands, such as raw materials, manufacturing costs, labour costs, transportation costs, branding and marketing costs, rent, and the profit the dealership wants to make on the sale. Now if you don’t think the car is worth $50,000 you will choose a cheaper car at a price you are happy with, but the dealership still makes a profit on the sale of the cheaper car.

In the case of the interest paid on a loan, the interest is the PROFIT the lender makes on the loan. In fact if you look at the breakdown of the $500,000 loan you will see that admin fees, management fees and interest listed to make up the final real price of $600,000.

Just like the profit the car dealership makes on the sale of the car. This profit is what the lender feels is a good reflection of the risk undertaken in providing the loan. Therefore interest, like profit, does not create money out of thin air. It is a real cost that is part of the final sale price paid by the buyer.

While this is not a strictly business article it does involve money, and money is half of every transaction, and business is about successful transactions.

Zeno’s Paradoxes