How Bitcoin Reconnects Your Brain: Bitcoin and Time Preference | Author: Max Mittelstaedt I Government’s Bitcoin | The Capital | July 2021
High time preference = give me everything now
Low time preference = I will save and invest to have more in the future
You will find many examples where low time preferences have led to new technologies, valuable companies or cultural heritage. Progress requires capital accumulation, long-term goals, and future-oriented planning. The construction of the Eupalinos tunnel (probably the oldest aqueduct in the world) took 10 years. The ceiling of the Sistine Chapel took 4 years. Let’s take a look at some of the wonders in the world:
· Taj Mahal-17 years old
Petra-developed for centuries
· Machu Picchu-about 100 years
·The Colosseum-8 years
·Christ the Savior-9 years
·The Great Wall of China-2000
· The Pyramids of Giza-120 years (a pyramid is about 20 years)
“As you might realize, “Civilization” requires a lower time preference. They need to save money and plan for the future. The successful people among us bargain with the future. A great idea begins to take more and more clear forms. Appears. This idea is the focus of a long and deep story. This is the moral of the story. The sacrifice of success.” — Jordan Peterson
As the time horizon improves, things will get better over time.
Fiat currency failed Belated joy test. Everything is focused on immediate consumption at the moment. Why is this happening? The reason lies in the design of banknotes, unlimited printing, and the resulting inflation.
There is no support for fiat currencies today. Currency exists only because the state controls it and the people trust it. However, every citizen now feels the consequences of printing money. The purchasing power of the U.S. dollar continues to decline. Maybe you think the U.S. dollar is better than Bitcoin because it is stable and less volatile. But statistics show that the dollar seems to have remained stable only for a short period of time. In the long run, the legal currency is very unstable and has a continuing downward trend.
The market is flooded with new funds because it is easy to create and can be expanded at will. There is no upper limit on the money supply. Inflation will damage the purchasing power of the population. It takes more and more money to buy the same goods because their prices have risen.
Therefore, it has a suppressive effect on the population. If you want to save $1,000, and next year the $1,000 will actually be worth only $960 due to inflation, what kind of culture does this encourage?
This encourages current spending and puts consumption above long-term financial goals. Money is eaten up by inflation, and you will be motivated to consume. Therefore, the Fiat system manipulates people with consumerism, addiction, and debt. In the picture, you see American debt.
“In a 2011 study (“The New Science Behind Your Consumer Addiction”), researchers tested whether people are willing to meet and delay instant gratification and delay by providing a certain amount of (hypothetical) money they can currently receive. Choose between gratification, or tell them they can wait a month to get more money. The results show that the willingness to delay gratification depends on the amount provided.” — https://en.wikipedia.org/wiki/Delayed_gratification
The US dollar will not provide you with any return in the future. Saving dollars is a sure loss, and there is no incentive to focus on saving for the future.
The total monetary base increased from US$3.4 trillion in January 2021 to US$6 trillion in 2021, and only 22% of the current US dollar was printed in 2020. Also known as M0, the monetary base of an economy includes all physical banknotes and coins in circulation, as well as bank reserves held by the central bank. In the FIAT system, the return on savings is zero because the money supply is increasing. Low interest rates and inflation force savers to take (short-term) risks in order to earn returns. This can lead to improper investment and speculative booms in the financial markets (fe Meme-stocks), which can damage long-term growth.
“The higher the return on investment, the more satisfying the experience of delayed gratification (reflected in higher income and reproductive success), and therefore, the higher the degree of long-term orientation they pass to offspring. Moreover, the higher the genetic time preference , The higher the degree of long-term orientation passed to future generations. In fact, there is evidence that greater rewards for delayed gratification will further enhance the ability to delay gratification.” — Oded Galor and Ömer Özak
Bitcoin will help postpone today’s satisfaction to improve the present and future. This delayed gratification describes the process experienced by the subjects when they resist the temptation of immediate rewards and prefer later rewards. Generally speaking, delayed gratification is related to resisting smaller but more direct rewards in order to obtain larger or more lasting rewards later.
For Bitcoin, you need to face the future. The Bitcoin standard encourages low time preference behaviors, such as investing in education, family, and civilization.
Let’s briefly discuss a few key points:
- 21 million bitcoins: a fixed supply that does not depend on demand. Bitcoin is the first scarce digital asset. The Bitcoin money supply is completely inelastic. The price of Bitcoin does not affect mining (this is the case with other commodities or assets. You can produce more oil or issue more stocks.). The inflation rate is very low at 1.75% (the inflation rate of gold is 1.8%.). But unlike gold or fiat currency, we know the maximum supply of Bitcoin.
- Bitcoin is growing by an average of 142% per year. Bitcoin reached a market value of $1 trillion in just 12 years (Google and Amazon took about twice as long). Bitcoin maintains its value for a long time, thereby improving planning for the future. So far, Bitcoin has been circulating. Anyone who has held Bitcoin for more than 4 years has received a good return. Bitcoin is programmed to rise.
- Bitcoin is optimized for security. The blockchain is small enough that anyone can run a complete node. Currently, there are more than 10,000 nodes. Moreover, Bitcoin mining is diversified in many countries, and the computing power is large enough. Bitcoin is a decentralized network because there is no central identity responsible for the network.