In mainstream economics, barter is considered an auditee because it only scales to very small levels. In fact, there's a close correlation between barter and the Dunbar number.
The Dunbar number is the maximum size a social group can reach without trade, language or currency, it's the limit to social organization in a flat non-hierarchic structure. We first observed this in primates, the largest troop of chimpanzees for example that you will see before they split into two tribes and inevitably start fighting each other, is about 150 members of the species. That's called the Dunbar number, we see that in human populations too, it's why you feel at home at the village because everybody knows everybody. It's where you can have social organization without intermediaries, barter only scales to that and part of the reason why it only scales to that is barter creates this complexity of trying to price services in other services or products in other products. So if you're a hairdresser and you want chickens, and you want to cut hair for chickens, you have to figure out what the exchange rate is between haircuts and chickens is, but if you want to get an oil change at the garage, you need to figure out the exchange rate for haircuts to oil changes is. Then you have to keep this very complicated matrix of exchange rates between all of these products and services.
We found the solution to that, about 4000 years ago called money. It turns out, if you just denominate everything in money, you have one exchange rate between money and everything else and the best part of money is it doesn't have intrinsic value or commodity use. Bananas aren't good money because you eat them. Gold is good money because there's not much you can practically do other than jewelry. Why is money really useful as an abstract form?
Because it turns out, money is a language. Money is a means of communicating value to each other, it's a linguistic construct. It arises out of civilizations that have the ability to communicate. We can teach it to primates, we can teach it to dolphins, we can teach it to elephants, but money is a uniquely human thing because it's an emergent aspect of civilization. Money is useful because it has no value, other than a medium of exchange which does have value. Intrinsic value.
The things that you eat for example. So it's not a barter system, in fact, once you realize that Bitcoin is the first form of completely programmable digital money, money that responds to inputs and creates different conditions, money that can be constrained in ways through programmatic technologies for example, you could create Bitcoin or other digital currencies that are only spendable if you have 2 of 3 signatures in a governance system. You can say, "oh, for this account the CEO and the CTO must sign in order to spend it."
That's a simple example of what we call a smart-contract in this space. This is a lot more than barter. The second thing relates to technology and I would agree with you, there is a pre-requisite right now that use this technology are primarily educated technologically literate and fairly affluent people, but that's not always how it's going to be. I think one of the great parallels to this is the development of cell phones. Who thinks a phone is a status symbol today?
In fact, it's more of a status symbol to have your assistant carry your phone. The most powerful people in the world don't answer phones or carry them, they have an army of people carrying phones for them. The status symbol is the leave it behind, who has phones now? The most produced phone in the world is the Nokia 3000, it's been produced by the billions, you will find it in the furthest parts in the Brazilian Amazonian basin, you will find it in sub-Saharan Africa, the tiniest village that has nothing else has a solar panel and a Nokia phone. That's how that technology evolved. What if we can take Bitcoin and put it on those devices?
So now we're seeing this happening with Android devices, the average price for the cheapest Android device you can have is about $25 today. Most experts believe that by the next 3 years, you'll be able to buy an Android phone, a full smartphone, with an ARM Cortex processor for about one dollar. Now, what happens when this one-dollar device is simultaneously a Western Union remittance termination point, a Wells Fargo wire transfer station, a Bloomberg terminal for trading stocks? What happens when that device is a bank and you can hold it in your hand and be a banker so we will not leave billions of people behind?
In fact, we will deliver a bank to the pockets of seven and a half billion people with this technology. The goal of Bitcoin is not to bank the world, the goal is Bitcoin to de-bank all of us.
September 19, 2018
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