### Why Bitcoin Started and a Brief History of Money

Money makes the world go round. ~ Cabaret (lyrics by Fred Ebb)

Isn't it funny that everyone accepts this colloquialism as matter of fact? All of us live with money. It's inescapable. We depend on it. We dream about it. We demonize it. We even plan our entire lives on it's scarcity or abundance. Let's stop for a second and think about this. If you step back and really take an objective look at the concept of money and how it has pervaded our collective existence, you could be forgiven for thinking that we've become cult members to this monetary idolatry. How did we get here? What has brought us to this point?

To answer this, let's go through a brief history lesson on money (think: School House Rock, not History of Finance 101).

### Bartering

At the dawn of civilization, people realized they could trade things to get what they want. We call this bartering:

"I collected some berries, but I want some meat. Hey look! There's a fisherman with a fresh catch. I could kill him for some of his fish...OR...what if I give him some of my berries for some of his fish? Then we can do this tomorrow and the next day and so on. I'm a genius!" ~ Caveman Joe

Problem with this is that not everyone wants what you're offering. What if the fisherman is allergic to the berries you picked? What if the kids want chicken nuggets instead of fish? What if the fisherman gets killed by the next guy who didn't have this transactional epiphany? This is why we created a standard currency. At first, it was pieces of obsidian because obsidian could be used to make many high quality tools (and kill Whitewalkers). But as civilizations developed around the world, the utility and availability of obsidian varied from culture to culture, forcing us to agree on some other form of currency.

### It's All About the Bling

The concept of a commonly accepted currency was a major relief because it meant that this could act as a representative medium for the stuff that someone wants:

"I traded my berries for some fish, but the fish spoiled by the time the A/C repairman got around to my hut. Now what? Well...the fisherman did give me a bunch of these cowry shells. Maybe the repairman will want some of those instead. I'm a genius!" ~ Tribal Joe

In lieu of obsidian, many tribes and cultures accepted cowry shells as a form of currency. These cowry shells were desired by just about everyone because they were the fashion statement of the millennia and they don't spoil, weigh a ton, or try to escape in transit.

Eventually, some kingdoms in China invented the first coins. They were cast in bronze and the idea really caught on (for the next 3,000 years). Soon, if you were any ruler, monarch, elected official, despot or warlord with any real power, you were minting your own coins out of something hard and shiny. Because, let's face it: shiny trumps useful when it comes to making the wife and kids happy.

### Money = Power

Skipping all the transitions that happened in currency (paper currency, issuing of stocks, etc.) for the sake of keeping your attention, let's accept the fact that very few people have the capacity to create a unit of currency.

In order for you to make a coin, you had to not only mine the ore out of the ground, burn off the slack, divide the metal into perfectly weighted portions, create a cast with questionable artwork of some dude's head and then mint these portions of metal into the coins you'd eventually spend. This is a lot of work and a complex set of skills for just one person. Heck, it's a lot of work for many people. This is why the minting of coins was usually done on an industrial scale by the person in charge; otherwise identified as that dude whose head is on the face of the coin...or is his face on the head of the coin?

Semantics aside, the point is that as soon as humanity collectively agreed to accept a representative unit of currency for just about everything we produce or consume: food, products, services, education, bribes, medicine, influence; a handful of people gained incredible power over everybody else:

"Everyone in the land is using my coins! And since I'm the only person in the land allowed to make more coins, I'm a rich genius!" ~ Warlord Joe

### Fiat Money

It wasn't that long after people started using coins that the concept of paper money came about. Again, it was the Chinese who were the first to use paper money...and they were the first to experience inflation and the subsequent devaluation that goes along with it. But honestly, the idea of paper money makes sense:

"It takes a long time to make all these coins and my queen is getting tired of carrying 23.7 kilos of coins to buy berries, fish and cowry shells at the market. What if I just tell everyone that this piece of paper is worth one of my coins? Then I can make money faster, queenie stops carrying kilos of coins and...I'm a genius!" ~ King Joe

Pegging paper money's value to a commodity like gold, silver, copper, silk, etc. is not fiat money because its value is based on something tangible. It took centuries for these people of power to truly convince the rest of us that they don't need vaults full of gold or silver for their paper money to still have value. In fact, it was only in 1971 that the US converted the dollar into a completely fiat currency.

"I know that my paper money says each bank note equals one coin. But what if I lie a little and print more notes than there are coins in my coffers? I mean, those bags of coins didn't get any lighter, and there's no way everyone will trade in all of their notes for coins all at the same time...so who will find out? I'm a genius!" ~ Elected Official Joe

With the transition to fiat currency, the age of accountability ended for both, governments and the banking industry. Governments were given carte blanche to print as much money as they desire and banks, the greediest organizations of them all, could rely on the government (thanks to the Federal Depository Insurance Corporation set up by the Banking Act of 1933) to bail out the poor people whose money they've squandered. To reinforce this point, look at this list of the biggest bank failures in (only) US history. Notice how none of the dates occurred before 1971. Coincidence? I think not.

But why did this happen? Shouldn't we be able to trust in the government that's "of the people, by the people, for the people?" ~ Abraham Lincoln. One would think...but let's remember: the US does not have a monopoly on money. Money is a human concept. It's acceptance as the system by which we give value to and transact just about everything has been and is accepted the world over.

Additionally, the amount of times those people of power couldn't think far enough ahead to realize that inflation is the consequence of fiscal overindulgence is striking. Here's a list of all the nations who have experienced the most extreme hyperinflationary events in history:

To be fair, many of these situations weren't the direct result of a government just printing money to make it rain. But this asterisk is of no consequence to the poor souls who lost their life savings as a result.

Of course, going back to the gold standard is an impossibility. Today, only about 10% of all the money in the world is represented by physical money (banknotes and coins). The rest of the funds are essentially just numbers in a book. Does this mean that 90% of all the money in the world is not real? Essentially...yes! The majority of the value that we, human beings, collectively give to things is not represented by anything that physically exists.

Think of the money in your bank. Does that local bank have enough cash in their vault to equal exactly the amount of money you and every one of their customers have in their accounts? No way! In fact, regulations require that a bank only maintain about 10% of your money on hand (hmmm, where else did I hear that percentage?). So what does the bank do with the other 90% of my money? Great question. This is why I made that snide remark about banks being the greediest organizations of them all.

When you deposit any money into a bank, the reason banks are so happy and willing to take your money is because they get to leverage 90% of those funds. Leveraging means that they can use these funds to invest into (what they hope will be) interest or value earning investments. So if you deposit $10,000. They will then take$9,000 and buy a property by offering your money as a mortgage to someone else. Or perhaps they will loan that $9,000 to an entrepreneur looking to expand their business. Did you give the bank permission to do this with your money? No. But they are legally allowed to do so. After all, banks have tons of very intelligent people working for them in fancy offices to figure out how they can earn more money. So of course, these intelligent people are going to make sure they're not buying a property that could potentially lose value or loan your money to someone who's business might fail, right? "I'm going to make a very safe place for people to put their savings. We'll call it a bank. But now that everyone put their money in my bank, I have a ton of money! What if I give my cousin some of that money to start his shellfish restaurant, Obsidian Cowry? Of course, money isn't free in this world (except for me), so I'll charge him a fee for giving him this money. And if he doesn't pay me back, I'll just take his restaurant. I'm a genius!" ~ Banker Joe Remember the mortgage crisis of 2008? That's when this system catastrophically failed. If you watched 'The Big Short', you got a much more detailed explanation of what happened. Essentially, banks and the finance industry as a whole got into big trouble when the real estate market dropped 20% over 2 years. Greed drove corporate financial institutions and the mortgage industry to use your money to underwrite mortgages to people that were not qualified to get one. And when these people couldn't pay their mortgages en mass, the banks lost your money because they had to repossess thousands of homes whose value had dropped. They didn't tell you this, of course, because the government was there to bail them out with...oh that's right, your tax money. It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. ~ Henry Ford ### Who Else is Getting Rich Off My Money? Now that we have entered the digital age, cash is being used less and less. What this means is that the flow of money is happening more easily and much more often. But when you pay for your vegan double shot spiced mocha frap with your debit or credit card, how do Visa, Mastercard, Amex or whichever credit card company you choose to support make money? The obvious answer is the interest rates they charge on the high balances everybody racks up and pays off over time (or never). Well, for Amex and a few other card companies, that's true. But for the biggest players in the field; Visa and Mastercard, this stream of income is given to the banks who offer the loans through their cards. So all those interest payments millions of people are paying each month is not where most of the money is coming from and this puts us back at square one. The real answer is the hidden fees most people don't even know exist. Now there are those fancy cards that give you X miles for every dollar you spend who charge you a small fee to use these cards and earn these perks. But nobody is getting all that rich off that 50 to 100 bucks each year. Instead, it's the fees the card processor charges the merchant or business owner every time a card is swiped. The customer doesn't see these fees because they are charged the exact amount the product is sold for. Instead, it's taken out of the business owner's profits for giving their customer's the privilege of paying by card. How much are those fees? Only about 1-3%. But multiply that 1-3% by all the transactions being processed all over the world each and every day. Here's some sobering statistics: Based on Visa's Fiscal 2019 Annual Report, Visa earned$15.3 billion of profit off of $22.9 billion of revenue. The scary number is the total amount of money Visa processed last year...wait for it...11.6 trillion dollars! And that's just Visa! Mastercard processed$6.5 trillion, earning $8.1 billion in profit and American Express processed$1.24 trillion, earning $6.7 billion. Remember that the US GDP in 2019 was$21.43 trillion. This means that the top 3 credit card companies processed almost the equivalent of the world's richest nation's GDP through their terminals last year. All of a sudden, that innocent 1-3% doesn't seem so small.

So after the greedy banks invest our money without our permission and the omniscient credit card companies take their cut from every transaction, who else is getting rich off my money? Let's make a list:

• Currency exchanges buy/sell currencies at terrible margins and sometimes even add a commission on top.
• Banks typically charge a wire fee every time you want to wire (transfer) money to an outside party (someone not a member of your bank).
• ATMs usually charge fees unless you use your own bank's machines.
• Financial advisors charge fees on every trade they place or for just overseeing your accounts even if they don't do anything with your money for years.
• Stock Exchange Platforms usually charge fees on every trade taking place (thank you Robinhood for freeing us!).
• Closing costs for buying a home (US) are usually 2-5% of the home's value...why? What are title companies actually doing for all that money...paperwork, really?
• Governments charge a myriad of taxes on income, inheritance, dividends, gifts, capital gains, payroll, property and on every single transaction that takes place.

### It All Comes Down to Trust

In going through this (arguably) abridged journey through the history of money, it's obvious why money was created and the reasoning behind its acceptance. But what began as a logical method of representing value evolved into a more and more complex system; agreed upon by the masses, but controlled by a few. As the system grew more and more disconnected with the logic of why X has value, the greater the opportunities for those in power to manipulate, leverage and control the entire financial system.

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. ~ Satoshi Nakamoto

The result: on January 3rd, 2009, Satoshi Nakamoto embedded into the block why Bitcoin was created by citing a newspaper article in The Times.

Perhaps this was the straw that broke the camel's back or maybe it was just a poignant coincidence for a project that was years in the making, nobody will know but the message is clear. Here is our alternative.