Bitcoiners have long thought of poor countries as the poster child for the problems bitcoin solves. Many have pointed to the potential for bitcoin to bank the unbanked and allow them access to global markets, reduce transaction fees, and make remittances cheaper. Yet, ten years after its inception, it has made very little progress on these fronts. The belief in bitcoin’s ability to achieve these feats comes from the common mistake of assuming that its primary use case is a cheap mass payments network, as opposed to a base settlement network inextricably linked to a native hard money. Bitcoin does not offer the poor a cheaper, more inclusive Visa or Paypal, it offers the entire world an alternative to central banks’ monopoly on money. Unlike Paypal or Visa, which can run on top of any currency, Bitcoin the payment network is completely worthless without people demanding to hold its native token, and the network’s utility rises in direct proportion to the value of cash balances held in its native token. This constitutes the pool of liquidity available to potential traders, and the larger the cash balances, the more frequently opportunities will naturally emerge for trade with bitcoin as the medium of exchange. For individuals holding their government’s money and looking to trade with one another, bitcoin is highly inconvenient as it would involve the conversion into and out of government money, with significant transaction costs.
Does this mean that Bitcoin offers no benefit to the world’s poor? On the contrary, if Bitcoin succeeds as a base global settlement network, the benefits would be of far greater significance than a cheaper payment network. To understand why, one must first understand how utterly disastrous and destructive the current global monetary system has been for the world’s poor. And to understand this monetary system we must first begin by examining its sordid history, which started in the fateful second decade of the twentieth century.