Flashcards: Why Bitcoin (Class 1)
Use these for Active Recall. Try to answer before looking at the solution.
Q1: What is the difference between a Bearer Instrument and Credit?
A: A Bearer Instrument (e.g., Cash, Bitcoin) is owned by whoever holds it; possession is the proof. Credit (e.g., Bank balance) is a debt obligation; you own a promise from a third party to pay you.
Q2: What is the “Cantillon Effect”?
A: The uneven distribution of new money. Those closest to the source (banks/govt) spend the new money at old prices, while those at the edges receive it last, after prices have already risen.
Q3: Define “High Time Preference” vs “Low Time Preference.”
A: High Time Preference (The Grasshopper) values the present over the future (immediate consumption). Low Time Preference (The Ant) values the future over the present (saving and investing).
Q4: How is “Scarcity” technically defined in the Stock-to-Flow model?
A: Scarcity is the inelasticity of supply. It is measured by the ratio of existing Stock over annual Flow. A high S2F means production cannot easily be increased to dilute the value.
Q5: What are “Shrinkflation” and “Skimpflation”?
A: Shrinkflation is reducing product size while keeping the price stable. Skimpflation is reducing the quality of ingredients/services while keeping the price stable.
Q6: What does Giacomo mean by “De-virtualization” of money?
A: Moving away from digital money being just a centralized database entry (Credit) and turning it back into a digital “object” that you can hold and control directly (Bitcoin).
Q7: Why is “Saving” required for “Innovation”?
A: Innovation takes time and effort. You can only afford to spend time building a “fishing rod” (capital) if you have enough “saved fish” to survive while you are not actively fishing.
Q8: What is the “Skinny Pirate” analogy for Cryptography?
A: It shows that physical force (The Big Pirate) can be defeated by math (The Cipher). If a map is encrypted or held in your head, violence cannot take your wealth.