How Bitcoin Teaches People about Finance
Some historians believe that there have been times in history when people were better educated about money than the general public is today. One such period was during Ancient Greece’s golden age, particularly in Athens.
Athens in 400 BCE was very special, and it still is in our history, because it was the birthplace of democracy. Their democracy, however, was not the same as our modern democracy. particularly when it comes to their citizens’ participation in the day-to-day activities of democracy. To simplify grain trade and increase the security of investors’ portfolios, Athens established a complex system of bankers and insurers. During these times, many ships sank in the Aegan Sea, and these financial instruments allowed one to protect their investment and share the risk of their business with the industry through insurance.
Of course, there were frequently disagreements over these issues that had to be resolved in court. The Athens court system was designed to handle this type of case, but it was also used for everything else. Here are a few guidelines for their court system:
- The jury was made up of 500 citizens chosen at random from society for each trial.
- The trial could only last one day, and the case was settled at the end of the day.
- The jury did not deliberate as a group; instead, they voted.
- The defendant and plaintiff represented themselves, but their speeches were sometimes written down by famous orators (1).
The first point is critical to the argument of this article: each trial has a jury of 500 people. Athens had 50,000 citizens at the time (and an additional 100,000 slaves living within the city walls who were not counted as citizens and did not participate in city decisions), so the 500 people involved in each trial represented 1% of the population.
Consider this in today’s world: each jury would require 3.3 million Americans. Alternatively, 14 million Chinese citizens would be involved. It sounds impossible, but there is one technology that did not exist in Athens that could help: the internet. Perhaps this type of jury could be revived today? Trial results would not be the subject of such a debate because 1% of randomly selected individuals can be considered a large enough sample to represent society as a whole for a given trial. It not only makes sure that trials are fair, but it also makes them more open and less likely to be swayed by outside forces.
During his lifetime, the average Athenian faced numerous trials, including complex ones, and was exposed to topics such as finance, risk, long-term investment, compounding, and so on. Such trials are still documented today. One example is the story of Demosthenes, an Athenian who had his ancestors steal his inheritance because he was too young when his father died. He brought his uncles to trial as adults. Here’s an excerpt from his account of the situation:
“My father, a juryman, left two factories, both doing big business.” One was a sword-manufacturing company that employed thirty-two or thirty-three slaves, the majority of whom were worth five or six minae each, and none were worth less than three minae. My father received a clear income of thirty minae every year from these. The other was a twenty-slave sofa factory given to my father as security for a forty-minae debt. This netted him a tidy sum of twelve minae. In terms of money, he left a talent loaned at a drachma per month with an interest rate of more than seven minae per year… “Now, if you add the interest for ten years, calculated at a drachma only, you will find that the total, principal and interest, is eight talents and four thousand drachmae.”
How many ordinary people in our modern world could follow such an argument? It discusses two businesses, loans, interest rates, and the compounding effects of these factors. Most people today do not understand compound interest, despite the fact that it is one of the most basic long-term thinking concepts in finance.
Our financial system is layered with many levels of complexity and is presented as a complex topic, including personal finance. I believe this has been done over time by industry professionals for two reasons:
- People will hire professionals to manage and custody their funds if they are convinced that it is a complicated subject.
- Governments can make it seem like they control our financial system and force people to rely on their expertise, which makes people less involved in their own lives.
People are starting to realize the impact that inflation can have on their lives. They may not understand where it comes from, but they recognize the importance of personal finance or their savings will be slowly eroded by inflation. This inflationary mindset has always existed. This is one of the reasons people invest in real estate and why prices are so high. It is now pushing people to make even riskier investments. This is one reason why the cryptocurrency world is growing so fast and seems to be so appealing to a lot of people: there is a lot of money to be made, but there is also a lot of risk.
People who begin investing in cryptocurrency will gradually begin to distinguish between bitcoin and “crypto” at some point (often as a result of a shitcoin losing 99% of its value or a hack causing them to lose their funds). We will write a follow-up article on this specific topic. Bitcoin is not crypto.
People gain financial independence as a result of the way bitcoin is designed. You are the sole owner of your assets, and no one can take control of them unless you give them access. This is extremely empowering, but it can also be a frightening endeavor, as it has the potential to expose users to additional risk. This implies that individuals must accept responsibility for their financial decisions. Every decision they make is their own, and in order to avoid mistakes, they must educate themselves.
This course begins with an understanding of bitcoin wallets and quickly progresses to more complex topics:
- What exactly is the bitcoin blockchain?
- How does it function?
- What exactly is money?
- What exactly is a store of value?
- What exactly is modern monetary theory?
- What exactly is quantitative easing?
- Who is in charge of and benefits from our system?
And there are many more that, one by one, open the mind to how our financial system works. Many great thinkers and contributors in space help to understand these points.
People are now being forced to take control of their own funds and accept personal financial responsibility. The veil that has always hung over the world of finance is slowly being lifted, and what were once considered extremely complex topics are now considered day-to-day topics for many. This is because the trust that could once be placed in our centralized financial institutions has vanished as a result of decades of customer abuse, bailouts, and other practices.
The Athenian system could not keep up with the growing population of cities and countries. Is a similar system so difficult to imagine today, given our current technologies? Perhaps bitcoin will be the asset that points the way in this direction. Because of its cryptographic properties, but also because of the additional benefits of its passive properties, such as the fact that users must educate themselves, which can only benefit them and our society.