Inception: Satoshi Nakamoto Monetary Insights
"Return to the root and you will find the meaning" — Sengcan
Throughout history, every revolution has had its pivotal moment—a turning point that separates “how things were” from “how things could be”, pointing toward a new model for the future. Today, we are living that moment as we witness a decentralized digital transformation of the monetary system, whose root can be traced back to the inflection point marked by Nakamoto (2008)1 publication of the Bitcoin whitepaper and its subsequent system launch. Historically, the challenge of achieving decentralized coordination in a monetary system—while minimizing the necessary trust and resisting malicious actors—remained unsolved until the invention of Bitcoin.
But one might legitimately ask: why is this truly revolutionary in monetary history when society has thrived for thousands of years with advances in physical money, and many of us have been using digital bank money for years? The answer lies in a fundamental shift. For the first time, a major societal institution like money can be managed in a censorship-resistant way, free from gatekeepers who can manipulate ownership records and its value for their own political agendas, often at the expense of the common good.
Throughout history, money, as a symbol and medium of social exchange, has been controlled by various elites. From early credit recording systems in temples to commodities used as money, power rested with those exploiting precious metal deposits or minting coins, while others relied on assayers to ensure their purity and prevent dilution with less valuable metals. Over time, custodians of records and issuers of representative money2—emperors, monarchs, bankers with state backing, and modern governments with central banks—have controlled centralized ledgers, from tally sticks and paper currency to electronic records. Until today, when money no longer needs to represent a claim on something of value but instead relies on forced trust in the issuer.
Bitcoin marks the first time a monetary representation is maintained and secured through a distributed computing network, decentralizing the power to uphold this institution and allowing anyone who meets the technical requirements to participate. Bitcoin's consensus mechanism, combining proof-of-work with a peer-to-peer network, effectively solves the longstanding Byzantine Generals Problem by enabling a decentralized network to agree on a single state version of the blockchain3, even in the presence of malicious actors. It also addresses the Double-Spending Problem by making alterations to the blockchain prohibitively expensive in terms of computational power, rendering double-spending virtually impossible.
If there are still doubts about Bitcoin's value, hopefully, this clarifies that it is more than just a distributed computing technology representing an unbacked asset with a price fluctuating due to its limited supply. It’s the gateway to a paradigm shift, both technologically and monetarily, and I encourage you to keep exploring it if you still have any doubts.
Given the monetary nature of the project, the goal is to ‘return to the root to find the meaning’, as Sengcan4 said, of why we are here as an industry. This involves exploring Satoshi Nakamoto's publicly shared insights on the vision for the future monetary system, and, in alignment with that, the bitcoin’s role and Satoshi’s reasoning behind its design principles for that future.
This analysis compiles Satoshi's monetary insights and perspectives on bitcoin as an asset from original published messages, which are fewer compared to discussions about Bitcoin as a distributed network. It presents a coherent picture that Satoshi originally shared with the world, connecting the interconnected ideas expressed at various times about the intended function and design principles behind Bitcoin as the first required step toward an envisioned currency system built on bitcoin’s base.
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1. Satoshi’s Endgame Vision: Dynamic Smart Money
In one of the lesser-known yet most deliberate messages, Satoshi Nakamoto outlined a long-term vision that illuminates the monetary reasoning behind bitcoin on the P2P Research Mailing List on February 13, 2009, a few days after the first block was mined. This came in response to Martien van Steenbergen's suggestion about having self-organizing elastic currencies with the correct supply amount at all times:
Martien van Steenbergen: [1] > Would love to also see support for not having to supply and managing money. Would make it easier and cheaper to maintain and results in having sufficient money, always and everywhere. No scarcity, no abundance, exactly the right amount all times, self-organizing.
Satoshi specifically responded to Martien, clearly acknowledging that bitcoin is not the ultimate step but rather the foundational first step toward a broader vision—an inelastic ‘basic P2P currency’ upon which dynamic/ elastic, ‘programmable P2P social currencies’ can be built. The developer explicitly referred generically to the programmed elasticity of these currencies as ‘dynamic smart money’ [*]5:
[1] Satoshi: That's do-able. It can be programmed to follow any set of rules. I see Bitcoin as a foundation and first step if you want to implement programmable P2P social currencies like Marc's ideas and others discussed here. First you need normal, basic P2P currency working. Once that is established and proven out, dynamic smart money is an easy next step.
See the key contribution to the Satoshi Nakamoto Institute by one of the early contributors to The Hard Money Project.
[These words align with the idea that a currency's purchasing power is fundamentally a local economic relationship between an adaptive, or “smart”, currency supply and the aggregate of goods and services exchanged in its denomination. Satoshi later referenced this concept of value in subsequent messages.
To understand the full message, it's essential to interiorize why a currency's purchasing power is, by design, a local economic relationship. Variations in the availability of exchangeable economic resources across communities arise from factors like natural resource endowments, climate, and local demographics, which shape the workforce. Productivity differences, driven by physical and human capital, influence technological advancements, where culture and customs play a key role in shaping how these goods and services are provided, utilized and exchanged. Since each economy is unique, if the local economic value exchanged for currency varies between communities, the currency supply must be elastic by design to stabilize purchasing power; otherwise, imbalances lead to direct purchasing power losses and transfers between parties.]
This parenthesis clarifies why, in the same message, when discussing dynamic smart money’, Satoshi followed up by referencing an aspirational vision of currencies that could be programmed as community-based or, as explicitly mentioned, ‘P2P social currencies’, unrestricted by geography. The underlying principle is that an economy can be shaped virtually by economic activity surrounding a currency, extending beyond physical geographic borders.
[1] Satoshi: I love the idea of virtual, non-geographic communities experimenting with new economic paradigms.
Satoshi’s still-unfinished vision points to building on bitcoin’s foundation as a ‘basic P2P currency’—efficiently transferable peer-to-peer through the Bitcoin network like electronic cash, while referred to as “basic” for its fundamental purpose as global, neutral base money6 or reserve/basic currency. Unfinished, as it would occur once bitcoin was established and proven, aligning with Martien's proposal and forming the basis for a new currency system of communities' ‘programmable P2P social currencies’, self-organizing in a trustless way and experimenting with new economic paradigms. Let’s see how Satoshi reinforces this vision with the rest of the original monetary messages.
2. From Vision to Bitcoin’s Supply Design Principles
Satoshi’s vision of ‘dynamic smart money’ as local P2P community currencies wasn’t a one-time idea, quickly forgotten. Rather, it was a recurring theme, supported by coherent arguments on economics and monetarism, which Satoshi complemented by detailing the objective and design principles behind choosing bitcoin’s fixed, predetermined supply as the first step toward realizing this broader vision.
Reviewing the messages, and following up on the previous one to Martien about his/her endgame desire, Satoshi responded five days later, on February 18, 2009, to Sepp Hasslberger's question in the P2P Foundation forum about the mechanism or formula used to regulate bitcoin's supply:
Sepp Hasslberger: > Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula? If there is no formula, who gets to make that decision and based on what criteria will it be made?
Satoshi responded by emphasizing the need for a decentralized monetary system through a neutral asset that no single entity could control or regulate, with no central bank adjusting the money supply and no third-party trust required. [*]7:
[2] Satoshi: To Sepp's question, indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because…
Aligned with this, three days earlier, Satoshi referred to Bitcoin as the first decentralized and trustless system infraestructure. [*]8:
[3] Satoshi: I think this is the first time we're trying a decentralized, non-trust-based system.
Satoshi further explained to Sepp that the need to dynamically adjust the supply to ‘the real world value of things’ as goods and services exchanged in its denomination, in order to balance purchasing power, could have been achieved if there were a clever way to determine the aggregate value of those goods and services. The decision not to implement such a system wasn’t due to oversight; rather, Satoshi openly admitted to not knowing how to solve this problem through software without trusting someone’s policies, in the explicitly decentralized way:
[2] Satoshi: …I don't know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.
Satoshi later reiterated this challenge of adapting supply to the value of things in a comment to Martti Malmi on May 3, 2009. This time not in reference to a self-sovereign currency with independent monetary policy but to a currency peg9 in foreign exchange value to existing sovereign currencies. The provided context explained that during bitcoin's design phase, achieving price stability (in terms of foreign exchange rates), as seen in existing currencies, was desirable but impossible without elastically adjusting the supply to its future demand dynamics. [*]10:
[4] Satoshi: My choice for the number of coins and distribution schedule was an educated guess. It was a difficult choice, because once the network is going it's locked in and we're stuck with it. I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard. I ended up picking something in the middle.
This explains why, in line with the endgame vision [1], Satoshi contrasted an elastic supply—one that adjusts to stabilize a currency's purchasing power, its “domestic value”—with bitcoin's predetermined fixed supply policy, which results in volatility in both its “domestic value” and its “foreign exchange value” as determined by its exchange rate(s) pricing. This volatility arises from unexpected fluctuations in both domestic and foreign demand subject to a fixed supply, which is amplified when paired with lower liquidity assets.
[2] Satoshi: Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes.
Satoshi here addressed two different concepts of “value”:
‘Instead of the supply changing to keep the value the same’. Here, Satoshi referred to stabilizing the currency's purchasing power in relation to goods and services (domestic value), as its market price relative to other assets/currencies—its foreign exchange value—could still be volatile with a poorly implemented elastic supply policy.
‘The supply is predetermined and the value changes’. Satoshi may have been referring to volatility in both “domestic” and “foreign exchange” values, as a fixed supply inherently causes fluctuations in relation to both goods and services as well as respect to other currencies.
These messages align with the foundational economic theory that Satoshi outlined earlier in an email to Ray Dillinger on November 8, 2008, just eight days after releasing the whitepaper. In that email, Satoshi helped Ray understand that the issue isn’t about the supply volume or its growth rate per se, but about having the ability to adjust it based on the demand from people using or spending the currency on goods and services, in order to stabilize purchasing power and keep aggregate prices steady. [*]11:
[5] Satoshi: It is known in advance how many new bitcoins will be created every year in the future. The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable…
Satoshi saw the concept of dynamically aligning the money supply (monetary inflation rate) with spending demand as essential for this money to circulate and function as a currency. This idea was also alluded to in the same thread in response to Martti Malmi's question about using a commodity with natural inflation as money—or currency, given the context of the question—where Satoshi compared gold, historically issued at a moderate supply rate (2-3% yearly) over an indefinite period, to fiat monetary inflation, which has consistently been higher. [*]12:
[6] Satoshi: The supply of gold increases by about 2%-3% per year. Any fiat currency typically averages more inflation than that.
However, there's a key difference between bitcoin and gold: while gold’s supply growth is low but unpredictable—making it more difficult to form expectations and influencing purchasing habits, as observed when gold was used directly in minted coins—bitcoin is the first asset with inherent scarcity, defined by a predetermined fixed supply issued at a constant rate. In other words, it’s the first hard asset in history.
This difference is the point Satoshi would reiterate in many ways: bitcoin supply was designed to encourage early demand and accumulation, thereby limiting the circulation needed for an asset to function as a currency actively used as a medium of exchange, granting it direct purchasing power and supporting consumption and productive investments that drive economic development. This brings us to the next point: understanding the mission Satoshi intended with that design.
2.1 Preprogrammed scarcer gold, unfit as currency
Satoshi identified that an adaptive, elastic supply tied to economic value is necessary for money to function as currency but acknowledged several challenges: the uncertainty [2] of how to adjust the monetary policy’s feedback loop to stabilize purchasing power in line with the unpredictable and unknown ‘real world value of things’; the challenge [4] of adapting supply to stabilize its “foreign exchange value” relative to other existing currencies; and the implied issue [5] of regulating a dynamic supply rate in line with spending demand for goods and services without discretionary controls or capital restrictions.
These shared unknowns and challenges of functioning as a currency explain why Satoshi positioned bitcoin as a foundational asset—akin to a reserve currency or base-money with a fixed, predefined supply schedule, as a step toward a future goal outlined in the vision [1]. Specifically, the Nakamoto (2008) whitepaper describes bitcoin as analogous to “gold”, but in terms of mining resource efforts, with its coin supply distributed into circulation at a constant mining rate:
[7] Satoshi: The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation.
However, Satoshi’s additional messages clarified that while bitcoin’s issuance at a constant rate through computational mining is monetarily analogous to gold, it was never designed to replicate gold’s indefinite and uncertain mining process. If bitcoin had adopted gold’s model of low but unpredictable issuance over time, its appeal as a new digital asset likely would have diminished, as the uncertainty of an unlimited total supply would have deterred investor demand.
This is why Satoshi explained to Ray Dillinger [5] the reasoning behind designing bitcoin's fixed supply to be distributed with a constant deflationary halving rate, making it more appealing to early demand compared to gold or previous tangible commodities. This design aligns closely with the properties of a foundational neutral base money to build upon:
[5] Satoshi: …If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase. Coins have to get initially distributed somehow, and a constant rate seems like the best formula.
This approach could incentivize demand and balanced accumulation from early holders, potentially increasing bitcoin's market price, its foreign exchange value relative to other assets and currencies. The deflationary, constant rate strategy was designed to establish bitcoin's expected scarcity early on, halving the mining rate every 210,000 blocks (4 years), up to a total supply of 21 million tokens. Explained on January 13, 2009. [*]13:
[8] Satoshi: Total circulation will be 21,000,000 coins. It'll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years…
Satoshi emphasized repeatedly and in various ways how this approach could bootstrap and foster a positive initial demand feedback loop. As more users became aware of bitcoin's capped scarcity at 21 million units, it created an incentive to buy and hold the asset. This generated increasing network effects as users observed a rise in its market value, further driving demand from new users.
On January 16, 2009, Satoshi noted in an email that capturing a portion of early aggregate demand made sense, as if traction were achieved, that demand could turn into a self-fulfilling prophecy. [*]14:
[9] Satoshi: It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy.
In the same vein, the positive feedback loop incentivizing demand from new users was articulated in a comment to Sepp Hasslberger on February 18, 2009:
[2] Satoshi: As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.
Later, in a July 9, 2010 BitcoinTalk comment, Satoshi emphasized the monetary policy's incentives for early accumulation and holding (cornering the market) rather than selling or spending bitcoin on necessary economic resources. This is due to bitcoin's scarcity, as the initially bootstrapped buy demand creates upward pressure on its price/exchange rate over time, appreciating its “foreign exchange value”. [*]15:
[10] Satoshi: When someone tries to buy all the world's supply of a scarce asset, the more they buy the higher the price goes. At some point, it gets too expensive for them to buy any more. It's great for the people who owned it beforehand because they get to sell it to the corner at crazy high prices. As the price keeps going up and up, some people keep holding out for yet higher prices and refuse to sell.
Satoshi's repeated explanations about the supply design emphasize confidence in this incentive structure, which could drive bitcoin's market price higher, enhancing its “foreign exchange value” while further reinforcing demand.
Now, going back, these explanations about the supply design shed light on why Satoshi, early on, described bitcoin in a monetary sense more as a precious metal—a commodity with both domestic and foreign value volatility due to its scarce, pre-programmed supply, designed to bootstrap early demand that positively reinforces itself over time. At the same time, Satoshi contrasted it with money functioning as a currency that circulates actively as a medium of exchange in the economy, supported by an elastic supply that adapts to each community's economic needs to stabilize purchasing power (direct domestic value):
[2] Satoshi: In this sense, it's more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes.
From a complex adaptive system perspective, bitcoin's design features an uncalibrated monetary policy without a feedback loop, meaning the supply does not adjust to the state conditions and diverse dynamics of each economic community (what Satoshi referred to as ‘the real world value of things’ ). As a result, it cannot balance or stabilize any potential purchasing power.
The more holding (HODLing) occurs due to uncontrollable human reactions to the inherent incentives Satoshi described, the higher the velocity or demand spending rate for the circulation of goods and services needed as response to maintain the same output and purchasing power over time. This would lead to a supply deficit imbalance if bitcoin were used as currency.
This imbalance creates a self-reinforcing cycle: a positive feedback loop where the greater the incentive to hold plays out over time, the lower the circulation rate becomes as inverse. As a result, the economic output and income generated in its denomination decrease, ultimately diminishing its direct purchasing power. These growing HODL incentives have materialized over time in practice, with over 92% of holders now (Oct 14, 2024) not spending any bitcoin for more than a month. Now think what would happen to your economy if only 8% of participants spent just a “small fraction” of currency within a month, while the rest accumulated it for over a month...
So, offsetting this loss of economic output and purchasing power would require non-holders to increase their spending velocity at the same rate as the rise in HODL—an impractical and challenging task given its wealth redistribution effect, where those who need to spend to cover their necessities do so, while those who can accumulate and hold as long as possible follow the system's inherent incentives, amassing what others spend.
As a result, by design, the supply will never adequately respond to fluctuations in velocity (the rate of spending on goods and services) needed to stabilize purchasing power. Additionally, the asset's inherent buy-and-hold incentives nullify its circulation as a medium of exchange, which is what drives income and economic output. This causes bitcoin to experience high and uncontrollable value variability, both in its potential “domestic value” and in its market exchange rate as a result of its “foreign exchange value”, making it challenging to ever function effectively as a currency.
Now, understanding the incentives that Satoshi embedded in bitcoin’s design reveals why a system with a rigid, predictable supply schedule inherently promotes buy-and-hold behavior, especially among those who can afford not to spend, thereby discouraging selling and the economic activity required for its direct purchasing power.
If the term “currency” comes from the Latin ‘currere’, meaning “to flow” or “circulate”, then bitcoin's inherent diminishing circulation over time underscores that its design purpose lies elsewhere. Meanwhile, as Satoshi pointed out, it relies on speculative appreciation in its foreign exchange value relative to other currencies as demand increases against a fixed supply, characteristics of a neutral safe-haven asset.
Therefore, the message [2] to Sepp implies, from first principles, that since holded money is the inverse of circulating money (currency), which generates economic income, the more money is holded, the less it acquires direct purchasing power. Thus, the use cases in Satoshi's comparison of a scarce precious metal and money as currency are inherently dichotomous and incentive-incompatible by design.
Finally, Satoshi started using the term “cryptocurrency” later on, from June 11, 2009, for marketing purposes as a catchy word to introduce bitcoin. It was not intended to signify its use as a currency, as confirmed by all her/his previous messages. [*]16:
[11] Satoshi: Someone came up with the word “cryptocurrency”... maybe it's a word we should use when describing Bitcoin, do you like it?
In this way, bitcoin’s appeal as a safe-haven asset with programmed scarcity and a tendency for price appreciation relative to other assets and currencies positions it as a potential hedge against currencies debasement and their loss of purchasing power. However, its design, which inherently incentivizes holding and limits its unpredictable circulation, means that bitcoin will always depend on and maintain indirect purchasing power through at least one foreign currency (primarily the U.S. Dollar system today), facilitated by cross-asset pricing and/or bitcoin-to-currency conversion triangulation.
This section concludes by highlighting, through Satoshi's original design-focused messages, why bitcoin was never intended—and by its design nature cannot serve as a standalone currency—as it inherently relies on at least one external currency system to enable direct purchasing power through triangulated pricing/conversion. This explains why Satoshi designed bitcoin as a foundational first step, as outlined in [1]: a basic P2P currency working as a base reserve asset. Satoshi implied that the project would remain incomplete until Martien's idea of a self-organizing system of self-sovereign currencies, alluding to ‘programmable P2P social currencies’ as ‘dynamic smart money’, could be realized. Such a system, built on bitcoin’s reserve asset for communities experimenting with new economic paradigms, would require a decentralized, trustless model free from fiat central bank control over the most critical aspect of any currency system: its purchasing power.
2.2 Better ‘moneyness’ than gold, more portable than paper cash
The next steps required demonstrating why bitcoin, as a digital commodity, is monetarily superior to any previous physical commodity. Later, in blog posts dated August 27, 2010, Satoshi reiterated the idea of bitcoin's design as being more akin to a scarce metal like gold, highlighting some of its sound money properties such as programmed fixed-supply and effective portability, in a way superior to gold. Satoshi's thought experiment challenges traditional notions of money that emphasize inherent or non-monetary value, as suggested by the monetary convergence of commodities with intrinsic functionality in Mises' Regression Theorem (1912)17. Satoshi suggested that bitcoin's scarcity as a demand bootstrap, combined with its utility for easily portable digital wealth transfers, reinforces its desirability not as a currency but as hard base money—hence the following comparison to a base metal like gold. [*]18:
[12] Satoshi: As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: boring grey in colour, not a good conductor of electricity, not particularly strong, but not ductile or easily malleable either; and one special, magical property: can be transported over a communications channel. If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it…
I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something.
In line with bitcoin's use case as a potential value hedge with attractive demand, Satoshi compared bitcoin to an investment asset, more like a collectible or commodity, earlier that same day, August 27, 2010, on the forum. [*]19:
[13] Satoshi: Bitcoins have no dividend or potential future dividend, therefore not like a stock. More like a collectible or commodity.
Additionally, in the same vein, previously on May 3, 2009, in the Bitcoin Mailing List, Satoshi emphasized why bitcoin represents a historic revolution in commodity money. Satoshi explained that some commodities converge to be adopted as money because their demand for monetary use outweighs any other intrinsic functionality, specifically due to properties that give them a higher monetary premium or “moneyness”20 compared to other assets.
This explained why bitcoin can be a superior hard asset in terms of “moneyness” compared to gold and other physical commodities, as it can be traded over internet channels without trusted third parties (TTP)—making it the first asset in history to meet the 7th property: censorship resistance and protection from political capture.
[14] Satoshi: Historically, people have taken up scarce commodities as money, if necessary taking up whatever is at hand, such as shells or stones. Each has a kernel of usefulness that helped bootstrap the process, but the monetary value ends up being much more than the functional value alone.
Most of the value comes from the value that others place in it. Gold, for instance, is pretty, non-corrosive and easily malleable, but most of its value is clearly not from that. Brass is shiny and similar in colour. The vast majority of gold sits unused in vaults, owned by governments that could care less about its prettiness.
Until now, no scarce commodity that can be traded over a communications channel without a trusted third party has been available. If there is a desire to take up a form of money that can be traded over the Internet without a TTP, then now that is possible.
Its programmed scarcity mirrors that of precious metal commodities, while its distributed digital nature allows for more efficient, secure and trustless transfers than any physical cash or alternative commodity. That’s where the “electronic cash” analogy in Nakamoto’s (2008) whitepaper comes from—it emphasizes bitcoin’s peer-to-peer nature, allowing ownership control and direct exchange without intermediaries, while improving on the portability of paper cash by enabling trustless transactions over the internet:
[7] Satoshi: A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution.
This concludes how bitcoin, as conceived by Satoshi Nakamoto, monetarily combines and enhances the properties of both the best physical commodities and paper cash.
Satoshi’s design made bitcoin a neutral commodity, free from issuance by any entity with political bias or agendas, and endowed it with superior monetary properties compared to any previous forms of money. It brings Satoshi's vision of hard money to life, in ways superior to gold under the gold standard, serving as the foundation for Satoshi's desired next step vision: a permissionless, decentralized, and trustless monetary system of community-driven or ‘P2P social currencies’ built on bitcoin.
3. Synthesis
After returning to the roots and conducting a comprehensive analysis of the insights Satoshi shared over a couple of years of public interactions, we can synthesize and understand the reasoning and meaning behind bitcoin's monetary design, which is anchored to a long-term vision and conceived as a foundational step—a form of base-money, a fundamental digital commodity for the world. Bitcoin was designed to be the hardest form of neutral money ever created: not centrally issued, scarcer than gold, surpassing previous commodities in “moneyness”, and providing superior self-sovereign control and portability compared to paper cash, thanks to its trustless, decentralized digital nature. This is why it's described as a ‘Peer-to-Peer Electronic Cash System’.
Although the full technical explanation goes beyond the scope of this content, it was designed not just from a monetary standpoint, but also with a distributed network optimized for the low-frequency transfers required for this role, rather than for the frequent payments needed for a circulating currency.
In this way, Bitcoin would pave the way for what Satoshi referred to as the next step: programmable community currencies built on its foundational role as base-money, enabling non-geographic communities to experiment with new economic paradigms. This would embody Satoshi's vision of decentralized ‘dynamic smart money’ to life—autonomous currencies, with the supply self-regulated without human intervention, and programmed to adapt elastically to ‘the real world value of things’. This setup would balance purchasing power within and across communities, stabilizing foreign exchange rates as a natural outcome. And all of this unfolds while keeping Bitcoin intact, sustained by a trustless, distributed system free from power abuses and censorship.
Bitcoin will fulfill its monetary role as designed, serving as a good hedge and store of “foreign exchange value”, always dependent on at least one foreign currency that maintains a more balanced purchasing power as a medium of exchange in its economy. This will hold true as long as its demand ratio relative to foreign currencies or assets remains higher than its stock-to-flow ratio21, which ratio should account not just for newly mined bitcoin units but also for the circulating bitcoins changing hands.
Share The Hard Money Project so others can learn about these critical topics for our times and join this initiative in development.Nakamoto, S. 2008. Bitcoin: A Peer-to-Peer Electronic Cash System. bitcoin.org/bitcoin.pdf.
Representative money is a type of currency with no intrinsic value of its own but represents a claim on a commodity or reserve asset that can be redeemed on demand for a fixed quantity of that asset. Historically, it was typically backed by a physical good, such as gold or silver, stored by the issuer.
A blockchain is a type of distributed ledger technology that records the state of the ledger, altered by transactions over time, in a sequential manner with cryptographically secured and immutable blocks across a network of computers.
Jianzhi Sengcan (died 606 CE) was the third patriarch of Chinese Chan (Zen) Buddhism. He is traditionally credited with composing the “Xinxin Ming” (Faith in Mind), a seminal poem that explores the principles of non-duality and the essence of the mind. The line “To return to the root is to find the meaning” reflects the Chan emphasis on looking beyond superficial appearances to grasp the fundamental nature of reality.
Nakamoto, Satoshi. Re: [p2p-research] Bitcoin Open Source Implementation of P2P. Email, February 13, 2009. Satoshi's original: diyhpl.us/~bryan/irc/bitcoin-satoshi/email-p2presearch-2009-02-13-023120.txt
Base money is the fundamental asset within a monetary system, universally recognized and accepted as the ultimate settlement layer and redeemable asset of value. It is the anchor upon which all other forms of currency and credit derive their stability and liquidity.
Nakamoto, Satoshi. Bitcoin Open Source Implementation of P2P Currency. P2P Foundation, February 18, 2009. p2pfoundation.ning.com/xn/detail/2003008:Comment:9562
Nakamoto, Satoshi. Bitcoin Open Source Implementation of P2P Currency. P2P Foundation, February 15, 2009. p2pfoundation.ning.com/xn/detail/2003008:Comment:9493
In this message, Satoshi alludes to the mission that stablecoins would later fulfill, as digital currencies pegged to a sovereign currency.
Malmi, Martti. Satoshi - Sirius Emails 2009-2011. GitHub Pages. mmalmi.github.io/satoshi/
Nakamoto, Satoshi. Bitcoin P2P E-Cash Paper. Email to the Cryptography Mailing List, November 8, 2008. metzdowd.com/pipermail/cryptography/2008-November/014831.html
Malmi, Martti. Satoshi - Sirius Emails 2009-2011. GitHub Pages. mmalmi.github.io/satoshi/
Nakamoto, Satoshi. [p2p-research] Bitcoin P2P e-currency v0.1 released. Email to the P2P Research Mailing List, January 13, 2009. diyhpl.us/~bryan/irc/bitcoin-satoshi/email-p2presearch-2009-02-13-135615.txt
Nakamoto, Satoshi. Bitcoin v0.1 Released. Email to the Cryptography Mailing List, January 16, 2009. metzdowd.com/pipermail/cryptography/2009-January/015014.html
Nakamoto, Satoshi. Re: BTC Vulnerability? (Massive Attack against BTC system. Is it really?). BitcoinTalk, July 9, 2010. https://bitcointalk.org/index.php?topic=242.msg2078#msg2078
Malmi, Martti. Satoshi - Sirius Emails 2009-2011. GitHub Pages. mmalmi.github.io/satoshi/
Mises, Ludwig von. 1912. The Theory of Money and Credit.
Although it's beyond the scope of this article, there is a narrow but important debate about Bitcoin's non-monetary utility as an infrastructure that brings positive externalities to the world.
Nakamoto, Satoshi. Re: Bitcoin does NOT violate Mises' Regression Theorem. BitcoinTalk, August 27, 2010. bitcointalk.org/index.php?topic=583.msg11405#msg11405
Nakamoto, Satoshi. Re: Bitcoins are most like shares of common stock. BitcoinTalk, August 27, 2010. bitcointalk.org/index.php?topic=845.msg11403#msg11403
Moneyness refers to how well an asset performs the essential functions of money—serving as a medium of exchange, a unit of account, and a store of value—while also possessing key characteristics of sound money like scarcity, durability, divisibility, portability, fungibility, and resistance to censorship. Bitcoin surpasses gold and previous hard forms of money because of its pre-programmed scarcity, unmatched portability, and decentralized structure, providing trustless security and global accessibility due to its digital nature.
The stock-to-flow ratio of bitcoin is a measure of its scarcity, calculated by dividing the total supply of bitcoin (stock) by the periodic issuance of new bitcoins (flow). In this context, “flow” also would need to include the circulation or movement of already existing bitcoins, reflecting both newly mined bitcoins and the transaction activity of existing ‘sats’ within the network. A higher stock-to-flow ratio indicates greater scarcity and is often associated with an asset being used more as a store of value rather than for frequent transactions.