Never Spend Your Bitcoin, Only Send It. (I’ll explain later)
There comes a time in your journey down the Bitcoin rabbit hole when you realize that not all monetary assets that you hold are of equal value. I, for one, live in Colombia: while the Colombian Peso isn’t the worst currency in Latin America, it has lost 50% of its purchasing power in dollar terms since I arrived in 2013. The exchange rate to the USD was about 1,800 COP / USD and now floats around 3,900 COP/USD. Therefore, when it comes time to spend one currency over the other, I have the easy choice of spending my Colombian Pesos over the dollars I hold. The “smart” decision, therefore, is to spend the currency which loses its value faster. In economics, this is called Gresham’s Law.
“In economics, Gresham’s law is a monetary principle stating that “bad money drives out good”. For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation”
-Wikipedia
The “bad” money is spent because it doesn’t hold its value in the long term as well as the “good” money. The “good” money is hoarded and stuffed under mattresses (or stored on USB drives as we see with Bitcoin). The comparison of the dollar vs the Colombian peso is easy to see on a multi-year time scale – don’t hold your pesos!
If we take that analysis a step further and extend this to the world’s first global, decentralized, digital monetary asset, Bitcoin, the US Dollar, and even more so the Colombian Peso, starts looking like the Venezualan Bolivar or the German Mark post-WWI – a slip n’ slide to hell.
BTC / USD 2015 – Present
The Lesson
Gresham’s Law isn’t some obscure law that is only put into practice by “smart” investors or economists; it’s as much a law of nature as gravity is. Venezuelans hoard dollars and spend their Bolivares, and it’s easy to see why. Bitcoiners spend the other currencies they hold and hoard Bitcoin.
DON’T SPEND YOUR BITCOIN: for now at least. Many of our Lightning Tutors in Latin America are saving in Bitcoin. Many were Bitcoiners before they started tutoring and already understood that though. The new tutors who begin to understand Bitcoin by holding it themselves quickly learn this lesson; it’s not hard to understand why it needs to be held long-term: it’s scarce and it’s only getting scarcer as each day passes. Scarcity and adoption, both of which are increasing, drive Bitcoin’s increasing purchasing power. We at Speakable hope to bring this amazing savings tool to more Spanish teachers in the future. Finally, on to the practical side of this article.
How can we give people Bitcoin without spending our own?
- In the US or El Salvador
If you’re in the United States (or El Salvador at the moment) you’re in luck; there’s an app for that called Strike! Strike, a company founded by Chicago native Jack Mallers, discovered the magic sauce: hook your bank account directly to the Bitcoin network (more precisely the Lightning Bitcoin Network). This allows you to send the dollars from your bank account as a bitcoin transaction. You spend your dollars, they receive Bitcoin. If you’re sending it to another Strike user, they’ll receive it as dollars in their app – just like the cash app or PayPal. This seemingly simple integration has taken the world by storm – now a Strike user in the United States can send dollars to El Salvador instantaneously for free; they may receive it as Bitcoin or dollars – their choice.
- Everywhere Else
Strike is planning on going global soon. Before you know it, Latin America, Asia, and Europe will all have access to it or another app that does the same thing. For the time being though, if you do need to spend a bit of Bitcoin here or there, here’s what I recommend.
- Purchase the amount you need to spend from a local bitcoin exchange. Local Bitcoins is global, but see if you can buy some locally on an exchange with a credit or debit card – whichever is cheaper.
- Send the purchased amount directly to the user from the exchange wallet. This will help reduce the number of transactions you’ll have to go through. Not really ideal but better than taking from your own hoard!
Learn More About Sending and Receiving Bitcoin
Summary
- “Bad” money will chase out “good” money – that’s why we don’t see people spending their bitcoin much.
- “Bad” money loses value quicker than “good” money.
- Colombian Pesos < Dollars < Bitcoin – its all relative. Hold the best money long-term; spend the worst money ASAP.
- Don’t spend your Bitcoin! If you need to send some either use the Strike app or purchase the amount you need to send only.
Sayonara Language Learners!
Links
Strike App: https://strike.me/
LocalBitcoin: https://localbitcoins.com/