Bitcoin introduces the world to the Cantillon Effect 2.0, often known as the Nakamoto Effect. Those who live closer to the truth may receive value-creating benefits in a Bitcoin world, rather than being rewarded for privilege, status, or geography.
The question of why we need Bitcoin (BTC) is widespread these days, but most people’s answers leave them shaking their heads and declaring that it’s either a Ponzi scheme or money for criminals. This conclusion does not describe how Bitcoin has the potential to address the systemic inequity and corruption that plagues our current monetary system.
Miners who contribute to the security of the Bitcoin network are rewarded with new Bitcoins and fees based on the level of protection they provide, known as the Nakamoto effect. In contrast, the Cantillon effect, a long-forgotten classic theory on the impact of the distribution of money on individual wealth, is one of the injustices of our current society.
Our modern monetary system, which relies on generating money primarily through debt issued by banks with interest, transfers wealth from the middle upwards, resulting in an unstable monetary system and a society in which “the future doesn’t matter”. “
Between 1970 and 2010, the International Monetary Fund reported 425 systemic banking, monetary and debt crises, an average of 10 each year. Monopoly state currency is a fragile and unequal system, whereas countries with many currencies have historically experienced greater stability and equality.
The answer to many of these issues regarding state control of money can be found in cryptocurrencies, a new type of non-state money. After the Great Financial Crisis of 2007-08, the first and most important of these, Bitcoin, emerged, with the system going live in January 2009.
This article explains the Nakamoto and Cantillon effects, and whether Bitcoin is the antidote to the Cantillon effect.
Please read our guide: Who is Satoshi Nakamoto: The Creator of Bitcoin, to learn more about the founder of the world’s first decentralized cryptocurrency.