The ancient coins are excellent in point of standard; they are assuredly the best of all moneys; they alone are well struck and give a pure ring; everywhere they obtain currency, both in Greece and in strange lands; yet we make no use of them and prefer those bad copper pieces quite recently issued and so wretchedly struck. ~ Frogs by Aristophanes

Around 400 BC, Sparta captured silver mines controlled by Athens and released the slaves. This caused a shortage of silver that forced Athens to issue new bronze coins with a thin plating of silver.

The hoi polloi, noticing the difference, kept the older silver coins and used the mostly bronze coins for every day expenditures. Weighing one coin in each hand, the baker, buying barley from the farmer, chooses to give the lighter one. Before long, the inflated coins became worthless which nobody wanted.

Gresham’s law is a monetary principle stating that “bad money drives out good” — Encyclopedia Brittanica

According to this principle, people will want to use the “bad money” for every day expenses, and keep the “good money” under their mattress. Thus, the “good money” goes out of circulation leaving virtually only “bad money”.

The baker, during one of the many the inflation crises in ancient Greece, kept the “better” coins, and paid with the “worse” coins. The “better” coins then were kept out of circulation.

Gresham’s law is typically used to describe moneys that have the same nominal value but a different commodity value. Take another example: given two coins in circulation whose face value is $1, but one is 80% silver and the other is 20% silver, which one would you hand to the shop keeper?

The point of the law in this context is that people, when choosing between spending two types of money, will want to let go of money that is of less value to them. Loosening the usage of Gresham’s law slightly, you can draw the line towards people wanting to let go of money that is depreciating in value quicker than the other.

Although this principle seems to pertain to metal coins, I think that the effect that is seen in Gresham’s law can be applied to the world of cryptocurrencies.

“No one wants to spend [bitcoin] [to pay for a meal]”, concluded the person I was talking to, who offered a service that allowed restaurants and stores to be paid accept bitcoin.

No one wants to spend [bitcoin] [to pay for a meal]

I had been able to pay for two things with bitcoins: my coffee and a meal. I had not been able to find more stores over the years of checking up on this service.

In spending those bitcoins, it seems the geeky side of me was in driving — I wanted to spend them to encourage the service and the businesses accepting them. However, the non-geeky part of me didn’t feel like spending it. I wanted to keep them because bitcoin has, since its inception, on average increased in value at a about 150% per year. On the other hand, the Pesos in my wallet were decreasing in value at about 3% per year. Even if were the case that bitcoin had not risen in value compared to the Peso, if were both stable enough and degraded slower than 3% per year, I would feel more comfortable keeping more of my money in that form.

The Singularity

Singularity is most popularly known as the point in which AI advances will reach a point where there will be runaway cycle of improvement upon itself. As AI improves itself, it will learn how to become better at improving itself, thus causing the explosion of intelligence.

With cryptocurrencies, I define the singularity to be the point where the cryptocurrency becomes as stable against the US Dollar.