Saifedean Ammous Keynote Lecture

The bitcoin standard. The decentralised alternative to central banks

The Rafael del Pino Foundation organised, on 2 October 2018, the Magristral Conference "The bitcoin standard. The decentralised alternative to central banks". given by Saifedean Ammous on the occasion of the presentation of his latest book "El patrón Bitcoin" published by Deusto.

Saifedean Ammous is Professor of Economics at the Adnan Kassar School of Business at the American University of Lebanon. After graduating in Mechanical Engineering from the same school in 2003, Ammous continued his education with a postgraduate degree in Development Management from the London School of Economics in 2004, followed by a PhD in Sustainable Development from Columbia University, USA. A specialist in cryptocurrencies, he carries out research and consultancy work for various organisations and is a regular lecturer and trainer in economic management for private sector professionals and senior civil servants.

The financial crisis has left a general feeling of distrust in society. Everything that has to do with the financial world is viewed with suspicion that is not always justified and, in this breeding ground, the so-called cryptocurrencies have been born. With this in mind, professor and economist Saifedean Ammous explains the history of money and explains why the future belongs to Bitcoin, among other cryptocurrencies. If the ills of the financial and monetary system have to do with instability, fragility or the creation of asset bubbles, cryptocurrencies, far from aggravating these widespread criticisms, can help to mitigate them. In the face of interventionism, Bitcoin, thanks to the blockchain technology that underpins it, offers a reliable, secure payment service that will challenge the monetary monopoly of central banks. From precious stones to common currencies, through the gold standard and credit expansion bubbles, the history of money is one of crises and ruptures that seek to be overcome, and in this book, Saifedean Ammous argues why we can believe that the Bitcoin can become the solution to this historical problem.


On 2 October 2018, Saifedean Ammous, expert in cryptocurrencies and author of the book "The bitcoin pattern", gave a lecture at the Fundación del Pino, in which he explained the characteristics and possibilities of this type of currency. Ammous considers bitcoin to be a completely unique form of money. He explained that the problem with most forms of money is that the more it is used, the more its value rises. This creates incentives for more of it to be issued, so that its value is devalued and it can no longer perform the function of a store of value. To avoid this type of situation, attempts have been made to use money that is difficult to produce, such as livestock or metals. Well, bitcoin is the most difficult money to produce. In fact, the amount of bitcoin has been limited to 25 million units and it is not possible to go beyond that and generate more. This is what makes bitcoin unique as a store of value, because there is no way to increase its supply. At the same time, the more people try to produce bitcoins, the harder and more expensive it becomes to do so. As a result, and also because it is based on blockchain technology, the bitcoin network becomes more secure because there are more processes in place. When the demand for bitcoins increases, their value increases, but their production does not increase as much because it is increasingly difficult to obtain one, which makes them more secure. Its security also derives from the fact that it is very difficult to attack because there is no single point of failure. So secure is it that, so far, no one has been able to confirm a fraudulent transaction with bitcoin because it is a hard currency, difficult to produce, globally available, voluntarily used and freely traded and valued in the market. When considering bitcoin's role as a store of value, the first thing to bear in mind is that it is currently an asset that is not strictly liquid, as bitcoin's transaction capacity (which is 500,000 transactions per day) has reached its limit and the application of a technology called SegWit (Segregated Witness) capable of quadrupling bitcoin's transaction capacity is needed. The current transaction limit is the reason why transaction costs have been rising significantly over the last few years. Bitcoin, however, protects against inflation because no more than 25 million units can be created. As a store of value, bitcoin therefore makes it possible to transfer value into the future. Bitcoin is an alternative, free and decentralised market, as opposed to the centralisation represented by central banks or gold, because most transactions do not take place on the bitcoin blockchain, but take place outside it at payment and exchange processors and on websites that use this cryptocurrency. One of the main benefits of bitcoin stems from the fact that money loses value over time, which encourages short-termism and consumerism. Hard money, such as bitcoin, on the other hand, does the opposite: it stimulates savings and capital accumulation, which leads to higher productivity and higher standards of living and well-being. In other words, with money as we know it, people prefer today's consumption to future consumption because that money loses value. With bitcoin, people would still spend today, but they would do so less frivolously, and it would stimulate savings. To try to illustrate this characteristic of bitcoin, Ammous gave an example related to the history of painting. According to him, a cryptocurrency would be like the Sistine Chapel: since it took Michelangelo four years to paint it, such a work is very rare and difficult to reproduce. On the other hand, soft money, the kind we use today, would be like a Mark Rothko painting, which takes twenty minutes to paint. The former makes works such as the Sistine Chapel very scarce; the latter means that paintings by Rothko and his imitators abound. As cryptocurrencies are not physical but computer-based, the territorial monopoly of central banks counts for little. Moreover, precisely because bitcoin is computer money, the government cannot confiscate it. That is why Venezuelans buy bitcoin; they can take it out of the country without the Maduro government being able to do anything about it. Ultimately, cryptocurrencies mean a return to limited government. Their use increases the power of families and local communities, while the role of states is weakened. It may also be the solution to the economic cycle because no more bitcoin can be created. And because it cannot be created, it cannot be manipulated. This manipulation of money is the cause of economic cycles, inflation and recessions, according to the Austrian school of economics' interpretation of the cycle. In the same way, the exorbitant privilege of the dollar would disappear, because the United States would not be able to monetise its fiscal problems, which then belong to the whole world.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.