THIS is how money works

Okay, reply guys on Facebook. This is how money works. I should not have to explain this. I’ve explained it on 500 different videos, but here we go again. Fresh for 2026, fresh for June 7 of 2026. Let’s talk about how money works. Okay, so when an asset, any asset is being monetized, meaning becoming money or becoming used as money, it goes through four stages. You can go back and look at, you know, shells, sea shells, glass beads, salt, wampom, gold, silver, even the US dollar. We’re going to talk about each of those and how they map to the four stages. Okay. When something is becoming money, it starts as a commodity. Uh, or sorry, it’s, let me back up. It starts as a collectible. Sorry, wrong C word there. It starts as a collectible. So, the very first time gold was used as money, it started as a collectible. People realized there was this yellow rock. It was relatively rare. People like collecting this yellow rock because it was relatively rare. People tend to collect things that are relatively rare. Nobody collects things that are plentiful. They only collect things that are rare. Okay? So everything starts out as a collectible. After enough people are collecting it, people want it because it is a collectible and people realize that you can use collectibles as a store of value. So the second stage which are the three stages of money are a store of value. Things that are money typically long-term become a store of value, a medium of exchange and a unit of account. But if you’re in the early stages of something becoming monetized, there is a fourth stage that happens before those three which is it is it is a collectible. So, Bitcoin started as as a collectible and people were collecting it because it had perfect monetary properties and they hypothesized that something with perfect monetary properties would become a money. Now, why did Bitcoin have perfect monetary properties? Because it was designed to be money and therefore it was designed with literal perfect monetary properties. But let’s go back to gold first. Okay, so gold is a collectible. Enough people want gold and start trading gold among each other that it becomes a store of value. people actually start holding on to gold because it is a store of value because they can use it later to trade for things. So even if they don’t want gold now they can trade it something for gold and then later on in the future they can trade it uh for something. So in that interim time it is a store of value when enough people are using the same thing as a store of value. It becomes a medium of exchange because people are saying, “Hey, rather than trade gold into eggs and then eggs for something else and then back into eggs and then back into gold. Let’s cut out the middleman. Whatever it is that we’re using in between, let’s cut that out and we’ll just use straight up gold instead.” So, when everybody is using the same thing as a store of value, it becomes a medium of exchange. And eventually, when everybody is using the same thing as a medium of exchange, it becomes a unit of account. A unit of account means people actually price things into it in it. It means accounting is done in that unit of account. It means you could walk into the grocery store and you see prices set in that uh in that unit. Okay. So, Bitcoin was a collectible for the initial 18 months of its life. For the first 18 months, Bitcoin did not have a price. There was no US dollar price until about July of 2010. So from January of 2009 until July of 2010, you really don’t have a price for Bitcoin. Not that nobody bought it or sold it, but there was really no price that was reflected on exchanges. For example, if you go to investing.com and you pull price history for Bitcoin all the way back to the beginning, the price history runs out in July of 2010 because that’s the first point at which there was actually exchanges and an actual price. there was enough buying and selling of Bitcoin that it had a price. Earlier than that uh was the first time it was actually used as a medium of exchange even though it’s not commonly used as a medium of exchange even now which was when llohine bought two Papa John’s pizzas with Bitcoin which was the first real world transaction for Bitcoin for something other than another currency. Okay, so four stages. Bitcoin was a collectible for four years. As soon as Bitcoin had a price in July of 2010 or a few months before that, depending on how you measure it, but as soon as it had a price roughly 18 months in, it was no longer a collectible. And now we’re only talking about three things. Collectible is off the table. Bitcoin is way too expensive now. Nobody uses Bitcoin as a collectible. Bitcoin is now in stage one of money, which is as a store of value. In the store of value stage of Bitcoin, every most people are going to convert Bitcoin to some other currency before spending it. That doesn’t mean you have to. You can you can use Bitcoin anywhere where there’s a Square Terminal which is made by the company behind Cash App. Uh you can use Bitcoin as stake and shake. You can use Bitcoin a lot of places. But most people are going to convert Bitcoin into a local currency before they use it. Whatever that is. It could be ruples or you know rambbei. I could be anything pesos, US dollars, whatever. So in the store of value stage, most people are converting currency or you are converting Bitcoin into some other currency before they spend. It doesn’t mean you have to, but it only makes sense to use Bitcoin as a medium of exchange when enough other people are using it as a as a store of value that it’s time to cut out the middleman. So most of the things I buy when I go when I walk into a convenience store and I buy gummy bears, most of the time the owner of that store is not trying to stack Bitcoin. If they were, they would allow me to pay in Bitcoin with a Square Terminal, for example. But most of the time, since 95% of the world owns zero Bitcoin, they’re not trying to stack Bitcoin. Their Bitcoin is still a new technology. And so I’m using a Coinbase debit card which is allowing them to receive US dollars even though it costs me Bitcoin. And the Visa network and Coinbase handle that conversion in the background. And when I spend Bitcoin with a Coinbase debit card in other countries, it’s converting my Bitcoin into again euros, pesos, um, uh, you know, name name your foreign currency, you know, uh, one, yen, euros, whatever. It’s doing that conversion in the background. So um in the in the store of value stage of a currency it is primarily being converted into another currency and it takes a long time typically at least a decade or two from when something is being used as a medium of exchange stage two of money which is stage four of collectible store of value medium of exchange unit of account. It takes a long time in the second stage of money, the third stage overall, but the second stage of money, which is store of which is a medium of exchange. It takes a long time to get to unit of account where people are actually pricing things in Bitcoin. So, a lot of the reply guys, which are basically every time I post something on Tw on, you know, Facebook or Twitter or anywhere, all the reply guys have to weigh in. Of course, they do zero effort. A lot of them don’t even bother to watch my videos. They just, you know, they look at the title and they can’t resist weighing in. But a lot of the reply guys are confused about that sequence and so they say it can’t be money because that you you know because I can’t use it in my local gas station. It’s like okay we’re not at the medium of exchange stage of monetary adoption of Bitcoin. We’re primarily mostly in the store of value. In the store of value stage most people are going to convert Bitcoin to some other currency. It doesn’t have to be US dollars. People like in the US are like stuck on US dollars. They’re like, “Bitcoin doesn’t have any value because you have to convert it to to US dollars.” It’s like, “No, who’s never traveled the world, who can’t not whose brain cannot contemplate the fact that there are60 currencies in the world. No, Bitcoin is not priced in US dollars. It’s not tied to US dollars. It just so happens to be you live in the US and you use US dollars. If you lived in another country, you’d convert it to that country’s currency. If you live in Thailand, you’re going to convert Bitcoin into the Thai bot. that Thai bought before you spend it. And so nobody in Thailand is like, “Bitcoin is tied to the US dollar.” No, it’s not, It’s It’s priced in every currency in the world. You just happen to live in America. And if you’ve never traveled anywhere, you don’t realize that the world uses other currencies other than the US dollar. Bitcoin is priced in every currency worldwide. You can convert in and out of Bitcoin to any currency worldwide at at floating exchange rates around the world. So again, store of value, medium of exchange, unit of account. Bitcoin is primarily in the first stage, which is a store of value. In that first stage, the the value you store in Bitcoin for the long term is so that you can spend it later. But you may not spend it in the form of Bitcoin. You may spend it by converting it into another currency before you spend that currency. So what that is always the case when something is a store of value. You don’t buy stuff with a piece of fine art. You don’t buy stuff with gold and silver. You don’t buy stuff with, you know, strategic drawing rights from the, you know, Bank of International settlements. Like, none of these things are mediums of exchange. You convert them into a local currency before you spend them. So, the fact that Bitcoin is in the store of value stage does not mean it’s not on its way to medium of exchange. I use Bitcoin as a medium of exchange all the time, but I’m also an advanced user. I have a Coinbase debit card. I always pay with Bitcoin anywhere somebody accepts it. So, like my radar is up and I’m constantly using Bitcoin in the real world to buy real world stuff. My whole world runs on Bitcoin. All the people I pay or virtually all of the people I pay in my nonprofit ecosystem, I pay with Bitcoin. The vast majority of donations I make to not to other nonprofit organizations are in Bitcoin. Like my whole world runs on Bitcoin. But yeah, when I walk into a gas station, I pay with a Coinbased debit card. They receive US dollars unless they choose to to receive Bitcoin by advertising the ability to take Bitcoin. So again, a lot of these reply guys are confused by that. They don’t understand that we’re in the store of value phase of Bitcoin. We are in the early stages of the medium of exchange aspect of Bitcoin. And that that paradigm understanding and we’re not in the medium uh a unit of account stage. We’re a long long way from medium of uh store value, medium of exchange, unit of account. I should have said unit of account. We are a long way from Bitcoin being a a uh unit of account. Almost nobody does their taxes in denominated in Bitcoin. Almost nobody prices things in Bitcoin because again typically you spend a decade or two as uh you know you spend a year or two in the case of Bitcoin 18 months as a collectible. You spend a decade or two as a store of value and we’re 17 years in. So, we’re most of the way through two decades, mostly as a store of value in the early stages of medium of exchange. And you spend at least another decade or two as a medium of exchange before you become a unit of account. You only become a unit of account because everybody’s using Bitcoin for everything. And then people start asking, if everybody’s using Bitcoin for everything, why am I doing my taxes in US dollars? Why am I doing my accounting in US dollars? Why are my prices in US dollars if everybody’s paying in Bitcoin? So they end up pricing in Bitcoin. But again, that’s decades down the road. So I I if if I could if if I could get two things through to all these reply guys on Facebook and Twitter and everywhere else, one would be the video I did and you know an hour ago, which was tell me why your argument why Bitcoin’s going to zero, why that did was not the case in 2012, 2014, 2018, and 2022. That’d be the number one question I’d ask them. But the number two thing I think that would clear up the most confusion is people’s misunderstanding how an asset becomes monetized. Now you might be wondering what happens when an asset is fully monetized. Meaning it is used as money. It is it has gone from being a collect collectible to a store of value medium of exchange unit of account and it’s the universal money of the world. And the answer is that money continues to increase in purchasing power by about 3% per year. Now, you might think, well, but wait, if there are no other currencies, how do you even know it’s going up 3% per year? Because at that point, everything is priced in Bitcoin. And at that point, you can buy about 3% more stuff every year. Now, how is that possible? That is possible because humans get about 3% better at making everything. So, every year we get three 3% better at making corn and soybeans and steel. you know, we get 3% better at digging gold out of the ground, building bridges, building houses. We just get better at everything because humans get better at doing stuff over time. On average, that’s about 3% per year. So even when Bitcoin is fully monetized because there’s a finite supply of 21 million Bitcoin, but there is not a finite supply of things that humans can make on average the purchasing power meaning how much stuff Bitcoin can buy on an annual basis will trend up at about 3% per year. Now different things will be you know maybe your purchasing power of flat screen TVs will go up 20% a year. Maybe your purchasing power of healthcare will go up 2% per year. But on average, it’s about 3% because on average, humans get about 3% better at making everything per year. Even though some things we get a lot better at, some things we get a little bit better at, on average, it’s about 3% per year. So once you understand collectible and then the three stages of money, so four stages total, one is the collectible and then three stages of money, store of value, medium of exchange, unit of account. Once you understand that, then a bunch of the questions and criticisms and critiques people have about Bitcoin all over my Facebook page go away because it’s clear that they’re just misunderstanding the stage we’re in and they’re misunderstanding how people would use Bitcoin. Uh, for example, a guy earlier today who was like, you know, explain to me how Bitcoin’s valuable if you take away the ability to convert it into any other currency. It’s like, okay, we’re in the store of value stage. In the store value stage, you’re supposed to convert it into another currency if the local vendor does not accept Bitcoin. Or if you can’t use a Coinbase debit card or Coinbase credit card, if you don’t have the ability to do real-time conversion like with a Coinbased debit card, then of course, of course, you’re converting Bitcoin into the local currency. That doesn’t mean something’s wrong with Bitcoin. And it means we are in the store of value function of Bitcoin and we have not yet moved fully into the medium of exchange and unit of account functions and unit of account I don’t even care about unit of account because who cares what your accounting is done in uh that’s like way down the road. The biggest problem with money is that it loses value. The biggest problem is the store of value function of money. The second biggest problem of money is the medium of exchange problem. And the third biggest problem is unit of account. So something becomes monetized by solving the biggest problem of money which is that it loses value and then it solves medium of exchange store value. Bitcoin’s just in the late stages actually. I mean it’s still, you know, the vast majority of the world doesn’t own any Bitcoin. So, I guess you could say Bitcoin is still in the early stages of being adopted worldwide as a medium of exch or as a store of value, but it’s in the very early stages of being a medium of exchange and it’s effectively almost non-existent in the stage of being unit of account because again that typically comes multiple decades later. So once you understand that, the whole thing makes a lot more sense and where we are and how people use Bitcoin makes sense on you once you understand how those series of steps fit Together.