IF YOU FIND it hard to imagine how bitcoins could ever replace dollars as the world's primary medium of exchange, consider the bizarre tale of the donut-shaped "rai" stones on the island of Yap. Weighing up to four metric tons and standing up to 12 feet tall, these rocks couldn't be slipped into a wallet, deposited in a bank, or even moved around without enormous effort.
Yet for centuries they served the Yapese people as an effective form of money, because "the high cost of acquiring new stones" made them hard to debase, writes Saifedean Ammous in The Bitcoin Standard: The Decentralized Alternative to Central Banking. The system lasted until the 1870s, when the Irish-American ship captain David O'Keefe managed to overwhelm the island's economy with a new supply of the giant limestone discs.
It's an artful beginning to a book that makes a case for bitcoin as the best form of money ever conceived, largely because its supply is permanently capped at 21 million units. That hard limit means bitcoin can never be devalued, as were the rai stones of Yap and every other historical currency to varying degrees. Thus, it can facilitate long-term planning and investment by businesses and households.
An economist at the Lebanese American University in Beirut, Ammous earned his Ph.D. in sustainable development from Columbia. Curiously, he worked as a teaching assistant under progressive economist Jeffrey Sachs, who has called bitcoin a waste of time and resources that is destined for collapse. Ammous' resume also lists as a reference economist Joseph Stiglitz, who has called for the U.S. to "outlaw" bitcoin.
Though written with clarity and wit, The Bitcoin Standard is not the definitive work I had hoped for: a book that thoroughly counters the best arguments of bitcoin's many detractors. It also lapses periodically into odd rants attributing all of society's alleged cultural failings--from "Miley Cyrus's twerks" to "bland, mass-produced junk food"--to government-issued money, as if financing endless wars and fueling the boom-and-bust cycle weren't enough to support his case.
Yet the book's virtues far outweigh its faults. While the best writings on the topic can be forbidding to readers who lack a technical understanding of how bitcoin functions, Ammous has managed to produce a complex analysis that doesn't require any prerequisite knowledge.
THE BOOK BEGINS by placing bitcoin in the context of other forms of currency. Though gold is resistant to...