What Is Sound Money?

The phrase sounds old-fashioned. Like something from a gold standard textbook.

But the idea behind it is simple, practical, and more relevant today than it has been in decades.

Sound money is money that reliably holds its value over time. Money that stores the fruits of your labour without silently eroding. Money whose supply cannot be manipulated by those in power.

Economists who believe in sound money argue that when money holds its value, people are incentivised to save and invest productively. When money constantly loses value — as modern currencies do — people are pushed to spend quickly, chase assets, and take on debt just to stay in place. The system punishes patience and rewards leverage.

Gold was the closest thing to sound money for most of human history. Its supply grew slowly and predictably. No government could conjure more of it overnight. Your savings in gold held their value across generations.

But gold had practical limitations — hard to divide, hard to transport, easy to confiscate.

Bitcoin takes the core property of gold — a supply that no human authority can expand — and adds the properties of digital cash: instantly transferable, perfectly divisible, impossible to confiscate from someone who holds it properly.

Austrían economist Ludwig von Mises described sound money as a tool against the expansion of government power. A money that governments cannot inflate is a constraint on their ability to spend beyond their means.

Bitcoin is the first sound money that is also digital.

Tomorrow: let’s run Bitcoin through the six-property checklist from Day 6. How does it score?

— The Daily Bit