To understand The Bitcoin Standard, we have to understand the gold standard. Historically the gold standard uses gold as a store of value and then issues place holders which are insured by the gold in banks or vaults.
It was an excellent way for nations to keep inflation low because it is a straightforward process to print money, and it is tough to mine gold. There is a finite amount of it on earth, so it keeps inflation at bay.
Saifedean Ammous says that "For something to assume a monetary role, it has to be costly to produce. Otherwise, the temptation to make money on the cheap will destroy the wealth of the savers, and destroy the incentive anyone has to save in this medium."
Like gold Bitcoins are hard to produce and will become harder to produce in the future as we get close to a maximum of 21 million coins.
In Saifedean Ammous' book The Bitcoin Standard, he said that "I like to call this the easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased, will destroy the wealth of those who used it as a store of value". One of the significant upsides to Bitcoin is that it much like gold you can't print more and therefore, it is a safe store of value because it can't depreciate due to higher supply.
Bitcoin has been labeled the gold of the 21st century; this is because it is valuable and hard to mine, just like gold. This has been a significant pro for many economists who believe that inflation and unchecked printing of money will ultimately hurt society in the long run.
There are only so many Bitcoins that can be mined. The maximum amount is 21 million, and they become harder and harder to mine as we get closer and closer to that number, much like gold.
The decentralized control of the store of value is also very important. This takes away the power of a government to change its value or make more because they physically can't. In relation to the gold standard, Allen Greenspan said, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."
Many parallels can be drawn here between gold and Bitcoin. When inflation is high, it is hard to justify saving and then reinvesting that money into something because you are losing money as it just sits there.
However, if you were to store U.S. Dollars in Bitcoin, then this would not be an issue because you are insured that the U.S. would not simply make more Bitcoins and you would lose money due to high supply.
The author of The Bitcoin Standard, Saifedean Ammous states that "Bitcoin can be best understood as distributed software that allows for the transfer of value using a currency protected from unexpected inflation without relying on trusted third parties. In other words, Bitcoin automates the functions of a modern central bank and makes them predictable and virtually immutable by programming them into code decentralized among thousands of network members, none of whom can alter the code without the consent of the rest."
The whole idea behind a Bitcoin backed monetary policy is that it is a sounds store of value. "Human civilization flourished in times and places where sound money was widely adopted, while unsound money all too frequently coincided with civilizational decline and societal collapse" - Saifedean Ammous.
Bitcoin is also an insurance policy against reckless spending on the governments part. Let's say that John is saving money to buy his first home. However, the government wants to increase spending drastically. This action would require the printing of more money, and as a result, we would see inflation. Even though John has the same amount of money, it would be worth significantly less, and he would have to save more. However, if Bitcoin backed his money, then this would be a non-issue.
Essentially what is being said here is that with a monetary policy that is backed by Bitcoin, we could see a very prosperous and wealthy future.
Bitcoin Won't Be Used For Day To Day Purchases Or Payments
When most people think of Bitcoin as a form of currency, they imagine using it themselves to buy things like coffee, Lunch, or clothes. However, that is not Bitcoin's strength. Bitcoin is an excellent tool for moving large amounts of money quickly, securely, and cheaply, all without regard for borders.
In the future, we will most likely see Bitcoin as a store for large amounts of money, and it will be used mainly at an institutional level. We will most likely see it being used for clearing and settlement of funds.
The technology would be perfect for a bank to bank transfer in the many millions or hundreds of millions. A bank like JP Morgan Chase could easily send the money for a government bond to a developing country. For example, if they sent $100,000,000, it would clear in about 40 minutes, and the transaction would cost two to four dollars.
In essence, the future of Bitcoin in the economy that it will be used for large transactions mostly on an institutional level that needs to be completed reliably, with a high level of security and speed. It is now easy to see why it has been labeled the gold of the 21st century.
Even though its application may change between now and ten years down the road, it's technology has the chance to make the world a better place.