I can’t understand crypto without getting my head around what money is, especially as it relates to inflation. Humans invented money because it was the most efficient way of avoiding the difficulties of barter. Money is a token that represents an agreed value that can be transferred in exchange for anything else of value. That part is easy, the problem is what to use as a token. Humans have tried beads, shells, gold and silver among others.

Gold has been used for ages, probably because it doesn’t tarnish and is difficult to mine. Then humans found out that they could issue paper token representing the gold. This was clever, making it easy to transfer value until it was found that the bank could issue more money than it had gold stored, and then to issue notes that had no gold at all to back them up.

That was my attempt to simplify the issue of currency and to show that it is based on nothing other than the belief that it has value. The real problem comes with the fact that the people who issue the currency can keep on issuing it without having anything of value to back it up.

The printing of new currency creates inflation because the amount of production available is the same and the excess money creates increased prices. Increased prices = inflation.

Bitcoin has a limited supply, with a computer program keeping the new coin production at a fixed level. The inability to increase Bitcoin’s supply means that it is immune to inflation and as such is a store of value.

From my point of view, fiat currencies (from governments or central banks) are obsolete. Today 1 Bitcoin is worth over $42,000.