📚 ELI-5

FIRE BTC Issue 62 - What kids see that adults ignore about money

Kids see the world differently than adults. They observe things for what they actually are, without years of accumulated explanations layered on top. They haven’t learned to accept things as “just the way it is.”

Take money, for example. My kids recently looked at a one dollar bill and a hundred dollar bill sitting side by side. Same paper. Same texture. Same material. Identical in every physical way except for the numbers printed on them.

“Why is one worth more if they’re exactly the same?” they asked.

It’s the kind of question that exposes something adults have learned to ignore. We’ve accepted the premise so completely that we never question it anymore. But kids see the obvious truth: two pieces of identical paper with different numbers, yet we treat them as fundamentally different in value.

This innocent observation points to something deeper about how money actually works. And it becomes even more relevant when you look at what’s happening in the news right now. When the President of the United States threatens criminal charges against the Chair of the Federal Reserve to pressure him into lowering interest rates, you’re watching adults fight over who gets to decide what those numbers mean.

Kids would just see the absurdity.

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🔍 The truth about all money

So why does that hundred dollar bill give you more purchasing power? The answer is simple and a little weird: because we all agree it does.

There’s no magic in the paper. No “intrinsic value” hiding in the ink or the cotton fibers. The hundred dollar bill isn’t made of anything more valuable than the one dollar bill. The difference is pure collective agreement. We’ve decided—together, as a society—that the number one hundred on a piece of government-issued paper is more valuable than the number one written on an otherwise-identical paper slip.

This is true for all money. Every form of currency that has ever existed derives its monetary value from one thing and one thing alone: collective belief. Bitcoin works the same way. A bitcoin isn’t valuable because it’s made of something special. It’s valuable because millions of people have agreed it is.

Value isn’t intrinsic. It’s subjective. It exists only in the minds of people who believe it does. This might sound unsettling, but it’s the foundation of understanding why some forms of money are better than others—and it’s exactly what we explored in our previous piece on the intrinsic value myth.

The real question isn’t whether money has intrinsic value. The question is: what constraints exist on the thing we’ve collectively agreed to believe in?