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# Why Do We Think Money Is Real?

It is actually a constantly shifting network of agreements to trust others

Maria Bustillos

Maria Bustillos, editor of Ethereum’s culturemag, Popula, asks us to think about just what money is, before we make up our minds about Bitcoin.

In fact, almost all of our U.S. dollars, about 90 percent, are purely abstract — they literally do not exist in any tangible form. James Surowiecki reported in 2012 that “only about 10 percent of the U.S. money supply — about $1 trillion of the roughly$10 trillion total — exists in the form of paper cash and coins.” (The number now appears to be about $1.5 trillion out of$13.7 trillion.) There is nothing stopping our banking system from creating more dollars whenever the mood strikes. Of the $13.7 trillion in the M2 money supply as of October 2017,$13.5 trillion was created after 1959—or, to put it another way, M2 has expanded by almost 50 times … One evident result of this wantonness is inflation: The purchasing power of \$1 in 1959 is now a little under 12 cents.

But it’s more than that:

Money is only a shifting network of agreements made in and on behalf of the hive, and that’s all it has ever been—a fragile thread in a web of human trust. Maria Bustillos, “You Don’t Understand Bitcoin Because You Think Money Is Real” at Medium

That’s exactly right. If we accepted payment only in the goods we need to live, we would not need to trust anyone after that. But every time we accept payment in money, we are trusting hundreds of millions of people to do the things they and we expect them to. That, of course, is why, when governments fall, their money becomes worthless.

Incidentally, the supply of bitcoins is theoretically limited to 21 million:

Like gold, Bitcoin cannot simply be created arbitrarily. Gold must be mined out of the ground, and Bitcoin must be mined via digital means. Linked with this process is the stipulation set forth by the founders of Bitcoin that, like gold, it have a limited and finite supply. In fact, there are only 21 million Bitcoins that can be mined in total. Once miners have unlocked this many Bitcoins, the planet’s supply will essentially be tapped out, unless Bitcoin’s protocol is changed to allow for a larger supply. Nathan Reiff , “What Happens to Bitcoin After All 21 Million are Mined?” at Investopedia

We are currently into the 17 millions. The fixed limit is intended to provide a check on inflation. Time will tell.

Note: In a recent Mind Matters Today podcast, Robert J. Marks interviewed TCU economics student Will Fullerton about the future of blockchain technologies, the technologies that power digital currencies like bitcoin. Then Will returned to explain the workings of the cryptocurrency that started it all in “Bitcoin and the Keys to Cryptocurrency Security”

See also: A wallet you can’t feel? Will Bitcoin change the rituals around money? It’s tempting to assume that cryptocurrencies like Bitcoin will succeed because social media did. But digital doesn’t mean magic. Cryptocurrencies will work if the needs met are more significant to most people than the problems created are.