From 6fbb12fbc10e76ae5a42e29b859d73fb3fb1b1c1 Mon Sep 17 00:00:00 2001
From: Pablo Martin <pablo.martin@superhog.com>
Date: Mon, 26 May 2025 17:33:41 +0200
Subject: [PATCH] gresham's article

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             <h2 id="writings-header">Writings</h2>
             <p>Sometimes I like to jot down ideas and drop them here.</p>
             <ul>
+                <li>
+                    <a href="writings/gresham-law-has-nothing-to-do-with-bitcoin.html" target="_blank"
+                        rel="noopener noreferrer">Gresham's Law has nothing to do with Bitcoin</a>
+                </li>
                 <li>
                     <a href="writings/my-tips-and-tricks-when-using-postgres-as-a-dwh.html" target="_blank"
                         rel="noopener noreferrer">My tips and tricks when
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+<!DOCTYPE html>
+<html>
+  <head>
+    <title>Pablo here</title>
+    <meta charset="utf-8" />
+    <meta viewport="width=device-width, initial-scale=1" />
+    <link rel="stylesheet" href="../styles.css" />
+  </head>
+
+  <body>
+    <main>
+      <h1>Hi, Pablo here</h1>
+      <p><a href="../index.html">back to home</a></p>
+      <hr />
+      <section>
+        <h2>Gresham's Law has nothing to do with Bitcoin</h2>
+        <p>
+          This is going to be a thorough explanation for a simple thing, but we
+          will take it slow since this topic somehow causes loads of confusion.
+        </p>
+        <p>
+          Okay, so there are a lot of people in Bitcoin circles who talk about
+          <a
+            href="https://en.wikipedia.org/wiki/Gresham%27s_law"
+            target="_blank"
+            rel="noopener noreferrer"
+            >Gresham's Law</a
+          >. They often say, “Gresham's Law states that bad money drives out
+          good money”, then relate it to Bitcoin and the USD, and finally
+          proceed to reason all sort of of things on top of that. But here's
+          some very much needed clarification: Gresham's law has nothing to do
+          with Bitcoin's relationship to the USD. In fact, it actually has
+          nothing to do Bitcoin, or with the current USD for that matter.
+        </p>
+
+        <p>
+          Gresham's Law is relevant to a very specific type of moneteray system:
+          when we use coins that contained precious metals (spoiler: we don't
+          live in that period of history anymore). The law says that bad money
+          drives out good money, but what a lot of Bitcoiners seem to miss is
+          the actual meaning of “good” and “bad” in this context. People tend to
+          interpret “good” and “bad” as meaning “hard” and easy money, so they
+          reason something like: “Because Bitcoin is harder than the USD,
+          Gresham's law applies here.” But that is not what Gresham's law is
+          about at all.
+        </p>
+
+        <p>
+          In the context of Gresham's law, “good” and “bad” refer to face value
+          versus commodity value.That doesn't ring a bell? Let me explain:
+        </p>
+
+        <p>
+          Imagine a magic land where there is only one type of coin. There's no
+          other money — just this one coin. The coin states on itself that it
+          contains one gram of gold, and right now, it really does contain one
+          gram of gold. Everyone uses it, and everyone is happy. There's no
+          “bad” money, no “good” money — it's all nice and simple.
+        </p>
+
+        <p>Now, let's spice it up a bit.</p>
+
+        <p>
+          After some time, a cheeky bastard (typically, a king) comes along and
+          starts making coins that look exactly like the original coins. I'll
+          call these the bad coins. The original coins will be the good coins.
+          Both types of coins say on them “one gram of gold,” but the bad coins
+          only have half a gram of gold actually in them (hence why they are
+          bad).
+        </p>
+
+        <p>
+          So, to recap:<br />
+          - Good coins: one gram of gold on the coin, and actually one gram of
+          gold inside.<br />
+          - Bad coins: one gram of gold on the coin, but only 0.5 grams of gold
+          inside.
+        </p>
+
+        <p>This is where Gresham's Law applies.</p>
+
+        <p>
+          People in this coiny fantasy land are not stupid — they know that the
+          gold content is what matters. At some point, someone will realize the
+          bad coins don't have as much gold as they claim and will develop a
+          preference for the good ones. So, if I'm John the Blacksmith and I
+          want to buy some iron, and I have a stash of coins — some good, some
+          bad — I would rather keep the good coins and spend the bad coins. Why?
+          Because I want to keep as much gold as possible, of course.
+        </p>
+
+        <p>
+          What happens then is that people try to get rid of the bad coins and
+          hold on to the good coins. They exploit the confusion created by the
+          fact that all coins have the same face value (it says “one gram” on
+          all coins, so everyone assumes they're worth the same), even though
+          the actual commodity value (the gold inside) differs.<a
+            href="#footnote-1"
+            >[1]</a
+          >
+        </p>
+
+        <p>That is the proper explanation of Gresham's law.</p>
+
+        <p>
+          Now, back to the original point: what are the face value and commodity
+          value of Bitcoin?
+        </p>
+
+        <p>
+          That's makes no sense. Bitcoin is not a physical coin with metal in
+          it. It has no concept of face and commodity value. And neither is the
+          USD nowadays. Therefore, Gresham's law has absolutely nothing to do
+          with Bitcoin, the USD and any preferences the world might develop
+          between the two.
+        </p>
+
+        <p>
+          Hopefully, this explanation helps make things clear. From now on, if
+          you want to keep your public image intact, please refrain from
+          invoking Gresham's law when discussing Bitcoin and USD — because it
+          shows you don't know what Gresham's Law is actually about. Don't feel
+          to bad if it happened to you though: it can happen even to
+          <a
+            href="https://river.com/learn/terms/g/greshams-law/"
+            target="_blank"
+            rel="noopener noreferrer"
+            >massive exchanges with a great reputation.</a
+          >
+        </p>
+
+        <p id="footnote-1" class="footnote">
+          <em
+            >[1] Not relevant to the point of this post, but it's worth noting
+            that Gresham's Law situation is not always sure to happen in the
+            described scenario. If the difference between the good and bad coins
+            is massive, and no force opposes it, the market might jump into
+            <a
+              href="https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gresham's_law_(Thiers'_law)"
+              target="_blank"
+              rel="noopener noreferrer"
+              >Thier's Law</a
+            >
+            instead.</em
+          >
+        </p>
+        <hr />
+        <p><a href="../index.html">back to home</a></p>
+      </section>
+    </main>
+  </body>
+</html>
