Success in Time Preference

“The success of most things depends upon knowing how long it will take to succeed”, a favourite quote of mine written by Montesquieu. He is the author who penned The Spirit of Laws, a novel that paved the way for separation of power. The concept of success, as written by Montesquieu, is an important concept to understand when discussing time preference and the success of Bitcoin, because it all relates back to economics. Yes, I said it. Economics. Without an understanding of (Austrian) economics, world affairs, and simple mathematical procedures, how can we even begin to understand the value placed on Bitcoin or time?

Everything has Limits

As a parent, you deal with high or low time preference choices repeatedly throughout the day. As a parent you often will encounter moments of high time preference; the now. A primer example would be giving in to a temper tantrum to quell the storm while shopping for groceries and avoiding utter embarrassment from fellow shoppers sans toddlers. If you give in to temptation, give in to the temper tantrum, you’ll have a spoiled child and a master manipulator on your hands. You’ll also have failed in the marshmallow test of low time preference choice making. For a single person; time preference choices are vastly different; waking up in the middle of the night to eat hot pockets or waiting until the morning time. Passing that marshmallow test would be passing the low time preference choice.  Either way time preference affects us all and when put into the context of everyday life, time preference is a finicky thing.

Zoom Out

As a Bitcoiner, my time preference has changed tremendously and I consistently choose to make ultra-low time preference choices in relation to how I handle finances with fiat, and Bitcoin transactions. Ultimately, my ultra-low time preference choice is to create a generational transfer of time and risk. I call it ultra-low time preference because I am creating generational wealth for my children’s children. This is the only way to ensure that the sats I stack today will be cherished and used for good and not dipped into out of temptation. Think of ultra-low time preference as irrevocable trust. 

Bitcoin is a decentralized digital currency and as such, the value placed on Bitcoin from a fiat viewpoint is the monetary figure in front of it. If I stack one million sats today, it will be worth (at the time of this writing) one million sats always, but which is around $47,203 on December 14, 2021. However; the longevity of that value greatly exceeds the worth placed on those one million sats today.

Low time preference. The gratification comes in knowing that the sats I stack today, will in the future be worth exponentially more. By creating this transaction, daily, I take the first steps toward a generational transfer of time and risk.

The Network

The Bitcoin network is a completely different understanding and perception of time sequence and preference itself. It takes 10 minutes, approximately, for the network to confirm a transaction. The blockchain is essentially anonymous, peer-to-peer, and backed by encrypted addresses that hold their respective balances so that nothing is double spent. Each block builds upon the previous blocks, dependent upon the transaction accuracy. Thus, if we were looking at the blockchain it would be as if the bricks on top of a house are dependent upon the brick laid down underneath it. 

Each node records the data sent to it, and each node on the receiving end verifies the transaction sent to it. There are no gimmicks or hassles, and with the Schnorr/Taproot digital signature upgrades, there are improvements to Bitcoin’s privacy, lower transaction fees, and unlocking of the potential for smart contracts to be utilized on the blockchain. This is phenomenal in the sense that the time sequence for conducting transactions over a longer period of time have been enabled, thus embedding the low time preference within the core coding of Bitcoin itself.

Ultimately, every individual who stacks sats benefits the network. However, it is those that continually engage with the network that will be able to pass the marshmallow test. The ability to HODL, to keep diamond hands around your stack, and continually stacking sats. It’s been said time and time over, the ultimate marshmallow test is Bitcoin; but without the 15-minute window Mischel allocated for his initial study. Will you be able to pass?