My answer is Time.
I think everyone should measure everything - including cryptocurrencies, fiat currencies, and anything they own - in the most important asset there is: time.
And my answer applies regardless of whether or not Bitcoin replaces fiat currencies.
My answer comes from two simple ideas:
- You should choose to measure your assets in the same units in which you’re required to pay your liabilities
- Some people have a liability in fiat currency, but everyone has a liability in time.
For example, I owe income tax and student loans that are denominated in US dollars. Since I’m required to pay my liabilities in dollars, I choose to measure my assets in dollars.
But I also have a liability to life itself, and that debt is denominated in time.
That’s why I measure my own portfolio in terms of dollars and time.
In addition to the normal balance sheet and income statement, my financial spreadsheet has a few scenarios in it that I believe are more important that the dollar amounts:
- If I continue with this level of assets, liabilities, income, and expenses, how long can I sustain my current standard of living?
- If I could lower my liabilities or expenses by X amount per month - without lowering my standard of living, how much longer would I be able to survive like this?
- If my income disappeared (e.g. if I quit or lose my job), and I were forced to use my savings (and other assets) to pay for living expenses, how long could I survive like this?
Then I do a few thought experiments to evaluate whether or not my assets (and my income) are in jeopardy, and if so, what I can do to protect them (e.g. physical protection, cyber protection, legal protection, etc).
But notice that the measurements in time are the only ones that matter. It doesn’t matter if I have a million dollars in the bank. If I spend a million dollars a month, then my net worth is only “one month.”
So how should we measure Bitcoin?
And of course, it will have a different value for everyone.
If your rent is $1,000 per month, and the “price” of 1 Bitcoin is $9,000, then to you, 1 Bitcoin is worth “9 months of rent.” For someone who pays $1,500 per month in rent, 1 Bitcoin is only worth “6 months of rent.”
It doesn’t matter how Bitcoin is “priced” on the exchange; it only matters how Bitcoin is “valued” by you.