Juraj on Nostr: One of the reasons we do accounting is we want to know if we generate profit or if we ...

One of the reasons we do accounting is we want to know if we generate profit or if we are losing money. The benchmark for this is just holding money, which is defined in the accounting as having zero risk.

The choice of this unit of account is based on our goals, preferences and often the type of money we use in life. Why? Because in the situation of profit, we want to have higher purchasing power. That's why I've been doing all my personal financial planning and accounting in gold, even before Bitcoin came to be. That was a better reflection of purchasing power.

But here comes opportunity cost. Do I want to make 10% p.a. on fiat tokens when I could have bought Bitcoin? Or do I want to make 3% p.a. in bitcoin terms? Using fiat coins for accounting is just useless, it does not tell you anything about your purchasing power (discounting with CPI does not work). And it completely hides away opportunity cost of holding BTC (risk free - in your own cold storage.. Here I'm not talking about price risk, price does not matter if you want more BTC).

For many people and even companies, Bitcoin is already de facto unit of account.

It's not all unicorns and roses though. It is extremely hard to get Bitcoin denominated yield from entrepreneurial work. The benchmark is hardcore. For many it just means saving resources of the society (also known as hodling - deciding not to use scarce resources you can use and hold only money), and having more free time. But you can also do things where you get return on your time but not money. You save money and turn time into more money. Or you can borrow (short) fiat and invest that.

One thing is certain - any entrepreneur not thinking in Bitcoin terms does not see the full picture. That does not mean they have to switch their unit of account, they at least need to be aware of the trade-offs though.