Claudio Koller · 3/23/2023

Bitcoin and the Time Preference

Time preference is an economic concept that describes an individual's preference to consume in the present over future times when multiple options are available to them. In other words, it describes an individual's tendency to prioritize short-term rewards over long-term benefits.

What is Time Preference?

Time preference describes the relationship in which a person values the present compared to the future. It is generally assumed that a consumer prefers a good if it can be consumed in the present rather than in the future. An example of this is the preference to receive a new smartphone today rather than a year from now.

Similar to consumption, for many people or businesses, receiving payment today is better than receiving payment in the future. This is because an economically minded person or business wants to collect their money as early as possible and spend it as late as possible.

Marshmallow Experiment

The Stanford Marshmallow Experiment was a study that looked at time preference and was conducted by researcher Walter Mischel between 1968 and 1974. The experiment involved approximately four-year-old children in whom reward deferral was studied.

In individual sessions, the children were shown a desirable object such as a marshmallow or a cookie. The experimenter told the children that he would leave the session room for some time and that they could call him back by pressing a bell and then receive a marshmallow.

However, if they waited until the experimenter returned on his own, they would receive two marshmallows. If the child did not ring the bell, the experimenter usually returned after 15 minutes.

Follow-up Observations

In follow-up observations of the Stanford Marshmallow Experiment, reward deferral was shown to be a reliable predictor of later academic success and a number of personality traits.

The researchers found that children who were able to wait longer for preferred rewards tended to have better life outcomes. These outcomes were measured by factors such as academic achievement, educational attainment, body mass index (BMI) and other factors.

What does Time Preference have to do with Bitcoin?

Solid money or «Sound Money» is a major factor influencing individual time preference. Money like gold or bitcoin have exciting monetary characteristics that make it more attractive to long-term saving and not consuming.

By using bitcoin, one can lower their time preference and be more likely to forgo current consumption, allowing for long-term planning. This can have an impact on consumer society, which in turn has an impact on today's economy and environment.

Bitcoin represents a return to hard and reliable money as with a gold standard, but in a completely new digital form.

> Learn more about the Medium of Exchange and what monetary Characteristics it should have.

Spread the knowledge

If you liked this content, make sure to share it with your friends. If you think there's something missing here, send us a quick message.


Congratulations! 🥳

Your bank payment arrived and was successfully exchanged into bitcoin.

Your bitcoin are soon on the way to your Bitcoin wallet.

Bitcoin purchase

Bank payment:EUR 100.00

Purchased:BTC 0.00435850

Exchange rate:EUR 22,599.90 / BTC