Bitcoin has few attributes of money but all the attributes of a collectible
jabberwocking.com
jabberwocking.com
People want to collect bitcoin at current valuations because they are convinced it will become a currency/store of value of the future and hence rise in value.
If everyone suddenly switched to believing “Oh bitcoin doesn’t do anything but it is a fun collectible which also has mining costs to track ownership” its value would plummet.
My point was that, if the author’s argument is true, bitcoin will only have value as a pure collectible if people maintain some wider narrative that opposes the argument in the essay.
No one would collect a sterile piece of cardboard devoid of any story, just as no one would collect “Digital token #385839, definitively devoid of use”.
I’m not saying Bitcoin needs to become a useful currency to maintain a value. I’m saying it needs to have people believe it will, or to believe some other narrative about it which makes them consider it as more than a collectible.
Gold's current value is not related to its function as a material for jewelry, but from a myth that it is a store of value. If people would stop believing the myth, the cost of gold would plummet and stabilize around the value it provides as a material for jewelry.
Similarly, "art is lovely" is a really stretched argument. If you want, you could print your transaction block hash and consider it pretty as a math-art concept.
So yes, bitcoin needs people to believe in its value to remain valuable, much like everything else that is not a raw utility - nations, religions, money, corporations, gold, baseball cards, and so on.
Heck, even Ferraris would become much cheaper if people only valued them for their function. They cost a lot primarily because we value them highly due to myths and scarcity.
imagine if tomorrow, we suddenly find ourselves mining gold from asteroids, and that gold suddenly became super-abundant. Would the price of gold drop to match just the material usage value (e.g., for jewellery and electronics)?
As someone who gets regular offers for my 3 minute art pieces without promoting this anywhere or so. Literally just by having them. I have to disagree
I can't explain it but people definitly collect useless items
Would like to hear more of your theory, in my view Bitcoin is a fossil whose community is intent on keeping it a fossil. All energy towards improving the network are focused on Layer 2. Transactions per second will not be increased, max supply will not be increased... the various forks of bitcoin speak to this. Why do you believe Bitcoin can keep an edge?
That's generally true for all currencies. If everyone suddenly switched to believing "X-sovereign-currency" doesn't do anything but legitimizes that sovereign and has military and human rights costs to maintain the illusion of that legitimacy, its value would plummet.
Currencies are not real, their value is in our collective heads, or at the tip of the gun, or because you can pay taxes in it or get sent to jail. Yes, in general they're nice because it makes transactions less of a pain, but that isn't specifically true for any one currency.
These all seem very real. And not something that will disappear (or even drop) if media attention or nerd interest moves elsewhere.
Cryptocurrencies exist in a digital and decentralized world. They will outlast governments.
Is this the "greater fool" argument against Bitcoin?
In my view, it's not a currency until people stop speculating and start using it like a currency.
So yes, it's a collectible with ridiculously high transaction costs that make it difficult for me to use as a currency.
I’ve been following Bitcoin for more than seven years and absolutely nothing about it has fundamentally changed. It has always been a “currency” majority owned by dodgy shadowy characters. It’s always been slow. It’s always been unscalable (by design!). It has always been a get rich quick pyramid scheme.
It doesn’t matter what its USD value is. It’s a scam. Always was, always will be.
Our current financial system is also layered similarly btw. When you buy something with your credit card, it doesn't settle right away.
Is Bitcoin the best thing to use as an settlement layer?
You can use eth or any of the thousands of other crypto-currencies, Bitcoin benefits from being the most secure and also having the largest network effects due to being the earliest. When it comes to money, security is the most important thing and Bitcoin offers the most secure settlement layer.
This is the case of having a better technology doesn't matter, Bitcoin came at a very lucky time and also grew organically for many years and had arguably the fairest coin distributions (most coins nowadays are shilled very heavily by it's developers and investors). It's also the most secure and well-known.
Because of those things, it'll be very difficult if not impossible to unseat Bitcoin when it comes to store of value/currency. Bitcoin also sees development in form of lightning network. For all other use cases, I think eth covers most bases and has also developed a very large network of users and developers.
So whatever next big crypto project comes needs to be not just "better", but like at least 10x better.
Monero isn't just claiming this though. It actually delivers on its promises. It's actually private, authorities are having trouble tracing it. Criminals are already switching to Monero. Transactions are fast and the fees are low. It's mineable by ordinary CPUs, no centralized ASIC/GPU mining operations in China. Since mining is more decentralized, nobody opposes improvements to the Monero blockchain like the bitcoin and ethereum miners do.
> at least 10x better
Monero is pretty much infinitely better. If any coin is positioned to unseat bitcoin it's Monero. If there's any sanity left in this cryptocurrency market this will happen one day.
Ethereum: Market Cap: Fr 261,435,750,490 Volume: Fr 39,931,852,584
Its not like Bitcoin is standing up there alone. Sure still far stronger, but the times where its only bitcoin and the others is likely over.
If XMR usage got big enough it would very much need layer 2 even more, the developers themselves acknowledge this and are upfront about it. These very basic computing problems that have been repeated ad nauseam for a decade now do not magically go away and are actually a lot worse for monero due to ring transactions being much heavier.
Are you really going to store a 2 TB blockchain that needs days of compute to initially confirm so you can transact with your friends privately? The first layer has insane amounts of PoW security baked in at this point, it's not for general consumption anymore.
As well as all the rangeproofs that further bloat the chain size. Other confidential blockchain designs allow the removal of rangeproofs for all spent outputs (ie the vast majority).
I'm sure they'll be able to solve any problem that comes up. Monero isn't plagued by miners blocking progress like bitcoin is. I believe the coin will continue to improve.
> Are you really going to store a 2 TB blockchain that needs days of compute to initially confirm so you can transact with your friends privately?
Isn't it possible to prune the blockchain on local nodes?
If it were to freeze at it's current price, it would only be able to power a very small economy of 1T$, that's nothing considering it's borderless and digital.
It will never become a global reserve currency for the same reason gold is no longer a basis for money. It is better to inflate your way out of problems (print money to bail out key institutions) than to deflate your way out of them (great depression). Better is defined as causing less harm to individuals.
Inflation sucks for more people than deflation. It causes social strife, environmental destruction through overconsumption, a widening gap between the rich and the poor, more expensive healthcare for lower classes, stress and the need to live on the corporate treadmill, a general inability to identify worthwhile investments versus ponzi schemes because TINA, pushing more people into partial servitude to the economic system by encouraging borrowing.
It's great for the rich, though. Lowered interest rates things like financial games, leveraged trading, and corporate agglomeration become favored. And the devaluing currency pushes average joes to participate in the wall street casino, which is good for CEOs.
It's not the deflation of the great depression that was causing starvation. Remember that during the part of the great depression where people were starving (nobody was starving at the onset), the government was doing things like buying food and burying it on the premise that this would create demand and stimulate prices.
I'd counter by saying that the strongest decades of median real wage growth and general GDP growth were during the high inflation 1960s and 1970s.
I'd argue that the fact nobody was starving at the beginning of the great depression means that the economic mess didn't cause the starvation is a bit of a straw man. Of course, at the beginning, people don't immediately find themselves in destitution, they draw down savings. The destitution begins when the economic disruption becomes prolonged.
I can't find any primary sources on the government policy of destroying food, but I'd conjecture the reason it was done (if it happened) was to support nominal food prices and therefore the apparent credit-worthiness of farms in a highly deflationary environment. Of course, the real problem was that there was insufficient aggregate demand to support the nominal food price, i.e. deflation combined with wage-price downward stickiness caused the market to fail to clear.
No I'm not. The one is the primary mechanism that is being used to create the other.
> Of course, the real problem...
The real problem was policymakers believing dumb shit, if we're being charitable, confusing correlation for causation.
How about 1860-1900. A deflationary era when median wealth increased ( even without taking into account that a chunk of the population was liberated from chattel slavery) and the us went from failed state to international colonial expansionist superpower
Moving money in higher amounts can get expensive as fuck.
If you agreed to work for a company for X monero a month, and the value of monero (relative to USD or your local currency) dropped by 90% a few months later, would you continue to work at the originally agreed upon rate?
And on the opposite end, if a coffee shop sold lattes for Y monero, would you be okay with continuing to pay Y if monero shot up by 1000%?
What you could do against the fact that the USD is heavily losing on value is a different topic tho.
On the same note: You are likely getting paid in $. Your currency lost about 4% in value against the CHF in the last months. Is this something you worry about? I guess not.
Unlike Bitcoin, the value of gold in a given market has a tangible backing that isn't purely speculative.
[1] https://www.statista.com/statistics/299609/gold-demand-by-in...
It's like saying, "Bitcoin has residual value because you could always sell the GPU mining equipment"
I'm not sure your analogy of GPU mining hardware makes sense to me. You can have Bitcoin without having GPUs. Just like you can have gold without having a mining operation.
So if Bitcoin crashes to some hypothetical value tied to consumability, you're left with nothing. Whereas gold is still something you could sell for industrial and fashion use.
I don't think there's a good analogy between cryptocurrency and gold because they're not very similar at all unless people only narrow the scope to long term holdings and ignore risk/speculation.
In this light, how is Bitcoin any different?
Note that currency has two functions: store of value (Bitcoin) and medium of exchange (Ethereum? Ripple? Carbon credits? Other?). That we can split these functions should not be surprising. Plus, our modern money system is a fairly new invention and it's clearly being disrupted. Hell, even the idea of an electronic ledger to track stock ownership was only really developed in the 1980s by Cede and the DTC -- and it still takes 2 days to fully settle.
People rationally buy 5% perpetual yields to cream the asset, not HODLing in the hopes some other buyer will come.
Absolutely I would make a case about the net present value of future distributions - the clearing IRR is currently around 4%, having been around 5% last year.
Similarly real estate pays rent or owners equivalent rent (the value the owner derives from living in it rather than paying market rents). Here, the market seems to clear around 2-3% net of maintenance, having previously cleared around 6% when interest rates were higher.
Bonds pay interest, albeit at this time the clearing yield level is very very low.
What is the clearing yield of bitcoin? Undefined, because it has no expected future intrinsic cashflow payable to the owner.
Bitcoin hodlers have only one possible way to collect a future cashflow, sale to another person for either fiat or goods/services.
Bitcoin is a collectible. It is very much like gold, which has a far longer history and similarly high transaction costs. Gold, in my view, is also a collectable, and it's frequently advertised as such. (Just look at the gold coin ads and compare to BTC.)
Controversial view: fiat currencies are also a collectible. The difference being it's universally accepted tender, its government enforced, you're taxed in it, transaction costs are cheap, and insanely fast (moving money can be a pain). This is what makes fiat a proper currency. Also, while we like to make fun of central banks for money printer go brr, there's real value in the stability they provide. The Great Depression was a disaster because of the lack of monetary response, and banks of the world have learned since.
Also, there are heavy incentives for governments to drive use of their currencies, and there's a LOT of competition from governments to dethrone USD. China, for one, is trying to internationalize the renmimbi and dethrone USD in its sphere of influence. Do you really think they're going to give BTC the space to thrive?
Now, let me be clear, my view on crypto is nuanced--I'm very exited about DeFi and ETH2, but my longterm view on BTC is a bit sober.
Yes, projected earnings. Speculation. Just like cryptocurrencies.
I know only few people who own crypto as pure speculation. Most are using too (at least from time to time)
I only partially care if it goes /2 or x100. Its still money
I know a few people who made $50m before they were 30. The act of spending money is now fun for them, almost independent of the outcome. Incredibly high donations to twitch streamers, denominated in BTC, tickle their fancy.
Every other person I know who owns BTC is either trying to speculate by owning a lot of it or believes that putting 5% of their investment portfolio is good for diversification. In the same way that I don't spend VTI at the store, these people don't spend BTC at the store.
Bitcoin isn’t a cash competitor, it’s a gold competitor - and it’s a pretty good one.
Part of something like gold is the shared social belief in it as a store of value. Bitcoin has this and there’s enough time and infrastructure behind it at this point that I’d bet it’s likely to keep it.
That plus its scarcity guarantee and disconnect from the federal monetary policy of any one country or bank makes me bullish on its future in the long term.
I’m also bullish on ethereum, but for different reasons.
Gold has inherent uses as a precious metal. Bitcoin mining only computes SHA256 hashes for no actual purposes.
I wish it'd just lose it's value already so that liquidity will flow into all the much better coins out there. Not likely to happen though...
A large aspect of currency/store of value/whatever is social/network effects.
That’s just objectively false, though. Yes, a small group of people collect Bitcoin because they believe it will become a currency and therefore rise in value. But most people who collect Bitcoin think it will rise in value because they see it rising in value.
Occam’s razor, dude.
1 bitcoin is its own thing
2 bitcoin has a clear analog in the form of gold
Collectibles are a terrible analogy because
1 they are not fungable and bitcoin is
2 they are not easily converted into currency whereas bitcoin is
3 they carry novelty and bitcoin does not (cryptocurrency may carry some novelty but each individual bitcoin does not).
4 their value is based on nostalgia turned speculation whereas bitcoins is more complex (though still speculative)
5 neither is really good for anything other than maybe as a value store (though both are questionable on that front too)
I could go on. Gold is genuinely a pretty good analogy for bitcoin. People buy both believing they can be converted into money later or directly traded. Both have pools of true believers, spectators and novelty purchaers. The main difference is simply that bitcoin does not have the long history that gold does.
That's a heck of an understatement - Gold's track record dates back essentially to the beginning of civilization or earlier.
Bitcoin is not fungible. Bitcoins can be distinguished by their transaction history. Governments are blacklisting addresses and all bitcoins that have passed through them are now tainted. Exchanges already reject deposits containing coins tainted by association with blacklisted individuals or even coin mixing services.
A government can scream and shout but they cannot block a bitcoin transaction.
Governments cannot block transactions but they can stop people from accepting the coins. Money that can't be spent is worthless.
I could use your argument to say U.S cash is not fungible because each bill has a serial number. And the government occasionally tracks bills with a given number.
In some highly technical way, is the medium not fungible? Sure. Just as in prison exchange of cigarettes there might be someone who won't take Parliaments and someone else who wants only Marbs. But most of the time, most people, exchanging most coin, consider them interchangable. And in any financial tool that is what matters. Not theory but how people treat it.
Bitcoins are far less fungible. If you can look at all the transactions which have occurred in the past on a given token, and retroactively decide it is unfit for exchange, this is categorically different than saying you can put a dollar bill through the washer and make it unusable.
Generally, to a percentage very close to 100%, people are not doing that.
And some circulated currency becomes more valuable because of its collectability or changes in its composite metals. But we do not say the system of currency itself has been rendered I fungible. I have ceded the technical point here several times. But for most practical purposes it is fungible because most users of bitcoin do not care which coin they get when they recieve it nor which one they lose when they recieve it.
Blacklisting bitcoins gained from mined blocks containing blacklisted addresses would easily do that.
Probably processing transactions from those addresses already is illegal with current laws. Why should you be able to earn transaction fees from that?
Monero is fungible because it's private. Every transaction is signed by lots of users and nobody can tell where the coins are actually coming from. There's no way to tell them apart.
I have yet to see a widespread other usage of cryptocurrency.
Of course bitcoin (like cash) limits your recourse against the seller, so you have to take that into account. Sometimes though, that is to your advantage when the risk is low enough (small transaction, trusted seller) that the hassle avoidance outweighs the risk.
This isn't possible with credit card or bank transfers.
And I’m not sure why I would want to maintain two currencies anyway, one for small payments where for some reason I don’t want protection, and another when I do want protection. Having to hold multiple currencies dependent on what I want the level of dispute resolution to be sounds like a huge step back.
The main risk isn’t that someone wants to reverse a coffee, it’s that their whole wallet gets stolen.
Or a credit card with spending limits?
In the U.K. with banks like monzo you can also raise/lower the limit instantly via an app. Also the fraud detection algorithms will automatically ask for 2FA on larger transactions or ones that look fraudulent e.t.c.
Yes there are modern banking solutions like this (we have instant transfers between banks with a comfortable QR scanning app just like google pay here in Switzerland) but this only works in Switzerland. For any international transfers we have to fall back to Swift transfers (slow) or credit cards (mentioned issue).
Yeah you can do that exactly with a debit card - just ask your bank to remove the spend limit and give you zero overdraft.
Once you realise effectively you are describing a debit card with less options then suddenly it doesn't look like such a good feature.
But now we are specifically just talking about international payments where you explicitly don’t want any currency conversion or buyers protection, and the use case is just getting farcically narrow.
Sure, those things exist, and cash also exists, and in physical real-life transactions you get to decide for yourself which one you want to use. With online transactions and without crypto, for the most part you currently don't have a choice, and that's not good.
Example: if I'm storing important archive data in AWS Glacier that has to be retained for years and I have to pay monthly, I'd be much more worried about data loss due to something going wrong with one of the monthly automatic card payments than with AWS defrauding me or with Glacier itself failing. So I'd rather pay with crypto (or ideally, pay years in advance up front and not worry about monthly payments at all), than leave it up to the whims and vagaries of some damn card company's flaky software.
Yes stuff like that has happened to me more than once in real life (not with amazon but with some other hosting providers).
So its not only about permissions and burocracy but also that their system is old and sucks.
I'm not trying to hype you up, but I think that there's a lot of utility happening outside of your bubble. Some of that happens in countries you don't live in, other use cases appear between banking systems which remain opaque to you. That's not the same as "no utility".
See: Derivative based on bitcoin/ETH.
It's not a counterpoint, just a third category.
I doubt the far majority does even know what an ICO or NFT is and most of them likely still have and use their PayPal daily.
There is really nothing shady about protecting your money from failing currencies by investing in something that works right now.
Secondly, the attributes of money are, according to Rothbard from memory:
- hard to counterfeit: bitcoin has this better than anything else.
- a store of value (not price stability.): It’s doing this great, just don’t buy late in the post halvining revaluation period. (Bitcoin haters don't seem to know the halvening exists. Bitcoiners are not worried about “price stability”.)
- divisible: down to 1/100,000,000 of a bitcoin, further possible with lightning. This rnables micro transactions.
- immune to spoilage: bitcoin can’t dissolve in water like salt (a previous form of money) and is quite robust, and can be backed up!
- easy to transport: bitcoin can be stored in any number of ways, more portable than paper money even.
- fungible: bitcoin is pretty fungible, but anti-freedom forces are trying to change that.
- liquid: bitcoin is extremely liquid with a global exchange network and ATMs all over and multiple p2p exchange services like localbitcoins.com to serve even places like the Sudan. Is paypal easy to use in the Sudan? Bitcoin is a more liquid form if money than anything other than the US Dollar and is competitive even there.
What bitcoin IS NOT, is a collectible like baseball cards. Baseball cards are absolutely not fungible— that is what makes them collectible! A babe ruth rookie card in mint is worth a lot more than last years random rookie card.
The author of this piece doesn’t understand what money is, or why bitcoin is the way it is, which means they haven’t done basic research.
I understand, certain people really hate bitcoin— and for good reason. Bitcoin will eventually obsolete the fiat inflation system which has created the wealth inequality in much of the world. The system that lets politicians buy power and escape responsibility for violating rights.
Bitcoin destroys the number one tool of human oppression.
A tool which, by the way, paid money to indoctrinate people into beliefs that result in them hating bitcoin.
But bitcoin isn’t alive. The hate doesn't affect it. Bitcoin is a well constructed set of incentives.
Embrace or ignore, your choice.
What part of Bitcoin abolishes corruption, power-grabbing and bribes? How would it fix anything you accuse the current system of?
Actually, the deflatory effect of Bitcoin is more likely to create the kind of issues you mentioned, as there are historical examples (Great Depression).
I "hate" (rather, despise) Bitcoin because it's an obsolete Blockchain technology that uses absurd amounts of energy for the purpose of calculating SHA-1 hashes. There are dozens of other protocols that have taken off, that either don't use POW, or that use POW in a more useful manner.
The Great Depression was caused by the government making gold illegal, effectively confiscating the nations wealth and replacing it with massive fiat inflation. It was a period of monetary inflation that caused and economic contraction.
One if the ways inflation is used to indoctrinate people against their best interests is demonizing “deflation” by conflating it with the contraction in the Great Depression.
A grandma on fixed income shouldn’t have her prices go up %30 because politicians wanted to spend trillions to pay off bribes, as we have seen in the past year, where our monetary base was increased by $7T (or more) with only a fraction going to benefit Americans.
There is nothing yet discovered that can replace proof of work. There are a lot if people selling scams who think proof if work is a weakness, but they are always centralized (ethereum, dash) or PoW masquerading as something else, or simply not a cryptocurrency (ripple).
Look, I'm not going to try to convince you. You're trying to protect your assets by denying reality, maybe you have a family to feed, maybe you just want to go to the moon, whatever.
For everyone else, I invite you to study history. The depression happened before anyone touched the gold standard. Countries that abandoned the gold standard earlier have recovered faster. Don't believe me, please read books.
Other important note. You can become rich with Bitcoin, yes. Being richer doesn't make you smarter.
Claiming that the great depression or the long depression that preceded it were not exacerbated by the governments inability or unwillingness to artificially inflate the money supply is delusional. The deflation rate was above was 9% in 19931, 10% in 1932 this continued until 1934 which when prices started rising again, however 38 and 39 again had negative inflation.
The period preceding the great depression was not inflationary either, inflation in 1921 & 1922 was -10% and -6.15% and the rest of the years had relatively low inflation. In fact the Dollar's value only fell back to what it was in 1920 in 1946.
Anyway, I'm hardly opposed to keeping inflation low. I would be fine with 0 inflation, for that matter. By 0 inflation, I don't mean a fixed money supply. I mean $X pays for about the same amount of goods 10 years from now as it does today.
Accepting limitless deflation via a fixed monetary supply is just as absurd as accepting limitless inflation.
It does not make sense to base a monetary system on a token that represents "1/k of all the wealth", where k is a constant. So just by stuffing the token under your mattress, contributing to zero economic activity, you reap the rewards of all economic growth that added wealth to the world.
Here's how I see it:
The US M2 money supply grew from $286B in 1959 to $19,670B in 2021.
With that came inflation: a dollar in 1959 could buy roughly what $9.13 buys today, according to the BLS.
But that level of inflation is not even close to 1:1 with the money supply increase.
The money supply grew to almost 69x its 1959 size, but the dollar is worth 1/9th what it used to be, not 1/69th. That's because the whole pile of dollars put together are representing more real world wealth than existed back then. The economy has grown, more people are participating in it, and it's making more stuff people value.
Maybe the correct level of growth in the money supply would've been 9x smaller, for no inflation. So the dollar today would buy roughly what it did back in 1959. I suppose that would be OK. But that's still a money supply increase from $286B to $2,193B.
What if the money supply was fixed? So instead of roughly 9.1x inflation, we'd have roughly 7.7x deflation: the dollar today would buy 7.7x the stuff it bought back in 1959. How is that fair? Grandpa's pay for a day's work back in '59, which he put in a safe and forgot about, is worth what I get for a week and a half of work in 2021? Talk about oppressing the poor, you're never going to beat "old money" in this system. The longer the family has been wealthy the more unattainable their savings will be in terms of present-day wages and earnings.
And that's all assuming the best case scenario, which is that the 7.7x economic growth still happens with this deflationary currency. I could easily see it being lower given that there's less incentive for anybody to invest in businesses.
As we all know, there was remarkably little oppression of the poor back when we used the gold standard and minting new money was limited.
Gold is genuinely scarce but there is %1 inflation and the asteroid mining risk.
Meanwhile bitcoins inflation rate gets cut in half every 4 years until it becomes zero in 2140.
> The system that lets politicians buy power and escape responsibility for violating rights.
Wouldn’t it be more energy-efficient to just go back to golden years before William Jennings Bryan’s 1896 presidential campaign?
Can you think of historical examples of dramatic wealth inequality or misuse of political power? As surely as the Dalai Llama is Catholic, history shows us that empires and robber-barons were vanishingly rare before Bretton Woods.
Cheers!
https://www.bloomberg.com/news/videos/2021-03-04/china-s-inn...
I presume that in societies that used salt as money, anybody who lost it to "spoilage" was considered to be responsible for their own loss and this was not considered a downside of the salt-based economy.
Similar to throwing out a hard drive with your Bitcoin wallet on it, or sending coins to an address nobody has the private key to, or dying without telling anybody how to access your bitcoins.
This is a very silly claim considering that 20% of all bitcoin is considered to be "lost" and can't be recovered. Due to the nature of bitcoin this figure should reach 100% eventually (of course this would be a very slow process as long as it has a very high price).
btw I'm not sure if you're aware but you can actually recover salt which was dissolved in water.
Also historically there is no conclusive evidence that salt's use as currency was ever particularly widespread.
This doesn’t make sense. Debt is money owed. So if money is “an accounting mechanism for keeping track of debt” then we have a circular definition.
Money can be completely separated from debt. And until around a hundred years ago — where gold was and had been money for hundreds of years — it was. A silver or gold coin is not anyone’s debt, yet it was used as money for centuries.
An excellent critique of the idea that money is created by governments was written by Carl Menger in his essay from 1892 entitled “On the Origin of Money”: https://is.muni.cz/el/1456/podzim2009/MPE_MOEK/um/8972262/me...
Menger defines money as, simply, “the most liquid good” — where liquidity i, essentially, defined as “how much value you lose when you exchange to and from a certain good”. For example, if you have a hundred chickens and you sell them in exchange for wheat, after which you immediately buy back chickens with your wheat, you will lose more value (chickens) than if you were to use gold as an intermediate commodity. This gives rise to a “common” intermediate commodity, because everyone wants to lose as little value as possible when selling/buying, and this intermediate commodity is money.
Of course, this has changed by now, since each country now issues their own currency and disincentivizes the use of competing monies/currencies through various means (primarily by defining their own currency as the “one true measure of value” by charging capital gains taxes on competing monies).
But if I have BTC, there is a specific BTC that is mine. That is how I've understood it. The IRS tax guide for crypto says as much talking about buying and selling two coins bought from two different years.
But even if Bitcoins had serial numbers, they would still be practically fungible. Dollar bills have serial numbers and 99.99% of the time, dollars are treated as being completely interchangeable (ignoring the corner case of people hanging the first dollar they made on the wall, etc.). If you give a store one, they treat it as if you gave them $1 in value and don't care which specific dollar you gave them.
https://cointelegraph.com/news/over-10-000-blacklisted-btc-f...
Tonnes of examples. I’ve been unable to sell coins on coinbase and polo that I got from Bisq
If you own 2 BTC, there aren't specific Bitcoins that are marked for you.
If you own 2 BTC in an exchange then it is true that you are unlikely to own any specific 2 BTC but that's an entirely different subject. At that point you don't really own them.
1. Alice owns one BTC
2. Bob owns one BTC
3. Both send their BTC to Charlie
4. Charlie sends one BTC to David
Question: Is there unambiguous way to define whether David got the BTC originally owned by Alice or the one owned by Bob? If yes, how? If no, doesn't that mean that there exist no specific bitcoins anywhere?
Yes. BTC is completely traceable. You can follow the TXOs
1. Alice knows the private keys corresponding to one or more unspent outputs of transactions, with a total value of 1 BTC;
2. Bob knows the private keys corresponding to one or more unspent outputs of transactions, with a total value of 1 BTC;
3. Both create new transactions, specifying one or more of their formerly unspent outputs as inputs to the new transaction, and Charlie's address (which is a hash of a public key) as one of the outputs of the new transaction, that output having the value of 1 BTC;
4. Charlie creates a new transaction, with David's address as one of the outputs, having the value of 1 BTC. Note that, at this point, Charlie can chose which of the unspent outputs will be used as the input for the new transaction. It can be the output from Alice's transaction, it can be the output from Bob's transaction, it can be the output from some other transaction, or it can even be a combination of them: the transaction could have both Alice's and Bob's outputs as inputs, and have two outputs, one going to David, the other going to a new address (which can be a "change address" on the same wallet, or an address belonging to someone else).
However I just want to give an obligatory caution that this is a very contrived answer. In the real world it can be difficult, there are typically many inputs and outputs to a transaction (and we are rarely able to associate names with addresses). There exists an entire field devoted to this called blockchain analysis or chainanalysis.
You can see for yourself. Choose any address on the BTC blockchain. See the transactions it has been involved in. You can inspect inputs and outputs. Here is an example: https://www.blockchain.com/btc/address/1CUTyyxgbKvtCdoYmceQJ...
If your wallet has 10 BTC in it and you send someone 1 BTC, there is no way to know which one of the 10 Bitcoins was sent. It is literally not part of the implementation of Bitcoin.
Admittedly that link was a terrible example. Block Explorer only shows the address associated with the transaction input but if you want to see the origin of specific coins regardless of whether an address is being reused, you can get the information from the "list of inputs" field in the raw transaction.
In this overly contrived example with single input transactions, if Dylan wants to recurse up tx inputs to the tx between Bob and me in order to verify that he received some of the same coins, he can do the following:
uptx(){
curl -sS "https://api.blockcypher.com/v1/btc/main/txs/$1" | jq -r .inputs[0].prev_hash
}
uptx "$(uptx f57cd4acc4b67d819f78d6cd7f17d1dded436735a6c7765afe40269581d2098a)"
> 32c8f56bbee2b79f71b285697f3b41990091ddc37b667aeb4cb83c1d7be2a847Interest or novelty, perhaps, but not value. There's a big difference between a baseball used in a game and a baseball card. NFTs show this distinction a bit better because, like baseball cards, they're only loosely associated with the person or thing that's actually culturally interesting.
> Bitcoin is very fungible.
As others have said, there's a record of your bitcoin's life, but there are also a fixed number of bitcoins.
(Leaving aside 3-10% fx conversion fees, ACH delays, wire deadlines, and more that prevent "dollars" from being a useful international or digitally transferable form of "money")
But otherwise good take circa 2010 ;)
If people argue very much about if X applies or not, then X probably applies to a certain part close to 50%.
So Bitcoin kinda is like money, and kinda is not.
So can we just stop the arguing and move on to figuring out ways to make use of it, or write code to improve it if you don't like the as-is state, given that it exists and won't go away? :)
Bitcoin and other cryptocurrencies certainly share a lot of the properties of money: cleanly divisible, readily accepted as a medium of exchange, and difficult to counterfeit. But as much as it is used as a currency, there doesn't appear to exist much of a lending market (a key property of money), and there are tons of people that are sitting on it like an investor might sit on gold stockpiles or land, which makes me think the baseball card analogy is still appropriate.
[0] https://www.aei.org/carpe-diem/markets-in-everything-tide-la...
There is a finite amount of it out there, and it has to be "mined".
There is nothing that makes it different from any other "coin" or really any other combination of bits (just like gold isn't unique among all the elements in any way), but it is simply what most people decided would be the one.
No country or central government decides how much Bitcoin is worth. It is all up to people trading on many individual exchanges. Or you can buy/sell it directly without using an exchange, all same as gold.
Is Bitcoin (or will Bitcoin ever be) a currency? This one is complicated, and goes into subjective discussions about what currency even means.
This is true today. It was not true in the US 50 years ago. It does not need to be true tomorrow.
The government can put ceilings and floors in the price of all things just as easily as Turkey banned crypto.
and see how Venezuela fared when they tried to control their official currency exchange to the USD.
> No country or central government decides how much Bitcoin is worth. It is all up to people trading on many individual exchanges. You can also buy/sell it directly without using an exchange, all same as gold.
It's a nice ambition, but is bitcoin really decentralized? The thing which made BTC less useful as a currency between 2015 and 2017 for example was that the core team refused to increase the block size, meaning transactions got much much slower and more expensive.
To compare BTC to gold, our best physical manifestation of "intrinsic value" seems a bit off the mark for something which is vulnerable to being rendered useless if a hand-full of unaccountable individuals decide to make it so.
The network is the value. To me, this is what bitcoin is. https://medium.com/the-capital/the-network-is-the-value-an-e...
As a collectible, it can choose to print more of itself if needed, all it takes is a majority to agree to it by altering its protocol (which could also result in a fork).
As a collectible, it can also trade itself digitally, but cannot be copied.
As a collectible, it keep tracks of all transactions between parties (even though the parties are anonymous).
So I mean, it is what it is. It has resemblance with gold, with fiat currencies, and with collectibles, but it's also none of those.
And similarly, different cryptocurrencies and blockchain based technologies have similarities with one another, and yet important differences.
I think the question that matters more is: could it be used as money?
The article says it needs to be usable to pay a central governments taxes, that's just a matter of policy, so it seems like it could.
It also says it has to capture dept, well that's an interesting difference here, some other crypto could work as such, but Bitcoin has a fixed limit right now. I don't know if money needs to capture dept, that's what it does now, it didn't always.
And so I think I won't agree with this articles definition of money, I recommend people read wikipedias take instead: https://en.m.wikipedia.org/wiki/Money#Functions
> Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context
Maybe you don't consider Bitcoin generally accepted quite yet, but it could be, and I think that could make it money if we wanted too. And that's because it has all the functions needed to do so: it can store value, it has a unit of relative measure, and it provides a medium for its exchange.
Which leads us to the most important question: Why would we use it as money over the alternatives?
A collectible can be compared in value to another collectible of the same type. I might want a 1979 Dave Kingman card because I'm nostalgic for Dave "Kong" Kingman. Others will buy the Dave Kingman card to sell it to people like me, but we all give the card value based on its condition, the player, the year, etc.
But a Steve Macko card and a Dave Kingman card are completely different in value. They are independently valued. Bitcoin is not.
Some individual gold bars are collectibles.
In the context of the article there are a limited number of say babe Ruth cards. They are all the same. Bitcoin is the babe Ruth card. Other cards represent other coins.
Arguing if bitcoin is money is like arguing if a ferrari testarosa is a car. It clearly is,but at the same time it's not a terribly useful car.
Sure bitcoin is money, but it's not an especially useful form of money. Its main attribute is scarcity,not utility. A regular car will drive around 200 000 miles in its lifetime, the ferrari maybe 50 000, probably less.
Bitcoin may be money, but its a pretty weak form of money in terms of what we need everyday.
2,100 trillion satoshis is qualitatively different than something with only tens, hundreds or thousands of units.
Not to mention that every Babe Ruth card is still judged individually on its relative value to other Babe Ruth cards. Differentiated by its condition for instance.
I just don't see that comparison making any sense.
Gold has inherent value. You can melt them and use the gold. A better example might be diamonds. They have value, but very little is intrinsic in the actual gem. They are collectibles.
Of course there isn’t anything directly to do with baseball cards, but there are probably more similarities than with fiat currency, which is their argument.
Now imagine that these baseball cards, instead of featuring professional baseball players, instead featured people who had run on a giant hamster wheel for some time at some speed. Also, the more baseball cards that get made, the longer/faster the person has to run on the hamster wheel.
Initially, you could run on the giant hamster wheel for a few minutes and make a baseball card. Now, because so many baseball cards have been made, you have to run for months on a giant hamster wheel.
Eventually, professional athletes figure out that instead of using their athletic prowess to play sports, they can actually make more money by taking their athletic ability and running on giant hamster wheels. In addition, many metal shops have also figured out that instead of making other stuff, they can maximize their revenue by instead concentrating on making giant hamster wheels so people can run on them to make these cards.
Even its strongest selling point, absolute privacy, is mostly a lie
It's only when the media picked up that drug markets are starting to use Bitcoin (they've been there before, just not at that scale) when the sentiment changed.
Imagine if you could exchange Beanie Babies with anyone in the world with an internet (or satellite) connection. That seems...at least a little more useful?
I'm curious why you feel that being digital "makes a huge difference"? Sure it's different. And coincident with a current popular disruption (digitization of everything we can think of), but does that make it transcendentally different? Or just different because times are different? Honestly curious.
Unlike eBay, with Bitcoin I can transact nearly instantly and without going through any middle men like PayPal and the like. This is huge.
I can also store 1bitcoin and 1million bitcoin on the same USB drive, and know that also unlike beanie babies, they won't deteriorate at all ever.
That said, BTC lacking the fungible property of sound money is a glaring issue.
Though a money system like Monero may end up becoming very important global money for the internet age.
I think the author is shortsighted.
It is also pretty trivial to fork Bitcoin so there is no more inherent value in Bitcoin vs a clone or fork. Compare that to a USD I think the last attempted fork was the currency of the confederacy going to show it’s not so trivial to fork.
It’s decentralised because the US can’t globally stop it.
A few cut undersea cables and a dose of kessler syndrome would make all those burned cpu cycles for naught.
You didn't have to do that to get bitcoin until recently either.
And even today, you don't have to mine. You can purchase bitcoin for whatever amount in USD, and like baseball cards, it'll (probably) grow in value.
However your argument is invalid. Also you could have just bought the $0.1 bitcoin back then. You also are not buying machines to build your own baseball cards and complain about the electric bill.
Here’s the best short description of bitcoin I’ve seen:
Bitcoin is a non-sovereign,
hard-capped supply, global,
immutable, decentralized digital store
of value. It’s an insurance
policy against monetary and fiscal policy irresponsibility
from central banks and
governments globally.