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.
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.
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.
I know only few people who own crypto as pure speculation. Most are using too (at least from time to time)
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.
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.
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.
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.
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.
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.
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.
Is this the "greater fool" argument against Bitcoin?
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.
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?
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.
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.
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.
So its not only about permissions and burocracy but also that their system is old and sucks.
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.
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.
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).
> 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!
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.
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.
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 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.
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?
Interest 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.
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.
Some individual gold bars 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.
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.
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.
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.