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Author Topic: Is Bitcoin money?  (Read 5921 times)
fresno
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September 21, 2010, 03:27:08 PM
 #1

Bitcoin is something radically new. Nothing like Bitcoin has been possible until now. I would go so far as to consider it sui generis; "in its own class".  This makes it important to understand what Bitcoin actually is before we try to describe it to others.

We're getting a good handle on the code, and of course on Bitcoin's function and utility, but what words should we use to describe Bitcoin itself? There has been some debate in other threads [mostly my doing] over how it is like/not like money, cash, dollars, etc. I'd like to start this thread by focusing on the term "money", and play Devil's avocate by asking for your best arguments that Bitcoin IS money.

My legal dictionary states "In usual and ordinary acceptation it [money] means gold, silver, or paper money, used as circulating medium of exchange, and does not embrace notes, bonds, evidences of debt, or other personal or real estate." [cites omitted]

Wikipedia says "Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment." [cited omitted]

Webster's Online Dictionary defines money as:
  • 1. The most common medium of exchange; functions as legal tender; "we tried to collect the money he owed us".
  • 2. Wealth reckoned in terms of money; "all his money is in real estate".
  • 3. The official currency issued by a government or national bank; "he changed his money into francs".
  • 4. A piece of metal, as gold, silver, copper, etc., coined, or stamped, and issued by the sovereign authority as a medium of exchange in financial transactions between citizens and with government; also, any number of such pieces; coin.
  • 5. Any written or stamped promise, certificate, or order, as a government note, a bank note, a certificate of deposit, etc., which is payable in standard coined money and is lawfully current in lieu of it; in a comprehensive sense, any currency usually and lawfully employed in buying and selling.
  • 6. In general, wealth; property; as, he has much money in land, or in stocks; to make, or lose, money.
[links omitted]
[/list]

I maintain that per these definitions, Bitcoin cannot possibly be described as "money". And further, I think that those who do describe Bitcoin as "money" are doing this community a disservice.

But that is just my point of view. Are there any that can convincingly argue otherwise, that Bitcoin IS money?




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September 21, 2010, 05:12:09 PM
 #2

I maintain that per these definitions, Bitcoin cannot possibly be described as "money". And further, I think that those who do describe Bitcoin as "money" are doing this community a disservice.

+1 agreed.  It's a commodity, a digital store of value.

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September 21, 2010, 05:41:46 PM
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I believe that the statement: "bitcoin is new kind of money" passes the duck test.

Bitcoins function as money (they're a unit of account, a medium of exchange, and a store of value), and if PayPal started allowing Bitcoin transactions tomorrow I'm certain they'd treat them as Just Another Currency.

If you like, call it a commodity, but I think all you'll accomplish is confusing potential users who might think they'll end up getting pork-bellies delivered to their porch if they don't get rid of their bitcoins.

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September 21, 2010, 05:46:20 PM
 #4

+1 agree that it is not money.  However, if it was a pure commodity then it would necessarily require some (even minimal) use value, beyond an exchange value.  Right now bitcoins have a 0% use-value and a 100% exchange value (eg, if they could not be exchanged for something else, they would merely be taking up space on our harddrives and are inherently useless, like random chunks of data).
theymos
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September 21, 2010, 05:50:17 PM
 #5

Anything that is being used as a medium of exchange is money. Bitcoin, like gold, is money.

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September 21, 2010, 05:53:39 PM
 #6

Anything that is being used as a medium of exchange is money. Bitcoin, like gold, is money.

Yes. It doesn't matter what nation-states think bitcoin is.

All we're doing is saying bitcoin as something else other than its economic reality.

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September 21, 2010, 06:06:37 PM
 #7

I've said it before, but heck, I'll say it again because I think it's very important Wink.  I simply wish that there was some useful application specifically for a "network verified" bitcoin (since a bitcoin is just a piece of data).  For example, if a PhD in Computer Science did a study and determined that a Bitcoin is the best seed value for a random number generator.  I think when a use-value for bitcoin as an input to some productive cycle (software development?) is found, it will be a huge boon for the bitcoin community and also it's extrinsic exchange value.

Of course, adding businesses and such that accept bitcoin directly helps it's exchange value as well.
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September 23, 2010, 03:41:05 AM
 #8

I do not consider gold to be money.  You can't go and buy most goods and services with gold.  Gold is a commodity, dollars are money.

Bitcoin is a virtual currency.  It has more in common with paypal than it does with dollars or with gold.  I wouldn't really call it money until it is more widely accepted as payment for goods and services.

Tarot Card Readings for Bitcoins, available via e-mail, phone, skype or IM of your choice.  Inquire for price, quite reasonable.
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September 23, 2010, 03:46:27 AM
 #9

I do not consider gold to be money.  You can't go and buy most goods and services with gold.  Gold is a commodity, dollars are money.

Dollars are currency, not money.  Money can be a currency and vice versa, but they are not quite the same thing and not entirely interchangable.  And fiat currencies are, by thier very definition, not money.  Gold, in our modern world, is still money even though it's no longer a currency.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 23, 2010, 04:43:57 AM
 #10

I do not consider gold to be money.  You can't go and buy most goods and services with gold.  Gold is a commodity, dollars are money.

Dollars are currency, not money.  Money can be a currency and vice versa, but they are not quite the same thing and not entirely interchangable.  And fiat currencies are, by thier very definition, not money.  Gold, in our modern world, is still money even though it's no longer a currency.

We're using different definitions then.  By your definition Bitcoins are not a currency, since I can't use them for most transactions. 

What makes gold money?  What property does it have that, say, plutonium, does not?

Tarot Card Readings for Bitcoins, available via e-mail, phone, skype or IM of your choice.  Inquire for price, quite reasonable.
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September 23, 2010, 05:01:19 AM
 #11

Anything that is being used as a medium of exchange is money. Bitcoin, like gold, is money.

Bingo!
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September 23, 2010, 05:02:54 AM
 #12

I do not consider gold to be money.  You can't go and buy most goods and services with gold.  Gold is a commodity, dollars are money.

Dollars are currency, not money.  Money can be a currency and vice versa, but they are not quite the same thing and not entirely interchangable.  And fiat currencies are, by thier very definition, not money.  Gold, in our modern world, is still money even though it's no longer a currency.

We're using different definitions then.  By your definition Bitcoins are not a currency, since I can't use them for most transactions. 

What makes gold money?  What property does it have that, say, plutonium, does not?

Gold is a unit of account, a medium of exchange, and a store of value; therefore, it is money. Bitcoin falls squarely under this definition. Gold is also a commodity, whereas bitcoin is not due to it not having any (current) use value.

((BTC === Money) && (BTC !== Currency) && (BTC !== Commodity) === true)

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September 23, 2010, 05:06:23 AM
 #13

Bitcoin is verified data  Smiley
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September 23, 2010, 05:27:59 AM
 #14

bitcoins are just like shells or furs in ancient times - of course they are not banknotes or coins, but it's money, because they have all the functions of money

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September 23, 2010, 08:05:42 AM
 #15

I do not consider gold to be money.  You can't go and buy most goods and services with gold.  Gold is a commodity, dollars are money.

Dollars are currency, not money.  Money can be a currency and vice versa, but they are not quite the same thing and not entirely interchangable.  And fiat currencies are, by thier very definition, not money.  Gold, in our modern world, is still money even though it's no longer a currency.

We're using different definitions then.  By your definition Bitcoins are not a currency, since I can't use them for most transactions. 


How did you get that out of what I wrote?  I didn't even attempt to define what a currency was, I only stated that fiat currency was not, and it isn't.  Trying to have a conversation with a person who tells me what I mean to say is always a futile endeavor.

Quote

What makes gold money?  What property does it have that, say, plutonium, does not?

Off the top of my head, gold is safe for handling.  To be precise, I should say gold is a good money, because it has all of the characteristics of an ideal money to some degree or another...

http://www.marketoracle.co.uk/Article10370.html

"Aristotle on good money

Aristotle (384 BC - 322 BC) was a Greek philosopher, a student of Plato and teacher of Alexander the Great. Aristotle discovered, formulated, and analyzed the problem of commensurability. He wondered how ratios for a fair exchange of heterogeneous things could be set. He searched for a principle that makes it possible to equate what is apparently unequal and non-comparable.

Aristotle says that money, as a common measure of everything, makes things commensurable and makes it possible to equalize them. He states that it is in the form of money, a substance that has a telos (purpose), that individuals have devised a unit that supplies a measure on the basis of which just exchange can take place. Aristotle thus maintains that everything can be expressed in the universal equivalent of money. He explains that money was introduced to satisfy the requirement that all items exchanged must be comparable in some way.

Within such frame work, Aristotle defined the characteristics of a good form of money:

1.) It must be durable. Money must stand the test of time and the elements. It must not fade, corrode, or change through time.

2.) It must be portable. Money hold a high amount of 'worth' relative to its weight and size.

3.) It must be divisible. Money should be relatively easy to separate and re-combine without affecting its fundamental characteristics. An extension of this idea is that the item should be 'fungible'. Dictionary.com describes fungible as:

"(esp. of goods) being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind."

4.) It must have intrinsic value. This value of money should be independent of any other object and contained in the money itself.

(snip)

Fiat Currency

Money must be a good store of value by definition.

Fiat paper currencies are popular at times since they are convenient and can be created at will to please the public. However fiat money fails the all important "intrinsic value" test, as its value is solely derived from legal tender laws. The compliance of such law rests on the credibility and strength of the issuing authority. As we know government and political factions can rise and fall faster than pop stars in some cases. It's no surprise that no fiat money has ever survived through time, and they can never be viable money regardless of technological breakthroughs or other human advances."

(end excerpt)

Bitcoin is a currency because it can be, and is intended to be, used as a medium unit of exchange.  Yet it does not require the legal backing of any government; so it is not fiat.  Nor does it, presently, have any attribute that would imply a market value outside of the context of it's intended use as a medium of exchange.  As has been noted in other threads, Bitcoin is most like a LETS for the Internet, but even that analogy has it's faults.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 23, 2010, 08:12:33 AM
 #16

bitcoins are just like shells or furs in ancient times - of course they are not banknotes or coins, but it's money, because they have all the functions of money

Bitcoins don't have a value outside the context of their use as a medium of exchange.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 23, 2010, 08:22:22 AM
 #17

bitcoins are just like shells or furs in ancient times - of course they are not banknotes or coins, but it's money, because they have all the functions of money

Bitcoins don't have a value outside the context of their use as a medium of exchange.

I don't much value furs or have a use for them here in the tropics. But I think my bitcoins are interesting and fun.

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September 26, 2010, 03:02:15 PM
 #18

AFAIK I very much think bitcoin is just about as much a money as gold is.   Some people don't think gold is money, and it might be quite difficult to convince them that BTC is.

Personnaly I don't agree with the fourth Aristotle's characteristic of money.  I doubt money should have any intrinsic value.  More precisely, such a value according to me comes from the compliance to the three first characteristic.

For instance, I think that gold has really very few intrinsic value, but since prehistocical ages men have noticed the fact that gold could be used as a exchange medium (it obviously complied to the three characteristics :  durable, divisable, portable).  This is this usage that gave it its value.  with time people started to wear it as jewelry only becauses by this way they could show off their weilth.

Actually I think that the fourth characteristic should be replaced by the "hard-to produce" aspect, or scarcity.  Water, for exemple, is durable, divisable and portable (as long as you have a bottle Smiley ).  It also has much value (especially when you're thirsty Smiley ).   However, water can be produced in many ways, and is far too present on earth to be used as a currency.



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September 26, 2010, 03:11:04 PM
 #19


For instance, I think that gold has really very few intrinsic value, but since prehistocical ages men have noticed the fact that gold could be used as a exchange medium (it obviously complied to the three characteristics :  durable, divisable, portable). 




Electronics, man. Electronics. IF gold are cheaper, than electronics would be cheaper too and we would use gold much more often in other area. If we ever mine asteroids, gold would cease to be money. An irony, if you think about it.

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September 27, 2010, 03:57:31 AM
 #20


For instance, I think that gold has really very few intrinsic value,


Gold and silver both have excellent industrial characteristics.  They are both excellent conductors, for example, with silver being the best elemental conductor known to science; and gold does not corrode even in harsh environments such as under the ocean floor.  Both are used extensively in electronics for space, and gold is used as a coating for glass windows, because it can filter out radiation and solar intensity much better than leaded glass.  Silver is also traditionally used in dishes because it has antibiotic effects, not because of it's color.  Polished lead can look almost as shiny, and that would not turn out as well.  Pure silver is not the only material that inhibits surface growth, but the only one known of before 1965, and still one of the better methods, and used in medicine to this day.  Silver is an excellent heat conductor as well, and used in heat paste to dissipate the heat of a computer's cpu.  Silver can be used to make better batteries, but they would literally cost a fortune.  Gold would make an ideal material for bullets, because it's more massive than lead, non-toxic to any form of life, and as soft as lead and therefore as likely to 'mushroom' effectively.

The point here is, the main reason that we don't see these uses is because of the monetary value of gold, not because it isn't useful.  The 'intrinsic' value doesn't have to add to, nor equal, it's monetary trade value; only provide for a natural price floor.

Quote

Actually I think that the fourth characteristic should be replaced by the "hard-to produce" aspect, or scarcity.


Scarcity is not a characteristic of money, because it's trade value adjusts to it's scarcity.  Historicly; gold, silver and copper coins were all inter-traded, but copper wasn't particularly scarce.  Iron/steel was more valuable during the middle ages, because kings had a hard time outfitting armies with weapons made of copper.  Steel cooking pots would have been considered expensive.  One contributing cause was that refinement of quality iron required much more energy and labor than copper, silver or gold.  All of those being softer metals, and therefore much less labor intensive than iron or steel.  These days, refined gold "above ground" is less scarce than silver of a comparable condition; yet gold is many times more valuable because of it's monetary value, which silver lost along the way.

Taken on the other side, platinum is much scarcer than gold, and today is much more valuable because there are industrial uses for which there are no acceptable alternatives, not because of any monetary value.  The miners were aware of platinum by the 1600's, but Spanish treasure ships were likely to forge it into a ship's ballast weight, a cannon, or even a cannonball rather than use it as money.  It was scarce stuff, and they knew it, but they didn't have any special use for it, and is was too scarce to attempt to make it into coins, because it was so scarce that most people had no experience with it, and would therefore be unlikely to be willing to trade in it at all.  Mercury was often found in silver (which is why it was called quicksilver) but also often found with platinum.  Mercury was significantly more valuable than platinum because doctors of the day believed it had medicinal properties.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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