Bitcoin - it's the first cryptographic commodity, NOT currency:http://paulbohm.com/bitcoin-decentralization/
Bitcoin is a great concept and I'm mining away, but it functions like a cryptographic commodity, not a currency, since it holds all of the properties of a commodity:
1. Like a commodity, a finite quantity of bitcoins can be mined, similar to gold or oil being generated at a fixed rate. Bitcoin's value is in part derived from scarcity.
2. Like a commodity, price is a derivative of inherent value and unique properties possessed by said commodity. Bitcoin's inherent value is the incredible ability to produce untraceable (assuming the user is competent), irrevocable exchanges of possession, digitally, and, of course, the underlying value of all bitcoins in circulation is BOTH a function of the power requirement needed to generate the next block and the billions of dollars' worth of computing power (increasing exponentially over time) that would theoretically be needed to 'break' the block chain.
e.g, price per bitcoin is roughly = [value of untraceability + (cost of killing the entire block chain + power requirement to win coins from guessing the next block)]
By comparision, oil's value is
its industrial usefulness - you can manufacture gas or plastic out of it, for example; the value of beans comes from their edibility and high nutritional value. And, of course, you can build things out of wood. Bitcoin's value and unique properties are no different - they can be swapped between two locations discretely.
3. Also, like a commodity, bitcoin is virtually indestructible (assuming the user is competent and takes basic steps to back up their wallet, split their assets amongst multiple wallets, etc).
4. Commodity valuations are typically deflationary when measured against any circulated money, e.g. the price of oil or gold increases over time, just like bitcoin. Also, like commodities, bitcoin price goes through bubble valuation phases.
5. The rate at which someone can make a valid, verifiable transaction is too slow for bitcoin to function in modern-day commerce. I can buy a cup of coffee with some spare change in just a few seconds, and the transaction is verifiable within a couple of seconds. Bitcoin is really not verifiable until a few blocks have been generated, and nobody is going to wait in line 10-20 minutes per customer (assuming people are storing little wallets on cards one day). The block generation rate would have to be under 5 seconds for bitcoin to be usable in physical commerce and at least be usable like paper money.
6. While bitcoin is poorly-suited as a medium of exchange for physical commerce (point 5), it's also bad in and of itself as a medium of exchange for large transactions, since its anonymity means it's easy for buyer or seller to scam one another without a solid executed written contract, or solid third party mediator, both of which nullify the benefits of anonymity provided by bitcoin.
To summarize, bitcoin derives its value from commodity-like properties, and is a fairly poor medium of exchange in physical or e-commerce. It makes much more sense to me to call it a commodity. It's the first crypto-gold in existence.
I also think it's the greatest idea since sliced bread.
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