Yet Another Misunderstanding of Bitcoin

[mizerydearia]

From one of my Uncles after introducing Bitcoin to them:

Hello,
I am not familiar with BitCoin. Sounds like a closed-ended bartering mechanism? right?
 
In my crude opinion, for currencies to be relied on, they should be:
1.  Hard Currency (internationally float-able/exchangeable)
2.  Have liquidity (sufficient number of people believe / concur in its exchangeable value)
3.  Have the ability to be used by mainstream population
 
It would be interesting to see about how other people adopt it long-term. and what is its rate of adoption.
 
Creating money has always been an interesting topic in history.

I don't think your uncle is misunderstanding anything yet.  Bitcoin isn't hard money, it's not even money really.  It's a currency.

I am not familiar with what a "closed-ended bartering mechanism" is and thefore I do not understand whether it is accurate understanding of Bitcoin or not. =/  Regardless, I am not certain I can best explain Bitcoin since the countless individuals I have discussed with or tried explaining to, I failed mizerably and haven't been able to peak anyone's interest.  Therefore I instead direct them to partially participate with the rest of the community/enthusiasts, if at all likely for them to engage in such participation.

[MoonShadow]

I don't think your uncle is misunderstanding anything yet.  Bitcoin isn't hard money, it's not even money really.  It's a currency.

[hugolp]

I am not familiar with what a "closed-ended bartering mechanism"

It seems to me that it is a convoluted way of saying "medium of exchange".

I don't think your uncle is misunderstanding anything yet.  Bitcoin isn't hard money, it's not even money really.  It's a currency.

Isnt the objective of a currency to be money?

[freetx]

His points are reasonable, only thing I think he should reconsider is his concerns regarding liquidity.

Liquidity is only a real problem when divisibility is hard (its hard to pay for something with a spec of gold). Being a pure digital currency, there are no real liquidity concerns since transactions can be done at the .00000001 level.

[MoonShadow]

Isnt the objective of a currency to be money?

The objective of a currency is to be a substitute for money.  Think real cream versus coffee creamer in your coffee.

The two concepts are not mutually exclusive, but an object being one does not conclude that said object is the other as well.  In our modern world, most of us have grown up thinking that fiat currencies such as the US$ and the Euro are money, but they are not.  Money is some kind of commodity that has certain characteristics that lead to it's use as a medium of exchange, naturally.  But this says nothing about the standard trade unit.

Currencies are units of measurement of a medium of exchange.  A fiat currency is a unit of measurment defined by fiat, i.e. by an act of a government.  A hard currency is a currency that is defined as a particular amount (usually weight) of a commodity that is regarded as a money, such as the silver certificates of fifty years ago in the US.

A lump of pure gold is money, but not a currency, until some mint strikes it into a standard sized coin that says as much on the face of it.

A piece of paper can be a currency, if backed (or enforced) by some large entity, but is not money (even if it is used with a gold standard) because paper isn't the kind of commodity that makes a good money.

[freetx]

Isnt the objective of a currency to be money?

A piece of paper can be a currency, if backed (or enforced) by some large entity, but is not money (even if it is used with a gold standard) because paper isn't the kind of commodity that makes a good money.

Absolutely correct. And to ask the question "Can debt (ie. Gov Bonds) be money?" is one of the most fundamental enlightening questions a person can ask.

On a semi-related note: I have seen many FRN's - but the only USD's I've seen are in the shape of pre-65 silver coins.

[hugolp]

Isnt the objective of a currency to be money?

The objective of a currency is to be a substitute for money.  Think real cream versus coffee creamer in your coffee.

The two concepts are not mutually exclusive, but an object being one does not conclude that said object is the other as well.  In our modern world, most of us have grown up thinking that fiat currencies such as the US$ and the Euro are money, but they are not.  Money is some kind of commodity that has certain characteristics that lead to it's use as a medium of exchange, naturally.  But this says nothing about the standard trade unit.

Currencies are units of measurement of a medium of exchange.  A fiat currency is a unit of measurment defined by fiat, i.e. by an act of a government.  A hard currency is a currency that is defined as a particular amount (usually weight) of a commodity that is regarded as a money, such as the silver certificates of fifty years ago in the US.

A lump of pure gold is money, but not a currency, until some mint strikes it into a standard sized coin that says as much on the face of it.

A piece of paper can be a currency, if backed (or enforced) by some large entity, but is not money (even if it is used with a gold standard) because paper isn't the kind of commodity that makes a good money.

It seems to me it all depends on the definition of money. If you define money as whatever the people uses as medium of exchange, then a currency (or anything) that people uses as money becomes money (and stops being money when people dont use it as money anymore).

[kiba]

Bitcoin's law: If a discussion grow longer, the probability of an argument on what exactly bitcoin is increases. Is it money, currency, commodity, or something else entirely?

[ShadowOfHarbringer]

Bitcoin's law: If a discussion grow longer, the probability of an argument on what exactly bitcoin is increases. Is it money, currency, commodity, or something else entirely?

If i wanted to cover bitcoin in one sentence, then i would say "Bitcoin is the first virtual, electronic bullion".

[MoonShadow]

It seems to me it all depends on the definition of money. If you define money as whatever the people uses as medium of exchange, then a currency (or anything) that people uses as money becomes money (and stops being money when people dont use it as money anymore).

I'm not debating semantics here, I'm stating established economic definitions.  You could define the word "money" as a gram of lint from your pocket, but that wouldn't make it money from any economic perspective.  Any money has several characteristics, as a minimum subset, that are required for the commodity to be ideal for the use as a medium of exchange.

[hugolp]

It seems to me it all depends on the definition of money. If you define money as whatever the people uses as medium of exchange, then a currency (or anything) that people uses as money becomes money (and stops being money when people dont use it as money anymore).

I'm not debating semantics here, I'm stating established economic definitions.  You could define the word "money" as a gram of lint from your pocket, but that wouldn't make it money from any economic perspective.  Any money has several characteristics, as a minimum subset, that are required for the commodity to be ideal for the use as a medium of exchange.

Honestly the one I stated is the most common definition of money that I have read. But you might have a different experience.

[grondilu]

Honestly the one I stated is the most common definition of money that I have read. But you might have a different experience.

IMHO, you shouldn't care that much about definitions.  In french, we don't even have a proper name for "money".  Most usual word is "argent", which is the same as the word for silver.  The word "monnaie" existe but is also used for "change".  We use "devise" for currency, but never for money.

What I mean is that things exist beyond the name you use to call them.  You both have your idea of what money is.  Why one of you should be wrong ?

[hugolp]

Honestly the one I stated is the most common definition of money that I have read. But you might have a different experience.

IMHO, you shouldn't care that much about definitions.  In french, we don't even have a proper name for "money".  Most usual word is "argent", which is the same as the word for silver.  The word "monnaie" existe but is also used for "change".  We use "devise" for currency, but never for money.

What I mean is that things exist beyond the name you use to call them.  You both have your idea of what money is.  Why one of you should be wrong ?

No problem in having your own definition, but when you are talking with someone agreeing in the meaning of the words is needed.

[em3rgentOrdr]

Bitcoin's law: If a discussion grow longer, the probability of an argument on what exactly bitcoin is increases. Is it money, currency, commodity, or something else entirely?

Let's call that KIBA'S LAW!!!  

Also keep in mind Bill Clinton's law: "It all depends on "what the meaning of the word 'is' is."   So I would argue that we should decouple the following two related meanings of "is" as relevant to bitcoin:

• the fundamental physical structure that describes the entity known as bitcoin: a distributed electronic network-based peer-to-peer cryptographic timestamp network of transactions that uses proof-of-work to ensure that the official mutually-agreed-upon list of transactions could only be generated by nodes with a majority of network power of computers solving for SHA hashes based on a difficulty that increases with network size and over time.
• the functional ability that describes what the entity known as bitcoin does or can be used for: a distributed electronic network-based peer-to-peer medium of exchange where issuance of new units of exchange (i.e. rate of inflation) is limited to a fixed rate per unit of time which gradually decreases over time and which prevents double spending without requiring a centralized agency.

Of course I am not the best with words, but I hope you understand that the difference between fundamental structure as a distributed timestamp network and functional ability as a distributed inflation-resistant electronic currency.  There are further relevant definitions of "is", such as it's legal definition as possibly a currency/monetary instrument versus a commidity.  This separation between structure and function is important since bitcoin's fundamental structure could allow it to be used for other functions, such as DNS registration or email spam prevention.

[ShadowOfHarbringer]

Bitcoin's law: If a discussion grow longer, the probability of an argument on what exactly bitcoin is increases. Is it money, currency, commodity, or something else entirely?

Let's call that KIBA'S LAW!!!  

Agreed

• the fundamental physical structure that describes the entity known as bitcoin: a distributed electronic network-based peer-to-peer cryptographic timestamp network of transactions that uses proof-of-work to ensure that the official mutually-agreed-upon list of transactions could only be generated by nodes with a majority of network power of computers solving for SHA hashes based on a difficulty that increases with network size and over time.
• the functional ability that describes what the entity known as bitcoin does or can be used for: a distributed electronic network-based peer-to-peer medium of exchange where issuance of new units of exchange (i.e. rate of inflation) is limited to a fixed rate per unit of time which gradually decreases over time and which prevents double spending without requiring a centralized agency.

[Common folk MODE]
What da hell are ya talkin' 'bout man ?
If that was an insult, you're getting your ass kicked today.
[/Common folk MODE]

[hugolp]

This separation between structure and function is important since bitcoin's fundamental structure could allow it to be used for other functions, such as DNS registration or email spam prevention.

I could not agree more. Money really is a function, not a determined object.

[MoonShadow]

It seems to me it all depends on the definition of money. If you define money as whatever the people uses as medium of exchange, then a currency (or anything) that people uses as money becomes money (and stops being money when people dont use it as money anymore).

I'm not debating semantics here, I'm stating established economic definitions.  You could define the word "money" as a gram of lint from your pocket, but that wouldn't make it money from any economic perspective.  Any money has several characteristics, as a minimum subset, that are required for the commodity to be ideal for the use as a medium of exchange.

Honestly the one I stated is the most common definition of money that I have read. But you might have a different experience.

The common definition isn't the economic definition.  Just like many other terms used in common speech, the common use of the word is vague, while the jargon use is not.  Take the term, "coke"; it could refer to a number of things in the common speech, but usually either a form of cocaine or a dark soft drink.  But used in a specific context, coke becomes one of the early products of steel production.

Context is important.  I don't feel that it should be neccessary for me to mention the context in every post that I make on this forum, since the context of the economic use of the term "money" is already established as a de facto.

[MoonShadow]

This separation between structure and function is important since bitcoin's fundamental structure could allow it to be used for other functions, such as DNS registration or email spam prevention.

I could not agree more. Money really is a function, not a determined object.

I almost agree, but with a couple cavets.

Money isn't the object, it is a set of characteristics of the object that render that object the best choice for the function, within the set of objects that are available to the trading parties.  But for something to be a money, it must have these characteristics as part of their nature, not as part of a promise of a third party.

And this is one reason that Bitcoin is not money, yet is a wonderful currency.  The value of any particular coins are not a characteristic of the data in question, but a result of the implicit backing of the entire system.  Without the blockchain and the Bitcoin P2P network, the bitcoins recorded in my wallet are of zero value.

[mizerydearia]

I contacted my Uncle again regarding the latest headline from EFF https://www.eff.org/deeplinks/2011/01/bitcoin-step-toward-censorship-resistant and he replied suggesting:

EFF is a great org.
 
I think odds are not in favor of any anonymous exchange medium.  if governments cannot control & track it, they cannot tax it.  Therefore, there is lots of barriers to overcome.  The master keys of the key technologies are always held by government entities, for many sensible reasons, chief among them is fraud and crime.
 
if the above can be overcome, liquidity is still a barrier.  Liquidity refers to sufficiently large markets and volumes, so the medium can be valued for trade.
 
several years ago 2002, I wanted to do a similar thing in a smaller scale - just one country -Denmark.  In discussion with a Danish bank team, we finally concluded that the concept does not have a technical barrier.  the para-technology barriers cannot be under-estimated.
 
please do not post / publish my comments /emails without prior authorization.  I value my privacy greatly.
 
My email communications are always communications of one to one. Not one to many.  Not even when you might think it is anonymous, because it is not.

It is a bit disappointing that based on his initial statement his concern seems to be focused on 'governments.'  While I recognize that majority of people have established the idea that the world revolves around government control and without that control (from governments) then the idea may be replied to in a kind of oppositional manner, it isn't so exciting that people pursue that ideaology.  However, the initial statement merely suggests that he 'thinks the odds are not in favor.'  Perhaps even though he had communicated merely that he 'thinks' the odds are not in favor, that his actions (or inactions) based on his thoughts (or communicating such thoughts) will be representative of the very statement that 'he thought,' particularly that of not being in favor of any anonymous exchange medium.  Therefore because he 'thinks' the 'odds' are not in favor, he also will therefore not be in favor of any anonymous exchange medium.  I, on the other, have no concern what 'the odds' (what odds? or rather, if this concept has odds, then everything has odds) are and also have no concern for any similarities to that of gambling, but am enthusiastically in favor of the Bitcoin exchange medium, much more favorably than that of the us dollar exchange medium.  By the way, I had also linked to my Uncle the thirty minute cartoon entitled The American Dream which explains the us dollar, federal reserve, current system of 'exchange medium,' however I did not receive any response from him in relation to that video and am uncertain if he watched it or any portion of it and also if he does or does not agree with any or some of the content expressed within the video.

Continuing past the second opening sentence of his, after his first, suggesting that the EFF is great org., "The master keys of the key technologies are always held by government entities, for many sensible reasons, chief among them is fraud and crime."

The master keys of the key technologies are 'always' held by government entities

Now I clearly recognize that he did not watch the video and that he also is not aware that ~100 years ago there was no government entity and therefore of any 'key technologies' that existed during such times, that there was also no 'master key.'  Other than that, due to lack of consideration or realization of such realities of history, I have no further statements.

Anyone else care to respond to the insights brought on by my Uncle?

Actually, I just noticed before even reading his response fully, that my Uncle had declared not to publish his comments.  It is too late, and even so, information wants to be free.  I imagine that in my posting his response (which may be similar to many other individuals and can probably be reproduced or the same ideas can be established from other publicly accessible resources).

Considering my Uncle's stature in society I imagine that if there is any violation of law involved in my posting his message written to me and also based on our not so well established closeness in regards to Family or acceptance of one another as individuals that there may be 'legal' concerns established with assistance from brutal us government, law, policing, control, power, manipulation, money, greed system that is established throughout the world (as has been seen relative to Julian Assange requested to be extradited even though not us citizen) directed towards this particular forum post.

[FreeMoney]

There is no reason to publish his email verbatim if he doesn't want you to, it is simple enough to paraphrase, I'll do it for you:

I like the EFF

The odds are against bitcoin because governments want to tax and track. This is right for them to want because of crime and fraud.

Lack of liquidity will ruin bitcoin anyway. There are not large enough markets and volumes.

I wanted to do a similar thing in Denmark, banks said it was possible techwise but impossible because of something called para-technology, I believed them.

Don't publish my comments.

Really, this is for your eyes only.