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Author Topic: Let's end one debate: Commodity vs Money  (Read 3825 times)
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October 10, 2011, 07:52:29 PM
 #21

First, let's define commodity. A commodity is a subcategory of "goods."
So how do you define a good? Is the Euro a good too?

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October 10, 2011, 08:23:27 PM
 #22

> evoorhees:
     > Specifically, commodities are goods which have little
     > or no "qualitative variation" across units of them.

Yes, though a good is typically defined as a physical object. I'll grant that a digital bitcoin is practicality a good, in contrast to an intangible service, and could therefore be a commodity for the reasons you state.


> evoorhees:
     > money emerges, and it emerges from its
     > prior categorization as a commodity.

'Prior' is a key word, but as discussed elsewhere on this forum, and in my tangential below, I don't think this is a relevant prerequisite for mediums of exchange, account, or value.


> evoorhees:
     > So we see that money IS a commodity

An unsound conclusion unsupported by your otherwise well written logical foundation. Money can be either an object or a record. Money is not necessarily a commodity otherwise most of our fiat and aggregates (M3) could not be money either.

Bitcoin reverses abstractions. Rather than evolving from commodity to money, bitcoin attempts to regress from money to commodity. I believe in fact, we are asking the wrong question and focusing on the wrong abstraction.

Bitcoins do not exist nor have inherent value. They are hardly goods but they are units of account and stores of value. They are exchanged, but they are not a medium. In and of themselves, they are not money.

Bitcoin transactions do exist and have inherent value. Bitcoin transactions and the public bitcoin record is the medium. Transactions have no qualitative variation but as a service, they are not a commodity.

Combined, they represent a monetary system. The value of transactions are denominated in bitcoin but bitcoin value has no current market relationship to the utility value of transactions.

I believe we would do ourselves a favour by refocusing on the utility value of the transactions as a service rather than forcing a non-extant thing into a incompatible definition established "Since the dawn of time".

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October 10, 2011, 10:05:54 PM
 #23

Since the dawn of time, forum members have debated whether Bitcoin is a commodity or a currency/money. Let's ignore what the courts might call it (who the hell knows), and examine it in terms of economics.

If we were fortunate enough to live in a world where the government had not destroyed everyones' economic education, we'd know that "currency" and "commodity" are not mutually exclusive concepts.

It's important to understand where money comes from, when it doesn't come from the diktat of kings. In a world without government monopolization of money, would we have money? Of course we would. But how, without coercion, would the marketplace know what to use as money?

First, let's define commodity. A commodity is a subcategory of "goods." Specifically, commodities are goods which have little or no "qualitative variation" across units of them. Coffee beans. Rice. Wheat. Gold. Iron. Every unit is more or less the same as every other. Cars, houses, and computers are not commodities. Sand would be considered a commodity but it is so common that nobody cares enough to trade futures on it =)

And now let's look at "money." If there is no money in an economy, people trade goods with each other in barter. What you find is that they will start accepting commodities in trade frequently, because they know they are more widely desired and tradeable. Coffee beans are more easily traded than sheep (because sheep are heavy and can't be cut in half). Eventually, that commodity which becomes most widely accepted in barter becomes the de facto "money." Societal markets may gravitate toward one or several forms of money - but always money emerges, and it emerges from its prior categorization as a commodity.

So we see that money IS a commodity - it is that most widely desired commodity. It is the commodity which everyone wants to use in exchange. Review the history of gold, as it was always a commodity and gradually was accepted to the point where it was used as money. But its use as money didn't suddenly remove the label of commodity from it. Gold is both money and commodity. (gold was not chosen arbitrarily either - it's specific properties have made it the best form of money).

Just as "skiing" is a subcategory of "sports," so too is "money" a subcategory of "commodity." So let's please stop debating whether Bitcoin is a commodity or a money. It is absolutely a commodity, for each bitcoin is equal to every other - and it is also money to the extent it is used as barter for payment. Bitcoin is already used in many transactions every day, and thus it is very clearly a money as well as a commodity.

We can argue whether it will continue to be a money, or will replace other monies, etc, but it is silly to ponder whether it's a commodity or a money.

It's both.
I learned from reading some publication of the Von Mises Institute that money can have an intrinsic value and an exchange value and that the actual value is the sum of the two.
At the time of first issue the exchange medium (money) has a value which is equal to its intrinsic value.
In the case of gold it's the value it had when the first goldsmith accepted it for storage, but did not yet issue certificates for barter.
In the case of bitcoins, I propose the intrinsic value is zero, because nobody would buy bitcoin if it hadn't any exchange value (yet), regardless the costs (computer hardware, energy) associated with its creation.

Translating this piece of theory to the OP's post I would propose that his 'commodity' value reflects the 'intrinsic' value as used by Von Mises, and that his (OP's) concept of  'the money' is the sum of intrinsic and added exchange value.

So, gold is a commodity which has both intrinsic and exchange value.
Rice (in the western world) is only a commodity.
Bitcoin is not a commodity (it has no intrinsic value), but being a medium of exchange, has an exchange value, in the sense of Von Mises.
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October 10, 2011, 10:49:44 PM
 #24

Money can be either an object or a record.

When it's an object, it is not the object itself that gives it vale, it's the record of it's value printed on top of it.
You may say that the object includes the ink and it's pattern (which is a form of information) but then i could say that the computers and storage and the internet are all part of the object bitcoin.
By that i actually mean the system bitcoin is running on.
And that can be brought back to physical money since the coins and notes are all just one big system that is carrying information around.
That is what money is, an information system, an elaborate i-owe-you scheme that we all agreed on and maintain.
And the thing with information is that it can be encoded in many ways, like with ink on paper or as electric charge stored in ram.
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October 11, 2011, 02:42:16 PM
 #25

For me the capital question is
Does money need so called "intrinsic value" (part of its value is not exchange or monetary value derived from the fact that is used as a medium of exchange)?
And the answer is no. As said, money is information.
Money can have only monetary value.

Many Austrian school advocates and economists believe that money needs intrinsic value. This is the dogma that leads many people to state things like "bitcoin is a scam because it has no intrinsic value" or "bitcoin doesn't worth the paper is not printed on".

The advantage of gold is that it cannot be printed by a central authority, but bitcoin shares this advantage. Gold would be superior to bitcoin as a medium of exchange only if the internet somehow breaks down. A rainbow bomb?

I would say that a commodity needs to have some value that is not derived from the fact that the good is used as a medium of exchange.
Therefore, bitcoins are not commodities but are money (because they have monetary/exchange value).

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 11, 2011, 03:09:08 PM
 #26

For me the capital question is
Does money need so called "intrinsic value" (part of its value is not exchange or monetary value derived from the fact that is used as a medium of exchange)?
And the answer is no. As said, money is information.
Money can have only monetary value.
Remember that information can have features and properties.
And the information about the value is meaningless without a system that can act on the information.

We also need to deeper define money as money systems, money carriers and value information to make sense of this discussion.
Money value is just information, but a value carrier may need some intrinsic properties that make it function.
And a money carrier or a money system can be valued for certain features.
Sometimes these features are nessesary to correctly use the value information, sometimes they add a nice bonus to the use of value information etc.
My point is that the word money covers too many things and we need to specify more.
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October 11, 2011, 03:17:10 PM
 #27

My point is that the word money covers too many things and we need to specify more.
My point is, you can not use any existing legal frame to regulate bitcoin. If you want to regulate bitcoin (and the like) you have to create entirely new legal frame!

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October 11, 2011, 03:51:49 PM
 #28

I don't know if this is a joke thread, I presume no.

Bitcoin is neither money nor commodity.

Bitcoin is a synthetic security, that is unfortunately receiving a lot of fraudulent promotion.
I would really appreciate if people would clearly define the terms they are introducing in a discussion.
For as far as I can find it, the definition of 'synthetic security' as given by moneyterms.co.uk is: "A synthetic security is created by combining securities to mimic the properties of another security. The security being mimicked may not actually exist."

I don't think the description of bitcoin comes even near this definition.

Quote
The existing laws about illegal offerings of securities will be used to prosecute those promoters who perpetuated and are perpetuating the deception.
What deception are you talking about?

Quote
At this time the amounts involved aren't big enough to trigger criminal prosecutions. The litigation under private or commercial law rules had already occurred.

I presume that all those discussions will be resolved in most jurisdictions in the next 2-3 years, unless the unit price of bitcoin drops to such a low levels that the outcome will not be worth litigating.
I agree that at the moment bitcoin is an insignificant threat to the current money masters, but that they will happily use every possible legal pretext to kill it once it has hit mainstream, if ever.

Edit:
Quote
Bitcoin is neither money nor commodity.
Definition of money as per Wikipedia: "Money is any object or record 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 in the past, a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can serve as money."

Bitcoin is a secure verifiable binary record which is generally accepted as payment and debt repayment in the socio-economic context of bitcoin adepts. It serves as exchange, unit of account, store of value and maybe as a standard of deferred payment. So, per the very definition of money, bitcoin is plainly just that, money.
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October 11, 2011, 04:45:47 PM
 #29

My point is that the word money covers too many things and we need to specify more.

I just mean the medium of exchange.
But the wikipedia definition fits well with my use of the word:

"Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. community"

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 11, 2011, 04:46:18 PM
 #30

So, per the very definition of money, bitcoin is plainly just that, money.
You are quoting very good sources for the beginners. May I suggest that you dive a little bit deeper: follow the links I gave to the John Nagle's post, and follow his links to the appropriate legal sources.

This back-and-forth is kind of pointless, leads to no greater understanding for anybody. With the beginner-level argumentation one can make a proof that cigarettes are money. And in fact they were in use as such in some prisons and internment camps.

Ultimately, this kind of arguments for and against will end up as an evidence in some future trial about illegal promotional and sales activities of bitcoin. Quite obviously you are a beginner, for example don't meet the definition of "accredited investor". You also never have been involved in any securitues litigation, and probably not in any litigation whatsoever.

Please treat this forum as an opportunity to learn the wider social context of this nice innovative whatchamacallit called bitcoin. Repeatedly arguing the same point over-and-over with somebody like me is just a waste of your time. You can spend it better on a real learning and education. Web is full of the resources to learn, but all the good ones require focus and dedication, they aren't a single page summaries like the ones you referred to.

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
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October 11, 2011, 04:57:11 PM
 #31

So, 2112 how do you define money?

By the way, the link you posted by Nagle talks about GBLSE, which is a centralized stock exchange. I don't see how it is related to this discussion.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 11, 2011, 05:47:51 PM
 #32

So, per the very definition of money, bitcoin is plainly just that, money.
You are quoting very good sources for the beginners. May I suggest that you dive a little bit deeper: follow the links I gave to the John Nagle's post, and follow his links to the appropriate legal sources.
Thanks for your compliments but I don't think reading treatises about stock exchanges will really change the definition of money.

Quote
This back-and-forth is kind of pointless, leads to no greater understanding for anybody. With the beginner-level argumentation one can make a proof that cigarettes are money. And in fact they were in use as such in some prisons and internment camps.
Please, do give me an example of 'beginner-level argumentation' that proves that 'cigarettes are money'.
As of now, I'd not be able to achieve this. (I wonder whether this makes me a not-even-beginer in securities litigation.)

Quote
Ultimately, this kind of arguments for and against will end up as an evidence in some future trial about illegal promotional and sales activities of bitcoin. Quite obviously you are a beginner, for example don't meet the definition of "accredited investor". You also never have been involved in any securitues litigation, and probably not in any litigation whatsoever.
Exactly, I am a useless amateur who spends all his time wasting the time of 'accredited securities investor para-legal counselors' with extensive experience in securities and other fraud litigation, or whatever 'whatchamacallit' else you are Smiley

Look, if you are getting tired of arguing things that other people think are wrong, and you do that in a public forum like this is, then please do not be offended, or bored for that matter, if somebody is trying to reply and tells you where he thinks you are making a mistake.

Quote
Please treat this forum as an opportunity to learn the wider social context of this nice innovative whatchamacallit called bitcoin. Repeatedly arguing the same point over-and-over with somebody like me is just a waste of your time. You can spend it better on a real learning and education. Web is full of the resources to learn, but all the good ones require focus and dedication, they aren't a single page summaries like the ones you referred to.
Yeah right... Please point me to a thorough college/university textbook on bitcoins then. O wait, that does not exist.

And if a simple definition, found in a 'one page summary' somewhere on the web, already proves your statements wrong, then please be a good sport and admit either your mistake or lack of economics 101 knowledge, and don't try to intimidate people out of the discussion, just because of the simplicity of their argumentation and/or their supposedly lack of education. It's the simple arguments that are the most fundamental.
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October 11, 2011, 06:19:31 PM
 #33

So, 2112 how do you define money?

By the way, the link you posted by Nagle talks about GBLSE, which is a centralized stock exchange. I don't see how it is related to this discussion.
It doesn't matter how I define money. This is for the courts to decide.

The link into the GLBSE thread is a very clear and important example that the definition of "security" under the criminal law is way much broader that under the contract law. And it is a beautiful example how the "we didn't issue a security" defense was useless in the court. The judges and jury will always focus on the inherent deception in the sales and promotional practices. In the Bowdoin case there were additional counts of mail and wire fraud which greatly strenghtened the prosecution case.

Anyway, I'm not writing this to argue. The point is to provide the interested readers with somewhat competent perspective from non-lawyers on how to avoid getting snagged into an expensive litigation.

I'm hoping that the inteligent readers will understand the arguments and do a further research on their own. When the large portion of the Bitcoin community is engaged in some form of crookery it is easy to get inadvertently caught in some "accesory to fraud" litigation.

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
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October 11, 2011, 06:55:51 PM
 #34

Language is a social construct. A civil legal definition is no more valid than colloquial beginner-level argumentation. We have agreed to the basic wikipedia definitions of commodity, money, currency, goods, and services and are arguing about whether or to what extent they apply to this previously uncategorized innovative whatchamacallit called bitcoin. After the French court makes a ruling, we will benefit from their argumentation but continue to debate whether the French court's findings were correct.

My two bits:
physical good NO
intangible service MAYBE
commodity MAYBE
money YES
currency YES
new asset class YES
best idea since velcro YES

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October 11, 2011, 07:00:31 PM
 #35

A security requires an issuer.
For the purpose of criminal law the issuer is clear: it was Gavin Andresen until 2011-07-03, then the next two tranches were signed by "fabianhjr".

https://github.com/bitcoin/bitcoin/blame/master/src/main.cpp

and look for lines 1309 to 1318.


Really? What if the client let everyone lock in their own block number/hashes? What would it mean then?
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October 11, 2011, 09:58:03 PM
 #36

@2112

Relax: before you invoke "criminal" law, ask yourself why you are doing so.
You'll live a happier life if you live with no fears.
Read about the 4 knights of infocalypse: you are riding one of them.


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October 11, 2011, 11:02:58 PM
 #37

I'm half expecting that in the future the next tranches of Bitcoin will be signed off by some unknown Arsene Lupin who will access the github only through Tor and be essentially nontraceable.
... and one day God created gold to serve people as money. Now he signs off his deeds by some unknown Arsene Lupin who will access planet Earth only through Tor and is essentially nontraceable. Amin...

Although gold was illegally created by God people continue to use it as money for the last 6000 years. Go figure...

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October 11, 2011, 11:26:12 PM
 #38

Although gold was illegally created by God people continue to use it as money for the last 6000 years. Go figure...
I will put this one in my file with quotes/signatures if you agree:

"Although gold was illegally created by God people continue to use it as money for the last 6000 years. Go figure..."
 -- becoin ( https://bitcointalk.org/index.php?topic=47111.msg569047#msg569047 )
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October 12, 2011, 02:18:01 PM
 #39

So, 2112 how do you define money?

By the way, the link you posted by Nagle talks about GBLSE, which is a centralized stock exchange. I don't see how it is related to this discussion.
It doesn't matter how I define money.
It is a key concept for the topic we were discussing. A very important topic in my opinion.

This is for the courts to decide.
I'm not a big fan of democracy, but in democracy we're supposed to decide what the court will enforce.
Yes, there's "representative" politicians in the middle and all but hopefully we will get there.
I mean suppressing money monopoly/cartel laws.

The link into the GLBSE thread is a very clear and important example that the definition of "security" under the criminal law is way much broader that under the contract law. And it is a beautiful example how the "we didn't issue a security" defense was useless in the court. The judges and jury will always focus on the inherent deception in the sales and promotional practices. In the Bowdoin case there were additional counts of mail and wire fraud which greatly strenghtened the prosecution case.

Anyway, I'm not writing this to argue. The point is to provide the interested readers with somewhat competent perspective from non-lawyers on how to avoid getting snagged into an expensive litigation.

I'm hoping that the inteligent readers will understand the arguments and do a further research on their own. When the large portion of the Bitcoin community is engaged in some form of crookery it is easy to get inadvertently caught in some "accesory to fraud" litigation.

Law and bitcoin, another interesting topic.
Watch this video:
http://onlyonetv.com/2011/09/the-bitcoin-show-episode-044/

This guy is very interested in discussing bitcoin legal issues.
I think these people are very interested in that subject too:

http://bitcoinconsultancy.com/
http://onlyonetv.com/2011/07/the-bitcoin-show-episode-027/

Now let's go back to money and bitcoin.


2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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