What’s the nature of currency?

[RainbowKun]

I have talked about the nature of value---consensus given by the public. Value is invisible and intangible, yet it actually exists. Value is undifferentiated or abstract human labor condensed in commodities. Such human labor is factually endowed by collective consensus.


About how consensus of human society is formed, some by violence, some by negotiation, some by legal agreement and some by multi-party cooperation.Since Bitcoin was born, mankind got a new way of reaching consensus, that is, technology. This is an innovation based on human civilization.


In the human society before, the formation of consensus was achieved one after another by historical evolution, which took a long time, and value was gradually manifested. However, when Bitcoin emerged, the generation of value is realized by consensus mechanism at the technical level. On the foundation of that, let's look at the nature of currency.

Bitcoin, in many occasions, is deemed as a currency, which I believe will inevitably become a super-sovereign currency and world currency supporting the entire human civilization. So, what is the nature of currency? Why can Bitcoin become a currency?


Currency is the greatest invention during the economic progress in human society. It rump up the effectiveness and efficiency of economic behavior, leading human society from barbaric to civilized. From an economic point of view, currency is a contract between the owner and the market regarding the right of exchange. Essentially, it is an agreement between swappers, reflecting the cooperative relationship between different individuals in society. Currency is also a consensus mechanism in effect.


Shells are the first to function as currency. Because at the beginning some people felt shells suitable, so they told others about it. When that's accepted by more and more people, a consensus was reached. Later, copper coins took the place of shell and then replaced by gold and silver. Next, it's legal tender's turn. Seeing the weakness of legal tender, humans started to place hope on Bitcoin. Satoshi Nakamoto reestablished the consensus of human society on currency by technology.


In economic behavior, currency acts as a transaction intermediary, which is endowed with value by consensus. Much of the time, value is not objective since whether a thing is of value depends purely on the public. The same is true for Bitcoin nowadays: Bitcoin is becoming a world currency because it's recognized by increasing number of people globally.


People discovered the underlying technology of Bitcoin and approved it. They also recognized Bitcoin's status as gold in digital world. Bitcoin's global consensus is expanding:

• firstly, consensus is reached among Bitcoin believers,
• and then step by step this consensus penetrates different countries and central banks,
• and finally it'll be accepted by everyone.

Now you'll find that the essence of currency is still consensus, and its value is given by consensus as well. The collective consensus will gradually render Bitcoin a world currency. No one can resist this trend but adapt to it.

[1715197428]

1715197428

[Fundamentals Of]

I beg to disagree that the nature or essence of currency is consensus, at least not until Bitcoin came. It may be so in a small and primitive community but it cannot be in an advanced and large society.

The fiat currency is made up of a lot of policies, decisions, changes, impositions, etc which are not out of consensus. Of course it could be argued that it is hard to gather the opinions and ideas of everybody and that the very reason why there is a government is that it would act and decide on behalf of the larger population.

However, this is not really the case about fiat. The decisions of the few persons who decide about the direction of the currency are not really reflective of the people's voices and sentiment. So everything is merely imposed on the citizenry whether they like or not.

[HaleyOccam]

1.The essence of currency is a value anchor. When you pay labor or produce something, the market will naturally give you a price corresponding to your payment (value manifestation)

2.The essence of currency is liquidity. For legal currency, it is done by the bank. His transmission medium is commodity circulation and capital circulation.

3.The essence of currency is credit, which is more effective for world currencies or super-sovereign currencies mentioned in forums.

4.

Musk said that the essence of currency is a commodity that can serve as a general equivalent.

5.I may also say that the essence of currency is rights. Whoever has a strong fist, whose weapon is advanced, whose technology is advanced, whose country is powerful, is what he says, and everyone must abide by it.

[RainbowKun]

I beg to disagree that the nature or essence of currency is consensus, at least not until Bitcoin came. It may be so in a small and primitive community but it cannot be in an advanced and large society.

The fiat currency is made up of a lot of policies, decisions, changes, impositions, etc which are not out of consensus. Of course it could be argued that it is hard to gather the opinions and ideas of everybody and that the very reason why there is a government is that it would act and decide on behalf of the larger population.

However, this is not really the case about fiat. The decisions of the few persons who decide about the direction of the currency are not really reflective of the people's voices and sentiment. So everything is merely imposed on the citizenry whether they like or not.

Yes, the current legal tender system, as you said, does not represent the interests of the majority of people, but is controlled by the minority. This is what I have emphasized in the previous article. The current world currency system is the most unreasonable 50 years in the history of human civilization. Therefore, in the end Bitcoin appeared, and Bitcoin represented the interests of the vast majority of the people. As Bitcoin's global consensus becomes stronger and stronger, more and more people will choose Bitcoin and abandon legal currency.

[defi-Dany]

Do you think that since Bitcoin can be issued without a central bank, cryptocurrency can bypass the state, replace the current legal currency, and achieve denationalization.

This kind of anarchist ideology should have been with mankind since ancient times, but I am sorry that this idea has never been realized in the past few thousand years.

Will it happen in the future? It is necessary to ask whether the country agrees or not.

The lesson of history is that thousands of years ago, when countries began to emerge, they began to monopolize coinage rights. Why? Because coinage itself is not for trading, but for taxation and effective governance.

Therefore, if you want to denationalize currency, you have to deprive the country of its coinage and currency issuance rights. Sorry, you are asking the country’s lifeblood. You have to ask the country whether it agrees or not.

So do you think the country will agree?

There is another question, can you really live in a world without a country?

My answer is that it is not clear what will happen after 100 years, but the country will definitely be there as long as you are alive.

[RainbowKun]

Do you think that since Bitcoin can be issued without a central bank, cryptocurrency can bypass the state, replace the current legal currency, and achieve denationalization.

This kind of anarchist ideology should have been with mankind since ancient times, but I am sorry that this idea has never been realized in the past few thousand years.

Will it happen in the future? It is necessary to ask whether the country agrees or not.

The lesson of history is that thousands of years ago, when countries began to emerge, they began to monopolize coinage rights. Why? Because coinage itself is not for trading, but for taxation and effective governance.

Therefore, if you want to denationalize currency, you have to deprive the country of its coinage and currency issuance rights. Sorry, you are asking the country’s lifeblood. You have to ask the country whether it agrees or not.

So do you think the country will agree?

There is another question, can you really live in a world without a country?

My answer is that it is not clear what will happen after 100 years, but the country will definitely be there as long as you are alive.

In the future, state institutions will certainly exist, but the issuance of currency will no longer be monopolized by the state. No state agency is willing to give up its coinage rights and monopoly profits. But when Bitcoin was born, everything changed. Bitcoin gives ordinary people another choice, to own Bitcoin and abandon legal tender. In this way, you can truly protect your own assets and allow your assets to appreciate. This trend has now taken shape and is unstoppable.

[Pmalek]

Bitcoin has already achieved consensus. It's users are in agreement that the POW-based technology has its use case and can be utilized to transfer value from point A to point B. As the time goes by, this agreement between people will either increase or decrease based on whether or not a new and better payment system will be created in the future. What the government thinks about the consensus that was reached between Bitcoin enthusiasts doesn't really matter. If people come to an agreement that Britney Spears posters can be used in exchange for goods and services, a government agency doesn't have a say in that matter.     

Do you think that since Bitcoin can be issued without a central bank, cryptocurrency can bypass the state, replace the current legal currency, and achieve denationalization.

I don't think Bitcoin will ever become the ultimate replacement asset for fiat currencies. At least not one that will be private and help people to not pay taxes. But I do believe that the two worlds can coexist and affect each other in a way to iron out their flaws and shortcomings.

[Kimberl2020]

There are five risks in the use of Bitcoin:

(1) Policy risks. The decentralized nature of Bitcoin may threaten the traditional monetary system, affect the government's macro-control capabilities and reduce fiscal revenue;

(2) Legal risks. At present, Bitcoin is only protected by the laws of various countries as a virtual commodity rather than a currency;

(3) Speculation risk. Bitcoin does not have national credit or physical assets as protection, and the price may fluctuate sharply, which is extremely risky for investors;

(4) Money laundering risk. Bitcoin has the characteristics of anonymity and freedom from geographical restrictions. It is difficult to monitor the flow of funds, and it will be very easy to circumvent government supervision;

(5) Substitution risk. Bitcoin still has defects such as lack of credit guarantee, poor security performance and easy to cause deflation. At the same time, it has to face the competition of various emerging altcoins, and there is a greater risk of substitution.

[Fundamentals Of]

I beg to disagree that the nature or essence of currency is consensus, at least not until Bitcoin came. It may be so in a small and primitive community but it cannot be in an advanced and large society.

The fiat currency is made up of a lot of policies, decisions, changes, impositions, etc which are not out of consensus. Of course it could be argued that it is hard to gather the opinions and ideas of everybody and that the very reason why there is a government is that it would act and decide on behalf of the larger population.

However, this is not really the case about fiat. The decisions of the few persons who decide about the direction of the currency are not really reflective of the people's voices and sentiment. So everything is merely imposed on the citizenry whether they like or not.

Yes, the current legal tender system, as you said, does not represent the interests of the majority of people, but is controlled by the minority. This is what I have emphasized in the previous article. The current world currency system is the most unreasonable 50 years in the history of human civilization. Therefore, in the end Bitcoin appeared, and Bitcoin represented the interests of the vast majority of the people. As Bitcoin's global consensus becomes stronger and stronger, more and more people will choose Bitcoin and abandon legal currency.

Given that Bitcoin is created as a reaction to the failure of the government and the central banks to value the trust that the people give to them, it is truly representing the welfare of the people. But since we are talking about consensus, Bitcoin would still be dependent on whether the people would choose to use it or not. Unlike fiat, it is not to be imposed upon anyone. And even if Bitcoin is a fair currency, if the people wouldn't use it because it is still convenient to use fiat, then it will remain simply as an alternative.

[amishmanish]

1.The essence of currency is a value anchor.

2.The essence of currency is liquidity.

3.The essence of currency is credit,

4.Musk said that the essence of currency is a commodity that can serve as a general equivalent.

Agree and it is clear that bitcoin has all of these properties.

5.I may also say that the essence of currency is rights. Whoever has a strong fist, whose weapon is advanced, whose technology is advanced, whose country is powerful, is what he says, and everyone must abide by it.

This has been the feature of currencies in the modern nation states. This is also in fact the only underlying "merit" for these currencies. They existed because the governments have the ability to exercise power. In the words of Must himself, "Government is just a corporation with a monopoly on violence".

This is the beauty of Bitcoin. Where the currencies issued by governments and influenced by the rich and powerful need violence to be able to render the first 4 services, Bitcoin needs no figurehead, no central authority, and most incredibly, no violence to accomplish the same.

Anybody who cares about the individual and society will be quick to realize that this is a superpower of bitcoin and bitcoin itself. None of the other so-called energy efficient, corporate coins can even come close to it.

There are five risks in the use of Bitcoin:

(1) Policy risks.
(2) Legal risks.
(3) Speculation risk.
(4) Money laundering risk.
(5) Substitution risk.

This should well be a post unto itself Kimberl. I don't think its even connected to what the OP wrote or anybody else commented. It is a worthwhile line of exploration though. Would you be kind enough to make a separate, detailed post on this? I'd be happy to merit it. PM me if you do otherwise it may get lost.

And there seems to be quite a few economically and philosophically inclined posters coming up in the last few weeks. A happy development. Lets all keep it up. Always good to learn from the different people.

[RainbowKun]

I beg to disagree that the nature or essence of currency is consensus, at least not until Bitcoin came. It may be so in a small and primitive community but it cannot be in an advanced and large society.

The fiat currency is made up of a lot of policies, decisions, changes, impositions, etc which are not out of consensus. Of course it could be argued that it is hard to gather the opinions and ideas of everybody and that the very reason why there is a government is that it would act and decide on behalf of the larger population.

However, this is not really the case about fiat. The decisions of the few persons who decide about the direction of the currency are not really reflective of the people's voices and sentiment. So everything is merely imposed on the citizenry whether they like or not.

Yes, the current legal tender system, as you said, does not represent the interests of the majority of people, but is controlled by the minority. This is what I have emphasized in the previous article. The current world currency system is the most unreasonable 50 years in the history of human civilization. Therefore, in the end Bitcoin appeared, and Bitcoin represented the interests of the vast majority of the people. As Bitcoin's global consensus becomes stronger and stronger, more and more people will choose Bitcoin and abandon legal currency.

Given that Bitcoin is created as a reaction to the failure of the government and the central banks to value the trust that the people give to them, it is truly representing the welfare of the people. But since we are talking about consensus, Bitcoin would still be dependent on whether the people would choose to use it or not. Unlike fiat, it is not to be imposed upon anyone. And even if Bitcoin is a fair currency, if the people wouldn't use it because it is still convenient to use fiat, then it will remain simply as an alternative.

Yes, legal currency is now very convenient to use, and it is still the mainstream of social use. But when Bitcoin was born, a whole new choice was given to the people. People can use Bitcoin freely without control. This kind of consensus idea is constantly spreading. As the underlying infrastructure of the Bitcoin ecosystem gets better and better, the consensus of Bitcoin will become stronger and stronger, and the use of Bitcoin will become higher and higher.

[davis196]

All the things that you and the forum members stated are right.
The only which I can add is that currency is a tool to measure the value of an object and/or to measure the value of human labor.The labor theory of value states that the value of most goods is basically the value of the labor,which was used to produce those goods.This theory was abandoned,since labor isn't the only component of value.Scarcity and utility are other components of value.
Technology and innovation can create utility and therefore,it can create value.
Technology can also create scarcity.Bitcoin is scarce and useful,therefore it has value.

[RainbowKun]

All the things that you and the forum members stated are right.
The only which I can add is that currency is a tool to measure the value of an object and/or to measure the value of human labor.The labor theory of value states that the value of most goods is basically the value of the labor,which was used to produce those goods.This theory was abandoned,since labor isn't the only component of value.Scarcity and utility are other components of value.
Technology and innovation can create utility and therefore,it can create value.
Technology can also create scarcity.Bitcoin is scarce and useful,therefore it has value.

Yes, your supplement is great. Currency is a tool to measure the value of an object and/or to measure the value of human labor. Human beings pay their own labor at work, and at the same time obtain their own remuneration in the form of currency. These remunerations are a judgment of labor. It can also be said to be the value created by our individual. In this case, currency is equivalent to value. However, this kind of value judgment standard needs more people's recognition and endows the power of consensus. At present, this recognition is based on the sovereign credit of the government. Bitcoin creates credit based on technology and algorithms.

[Wexnident]

Yes, legal currency is now very convenient to use, and it is still the mainstream of social use. But when Bitcoin was born, a whole new choice was given to the people. People can use Bitcoin freely without control. This kind of consensus idea is constantly spreading. As the underlying infrastructure of the Bitcoin ecosystem gets better and better, the consensus of Bitcoin will become stronger and stronger, and the use of Bitcoin will become higher and higher.

Wouldn't it still depend on how much "convenience" Bitcoin could actually provide and whether said convenience is, well, actually convenience to the party using it? Like take, for example, Bitcoin's ability to transact worldwide without borders and problems and whatnot compared to actually using fiat from one country to another, who says that said problem wouldn't be addressed in the future right? The only real way imo for Bitcoin to actually be the main currency to be used is if Fiat was complete. I hardly think that people would suddenly turn to Bitcoin just because others said its good, when in their current situation, Bitcoin and fiat pretty much does the same thing that they always need it to do.

[slaman29]

Yes, legal currency is now very convenient to use, and it is still the mainstream of social use. But when Bitcoin was born, a whole new choice was given to the people. People can use Bitcoin freely without control. This kind of consensus idea is constantly spreading. As the underlying infrastructure of the Bitcoin ecosystem gets better and better, the consensus of Bitcoin will become stronger and stronger, and the use of Bitcoin will become higher and higher.

Wouldn't it still depend on how much "convenience" Bitcoin could actually provide and whether said convenience is, well, actually convenience to the party using it? Like take, for example, Bitcoin's ability to transact worldwide without borders and problems and whatnot compared to actually using fiat from one country to another, who says that said problem wouldn't be addressed in the future right? The only real way imo for Bitcoin to actually be the main currency to be used is if Fiat was complete. I hardly think that people would suddenly turn to Bitcoin just because others said its good, when in their current situation, Bitcoin and fiat pretty much does the same thing that they always need it to do.

I also talked about this recently in arguing that Bitcoin needs to be easier and more convenient to use for it to truly gain mass adoption. And I'm not just talking about "having" Bitcoin or investing as majority of people who say they do actually just keep it on exchanges or worse, have something on Paypal or similar that isn't even really BTC.

Underlying infrastructure and all that yes, but the interface on top also needs to be very good. And the "fiat ramps" as they say.

[amishmanish]

I also talked about this recently in arguing that Bitcoin needs to be easier and more convenient to use for it to truly gain mass adoption. And I'm not just talking about "having" Bitcoin or investing as majority of people who say they do actually just keep it on exchanges or worse, have something on Paypal or similar that isn't even really BTC.

Underlying infrastructure and all that yes, but the interface on top also needs to be very good. And the "fiat ramps" as they say.

Bitcoin is pretty easy to use. I mean at least as easy as it comes in the crypto world. The usage issue is being solved with the Lightning Network pretty well I'd say. There is almost >2k BTC on LN now. So, the usage is definitely growing and it is more a matter of regulatory convenience now rather than technical convenience.

Same for the Fiat ramps. It is mostly about what regulation will allow which will determine how "adoption" grows. There is another way of looking at it though. Even without much regulation, Bitcoin has done well. People who take the time and effort, eventually find ways. Maybe it is better than bitcoin is for self-starters, rather than for those who need to have their hands held all the time to decide whats good for them financially. Most of those people should probably then just stick to Mutual Funds and shit.

[blue_nexus15]

The essence of the base currency is an organic means of payment, circulated as an exchange of value for goods, if fiat is an absolute consensus on value and generates inflation, then bitcoin has a  relative value. It even transcends the very nature of money - An identifiable asset. That is also the reason that the current legal currency(fiat) is losing economic and social efficiency.

[RainbowKun]

I also talked about this recently in arguing that Bitcoin needs to be easier and more convenient to use for it to truly gain mass adoption. And I'm not just talking about "having" Bitcoin or investing as majority of people who say they do actually just keep it on exchanges or worse, have something on Paypal or similar that isn't even really BTC.

Underlying infrastructure and all that yes, but the interface on top also needs to be very good. And the "fiat ramps" as they say.

Bitcoin is pretty easy to use. I mean at least as easy as it comes in the crypto world. The usage issue is being solved with the Lightning Network pretty well I'd say. There is almost >2k BTC on LN now. So, the usage is definitely growing and it is more a matter of regulatory convenience now rather than technical convenience.

Same for the Fiat ramps. It is mostly about what regulation will allow which will determine how "adoption" grows. There is another way of looking at it though. Even without much regulation, Bitcoin has done well. People who take the time and effort, eventually find ways. Maybe it is better than bitcoin is for self-starters, rather than for those who need to have their hands held all the time to decide whats good for them financially. Most of those people should probably then just stick to Mutual Funds and shit.

Bitcoin is more suitable for people with independent thinking and continuous learning ability. Not suitable for those who just wait for others to feed. Bitcoin is a brand new thing, only 12 years old. In my opinion, it brings together the best knowledge of various human subjects. This puts forward very high learning requirements for each of us. If we cannot maintain high-intensity learning of Bitcoin, we will not be able to keep up with the pace of development of Bitcoin and will eventually be eliminated by the times.

[slaman29]

Underlying infrastructure and all that yes, but the interface on top also needs to be very good. And the "fiat ramps" as they say.

Bitcoin is pretty easy to use. I mean at least as easy as it comes in the crypto world. The usage issue is being solved with the Lightning Network pretty well I'd say. There is almost >2k BTC on LN now. So, the usage is definitely growing and it is more a matter of regulatory convenience now rather than technical convenience.

Same for the Fiat ramps. It is mostly about what regulation will allow which will determine how "adoption" grows. There is another way of looking at it though. Even without much regulation, Bitcoin has done well. People who take the time and effort, eventually find ways. Maybe it is better than bitcoin is for self-starters, rather than for those who need to have their hands held all the time to decide whats good for them financially. Most of those people should probably then just stick to Mutual Funds and shit.

It really isn't. For me and for you, it's easy but you can't argue that it's easier than fiat and fintech apps.

And I do love Bitcoin so it's not like I'm attacking it but when I first came to use it 4/5 years ago, the apps weren't great if you want your own open source wallet which was non custodial. It's better today but it's still not as easy and friendly to use as other fintech apps but that's a problem we may not be able to solve if you still want people to set their own fees, have their own coin control, have multiple spend, etc.

It's also an attitude that we have to change a little. Instead of saying to people boy, go stick to mutual funds and shit, I think we can also look inward and make things for the mainstream.

We keep saying mainstream adoption right? So  shouldn't we act it also?

[RainbowKun]

Underlying infrastructure and all that yes, but the interface on top also needs to be very good. And the "fiat ramps" as they say.

Bitcoin is pretty easy to use. I mean at least as easy as it comes in the crypto world. The usage issue is being solved with the Lightning Network pretty well I'd say. There is almost >2k BTC on LN now. So, the usage is definitely growing and it is more a matter of regulatory convenience now rather than technical convenience.

Same for the Fiat ramps. It is mostly about what regulation will allow which will determine how "adoption" grows. There is another way of looking at it though. Even without much regulation, Bitcoin has done well. People who take the time and effort, eventually find ways. Maybe it is better than bitcoin is for self-starters, rather than for those who need to have their hands held all the time to decide whats good for them financially. Most of those people should probably then just stick to Mutual Funds and shit.

It really isn't. For me and for you, it's easy but you can't argue that it's easier than fiat and fintech apps.

And I do love Bitcoin so it's not like I'm attacking it but when I first came to use it 4/5 years ago, the apps weren't great if you want your own open source wallet which was non custodial. It's better today but it's still not as easy and friendly to use as other fintech apps but that's a problem we may not be able to solve if you still want people to set their own fees, have their own coin control, have multiple spend, etc.

It's also an attitude that we have to change a little. Instead of saying to people boy, go stick to mutual funds and shit, I think we can also look inward and make things for the mainstream.

We keep saying mainstream adoption right? So  shouldn't we act it also?

Bitcoin operation is indeed not very easy for novices. They are fundamentally different from the original bank payment operation methods, especially the most basic security measures such as the preservation of private keys. Quite a lot of novices eventually lost their bitcoins due to improperly kept private keys. This is a huge lesson for each of us. Bitcointalk has done a great job in the basic popularization of Bitcoin.