A Simple Reason Why Bitcoin is not Money

[JamesNZ]

Money is often defined as a medium of exchange, a store of value and a unit of account. But that definition is generic. It says nothing about the most important thing - the value of money. How do we actually know the worth of money? That is, how can we, as market participants, determine how many units of something are worth accepting for goods or services? Let's say you're selling a bicycle, and in return, a person offers you 100 units of something they call a 'medium of exchange'. Can that generic term tell you whether the exchange is worth it or not? Well, apparently not. On the one hand, you know that a bicycle is used for transportation, recreation, and sport and that its value depends on how well it serves those purposes. On the other hand, you have no idea what purpose is served by what was offered for your bike. Therefore, for something to be money, it is not enough that it can be exchanged on the market, that it can be used as a medium of exchange. The precondition is that it can fullfil a purpose. The fulfilment generates a specific amount of benefit. The higher the benefit the higher the value. That value is then used as a reference to estimate how many units of that thing are worth accepting for goods and services.

Let's therefore assume that those 100 units are 100 apples. Apples can fulfill the purpose of nutrion. By knowing that purpose, you can evaluate whether it is worth giving your bike for those 100 units. The same is true for other products that have historically been money - livestock, grain, wine, fur, metals, etc. All these products were able to fulfill purposes beyond serving as a medium of exchange. That was then used for estimating how many other products to give for them.

Today, the dominant type of money is the one created by banks, i.e. fiat money. Unlike the above-mentioned types of money, it has no value in itself, i.e. it has no intrinsic value. However, as we have shown above, it is the purpose, not the form, what gives value to something. If an item can fulfill a purpose besides being exchanged on the market it has value. With fiat currencies, the purpose is the return to the banks. Namely, the units of these currencies are created as claims of commercial banks based on approved loans to individuals and companies, and as claims of central banks based on the purchase of government bonds. When they are created as such, the units are put on the market where they are used as a medium of exchange. However, since banks demand them from debtors, the units are regularly withdrawn from the market to be returned to the banks for satisfying loan and bond debt. By fulfilling this purpose, they are no longer exchanged on the market, just like apples that are eaten. And they come back to the market with new debt.

As the return of fiat units is protected by collaterals, we can easily determine the value of these units. Namely, if debtors fail to return them, the banks themselves will return them after they get them on the market by selling foreclosed property of the debtors. So, if banks protect the return of 10 thousand units of some currency with low-end cars, then the value of these units is somewhere in the range of the value of these cars - the market will get such cars at the withdrawal of 10 thousand units. If banks use high-end cars as protection, the units are worth more. If they use houses, the value of the units is much higher.

Now we finally come to Bitcoin. Bitcoin is said to be money. But is that true? Given the above, we can determine this quite easily. All we need to do is answer the following question: can Bitcoin fulfill a purpose besides being traded? And here the answer is resolutely - no. Namely, the way Bitcoin was created, is that its author came up with a protocol that assigns virtual points (bitcoins) to online address. The points are stored in a peer-to-peer database called blockchain. However, whichever owner of an address holds the points, cannot use them for anything except send them to another online address. They can only exchange them on the market, i.e. use them as a means of exchange. Therefore, there is no purpose that Bitcoin could fullfil to generate a specific amount of benefit to its holders. Consequently, there is no value to estimate. Due to the absence of a value as a reference for how many bitcoins is worth accepting for goods or services, market participants do that blindly. For example, they used to give two pizzas for 10 thousand bitcoins, and today they give the equivalent of a whooping 1,000 houses for the same number of bitcoins. This is a nice practical confirmation of the fact that Bitcoin is not money. It creates the illusion of money because it is exchanged but is not money because it lacks value reference.

If Bitcoin is not money, then what is it? Some would now say: "asset", "commodity", "coin", token", etc. Yet, all these terms refer to purposeful items that have value references. Tokens, for example, can be redeemed by the issuer for a predetermined amount of money, goods, services, etc. This amount is a value reference for estimating how many other things are worth giving for these tokens. So what exactly is Bitcoin? Well, it is a system for recording members of a decentralized and self-governing pyramid scheme. Unlike traditional pyramids, this one has no central operator that collects purposeful items. Instead, individuals pay such items into the scheme by giving them directly to existing members. Then the system records them as members by attributing a certain number of points to their online addresses. Finally, members wait for new contributors to exit the scheme. Without them, the return of purposeful items is not possible. And this is how all pyramid schemes operate. Since the Bitcoin scheme is online and thus global, early members made huge profits. This caused great public interest and created a considerable membership base. It is estimated that today the scheme has more than 200 million members. How long will that modern-day investment pyramid last is yet to be seen.

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[Hatchy]

It works as money because it is exchanged but is not money because it is purposeless.

How do you mean that Bitcoin is purpose less mate?

everyone here knows that Bitcoin isn't the same as regular money, but it shares some qualities with money, even though it's not officially seen as traditional money by most authorities. Instead, it's often called a cryptocurrency or digital asset. Despite not being classified as money, people use Bitcoin for transactions, investments, and as a store of value, similar to money. It's a digital asset that can be used to buy goods and services, making it an alternative to regular currencies, although it's not considered money in the traditional sense.

If Bitcoin is not money, then what is it? Well, it is a means of recording membership in some kind of decentralized and self-governing pyramid scheme. Members invest purposeful items in it - goods, services and money. They then get recorded by the peer-to-peer network with a certain number of points. Finally, they wait for new investors so they can get out of the scheme. Without new investors, they cannot get purposeful items back - which is how all pyramid schemes operate. Since the Bitcoin scheme is online and thus global, early members made huge profits, which caused great public interest and created a considerable membership base. It is estimated that today the scheme has more than 200 million members.

That's bull shit mate. I kind of wonder where you get all these rubbish from. Bitcoin is a digital currency that doesn't depend on banks and works using a special system called blockchain. It lets people send money directly to each other. Unlike a pyramid scheme that relies on getting more people involved, Bitcoin's value is based on various factors, including scarcity, utility, adoption, and market demand.Some people who got into Bitcoin early made a lot of money as its value went up, but it's not just about getting more and more people to join in. The technology it uses and the fact that there's only a limited amount of Bitcoin help make it valuable.

It is estimated that today the scheme has more than 200 million members.

Lastly, we don't call it members but investors try and get the difference.


With all these many write ups, you still couldn't defend your point why Bitcoin isn't money. I taught maybe you had a good idea of what you were trying to tell the community.

[franky1]

to correct the OP

currency is anything used as a medium of exchange

MONEY is a specific currency used by a community/nation and ratified as the official currency of that society.. money in history has been controlled by the rulers of that society and distributed/taxed and accounted by those rulers(legal tender)

much like europeans claim euro as their money, much like americans claim dollar as their money
we in the bitcoin community/society deem bitcoin as OUR money with a different method of distribution and control..

but europeans do not claim dollars as europeans money. but still recognise dollar as a medium of exchange foreign currency vs euro

[JamesNZ]

It works as money because it is exchanged but is not money because it is purposeless.

How do you mean that Bitcoin is purpose less mate?

everyone here knows that Bitcoin isn't the same as regular money, but it shares some qualities with money, even though it's not officially seen as traditional money by most authorities. Instead, it's often called a cryptocurrency or digital asset. Despite not being classified as money, people use Bitcoin for transactions, investments, and as a store of value, similar to money. It's a digital asset that can be used to buy goods and services, making it an alternative to regular currencies, although it's not considered money in the traditional sense.

If Bitcoin is not money, then what is it? Well, it is a means of recording membership in some kind of decentralized and self-governing pyramid scheme. Members invest purposeful items in it - goods, services and money. They then get recorded by the peer-to-peer network with a certain number of points. Finally, they wait for new investors so they can get out of the scheme. Without new investors, they cannot get purposeful items back - which is how all pyramid schemes operate. Since the Bitcoin scheme is online and thus global, early members made huge profits, which caused great public interest and created a considerable membership base. It is estimated that today the scheme has more than 200 million members.

That's bull shit mate. I kind of wonder where you get all these rubbish from. Bitcoin is a digital currency that doesn't depend on banks and works using a special system called blockchain. It lets people send money directly to each other. Unlike a pyramid scheme that relies on getting more people involved, Bitcoin's value is based on various factors, including scarcity, utility, adoption, and market demand.Some people who got into Bitcoin early made a lot of money as its value went up, but it's not just about getting more and more people to join in. The technology it uses and the fact that there's only a limited amount of Bitcoin help make it valuable.

It is estimated that today the scheme has more than 200 million members.

Lastly, we don't call it members but investors try and get the difference.


With all these many write ups, you still couldn't defend your point why Bitcoin isn't money. I taught maybe you had a good idea of what you were trying to tell the community.

It's pretty simple: purposeless is something that, when bought, can never be used for anything - which is why it ultimately must be sold - dumped on someone else.

Money must be purposeful because only via the fulfilment of a purpose you get benefit that you then compare with the benefit that goods and services provide. Without having a purpose as a pivot for estimating how many goods or services to give for something it is impossible to make a rational trade. That's after all the reason why Bitcoin price is fluctuating so much. There's no pivot and people trade bitcoins blindly -  today a pizza for 5 thousand bitcoins, tomorrow a car for 1 bitcoin. Bitcoin is not money. It's simply a means to inform you that you invested purposeful items in the scheme where you need new investors to get out and return purposeful items.

[EarnOnVictor]

to correct the OP

currency is anything used as a medium of exchange

That's not correct!

Currency is not ANYTHING used as a medium of exchange, you can use many things as a medium of exchange which I'm sure is obvious around you. You can purchase your shoe and other products and properties with gold or other products and properties, which makes your definition faulty.

Currency is rather a LEGAL TENDER (fiat) note and others backed by the central bank of a country.

[bayu7adi]

If Bitcoin is not money, then what is it? Well, it is a means of recording membership in some kind of decentralized and self-governing pyramid scheme.

Bitcoin never promises profits by recruiting new members. Even if you introduce someone to buy Bitcoin, there's no guarantee you'll make money just because your friend becomes a Bitcoin investor. This is purely because it's an open market where anyone can buy and sell Bitcoin.

The number of investors may increase, and prices may rise, then offering profits by this moments...  but blockchain technology is irreplaceable, and Bitcoin is a strong example of a cryptocurrency with a large community that's part of Bitcoin.

If a Bitcoin ETF gets approved by the SEC, would you still call Bitcoin a pyramid scheme?? After all, something with a limited supply and increasing demand tends to see price increases, right? Take, for instance, land and real estate in Singapore. Limited supply and booming districts certainly drive their prices sharply upward over time.

[DapanasFruit]

I am sure OP is here making this post for the sake of intellectual discussion perhaps but at some time we can just be muddling things most especially for newbies. I am just a regular guy, when I see something that I can use to buy and I can also convert into my local currency then it can be some sort of money...at least in my mind. I do believe that Bitcoin can function as money since I can use it to buy some things in some places where it is accepted. Now, for people who are hoarding as many BTC as they can in preparation for the next bull run in 2024, BTC can be an investment or an speculative asset. One can have varying definitions and impressions of Bitcoin and that is so fine with me. 

[Upgrade00]

If an item can be used for a concrete purpose besides being exchanged on the market it has value. With fiat currencies, that purpose is - the return to the banks. Namely, the units of these currencies are created as claims of commercial banks based on approved loans to individuals and companies, and as claims of central banks based on the purchase of government bonds.

This doesn't make any sense to me. Banks created a system, governments legalized that system and now the citizens are forced to use that system. This system was at a time backed by gold which has real value, but that was ditched and now it has no intrinsic value.

Trying to draw a connection between collateral and value is a high reach. For there to be a transfer of value then every unit is backed by the other asset which is not the case in fiat. And with the concept of credit which makes it possible to spend money you don't have to pay in the future, there will be a huge deficit using your argument


I would not have bothered replying if I had jumped to the end and read the gibberish about pyramid scheme. This is a terrible attempt at trolling.

[AprilioMP]

The definition of money is a medium of exchange. Not only in paper form but also in metal form depending on which countries agree on the form and type of their money.

In my country, money is known as Rupiah (Rp). With Rupiah we can spend anything we want using Rupiah because Rupiah is a legal means of payment.
I think it's the same in other countries too.

-snip-

That's not correct!

Currency is not ANYTHING used as a medium of exchange, you can use many things as a medium of exchange which I'm sure is obvious around you. You can purchase your shoe and other products and properties with gold or other products and properties, which makes your definition faulty.

If this is what causes the definition of money to be wrong in your opinion because gold can also buy products or property, I think you are trying to play the function of reason.
Before fiat was in the form of paper or metal, perhaps the ancient Egyptians [Pharaoh] also had a different definition of money.

[Jawhead999]

Bitcoin is money because you can use that to pay or buy anything just like fiat, the difference is people and government aren't yet accept Bitcoin to be used as daily transaction because of scalability issue, privacy concern, regulation problem.

Pyramid scheme is where the new people are lose, in Bitcoin no one is losing as long as you're a long term holder.

If you think demand and supply is a pyramid scheme, everything is a pyramid scheme.

[KiaKia]

Anything you can use as a medium of exchange should fit the same name as money, I don't care what you believe about Bitcoin, purposeless you say? That's on you and mind you I don't see any reason why someone like you come on the forum, Bitcoin is better than Fiat currency, there is nothing you can say that matters here, everybody knows that Gold can be use as a medium of exchange and that doesn't leave Bitcoin out of this category too, including precious stones and diamonds.

I have used Bitcoin to make so many purchases online, I just bought a starlink and installed it myself, the seller decided to accept Bitcoin as payment and I was glad to pay using Bitcoin, I got my package after 24hrs of making the payment.

Fiat money is what the government makes us work for and make payment using, it's from the government and mind you they are also the maker of this fiat money, to me gold beats Fiat completely, because it can't be printed like they always print the paper money, and another thing that is this close is Bitcoin, this was the reason they hated Bitcoin, assuming the government are the early adopters of Bitcoin they would have purchase almost all bitcoin for cheap price years ago, they missed the chance and they don't like it as well.

[lombok]

The definition of money is a medium of exchange. Not only in paper form but also in metal form depending on which countries agree on the form and type of their money.

In my country, money is known as Rupiah (Rp). With Rupiah we can spend anything we want using Rupiah because Rupiah is a legal means of payment.
I think it's the same in other countries too.

-snip-

That's not correct!

Currency is not ANYTHING used as a medium of exchange, you can use many things as a medium of exchange which I'm sure is obvious around you. You can purchase your shoe and other products and properties with gold or other products and properties, which makes your definition faulty.

If this is what causes the definition of money to be wrong in your opinion because gold can also buy products or property, I think you are trying to play the function of reason.
Before fiat was in the form of paper or metal, perhaps the ancient Egyptians [Pharaoh] also had a different definition of money.

The legal means of payment determined by the state are fiat currencies such as USD, Rupiah, Euro, Rubber, Yuan, Yen and so on. However, if the exchange or bartering depends on both parties, if you want to barter with a friend regarding goods or services, that is also legal (for example, bartering gold and shoes or gold with other collectibles or collectibles with collectibles). However, when it comes to legal payments, the only thing that is determined by the state is to use the fiat currency of each country.

Before the fiat currency system was in operation, the coins used were gold and silver or a barter system was used.

[kotajikikox]

have your own belief and understanding but let us have ours also, yeah there are limited places or countries that allows bitcoin to be acted like money(purchasing power) but you cannot deny that in other countries it is used to buy anything like in EL Salvador in which they adopted bitcoin as a currency.
so maybe if you are living in China in which Bitcoin is banned then you can call it as not Money but for us? this is a digital form of Money, thats it.
and that is also a simple reason why we believe this is money and will remain money for the next generation , hope that you will not eat your words when time comes that bitcoin is allowed to use worldwide.

[AnonBitCoiner]

Bitcoin is money because you can use that to pay or buy anything just like fiat, the difference is people and government aren't yet accept Bitcoin to be used as daily transaction because of scalability issue, privacy concern, regulation problem.

Yes it will be true if we called bitcoin as money because money is that thing with the help of which we can be a part of buying and selling mechanism and same is the case of bitcoin that most of the people are using bitcoin as a payment option but lots of people are just investing in it because they want to enhance the power of their money.

Country where there is restrictions and people cannot use bitcoin will not consider bitcoin as a money because it is believed that success which you cannot see with you own eyes will not be so effective. Those individuals who are involved in bitcoin payment can understand the value of bitcoin and can say that yes bitcoin is money and because of this money you can actively buy and sell as well as increase your financial strength through investment.

[AprilioMP]

✂️

The legal means of payment determined by the state are fiat currencies such as USD, Rupiah, Euro, Rubber, Yuan, Yen and so on. However, if the exchange or bartering depends on both parties, if you want to barter with a friend regarding goods or services, that is also legal (for example, bartering gold and shoes or gold with other collectibles or collectibles with collectibles). However, when it comes to legal payments, the only thing that is determined by the state is to use the fiat currency of each country.

In relation to the general definition of money, do you think it is correct as I know it?
Money is a legal medium of exchange and is recognized by a country, such as the types you mentioned, starting from dollars, euros, rupiah and others.

Before the fiat currency system was in operation, the coins used were gold and silver or a barter system was used.

Gold and silver were the means of exchange in ancient times, history confirms that they were often used in the barter system.
Let's return to the discussion of money and the OP's question about why Bitcoin is not money. For me, Bitcoin is money that can be used as a medium of exchange to buy goods for those who use it.

[Natsuu]

Well as how I see it today in our country, I cant consider it as money yet because it is not our legal tender. Anyone can use bitcoin to buy things from places that accept them and its similar to regular money, but it only exists online. The catch is, not all stores or businesses are cool with accepting Bitcoin yet. Plus it's not controlled by any country's government so its value can be a bit unpredictable. People mostly see it as an investment or a way to make online transactions but it's not as universally accepted like dollars or euros.

[Marvelman]

Here's my take on a simple counter-argument.

Money, as OP rightly pointed out, serves as a medium of exchange, a store of value, and a unit of account. These are its primary functions. Bitcoin does all that.  People use Bitcoin to get goods and services, they invest in it as a store of value, and even use it to measure the value of other assets.  It's traded like any currency.  The Bitcoin market sets prices for other cryptocoins too. so Bitcoin works as money because people find it useful and are willing to exchange goods, services, or other assets for it. If people are willing to sell real goods for digital tokens, those tokens take on value.

but Bitcoin is different than old-fashioned money though.  It doesn't have physical intrinsic value like gold.  But it's valuable because crypto users trust it.  They trust Bitcoin, so it works as digital money.  The whole decentralized network backs it up. So it works like money because people use it like money.

[Wakate]

It amazed me why op will come up with a post like this one with the idea of Bitcoin not been money. Maybe you needed to expatiate more on the examples you have given so far. Once something is legal and there is a consensus for it to be used as a medium of payment just like we see today how Bitcoin is being transacted for payment of goods and services.

I think op need to keep is ideas on what Bitcoin is meant to be since he feel like Bitcoin should not be used as a medium of payment. Check-in the whitepaper of Bitcoin is what I think will help him to understand the concept of Bitcoin and what it is meant to be used for. I am not in for any contentious explanations because I believe there are enough information on the internet that would explain what Bitcoin is meant to be and what it is actually used for.

[JamesNZ]

So here we have the same problem as in my previous thread - the responders are ignoring my arguments and talk about completely irrelevant stuff.

Let's repeat the arguments in the simplest form.

A) Why's Bitcoin not money?
Because it is purposeless. Meaning, when bitcoins are bought they can never be used for anything, and whoever holds them must ultimately sold them - dump them on someone else.

Due to the lack of a purpose whose fulfilment would generate a specific amount of benefit, there's no pivot for estimating how many bitcoins to accept for goods or services and is, thus, impossible to perform a rational trade.

B) Why is Bitcoin a pyramid-style scheme?
Because whoever invested purposeful items in it cannot get such items back without new investors.

So, it's not about definitions. It's about reality. In reality Bitcoin is purposeless and existing investors need new investors to get out. Definitions cannot change reality.

[franky1]

to correct the OP

currency is anything used as a medium of exchange

That's not correct!

Currency is not ANYTHING used as a medium of exchange, you can use many things as a medium of exchange which I'm sure is obvious around you. You can purchase your shoe and other products and properties with gold or other products and properties, which makes your definition faulty.

Currency is rather a LEGAL TENDER (fiat) note and others backed by the central bank of a country.

currency is a broad term...
then within the term there are different types of currency
there are many types of currency.

money is the "legal tender" subcategory of currency.. not the other way round

bitcoin does have its own community and association that xBTC is worth $yyyyy

bitcoin is not the money of US central bank. the US central bank just sees bitcoin as an asset currency
bitcoin is OUR money