Here is the article that nicely explains it:
https://medium.com/@mario.kb99/bitcoins-do-not-exist-debunking-a-collective-delusion-f0afe8fb6568"Bitcoins Do Not Exist: Debunking a Collective Delusion
Recently, a colleague proudly told me that he had bought “two whole bitcoins” for $120,000 and that he now owned a valuable asset.
I tried to explain that he had fallen victim to a collective delusion and that he had simply given his money away because there are no “bitcoins.”
He opened a crypto app on his phone and showed me a record reading “2 BTC,” insisting that it proved he owned two bitcoins. I pointed out that this proved nothing.
I picked up a pen, wrote “2 BTC” on a piece of paper, and said that I had just created exactly the same record. I explained to him that this did not mean that two units of something had miraculously appeared in my possession. There was nothing to analyze to determine whether it was an asset or whether it was valuable.
He responded that the creation of Satoshi Nakamoto, named “Bitcoin,” stores his bitcoins. Accepting this for the sake of argument, I suggested we look closely at that creation to see what we could actually find.
I pointed out that what we actually see is a network of computers storing a database of user addresses, each associated with a number. His address, for example, is associated with the number 2. We also see the network’s protocol, the software that implements it, and its rules. One of those rules limits the sum of all numbers associated with addresses to 21 million. But nowhere do we find two units that we could call ‘bitcoins’ and analyze. There are no two digital items, such as documents, photographs, or software programs; no two intangible items, such as patents or copyrights; and no two physical items, such as metal coins.
“At that point, my colleague changed the subject and brought up fiat currencies and stocks. He argued that when people hold dollars or shares of Apple stock, they also just have records such as ‘100 USD’ or ‘5 AAPL.’”
I responded, “This is not true. What they actually have are units of an existing thing. The record merely tells them how many of those units they hold.”
“In the case of Apple stock, that existing thing is a company. Because the company exists, we can analyze whether owning units of it provides any benefits. It does. The company can distribute profits, execute buybacks, or liquidate its assets. Those future benefits make the shares valuable to their holders and therefore an asset.
The same principle applies to dollars. In their case, the existing thing is debt. Because that debt exists, we can analyze whether holding units of it provides any benefits.”
My colleague interrupted, asking how that could be. He argued that, unlike Apple, the bank does not pay him profits or transfer its property simply because he holds cash or a bank balance.
I responded, “This is where many people get confused. It is not the bank that provides the benefits, but the bank’s debtors.
Commercial banks and the Fed create dollars as loans to businesses, individuals, or the state. That’s why dollars are units of an existing debt. Those debtors are legally required to repay their debts.”
“But they don’t owe me anything,” he objected. “They owe the bank. Why would they ever give me anything of value?”
“Because they must first obtain the dollars you hold to repay their loans,” I replied. “If you already hold dollars, the debtors must offer their goods, services, or labor on the market to obtain those dollars from you. The bank simply acts as the intermediary enforcing repayment.”
“And what if they refuse?” he asked.
“Then they default. The bank seizes their collateral, such as houses, cars, or land, and auctions it for dollars. As a holder of dollars, you can purchase that collateral. The bank keeps the dollars to extinguish the unpaid loan, while you receive the debtor’s property. Either way, the benefit to you comes from the debtor.”
My colleague responded that none of this applies to the state, which is the biggest debtor of all. The state doesn’t have to work for you, and there is no property seizure if it defaults.
“That’s true,” I replied, “but the state still provides a benefit to holders of dollars. Because it owes the central bank, it accepts your dollars in settlement of tax liabilities.”
I continued, “All of these benefits make dollars valuable to their holders. That is why they are assets.”
I went on, “Now let’s apply exactly the same reasoning to Bitcoin. When Nakamoto’s creation records ‘2 BTC,’ the record does not tell you that you hold two units of any existing thing, such as a debt, a company, a document, a photograph, a software program, a patent, or a metal coin. Consequently, there is nothing to analyze to determine whether it is valuable or whether it is an asset, just as there was nothing when I wrote ‘2 BTC’ on a piece of paper. So, you did not buy two bitcoins. You bought a digitally recorded number: 2.”
Unable to answer, my colleague pivoted, claiming he didn’t actually care because the market is massive and he was bound to make money anyway.
I pointed out that this is precisely the problem and the very core of the collective delusion in which he was participating. Millions of people are giving away assets just to hold a number, surrendering tangible future benefits for something anyone can create for free with a few strokes of a pen or taps on a keyboard.
I concluded, “Every collective delusion inevitably ends in a harsh awakening. When that happens, no one will be willing to give you assets anymore, and your money will be gone forever.”"
