Not a currency, not a commodity, but an accounting system

[hazek]

Bitcoin is definitely NOT a security as it requires the promise or backing of no separate party. The Bitcoin software is indeed an accounting system, but Bitcoins themselves are not an accounting system.

I'm going to have to dissent here for technical reasons.  In reality, bitcoins are no more than a mental construct.  They don't even exist as a digital object.  Only transactions exist, and they are not, themselves, bitcoins.  There is only the accounting system.

I disagree. I mean aren't there tokens within this accounting system? Does it matter that these tokens exist only as part of transactions?

No, there are no tokens, not even in the transactions.  There are only the transactions, with entries on who is sending bitcoins to whom (via addresses) and how much.  That is all.

Well yes but also no. I mean aren't the numbers representing something? It's not like if I'm sending you a 1, I'm sending you 1 bitcoin. Even though in the system there is nothing else recorded but the number 1 in a transactions that 1 still represents something otherwise bitcoins wouldn't really be fungible because once I send you 1, 1 is yours and yours only, and no one else can send 1, no?

[hazek]

Tell me what the bitcoins themselves are useful for beyond a unit of exchange.

How can I if I just did but you wont listen?:

Those are not uses for bitcoin, nor the bitcoin network at present

Honestly, I know it's an impossible task, as I have already mentioned, bitcoins don't really exist.

There is nothing that says the Bitcoin system can only serve one purpose. Once people clearly understand what it is many different be figured out. But even just the use as a novelty as enough to fulfill the requirement of a commodity. And that's certainly what it was at the very beginning.

[Sukrim]

Bitcoin can also be described as a solution for the http://en.wikipedia.org/wiki/Byzantine_Generals%27_Problem using proof of work with the limitation that whoever rules over more than half or the processing power in the network can decide as a dictator within certain limits.

It is currently used for accounting of "Bitcoins" but also in different implementations for "Namecoins" + a distributed DNS-style system for example or just to track proofs of work in the P2Pool sharechain.

What makes the Bitcoin implementation different form a "standard" accounting system in my opinion, is the distributed generation of transactions "out of thin air" following a specific scheme and instruction set. There is no real use or equivalence to this in a regular accounting system (If you take gold from the earth, you have more gold + the earth has less, if you take money from someone, you have more money and this person has less...). This could have been done differently if for example Satoshi would have implemented a "golden pot" - a special address where 21 million BTC are stored in the first block and everyone has the private key - but only 50 BTC for the first ~4 years, 25 for the next ~4 years etc. are allowed to be included as transaction. This might in hindsight have made it more easy for people to understand the concept of money generation in Bitcoin... Maybe Bitcoin 2 or whatever comes in the future will do it like this?

[evoorhees]

Honestly, I know it's an impossible task, as I have already mentioned, bitcoins don't really exist.

They exist just as much as inches or meters or megabytes exist -  they're all units of measurement. And the Bitcoin software certainly exists - so the Bitcoins themselves are measurement units within that software.

[wareen]

[...] bitcoins don't really exist.

Bitcoins are an emergent phenomenon of the blockchain.
They are just as "real" as friction or temperature.

[Mageant]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property. If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

[hazek]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

Just because some people use it for barter doesn't mean it's a currency. Would you say sheep are currency just because people in Afghanistan use them for trade? At most it's a local currency because it lacks the typical "generally accepted" part of it's definition.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property.

What about the use of Bitcoin as a novelty? When Bitcoin got started it had no other use but as novelty much like gold jewelry.

If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

Completely irrelevant.

[N12]

Just because some people use it for barter doesn't mean it's a currency. Would you say sheep are currency just because people in Afghanistan use them for trade? At most it's a local currency because it lacks the typical "generally accepted" part of it's definition.

It’s not even a local currency. Bitcoin is currently no currency because it’s no unit of account, noone will actually accept Bitcoins as such for services and goods, but only as a function of its USD worth on exchanges.

[evoorhees]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property. If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

Hmmmm - if you were the only one in the world to have gold, would it not be similarly worthless? One can derive aesthetic value from gold, but a computer nerd can similarly derive tech-geek aesthetic value from Bitcoins. Indeed, before BTC had a market price, people traded them because they are cool - there is an aesthetic property to Bitcoin as a thing, just like a shiny stone or metal.

And further, it is not true that Bitcoin has "no" value other than money. There are a few weird uses people have mentioned - a timestamp, a means of anonymous proof of various info, a distributed record keeper, and certainly others we haven't considered.

So while bitcoin's value may be due 99.999% to its usefulness as money, it has some tiny fraction of value beyond that. Does that not then satisfy your commodity definition? Let's remember too that gold's value is vastly due to its use as money and a store of value (which derives in turn from its usefulness as money). If jewelry and industry were the only uses of gold, it's price would be vastly lower, probably in the single digits of what it is now.

So what then is the fundamental difference that makes gold a commodity money, but not bitcoin? Both are commodity monies in my opinion, the former a physical commodity and the later a digital commodity.

[Piper67]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

Just because some people use it for barter doesn't mean it's a currency. Would you say sheep are currency just because people in Afghanistan use them for trade? At most it's a local currency because it lacks the typical "generally accepted" part of it's definition.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property.

What about the use of Bitcoin as a novelty? When Bitcoin got started it had no other use but as novelty much like gold jewelry.

If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

Completely irrelevant.

If you were the only person in the world to have potash it would also be useless. You could turn it into something and sell it, at which point you'd cease to be the only person in the world who has it... same as with Bitcoin.

Edit: Ack, I should know better than to jump into a thread that Evorhees is already playing in... he's got it covered, as usual.

[Mageant]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

Just because some people use it for barter doesn't mean it's a currency. Would you say sheep are currency just because people in Afghanistan use them for trade? At most it's a local currency because it lacks the typical "generally accepted" part of it's definition.

If the sheep are generally accepted as medium of exchange, then yes, sheep would be currency. It would be both a commodity and a currency. This is a similar situation to Germany after WW2 and in prisons where cigarettes were used as currency, but were also a commodity.

What about the use of Bitcoin as a novelty? When Bitcoin got started it had no other use but as novelty much like gold jewelry.

When Bitcoin started it was basically just an experiment. I don't really see any "novelty" use of Bitcoin. If I started a fork of Bitcoin, let's call it "Mageantcoin", how much would you give me for it? It's the same as if I printed pieces of paper with Mageant$ on them. There would be little to no use for them. The value of Bitcoin - at least now - it that it has some established value, currently around 5$.

[hazek]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property. If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

Hmmmm - if you were the only one in the world to have gold, would it not be similarly worthless? One can derive aesthetic value from gold, but a computer nerd can similarly derive tech-geek aesthetic value from Bitcoins. Indeed, before BTC had a market price, people traded them because they are cool - there is an aesthetic property to Bitcoin as a thing, just like a shiny stone or metal.

And further, it is not true that Bitcoin has "no" value other than money. There are a few weird uses people have mentioned - a timestamp, a means of anonymous proof of various info, a distributed record keeper, and certainly others we haven't considered.

So while bitcoin's value may be due 99.999% to its usefulness as money, it has some tiny fraction of value beyond that. Does that not then satisfy your commodity definition? Let's remember too that gold's value is vastly due to its use as money and a store of value (which derives in turn from its usefulness as money). If jewelry and industry were the only uses of gold, it's price would be vastly lower, probably in the single digits of what it is now.

So what then is the fundamental difference that makes gold a commodity money, but not bitcoin? Both are commodity monies in my opinion, the former a physical commodity and the later a digital commodity.

This couldn't be more inline as to how I view the world.

[hazek]

When Bitcoin started it was basically just an experiment. I don't really see any "novelty" use of Bitcoin.

Really? You don't think it's a novelty when a guy buys a pizza with 10.000 BTC instead with a $10 bill?

EDIT: BTW "an experiment" is also 'a use' other than as a currency.. so you kind of already made my point. 

[Mageant]

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property. If I were the only person in the world to have Bitcoins it would be useless, just as with any other currency.

Hmmmm - if you were the only one in the world to have gold, would it not be similarly worthless? One can derive aesthetic value from gold, but a computer nerd can similarly derive tech-geek aesthetic value from Bitcoins. Indeed, before BTC had a market price, people traded them because they are cool - there is an aesthetic property to Bitcoin as a thing, just like a shiny stone or metal.

And further, it is not true that Bitcoin has "no" value other than money. There are a few weird uses people have mentioned - a timestamp, a means of anonymous proof of various info, a distributed record keeper, and certainly others we haven't considered.

So while bitcoin's value may be due 99.999% to its usefulness as money, it has some tiny fraction of value beyond that. Does that not then satisfy your commodity definition? Let's remember too that gold's value is vastly due to its use as money and a store of value (which derives in turn from its usefulness as money). If jewelry and industry were the only uses of gold, it's price would be vastly lower, probably in the single digits of what it is now.

So what then is the fundamental difference that makes gold a commodity money, but not bitcoin? Both are commodity monies in my opinion, the former a physical commodity and the later a digital commodity.

Gold has many unique properties and can be used for many things, jewelry, electronics, making placards that stand the test of time. It is a metal that does not corrode. I could even make plates and cutlery from it that would always be shiny.

Sure, Bitcoin has some tiny fraction of usefulness beyond currency as you said. But, as you said that percentage is very small compared to its value as currency. Indeed the same holds for gold, although I think the percentage would be higher than for Bitcoin.

The difference between gold and Bitcoin is that gold *started out* as a commodity. Gold was *first* valued for its usefulness by itself and *then* gradually evolved into a currency, too. It is only in our culture that the value of gold as currency has far exceeded that of use of the metal itself. Check out the ancient cultures of America, such as Aztecs and Inkas, they were using gold but not as a medium of exchange. Whereas Bitcoin since its inception was intended as a currency.

[Mageant]

If you were the only person in the world to have potash it would also be useless. You could turn it into something and sell it, at which point you'd cease to be the only person in the world who has it... same as with Bitcoin.

Not true. I can make soap out of potash. That is quite useful for myself. I don't have to sell it to anybody to get use out of it.

[hazek]

Ugh. People and their beliefs.

This is really pointless. I see logically consistent reason to call it a commodity, so that's what I'm going to do. If someone disagrees, well, what the fuck do I care. Be my guest and call it what you will.

[nybble41]

Honestly, I know it's an impossible task, as I have already mentioned, bitcoins don't really exist.

They exist just as much as inches or meters or megabytes exist -  they're all units of measurement. And the Bitcoin software certainly exists - so the Bitcoins themselves are measurement units within that software.

Inches and meters are units of distance. Megabytes are units of information. These are both properties of the physical universe, defined in terms of experimental measurements.

What are bitcoins units of? Can you offer a non-circular definition?

Bitcoin is *effectively* a currency because that is what it does and how people use it. Although, it does have some special properties that make it a very novel and unusual type of currency.

Just because some people use it for barter doesn't mean it's a currency. Would you say sheep are currency just because people in Afghanistan use them for trade? At most it's a local currency because it lacks the typical "generally accepted" part of it's definition.

A currency is any economic good routinely used within a community for indirect exchange. Local currencies are still currencies, and in a sense all currencies are local--none of them are accepted universally.

A commodity always has a use by itself. If gold were not used as medium of exchange or storage of value it would still be useful because you can make useful things with it, such as electronics and jewelry.

Bitcoin does not have that property.

What about the use of Bitcoin as a novelty? When Bitcoin got started it had no other use but as novelty much like gold jewelry.

The bitcoin system may have novelty value, but bitcoins were never novelties because, as has already been stated, they don't exist in any sense other than as completely abstract units of measurement, like points in a game.

If the bitcoin system can be considered a system of currency, the economic good it is based on is not a commodity, but a service: the distributed service offered by every other bitcoin user of recognizing your participation as an equal, and enforcing the rules of the game.

Hmmmm - if you were the only one in the world to have gold, would it not be similarly worthless?

No, because gold has unique and valuable physical properties, even if you completely disregard its use as a currency. There would be value in direct use even without anyone to trade with, and likely even more value in terms of direct exchange.

[Mageant]

When Bitcoin started it was basically just an experiment. I don't really see any "novelty" use of Bitcoin.

Really? You don't think it's a novelty when a guy buys a pizza with 10.000 BTC instead with a $10 bill?

EDIT: BTW "an experiment" is also 'a use' other than as a currency.. so you kind of already made my point. 

You can also make a joint from a dollar bill. That is also a use other than as a currency. Does that make dollars a commodity?

[hazek]

What are bitcoins units of? Can you offer a non-circular definition?

Electricity and CPU(GPU) power spent on mining?!

[hazek]

When Bitcoin started it was basically just an experiment. I don't really see any "novelty" use of Bitcoin.

Really? You don't think it's a novelty when a guy buys a pizza with 10.000 BTC instead with a $10 bill?

EDIT: BTW "an experiment" is also 'a use' other than as a currency.. so you kind of already made my point. 

You can also make a joint from a dollar bill. That is also a use other than as a currency. Does that make dollars a commodity?

Of course! The mere fact that it's a paper bill makes it a commodity!