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

[nybble41]

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

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

The relationship between bitcoins received and electricity/computation spent is extremely elastic. It varies not only with the current difficulty, fees, and mining reward (and the vagaries of probability) but also with advances in the method of computation and the underlying technologies. As such, it would be quite a stretch to consider bitcoins a "unit" of either electricity or computing power, which at any rate already have perfectly adequate units of measurement.

[Piper67]

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?

If you don't think dollars are a commodity, you've never lived in a third world country... trust me, they are.

[foggyb]

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

Bitcoins exist just as much as any solid matter exists. Most "solid" objects such as a wooden desk are mostly empty space, by a HUUUUGE ratio, about 10^15. The electrical fields of the atoms make matter feel solid.

One could in theory create an app together with hardware and a projection system that can create the illusion of holding physical bitcoins. The more bitcoin in a "stack", the heavier it would be. Interesting thought experiment.   

Or, better yet, if somehow we could create a new element that is visible and solid, and somehow its properties would allow us to embed bitcoins in it.

[cryptoanarchist]

I don't care how bitcoin is classified by anyone in particular.

[MoonShadow]

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?

Sure.  All currencies are standardized units of measurements of relative value.  I'm sure that doesn't tell you anything, but that is what they are.

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.

The Spanish once considered platinum to be worthless, because no one had a use for it and it wasn't widely enough know to be a money.  They famously made cannons out of what they had for a couple of spanish ships intended to transport gold they got from the Americas.  One that was sunk still sits somewhere on the ocean floor, filled with it's shipment in gold.  In modern valuation, one of the cannons is worth more than the rest of the ship and it's cargo.  Gold does have unique physical properties that we can make use of in modern industry, but that we don't because gold is too valuable.  Those uses don't exist without industry, so to say that gold is uniquely valuable if no one else wanted it is false.

[MoonShadow]

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

Bitcoins exist just as much as any solid matter exists. Most "solid" objects such as a wooden desk are mostly empty space, by a HUUUUGE ratio, about 10^15. The electrical fields of the atoms make matter feel solid.

This is a rediculous comparision, that does not deserve a response.

[MoonShadow]

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.

Really?  Care to explain your logically consistent reasoning?  If it violates the definition of a commodity, then I'm going to call B.S.

[D.H.]

What are people even discussing here? If it had to do with what the law considers it I guess the discussion would make sense, otherwise just call it what you want. I'll call it a currency. Hazek will call it a commodity. Everyone's happy.

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?

A bicycle could also be used as a weapon (by hitting someone in the head with it). So it has value as a weapon. Do people call it a weapon? Most people won't, but the newspaper might do it that day ("His weapon was - a bike!"). That's fine with me.

[MoonShadow]

What are people even discussing here? If it had to do with what the law considers it I guess the discussion would make sense, otherwise just call it what you want. I'll call it a currency. Hazek will call it a commodity. Everyone's happy.

I care not what a law says.  I'm concerned only with the economic meaning of these words.

[SMTB1963]

Stating "not a currency, not a commodity, but an accounting system" is a bit like stating "not a Ding Dong, not a Ho-Ho, but a bakery".  There are really two separate questions with two separate answers implied in the title of this thread - not a choice between three distinct definitions.

1) Is the bitcoin system an accounting system?  In accounting parlance, no.

...a collective & distributed triple entry ledger system...

This.  The bitcoin system most closely resembles a ledger system from an accounting perspective.  While a layman might say ledger system=accounting system, telling an accountant that the bitcoin network is an accounting system is like telling a doctor that a trachea is a respiratory system.

2) Are bitcoins a commodity or currency?

While some commodities have been used as mediums of exchange, ALL commodities have uses beyond that limited purpose.  Bitcoins do not share this property.  If I have a bitcoin, I can't do anything with it other than spend it.  That makes it a currency.  Claiming otherwise renders the terms currency/commodity meaningless.

as I have already mentioned, bitcoins don't really exist.

  Lost me on that one.
 

...otherwise just call it what you want. I'll call it a currency. Hazek will call it a commodity. Everyone's happy.

You and Hazek might be happy, but not everyone else will be.  "Currency" and "commodity" have separate and distinct meanings for a reason.  The bitcoin community will be doing itself a disservice by using the terms interchangeably/haphazardly, or in a manner which contradicts general usage by the rest of the world.

[foggyb]

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

Bitcoins exist just as much as any solid matter exists. Most "solid" objects such as a wooden desk are mostly empty space, by a HUUUUGE ratio, about 10^15. The electrical fields of the atoms make matter feel solid.

This is a rediculous comparision, that does not deserve a response.

That's a pointless comment, I won't bother reacting to it.

[MoonShadow]

as I have already mentioned, bitcoins don't really exist.

  Lost me on that one.
 

You probably missed my explaintion earlier in this thread.  My argument against bitcoins being a commodity is rooted in the idea that commodities are objects with alternative uses, but bitcoins are nothing more than entries into a 64 bit variable on a transaction.  There does not exist an object, not even a digital one, that can be referred to and honestly state "that's a bitcoin" or "that's a half bitcoin".  There are no cryptographic tokens used that represent bitcoins in any fashion, unlike earlier attempts to create a cryptographic currency online.

Thus, if they don't exist outside of an abstract concept in our human minds, then they can't possibly have an alternative use.  Now the bitcoin network could have alternative uses, such as a timeservice for public notary online, or as a name registry as in the case with namecoin, or even a shared entrophy source for cryptographic communications; but those alternative uses are alternatives for the service of the network, not of the unit of value that we refer to as a 'bitcoin'.

[SMTB1963]

You probably missed my explaintion earlier in this thread.  My argument against bitcoins being a commodity is rooted in the idea that commodities are objects with alternative uses, but bitcoins are nothing more than entries into a 64 bit variable on a transaction.  There does not exist an object, not even a digital one, that can be referred to and honestly state "that's a bitcoin" or "that's a half bitcoin".  There are no cryptographic tokens used that represent bitcoins in any fashion, unlike earlier attempts to create a cryptographic currency online.

Thanks, and 100% agreed.  I'd go even further by saying that even if there were tokens in the system used to represent bitcoins, they still wouldn't be commodities - because their only use would still be as a medium of exchange.

Thus, if they don't exist outside of an abstract concept in our human minds, then they can't possibly have an alternative use.  Now the bitcoin network could have alternative uses, such as a timeservice for public notary online, or as a name registry as in the case with namecoin, or even a shared entrophy source for cryptographic communications; but those alternative uses are alternatives for the service of the network, not of the unit of value that we refer to as a 'bitcoin'.

A distinction that seems to escape some in this thread, unfortunately.  I'd also speculate that many in the "bitcoin is a commodity" camp believe so because they subscribe to an ideology + economic philosophy that claims "real" money must start as a commodity. 

[MoonShadow]

  I'd also speculate that many in the "bitcoin is a commodity" camp believe so because they subscribe to an ideology + economic philosophy that claims "real" money must start as a commodity. 

I believe that, too.  But the Misis Regression Therom applies to naturally occuring money.

[niko]

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.

This

[niko]

Stating "not a currency, not a commodity, but an accounting system" is a bit like stating "not a Ding Dong, not a Ho-Ho, but a bakery".  There are really two separate questions with two separate answers implied in the title of this thread - not a choice between three distinct definitions.

1) Is the bitcoin system an accounting system?  In accounting parlance, no.

...a collective & distributed triple entry ledger system...

This.  The bitcoin system most closely resembles a ledger system from an accounting perspective.  While a layman might say ledger system=accounting system, telling an accountant that the bitcoin network is an accounting system is like telling a doctor that a trachea is a respiratory system.

Good point, thank you.

[benjamindees]

But the accounting system only accounts for Bitcoins.

You can say that Dollars don't really exist either, since they're just numbers on little pieces of paper, and those papers are "just an accounting system".

[MoonShadow]

But the accounting system only accounts for Bitcoins.

You can say that Dollars don't really exist either, since they're just numbers on little pieces of paper, and those papers are "just an accounting system".

Indeed, you could say that, and be entirely correct.  Because that's true.  Those Federal Reserve Notes that you carry around in your wallet are represented by the ink and paper, but currency is always an abstract idea.  As I said before, currencies are just another form of standardized unit of measurement, in this case of relative valuation.  We mere mortals need numbers to make economic calculations, and currencies are just numbers.

[cryptoanarchist]

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?

Actually no, you cannot make a joint from a dollar bill.

[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?

Actually no, you cannot make a joint from a dollar bill.

OK, wow, that confirms it, they are in fact totally worthless.