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Author Topic: The Definition of Cash  (Read 1811 times)
Nicolas Dorier
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December 27, 2014, 02:35:30 PM
 #1

I see that the same word : cash, is often used to talk about 2 radicals different things.

In the first definition, cash distinguishes two different type of money : "ledgered" money, versus "owned by the bearer" ones.
Wire transfer, checks, swipe card, versus bills.

In Mises terminology, we might be tempted to think that this is what he refers as "credit money" versus "fiat money".
For Mises, Credit money is any claim on someone or something falling due in the future that is used as a general medium of exchange.
A bank balance represents a claim issued by the bank, that you can redeem for fiat money, and this is what is used instead of fiat money for the majority of exchanges today.

But in the past, bank issued notes, which are both "owned by the bearer" and credit money, felt into the definition of "cash", and considered more or less equivalent to government's issued money. (Milton Friedman explaining that in A Monetary History of the United States)

With this definition, is Bitcoin cash ? because the peculiar thing is that it is ledgered money but still "owned by the bearer".
I would empirically say that the specific feature of cash widely used today is whether or not the money is ledgered.
This would explain why any "Toward cashless society" articles that you can read in the web do not think that moving Bitcoin with your mobile phone is similar to using cash.

We should note that Bitcoin is the first ledgered money that is still "owned by the bearer".
But it is also the first ledgered money that does not represent Credit Money. (to my knowledge)

The second definition that I see arising from the web, and I think is better suited is the presence of third party.
Under this new definition, any medium of exchange that can be transfered between two peers without any approval by a third party is considered cash.
This definition is simple and clear cut. Under this definition, Bitcoin is cash, no other discussion needed.

Contrary to the previous definition, a "Toward cashless society" article would not focus on the fact that money becomes more and more ledgered.
It would focus on the increasing requirement of approval of a third party for any exchange between two persons.

Interestingly enough, this is the definition implied by Milton Friedman in 1999 when he was speaking of e-cash. https://www.youtube.com/watch?v=fYD17h6hlCs

[UPDATE]
This second definition is also the definition that Satoshi is using.
[/UPDATE]

So the question is which definition are you using ?


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December 28, 2014, 01:20:22 AM
 #2

Cash is an outdated word. I see people transferring money from their savings account to their spending account on the fly with a smartphone, to buy a damn sandwich with their card.
If that is not cash, u tell me.

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December 28, 2014, 01:27:14 AM
 #3

Cash (noun). Rules everything around me. See also: Cream. Get the money. Dollar dollar bills. Yo.

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December 28, 2014, 03:28:15 AM
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Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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December 28, 2014, 08:48:35 AM
 #5

Great post OP and interesting points.

One small correction, there is a "3rd party" involved in the transfer of bitcoins, that of the bitcoin network itself, miners, relaying nodes, etc. However, as long as your TX abides with the protocol the intervention of that '3rd party' is very limited and highly improbable.

Cash, or any bearer instruments are, imho, a more pure form of money, with less encumbrances and more highly fungibie in general. Also keep in mind blacklists of serial numbers for certain stolen notes, tokens etc are anti-ledgers that reduce 'cashness' for some systems.

Of course, cryptography opens up many new possibilities for alternate forms of ownership, 'cash' and monetary properties once concepts like valuable immutable data and money as a content type are absorbed.

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December 28, 2014, 08:52:43 AM
 #6

Satoshi Nakamoto used the term 'cash' in the title of the Bitcoin white paper. That's good enough for me.

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Nicolas Dorier
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December 28, 2014, 03:38:07 PM
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Satoshi Nakamoto used the term 'cash' in the title of the Bitcoin white paper. That's good enough for me.

So you are using the second definition.

Quote
Great post OP and interesting points.

One small correction, there is a "3rd party" involved in the transfer of bitcoins, that of the bitcoin network itself, miners, relaying nodes, etc. However, as long as your TX abides with the protocol the intervention of that '3rd party' is very limited and highly improbable.

Cash, or any bearer instruments are, imho, a more pure form of money, with less encumbrances and more highly fungibie in general. Also keep in mind blacklists of serial numbers for certain stolen notes, tokens etc are anti-ledgers that reduce 'cashness' for some systems.

Of course, cryptography opens up many new possibilities for alternate forms of ownership, 'cash' and monetary properties once concepts like valuable immutable data and money as a content type are absorbed.

That's why I said "approval by a third party", not "need of a third party".
Miners don't approve anyone to do the transfer, since they do not even know who you are. The approval is only on the protocol aspect. (does such script is supported, or other peculiarity of bitcoin transaction that make malleability possible)

So this definition "cash" rely more on the censorship resistance of the money form.
This would surely fall in a theorical future where government collaborate to be 51% miners, and would be able to blacklist coins at will. (which, as you point out, in the second definition, would reduce the "cashness" of Bitcoin)




Ahah, this is important to know about what a politician is talking about, they are adept of this kind of meaning manipulation.
"Terrorism" is such an example, the definition is different on the tongue of the politician and of the people.
The purpose is either to create division between people that are in fact talking about different things without knowing it, or either to make a dissident agree with you, not knowing you speak of a different thing.

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December 28, 2014, 05:56:34 PM
 #8

Cash is an outdated word.

Agreed. One thing I know is the definition of what cash is is changing and bitcoin has re-wrote the riles. I guess cash usually refers to something physical, but you can still spend fiat digitally and it's not really considered cash but it is obviously still money.
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December 28, 2014, 07:05:10 PM
 #9

You forgot the "physical" part. Money at a bank account isn't cash at all, cash is something you can hold in your hand.
If you travel to North Africa, there are small towns without a single ATM, nor a single shop which accepts checks or credit cards. So if you don't have real cash there, physical cash, you just die.
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December 28, 2014, 07:57:30 PM
 #10

Satoshi Nakamoto used the term 'cash' in the title of the Bitcoin white paper. That's good enough for me.

Whats more cash: Monero or Bitcoin?
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December 28, 2014, 08:07:23 PM
 #11

You forgot the "physical" part. Money at a bank account isn't cash at all, cash is something you can hold in your hand.
If you travel to North Africa, there are small towns without a single ATM, nor a single shop which accepts checks or credit cards. So if you don't have real cash there, physical cash, you just die.


You misread, I never considered money in bank account as cash.
If you consider the physical part important for the definition (in other words "owned by the bearer"), then bitcoin is not cash.
If you consider the third party approval important for the definition, then bitcoin is cash.

Quote
Agreed. One thing I know is the definition of what cash is is changing and bitcoin has re-wrote the riles. I guess cash usually refers to something physical, but you can still spend fiat digitally and it's not really considered cash but it is obviously still money.

It did not. Milton Friedman spoke about what is now called Bitcoin "cash" in 1999. (satoshi's definition, cash meaning "without third party approval")

Quote
Whats more cash: Monero or Bitcoin?

I assume you are using the second definition.
I don't know Monero, if it does not require third party approval to make a payment, then it is cash as much as bitcoin.
However, if it makes it impossible to create blacklisted coins (as marcus_of_augustus pointed out), then I would say that Monero is more cash.

A dollar bill in circulation might have his ID blacklisted. However, such ID being almost never checked by merchant, I don't consider it impact severely the "cashness" of dollar bills.
However, Bitcoin is another story since blacklisting of coin can be enforced by bitcoin hardware/software approved by the state. Which might potentially make its "cashness" lower than a dollar bill.

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December 29, 2014, 12:51:43 AM
 #12

I would suggest that one of the distinguishing characteristics of cash is that it is highly liquid.  This has two senses.  Firstly, the amount of time and effort that it takes to complete a transaction, and second, the extent to which finding a "buyer" for the transaction is possible at all.

Regarding the first point: if you hold paper banknotes, this is one of the most liquid examples of value that exists.  There really is no waiting to have them transferred or accepted, assuming it's an accepted currency in the area.  You can do it in person in seconds, any time, day or night, with anyone (who accepts that currency and denomination, which would be most people in an area in which it is in use), and with no loss in value.

In this sense (traditional) bank accounts are inherently less cashlike than printed bank notes, if only slightly, because it takes some time to make a transfer, your bank card itself is not going to be accepted by just anyone (only some merchants), and it is inherently less liquid.  Where bitcoin is interesting is that in some ways it is more liquid than cash, specifically, over the Internet.  It is faster to make a transfer across the world 'instantly' via bitcoins, than by somehow trying to get the paper banknotes across the world, and much faster than completing a wire transfer (which may also be reversed).  On the other hand, when dealing with someone in person, it takes longer to receive a bitcoin transaction and confirmations than to physically be handed banknotes and make any required change, though the difference is not much.  So in terms of the speed of a transaction by someone who accepts both banknotes and bitcoins, bitcoin is slightly less cashlike.

There is a second factor to liquidity, however: not everyone accepts bitcoin for everything, so it is less liquid due to acceptance.  To get value back out of bitcoins you have just received, you need to find a specific "buyer."  To get value back out of U.S. dollars you just received, you can immediately spend them anywhere, assuming you're in an area that uses U.S. dollars, with no loss of value.  It's perfectly liquid.  In this sense, of course, Euros are less cashlike in the United States than they are in Europe, and dollars are less cashlike in Europe than they are in America.  That is somewhat of a silly distinction - to say that dollars are more so cash in America than they are in Europe.  But it does make sense to sometimes think about it this way.

And, surprisingly, we must conclude that bitcoins are more cashlike over the Internet than $100 bills are.

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December 29, 2014, 04:38:42 AM
 #13

Satoshi Nakamoto used the term 'cash' in the title of the Bitcoin white paper. That's good enough for me.

Whats more cash: Monero or Bitcoin?
"All money is money" - Fifty Cent
Cash is a noun. So what's more money for some is never enough for others.  Monero has what I consider to be security problems, but also strengths. Bitcoin's strengths and weaknesses are well known.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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December 29, 2014, 12:57:48 PM
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Quote
"All money is money" - Fifty Cent
Cash is a noun. So what's more money for some is never enough for others.  Monero has what I consider to be security problems, but also strengths. Bitcoin's strengths and weaknesses are well known.
I did not argued with that, all instrument used as medium of exchange can be considered money. The discussion is on what "Cash" means, and not every money is cash. A USD in a bank account is not the same as a USD on a bill, and I was wondering : which particular aspect make you qualify as "cash" one and not the other ? Is it the physical aspect, or the approval by third party during an exchange ? Given the two widely spread definition, Bitcoin might or might not be considered as cash.

Quote
I would suggest that one of the distinguishing characteristics of cash is that it is highly liquid.
So it is a third definition, liquidity being what define "cashness".
However, a USD in your bank account is still highly liquid, but no one would qualify it as cash.
According to your second definition of liquidity, both, a dollar bill and a USD in a bank account are highly liquid, even more than Bitcoin.

Quote
Where bitcoin is interesting is that in some ways it is more liquid than cash, specifically, over the Internet.
This argument also hold with "Where bank account USD are interesting, is that in some ways, it is more liquid than cash, specifically over the internet (card, wire transfer)". But you don't consider USD in banks as cash.

Then you explain that liquidity depends on geographic location and time, which is true.
However, I'm not sure "cashness" is related to liquidity. Because take a 5 USD bills, against 1000 Yen.
If you are in Japan, then the yen is more liquid that the USD, however I would not say that Yen is more cash than my USD bill.

Quote
And, surprisingly, we must conclude that bitcoins are more cashlike over the Internet than $100 bills are.
According to your first definition of "liquid" yes, according to the second, no. You are using the same word for two different things.

In the definition you gave of "cashness" I think "the amount of time and effort that it takes to complete a transaction" fit better.
However, imagine that a killer app and standard come in the banking industry, that would permit two persons to exchange "credit USD" as easily as bitcoin and worldwide, you would still not consider it as cash. (credit USD = USD in bank account)

Because of that, I still think "cashness" is the ability for money to be exchanged without third party approval.
The more a third party can prevent the transaction from happening, the less "cashness" has the money.

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December 29, 2014, 01:45:49 PM
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So it is a third definition, liquidity being what define "cashness".
Here's your problem. Cashness is an adjective. Cash is a noun. For example: being human does not make one humane. You made up the word. You can make any meaning you want.

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December 29, 2014, 01:51:40 PM
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So it is a third definition, liquidity being what define "cashness".
Here's your problem. Cashness is an adjective. Cash is a noun. For example: being human does not make one humane. You made up the word. You can make any meaning you want.
Define cashness as the probability someone call your money "cash" given the definition X of it. And there is 2 different definitions. (3 if we count FederalReserveofWIP's one)

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December 29, 2014, 02:04:39 PM
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Definition of "cashness" = being able to make any any song sound cool.

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December 29, 2014, 05:03:16 PM
 #18

You forgot the "physical" part. Money at a bank account isn't cash at all, cash is something you can hold in your hand.
If you travel to North Africa, there are small towns without a single ATM, nor a single shop which accepts checks or credit cards. So if you don't have real cash there, physical cash, you just die.


You misread, I never considered money in bank account as cash.
If you consider the physical part important for the definition (in other words "owned by the bearer"), then bitcoin is not cash.
If you consider the third party approval important for the definition, then bitcoin is cash.

Quote
Agreed. One thing I know is the definition of what cash is is changing and bitcoin has re-wrote the riles. I guess cash usually refers to something physical, but you can still spend fiat digitally and it's not really considered cash but it is obviously still money.

It did not. Milton Friedman spoke about what is now called Bitcoin "cash" in 1999. (satoshi's definition, cash meaning "without third party approval")

Quote
Whats more cash: Monero or Bitcoin?

I assume you are using the second definition.
I don't know Monero, if it does not require third party approval to make a payment, then it is cash as much as bitcoin.
However, if it makes it impossible to create blacklisted coins (as marcus_of_augustus pointed out), then I would say that Monero is more cash.

A dollar bill in circulation might have his ID blacklisted. However, such ID being almost never checked by merchant, I don't consider it impact severely the "cashness" of dollar bills.
However, Bitcoin is another story since blacklisting of coin can be enforced by bitcoin hardware/software approved by the state. Which might potentially make its "cashness" lower than a dollar bill.
Monero is definitely "more cash", when people think about cash they think about what we all know. There is a lot of effort being put into washing Bitcoins, if you sold your weed or whatever with Monero, you wouldn't need to invest in washing methods and potentially get scammed. It's unfortunate that people don't get the potential of Monero. Both BTC and Monero have its own uses.

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December 29, 2014, 11:20:54 PM
 #19

cash is a payment method in a trading activity between buyers and traders, usually with a cash payment method makes everything is faster and easier, there is still a shortage of excess reversed if we pay in cash, the money that we have will be quickly exhausted, so spending plans we have to really mature ...  Tongue
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December 29, 2014, 11:36:35 PM
 #20

You forgot the "physical" part. Money at a bank account isn't cash at all, cash is something you can hold in your hand.
If you travel to North Africa, there are small towns without a single ATM, nor a single shop which accepts checks or credit cards. So if you don't have real cash there, physical cash, you just die.


You misread, I never considered money in bank account as cash.
If you consider the physical part important for the definition (in other words "owned by the bearer"), then bitcoin is not cash.
If you consider the third party approval important for the definition, then bitcoin is cash.

"Owned by the bearer" doesn't mean anything, it's the physical part which matters. Both of your definitions are wrong. A 1$ bill lost on the pavement obviously doesn't belong to any bearer, but it's still cash, isn't it?

Not being physical, BTC isn't cash.

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