Topic: Why bitcoin isn't currency. (Read 21363 times)

True. Dollar and euro are widely "accepted", trusted, commonly used, accustomed, etc. Additionally they are more of less "guaranteed"; i.e. savings on a bank-account are covered by governments if the amount is less than €100,000 in case the bank goes bankrupt, f.i. in my country, The Netherlands, that is.
Let's say that bankruptcy is a "systems failure" similar to corrupting a BTC-wallet. Shouldn't there be a "back up" option in the Bitcoin-Network that can restore "lost" BTCs and assign them to the "victim" ? wouldn't such a "feature" enormously increase Bitcoin's promising reputation/image?


I see what you mean; i.e. Bitcoin has to find its way through the unregulated free market. This might result in a very limited group of people reigning over the global wide Bitcoin population and that would be no better than the world we live in today. The only difference would be, new greedy faces and no inflation. Yet Bitcoin has one strict predefined rule, which orchestrates the amount of BTC's being created every 10 minutes. I don't understand why most Bitcoin-adapters are so violently obstructing the possibilities of assigning more mathematical restrictions to the Bitcoin protocol; time and time again they reply by "go make your own alt-coin."

I don't disagree.


Unfortunately I didn't and I don't have a fortune teller globe. Wether or not Bitcoin will be a widely spread and flourishing currency can not be answered with any certainty at this moment.



Then I think the only change Bitcoin will bring is deflation, which creates its own problems and advantages. Anyway I don't believe in "Greed is good" albeit in "In us we trust" and in natural behaviorism as observed and analyzed by Frans de Waal.
 

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Both actually.  And under either theory, Bitcoin is a a currency.  There are some specific legal definitions under which Bitcoin is not a currency, and usually that is actually to Bitcoin's benefit, because being a currency under some legal definitions would subject it to stringent regulations.  When it is considered a "commodity" instead, that is actually beneficial.

However, Bitcoin is definitely a currency under most normal human language uses of the term.

I'll summarize my take on what Bitcoin is, should, and will be as a currency.

First it is a financial protocol manifested as a PoW network. There are many cryptocurrencies attempting to prove their merit. So far Bitcoin is the most successful. Several unique websites and applications have been released supporting Bitcoin's exotic transaction mechanisms.

Second, it is a virtual commodity currently used to exchange and barter. Bitcoin is reasonably decentralized medium of exchange, which makes it more desirable than centralized objects (like frequent flyer miles). It is highly divisible and relatively fungible. It is also a store of value. Bitcoin has many unique traits that avail an emergent complexity. In this regard, many see this functionality as a currency. Many of them also argue that metals are also currencies. Few however would argue that currencies are also commodities. This gives us room to further define Bitcoin as a third manifestation.

Currencies have something not inherently designed into the Bitcoin protocol. They have the faith of their users as having a value relative to something else. That is to say that it is "backed" by something. Rarely they are backed by commodities, but they are often desirable that way. Currently, fiat currencies are backed by little more than capital control mechanisms such as tax brackets, fees, and other financializations that control how much wealth certain classes of people hold. They also use use legal tender laws, money transmitter laws, and the power of state to enforce these controls. They "insure" your savings against theft by printing more money. These "backing" mechanisms may seem bizarre to a logical person, but they play on deep psychological needs for many people to feel that *someone* is in control of the money, that it will have value tomorrow.

Bitcoin serves as a foundation for future currencies because it has something no other currency has ever had. Bitcoin uses mathematical algorithms to serve as an alternative to some of the state controls such as anti-counterfeiting and inflation. Using the PoW network and protocol as a medium for currency creation gives rise to the possibility to create currencies that not only have the security of cryptography, but can also have all of the psychological properties desired by many. Fiat currencies can be created through overlaying protocols such as ColoredCoin, MasterCoin, and other similar products. They can not only be backed by real commodities if someone is inclined to do so, but they can also act as fiat currencies in that they can be somewhat inflationary. This is the most exciting aspect of Bitcoin development as it satisfies everyone from Keynesians to Mises' Libertarians. One can simply take a nearly worthless amount of BitDust and assign any value you wish to back up.

Of course you can always use Raw Bitcoin as a currency if you care to suffer the slings and arrows of the global markets. Some say that the price will stabilize over time. Perhaps, but the history of gold, silver and energy say otherwise. I will predict that almost everyone will choose to color their spending Bitcoin with something eventually. Over time, Raw Bitcoin days will be destroyed.

tl;dr Bitcoin is first a protocol, second a commodity, and will finally begin to be realized as an acceptable currency.
edited for clarity

Which was true at the time.  Bitcoin is a poor currency, at the present time.  Most of us can see it's potential, though.

The argument is basically a philosophical one.

Do you accept the labor theory of value or the subjective theory of value?

The labor theory of value is archaic, so it is useless to look for intrinsic value in medium of exchange. Currency is a token. It doesn't need to have value in itself to be able to represent a unit of account. It just has to exist and be quantifiable.

It's a currency. Because it can currently be used to represent a unit of account.

Money is an entry on a ledger. Currency is a physical representation of this entry that can be used for exchange.

It will be the sum of what value everybody wants to have in reserve, for the short run as well as savings.

Let's agree that Bitcoin (the protocol) with its digicoins (BTC) function as a currency. Then the question remains wether or not it is a good currency. I think the numbers tell the present situation, which makes it a bad currency, because people rather choose dollars and euros as a medium of exchange in ordinary day to day situations. The main reason stems from the fluctuations in price (value) related to dollar and euro. These fluctuation form excellent opportunities for speculators and this stagnates its distribution and usage.

Is there a way to avoid this stagnation? Is there an alternative way to "value" a BTC than to leave it to the market, where a very limited group of people turn the tables? Is this limited group of people any better than bankers and government anyway? Hmm, not sure. So, I do understand why Sublime5447 keeps asking for a neat and scientific definition of the unit of currency, but such definition would conflict the fixed amount of 21 million BTC.

In the early days the meter was defined as 1/40,000 of the earth's circumference. Nowadays its definition is derived from the speed of light and a fixed portion of time. In everyday life the meter is the unit for distance or length and is measured by practical instruments. It is a unit supported by almost everyone with common sense.

Now can 'we' give the newborn currency Bitcoin a practical definition that avoids fluctuations from speculators and early adapters? I think 'we' can. First 'we' imagine the ideal Bitcoin economy. This would be a world in which all people support Bitcoin and have abandoned all other currencies. In that imaginary world the 21 million BTC would cover the value of the world wide economy. The price (value) of a bread relates to the price of a pair of shoes, which relates to ... etc. Prices are relative and vary because of circumstances, context, maybe even culture and other phenomena. So this world's economy has a 'Bitcoin circumference' of 21 million BTC. Now, what happens when the economy grows, when the circumference increases? Well, the 'distance' between the 21 million BTC also increases, iow each BTC gets more value proportionally and the prices of goods begin to shift. The dynamics of the market will do the job.

Let's suggest one more thing to break open the market for a better distribution of BTC. Today we live in a transition kind of situation. BTC, dollar, euro, yen, yuan and many other currencies exist concurrently. So, is there a way to determine a fair price for 1 BTC, again avoiding those greedy speculators of course? IOW can 'we' find a formula that acknowledges the future amount of 21 million BTC and that counterbalance today's 12 million BTC against the total amount of all other currencies? I think, someone can.

There is a simple cause for this conflict.  All others are wrong.

This just circles back to my point about the argument of whether or not Bitcoin was a good currency or not being independent of the claim that it was a currency.  The definition of a currency is binary, not scalar; either Bitcoin was designed to be a medium of exchange or it was not.  By it's creator's own writings, it's obviously true that it was meant to function as a medium of exchange, therefore it's a currency.  There really isn't a counter argument here without changing the English definition of the term "currency".

Anyone who says Bitcoin isn't currency is literally retarded and doesn't even know what currency is.  There used to be a currency called "wampum" that was basically just the shells of various kinds of mollusc, mostly whelks and clams and other molluscs, and there was no central government that enforced its use as currency.  The tribes just basically agreed to use it as currency.

That's all that determines what a currency is.  People use it as a unit of exchange.  There does not need to be any government to enforce this.

I agree but those small stones have something bitcoin doesnt. The stones are a medium of exchange if we agree and are a unit of account they are definable in objective terms and are constant and a store of value if we agree. Bitcoins are not objectively definable you can say what a stone of certain weight or quality is worth you cant do the same with a bitcoin, now if we were to say that a bitcoin was equal to something that would be a different story.

1 unit of currency = x joules of work. 

'Currency is any agreed upon means of exchanges of goods and services, so you could have some small stones, as used in history, and if it’s accepted by a sufficiently large population, then that’s enough,'

Delusional?

Semantic discussion about "deflation" and "intrinsic value" apart, this was an interesting (th)read. I think that bitcoin is meant to be a currency, and as a means of "medium of exchange" it already functions a bit like a currency, but the amount of exchanges ( < 100,000 / day ? ) between about 3 million users shows that these BTC's don't flow like a current (yet). Maybe it will in the future, but now it covers only a marginal area in the world wide economy; i.e. a playground for speculators, early adapters (luck seekers) and miners.

BTW Economic "units", in the far future perhaps, when/if everyone uses BTC's and there are no other currencies, could be defined as:

1 BTC = 1/21 millionth part of the economy.

my two cents ...

Doesn't take hostilities or EMP, just a Carrington Event:
http://news.nationalgeographic.com/news/2011/03/110302-solar-flares-sun-storms-earth-danger-carrington-event-science/

The block chain will survive it, but fragmented, and mostly unusable until connectivity is rebuilt, unless you are sure you are on the biggest chain.
So maybe civil folks can use bitcoin specie and don't have to trade bullets?