I buy and sell things with it. Sure seems like a currency to me. What am I supposed to be “following” that I am not? The thrust of your argument with which I don’t necessarily agree?
I don’t care if it is a bad investment. I use it for specific purposes.
New Your Times today…
I think it’s a semantic point. “Currency” can be taken to mean more than just “something you exchange to buy and sell stuff”. For example, you could buy a book with a Barnes&Noble gift card, but that doesn’t make the gift card currency, at least by the “official” definition.
Google says the characteristics of currency are: durability, portability, acceptability, limited supply, divisibility and uniformity. And currency must act as a unit of account, a medium of exchange and a store of value. Bitcoin does most but not all of these things. In particular, it’s an unreliable store of value because its buying power fluctuates significantly over relatively short periods. A bitcoin someone picked up some years ago for pennies can now buy a whole laptop, and it could go dramatically up or down from here.
Traditionally, things which can be a unit of exchange but not a good store of value are undesirable, because there’s a bunch of work involved in procuring the unit of exchange, doing the transaction, and then on the other side turning the unit of exchange back into something that’s a good store of value. However if technology like the blockchain makes this process frictionless, it may not matter that it’s an unreliable store of value. In effect, we may no longer need one single thing to fill all the functions of “money” as it’s traditionally understood. I can see why this would make economists uncomfortable!
Which is why I brought up tokens. Tokens are like currency in a lot of ways. They can be used to buy, And things can often be sold/traded for them. They are portable, often persistent.
But they can’t really be used as a store of wealth their use is highly restricted by context. You can only by certain sorts of things in certain places. They must be converted to currency outside they’re context.
Tokens are generally considered bad for a number of reasons. They can used to obscure the cost off things. Artificially restrict purchasing. And the cost to acquire them does not generally align with the value or wealth that can be extracted from them. And the ability to convert them is often barred or restricted.
One thing about Bitcoin, it’s really great for causing confused discussions about the philosophy of money.
Money’s just, like, paper maaaaan.
What can? Really?
I keep my wealth in property, right now.
Ultimately. Nothing but land. And you can ruin land reducing it’s value. Or it can drop it’s value to the point where it’s only value is subsistence living on it.
But some things are better stores of wealth than others. Tokens typically don’t store wealth well. Their use is too restricted to be wealth themselves. They cost more in wealth than they provide. And wealth is difficult to extract. Strong currencies are good stores of wealth because their value is stable, an their issuers are unlikely to disappear. If you put 20k in us dollars in the bank it is quite likely to be there with at least 20k worth of buying power in 30 years. Weak currencies, with low or volatile values aren’t. Because that buying power might evaporate in weeks or months. Commodities are generally stable, And retain some base level of value because they are things. Meat, grain, metals. Adorable things with real world uses . Government bonds store wealth well, provided the government isn’t likely to implode. Lending and saving at agreed upon interest rates. And so forth. Basically things with value that we can reasonably expect to keep that value.
Bitcoin’s value is too unstable to store wealth. If you shifted wealth to bitcoin now thinking you’d get your money out even in 6 months that more than likely won’t happen. Stable ways to store wealth do not generally climb up towards the price of gold. Fall to a fraction of that, then climb back up. Over the course of just years or months. I think there’s other things at play too. But in the short of it volatile is bad. Things with flat trajectories or slow, predictable rises and falls are good.
ETA: “Adorable things” was definitely a typo. But I like it. So I’m sticking with it.
What starts as confusion can (and does) develop into a much deeper understanding of money, if one is willing to put in the effort. There’s a saying that Bitcoin is God’s way of forcing nerds to understand finance, and it’s true – contrasting Bitcoin with other currency-like things is a useful and constructive exercise in understanding the nature of money, which most people (nerds included) largely take for granted. It turns out that money is a really fascinating topic, and not at all what most people think it is.
Yes, Neal Stephenson wrote a 2,500 page trilogy of novels in longhand in a notebook on the subject.
You aren’t really advancing your understanding of functional money though. For BC enthusiasts 5+ years ago, all previous forms of money would be cleared away and the States would fall… etc.
It was clear that the cheerleaders hadn’t read about the history of metal money or sovereign fiat money, or how money developed the way it did. Their ideas seemed to revolve around money as being sovereign metal, more because that’s the crackpot “libertarian” fantasy pushed (for decades) by b-school nerd wranglers. Their understanding of money wasn’t based on anything real.
Fiat money is still not well understood by the BC community. BC’s limitations are, to be blunt, mostly seen as technical hacking issues with transactions rather than addressing the fundamentally undemocratic nature and regular ole’ micro- and macroeconomic shortcomings.
This problem happens whenever coders try to “support” a formerly analog human activity. The tool sucks, appearing to be designed by people with no experience or ability in the analog activity. Complaints aren’t understood and the Dunning-Kruger effect takes over, especially among the MBAs who take over the market and force the shitty tool on the users, setting standards of quality for the tool’s output back to a grade-school level. The coders and their bosses feel better by dismissing criticism as hatin’ from oldsters who can’t keep up. It’s really the BC guys who can’t keep up and compensate by moving the finishing line to a safe zone.
At least BC is shitty enough I’ll never be forced to use it.
Maybe the speculation in BC is because The Rump’s string-pullers might push to convert the Fed to a cryptocurrency. 
Rumors started here! What could go wrong?
I’ve seen it commented more as “Bitcoin is the best way to teach radical libertarians the purpose behind financial regulations.”
Bitcoin takes the monetary system back essentially a hundred years. We know how to beat that system. In fact, we know how to nuke it for profit. Bitcoin is volatile, inherently deflationary and has no lender of last resort. Cornering and squeezing would work well - they use mass in a finite trading space. Modern predatory algos like bandsaw (testing markets by raising and suddenly dropping prices), sharktooth (electronically front-running orders), and band-burst (creating self-perpetuating volatile equilibria in a leverage-sensitive trading space, e.g. an inherently deflationary one), would rapidly wreak havoc. There is also a part of me that figures regulators will turn a blind eye to Bitcoin shenanigans.
That wasn’t at all my point. At all. My point was simply that understanding the ways that Bitcoin does (and, significantly, does not) resemble traditional forms of currency can lead one to a better understanding of what currency actually is, and (as you put it) the philosophy of money.
I’m definitely not advancing the notion here that Bitcoin is a replacement for fiat currency. Can it be used in ways that are similar to currency? Yes, absolutely. Can it do things that traditional currencies cannot? Yes, absolutely. Is it imperfect? Oh hell yeah. But it is precisely these differences (and flaws) that can lead one to a deeper understanding of the nature of money.
Which cheerleaders, specifically? The magic hand-wave, pronouncing “they” to be in error is pretty meaningless without identifying who “they” are. There are lots of people who have been interested in Bitcoin. Some of them were full of shit. Some of them decidedly not. The fact that you might have encountered someone in the past who didn’t know what “they” were talking about is hardly surprising. There are people right here in this thread doing the exact same thing.
See my previous comment.
Your reduction of Bitcoin to merely a programmatic analog of a human activity does Bitcoin (and yourself) a grave disservice. It seems likely that you’ve become trapped by your own fixation on the idea that Bitcoin is supposed to replace currency, and nothing more. If you let go of that (and all of your objections to Bitcoin on that basis) you might find that the blockchain concept is much more interesting than merely “digital money”.
Putting all that aside, I’ll end with this: a thing has value if someone is willing to pay for it. At the moment, Bitcoin has value, in spite of your hand-wringing about how imperfect it is. Tomorrow, it could very well be worthless. Who knows?
Neither of us, that’s who.
I even linked to a blockchain piece I today’s New York Times…
It seems likely that you’ve become trapped by your own fixation on the idea that Bitcoin is supposed to replace currency, and nothing more.
The center of my opinion about BC is that, like sovereign metal certificates, it’s a pain in the ass. A toy. A toy structured so it’s not useful and a distraction from real issues.
That wasn’t at all my point. At all. My point was simply that understanding the ways that Bitcoin does (and, significantly, does not) resemble traditional forms of currency can lead one to a better understanding of what currency actually is, and (as you put it) the philosophy of money.
There’s little useful exposure to the realities of money in BC. Money is a tool of society, of legal sovereignty. BC is unbacked penny-stock bullshit. Read some Angus Maddison and other econ history for useful info.
And there it is at last, the polished turd at the center of your argument. Do tell, Andy: who gets to decide which are the “real” issues? Are you suggesting that because there are other issues in the world that nobody should be allowed to dabble in useless ephemeral things like Bitcoin?
That’s a whole lot of bullshit right there.
polished turd at the center of your argument. Do tell, Andy: who gets to decide which are the “real” issues?
I dunno. I’m a liberty-loving social democratic republican, guillotines and all. A sandbox experiment is one thing. A failed attempt at remaking currency for the benefit of… no one who doesn’t have a monopoly on computing power… it just seems stupid.
I mean, seriously, what turd is being polished here? Bitcoin?
Then don’t think of it as an attempt to remake currency. Think of it as a really interesting thought experiment testing out some fairly new ideas.
And by the by, computing power is not required in order to use Bitcoin. Seems a really odd thing to say, really.
