Nobody believes Bitcoin is a workable currency to denominate all value as of today. But people speculate that it will be one day. If it succeeds, it will be slightly deflationary, but I don't think this is a hindrance. It does shift the incentives from being a debtor to being a creditor slightly, though. Is this a bad thing?
Also, was the meme really created by exchanges or sellers who want to get a hand on your Dollars? Or is it rather an expression of excitement of some guy who got rich on buying early? I don't think you should try to debunk Bitcoin based on some meme.
Apart from that, Bitcoin needs more serious critics like you!
The entire marketing pitch of Bitcoin rests on the assertion that it is money, rather than something priced in money on a market. That's the only way that the meme works, and that meme was one of the most crucial in the early days of Bitcoin mania. I use that meme because it is a great example of an ongoing category error that lies at the heart of almost all Bitcoin rhetoric - the idea that a money-priced asset somehow is 'competing' with the money used to price it. That category error is writ large in the meme - the top half shows money, while the bottom half shows something priced in money, but presents them as if they were comparable. That's like mapping the trajectory of a US-dollar denominated share on a graph alongside the trajectory of the US dollar, showing the dollar declining while the share price goes up, even though the share value is measured in the thing that's declining
Anway, even if that is but one meme, the argument underlying it remains the most core argument used by the Bitcoin community to this day. For example, if you go onto BTC forums right now, you will see massive amounts of scaremongering about inflation, with Bitcoin being presented as some kind of competing monetary system that isn't subject to that. Note that they are not presenting Bitcoin as a non-monetary asset (like real estate, shares, or rare postage stamps) that can be bought with money to resell for money at a later date in the hope of creating an inflation hedge. This is what is so BS about the community right now. If they were honest, they would say 'BTC is a collectible asset that you can maybe use for inflation hedging, like many other assets', but they try to claim that it is somehow both a *unique* counter to inflation and a new monetary system. If you want to go deeper into this confusion, check out the piece I did for Coindesk called How to Win A Bitcoin Street Fight https://www.coindesk.com/bitcoin-street-fight-mortal-combat
So what you are saying is that people who own, sell, or just write about Bitcoin have sometimes flawed concepts. Wow.
What I wonder is why you draw such strict categorical lines. Bitcoin may be used by most to trade and make a buck TODAY, but it is designed to GROW INTO being a new private money. And I'd argue its design is pretty smart for this purpose.
Can it be that you have a problem with private money in general, that money needs some kind of governmental badge for you?
I think money is that which is used - more or less - as such and there are no strict lines. One could make a good case that (private / public) bonds, repo, mmf shares, even equity etfs are money today already.
You need to go deeper. I have worked on many non-government 'private money' systems, but I do understand that many Bitcoiners default to labelling anyone who critiques the system as being a 'statist' trying to protect the status quo. That's a shallow cop-out though.
You need to have an actual theory of how a collectible with a dollar price, which is used for countertrade (https://brettscott.substack.com/p/crypto-countertrade), will somehow 'transition' into being a monetary system used to hold markets together. Right now many in the Bitcoin community will simply assert that 'in the future it will become money', and their theory is that it will become money because 'more people will use it', as if the only thing you need to turn something into a monetary system is for people to believe in it. That is founded on some pretty fundamentally flawed monetary theory (and no, fiat money systems do not work like that), so I encourage you to go beyond the standard Bitcoin community and start building an actual theory for how this imagined transition will happen
"You need to have an actual theory of how a collectible with a dollar price, which is used for countertrade, will somehow 'transition' into being a monetary system used to hold markets together."
replace "dollar price" with "sea shell price" and you have the question of locals when gold was brought to some remote island. Right?
And yes I insist that believe / custom / reciprocal emergence is what monetizes an asset. Just that some assets are better suited to become money by virtue of their characteristics. Speaking with Aristotle: "nomos" is the reason, "physis" is the condition. Nomos qua convention begets law (= fully-fledged monetary system).
Lovely work this is. Thank you. Listening in on the so-called crypto gurus on various podcasts reminds me an old axion; never buy wares from people who have no clue or are dishonest about their ultimate utility.
Ok, one more comment from me on your article. Quoting: "The dealers might say ‘Bitcoin is increasing in purchasing power’, but Bitcoin is not used to purchase things. It is, rather, something that is purchased."
Tesla now accepts Bitcoin, so one can swap the digital token for real tangible goods. The place where I live now has a few local stores (including coffee shops & pizza shops) that accept payment in Bitcoin.
If more and more economy agents accept BTC as means of payment, that digital token might become a "secondary currency". Disclaimer: I do not hold (and never have held) any Bitcoin.
The technical term for what is happening is called countertrade https://www.investopedia.com/terms/c/countertrade.asp. In simple terms: there is a speculative market for Bitcoin where its price in money is established. Once it has a price, it can be swapped (counter-traded) for other objects with prices. Because it is a movable digital object with a price, it has very high counter-tradability (as opposed to say, a camera, which is very hard to use for counter-trade). Implicitly, two monetary transactions are being superimposed over each other, but the money part of each transaction is being cancelled out, while two goods cross over. Thus, Bitcoin is a money-priced good, being exchanged for another money-priced good (e.g. pizza). I know this because I've done many of these transactions.
Thus, Tesla is not 'accepting' Bitcoin in the sense of money. Tesla is assessing Bitcoin's money price and then allowing you to swap Bitcoin with them for something else with a money-price
Just to try to pin this down a bit more; similarly there is market for currencies. Where you trade one currency against another. Would that constitute a countertrade?
If Tesla decided that yes, you may exchange 2 BTC for one Tesla, irrespective of what the price of BTC is in USD would Bitcoin then constitute money?
To answer the first question: the FX market is a place where you take one currency used to price real goods and services in one geographic area, and swap it for another currency used to price real goods and services in another. Nothing gets to be on the FX market unless it is also a unit of account that dominates in a particular region, and the FX market is like an interstitial zone between currency networks. FX trades are not countertrade, which is where one money-priced thing is swapped for another.
The key test to determine whether something you're holding in your hand is a currency is this: when you are within its zone of geographic dominance it will make you think of goods and services you can get for it, rather than making you think of another currency. FX traders are unique in the world in terms of thinking of money as something that is 'sold', rather than something used to buy, and that is purely due to the fact that they occupy a specialist role at the boundaries between currency networks.
To answer the second. Sure, if Tesla began to use BTC for true pricing then that would make a difference, but given that almost all of Tesla's input costs are not in BTC that's going to be pretty challenging for them
Another useful way to determine whether or not the “thing” (physical or symbolic) you’re “holding” is a currency is this: can you pay the taxes, fees and/or fines levied by the sovereign in its zone of geographic dominance?
I'd partially agree, but it's often useful to think of money as 'the thing that holds an interdependent economic network together', and - yes - it's true that state-issued money is particularly good at doing this, and has those properties you described. But state money is not the only thing that could do that. There is no inherent reason why, for example, a small scale mutual credit system could not hold a group of 150 people together, and thus come to form a monetary network.
When we look at Bitcoin, however, we can easily see that it does not hold an interdependent network of people together - it is a discretionary money-priced item that they can choose to hold or not, and which they can engage in countertrade with (https://brettscott.substack.com/p/countertrade-spades)
It would nice of you if you could elaborate a bit more on why the case of someone selling e.g. x amount of USD for y amount of EUR is different from selling an amount of BTC for an amount of fiat currency. Isn't that what the FX markets do? Namely, selling an amount of a currency and accepting to be paid for it in another one.
I can feel that my question (posed as a statement) can be debunked, I just don't know how.
Bitcoin is on the goods market, not on the FX market. This is not a perfect analogy, but think of the FX market as being a little like the Olympic Games of currencies, with all the competitors being dominant in one particular geographic region, with that dominance marked by the fact that goods in that region bear its symbol and are priced in it. The South African Rand is not a globally dominant currency, but I guarantee you that if I go into a South Africa supermarket the prices are all in Rand (I'm from South Africa, so I can confirm this). That's why the Rand is on the FX market, where is might be traded against the Malaysian Ringgit, which is used to price goods in Malaysia. Bitcoin is not used to price anything, and - much like a mango smoothie that I can buy in Kuala Lumpur with Ringgit, it will have a price, rather than be used to price things
Sorry, it is detrimental to my site for people to advertise unrelated stuff in my comments section. The comments section is meant for people who wish to further discuss the article they've just read, rather than to be diverted to different sites. I hope you understand. Cheers
You are mostly arguing against Strawman here.
Nobody believes Bitcoin is a workable currency to denominate all value as of today. But people speculate that it will be one day. If it succeeds, it will be slightly deflationary, but I don't think this is a hindrance. It does shift the incentives from being a debtor to being a creditor slightly, though. Is this a bad thing?
Also, was the meme really created by exchanges or sellers who want to get a hand on your Dollars? Or is it rather an expression of excitement of some guy who got rich on buying early? I don't think you should try to debunk Bitcoin based on some meme.
Apart from that, Bitcoin needs more serious critics like you!
The entire marketing pitch of Bitcoin rests on the assertion that it is money, rather than something priced in money on a market. That's the only way that the meme works, and that meme was one of the most crucial in the early days of Bitcoin mania. I use that meme because it is a great example of an ongoing category error that lies at the heart of almost all Bitcoin rhetoric - the idea that a money-priced asset somehow is 'competing' with the money used to price it. That category error is writ large in the meme - the top half shows money, while the bottom half shows something priced in money, but presents them as if they were comparable. That's like mapping the trajectory of a US-dollar denominated share on a graph alongside the trajectory of the US dollar, showing the dollar declining while the share price goes up, even though the share value is measured in the thing that's declining
Anway, even if that is but one meme, the argument underlying it remains the most core argument used by the Bitcoin community to this day. For example, if you go onto BTC forums right now, you will see massive amounts of scaremongering about inflation, with Bitcoin being presented as some kind of competing monetary system that isn't subject to that. Note that they are not presenting Bitcoin as a non-monetary asset (like real estate, shares, or rare postage stamps) that can be bought with money to resell for money at a later date in the hope of creating an inflation hedge. This is what is so BS about the community right now. If they were honest, they would say 'BTC is a collectible asset that you can maybe use for inflation hedging, like many other assets', but they try to claim that it is somehow both a *unique* counter to inflation and a new monetary system. If you want to go deeper into this confusion, check out the piece I did for Coindesk called How to Win A Bitcoin Street Fight https://www.coindesk.com/bitcoin-street-fight-mortal-combat
So what you are saying is that people who own, sell, or just write about Bitcoin have sometimes flawed concepts. Wow.
What I wonder is why you draw such strict categorical lines. Bitcoin may be used by most to trade and make a buck TODAY, but it is designed to GROW INTO being a new private money. And I'd argue its design is pretty smart for this purpose.
Can it be that you have a problem with private money in general, that money needs some kind of governmental badge for you?
I think money is that which is used - more or less - as such and there are no strict lines. One could make a good case that (private / public) bonds, repo, mmf shares, even equity etfs are money today already.
You need to go deeper. I have worked on many non-government 'private money' systems, but I do understand that many Bitcoiners default to labelling anyone who critiques the system as being a 'statist' trying to protect the status quo. That's a shallow cop-out though.
You need to have an actual theory of how a collectible with a dollar price, which is used for countertrade (https://brettscott.substack.com/p/crypto-countertrade), will somehow 'transition' into being a monetary system used to hold markets together. Right now many in the Bitcoin community will simply assert that 'in the future it will become money', and their theory is that it will become money because 'more people will use it', as if the only thing you need to turn something into a monetary system is for people to believe in it. That is founded on some pretty fundamentally flawed monetary theory (and no, fiat money systems do not work like that), so I encourage you to go beyond the standard Bitcoin community and start building an actual theory for how this imagined transition will happen
thanks for the suggestion.
"You need to have an actual theory of how a collectible with a dollar price, which is used for countertrade, will somehow 'transition' into being a monetary system used to hold markets together."
replace "dollar price" with "sea shell price" and you have the question of locals when gold was brought to some remote island. Right?
And yes I insist that believe / custom / reciprocal emergence is what monetizes an asset. Just that some assets are better suited to become money by virtue of their characteristics. Speaking with Aristotle: "nomos" is the reason, "physis" is the condition. Nomos qua convention begets law (= fully-fledged monetary system).
Not right no. You are using a very crude straw man of ancient cere-money systems. If you're interested, I wrote this about shell money systems here https://alteredstatesof.money/shell-money-as-ceremoney-in-png/
Very good analysis, I fuly agree. Bitcoin is not well suited to function as "money" and in that respect, Satoshi's design proved too simplistic as The Economist observed already back in 2011 (https://www.economist.com/finance-and-economics/2011/06/16/bits-and-bob). However I am curios as to what is your take on more recent, less well-known and understood blockchain-based designs. I wrote a post in my blog, I'd be honored if you found time to read it: https://steemit.com/hive-155234/@sorin.cristescu/crypto-communities-need-to-provide-value-to-the-world
Hi Sorin, thanks for the link. I'll go take a look now :)
Thanks, I'm a debatter by nature so I'm interesting in whatever counterarguments you might have to offer :)
Fantastic. Yet another piece of disinformation debunked. Thank you. Added it as a source on https://www.cynicusrex.com/file/cryptocultscience.html.
Lovely work this is. Thank you. Listening in on the so-called crypto gurus on various podcasts reminds me an old axion; never buy wares from people who have no clue or are dishonest about their ultimate utility.
Glad you like it Otis!
Ok, one more comment from me on your article. Quoting: "The dealers might say ‘Bitcoin is increasing in purchasing power’, but Bitcoin is not used to purchase things. It is, rather, something that is purchased."
Tesla now accepts Bitcoin, so one can swap the digital token for real tangible goods. The place where I live now has a few local stores (including coffee shops & pizza shops) that accept payment in Bitcoin.
If more and more economy agents accept BTC as means of payment, that digital token might become a "secondary currency". Disclaimer: I do not hold (and never have held) any Bitcoin.
The technical term for what is happening is called countertrade https://www.investopedia.com/terms/c/countertrade.asp. In simple terms: there is a speculative market for Bitcoin where its price in money is established. Once it has a price, it can be swapped (counter-traded) for other objects with prices. Because it is a movable digital object with a price, it has very high counter-tradability (as opposed to say, a camera, which is very hard to use for counter-trade). Implicitly, two monetary transactions are being superimposed over each other, but the money part of each transaction is being cancelled out, while two goods cross over. Thus, Bitcoin is a money-priced good, being exchanged for another money-priced good (e.g. pizza). I know this because I've done many of these transactions.
Thus, Tesla is not 'accepting' Bitcoin in the sense of money. Tesla is assessing Bitcoin's money price and then allowing you to swap Bitcoin with them for something else with a money-price
Just to try to pin this down a bit more; similarly there is market for currencies. Where you trade one currency against another. Would that constitute a countertrade?
If Tesla decided that yes, you may exchange 2 BTC for one Tesla, irrespective of what the price of BTC is in USD would Bitcoin then constitute money?
To answer the first question: the FX market is a place where you take one currency used to price real goods and services in one geographic area, and swap it for another currency used to price real goods and services in another. Nothing gets to be on the FX market unless it is also a unit of account that dominates in a particular region, and the FX market is like an interstitial zone between currency networks. FX trades are not countertrade, which is where one money-priced thing is swapped for another.
The key test to determine whether something you're holding in your hand is a currency is this: when you are within its zone of geographic dominance it will make you think of goods and services you can get for it, rather than making you think of another currency. FX traders are unique in the world in terms of thinking of money as something that is 'sold', rather than something used to buy, and that is purely due to the fact that they occupy a specialist role at the boundaries between currency networks.
To answer the second. Sure, if Tesla began to use BTC for true pricing then that would make a difference, but given that almost all of Tesla's input costs are not in BTC that's going to be pretty challenging for them
Another useful way to determine whether or not the “thing” (physical or symbolic) you’re “holding” is a currency is this: can you pay the taxes, fees and/or fines levied by the sovereign in its zone of geographic dominance?
I'd partially agree, but it's often useful to think of money as 'the thing that holds an interdependent economic network together', and - yes - it's true that state-issued money is particularly good at doing this, and has those properties you described. But state money is not the only thing that could do that. There is no inherent reason why, for example, a small scale mutual credit system could not hold a group of 150 people together, and thus come to form a monetary network.
When we look at Bitcoin, however, we can easily see that it does not hold an interdependent network of people together - it is a discretionary money-priced item that they can choose to hold or not, and which they can engage in countertrade with (https://brettscott.substack.com/p/countertrade-spades)
It would nice of you if you could elaborate a bit more on why the case of someone selling e.g. x amount of USD for y amount of EUR is different from selling an amount of BTC for an amount of fiat currency. Isn't that what the FX markets do? Namely, selling an amount of a currency and accepting to be paid for it in another one.
I can feel that my question (posed as a statement) can be debunked, I just don't know how.
Bitcoin is on the goods market, not on the FX market. This is not a perfect analogy, but think of the FX market as being a little like the Olympic Games of currencies, with all the competitors being dominant in one particular geographic region, with that dominance marked by the fact that goods in that region bear its symbol and are priced in it. The South African Rand is not a globally dominant currency, but I guarantee you that if I go into a South Africa supermarket the prices are all in Rand (I'm from South Africa, so I can confirm this). That's why the Rand is on the FX market, where is might be traded against the Malaysian Ringgit, which is used to price goods in Malaysia. Bitcoin is not used to price anything, and - much like a mango smoothie that I can buy in Kuala Lumpur with Ringgit, it will have a price, rather than be used to price things
What would you say about El Salvador then? I'm not sure if good are actually priced in BTC there. Or price in USD but you can pay that amount in BTC.
Sorry, it is detrimental to my site for people to advertise unrelated stuff in my comments section. The comments section is meant for people who wish to further discuss the article they've just read, rather than to be diverted to different sites. I hope you understand. Cheers
Understood, no worries, and thanks for explaining.