Skeptics are eager to criticize bitcoin because they claim that it doesn’t have any “intrinsic value” and therefore can’t possibly be money. What they fail to realize is that bitcoin has a market utility that no other form of money in history has ever had. That’s a bold statement so let me show you why bitcoin is money.
What is Money?
In order for something to be money, it needs to perform three basic functions. It needs to be a used as a medium of exchange, a unit of account and a store of value. In order to do these three things, it needs to possess six characteristics. It needs to be durable, portable, divisible, uniform, scarce and acceptable. All throughout history, societies have used a number of devices to provide these three functions with various levels of these six characteristics. Some historically popular forms of money have been salt, whale’s teeth, beads, shells, feathers but the most popular money of them all has been gold because it had more of these six characteristics than all of the others. In short, money is money because of what it does; not because of what it is.
Bitcoin is Durable
Money needs to be durable if it is going to stand the test of time. Durability is one of the reasons that gold was the best form of money for thousands of years. In ancient societies, certain food commodities were used as money because everyone wanted food. As we all know, food spoils after a while so it ended up not being the most durable form of money. One of the reasons that whale’s teeth made good money was because of how durable they are.
Bitcoin is Portable
Money needs to be portable if people are going to carry it with them. One of the problems with gold is that it is difficult to transport in large quantities and doing so puts the holder at high risk of robbery. Portability is probably the main reason why paper money was invented. People would deposit their gold or other forms of money into a bank or vault and were issued a certificate of ownership for their money. These certificates were just an IOU issued by the owner of the vault where the money was stored. This system was the birth of representative money. (It’s important not to confuse this with fiat money of today but more on that later.) Bitcoin is probably the most portable form of money in history because anyone can hold an unlimited amount of money in their pocket.
Bitcoin is Divisible
Money needs to be divisible if people are going to use it in everyday life. Historically, a lack of divisibility has been one of the of the biggest problems with most forms of money. You typically cannot divide money by itself. You need someone else to divide it for you if you don’t have smaller amounts yourself. Have you ever asked anyone “Hey, do you have change for a fifty?” They might respond, “No, sorry. I can’t break a fifty.” This is because your fifty dollar bill is not divisible by itself. It needs to be exchanged for other smaller denominations of money in order to divide it. Bitcoin on the other hand is divisible into one hundred million smaller units by itself (100,000,000 units). This makes a single bitcoin one million times more divisible than your dollars, pounds, euros pesos, yen, etc.
Bitcoin is Uniform
From a technical perspective Bitcoin is perfectly uniform or “fungible” because every bitcoin is just like every other bitcoin. Because of the transparent nature of the technology behind bitcoin (the blockchain), some governments do not consider certain bitcoins the same as others. Some bitcoins may be linked to illicit activity and therefore be subject to certain scrutiny from law enforcement. There is debate about the level of fungibility that bitcoin has but since bitcoin is an open-source software, the network is constantly looking for ways to change this to make bitcoin even better.
Bitcoin is Scarce
Money needs to be scarce if people are going to trust it as a form of money. If money can just be printed out of thin air at the whim of a politician or banker, then it is not scarce. This lack of scarcity is one of the biggest problems with the global money supply since money supplies can just be inflated or even hyperinflated to the point that bills are worth less than the paper they are printed on. Bitcoin on the other hand, solves the problem of scarcity because the supply is controlled by math rather than politicians and bankers.
Bitcoin is Easily Acceptable
As the bitcoin infrastructure grows, more people are realizing that bitcoin is not just a fad. People are finding new ways to accept it as a payment for goods and services. If you would like to accept bitcoin in just seconds on any computer or mobile device, be sure to try out RushWallet.com and you can accept your first bitcoin before you are done reading this post. What’s also important to note is that bitcoin’s borderless nature enables it to be accepted in any country in the world without any permission from banks or governments. This makes bitcoin more acceptable than most currencies in the world.
In conclusion, bitcoin is a medium of exchange, a unit of account and a store of value and is more durable, portable, divisible, uniform, scarce and acceptable than any other form of money on the planet. Even if you don’t yet see how bitcoin is going to change the global economy, the best things that you can do for your future is to own at least a little bit and save it until the infrastructure grows to the point that you find a use for it.
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