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.
Why Bitcoin Is Money
Bitcoin is increasingly recognized as a form of money due to its functional roles as a store of value, a medium of exchange, and a unit of account. As a store of value, Bitcoin’s scarcity, with a fixed supply of 21 million coins, and its resistance to inflation make it an attractive asset for long-term holding. Its decentralized nature and immunity to government manipulation further enhance its appeal as a reliable store of value. As a medium of exchange, Bitcoin facilitates transactions across borders without the need for intermediaries, reducing costs and increasing speed. Its blockchain technology ensures secure and transparent transactions, making it a viable option for everyday purchases and large-scale transfers. Additionally, Bitcoin serves as a unit of account, providing a standardized measure of value that can be used to price goods and services. Its widespread adoption and recognition by major financial institutions and corporations further cement its status as a legitimate form of 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 who makes it.
Bitcoin Is A Store Of Value
Bitcoin’s role as a store of value is underscored by its scarcity and durability. With a fixed supply cap of 21 million coins, Bitcoin is designed to be scarce, making it resistant to inflation and ensuring that its value is preserved over time. This limited supply creates a scarcity that drives demand, much like precious metals such as gold. Moreover, Bitcoin’s durability is exceptional; it exists purely in digital form, unaffected by physical deterioration. Stored securely on the blockchain, Bitcoin is immune to the wear and tear that can degrade traditional stores of value. This digital resilience, combined with its scarcity, makes Bitcoin an attractive option for long-term investment and value preservation, positioning it as a modern equivalent to traditional stores of value.
This is the first and most important reason why bitcoin is money. Is money cannot store value long into the future, then people won’t trust it and exchange it amongst each other.
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 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 A Medium Of Exchange
Bitcoin serves as an effective medium of exchange primarily because of its acceptability and portability. As a decentralized digital currency, Bitcoin is accepted by a growing number of merchants, online platforms, and even some traditional financial institutions, making it a viable option for transactions. Its portability is unmatched; Bitcoin can be transferred instantly across the globe without the need for physical presence or intermediaries. This characteristic makes it particularly useful for international trade and remittances, where traditional banking systems can be slow and costly. Furthermore, Bitcoin’s digital nature means it can be stored and transferred using just a smartphone or computer, eliminating the risks associated with carrying physical cash.
Being an effective medium of exchange is the second reason why bitcoin is money but we still need some extra utility to get the final key function of money.
Bitcoin As 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.
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 A Unit Of Account
Bitcoin functions as a unit of account due to its inherent properties of divisibility and fungibility. Divisibility allows Bitcoin to be broken down into smaller units, known as satoshis, which enables precise and flexible transactions. This granularity makes it possible to use Bitcoin for both large-scale financial operations and micro-transactions, catering to a wide range of economic activities. Additionally, Bitcoin’s fungibility ensures that each unit of Bitcoin is interchangeable with another, regardless of its transaction history. This consistency in value and interchangeability is crucial for a unit of account, as it allows for standardized pricing and accounting practices. Together, these qualities make Bitcoin a reliable and versatile unit of account, facilitating clear and consistent financial measurements and transactions.
Being an effective unit of account is the third and final reason why bitcoin is money.
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 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 bitcoin the same as others. Some bitcoins may be linked to illicit activity and therefore be subject to certain scrutiny from law enforcement. There is a debate about the level of fungibility that bitcoin has but since bitcoin is open-source software, the network is constantly looking for ways to change this to make bitcoin even better.
Take Action. Use Bitcoin.
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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