Why is Bitcoin Money?
There’s been a discussion recently on Bitcoin forums regarding whether or not it is properly considered Currency, or Money, or what. So, I felt I would contribute, as it were, my two Bitcents.
It seems to me, that the main mix-up is the definitions of the various terms. The problem is, that Bitcoin defies most of these definitions. Wikipedia defines currency as “physical objects generally accepted as a medium of exchange.” It further defines medium of exchange as “an intermediary used in trade to avoid the inconveniences of a pure barter system.” Money, on the other hand, is defined as “any object or record, that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context”
Now, using those definitions, We can examine the qualities of Bitcoin to determine exactly what it is: It is clearly a medium of exchange, as it serves as an intermediary to avoid the problems associated with barter, since it would be very difficult to pay someone in chickens over the internet. It partially fails the rest of the definition of currency, however, as that specifies ‘physical objects’. Bitcoin does, however, satisfy the definition of money, as it is specifically a record, that is accepted as payment for goods and services.
One slight issue, however, with both definition is the term, ‘generally’. Bitcoin is a very niche market right now, though of course it is growing by leaps and bounds. If you allow for that, however, Bitcoin completely satisfies the definition of money, and if you qualify Currency with ‘Digital’, then it satisfies that, as well.
Additionally, Bitcoin can be considered an asset. Wikipedia defines asset as: “Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value.” Bitcoin clearly fits this definition. It is an intangible thing, capable of being controlled, produces value, and is held to have a positive economic value.
Definitions are only half the story, however. These words often have very strong connotations, as well. The word ‘currency’ brings with it thoughts of official currencies, ‘money’ conjures images of folding paper with images of dead people on it, and ‘asset’ gets one thinking about bank vaults. While these are, indeed the things you expect when you hear those words, they’re by no means the only things you expect. No, ‘currency’ and ‘money’ interchangeably mean ‘value in trade’, and ‘asset’ also brings to mind a store of value, perhaps even an investment. Bitcoin satisfies these less official meanings, just as well, if not better, than even precious metals.
The one thing Bitcoin most definitely is not is legal tender. Bitcoin is not, and should never be, the enforced currency of any nation. It’s been suggested by a few people that we seek a small nation to adopt the Bitcoin as its legal tender, and it was roundly shouted down. Bitcoin is a voluntary currency, for a voluntary society, and should stay that way.
So, in summation, Yes, Bitcoin is money, it is digital currency, it is an electronic asset. No matter what you call it, currency, money, or just Bitcoin, it carries worth.