I deeply appreciate receiving the following stimulating message:
“Bitcoins can’t be money, since they are not universally accepted.
They did not emerge from a commodity. And (my favorite), they are not
antibacterial, which is common to all metal coinage.
“What they are is a misleading name for what is merely a computer
accounting system for barter exchanges.
“It ain’t money, it’s bookkeeping.”
To which I responded —
“I appreciate your thoughts on this. And since you are thoughtful on this subject, let me point out to you that cowry shells were not universally accepted either, but they still were money in a broad swath of earth. And why is universal acceptability a necessary criterion? Who hands down these edicts anyway? And who says that money MUST emerge from a commodity? (von Mises I know [Menger too], but what makes that pronouncement authoritative?) And is it really barter when you use another object (like bitcoins) to mediate an exchange? If so, then all money transactions are actually barter. Barter has to be disparate goods exchanged for other disparate goods, or else it loses all meaning. And even if we accept the notion of emerging from a “commodity,” how you demonstrate that the emergence of bitcoins in the process being used is not a commodity? It’s easier to say that it IS a commodity.
“And so, I deeply appreciate what you’ve suggested, because it has elicited from me all of these counter-thoughts, which I hope you find stimulating and perhaps persuasive.”
I add this. It seems to me that a bitcoin is a newly-produced commodity or good. In the same way, those persons who discovered a rock and got gold out of it produced a new good or commodity by extracting the gold. Marketability is a quality of a good that is subjectively assessed by those in the market. It seems that bitcoins possess it. People can recognize it and transport it at almost zero cost. They can exchange it very easily. The supply process of the bitcoin is also apparently known, but what is not known (at least to me) is the entry of future close substitutes. I’m leery of that. But gold had the same problem. How did early users of gold know that vast supplies would not be discovered?
I’d also like to mention that money CAN be accounting entries, if the process that creates those entries keeps the supply limited. In fact, accounting entries have certain advantages over hand-to-hand forms.
Liability claims that are used as money need the assurance that the claims are “good” and will be or can be paid off in things of value. That is why some may be looking for a “backing” to bitcoins. But bitcoins are not a liability claim at all. They are a manufactured thing, and so they are a good or an asset. Their value would be conceivably very low if they were not well designed. If I introduced bitsand, which was a digital entry for a grain of sand, it would be worthless. The value of the bitcoin is apparently being driven by certain uses that allow anonymity in transacting. That’s my guess.
