Bitcoin, the simplest money ever invented

Bitcoin aspires to be to money what the decimal numeric system is to arithmetics. Bitcoin, the monetary unit, is not different in essence to the set of ten numerals of the decimal number system (0, 1, 2, 3, 4, 5, 6, 7, 8 and 9), that is, a fixed set of ownable elements that anyone is free to use. It is crucial to take into account the concepts “ownable”, “fixed” and “free to use” (free in the sense of open), because these characteristics are incompatible with being managed by a third party. If the set is managed by a third party, there automatically arises the need to trust someone to mantain the fixed and open nature of the set.

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Talking about trust implies talking about the particular behavior of specific third party. As I have explained in previous articles, currencies such as the euro or the dollar are obligations of its issuers. Therefore, it does not have the slightest sense that Bitcoin requires trust in third parties, that would not bring anything new at all.

Bitcoin is something else, and it has to be or it will disappear. It is logical to think that if the market demands and values ​​Bitcoin, it does so for those qualities that are different from its competitors, and the qualities “fixed set” and “open access” clearly are. The extent to which the market will demand these characteristics is something that is in the process of being discovered. In this regard, fearing that the fixed nature of the set is altered would be as absurd as fearing the addition of an eleventh numeral to the decimal numeric system.

And the existence of these qualities will only be verifiable by anyone if the technical means necessary to be able to own and transmit units of that fixed set are accessible to anyone. That is why Bitcoin works like a geriatric, as Hugo Nguyen brilliantly explains. The market selects that implementation of Bitcoin that reflects these qualities more effectively, to the detriment of other implementations, such as Bitcoin Cash, which promise other things such as fast transactions at the cost of making verification more difficult for everyone, when qualities such as speed are not differential with respect to existing currencies (euros through SEPA, Visa, Paypal or Zelle).

To make clear what I want to convey about accessibility and verifiability, let’s look at an example with gold and other metals. If in order to distinguish gold from copper, it was necessary extremely expensive equipment, gold could hardly have been better money than other metals. The ductility of gold (that’s why it was bitten) and more importantly, a much greater density than most metals, allowed anyone to easily distinguish a gold coin from a copper coin. For equally sized coins, gold weighs more than double than copper.

Bitcoin is a present economic good, like gold, wheat or salt. Present goods differ from future goods in that their utility depends solely on the qualities of the good itself, regardless of who produced it; while the utility of future goods relies on the future behavior of a specific third party. This is the case of actual fiat currencies that rely on the behavior of the banks who issue them as liabilities.

When it comes to Money this is an essential characteristic, because one the basic purposes of Money is to settle debts. If the currency we use to settle a debt is another debt, we will hardly settle anything. The abstract set of 21 million Bitcoin is a present good, no unit of that set represents anyone’s obligation.

If for whatever reason the technical means to access and verify Bitcoin are no longer easily accessible to everyone and are replaced by other means that imply trusting someone, and they still call it Bitcoin, rest assured that they are lying to you. They are trying to prevent you from accessing Bitcoin.

I do not want to conclude this post without highlighting the idea that Bitcoin as a concept, a fixed set of ownable units, is beyond its technology and it will always be there, it can not be deleted. The only way to lose access to Bitcoin is because we fail or, even worse, we self-sabotage ourselves in the development of the necessary technical means that enable us to access it.

This is a fragment of a post originally published at www.juandemariana.org

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