Money and forms of money used in the past
In order to start off, I would like to take you through the definition of money. Money is a form of of value that can be used in transactions in order to exchange goods and services. This means that the object you are storing your values on shouldn’t be volatile, should be accepted by everyone for transacting purpose and should be scarce. Because of this reason, assets like Gold and silver have been used as a of value since the Lydia times (643 BC). Moreover, during the Roman times, (until 1907) and in several countries, coins were made of gold so that the amount of gold on the coin would be exactly the same as the amount mentioned in the coin.
Fast forward to 1932, This universality allowed the US government to back FIAT or paper money (Government controlled money) like USD, on the amount of gold in order to provide it with value. However, after 1971 Richard Nixon banned the private ownership of Gold and ended the universal Gold standard in order to have more control over the amount of FIAT money.
Since, there is no asset backed by FIAT currency all over the world, it is a shame that FIAT (Rupees, Bhatt etc ) are backed by FIAT (USD). Although, many banks around the world hold certain amount of Gold, the amount of Gold and the monetary value of the FIAT is completely off, meaning that more FIAT is printed every year.
bitcoin and other forms of of value
According to one of the greatest philosopher of all time, Aristotle (384–322 BC), there are four criteria for anything to be considered as money :
- Durable : The form of of value should never weather or become unusable. This was one of the reason why Silver didn’t work as a standard to back other forms of money because Silver corrodes (forming silver sulphide) overtime while Gold doesn’t. Gold and bitcoin have similar characteristics in the case of durability. The amount of bitcoin you have never wears off, if you had 1 bitcoin in 2014, you’ll have 1 bitcoin in 2019 as well. In addition, bitcoin doesn’t have a boiling or melting point while gold does (1,064 °C).
Thus, bitcoin passes the durability test. ✓
2. Portable : The form of asset should be easy to transact. In the present times, physical assets like Gold, Silver, Diamond are harder to ship from a country to another as there will be several regulatory issues, customs and fees. However, in case of , you can transfer any amount of , anytime, anywhere without regulations and a very minimal fee. Moreover, just like confirmations and checks while sending a parcel, has its own digital confirmations through nodes, so that there is fraudulent transaction.
Thus, bitcoin passes the portability test. ✓
3. Divisible : The form of asset should be easy to divide into smaller forms. Just like Gold and Silver, can be broken into tiny forms ie. 1 millionth of a (1 satoshi being the minimal).
Thus, bitcoin passes the divisibility test. ✓
4. Intrinsically valuable : The asset should be valuable in itself. This is one of the most debated topics when it comes to gold and . The argument is that Gold can be used for other uses like replacing gold teeth, , computers parts etc. and it is not the same case for .
“Nothing has intrinsic value” — Erik Voorhees
An asset gains its intrinsic value if a valuer considers it to have a value. Ever since the genesis of , the network and the asset have both gained immense amount of trust. consists of consensus algorithm “Proof of work” which means that ever since the genesis of a block every other block mined have a unique fingerprint that links one block to another forming a chain of blocks, or the . This means that in order to create the unique fingerprint, computational power is required.
“Every mined, is the “Proof of work” of the computers that mined it”.
Thus, bitcoin passes the intrinsic value test (if you trust on the computational power it take). ✓
Lastly,
“ is unconfiscatable.” — Tone Vays
No hacker can ever confiscate your as long as you have securely stored your private keys. brings responsibility to protect your private keys and in turn gives immense security through the network trust in transactions. ’s unconficatability will never let any other Richard Nixon ban the ownership of . will survive any governmental efforts to ban it.
Thus, bitcoin wins !
Credits :
Published at Fri, 03 May 2019 03:40:15 +0000
