Classical Ideas of Money
To recap last week’s analysis: the general understanding of money is that it serves three functions: store of value, medium of exchange, and unit of account. Certain properties of the way it is recorded (portability, fungibility, divisibility, etc.) allow it to fulfill these functions. For the USD, we examined the weight and size of the paper, the cost of printing and replacing bills, and the counterfeiting measures, among other characteristics of paper money.
Some of these properties simply don’t apply to Bitcoin and virtual currency in general. For example: portability. It was an important property in the past (cattle vs. cash), but it is not entirely relevant to an intangible form of currency.
How are we supposed to think about the portability of a bitcoin? It’s not something we physically own and carry with us. A bitcoin exists as data on server, 0’s and 1’s expressed by thousands of tiny transistors - not as paper in my pocket. A bitcoin is as portable as the device it is accessed and spent with.
We need a new definition to work with.