Bitcoin isn’t real money

On multiple occasions, I’ve been told that bitcoin not real money. It’s generated by computers, and the people with the computers get all the bitcoin. This is an unfair system, favoring those who have special access to technology that we can’t get. Bitcoin isn’t created, controlled, or given value by government. It’s not recognized or accepted in most places, and it’s banned in China and/or Russia.

What makes money, money? Where does money come from?

Bitcoin isn’t real money if you think that the definition of real money is government-issued currency. Bitcoin is the only currency that doesn’t appear to be government-issued, backed, or controlled.

Money is used as a medium of exchange, unit of account, and store of value.

There are certain properties that make a thing, whether bitcoins or dollars, good to use as money.

These properties are: portability, durability, divisibility, scarcity, fungibility, and identifiability (non-counterfeitability).

Dollars, which we consider to be real money, work well as money. They are fairly portable: they’re flat, can be folded, and fit in your pocket. They’re not too heavy. They’re durable: they last for a long time. They’re not very divisible, but they are divisible enough. At least they come in specific denominations, so we can easily do math and make change. You can go through the list and consider the suitability of the dollar along all the dimensions listed above.

Then, consider the properties of bitcoin. There are several aspects that many do not understand, two of which are: scarcity and identifiability. Many don’t understand how bitcoin, as a digital commodity, can be scarce. Their intuition betrays them, as they only have other digital items to compare with. Data is normally not scarce, and that is exactly why some people find bitcoin to be interesting. If it functions as intended, then it is a scarce resource, and always will be.

Like dollars, bitcoin is a pure money. It has no use other than as money. This is contrary to commodity-based money, like gold and silver. There’s great value and advantage in building an economy on a pure money.  Humans can design that money to be ideal for its purpose, instead of just taking what’s given to them. Mankind benefits and progresses by inventing new things that make ideas possible. Bitcoin enables many things that were previously impossible, like sending money electronically, and getting bank-account-like capabilities without needing the approval of a third party.

If you want to know what Bitcoin is, you should start with the Bitcoin Whitepaper.