Seven Monetary Characteristics of Bitcoin That Have Led to Its Success [in Journals]
Over the centuries, countless 'collectibles' have been accepted as payment. From precious metals – such as gold, silver, copper, or nickel – to animal hide.
The success of Fiat, historically, can be attributed to several characteristics – qualities – that it possessed over other forms of payment, that made it an ideal money material.
The evolution of digital currency, and its rise, can be attributed to higher quality characteristics in relation to its predecessors.
The monetary characteristics of Bitcoin which have led to its success, as a prominent example of these higher qualities, are notable.
1 . Bitcoin has high intrinsic value.
Intrinsic value is the perceived value given to an asset on its own, without regards to market price – what would the asset be worth if the market price was zero?
Bitcoin's intrinsic value is derived from it's payment network. In order to make use of the Bitcoin payment network - even for transactions which are denominated in USD and not BTC, the 'collectible' (bitcoin) is required.
Even if the coin were to hold no value, it's computing payment and hashing network would maintain immense value.
2 . Bitcoin has extreme portability.
It can be moved to virtually any medium with the use of an internet connection and address information.
3 . Bitcoin has very high divisibility.
Constructing fractional units into smaller or larger values is done with the decimal system, with a divisibility of up to 8 decimal places.
4 . Bitcoin has extreme scarcity.
In monetary terms, this means it has an ability to resist expansion of the money supply – inflation – due to a limited and short supply.
Without the ability to source more than the twenty-one million in eventual total supply, the value of Bitcoin will increase as a function of demand.
5 . Bitcoin has very high recognizability.
The probability that a buyer chooses to accumulate genuine money, and the decision of a seller to accept or reject an offer, is a function of a currencies level of counterfeit-ability. Thus, a currency must be distinguishable, or recognizable, from non-currency – including counterfeit money.
With its decentralized block-chain accounting for the ledger of all transactions, it becomes a near-virtual impossible task to inject counterfeit money, or a counterfeit transaction, into the network.
6 . Bitcoin has very high fungibility.
An asset that is capable of substitution while holding its equivalence is known to be fungible. For example, gold, whether in form of a coin or ingot (block), is equivalent in value if equal in weight.
Bitcoin is interchangeable with other bitcoin, and calculating a fraction of its whole is straightforward. Two payments of 0.5 Bitcoin is equivalent to one payment of 1.0 Bitcoin or four payments of 0.25 Bitcoin.
7 . Bitcoin has very high durability.
Money must possess durability, in the sense that it must be storable and should last for a long time without losing its value. A monetary asset that is used as a medium of exchange must store value from one transaction to the next, which requires durability.
The Bitcoin network incentivizes storage, maintenance, and security of its blockchain, neutralizing net cost through issuance of transaction fees – allowing the system to perpetuate.
We think alike!
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STOPvery well written....pointwise...nice