• Misunderstanding of why bitcoin is not a currency.
  • Started by Sublime5447
Misunderstanding of why bitcoin is not a currency.
on: January 15, 2018, 03:18:11 PM
I watched the hashgraph panel discussion put together by Demetri kofinas entitled "The future is not blockchain it's hashgraph" (https://www.youtube.com/watch?v=evWBgNdWNDk). In that panel discussion one of the presenters Andrew Masanto correctly made the statement that bitcoin is not a currency, but immediately followed it with the incorrect assertion that it was because of the slowness of the bitcoin blockchain network. I have been saying that bitcoin was not a currency since 2013 and it is refreshing to see other people who realize that fact as well, but believe it is very important to understand why. It is my understanding that Andrew will be heading up the effort to create a true digital currency on the hashgraph network, which will be very exciting because we have never created a true digital currency. I am very interested in conversing with anyone who will be working on the proposed public value unit, I believe I have valuable information on how the effort would need to be structured, mostly I just want to let them know why bitcoin is not a currency, the changes that would have to be implemented to make bitcoin a currency and why it matters. I do not want any compensation and am not interested in speculative gains. If anyone can steer me in the right direction it would be appreciated.
Thanks
Christopher North.     


  • Eamorr
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    • February 27, 2018, 05:06:48 AM
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Re: Misunderstanding of why bitcoin is not a currency.
Reply #1 on: February 06, 2018, 09:27:59 AM
Hi Christopher,

I think any network with a "public value unit" would need to negotiate a licensing agreement?

In some ways, the patented nature of the algorithm could be a very good way of regulating the public economy using democratic and consensus-like systems that humans have evolved to use over the years.


Re: Misunderstanding of why bitcoin is not a currency.
Reply #2 on: February 11, 2018, 01:11:13 PM
Hi Christopher,

I think any network with a "public value unit" would need to negotiate a licensing agreement?

In some ways, the patented nature of the algorithm could be a very good way of regulating the public economy using democratic and consensus-like systems that humans have evolved to use over the years.

I hope not, I really don't know how it could be structured, but it would be great if they just gave an irrevocable license for public use of the tech. 


  • Fleg
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    • February 25, 2018, 04:23:50 PM
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Re: Misunderstanding of why bitcoin is not a currency.
Reply #3 on: February 25, 2018, 11:35:47 AM
correctly made the statement that bitcoin is not a currency [...]. I have been saying that bitcoin was not a currency since 2013

Interesting, could you please develop on that statement ?


Re: Misunderstanding of why bitcoin is not a currency.
Reply #4 on: February 25, 2018, 11:41:01 AM
correctly made the statement that bitcoin is not a currency [...]. I have been saying that bitcoin was not a currency since 2013

Interesting, could you please develop on that statement ?

I would love to, I have a short write up on the matter, please read over it and let me know your thoughts.

Why bitcoin is not a currency and what would have to be changed to make it a currency.

It should be becoming clear that bitcoin is not a currency, if it was a currency you would be able to price a 30 year home mortgage in it and the buyer would know what they were going to be paying and the seller would know what they were going to be getting. That is not and can not be the case with bitcoin or any of the other currently available digital assets commonly refereed to by the misnomer "cryptocurrency" , but why?

To explain why bitcoin is not a currency you first need to understand what currency is. Currency is the base UNIT in a system of measurement for value. The reason that bitcoin is not a currency is because it is not a unit of measure. Units of measure all have socially objective definitions and are a constant, bitcoin can not be defined in objective terms and is therefor not capable of being a unit of measure and is therefor not currency. That reason alone would be enough to bar it from ever functioning as a currency, but we will look at a couple others as well.

The astute reader will be noting at this point that the worlds reserve currency the US dollar is also suffering from this same condition. It has not been definable in objective terms for the last 46 years, ever since the closing of the gold window by Nixon and the end of the bretton-woods agreement. Exactly, the USD is no longer a currency, for the same reason that bitcoin is not a currency, Its not a unit of measure.
So, the question becomes why are we able to make long term economic calculations with the dollar and not bitcoin? The answer is simply that we are operating the system off of the legacy of the gold standard. If the usd dollar were to be introduced in a similar manor as bitcoin without the legacy of a objective definition/standard, it too would have massive stability issues and would not be capable of pricing long term economic projects. The fact that the dollar is not currently a currency should be concerning.

The next major reason that bitcoin is not and can not be a currency is that it has a predetermined hard limit of around 21 million. Units of measure must have an elastic supply without any arbitrary limits. There is not a hard limit to the number of inches, pounds, hours etc. and there can not be a hard limit to the unit of measure for value either. If we wanted to create all value units in advance and keep the definition a constant we would have to know all of the value man is capable of creating, in the same way that if we wanted to create all of the units for the measure of length in advance we would have to know all of the length we might need to quantify in advance, both are unknowable.

The final reason that bitcoin is not a currency is that it contains the property it is supposed to represent (value), all units of measure with the exception of the unit of measure for value have evolved to become artifact free, there is literally no there there just words on a piece of paper. Inches contain no length, pounds contain no weight, hours contain no time and currency should contain no value. Science has proven that units of measurement should not contain the properties they represent. Which brings us to the difference between money and currency. Money is the most traded of commodities, contains socially objective value, and is used as a unit of measure, (examples would be gold, silver, salt, oil, water, paper notes). Currency is strictly a representation of value (examples would be coupons, air line miles, business to business barter credits, digital USD balances). Money is the inch worm (contains length and represents length), Currency is the inch ( a pure representation). We no longer use money in the same way that we no longer use the inch worm. In the same way inches have much greater accuracy and utility than inch worms, currency has much greater accuracy and utility than money.

In conclusion the way to create a true digital currency is to first define it in socially objective terms, second is to remove the limits and let the unit have an elastic supply and lastly to ensure that the unit does not contain socially objective value and is solely a pure representation.


  • Fleg
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    • February 25, 2018, 04:23:50 PM
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Re: Misunderstanding of why bitcoin is not a currency.
Reply #5 on: February 25, 2018, 01:39:45 PM
I agree with you that one unit of a currency should keep a constant value over time.

A currency is a medium of exchange by design. If the value of one unit of a medium of exchange grows over time, you are incentivized to hold it and to pospone your payment as long as you can because its purchasing power will grow over time. This slows down exchanges so this is bad for the economy.

But this goal is hard to acheive for a lot of reasons. Here are two of them in my opinion :
- currency units are often traded against other currencies amont on free markets
- value is never totally objective (one glass of water has almost zero value for a person leaving a normal day in a developed country but put this person for two days in the middle of a desert only with a gold bar and they will happily exchanging it against a glass of water on the third day)

what do you mean by : defined in socially objective terms ? I did not understand this part.

Regards


Re: Misunderstanding of why bitcoin is not a currency.
Reply #6 on: February 25, 2018, 02:44:11 PM
I agree with you that one unit of a currency should keep a constant value over time.


I don't think it should keep a constant value, but a relatively constant value, as a ratio to available value. In a low value environment it would have relatively greater value and in a high value environment a relatively lower value. In other words It should be a reflection of the overall condition of value creation and should fluctuate in accordance.

- value is never totally objective (one glass of water has almost zero value for a person leaving a normal day in a developed country but put this person for two days in the middle of a desert only with a gold bar and they will happily exchanging it against a glass of water on the third day)

Right value is always subjective to the individual at a given place and time under varied circumstances. That is the reason for prices. Prices are the representation of the subjective nature of individual values. If values were held constant regardless of circumstance then there would be no need for prices and they wouldn't exist.


what do you mean by : defined in socially objective terms ? I did not understand this part.


Like all units of measure it must have a definition that we all understand and agree to. For value it needs to be understood as something that we all recognize as having value and a general idea of what that value would be to us as individuals subjectively and to all of us as a society objectively.   

 


  • Fleg
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Re: Misunderstanding of why bitcoin is not a currency.
Reply #7 on: February 25, 2018, 04:24:30 PM
I don't think it should keep a constant value, but a relatively constant value, as a ratio to available value. In a low value environment it would have relatively greater value and in a high value environment a relatively lower value. In other words It should be a reflection of the overall condition of value creation and should fluctuate in accordance.

Good point. You convince me on this one. Furthermore, perfect constant value is impossible as seen. So, to rephrase it : the constraint on the value of a good currency unit is that it has to vary slower than the value of goods and services around.

Right value is always subjective to the individual at a given place and time under varied circumstances. That is the reason for prices. Prices are the representation of the subjective nature of individual values. If values were held constant regardless of circumstance then there would be no need for prices and they wouldn't exist.

Even if a currency exhibiting perfectly constant value existed, there would still be prices cause you still have to measure goods value in a common unit that make consensus in order to compare them (to compare apples and potatoes for example).
And even if every good or service had constant values, there would still be prices cause you still have to compare apples and potatoes. But in that last situation, prices are fixed one time for good so you could argue that it is like they do not exist.

Like all units of measure it must have a definition that we all understand and agree to. For value it needs to be understood as something that we all recognize as having value and a general idea of what that value would be to us as individuals subjectively and to all of us as a society objectively.   

Sorry I didn't get what you meant by the value of something seen from a society point of view objectively. This is the "objectively" that I don't get. I agree that, for example, a medium of exchange like the dollar, has a value for a society but it is still subjective for me (another society would give it another value).


Re: Misunderstanding of why bitcoin is not a currency.
Reply #8 on: February 25, 2018, 07:43:32 PM

Sorry I didn't get what you meant by the value of something seen from a society point of view objectively. This is the "objectively" that I don't get. I agree that, for example, a medium of exchange like the dollar, has a value for a society but it is still subjective for me (another society would give it another value).

Market prices are supposed to be aggregations of our individual subjective valuations, So when we average all of the various prices we come up with a price that society as a whole values "it" at (whatever "it" may be) , in that sense market prices should be objective measures.  For example the individual can say that they do not value drinking water, but society as a whole can not, further if we average the individual subjective values (including the individuals who dont value drinking water at all) what we should have is an objective measure of the value to society as a whole. Value is an agreement so is never solely determined by any one individual, you always have to keep in mind the value to whom? I can value anything at anything, but if someone else doesn't share that opinion then it doesnt contain the value i individually ascribe to it. It works the same way with other abstract "human" concepts, like love. I can say that I love Miss universe all I want, but unless she agrees that we are in love then there is no love, only stalking.