I'm tired of hearing attacks on Bitcoin because there's nothing "behind" it. Ideologues across separate aisles (like Schiff and Krugman) fail to understand this. So, I figured a thread to discuss this in more depth may be considered apt.

To me...

Money can, and has been defined, as a claim on human labor.


Let's break this down into two sections.

First, Gold....

For the Shiffs of the world - why is gold valued at all? The typical first answer is it's scarce. OK. But, so is Bitcoin. The second answer typically is there's a demand for it. There's also a demand for a digital currency with low transaction costs. A third answer is it's a product that is mined and is tangible. Bitcoin is "created". It's value is in part derived from cryptology and mining. That act, in and of itself, presents the labor involved and it's inherent value. This, here, the cryptology is always left out when discussing Bitcoin as money.

Admittedly, however, the one area that really separates Bitcoin from gold is tangibility (and usefulness there-within). You can't necessarily touch Bitcoin. But, arguing that there's no value to Bitcoin because you can't necessarily touch it is similar to arguing against the value of the internet, social media, or... numbers in any monetary account because you can't touch them.

That brings us to dollars (or fiat)....


The Krugman's of the world believe the dollar (fiat) has value mainly because of it's reserve status and store of value. Reserve status is obviously something that can change over time, so there's no need to debate that aspect. It's important to point out that the Krugman's of the world, most likely, would not offer scarcity as the triumphant characteristic of money (as they vouch for increases in the money supply). Instead, as Krugman has stated in his blog, he probably would vouch for the Fed itself (or central banks) and it's role in controlling the value of the dollar. The irony is, of course, that Krugman's of the world are arguing that The Fed is providing stability (through human labor, or in his mind, their intellect)... yet, Bitcoin as a claim on human labor (via cryptology, mining) is not as functional. So, at the end of the day, the argument for dollar superiority as a form of money comes down to store of value. And the thought is, it's stored value well, which is laughable considering the Fed has done this...

http://pmc.do.am/720px-Components_of_US_Money_supply.svg.png

...to the US money supply since the 1970s. The truth is, the dollar has acted as a horrid store of value. I mean, look at Bitcoin's price. That is a reflection of how poor the dollar is as a store of value.


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After all of the above, I don't see how one can deny that Bitcoin has the main feature of money. It's a claim on human labor. Now, if we want to get into text book definitions,...


I'd argue...

1. Unit of account - Bitcoin = dollar > Gold (not divisible)
2. Store of value - Gold (more tested) > Bitcoin > dollar (dollar has not remained stable)
3. Medium of exchange - Dollar > Bitcoin (could surpass dollar with time) > Gold (difficult to use for transactions)

Thoughts?