Lessons From the Newest Electronic Money – Bitcoin

One of the more interesting developments of the modern electronic age of money has been the rise of Bitcoin, a decentralized digital form of money.  If you’re not familiar with it or you’re confused by what Bitcoin is, you’re not alone.  It’s a fairly new, innovative and complex form of money.  And that’s right, Bitcoin is definitely money.

Today’s Dominant Form of Money Versus Bitcoin

Anyone who understands the basic tenets of Monetary Realism know that many things can serve as money and many things DO serve as money.  After all, anyone can create money, but the trouble is in getting others to accept it.  And since money’s primary purpose is in the means of exchange, just about anything can serve as money as long as it meets that primary purpose.  The thing is, there aren’t all that many things that meet that need on a broad level.  For instance, lots of people like to claim that gold is money (which it is), but gold isn’t accepted for payment in many places.  Therefore, MR says that gold has a low level of moneyness (to better understand the concept of moneyness please see here).  Gold is money, but it’s just not a very good kind of money.  Bitcoin is actually very similar.  If you have Bitcoins you can buy certain things online that only a Bitcoin merchant will allow you to buy.  These merchants accept Bitcoins as a form of final payment.  To them, it’s a form of money with a very high level of moneyness.  But to a company like Wal-Mart a Bitcoin is like a gold bar.  It doesn’t give you access to anything in their store therefore its moneyness is virtually nil in a Wal-Mart.  Most retailers around the world view Bitcoins similarly.

In the USA, the primary form of money is bank deposits because bank deposits are the form of money that dominate the US payments system.  The US payments system, which is maintained by private banks, is the primary playing field for the purpose of exchanging goods and services.  In other words, if you want access to the most convenient and widely accepted form of payment (bank deposits), you need to become a member of the US payments system usually by becoming a bank client.  This gives you access to credit cards, debit cards, a bank account that allows you to withdraw/deposit cash, etc which allows you to interact on the US payments system.  Becoming a bank client is kind of like opening a Ticketmaster account so you can obtain access to the means of exchange to gain entry into a theater performance (you just want access to the tickets that give you access to a performance).  In the case of banking, you open an account in order to gain access to the US payments system so you can access the performance that is the US economy.  Obtaining Bitcoins is similar in many ways, but very different as I’ll describe below.

READ FULL ARTICLE HERE:  http://pragcap.com/is-bitcoin-money

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