I like Max Keiser, I think he’s a great personality and shines a light on corruption like no other journalist but after re-reading this article which I posted 6 months ago, I have to unequivocally state that he’s wrong. The Aristotelian characteristics of money have 3 additionals which Max omitted. That is, medium of exchange, store of value and a standard of account.
It has not been around long enough to be a store of value and it’s volatile. It is now accepted by over 4000 vendors worldwide but its not universally accepted so it’s not a medium of exchange in the truest sense. Finally, it’s not a standard unit of account so you cannot derive a meaningful interpretation of prices, costs or profits. Is Bitcoin money, no it is not, is it a currency like fiat but in its infancy, yes it is.
I must make a point in regard to intrinsic value, value does not exist outside of the conscience. What do I mean by this? If the human race disappeared off the face of the earth, how much would your home be worth? A pint of beer or a latte? It wouldn’t have any value, it would be just an object as our conscience is not their to assign value. Intrinsic value needs to expanded using marginal utility theory and therefore ‘marketability’.
What is money? Gold, silver, their respective bills and to a lesser degree, copper. Max Keiser in The Huffington Post:
Since Bitcoin is now a $400 million market, with its price hitting new all-time highs, now might be good time to ask, is bitcoin money?
According to Aristotle, for something to be considered money, is has to fulfill four characteristics:
1) It must be durable. It can’t fade, corrode.
2) It must be portable. It has to be ‘dense’ so that you can take it with you when you travel to the market.
3) It must be divisible or, ‘fungible.’ This means that if you break it up into smaller pieces each smaller piece when you add them up will equal the value of the original piece.
4) It must have intrinsic value. One must consider that value does not exist outside of the conscious, if human beings disappeared off the face of the earth, how much would your home be worth? Or a pint of beer? It wouldn’t have any value. Therefore we must look to marginal utility theory and the theory of marketability. Those goods which are classed as money have no or a very limited declining marginal utility, by this I mean your satisfaction of receiving another unit of that good is not diminished.
Let’s look at these four characteristics and see if they apply to Bitcoin.
Bitcoin is a peer-to-peer, decentralized form of money; as durable as the Internet itself. Remember, the Internet or DARPA as it was originally called, was created as a fail-safe, global network with no ‘single point of failure.’ If one part goes down, data takes another route and nothing is lost. So on this point the answer is “Yes,” Bitcoin is durable.
Bitcoin is probably the most portable money in the history of the world. I can download any amount onto a thumb drive and walk across any border without any problems. Or, I could commit to memory a line of code that I can then input into the network and save or spend Bitcoins. So on the point of portability, Bitcoin gets an Aristotelian “Yes.”
Bitcoin is probably the most fungible currency ever created. You can break it down by 10,000 decimal places and trade it just as easily without it changing in value so on this point the answer is also “Yes.”
4) Intrinsic Value.
This is probably the characteristic that most people find difficult to comprehend. The intrinsic value of Bitcoin is very 21st century. If you think about it, what’s the one thing that has become extremely scarce over the past thirty years that has grown in desirability? Privacy.
Privacy is an age of universal email collection and spying, with millions of CCTV camera’s, and warrantless spying pervasive; privacy has become virtually non existent and therefore extremely scarce and desirable. Bitcoin can be a n anonymous transaction that maintains the user’s privacy beyond the reach of any authority. So on this point too, the answer is “Yes,” Bitcoin fulfills Aristotle’s need for having intrinsic value. Privacy is a desirable human right and people would want it even if it wasn’t encoded as Bitcoins.
In conclusion, using Aristotle’s four characteristics of money, Bitcoin fulfills all four. So then according to an Aristotelian definition, the answer is ‘Yes.’ Bitcoin is money.