For many individuals, their first sense of Bitcoin is that it’s magic web cash—one thing simply ignored and positively not well worth the time wanted to grasp it. Lots of the folks I speak to about Bitcoin say that their “plan” is simply to disregard it till it goes away. As we’ll study all through this ebook, that isn’t actually an possibility. Most individuals additionally chortle when offered with their first alternative to alternate “actual cash” for bitcoin. However bitcoin is actual cash; higher cash than any of us have had in our lifetimes—and it’s so far more.
Each Bitcoin the community and bitcoin the digital token could be onerous to outline as a result of they don’t simply change one factor and make it higher. Bitcoin is the brand new, higher model of gold from the bottom and the paper greenback invoice. Bitcoin can be the brand new, higher model of your financial savings account and your checking account and your bank card. It’s also the brand new, higher approach to ship cash internationally and to purchase a cup of espresso down the block. Bitcoin doesn’t simply change the onerous asset cash and the foreign money, but additionally the fee rails, the political financial coverage, and even the central financial institution—multi functional fell swoop. It’s a utterly new factor.
To really perceive Bitcoin, you need to perceive the factor it goals to exchange: cash. What’s cash? Oddly sufficient, regardless of its centrality to virtually all the things we do, we not often pause to think about the query. However now we have to if we actually need to perceive what Bitcoin truly is.
In essentially the most elementary type, cash is any object that’s used for some mixture of the next functions:
1. A medium of alternate (people can purchase stuff with it);
2. A unit of account (people can reliably use it to cost stuff); and
3. A retailer of worth (people can purchase stuff with it later).
Over time, many alternative objects have been used as cash: sea shells, salt, massive stones, gold, and the $20 Federal Reserve Be aware at the moment in your pockets. For those who’re studying this ebook in jail, you would possibly use cigarettes or packets of ramen as cash. I encourage you to replicate on how and why folks naturally converge on types of cash primarily based on the time and circumstances they discover themselves in and the way know-how has all the time performed a task within the growth of recent cash. Some issues make higher cash than others. As we’ll see, the paper cash and its digital copy you employ on daily basis is the most recent type of cash, but it surely isn’t the perfect—the truth is it’s removed from the best.
To be thought of a very good type of cash—one thing that accomplishes the three functions listed above nicely—an object will need to have some mixture of the next pretty intuitive properties:
1. Sturdiness (It has to final, not spoil or deteriorate);
2. Portability (You’ve gotten to have the ability to transfer it round);
3. Divisibility and Aggregability (You want to have the ability to purchase little issues and large issues too);
4. Fungibility (The items should be uniform);
5. Shortage (If there’s loads of one thing, it received’t keep worth);
6. Acceptability (Folks should need it so that you can use it); and
7. Verifiability (You don’t need loads of counterfeit cash).
You or I’ll produce other properties that we expect needs to be added to the record. For instance, I feel good cash needs to be created pretty. However that is the record that economists have used for generations. In truth, the Federal Reserve Financial institution of St. Louis lists these properties within the academics’ sources part of their web site12 and makes use of them to argue—appropriately—that US {dollars} are higher cash than a cow. A cow looks as if a low bar, however possibly they solely need to make the arguments they will win.
Every of those properties economists use to resolve how good one thing is as cash is measured on a scale; none of them is a binary “sure” or “no.” If an object fulfills many of those properties, it might make for a very good type of cash. From this record, it’s trivial to see what your instinct already tells you. Bananas would make a horrible type of cash and cash made from gold would most likely serve the aim nicely. However what in regards to the $20 invoice in your pockets? What about bitcoin?
In a head-to-head competitors, the $20 invoice simply beats bitcoin in class #6: Acceptability. However acceptability can change and has many instances all through historical past, and the hole is narrowing yearly as extra institutions settle for bitcoin. It’s not too onerous to think about that hole closing considerably over time. On a technicality, the greenback additionally has a slight edge in class #4: Fungibility. However that is solely a small distinction that most individuals wouldn’t discover, and technological strategies exist already that shut this hole utterly.
As we’ll see as the remainder of this part unfolds, Bitcoin walks away with the lead over {dollars} in all the different classes. It’s not even shut. Bitcoin just isn’t just a bit however much more Sturdy, Moveable, Divisible/Aggregable, Scarce, and Verifiable. These aren’t properties I cherry-picked as a result of they make Bitcoin look good. These are the outdated textbook properties economists have used for “good cash” endlessly. We are able to add to this record the truth that since Bitcoin is natively digital and programmable, it looks as if a greater type of cash proper now and for the longer term. Neither is Bitcoin simply higher than the greenback: when evaluating Bitcoin to different types of cash (e.g., gold) it nonetheless demolishes the competitors throughout most or all the classes. It’s merely the perfect cash that people have ever created.
Earlier than I clarify why that’s true, I need to pause and ensure we additionally perceive what cash isn’t. You’ll discover that the properties listed above for one thing to function good cash don’t require the merchandise to have a bodily type you’ll be able to maintain in your hand. Nor do the properties recommend that one thing used as cash must have another intrinsic worth. Nor do the properties recommend that cash should be issued by a authorities. All three of these items are sometimes cited as explanation why Bitcoin can’t be actual cash, but none of them actually have something to do with the precise definition of cash. These are issues folks reference as a result of they’re essential to their expertise with cash, however they aren’t intrinsic to that have. Similar to how what has served as cash has modified over time, so too has our expertise with cash.
For instance: It isn’t obligatory for cash to have a bodily type that may be touched or held. Certainly, you’ve got by no means held a lot of the {dollars} you’ve got earned, spent, and saved within the final 20 years. They’ve simply been numbers on a display. Digital cash, {dollars} or in any other case, is completely practical as cash. And the identical is true of Bitcoin; simply because you’ll be able to’t contact it doesn’t imply it’s not actual both. Hopefully that is reassuring, since that is usually the very first argument supplied by well-meaning people once they first begin to grapple with Bitcoin. However the easy reality is that you simply don’t want to have the ability to contact one thing for it to be a very good type of cash.
Neither is it obligatory for cash to have an intrinsic worth. In truth, as a result of cash is used to speak worth info from one market participant to a different, it’s higher that it not produce other use instances. Cash having intrinsic worth would add “noise” to the sign and make each financial resolution tougher. Think about having to weigh each buy you make together with your cash in opposition to the worth of its different makes use of. It could trigger financial exercise to grind to a halt as everybody debated whether or not to make use of the cash that they had for buying items or this different use. Some folks don’t notice that the numbers on their screens that symbolize the {dollars} of their checking account don’t have an intrinsic worth both. Bitcoin’s lack of intrinsic worth is one other quite common argument launched in opposition to it, when the truth is that seems to be a beneficial characteristic and never a bug. The truth that Bitcoin doesn’t have another intrinsic worth means it is ready to present worth info for financial selections with out noise or manipulation.
Lastly, it’s not obligatory that cash be issued by a authorities. For a lot of centuries it wasn’t. Folks would use numerous media of alternate and shops of worth with out the federal government interceding in any means. It was solely within the final couple of centuries that it made sense for governments to get into the cash recreation when it was troublesome to belief and confirm the purity and weights of coinage. Stamping the king’s face onto a coin served a function at that time. Since then, the intertwining of presidency and cash has been so full that the majority people have a tough time imagining that cash could be one thing separate from the federal government. This misunderstanding has repeatedly been manipulated for the only advantage of the federal government that controls the issuance of cash. However regardless of our expertise, there isn’t a want for cash to be issued by the state to be legitimate. Bitcoin is the perfect hope humanity has of severing the ties between authorities and cash.
On the very least it’ll function a test on how the governments discharge their duty as stewards of financial coverage.
The excellent news is that individuals perceive the seven properties of fine cash listed above on an intuitive degree. In different phrases, folks don’t have to learn an financial textbook to acknowledge “good” cash. They simply begin gravitating towards it over time. Folks received’t have to know why Bitcoin is healthier to know that it’s higher. Our current financial experiment with unbacked paper cash is just 50 years outdated, and paper cash owes most of its success to the privileged authorized standing paper cash enjoys via the governments that concern it. However absent coercion folks will all the time select a greater type of cash, as proven by the truth that they did for hundreds of years by utilizing gold. Earlier than Bitcoin had been invented, Jörg Guido Hülsmann defined, in his ebook The Ethics of Cash Manufacturing, that within the case of “gold and silver—and no matter else free males would possibly uncover and develop for financial providers . . . there’s a pure tendency out there to unfold the usage of essentially the most helpful monies over your complete world.”13 Bitcoin is healthier cash and due to that, Bitcoin adoption could be very more likely to develop and unfold for the foreseeable future.
This text is an excerpt from A Progressive’s Case for Bitcoin: New Revised Up to date Version, obtainable now for pre-order at a reduced worth of $21 via November 15, 2025.
12 Federal Reserve Financial institution of St. Louis, “Capabilities of Cash,” Financial Lowdown Podcast, https://www.stlouisfed.org/training/economic-lowdown-podcast-series/episode-9-functions-of-money.
13 Jörg Guido Hülsmann, The Ethics of Cash Manufacturing (Auburn, Ala.: Ludwig von Mises Institute, 2008), 197.
