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Issue #708: Important reminder

Issue #708: Important reminder

Apr 2, 2020
Marty's Ƀent

Issue #708: Important reminder

Despite what some people may say or want you to believe. Bitcoin's main value proposition has not changed since it was launched on January 3rd, 2009. Bitcoin is peer-to-peer digital cash. Always has been and, if enough bitcoin users participate in the distributed system, always should be into perpetuity.

Many people who have decided to launch and peddle altcoins will claim that they did so because bitcoin's fees became too high and its confirmations proved to come in too slow, making it an unviable digital cash because cash exchanges should be instant and virtually fee-less. However, the only thing these altcoin peddlers have highlighted is their ignorance when it comes to the definition of the word "cash".

Cash is a bearer instrument that can be used as final settlement during trade. This means that to fall under the definition of cash a monetary good must be under the complete control of the user and the receiver must be willing to accept it as final settlement in exchange for his good or service. Yes, some forms of cash, like the US Dollar, come with low to no fees and are able to settle instantly once goods have been acquired and the monetary good handed over in exchange. However, that does not preclude other monetary goods from fulfilling the role of cash if they do not exhibit those two particular traits. And furthermore, while there may not be fees at the point of sale with cash instruments like the US Dollar, there are hidde n fees in the form of inflation that occurs from the debasement of the currency that cash instrument represents. Tradeoffs exist. The US Dollar provides instant and "free" transactions at the point of sale at the cost of a steady debasement over time.

The only "problem" with Bitcoin is that it is upfront with its tradeoffs and they are visible and palpable during every transaction at the base layer. Due to the distributed nature of Bitcoin, the scarcity of its blockspace, and the scarcity of the total supply of bitcoins; fees and final settlement time stick out to the end user.

Scarce blockspace creates a competition to get transactions included in blocks in a timely manner, which creates a fee market with the highest bidders getting their transactions mined. Never forget, fees will only go as high as individuals are willing to pay. This will vary depending on the urgency with which one needs to move their UTXOs. If an individual is willing to wait a bit, they can secure a lower fee. The nature of Proof of Work makes it advantageous to wait until a certain number of blocks have been added on top of the block a user's transaction was included in so that he can guarantee that it won't be overwritten. Hence, a longer final settlement time when compared to a cash transaction at a bodega. And since there will only ever be 21,000,000 bitcoins and individuals the world over are competing to acquire those bitcoins, fees will naturally rise in USD terms as the price of bitcoin rises with more users. This is the nature of digital gold.

These are the tradeoffs bitcoin users have to live with if they want to ensure a peer-to-peer distributed cash that is controlled by no one and is unable to be debased via inflation. These tradeoffs are very much worth it in my opinion.

"But Uncle Marty, most people are using bitcoin as a store of value and speculating on its increased purchasing power over time! No one is using it as a medium of exchange!"

Pipe down now, child. That doesn’t matter. What matters is what bitcoin enables. Bitcoin enables people to use it as a store of value, medium of exchange, unit of account, etc. Just because you perceive that most bitcoiners use it as a store of value at this current moment doesn't depreciate its ability to function as a medium of exchange at all. People use bitcoin as a medium of exchange every day. You can't dictate how people should use bitcoin. Bitcoin has certain properties that enable different use cases. The predominant use case will fluctuate over time. Get over it.

Bitcoin has and always will be a digital cash instrument. And sooner or later more and more people will come to realize that digital gold is the best digital cash.

Final thought...

I can feel the warm weather on the horizon and I am ALL about it.


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