What is this strange new object called “bitcoin,” anyway? Many feel stymied, even intimidated, by the possibility of buying a thing or a service without reaching into their pockets for the familiar green and white printed paper buried in their wallets or stuffed into their handbags. Others still are suspicious of initiating a click on their computers without the inevitable follow-up act of volunteering sensitive personal credit card information.
But once you come to appreciate how bitcoin enables you to bypass the banking system and any intermediary altogether, you’ll feel only too happy to embrace a commercial transaction without using traditional money or plastic.
The fundamental way all of us can become more comfortable with bitcoin is to rethink the idea of money and currency altogether. What is money and what is currency, after all? In his positively reviewed 2013 book, Money,TheUnauthorized Biography — From Coinage to Cryptocurrencies http://www.amazon.com/Money-Unauthorized-Biography-From-Coinage-Cryptocurrencies/dp/0345803558, former World Bank official, Felix Martin, provides us with an alternative definition to the traditional definition of money we’ve come to accept without examination or question:
“Coins and currency … are useful tokens to record the underlying system of credit accounts and to implement the underlying process of clearing….But currency is not itself money. Money is the system of credit accounts and their clearing that currency represents.
…The vast majority of our national money – around 90 per cent in the U.S., for example, and 97 per cent in the UK – has no physical existence at all. It consists merely of our account balances at our banks. The only tangible apparatus employed in most monetary payments today is a plastic card and a keypad.”
There you have it – money is not truly a physical object, per se, but rather “the system of credit accounts and their clearing.”
Once you read through the exhaustive history he cites, and give the matter some thought, you’ll realize Martin’s analysis is unassailable. You’ll realize too that former U.S. Mint Director, Ed Moy, nails the essence of bitcoin when he writes:
“…The physical form of money has evolved from commodities to precious metal, to coins and paper bills and to electronic representations. Digital currency is just the next step in the development arc of money http://www.newsmax.com/Finance/Ed-Moy/cryptocurrencies-bitcoin-book-money/2015/05/29/id/647430/.”
And if we actually do rethink the definition of money, we canappreciate what Felix Martin means when he refers to money as “social technology,” and what writers about digital currency mean when they report how the bitcoin system works through “peer-to-peer technology.” They give a whole new meaning to the time-honored maxim “money talks.” Indeed it does – but in a more universal language.
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