What's the Deal with Bitcoin?

One thing I love about philosophy is its insistence on asking questions, particularly of claims that have long been assumed to be true. It can do this alongside any other discipline and at the intersection of many disciplines. The topic of Bitcoin lies at one such intersection. To have a robust, well-considered view about Bitcoin requires a working knowledge of philosophy, politics, economics, computer science, sociology, among others. It can be overwhelming at times! But, it is worth investigating. Here’s a claim that receives assumed, unspoken tacit endorsement by many: money is a government-backed paper note that allows me to purchase items or services. Now, enter philosophy. Philosophy would have us ask, “Wait, why is that how we should think about money? Aren’t there other things that count as money? Gold, the digital number on my online banking account, cigarettes in a prison, seashells for our beach-dwelling ancestors? What are the basic features of money?” I love that philosophy helps us get clarity on our concepts and how we think about the world. It makes a difference. So often, it seems, we dismiss certain ideas simply because they have been saddled with a label we are predisposed to not like. Philosophers of economics have offered three main functions of money:

  1. store of value

  2. medium of exchange

  3. unit of account

Money should serve as a store of value. It allows wealth to persist in a way that won’t naturally or quickly expire. Eggs would be a horrible store of value - if you put your wealth in eggs, you’d be broke in 2 weeks or so. So, we shouldn’t use eggs as money. Money should serve as a medium of exchange. It would be nice to be able to easily access it for all the points of sale I engage with in my day. It would also be nice if most, if not all, of my regular vendors accepted what I am trying to offer. Eggs fail here too. Money should also serve as a unit of account - that you could have a numerical value assigned to the amount of money you have. You’d want to easily calculate how much money is lost or accrued in a given transaction. Eggs might be okay here - it is obvious when you are receiving or losing an egg. But, something like seashell struggles here - there are all sorts of colors and shapes of seashells that could make accounting a challenging feat. So far, paper currencies have done pretty well on all three desired features. The more resilient and stable the government is that backs the currency, the more confident you can be with all three. Even still, the US Dollar for instance isn’t the best store of value - inflation has long been an issue facing the value, or purchasing power, of the Dollar. If you are new to the bitcoin conversation, here’s a way to come at it from a philosophical perspective: Is Bitcoin money? And then further, should we want it to be a money that receives widespread use? Our philosophy professor guests, Andrew Bailey and Bradley Rettler, help us unpack and think critically about these questions in this week’s episode. You can watch it here. If you have any questions about it, feel free to leave a comment on that video or write in to Stay Curious!