Not everyone seems to get what the problem is with bitcoin.
Imagine if instead of trying to be money, the bitcoin people had decided that their digital thingies should be considered clothing, Bit Clothes.
They would extoll the many advantages of Bit Clothing. Never needs washing, one size fits all, no more clunky suitcases or lack of closet space, never wears out, etc etc.
You see the flaw. Yes, Bit Clothes have all those advantages, but they do not have the first essential of clothing. They do not envelop the body. They aren’t clothes at all.
People don’t get what the problem is with bitcoins because they do not grasp what the first essential of being money is. Part of the reason for this is that we have been using paper for money for many decades now. Paper money is intrinsically useless, so people think why can’t anything, however useless, be money, just like paper is?
The answer is simple. Imagine if some cosmic ray fired by aliens from outer space wiped out all dollar bills, all paper money all over the world. And the govts all said they are retiring from the money business. Folks, from now on, you are on your own.
In short, there is no official currency anymore. What will people use for money? Would they use Monopoly money? Would the local printer just print up some artistic paper money and expect people to use that? What would you accept in exchange for your goods and services?
Historically, and it makes sense, too, people have only accepted as money [if not forced by govts otherwise] something of value to them. Something they could use, or knew many other people wanted to use. Why should I accept payment in colored pieces of paper when I can hold out for something worthwhile? And if I do accept some colored paper in payment for my work, how do I know someone else will want to accept it from me? Maybe I will be stuck with the colored paper, and not be able to get anything for it.
That’s what money has to be to work. As clothes are not clothes unless they envelop the body, so too money is not money unless it gives me something when I have it.
And even when the govt imposes paper money on a suffering populace, the principle remains true. The paper money gives me something in that I can use it to pay taxes, and cannot use anything else. Yes, it’s a sad day when that’s all we can say about the benefit of a currency, but that’s how it is.
We see now why bitcoins are not money. What can I do with a bitcoin? Eat it? Drink it? What has it given me now that I have one? Answer: Nothing.
Now people may say, “Who cares if a bitcoin is useful for anything in and of itself? What counts is that you can buy stuff in the stores with it.” And they are right. But the question is, what will make the storekeeper accept it? Common sense says people will only accept bitcoins as money [besides a few suckers and fools] if they feel it gave them something, as we explained.
Of course, we are making a big assumption here. That the masses will not be stupid. We may be overestimating them. But so far, in all recorded history,ancient and modern, they have never been that foolish as to accept something totally useless as money.