Home » Uncategorized » Bitcoin yet again, in simple language this time.

Bitcoin yet again, in simple language this time.

This is our third post about bitcoin. [First and second]. We keep trying to distill the essential idea of why bitcoin will never be money into simpler and simpler language. I think I have it down now.

The key is, the average person thinks, “I worked hard, now I want something in return that will make me happy. Bitcoin doesn’t make me happy at all. I cannot eat it or drink it. It will only make me happy if there is a sucker willing to trade for it, even though he gets nothing out of it. He, too, cannot eat it or drink it. I have no reason to think there will be such a sucker. So forget about bitcoins.”

How are you going to convince such a person to accept a bitcoin? Answer: You won’t. That’s why bitcoin is doomed to be used only by a very small population, until it dies off when they, too, finally think like the above person.

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18 Comments

  1. Anonymous says:

    Any good or idea had its beginnings with a single person(or a small minority of people).To put it simply, your argument is so broad you can apply it against anything before it became widely accepted. Replace the word bitcoin with cars, iphones, computers, etc.

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  2. Anonymous says:

    Lets put this post in its proper perspective shall we? Its the distant past. Coconuts are money. Someone comes up with the idea of some newfangled 'Paper Money'. Here is what you say, Smiling Dave you coconut cave man:"Paper Money yet again, in simple language this time.This is our third post about paper money. We keep trying to distill the essential idea of why paper money will never be money (like coconuts) into simpler and simpler language. I think I have it down now.The key is, the average person thinks, "I worked hard, now I want something in return that will make me happy. Paper money doesn't make me happy at all. I cannot eat it or drink it. It will only make me happy if there is a sucker willing to trade for it, even though he gets nothing out of it. He, too, cannot eat it or drink it. I have no reason to think there will be such a sucker. So forget about paper money."How are you going to convince such a person to accept paper money? Answer: You won't. That's why paper money is doomed to be used only by a very small population, until it dies off when they too finally think like the above person."I do not want to think like, be like, or live like you, or your mythological 'average person' thankyouverymuch.kthxbai

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  3. Smiling Dave says:

    No. Even if only one person in the universe had a car or computer, and two had an iphone, it would give them satisfaction. So they are worth money intrinsically. They do not have to be passed on to the next guy to enjoy them.But you cannot drive around in a bitcoin, or play computer games with it, or call up a friend with it. It has no scrap value either. It has no intrinsic value. It can only be passed on to the next guy.

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  4. Smiling Dave says:

    About paper money. Congratulations. You understand. Indeed paper money would never be accepted but for one thing, which I will explain.There are two kinds of paper money. One is redeemable paper money, in which the issuer is legally bound to give you gold or silver when you present him with the paper money. That kind of paper money is obviously completely different from bitcoin, where nobody has to give you anything.The other kind is called fiat currency, which is indeed like bitcoin in that the issuer does not have to give you anything. This is the kind of money all countries have started using in the twentieth century. But those moneys have a crucial feature that bitcoin lacks, mainly that there is a govt who insists you pay your taxes only with that paper money. Let us see how this makes a difference in the thinking process of the average person:"I worked hard, now I want something in return that will make me happy. Paper money doesn't make me happy at all. I cannot eat it or drink it. But on the other hand, if I keep some around, enough to pay my taxes, it will keep me out of Federal Prison. So it does have some use to me. Of course it's a sad commentary on modern life that govt money will not give me gold or silver like it used to, but merely protection from jail, but that's life."

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  5. Anonymous says:

    OK lets try again."I worked hard, now I want something in return that will make me happy. Bitcoin doesn't make me happy at all. I cannot eat it or drink it. But on the other hand, if I keep some around, enough to pay my taxes, it will keep me out of Federal Prison. So it does have some use to me. Of course it's a sad commentary on modern life that govt money will not give me gold or silver like it used to, but merely protection from jail, but that's life."So, for Bitcoin to be money, the feds have to accept it. That means that either your definition of money is flawed or the feds can make money out of nothing because they have a monopoly on violence.This boils down to Bitcoin being money.And gold not being money, because the feds wont accept it in payment of taxes.You logic is all scrambled up. Nice try but not even close.

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  6. Smiling Dave says:

    "So, for Bitcoin to be money, the feds have to accept it." Exactly. But do not err and think that the feds' accepting it is the only thing that can make something money. Bottled water is money in some parts of Iraq, but not accepted by the govt there. "That means that either your definition of money is flawed or the feds can make money out of nothing because they have a monopoly on violence."The latter. Especially since I did not give a definition of money. I'm going with thte standard one of money being a medium of exchange. The point of my posts is that for something to be a medium of exchange, it has to be accepted as such. And to be accepted as such, it has to be useful in some non trade way.The usefulness can be eating or drinking or jewelry or almost anything that many people are interested in having, including protection from violence."This boils down to Bitcoin being money."Why? It has no use."And gold not being money, because the feds wont accept it in payment of taxes."Today gold is not used as money in the US because every transaction in gold is taxed. So that people are reluctant to accept paymeent in gold for now. The feds not accepting it in payment of taxes does not disqualify it as a possible money at some future date. what I wrote earlier in this comment makes taht clear, I trust."You logic is all scrambled up. Nice try but not even close."I like to think I was misunderstood.The logic, once understood, is impeccable.

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  7. Anonymous says:

    People are using Bitcoin every day to buy and sell. Nothing is preventing this behavior from increasing over time. Indeed it is increasing over time. So, "having no use" is a strange argument to deploy against it.

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  8. Anonymous says:

    Smiling Dave I think you miss the point of many responders:An individual(or many) may have no utility in nail polish or corn husker. You may prioritize your desire to drive or eat or wear your goods, but your neighbor may not share your values. Your argument is that you project your preferences to everyone. By saying the masses have no reasons to value X(even though its your personal opinion), X will never succeed. This is your proof. That remains to be seen.Perhaps rather than speaking for everyone not using it, you should dig a little deeper and ask those who are using it why they would use something so useless?

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  9. Smiling Dave says:

    Reply to the previous two comments:"Having no use" means use of the object if you keep it in your house, not use in buying stuff. No one has any use for it except passing it on to the next guy.It's not a q of my priorities. Bitcoins have no use whatsoever to anyone, except to hand them over to the next guy.

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  10. Anonymous says:

    These arguments don't mean much when I read them as I use Bitcoin as a money.At least explain how it became a money and then why it will stop being a money.It's like those scientists who insist that bees can't fly. Flying bees invalidate their premises or methods.

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  11. Smiling Dave says:

    If you and your kid sister set up a system of paying each other for lollipops with tarot cards, that doesn't make tarot cards money, right? And why not? Because money has to be something accepted 1. by a whole community 2. in exchange for anything and everything.That's what medium of exchange means.When everything has a price in tarot cards, for a large group of people, not just a few close friends, then they can be legitimately called money.Bitcoin is not money yet, because there is no community, even if we call a group of people connected by computers a community, who will buy and sell everything for bitcoins.In my posts, I tried to get across why it will never be a money in the above sense [=medium of exchange].

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  12. Anonymous says:

    S.D, let me do you and your readers a favor and point out why your claim of "having no use" is not only extremely subjective, but also wrong when applied to bitcoin, since you refuse to do the research yourself.Bitcoin transaction are essentialy free, there is no middle man to pay a fee to, such as a bank or credit card company.Transactions are not reversible, this means merchants don't have to fear chargebacks.Transactions are extremely secure, not only from exposing personal information, but from forgeries or double spends.Coins can be divided infinitely, they are easy to transmit online, easy to store and transport.The total quantity of coins in existence is known, and any future increases in supply are known now and unable to be manipulated by a single power.Transactions are transparent, anyone can view every transaction that has ever happened. This means great oversight over businesses and banks that store coin.It is open source, the clients code is open for peer review.Most obviously it is distributed, there is no central hub that can be shutdown to stop transactions, something that previous forays into digital currency lacked.There is a thriving community of individuals and businesses willing to accept bitcoin, and that number is growing quickly.Those are a few properties of bitcoin that some people would find useful. If you find those things useless it's up to you, but at least present them to let others make up their own mind.

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  13. Smiling Dave says:

    For some reason, Anonymous' comment was placed in spam, but I retrieved it from there.Yes, Anonymous, you have pointed out many "uses" of bitcoin. But all of those "uses" are about making it easy and convenient to pass off to the next guy. Not one of them is about an actual use you can make of a bit coin. Can you eat it? Drink it? Wear it? Do anything at all with it but pass it on to the next guy?Reread my posts about bitcoin, and the comments, and thine eyes will be opened.

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  14. Iain says:

    Can you eat a gold coin? Nope. Can you use gold to make a necklace sure, but it takes some work. Can you eat a bitcoin? Nope. You can use the bits for something else, it would just take some work. The anti-bitcoiners have no legitimate argument at all. I normally respect those people's opinions, but on Bitcoin they just seem to lose it.

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  15. Smiling Dave says:

    Iain, my son,the key thing is to recognize the two kinds of uses. We shall call them A and B.Use A: Pass the thing onto somebody else, like a hot potato.Use B: actually use the thing without passing on to the next guy.Bitcoins only have use A. Gold has use B.See the previous posts, generously offered here free of charge, to understand why this distinction is important.

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  16. Tomasz Kaye says:

    “The key is, the average person thinks […]”

    Maybe most people think what you say they think right now. But gradually the average person may come to think something else:

    “Hold on! Bitcoin has a set of qualities that make it great as a medium of exchange if many people accept it. I’m noticing that you can buy more and more things with it. I think that more and more people are going to be using bitcoin in the future as they realise how it can help them. So I’m going to buy some now just in case I’m right. By the time the rest of the world has come around to my way of thinking my bitcoins will buy me that much more.”

    And thats how Bitcoin can become money (in the sense of very widely used).

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  17. Smiling Dave says:

    “Hold on! Bitcoin has a set of qualities that make it great as a medium of exchange if many people accept it.

    If.

    I’m noticing that you can buy more and more things with it.

    But far far less than I want and can get conveniently.

    I think that more and more people are going to be using bitcoin in the future as they realise how it can help them.

    It can only help them by being money, but it cannot be money.

    So I’m going to buy some now just in case I’m right. By the time the rest of the world has come around to my way of thinking my bitcoins will buy me that much more.”

    In other words, the average person will turn into a gambler with all of his paycheck, every payday.

    Tmasz, it’s been tried over and over. Many people have tried to create a money based on nothing. Like The Walking Dead, the money staggered around for a while, but in a short time, it lost all value. I gave many examples here: https://smilingdavesblog.wordpress.com/2012/10/07/bitcoin-and-the-numbers-game-part-2-in-which-we-shew-that-bitcoin-has-never-not-even-once-been-used-as-a-medium-of-exchange/

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