That’s the latest rationalization for bitcoin having non monetary value. Bitcoin has non monetary value as a means of transporting money. The folks at Mises.org have even fallen for this one. I’ve written about it before, but I just had a new idea.
Costello: Hey, Abbot, get this. A new Armored Truck company has opened for business. They will transport your money securely anywhere, plus there is a roulette wheel installed in the truck. As the truck speeds your money to its destination, it is automatically bet on any number you choose, from 0 to 00 to 36.
Abbot: What if I don’t want to bet on any number, just keep my money as is? All I want is for the Armored truck to deliver my money to its destination.
Costello: That’s no fun.
Abbot: No, that’s bitcoin. As a means of transporting money, it includes a gamble its price may drop and you lose big time. What kind of way is that to transport money?
Costello: Come on, Abbot, if you work fast, buy the bitcoin right away, then instantly transport it, the odds of losing anything are miniscule.
Abbot: But what about the recipient? Why should he accept payment in something that may drop in price?
Costello: He will have to unload it right away, too.
Abbot: So we are talking about a means of transporting money that involves both the sender and the recipient not holding onto the money for more than a few seconds, and this is baked into the transportation system.
Costello: Yep, and that’s how Microsoft and all them others are using bitcoin. Isn’t it wonderful?
Abbot: Of course, Microsoft pays a nice fee to some third party willing to take the bitcoins off their hands and assume the risk.
Costello: And that third party will always be there. Like the Roman Empire. I guarantee it.
Abbot: So bitcoin is a means of transportation that has baked into it a serious risk of losing big chunks of the money sent, but there are people out there willing, for a fee, to take the risk.
Costello: Sound viable to me. That’s exactly the kind of thing Mises was talking about when he said a money has to start off with intrinsic value. Risky, but someone out there is, for now, willing to insure you against the losses. Can’t get more intrinsic than that. What’s not to like? Microsoft thinks it’s OK, so why are you worried about it?
Abbot: To Microsoft, the whole thing is just another advertising expense. The companies interviewed about why they accept bitcoin all said it’s an advertising gimmick, and a cheap one at that, must cheaper than a television commercial. But Mr Average person would never agree to transporting money that way, or accepting money transported to him that way, with his money constantly gambled with whether he likes it or not.
Costello: Unless he’s buying drugs or something, which is a transaction involving other risks. So he figures the risk of losing on the roulette wheel is less than that of being arrested if he uses real money.
Abbot: Bottom line, bitcoin is not transporting money. It is transporting a lottery ticket with an unknown expiration date.
Costello: So it’s like a delivery truck that can only deliver rotten eggs.