The subject of Bitcoin has become a more common theme in libertarian circles. Just like goldbugs, the promoters of Bitcoin are passionate about their positions. The big questions are: is Bitcoin money and what is its potential for the future?
It is always good to start with a proper definition of money. I would define money as a commonly accepted medium of exchange. We have money so that we don’t have to barter. We can also use it for savings. But in order for money to function, it has to be widely acceptable.
I think this is where a bitcoin fails to meet the definition of money. It is not widely acceptable. It might be acceptable in certain circles of people, so it can function as a form of money in certain specific communities (not geographically speaking). If you went up to a guy on the street and asked him about Bitcoin, he would probably look at you funny. It is not widely recognized. Even if it did become widely recognized, it would still have to be widely acceptable in order to function as money in society.
I would say the same thing about gold in regards to money. Gold in America is not really money any more. If you walk into Walmart and try to pay with a gold coin or gold dust, the cashier would look at you as if you were crazy. And maybe everyone else is crazy for being so accepting of U.S. dollars. But regardless, it is U.S. dollars that are widely accepted and recognized. It is U.S. dollars that function as money in the U.S. It has practically been forced upon us by the government by using the central bank, legal tender laws, and other tactics. If there were a true free market, then gold and silver would likely function as money. But given the world we live in today, U.S. dollars are money.
So could Bitcoin one day become money, assuming that the government is not able to interfere? The answer is “yes”, but that would be for the market to determine. It would really be up to each individual on whether they wanted to accept and trust bitcoins as a form of money or use something else.
If I had to take a guess, I don’t think bitcoins are going to be the wave of the future. Here is Wikipedia on Bitcoin. Wikipedia is good at giving a good summary on things. It is usually understandable. When I read the entry for Bitcoin, it is still confusing. I am not trying to be insulting when saying this, but Bitcoin is an idea that comes to fruition when a libertarian meets a tech geek. It takes an IT guy to understand all of the lingo. The average guy on the street cannot really understand what a bitcoin is.
People understand gold. You can actually hold it in your hand. It can be used for jewelry. It has some industrial uses, although not as much as silver. It has a long history as functioning as money.
I do not agree with people who criticize bitcoins because they have no intrinsic value. The U.S. dollar doesn’t either, but then again, the free market did not really choose it as money. If bitcoins ever become money, it will have to come through the free market. But intrinsic value is overrated. Gold is mostly useless to people when it doesn’t serve as a form of money or wealth. It can look pretty. You can’t eat it or drink it. You can wear it, but only to look good. It’s not to keep you warm. But if money were based solely on its uses, then water, oil, food, and clothing would be better candidates to serve as money.
In a free market, everything is subjective. Things are valued according to the free market, which is really just the opinions of billions of people.
In conclusion, I doubt that Bitcoin will serve as a major form of money in the future, even if the government gets out of the money business. I have nothing against Bitcoin and I wish its users and promoters well. I generally think we are on the same side and seek more freedom. I just have my doubts as to whether other people can understand Bitcoin enough to trust it as a form of money. I think gold and silver are more likely to prevail again.