What is money and can Bitcoin really be used as currency?
Marquez Comelab explores what money is and the different forms it has taken in the past to help us determine whether Bitcoin can be used as currency.
What did you think of Bitcoin when you first heard about it? Many people immediately think of Bitcoin as something that is claimed to be cash or digital currency. Inevitably then, conversations about Bitcoin almost always turn to a discussion of what money is because, as described in the title of his white paper, Bitcoin is a “peer-to-peer electronic payment system”.
Most people generally think of Bitcoin as a fad, or worse, a scam. They say things like, “You don’t just create money. How can something like Bitcoin be money, or become money? This cynicism is understandable when the only currency most of us have ever known are the newer currencies like the dollar, the euro, the pound sterling and the yen. Yet, these are only forms of money that have existed relatively recently. To understand and appreciate what Bitcoin offers, we need to think further. For this reason, this article provides a brief introduction to the nature of money and asks if something like Bitcoin can be used as money.
I have looked around to see how money, cash and currency are defined, and for our intentions and purposes we can simplify it as follows:
Money is anything generally accepted as a means of payment to settle debt or exchange for goods and services. Cash is money in the form of currency, and currency is whatever is typically used to exchange one thing for another.
To expand on what the above definition means, let’s imagine a basic transaction between two people: you and me. You want something that I have, and I want something that you have. Since we are civilized human beings, we are not just going to fight each other to try to violently take what we want. So we do what the citizens do and come to an agreement. You might suggest something like, “In exchange for your bottle of vodka, I’ll give you ten packs of cigarettes.”
What you’re doing here is making me an offer. I could decide to make a counter offer to adjust the terms of the deal. We will likely continue to counter each other’s offers until we both come up with a proposal that balances the way we price vodka and cigarettes.
Now, suppose we finally agree that I give you my bottle of vodka in exchange for your 10 packs of cigarettes. Does this mean that vodka or cigarettes have turned into money? Not enough.
What we did was we swapped one good for another. Barter is the oldest form of commerce that we know of. With money not yet invented, ancient civilizations traded sheep for chickens or cattle for grain. They not only exchanged goods, they also exchanged services and favors.
Can we barter with Bitcoin? Certainly. If I had Bitcoins I could exchange them for your cigarettes, and if you had Bitcoins you could exchange them for my bottle of vodka.
When then does something like cigarettes or vodka become money? Something becomes money when many people usually accept it to settle debts or exchange for goods and services.
In prisons, cigarettes were once a popular form of currency that inmates exchanged for items or favors among themselves. Although with the establishment of anti-smoking rules and policies, the use of cigarettes as a bargaining chip has become problematic. According to Michael Gibson-Light, a doctoral student at the University of Arizona and former inmate, Gustavo Alvarez, author of Prison ramen, ramen noodles have turned into money in prisons. As prisons began to receive less funding from the US government, the amount of food given to prisoners declined and the quality deteriorated as well. For inmates, ramen is an inexpensive, tasty, high-calorie food that gives them the energy they need to work and exercise. As a result, it became so valuable that they started using it to buy all kinds of necessary items, from food and clothing to laundry and hygiene products.1
Vodka has also been used by Russians since the 16th century as a bargaining chip. In 1998, when the Russians lost faith in the ruble to function like money, the use of vodka as a medium of exchange became so common that a Siberian district gave 8,000 teachers 15 bottles each. as a salary. They initially offered to use toilet paper or coffins, but vodka was favored because it was the only thing that could be freely sold or exchanged for bread and other food!2
In the past, our ancestors also used various objects as currency. They used animals and plants. In China, Africa and India, they used cowries. Yes, those same seashells you find along rocky shores and reefs!
As with currencies like cigarettes, vodka, animals, and seashells, we can see that humans use anything, and have used anything, as currency. The process by which a particular item becomes currency is beyond the scope of this article, but we have enough to conclude that the process is driven by necessity. Whatever circumstances we find ourselves in, we will seek the most practical, efficient, and practical way to deal with one another so that we, and our dependents, can survive and prosper.
So something becomes money when people start to use it as money. Likewise, Bitcoin can also become money if and when people start using it to exchange goods or services in their daily lives.
Marquez Comelab has been following Bitcoin since 2015. He is interested in how Satoshi Nakamoto’s vision on Bitcoin, Bitcoin SV (BSV), can solve problems and add value to our financial and monetary systems. You can follow him on MarquezComelab.com or Twitter @Marquez_Comelab.
 Article: “How Ramen Noodles Came The King Of Prison Currencies,” By Laurie Vazquez, BigThink.com, Posted Aug 23, 2016: https://bigthink.com/laurie-vazquez/how-ramen-noodles-beat-cigarettes-to-become-a-prison-currency [accessed 23 Aug 2021].
 Article: “How Vodka Became Currency in Russia”, by Susie Armitage, Atlasobscura.com.com, published October 23, 2019: https://www.atlasobscura.com/articles/vodka-currency-russia [accessed 23 Aug 2021].
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