According to Aristotle, for something to be considered money, is has to fulfill four characteristics:
1) It must be durable. It can't fade, corrode.
2) It must be portable. It has to be 'dense' so that you can take it with you when you travel to the market.
3) It must be divisible or, 'fungible.' This means that if you break it up into smaller pieces each smaller piece when you add them up will equal the value of the original piece.
4) It must have intrinsic value. This means it must have value whether or not it's used as money per se.
Let's look at these four characteristics and see if they apply to Bitcoin.
1) Durability.
Bitcoin is a peer-to-peer, decentralized form of money; as durable as the Internet itself. Remember, the Internet or DARPA as it was originally called, was created as a fail-safe, global network with no 'single point of failure.' If one part goes down, data takes another route and nothing is lost. So on this point the answer is "Yes," Bitcoin is durable.
2) Portability.
Bitcoin is probably the most portable money in the history of the world. I can download any amount onto a thumb drive and walk across any border without any problems. Or, I could commit to memory a line of code that I can then input into the network and save or spend Bitcoins. So on the point of portability, Bitcoin gets an Aristotelian "Yes."
3) Fungibility.
Bitcoin is probably the most fungible currency ever created. You can break it down by 10,000 decimal places and trade it just as easily without it changing in value so on this point the answer is also "Yes."
4) Intrinsic Value.
This is probably the characteristic that most people find difficult to comprehend. The intrinsic value of Bitcoin is very 21st century. If you think about it, what's the one thing that has become extremely scarce over the past thirty years that has grown in desirability? Privacy.
Privacy is an age of universal email collection and spying, with millions of CCTV camera's, and warrantless spying pervasive; privacy has become virtually non existent and therefore extremely scarce and desirable. Bitcoin can be a completely anonymous transaction that maintains the user's privacy beyond the reach of any authority. So on this point too, the answer is "Yes," Bitcoin fulfills Aristotle's need for having intrinsic value. Privacy is a desirable human right and people would want it even if it wasn't encoded as Bitcoins.
In conclusion, using Aristotle's four characteristics of money, Bitcoin fulfills all four. So then according to an Aristotelian definition, the answer is 'Yes.' Bitcoin is money.
Quesadillas
■What Is Bitcoin, The Newest $1 Billion Currency?
How is virtual currency with no physical manifestation suddenly worth $1 billion in U.S. currency? Though it doesn't hold a candle to the $1.13 trillion in Federal Reserve Notes in circulation, Bitcoin is gaining traction (and attention). Let's run down what it is, and how to get it:
People like Bitcoin because it removes the middleman (like central banks, such as the Federal Reserve or credit card companies) from online transfers of money. Bitcoin also allows for more anonymity than any other manner of online payment -- and this fact (though it's difficult to say just how anonymous Bitcoin really is) influences how the currency is used. While some secretive purchases made online using Bitcoin are justified, one controversial Reddit group that seeks to "protect" men from feminists asks for donations in Bitcoin specifically to protect the identities of all involved.
There are two main ways to acquire Bitcoins: You can buy them or mine (yes, mine) for them. The exchange rate between Bitcoins and U.S. dollars fluctuates just like any other type of money. The current exchange rate as of Friday afternoon is 1 Bitcoin to $88.811. Like with traditional currencies, it's possible to make money just by buying and selling Bitcoins as exchange rates change.
As for mining for Bitcoins, it's a strange process. Mining is basically making your computer run a program to "do mathematical calculations for the Bitcoin network to confirm transactions and increase security," according to Bitcoin's official website.
Mining takes up a lot of space on your computer, and your odds of receiving any Bitcoins from mining on your own are slim. To compensate, many people join what are known as mining pools. In a pool, people can combine their computing power to crack the codes together, splitting the Bitcoin profits among themselves.
So there you have it -- a primer on Bitcoin. As we all know, the geek shall inherit the earth, so it's no surprise they're already preparing for the coming apocalypse by forming their own currency online.
People queue at an ATM outside a closed Laiki Bank branch in capital Nicosia, Cyprus, Thursday, March 21, 2013. (Petros Giannakouris - AP)
One of the most interesting side notes from the Cyprus bailout drama has been the sudden return to prominence of virtual currency Bitcoin after its fifteen minutes of fame in 2011.
In Cyprus, a combination of banking system volatility, strict capital controls and a dramatic loss of confidence in bank deposit insurance created almost perfect conditions for a Bitcoin comeback. In the last two weeks, the value of a single Bitcoin has exploded in value, from $40 to nearly $75 over the course of roughly two weeks, as depositors in Cyprus searched desperately for a way to keep their money from being confiscated during a bank bailout.
Bitcoin has become a new safe haven for investors similar to the way gold has historically been the favorite refuge of panicked investors during a financial crisis. Bitcoin has become so mainstream that worried Spaniards (many of whom see themselves as potentially the next victims in a financial contagion scenario) are downloading Bitcoin apps to their mobile devices at a rapid pace. There’s even a plan to install the first-ever Bitcoin ATM in Cyprus so individual investors can exchange their “real” currency for Bitcoins without the need for suddenly unreliable bank intermediaries.
Compare that scenario to 2011, when Bitcoin was first emerging as a decentralized cyber-currency, providing an opportunty to conduct shadowy financial transactions far from the prying eyes of bank regulators. The primary concern back then was privacy and finding a way to go off-grid. As such, Bitcoin was the perfect currency for the Occupy Wall Street crowd, living outside the traditional financial system of central banks, savings accounts and physical cash. And, not surprisingly, Bitcoin gained a reputation for being an outlaw currency, favored by black hat hackers, money launderers, drug dealers and tax cheats.
image of bitcoin (weusecoins.com) Not anymore, apparently.
You can now use Bitcoin as a payment option on Reddit, while some brick-and-mortar businesses are starting to accept virtual Bitcoins as a payment alternative. One homeowner in Canada, Mashable reports, is even willing to sell his roughly $400,000 house in exchange for Bitcoins.
But Bitcoin still makes a lot of people uncomfortable. Regulators and law enforcement officials by and large view Bitcoin as a dangerous tool for money laundering. Others refer to Bitcoin as an underground banking system or the currency of those who seek to engage in more controversial activities — such as financing the development of 3D-printed guns. And Bitcoin may not be as safe as its supporters would like to think, no matter how strong the encryption, given the Bitcoin heists and hacks of the past 18 months.
Nevertheless, some people have decided to put their full faith and credit, not in governments, but in the crowd and technology. They think nothing of storing digital wallets on smart phones, and no longer look askance when friends and family talk about alternative virtual currencies. (Remember FarmVille?) That said, we are increasingly aware of how nearly anything — especially our financial transactions — can be used to track our activities. Bitcoin may not be the answer to what ails the modern financial system, but it hints at a future in which technology plays an increasingly important role in stabilizing the ups and downs of any nation’s financial sector.
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TheWashingtonPost
Bitcoin Is A Disruptive Technology
A financial network is a technological platform that people build businesses on top of. And the traditional banking and credit card networks are closed platforms. If you want to build an e-commerce site, a payment network like Paypal, or any other service that deals in dollars, you need to convince incumbent financial institutions to do business with you. Getting such a partnership is difficult and involves a lot of red tape.
There’s a good reason for the high barrier to entry: electronic transactions in the conventional banking system are generally reversible. If someone makes a fraudulent charge to your credit card, you can dispute the transaction and in most cases the bank or the merchant, not the customer, will cover the cost. That’s convenient for consumers, but it requires the financial system to be a fairly close-knit web of trust. Allowing a new member into the club creates risks for everyone else. So the incumbents are understandably reluctant to deal with anyone who isn’t well-known and well-capitalized.
Bitcoin is different. Because transactions are authenticated cryptographically and cannot be reversed, there’s no need to restrict access to the network. There’s no risk to accepting payments from complete strangers. That means people don’t need anyone’s permission or trust to go into business as a Bitcoin-based merchant or financial intermediary. Accepting Bitcoins also allows merchants to avoid much of the administrative overhead, like dealing with chargebacks, that come with a conventional merchant account.
Of course, what looks like a plus for merchants can look more like a minus for consumers. Consumers generally like the conventional banking system’s strong consumer protections. We like the fact that we’re not on the hook for fraudulent banking transactions, and that the FDIC will make us whole if the bank holding our money goes bottom-up.
And Bitcoin looks inferior to the conventional banking system in other ways too. Visa and Mastercard are accepted at millions of locations around the world. Only a handful of merchants accept Bitcoins. Conventional banks have elaborate websites with features like direct deposite of paychecks and automatic bill-paying. Dealing with Bitcoin is too intimidating for all but a tiny minority of tech-savvy enthusiasts.
If you’ve read Clay Christensen’s The Innovator’s Dilemma, the last three paragraphs should ring a bell. The book’s argument helps to explain why a seemingly inferior payment network like Bitcoin has generated so much excitement.
The term Christensen coined, “disruptive innovation,” has become so overused as to become a cliche. But he gave it a fairly precise meaning with a lot of explanatory power. A disruptive technology is one that’s simpler and cheaper than what’s already on the market. Often, disruptive technologies are also inferior to what’s already on the market. They tend to be dismissed as impractical toys by industry incumbents.
The PC is a classic example of a disruptive innovation. The first PCs were much less capable than mini-computers and mainframes that were already on the market at the time. They had less powerful hardware and software and little if any customer support. And if you’d asked a hobbyist circa 1978 what PCs were good for, he probably wouldn’t have had a good answer.
But the low cost and simplicity of PCs meant that a lot more people could play around with them. One of those tinkerers, Dan Bricklin, invented the spreadsheet, the PC’s first “killer app.” And over time, people gradually figured out how to use these cheap, simple computers to perform functions that had previously required a computer that cost ten times as much. Most “servers” today are just souped-up PCs, and they’re orders of magnitude cheaper than computers that existed before 1975.
The Bitcoin economy today looks a lot like the PC market circa 1978. Most people today look at Bitcoin and see an impractical curiosity. They’re happy with the banking services they’ve already got and can’t imagine why anyone would want to use an alternative currency that’s much less widely accepted and offers many fewer consumer protections.
But a minority of nerds are playing around with it. Interesting applications keep popping up. There are Bitcoin-based banks, casinos, drug emporia, derivatives markets, retailers, and much more. Many of the new applications seem weird or marginal, and most of them probably won’t amount to anything. But one of them might prove to be Bitcoin’s Visicalc.
When people dismiss Bitcoins because they can’t think of how they’d use it, they’re missing the fact that Bitcoin is a platform, not a product in its own right. When ordinary users started buying computers, it wasn’t because they thought it would be cool to own a computer. They did it because they wanted to do spreadsheets or word processing or email. Similarly, ordinary users aren’t going to start using Bitcoins just because it’s a cool technology. If normal users start using Bitcoin, it will be because they’re interested in gambling, or cheap international money transfers, or some other applications that hasn’t been invented yet. And Bitcoin’s intermediary-free architecture means that many more people can try their hand at building the platform’s killer app.
The Huffington Post | By Alexis Kleinman