Question: —“Curt, does Bitcoin meet this Criteria? Is Bitcoin superior to Gold in terms of means of exchange?”—
[I]nteresting question. Lets look at the list.
1) Scarcity (no. as long as people want them we can create more of them at a constant rate – the problem is actually the opposite: requiring constant adjustment to the weights to require enough work to maintain consistent value. Otherwise we could produce them infinitely without cost.)
2) Commodity Utility. (no. it has no intrinsic use.)
3) Non-perishability (no. because like the stock market they require infrastructure for redemption.)
4) Volume and weight to value ratio (yes)
5) Nearly universal convertibility (not yet, and until we get to 10 second blocs, which kind of defeats the purpose, I suspect we wont get there.)
6) Functional unit of account, store of value, and medium of exchange. (not yet. Not enough volume).
UNDERSTANDING THAT BITCOIN ISN’T MONEY – IT’S FRACTIONAL SHARES OF THE BITCOIN NETWORK.
A bitcoin consists of a fractional share of stock in the bitcoin network. What separates the shares of stock in bitcoin from shares of stock in other publicly and privately traded stocks, is (a) that one need not go through a clearing house (anyone with a wallet can clear an exchange), and (b) that one can sell a fractional portion of a share of his stock (a bitcoin).
Just as any other business can fail, so can the bitcoin network. It is fully open sourced, fully transparent organization, operated by pretty good incentives, but that does not mean it cannot fail, and that those shares cannot be worthless. (In fact, it’s just as likely as not.)
BItcoin provides low transaction costs. And I suspect that it will result in a lower cost means of transferring money, rather than as money itself.
Now, I know a lot about the subject of what is money and what isn’t. Technically speaking, bitcoins are fractional shares of stock usable under some conditions as a money substitute that we call token money, for the purposes of decreasing transaction costs.
It is an ingenious way of funding a business. It is however, not ‘money proper’. Or, in classical language ‘money in the narrow sense’.
(Of course, that won’t stop a zillion imbeciles from spewing nonsense at me but that’s the reality of it.)
It is very unlikely that anything will surpass gold as a currency of last resort. And in truth, the currency of the reigning world powers will except under shocks, always be a better store of value than gold because prices are harder to manipulate than the price of gold, since governments work hard to insure that they are the exclusive manipulators.