-5

Bitcoin can be classified as a currency as it can be used as an medium of exchange or classified as an commodity given its speculative and volatile nature.

What should we classify Bitcoin as ??

Computernerd
  • 962
  • 7
  • 17

3 Answers3

8

It has properties of both. Tax authorities will eventually give their opinion on this. Through its properties of finite quantity, fungibility, and resistance to forgery/duplication, it acts as a commodity. It can be sent directly between any two parties anywhere on Earth, without regard for the quantity transacted or physical distance, to act as a currency.

By the way, establishing trust in a trust-free environment through cryptographic proof-of-work is a remarkable invention. Sending economic value, cheaply and securely, around the world in minutes, not days/weeks, is a remarkable invention. This is where the value comes from.

not22
  • 191
  • 3
  • I'm sorry, but why do you need bitcoins to send money? Paypal is as free and fast... – littleadv Mar 18 '14 at 23:34
  • 3
    @littleadv Bitcoin isn't the answer, but Paypal isn't always free, isn't always fast, and has a nasty habit of freezing your account and walking away with all your money on a whim – Yamikuronue Mar 19 '14 at 00:45
  • 1
    @Yamikuronue yeah... Mt.Gox etc... Paypal is always free if its between two individuals and not a business transaction, I've been transferring money through paypal. I do agree that they tend to freezing money occasionally, but that mostly happens in the US because they're unregulated. IIRC in the EU they're treated as a bank and cannot do such shenanigans. – littleadv Mar 19 '14 at 06:41
  • 1
    @littleadv Paypal is a for-profit private company and only works in a handful of countries. The majority of people on Earth can't use it. – not22 Mar 19 '14 at 11:45
  • @not22 That is actually not true (the majority of people can't use it part). – littleadv Mar 19 '14 at 16:01
  • Also, Bitcoin is impossible to inflate because it's designed with a limited money supply of 21 million (cf. Bitcoin's wiki page "Controlled supply"). – Geremia Mar 03 '15 at 18:20
4

I would classify Bitcoin as a hybrid.

Currency : It is accepted by e-businesses as a form of payment

Commodity : Chart illustrating the volatility and speculative nature of Bitcoin

Computernerd
  • 962
  • 7
  • 17
  • If it's a currency, it's a bad one: 1 hour confirmation times and total price instability. –  Mar 18 '14 at 17:06
  • @quantycuenta - I believe in your previous posts you were a diehard proponent of Bitcoin. Why this change of heart now ? – DumbCoder Mar 18 '14 at 17:23
  • 1
    @DumbCoder I'm a diehard proponent of cryptos. Bitcoin has a long way to go to becoming the ideal currency, but at least they proved it can work: a secure system of transferring money with the extremely important added benefit of having to be backed by nothing except its own supply. We'll never hear a Fed type question about Bitcoin: "what happens if the Treasuries & mortgages backing the Fed collapse?". The problem is that it needlessly takes 1 hour for funds to clear with 100% confidence and is price unstable. The crypto that can solve that changes the world for the awesome. –  Mar 18 '14 at 18:41
  • 1
    @quantycuenta secure? Mt.Gox etc... If someone steals money from my bank - I couldn't care less. What happens when someone steals your bitcoins from Mt.Gox? You don't have bitcoins. – littleadv Mar 19 '14 at 06:43
  • 4
    @littleadv MtGox != Bitcoin. Is the stock market now fundamentally unsound because of Bernie Madoff? If I were in a poorer country without the luxury of deposit insurance, or worse, my country goes so far as to suspend withdrawals, or worst, seizes my money, say, because it wasted the country's resources on, say, a real estate bubble to the point where it has more than a few empty megalopolises, I'd much rather hold my wealth in something like BTC despite all of the economic flaws. Variance is cheaper than losing everything. –  Mar 19 '14 at 12:43
4

Its neither. Its a scam. there's no value underlying it, and it has proven to be the most speculative and untrustworthy investment there is.

The scam works like a pyramid scam, so the more people come later on the more people who came in earlier on gain, so that is why you see so much hype around it encouraged and fueled by those early adopters who'll cash out at your expense. Imagine people who jumped on the bandwagon when each coin was worth a mere fraction of a dollar - they want you to "invest" at the current price of hundreds of dollars per unit so that they could cash out.

You'd be better off with tulips, really.

(And don't be discouraged by the downvotes on this answer, of course those scamers will try to shut me down. That will just prove the point.)

littleadv
  • 172,884
  • 15
  • 295
  • 479
  • 5
    I really don't understand the hoopla behind Bitcoin. People will only learn after they have been hit hard and lose money. – DumbCoder Mar 18 '14 at 17:05
  • 2
    At least I can see a tulip. – MrChrister Mar 18 '14 at 19:32
  • 3
    How is the issue you're describing any different than a fiat currency, like the US Dollar? What is the "value underlying" a fiat currency. Fiat currencies and bitcoin are similar in that their only value is the "faith" that causes people to accept them in exchange for goods or labor. The U.S. Dollar is just as much a scam... it's just been around longer. – Bart Oct 27 '14 at 17:27
  • @Brat a very tiring argument. I can explain to you how wrong you are, but why would I bother? Would it matter to you? – littleadv Oct 28 '14 at 02:39
  • @Bart - ongoing discussion such as this should be taken to a chat room. – JTP - Apologise to Monica Oct 29 '14 at 12:32
  • Try me... what is the "value underlying" a fiat currency such as the dollar? – Bart Dec 03 '14 at 20:08
  • @Bart lets start with the United States government. Who ensures that your bitcoins will be accepted by anyone next week? – littleadv Dec 04 '14 at 03:12
  • Hmmm... can you post a link to where the US government ensures that dollars will be accepted by anyone next week? Check your history... nearly every fiat currency has eventually collapsed into hyper-inflation – Bart Dec 04 '14 at 05:22
  • @bart Here's the answer to your question: http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx As to the hyperinflation - irrelevant. Bitcoin has a built-in hyper-deflation by definition, and it doesn't seem to bother you. – littleadv Dec 04 '14 at 07:15
  • Quoting from the link you provided: "There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services." As for deflation, you don't mind that the money you hold is guaranteed to lose its value (inflation)... I don't mind that the money I hold is likely to increase in value.... bitcoin is deflationary, not hyper-deflationary... there is actually an exactly defined quantity of bitcoin, unlike dollars where the government can and does print as much as it wants with no notice or input – Bart Dec 04 '14 at 12:24
  • @Bart The value underlying the USD or other countries currencies, is that, it's the only accepted way of paying taxes by the government. Since you will always have to pay taxes, there will be always an underlying value for USD. The same doesn't apply to Bitcoin, just like it doesn't apply to Monopoly Money. – jbssm Dec 04 '14 at 12:48
  • Another quote from the link you provided: "Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are 'backed' by all the goods and services in the economy."
    What does that even mean?     – Bart Dec 04 '14 at 13:23
  • @bart legal tender means any debtor must accept the currency. The point of the "deflationary" bitcoin is that the more you hoard the cheaper the stuff is going to be which will, by definition, lead to hyper-deflation and collapse. I can't understand the stupidity of anyone who thinks that built-in deflationary mechanism is somehow a good thing. Maybe you can help me understand what drugs do I need to take to have the same brain damage as you have? – littleadv Dec 04 '14 at 16:58
  • As to 'redeemable in gold' - is bitcoin redeemable in gold? If not - then again, irrelevant argument. – littleadv Dec 04 '14 at 16:59
  • @littleadv, legal tender does NOT mean that any debtor must accept it... ""There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services."" – Bart Dec 05 '14 at 01:04
  • I didn't say bitcoin was redeemable in gold... just quoting the US government about dollars not being redeemable – Bart Dec 05 '14 at 01:05
  • Regarding the deflationary argument, see http://www.forbes.com/sites/timothylee/2013/04/11/bitcoin-doesnt-have-a-deflation-problem/ – Bart Dec 05 '14 at 01:22
  • What's the point in that quote then? Re the Forbes article - I read the title, it was plain wrong, so I didn't continue. Bitcoin is deflationary by definition, and by design. That was the whole purpose and intention. – littleadv Dec 05 '14 at 03:24
  • @littleadv: "I can't understand the stupidity of anyone who thinks that built-in deflationary mechanism is somehow a good thing." ... so you are calling the entire Austrian school of Economics "stupid" – Bart Dec 11 '14 at 00:18
  • @littleadv, you didn't read the title very well... it never said Bitcoin was not deflationary... it said that it wasn't a problem – Bart Dec 11 '14 at 00:19
  • @Bart it is just as a problem as inflationary currency, except that bitcoin's built-in deflationary system doesn't allow mitigating it. And I have no problem calling Austrial school of Economics stupid if they think deflationary mechanism is good for economy. – littleadv Dec 11 '14 at 00:24
  • Great job mitigating it, when a dollar buys half of what it did just 26 years ago – Bart Dec 11 '14 at 02:34
  • @Bart and bitcoin buys half of what it did a year ago, and that's with the built-in deflation. Not sure what your point was. – littleadv Dec 11 '14 at 02:52
  • My point is that significant inflation over the long term is guaranteed with every fiat currency... pick any period of several years and you will see steady inflation... with bitcoin there is a very significant upward trend over the long term... bitcoin buys 20 times what it did 2 years ago, for exampe – Bart Dec 11 '14 at 03:32
  • @Bart that is not a trend. It buys 20 times more than it did 2 years ago, but half of what it did a year ago - that's a quality of speculative commodity (or, as I said, a scam). You cannot consider something of such a volatility as a currency. Compared to these swings, even the most unstable currency would look as it holds its value steady. Except maybe for the Zimbabwean dollar, but we know how that ended. – littleadv Dec 11 '14 at 06:10
  • Can we go back to the answer itself? Regardless of what you think of bitcoin as a currency or investment, to say it's a scam is just ignorant. What other scam has no company or individual or group controlling or profiting from it? What other scam goes on for 5 years? What other scam has an entire industry of companies involved in it with more coming on every day? Just taking a random recent headline: http://www.coindesk.com/microsoft-adds-bitcoin-payments-xbox-games-mobile-content/ – Bart Dec 11 '14 at 13:56
  • @Bart "What other scam has no company or individual or group controlling or profiting from it" - I disagree. There's no way to know who really profits from bitcoin, but there's a very good reason to assume that a very few people who started it are to profit the most. "What other scam goes on for 5 years" - It took Madoff's scheme more than 20 years to collapse. "What other scam has an entire industry of companies involved in it with more coming on every day" - same Madoff, as an example. – littleadv Dec 11 '14 at 17:10
  • For Madoff there was evidence that it was a scam. You haven't presented any evidence... all conjecture based on the fact that bitcoin is outside of your comfort zone – Bart Dec 11 '14 at 17:46
  • @Bart in the end, after 20 years, there was evidence. In the mean time you have nothing to say about the facts patter, do you? – littleadv Dec 11 '14 at 17:57
  • You haven't looked deeply into the Madoff case, it seems... there was evidence almost from the beginning, but it was ignored... there is no evidence after 5 years of bitcoin of any kind of scam – Bart Dec 11 '14 at 18:18
  • @Bart or maybe everyone just ignores it. Inflated prices, aggressive promotion, pyramid-like operation - I'm pretty sure in retrospective everyone will also say "there was evidence almost form the beginning". – littleadv Dec 11 '14 at 18:48
  • What is they pyramid-like operation? Who is at the top of the pyramid? Who are the "middle level" and "lower level" people? And in case you haven't noticed, Microsoft has now surpassed Overstock as the largest-profile company to accept Bitcoin. Has Microsoft been taken in by the scam? – Bart Dec 12 '14 at 03:26
  • And what would make you say the price is inflated? Because it's trading for over $300 a bitcoin? Do you realize that a bitcoin can be divided into up to 100 million pieces? That you can buy $1 or 1 cent worth of bitcoin? If the basic unit was changed to the millibit (as many advocate), so it would then be trading at 30 cents per millibit, would that suddenly make it "not inflated"? – Bart Dec 12 '14 at 03:32
  • Is Bloomberg deluded by the scam too because they list the Bitcoin trading price on their terminals? – Bart Dec 12 '14 at 03:34
  • @Bart oh, if Bloomberg has tickers on their terminals then it must be legit. After all, it's not that Bloomberg reports prices for pump&dump stocks, right? – littleadv Dec 12 '14 at 03:48
  • Bitcoin is backed by the laws of mathematics. You can pick your currency, backed by guns and guys who hide behind closed doors. I'll pick mine. – John Devor Dec 12 '14 at 05:31
  • @JohnDevor somehow I trust guns and guys more than mathematics when it comes to enforcement. – littleadv Dec 12 '14 at 06:14