Bitcoin as Money: A Beginner Level Look into What Money Really Is
Recently, some friends got together to discuss crypto and its viability. On one side, there were many positive feelings towards crypto and its role in the future. On the other side, the belief was that Bitcoin and other crypto is a scam, it is fake, and not worth investing in. However, what still needs to be examined is whether or not Bitcoin is real money.
What Is Money
Let us look at three aspects, which define whether an asset is or is not money. First, any real money has to be used as a medium of exchange. For something to be a medium of exchange it has to be an asset, which the holder believes, has value and the one receiving it also believes this. This is how coins have a value assigned to them, which everyone in society agrees. This makes them a medium of exchange.
Any real money needs a unit of account. A unit of account means the number of assets required to make an exchange, one can tell the quantity or quality of items that assets have been exchanged for. As a result, they can make a judgment that is based on the exchange rate.
Any real money needs to be a store of value. This simply means that if you have a given amount of assets, you should be able to go back and retrieve the asset at a different point. When you do this, the asset should still have value. Value does not spoil, rot, or lose relevance with the passing of time.
Does Bitcoin Qualify to Be Money?
First Bitcoin can and has been used to make purchases in the modern world. People use Bitcoin in making purchases, which mainly occurs online today. People are able to buy flights, Amazon goods, hotels, and much more.
Secondly, Bitcoin is a unit of account. This is because different amounts of Bitcoin will get you different quantities or qualities of services and goods. This all depends on the amount of Bitcoin you are willing to give out to get the service. This is no different from giving out fiat currency to get a good or service. It will allow you to estimate the quantity or quality depending on the Bitcoin that is asked for by the one giving out the good or service. As a result, this makes Bitcoin a unit of account.
Thirdly, Bitcoin is a store of value. This is because if you wanted to use Bitcoin to pay your tuition fee for college, and you buy some now, you expect the value to still be there in future. This will make it possible for you to pay for college whether the value has increased or stayed about the same in future.
So is Bitcoin really money or just an asset? From the study above, Bitcoin has all the three qualifiers of money. Thus, there is no doubt that Bitcoin is money. It acts and can be used in the same way as fiat currency.