Last night I made a post on twitter in which I expressed that bitcoin is not money. In fact, I said bitcoin is not a lot of things. My exact post was as follows. 

One of my connections, @OrangeSwell vastly disagreed with what I said and we went into a semi lengthy conversation about it (for twitter) where he explained his view and understanding. Seeing as how twitter limits characters and I really wanted to dive into this topic, I opted to continue my views here in this post instead. If you want to see the entire thread of the tweet it can be found here.

Let me start by explaining, I am not speaking about how people perceive bitcoin. I am speaking about factually what bitcoin is. I didn't always understand the difference. In fact, it wasn't until I began actually learning how to program blockchains that I actually started to understand a lot of this. In my opinion the only way to really understand what bitcoin is, is from a programming perspective. After all nothing exists outside of the code. 

To really understand what bitcoin is first you have to understand what a ledger is. A ledger is really nothing more or less than a database. It is a list of transactional data, so whereas its not a complex database, it still is a type of database. So lets start by looking at another popular database - that of MySQL. 

What is a computer database?

We refer to MySQL as a rational database. However it being a database is somewhat confusing because most misunderstand the properties of a database. A database is not merely the information, but rather the information as well as how that information is stored.

In the case of MySQL we know it is actually a piece of software that generates a database. That software contain features to add, modify and remove data. The software contains features to grant and remove permissions to users who may modify the information of the database.

So effectively the MySQL database is the software, the database, and the process used to modify that database. Understanding this is important to understanding what bitcoin is. 

As I just said bitcoin is really nothing more or less than a database known as a ledger. However because its a computer database that means bitcoin is a software for creating a database, its a process to modify (add to) the data in that database, its the process of granting permissions as to who can modify that data, and its the data itself.

This is incredibly important to understand. Its important to understand because it is within this definition that all the understand of bitcoin really takes place. 

Bitcoin is actually a software permission

Most people understand bitcoin is a ledger, but they will separate bitcoin the ledger, from bitcoin the currency. The thing is, bitcoin the currency doesn't exist because bitcoin is not a currency. What is commonly referred to as a currency is actually nothing more or less than a permission. Its nothing more or less than a permission because thats how bitcoin ledger operates. Its those permissions that define who can or cannot record information on the ledger. 

Bitcoin "the currency" has one and only one usage. It is a permission. If you have bitcoin, you have permission to be able to record data on the ledger, if you don't have bitcoin you cannot store information on the ledger. How much bitcoin is required to store that information is a combination of how many permissions you have compared to how many permissions others are willing to use to record to the database. Bitcoin has NO OTHER USE except to be used to store data on the ledger. 

Just to make sure there is no confusion, what we call 1 bitcoin, is actually a number 100,000,000. This is the number of potential times you could in theory write to the bitcoin ledger. We represent this in decimals for simplicity by saying 1 bitcoin is 100,000,000 sats (or cents). You can use these permissions to write to the ledger and how fast the information is recorded will depend on how many permissions one uses vs how many permissions others are using at the same time. These permissions can be granted to others. So, bitcoin as a currency is a misnomer. Its not a currency. Its a permission system used to write to the bitcoin ledger.

One can not show any other purpose of bitcoin, because factually there is no other purpose of bitcoin. This is a GOOD thing. It is this feature that makes bitcoin SO INCREDIBLY VALUABLE. At no point can bitcoin be used for any other purpose. Its an actual impossibility because bitcoin as a currency isn't a thing and it doesn't exist. Its nothing more than a permission for a service.

What people refer to as "spending bitcoin" is not actually "spending bitcoin". Its making a barter trade. You are agreeing to trade a number of permissions to write on the bitcoin blockchain in exchange for something. People consider the ability to write to the blockchain very valuable. Its because of this value in the permissions that people perceive bitcoin permissions as money and as currency, but factually its a permission (have I drilled into your head its a permission enough yet)? 

What is money?

Money is not a permission. Its a perceived value container. Specifically when we refer to money in a modern world we are referring to fiat currency, which means something whose value is made up by a government proclamation and given value. Its sole purpose is to give value to things.

It serves no other purpose. It has no other value. Its value actually comes from others willingness to accept it, what others are willing to trade for it, how often it exchanges hands in a day, and how expected it is to exchange hands in the future (this is called future investments)

Money is something that actually tangibly exists because of a governmental decree. When one uses a technology like a credit card, the credit card is just acting as a ledger for that money, but the money exists through decree. This means even if the money has not physically been produced yet, the promise that it will be produced has been guaranteed. It is a physical and tangible thing because of that. 

So to be clear money has NO OTHER PURPOSE other than to say the government has guaranteed it holds value and can be used in exchange for goods. The money is not a permission, its not an anything except a medium of exchange. Its not a product outside of that medium of exchange. Again I am referring to money as fiat currency, we are not yet referring to gold or precious metals. 

Because money is a governmental promise of a medium of exchange, money actually cannot be destroyed. I can take millions of dollars, make a giant pile from it, and light it on fire and I have not actually destroyed the money, because as far as the government is concerned, that money has been promised to exist (even if I am no longer the owner of it because i have burned it). If a government says there will be 1 trillion units of their currency, then nothing I do to that currency will change the fact the government will ensure 1 trillion units exist.

Is gold money?

This is an important feature of money that bitcoin does not hold. Its also within this feature that we can get into precious metals like gold. 

Gold has historically been used as money and is older than fiat currency. It worked as a form of money for similar reasons that fiat currency works as money. Unlike fiat currency which is a promise of a storage of value, precious metals need no promise - especially gold, as it cannot be destroyed. So its existence is guaranteed (short of someone shooting it into outer space). 

Gold can be "dissolved" but not destroyed. When gold is dissolved what is actually happening is its being broken down into infinitely smaller particles, but... it still actually exists, even if only on a microscopic level. So much like the promise with fiat currency - gold cannot be destroyed.

In modern times gold has also taken on value through its usage in various technologies, however historically gold had no usage until the last hundred years or so. It was used as a value container because it had no other usage other than to look pretty and it was impossible to destroy.

Is bitcoin money?

Bitcoin doesn't hold any of these traits that other money historically has. Bitcoin as "a currency" doesn't exist outside of the ledger, because its nothing more than the permission system build into the ledger that grants or denies people the ability to record information on the ledger. Bitcoin permissions CAN BE destroyed by recording information on the ledger that provides them useless (a process known as burning). 

Bitcoin "the currency" cannot be used in any sort of way outside of these permissions. If you wish to use bitcoin "the currency" it will be to store information on the ledger. You will use it as a permission. Its impossible to do anything else with it. 

So there is no guarantee of its existence, its actually a permission within a service used to record data on a ledger, its a software, and its the ledger itself. Its the permissions that hold value and are used in barter trades. Bitcoin is no more a storage of whether than a house or a car is. Sure it holds value. Sure that value can go up or down. Sure it can be used in a barter trade. But that doesn't make a thing money.

Because bitcoin is a permission, its not money, its a product. This is a BIT difference from traditional money. 

Now of course one can argue that in recent times gold has taken on these same properties. It does have a purpose. It is a product outside of just looking pretty and holding value. Whereas that is true, gold also can no longer be used in direct trade, or very sparingly where it can. You can't buy groceries with gold. You aren't filling the gas tank by spending gold. Those days are long gone.

So whereas gold does now hold the properties of a product, it is no longer being used as a medium of exchange.

Why did Satoshi refer to bitcoin as digital cash?

So I am saying bitcoin is not money yet Satoshi clearly defined bitcoin as digital cash in his whitepaper. I mean after all that was literally in the title of the whitepaper. So why am I disagreeing? 

Well for starters, Satoshi actually understood what I just explained, but Satoshi's vision for bitcoin changed over time and the original vision was never carried out.

The original plan for bitcoin was to incorporate a series of services, not just the blockchain itself, that would make bitcoin act as a lot more than just a permission system. One of those plans of course was the atom protocol. Sadly atom never became part of the public release.

Atom was to be a complete decentralized marketplace that many have compared to the openbazaar project. It was to be an integrated and separate part of bitcoin to the ledger. For whatever reason, this was removed from the public release, causing bitcoins usage to be contained to one and one one thing, permissions. 

Why does it matter?

Why does any of this actually matter? What difference does it make if people perceive it as money instead of just permissions? Why do I keep saying "it's important to understand"? The reason its important to understand, especially from the perspective of someone living in the US, is because legally these concepts hold vastly different merit. 

In 1996 was a lawsuit in the US that makes this so important. That lawsuit was Bernstein v. the U.S. Department of State, This lawsuit is very important to bitcoin and understanding what bitcoin is and is not very much falls into this. The ruling of that lawsuit set two very important presidents. 

First it defined it unlawful for government regulation to bar exportation of encryption software. It in fact define it unconstitutional to make such regulations. This is what makes it fully lawful to grant someone outside the US those bitcoin permissions. Because all you are doing is sending them a piece of encryption software. 

Second and perhaps more importantly it declared that source code is protected under freedom of speech. When you attempt to define bitcoin as money, you are taking away these legal protections. Bitcoin is nothing more than a ledger because it is nothing more than source code. Nothing exists outside of that source code. Its is protected speech. No one can demand you share your protected speech. No one can tax your protected speech. 

So again bitcoin is not money, its a ledger system and its a series of permissions that make that ledger system operate. Bitcoin is just sourcecode nothing more and nothing less. If more people understood this, it would be a lot easier to fight tax laws which are fully unlawful to place on bitcoin. 

Conclusion

I would challenge anyone at all that thinks they can prove this article wrong to do so. Attempt to use bitcoin in a way that is something other than permissions. Find a way to use bitcoin that does something other than acts as permissions on ledger system. I am 100% positive you can't, because the source code of bitcoin only defines a single usage - permissions.