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What is Money?
Although Bitcoin has been around for almost fifteen years, people still find it hard to describe what it actually is. Seven years ago, I published a post where I mentioned a few common properties of money, such as:
- It can be used as a store of value.
- It can be used as a medium of exchange.
- It can be used as a unit of account.
Bitcoin has been used as a store of value since its inception, but it’s certainly lacking the other two common properties of money. I think that Bitcoin in its current form is closer to a tech stock than to a currency, we don’t find it odd that no one is interested in showing their prices in Google shares or accepting them as a medium of exchange, right?
Paying With Stocks
Actually, I think that an index fund denominated debit card would be a great tool since stocks tend to generate better return than cash, but stocks are lacking the most important property of currencies: being able to spend them freely without asking for anyone’s permission. Most merchants accept cash, so you can always pay cash if your cashless transaction is being denied for any reason.
All fiat currencies can be converted to cash and spent in an anonymous and permissionless fashion, at least for now. Obviously, we can’t do anything like that with stocks or index funds, you can’t transfer them to anyone, and you can’t know for sure that your broker would approve your transfer request. For that reason, stocks are only good as store of value, but they are completely unusable as money.
Onchain Payments are Slow and Expensive
What about bitcoins, though? They already serve as a store of value, but, like stocks, they aren’t used as a medium of exchange or as a unit of account. The main reason for that is the fact that onchain transactions are too slow and expensive to be appealing to retail merchants. I once tried to buy a cup of coffee for bitcoins and I had to wait for a half an hour for Bitcoin miners to confirm my transaction. Some merchants may try accepting zero-conf transactions, but it’s just reckless, so no wonder that there aren’t that many Bitcoin-accepting merchants.
Bitcoin has no physical form and enabling instant permissionless cash-like payments is a very hard problem to solve. In fact, it took Bitcoin developers fifteen years to build a usable system which enables merchants to receive bitcoins instantaneously, for a very low fee. This system is called Lightning Network, and it’s being actively deployed worldwide at the moment.
Introducing BTC Map
BTC Map is a project I’ve been working on since May, and now it has a small team of people constantly improving our software and data. All of our data, apps and infrastructure is open source, and our goal is to make it possible to spend your bitcoins in the same way you’re spending your cash. Making Bitcoin a proper medium of exchange is one of the biggest unsolved problems and I hope we’ll be able to make a dent on that front.