That is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and managing director of Swan Bitcoin Worldwide.
There are metaphors and analogies for Bitcoin that you’ll have heard on podcasts or learn from varied articles or books — and this isn’t meant to criticize the complete observe of utilizing metaphors or analogies to pique folks’s curiosity in Bitcoin — however having a foul framework for understanding Bitcoin may cause errors in how we purpose about it from there. If folks take the metaphors too actually, they inevitably make errors of their reasoning about Bitcoin.
First, let’s take into account this citation on whether or not all metaphors are flawed:
“For it could be an absurd endeavor to banish from the language of financial principle each method of talking that isn’t actually appropriate; it could be sheer pedantry to proscribe each determine of speech, notably since we couldn’t say the hundredth a part of what we’ve got to say, if we refused ever to take recourse to a metaphor. One requirement is important, that financial principle keep away from the error of complicated a sensible behavior, indulged in for the sake of expediency, with scientific fact.”
–Eugen von Bohm-Bawerk
So, clearly, not all analogies are dangerous. However when striving for accuracy, the metaphor can’t be confused with the true scientific fact.
‘Bitcoin Is Saved Time’
The favored notion that bitcoin can “retailer our time” is an excessively unfastened and imprecise metaphor. It sometimes comes up when Bitcoiners are speaking concerning the injustice of fiat foreign money (this half is appropriate), however then it goes awry when the metaphor is stretched too far into suggesting that we must always “retailer our time” in bitcoin as a substitute of fiat foreign money.
The “retailer of worth” idea can arguably apply to Bitcoin if we take into account longer time frames, nevertheless it’s actually not storing time. Because the saying goes, time waits for no man. We converse in unfastened phrases corresponding to economizing time or “saving time,” however actually, time itself shouldn’t be what we economize, it’s how we spend our time. The desire is within the doing. Or, as my podcast visitor Conza recounted from a dialog with Konrad Graf, “Go forward, strive to not spend a while and reserve it for later as a substitute.”
Even when equivocating bitcoin as buying energy which stands out as the spirit of the analogy, it is very important do not forget that there are not any ensures right here. Bitcoin’s buying energy has gone down over chosen time frames, which is the place pondering of bitcoin as saved time can actually lead an individual astray if taken too actually.
Now, a shout out to my good friend Gigi, who has written on the idea of Bitcoin as constructing out an arrow of time. This idea does make sense and it helps to clarify why Bitcoin is designed the best way it’s — by holding time utilizing blocks as a substitute of seconds and never counting on a centralized time keeper. That is distinct from the wrong metaphor of “bitcoin as storing your time.” So, a extra correct framing can be that bitcoin retains time (utilizing blocks, not seconds), nevertheless it doesn’t retailer your time.
Bitcoin As Power/Battery
Some folks converse of Bitcoin as digital vitality or as if it’s a battery. However keep in mind, whereas Bitcoin miners use vitality, Bitcoin nonetheless doesn’t enable anybody to retailer or transport vitality. There’s not some central counter that we will go take our bitcoin to and redeem it for a set quantity of vitality. Sure, vitality could possibly be priced and bought for bitcoin, however that’s not the identical factor. The worth of vitality will fluctuate and bitcoin won’t even metaphorically retailer the identical quantity of vitality over time.
What error can this result in? It could possibly mislead folks on the place the worth is coming from. This metaphor leads folks towards a sort of value principle of worth, successfully placing the horse earlier than the cart. As a substitute, we must always purpose from the subjective principle of worth:
“The worth of a very good shouldn’t be decided by any inherent property of the nice, nor by the quantity of labor required to supply the nice, however as a substitute worth is decided by the significance an appearing particular person locations on a very good for the achievement of their desired ends.”
A associated cousin of that is the notion that bitcoin is “backed by” vitality. Sometimes, this comes up when a nocoiner says, “However Bitcoin isn’t backed by something.” So, in some circumstances, a nicely intentioned however flawed Bitcoiner could say, “No, Bitcoin is backed by vitality!” However that is flawed.
Usually, when one thing is “backed by” one thing else, it implies that it by some means has the assist of another entity, like a authorities. Traditionally, folks say the U.S. greenback was “backed by” gold, and other people may traditionally redeem notes for gold, however no such factor exists with Bitcoin. So, maybe a greater query to ask is, “What’s gold backed by?” Solely then are we attending to the reality of the matter: it was all subjective valuation all alongside. Magnificence is within the eye of the beholder.
Bitcoin As Violence Or A ‘Weapon’
Some folks need to body Bitcoin as a sort of “digital violence” or, extra not too long ago, body it as a weapon and a part of a “comfortable warfare protocol.” However this can be a gross misrepresentation of what Bitcoin is. Bitcoin is extra like cryptographic messages being handed round and validated on a community. Absolutely that’s nearer to “speech” than a “weapon.” Or, extra precisely, bitcoin could be considered a rivalrous digital commodity (the primary of its variety), working on an open-source financial community.
If the pen is mightier than the sword, wouldn’t it be applicable to name a pen a weapon? Not likely. Additionally, this complete line of argument is clearly blurring a line between what’s voluntary, and what’s initiating aggression (which is the half that’s flawed). How is working a node, adopting bitcoin as a rivalrous digital commodity and collaborating within the community a type of “weaponry”? That is simply gross mischaracterisation. Phrases imply issues.
A number of the analogies and metaphors utilized in relation to “bitcoin as comfortable warfare protocol” relate to miners competing to safe the “chain of custody.” However do they? Or is it actually extra like Bitcoin nodes are what safe Bitcoin? Miners can’t make invalid transactions seem legitimate to those that are working and verifying transactions with their very own Bitcoin node. So, isn’t it extra related to think about it like nodes safe Bitcoin? The job of miners is vital, however their job is extra associated to finality of transactions, not safety.
So, What Is The Actual Reality Then?
So, as talked about earlier, economically talking, bitcoin is extra precisely characterised as a rivalrous digital commodity. Bitcoin is the commodity itself — it’s not a declare on one thing, it’s the commodity itself. When folks ask what it’s backed by, this means they haven’t fairly grasped what it’s.
If an analogy helps a brand new individual get into Bitcoin and begin happening the rabbit gap, that’s nice! However as that individual advances their information about Bitcoin, further precision about what Bitcoin is will assist us all.
Due to my good friend Conza for uplifting this text and offering suggestions.
This can be a visitor submit by Stephan Livera. Opinions expressed are solely their very own and don’t essentially mirror these of BTC Inc or Bitcoin Journal.
