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Is Bitcoin a money?

Is Bitcoin a money?. Peter Weijland University of Amsterdam b ased on (joint) work with : Jan Bergstra and Karl de Leeuw. Why is the question relevant?. Money is subject to: Tax law Criminal law Regulatory control Political control. Methodology: typing Bitcoin.

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Is Bitcoin a money?

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  1. Is Bitcoin a money? Peter Weijland University of Amsterdam based on (joint) workwith: Jan Bergstra and Karl de Leeuw

  2. Why is the question relevant? Money is subject to: • Tax law • Criminal law • Regulatory control • Political control

  3. Methodology: typing Bitcoin • Let X be any artifact • A base type for X expresses a property of or objective for X • X is considered to be in the ‘intersection’ of all its base types • An optimal base type OBT(X) for X is a type that is: • Concise • Simple • Informative • Being a base type for X is (often) a matter of opinion or consensus rather than true or false • We look for an optimal base type for X = Bitcoin.

  4. A brief history of money • Hunters-gatherers • Farmers • Further specialization of labour • Bartering: - goods for goods- goods for commodities (‘barter catalyst’)- goods for money

  5. Aspects of a commodity Functional aspects: • Replaceable within its kind • Divisible in quantity • Low on specification1 (like semi-finished goods) Economic aspects: • Widely available • Any good of which production, consumption and exchange are regulated in a free market system 1 With respect to its applications

  6. Aspects of a money Functional aspects: • Money of Exchange • Money of Documentation • Money of Account • Store of Value Economic aspects: • Widely accepted • Political constraints, e.g: • Legal tender status • Quantity management • Claim rights

  7. Is Bitcoin a money? • No: • Lack of consensus on the Value of Account functionof Bitcoin(high volatility; unprotectedagainst deflation over the next 20 years) • Doubtsabout Store of Value function • Onlyacceptedby a minority of stores, shops andother providers of goods • No legal tender status Is Bitcoin a currency? • No. In our view the types “Money” and “Currency” are the same.

  8. Is Bitcoin any of these? • Digital currency • Crypto currency • Virtual money • Informational money No: it cannot be any of these without being a money or currency.

  9. Is Bitcoin any of these? (2) Bitcoinmaybetyped as: • Near-money • Candidate money • Partialmoney • Money-like. However, none of these seemsatisfactory as anoptimal base type forBitcoin.

  10. Is Bitcoin a commodity? • Yes: • We take the view thatallaspects of the base type “Commodity” applytobitcoin:

  11. Which one is optimal for Bitcoin? • ComputationalMoney-like Commodity (CMLC) • Informational Money-like Commodity (IMLC) • Money-likeInformational Commodity (MLIC) We propose: OBT(Bitcoin) = MLIC

  12. Landscape of terms Monies,CurrenciesandCommodities Partial Commodity Candidate Commodity Commodity Abstract Money Type Reduced Product Set Finance Partial Money Candidate Money Near- Money Money-like Commodity Money-likeInformational Commodity Informational Money-like Commodity Computational Money-like Commodity Money / Currency Crypto Currency Digital Currency Virtual Money Informational Money BitPenny Exclusively Informational Money Crypto Coinage

  13. Exclusively Informational Money Monies may have specific rights and obligations attached to them that are lawfully imposed on their users, such as: • Obligation of a tax statement to the authorities • Prohibition of forgery • Rights of privacy An Informational Money without any of these non-informational rights and obligations is called an Exclusively Informational Money (EXIM).

  14. EXIM: no property, no thieves With an EXIM we have no non-informational rights attached to the use of the money. So: • An EXIM does not recognize property rights; it is only access that counts. Within an EXIM there is no theft of money. It was shown by Bergstra & De Leeuw (2013) that the Bitcoin systems provides the functionality to create a true EXIM (though it is not claimed that this will be the future of Bitcoin).

  15. Other types of Bitcoin Possible types not related to Money, Currency or Commodity: • Internet-based Business- Bitcoins are shares in a highly speculative Internet Business • Investment scheme- If the store-of-value function becomes the dominant feature of Bitcoin • Multi-player computer game- Purpose of the game is to control as many Bitcoins a possible. Side effect: collective attack on the secure hash function SHA-256

  16. Conclusion • Bitcoin’sproposedOptimal Base Type is that of a Money-likeInformational Commodity • Bitcoinrequires more qualities in order tobecome a money or currency (in which case itwillalmostautomaticallybecomeanInformational Money) • Among these qualities are thosethatwill: • make Bitcoincommonlyaccepted • provideBitcoinwithlegal tender status • stabilizeits exchange rate.

  17. Thankyou

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