For many individuals, their first sense of Bitcoin is that it’s magic web cash—one thing simply ignored and positively not definitely worth the time wanted to know it. Most of the folks I speak to about Bitcoin say that their “plan” is simply to disregard it till it goes away. As we’ll be taught all through this e book, that isn’t actually an possibility. Most individuals additionally snigger when offered with their first alternative to change “actual cash” for bitcoin. However bitcoin is actual cash; higher cash than any of us have had in our lifetimes—and it’s so far more.

Each Bitcoin the community and bitcoin the digital token will be onerous to outline as a result of they don’t simply change one factor and make it higher. Bitcoin is the brand new, higher model of gold from the bottom and the paper greenback invoice. Bitcoin can also be the brand new, higher model of your financial savings account and your checking account and your bank card. It is usually the brand new, higher approach to ship cash internationally and to purchase a cup of espresso down the block. Bitcoin doesn’t simply change the onerous asset cash and the forex, but additionally the cost rails, the political financial coverage, and even the central financial institution—multi functional fell swoop. It’s a fully new factor.

To really perceive Bitcoin, you will need to perceive the factor it goals to exchange: cash. What’s cash? Oddly sufficient, regardless of its centrality to virtually every thing we do, we not often pause to contemplate the query. However we’ve to if we actually wish to perceive what Bitcoin really is.

In probably the most elementary type, cash is any object that’s used for some mixture of the next functions:

1. A medium of change (people should buy stuff with it);

2. A unit of account (people can reliably use it to cost stuff); and

3. A retailer of worth (people should buy stuff with it later).

Through the years, many various objects have been used as cash: sea shells, salt, massive stones, gold, and the $20 Federal Reserve Be aware presently in your pockets. For those who’re studying this e book in jail, you may use cigarettes or packets of ramen as cash. I encourage you to replicate on how and why folks naturally converge on types of cash based mostly on the time and circumstances they discover themselves in and the way expertise has all the time performed a task within the improvement of recent cash. Some issues make higher cash than others. As we’ll see, the paper cash and its digital copy you employ each day is the most recent type of cash, however it isn’t the very best—in reality it’s removed from the best.

To be thought-about a superb type of cash—one thing that accomplishes the three functions listed above properly—an object should have some mixture of the next pretty intuitive properties:

1. Sturdiness (It has to final, not spoil or deteriorate);

2. Portability (You’ve gotten to have the ability to transfer it round);

3. Divisibility and Aggregability (You want to have the ability to purchase little issues and massive issues too);

4. Fungibility (The models have to be uniform);

5. Shortage (If there’s lots of one thing, it received’t preserve worth);

6. Acceptability (Folks must need it so that you can use it); and

7. Verifiability (You don’t need lots of counterfeit cash).

You or I could produce other properties that we expect must be added to the checklist. For instance, I believe good cash must be created pretty. However that is the checklist that economists have used for generations. The truth is, the Federal Reserve Financial institution of St. Louis lists these properties within the lecturers’ sources part of their web site¹² and makes use of them to argue—accurately—that US {dollars} are higher cash than a cow. A cow looks like a low bar, however possibly they solely wish to make the arguments they’ll win.

Every of those properties economists use to determine how good one thing is as cash is measured on a scale; none of them is a binary “sure” or “no.” If an object fulfills many of those properties, it will make for a superb type of cash. From this checklist, it’s trivial to see what your instinct already tells you. Bananas would make a horrible type of cash and cash fabricated from gold would most likely serve the aim properly. However what in regards to the $20 invoice in your pockets? What about bitcoin?

In a head-to-head competitors, the $20 invoice simply beats bitcoin in class #6: Acceptability. However acceptability can change and has many instances all through historical past, and the hole is narrowing yearly as extra institutions settle for bitcoin. It’s not too onerous to think about that hole closing considerably over time. On a technicality, the greenback additionally has a slight edge in class #4: Fungibility. However that is solely a small distinction that most individuals wouldn’t discover, and technological strategies exist already that shut this hole fully.

As we’ll see as the remainder of this part unfolds, Bitcoin walks away with the lead over {dollars} in the entire different classes. It’s not even shut. Bitcoin just isn’t just a bit however much more Sturdy, Moveable, Divisible/Aggregable, Scarce, and Verifiable. These aren’t properties I cherry-picked as a result of they make Bitcoin look good. These are the outdated textbook properties economists have used for “good cash” without end. We are able to add to this checklist the truth that since Bitcoin is natively digital and programmable, it looks like a greater type of cash proper now and for the longer term. Neither is Bitcoin simply higher than the greenback: when evaluating Bitcoin to different types of cash (e.g., gold) it nonetheless demolishes the competitors throughout most or the entire classes. It’s merely the very best cash that people have ever created.

Earlier than I clarify why that’s true, I wish to pause and ensure we additionally perceive what cash isn’t. You’ll discover that the properties listed above for one thing to function good cash don’t require the merchandise to have a bodily type you’ll be able to maintain in your hand. Nor do the properties counsel that one thing used as cash must have another intrinsic worth. Nor do the properties counsel that cash should be issued by a authorities. All three of this stuff are sometimes cited as explanation why Bitcoin can’t be actual cash, but none of them actually have something to do with the precise definition of cash. These are issues folks reference as a result of they’re vital to their expertise with cash, however they aren’t intrinsic to that have. Similar to how what has served as cash has modified over time, so too has our expertise with cash.

For instance: It’s not essential for cash to have a bodily type that may be touched or held. Certainly, you’ve gotten by no means held many of the {dollars} you’ve gotten earned, spent, and saved within the final 20 years. They’ve simply been numbers on a display screen. Digital cash, {dollars} or in any other case, is completely purposeful as cash. And the identical is true of Bitcoin; simply because you’ll be able to’t contact it doesn’t imply it’s not actual both. Hopefully that is reassuring, since that is usually the very first argument provided by well-meaning people after they first begin to grapple with Bitcoin. However the easy truth is that you just don’t want to have the ability to contact one thing for it to be a superb type of cash.

Neither is it essential for cash to have an intrinsic worth. The truth is, as a result of cash is used to speak worth info from one market participant to a different, it’s higher that it not produce other use instances. Cash having intrinsic worth would add “noise” to the sign and make each financial resolution tougher. Think about having to weigh each buy you make along with your cash towards the worth of its different makes use of. It might trigger financial exercise to grind to a halt as everybody debated whether or not to make use of the cash that they had for buying items or this different use. Some folks don’t understand that the numbers on their screens that symbolize the {dollars} of their checking account don’t have an intrinsic worth both. Bitcoin’s lack of intrinsic worth is one other quite common argument launched towards it, when in reality that seems to be a beneficial function and never a bug. The truth that Bitcoin doesn’t have another intrinsic worth means it is ready to present worth info for financial choices with out noise or manipulation.

Lastly, it’s not essential that cash be issued by a authorities. For a lot of centuries it wasn’t. Folks would use numerous media of change and shops of worth with out the federal government interceding in any approach. It was solely within the final couple of centuries that it made sense for governments to get into the cash sport when it was tough to belief and confirm the purity and weights of coinage. Stamping the king’s face onto a coin served a goal at that time. Since then, the intertwining of presidency and cash has been so full that almost all people have a tough time imagining that cash will be one thing separate from the federal government. This misunderstanding has repeatedly been manipulated for the only good thing about the federal government that controls the issuance of cash. However regardless of our expertise, there is no such thing as a want for cash to be issued by the state to be legitimate. Bitcoin is the very best hope humanity has of severing the ties between authorities and cash.

On the very least it’s going to function a examine on how the governments discharge their accountability as stewards of financial coverage.

The excellent news is that individuals perceive the seven properties of excellent cash listed above on an intuitive degree. In different phrases, folks don’t have to learn an financial textbook to acknowledge “good” cash. They simply begin gravitating towards it over time. Folks received’t have to know why Bitcoin is best to know that it’s higher. Our latest financial experiment with unbacked paper cash is simply 50 years outdated, and paper cash owes most of its success to the privileged authorized standing paper cash enjoys via the governments that challenge it. However absent coercion folks will all the time select a greater type of cash, as proven by the truth that they did for 1000’s of years through the use of gold. Earlier than Bitcoin had been invented, Jörg Guido Hülsmann defined, in his e book The Ethics of Cash Manufacturing, that within the case of “gold and silver—and no matter else free males may uncover and develop for financial providers . . . there’s a pure tendency out there to unfold the usage of probably the most helpful monies over your entire world.”¹³ Bitcoin is best cash and due to that, Bitcoin adoption could be very prone to develop and unfold for the foreseeable future.

This text is an excerpt from A Progressive’s Case for Bitcoin: New Revised Up to date Version, accessible now for pre-order at a reduced worth of $21 via November 15, 2025.

12 Federal Reserve Financial institution of St. Louis, “Features of Cash,” Financial Lowdown Podcast, https://www.stlouisfed.org/training/economic-lowdown-podcast-series/episode-9-functions-of-money.

13 Jörg Guido Hülsmann, The Ethics of Cash Manufacturing (Auburn, Ala.: Ludwig von Mises Institute, 2008), 197.