This is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and managing director of Swan Bitcoin International.
There are metaphors and analogies for Bitcoin that you may have heard in podcasts or read from various articles or books – and this is not intended to criticize all practices of using metaphors or analogies to interest people in Bitcoin – but they have a bad framework. Understanding Bitcoin can cause errors in how we reason about it from there. If one were to take the metaphor literally, one would be making a mistake in reasoning about Bitcoin.
First, let’s consider this quote if all metaphors are wrong:
“Because it would be an absurd effort to eliminate from the language of economic theory every way of speaking that is not correct; It would be sheer pedantry to proscribe every figure of speech, especially since we cannot say a hundredth part of what we should say, if we do not never took recourse to metaphor. One important requirement is that economic theory avoids the mistake of confusing practical habits, which are done in the interests, with scientific truth..”
—Eugen von Bohm-Bawerk
So, clearly, not all analogies are dangerous. But in the pursuit of accuracy, the metaphor cannot be confused with actual scientific truth.
‘Bitcoin Saved Time’
The popular notion that bitcoin can “save our time” is a loose and imprecise metaphor. It usually comes up when Bitcoiners talk about the unfairness of fiat currency (this part is true), but then it goes awry when the metaphor is taken too far to suggest that we should “save time” in bitcoin instead of fiat currency.
The concept of “store of value” may apply to Bitcoin if we consider a longer time frame, but it really isn’t a store. time. As the saying goes, time waits for no man. We talk in loose terms like saving time or “saving time,” but actually, time itself is not what we save, but how we spend our time. Preference is in perform. Or, as my podcast guest Conza tells from a conversation with Konrad Graf“Please, try not to waste time and save it for later.”
Even when equivocating bitcoin is the purchasing power it can be spirit from the analogy, it is important to remember that there are no guarantees here. The purchasing power of Bitcoin has declined over the selected time frame, which is to say that thinking of bitcoin as a time saver can lead people astray if taken too literally.
Now, shout out to my friend Gigi, who has written about the concept of Bitcoin as building an arrow of time. This concept makes a lot of sense and helps explain why Bitcoin is designed the way it is – by keeping time using blocks instead of seconds and not relying on a centralized timekeeper. This is different from the false metaphor “bitcoin is saving your time.” So, the more accurate framing is bitcoin permanent time (using blocks, not seconds), but does not store time.
Bitcoin As Energy / Battery
Some people talk about Bitcoin as digital energy or as a battery. But remember, while Bitcoin miners use energy, Bitcoin still doesn’t allow anyone to store or transport energy. There is no central counter where we can go to take our bitcoins and redeem them with the amount of energy. Yes, energy can be priced and sold for bitcoins, but they are not the same thing. The price of energy will fluctuate and bitcoin does not even metaphorically store the same amount of energy over time.
What can this error cause? It can mislead people from where the value comes from. This metaphor leads people to kind cost value theory, effectively putting the horse before the cart. However, we must reason from the theory of subjective value:
“The value of a thing is not determined by the properties contained in the thing, or the amount of labor required to produce the thing, but its value is determined by the importance of the individual’s actions on the thing to obtain the desired end.”
A related cousin to this is the idea that bitcoin is “powered by” energy. Usually, this comes up when nocoiner says, “But Bitcoin is not supported by anything.” So, in some cases, a well-intentioned but mistaken Bitcoiner can say, “No, Bitcoin is powered by energy!” But this is wrong.
Generally, when something is “supported” by others, it implies that it has the support of some other entity, such as the government. Historically, people have said that the US dollar is “backed by” gold, and people have been able to exchange notes for gold historically, but there is no such thing with Bitcoin. So, perhaps a better question to ask is, “What is gold backed by?” Only then do we get the truth of the matter: it is all subjective value all together. The beauty is in the eyes.
Bitcoin As Violence Or A ‘Weapon’
Some people want to frame Bitcoin as a kind of “digital violence” or, more recently, frame it as a weapon and part of a “soft war protocol.” But this is a gross misrepresentation of what Bitcoin is. Bitcoin is more like a cryptographic message that is passed down and validated on the network. Probably something closer to “speech” than “weapon”. Or, more accurately, bitcoin can be considered a competing digital commodity (the first of its kind), operating on an open-source monetary network.
If the pen is mightier than the sword, does it deserve to be called a weapon? Not really. Also, this whole line of argument clearly blurs the line between what is voluntary, and what initiates aggression (which is the wrong part). How to run a node, adopt bitcoin as a competing digital commodity and participate in the network as a form of “weapon”? This is just gross mischaracterization. Words mean things.
Some of the analogies and metaphors used in relation to “bitcoin as a soft war protocol” relate to miners competing to secure the “chain of custody.” But are they the same? Or is it really more like a Bitcoin node is Bitcoin safe? Miners cannot make unauthorized transactions appear valid to those who walk by and verify transactions with their own Bitcoin nodes. So, isn’t it more relevant to think about it node secure Bitcoin? The job of a miner is important, but there is much more to it finality of transactions, not security.
So, What Is The Real Truth Then?
So, as mentioned earlier, economically, bitcoin is more accurately characterized as a competing digital commodity. Bitcoin is Commodity itself – it is not a claim on something, it is a commodity itself. When people ask what they support, it shows they don’t know what it is yet.
If the analogy helps newbies get into Bitcoin and start down the rabbit hole, that’s great! But as these people increase their knowledge of Bitcoin, additional precision about what Bitcoin is will help us all.
Thank you for my friend Konza for the inspiration of this article and suggestions.
This is a guest post by Stephan Livera. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.