For many people, the first feeling about Bitcoin is that it is magical internet money, something that is easily ignored and not worth the time it takes to understand it. Many people I talk to about Bitcoin say their “plan” is to ignore it until it runs out. As you’ll learn throughout this book, that’s not really an option. Also, most people laugh when they are given the first opportunity to exchange “real money” for Bitcoin. But Bitcoin is real money. We have far better money than we have ever had in our lives.
Both Bitcoin as a network and Bitcoin as a digital token can be difficult to define because they don’t simply replace or improve on one thing. Bitcoin is a new, better version of gold mined from the ground or paper dollar bills. Bitcoin is also a new and improved version of savings accounts, checking accounts, and credit cards. It’s also a new and better way to send money internationally or buy coffee in your neighborhood. Bitcoin not only replaces hard asset money and currency, it also replaces payment rails, political monetary policy, and even central banks all at once. It’s completely new.
To truly understand Bitcoin, you need to understand what it is intended to replace: money. What is money? Oddly enough, we rarely stop and consider this question, even though it’s at the heart of almost everything we do. But if you really want to understand what Bitcoin actually is, you should.
In its most basic form, money is an object that is used for a combination of purposes:
1. a medium of exchange (with which people can buy things);
2. Unit of Account (people can definitely use it for pricing). and
3. Store of value (people can later use it to buy things).
A variety of objects have been used as money over the years, including seashells, salt, large rocks, gold, and the $20 Federal Reserve bill that’s currently in your wallet. If you were reading this book in prison, you might use cigarettes and ramen packs as money. I encourage you to reflect on how and why people naturally focus on forms of money based on their time and circumstances, and what role technology has always played in the development of new money. Some have better returns than others. As we will see, while the banknotes and their digital copies that you use every day are the latest form of money, they are not the best, and in fact, they are far from ideal.
To be considered a good form of money, that is, one that is sufficient to fulfill the three purposes listed above, an object must have a combination of the following highly intuitive properties:
1. Durability (must last a long time without rotting or deteriorating).
2. Portability (must be able to move).
3. Divisibility and aggregation (must be able to buy from small to large).
4. Substitutability (units must be uniform).
5. Scarcity (value cannot be maintained if there is a lot).
6. Acceptability (people have to want it before you can use it). and
7. Verifiability (large amounts of counterfeit money is undesirable).
You or I may have other properties that we think should be added to the list. For example, I believe that good money should be created fairly. But this is a list that economists have used for generations. In fact, the Federal Reserve Bank of St. Louis lists these facilities in the teacher resources section of its website.12 And use them to argue, correctly speaking, that the US dollar is better money than cattle. Cows seem to have a low bar, but maybe they just want to have an argument that they can win.
Economists use each of these properties to determine how good something is when measuring money on a scale. None of this is a binary choice of “yes” or “no.” If an object meets many of these characteristics, it’s money in good shape. From this list, it’s easy to see what your intuition is already telling you. Bananas would make a horrible form of money, but coins made of gold would probably serve the purpose well. So what about that $20 bill in your wallet? What about Bitcoin?
In direct competition, the $20 bill easily outperforms Bitcoin in Category 6: Acceptability. However, acceptability can and has changed many times throughout history, and the gap has narrowed over the years as more establishments accept Bitcoin. It is not hard to imagine that the difference will narrow significantly over time. On a technical level, the dollar also has a slight advantage in Category 4 fungibility. However, this is just a small difference that most people won’t notice, and technological methods already exist that completely bridge this gap.
As you’ll see as the rest of this section unfolds, Bitcoin leaves behind the dollar in every other category. It’s not even close. Bitcoin is durable, portable, divisible/aggregatable, rare, and verifiable. These are not properties I hand-picked to make Bitcoin look good. These are old textbook properties that economists have used forever for “good money.” To this list we can add the fact that Bitcoin looks like a better form of currency now and in the future because it is inherently digital and programmable. Also, Bitcoin is not just better than the dollar. Even when comparing Bitcoin to other forms of money (such as gold), it can beat the competition in most or all categories. It is simply the best money ever produced by mankind.
Before I explain why that is true, I want to pause for a moment and also understand what money is. You will notice that the properties listed above to serve as money do not require the item to be in a physical form that you can hold in your hand. Nor does this property imply that something used as money must have some other intrinsic value. Nor do these properties imply that money must be issued by governments. All three of these are often cited as reasons why Bitcoin cannot be real money, but none of them have anything to do with the definition of real money. These are things that people refer to because they are important to their experience with money, but they are not essential to that experience. Just as what has functioned as money has changed over time, so too has our experience of money.
For example: Money doesn’t have to be in a physical form that you can touch or hold. In fact, you’ve never owned most of the dollars you’ve earned, spent, and saved over the past 20 years. They were just numbers on a screen. Digital money, whether dollars or not, functions perfectly as money. And the same applies to Bitcoin. Just because you can’t touch it doesn’t mean it’s not real. I hope you find this reassuring. Because this is usually the first argument that well-meaning people present when they first start working with Bitcoin. But the simple fact is that you don’t need to be able to touch something for it to be a good form of money.
Nor does money need to have any intrinsic value. In fact, since the money is used to convey price information from one market participant to another, it is better if it has no other use. Money with intrinsic value would add “noise” to the signal and make all economic decisions more difficult. Imagine having to weigh every purchase you make with your money against the value of other uses for that money. Economic activity will come to a halt as everyone debates whether their money should be used to buy goods or for other purposes. Some people don’t realize that the numbers on a screen that represent dollars in a bank account also have no intrinsic value. Another common argument against Bitcoin is that it has no intrinsic value, but in reality it turns out to be a valuable feature rather than a bug. The fact that Bitcoin has no other intrinsic value means that Bitcoin can provide price information for economic decisions without noise or manipulation.
Finally, there is no need for the government to print money. For centuries, this was not the case. People will use different mediums of exchange and stores of value without any government intervention. It was only in recent centuries that it made sense for governments to get involved in the money game, when it was difficult to trust or verify the purity or weight of coins. Stamping the king’s face on coins served a purpose at that time. Since then, the intertwining of government and money has become so complete that most people have difficulty imagining that money can be separate from government. This misconception has been repeatedly manipulated for the sole benefit of the governments that control currency issuance. However, despite our experience, we do not need state-issued money to be effective. Bitcoin is the best hope humanity has for severing the relationship between governments and money.
At the very least, it will serve as a check on how governments are fulfilling their responsibilities as custodians of monetary policy.
The good news is that people understand the seven characteristics of good money listed above on an intuitive level. In other words, people don’t need to read economics textbooks to recognize “good” money. They begin to gravitate toward it over time. People will no longer need to know why Bitcoin is good to know that Bitcoin is good. Although recent financial experiments with unbacked paper money are only 50 years old, much of the success of paper money is owed to the privileged legal status that paper money enjoys through the governments that issue it. However, the fact that we have been using gold for thousands of years shows that in the absence of coercion, people will always choose a better form of money. Before the invention of Bitcoin, Jorg Guido Hülsmann explained in his book The Ethics of Money Production: “In the case of gold and silver and everything that free people discover and develop for financial services, there is a natural tendency in the market to spread the use of the most useful money throughout the world.”13 Bitcoin is better money, and as such, its adoption is very likely to grow and become widespread for the foreseeable future.
This article is an excerpt from Progressive arguments against Bitcoin: New revised edition, Now available for pre-order at a discounted price $21 through November 15, 2025.
12 Federal Reserve Bank of St. Louis, “The Function of Money,” Economic Downturn Podcast,
13 Jorg Guido Hülsmann, The Ethics of Money Production (Auburn, AL: Ludwig von Mises Institute, 2008), 197.