The seven principles of sound money are as follows: fungibility, divisibility, durability, portability, acceptability, scarcity, and recognizability. Lets go through them one by one.
1. Fungibility
- Definition: Each unit of money is interchangeable with another unit of the same value.
- Example: A $10 bill can be exchanged for another $10 bill without any loss of value.
2. Divisibility
- Definition: Money can be divided into smaller units to facilitate transactions of varying sizes.
- Example: A dollar can be broken down into quarters, dimes, nickels, and pennies.
3. Durability
- Definition: Money must withstand physical wear and tear over time.
- Example: Coins and banknotes are designed to last through repeated handling.
4. Portability
- Definition: Money should be easy to carry and transfer.
- Example: Paper currency and digital money can be easily transported and used in transactions.
5. Acceptability
- Definition: Money must be widely accepted as a medium of exchange.
- Example: Most people and businesses recognize and accept U.S. dollars for transactions.
6. Scarcity
- Definition: The supply of money must be limited to maintain its value.
- Example: Central banks control the money supply to prevent inflation.
7. Recognizability
- Definition: Money should be easily identifiable and distinguishable from other items.
- Example: Distinctive designs and security features on banknotes help prevent counterfeiting.
Ok, got it?
Now, where does Bitcoin fit in?
Bitcoin is questionably fungible due to how traceable it is. Coins from a hack are inherently worth less than fresh coins with no transaction history to them, because most exchanges will happily take them then never give you anything in return and send the police.
Bitcoin is excellently divisible. No question or arguments on that front.
Bitcoin is durable, as long as you don’t lose your coins in a boating accident or leave them on an exchange. Like any digital data stored in standardized formats, they’re as durable as the bytes on disk.
Bitcoin is fairly portable, with the caveat being everyone can watch your movements, so do you really want to move your coins?
Bitcoin is somewhat widely accepted. Sure could be better, but it’s not bad.
Bitcoin is scarce. There will only ever be 21 million of them. This may be a problem someday, but for now it’s fine.
Bitocin is recognizable. You can easily prove that your coins are genuine and that they belong to you.
The main problems with Bitcoin come from its transparent blockchain.
I believe that Monero solves the privacy problem and is the true “crypto”-currency, as in hidden, as it was intended. Mark my words, Monero will continue succeeding, and you should get a few.
