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Comment by nickff | Hacker News Reader

Governments appear to be classifying bitcoin as a commodity so that they can tax and regulate it more heavily. I say this because I cannot find any definition of 'money' which would not include bitcoin, and these are the effects of the classification. If I am wrong, could someone please explain how and why?

P.S. I have never mined, bought, sold, or possessed bitcoin.

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Gold is a commodity and bitcoin fits closer to that then a currency. Bitcoin isn't issued by the US government and create by a process not by the government's will. Given how Bitcoin works, I cannot think of how it fits the definition of money as opposed to a commodity that is bartered.

Why does the issuer have anything to do with the question of whether something is a money?

indeed the two terms are orthogonal:

https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Fiat_money

Both are moneys

Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, as it is not supported by a government, and it is not based on a material.

Bitcoin is most definitely based on a material, but with the advantage that the material used in its construction is more varied. The material for construction is whatever material required to create and power computers to perform the calculations that mint currency and transaction blocks.

Government is "by the people for the people". If a set of people come together and agree to a currency, then you may firmly state that they have formed the minimal government needed to meet this requirement (even though I believe this requirement to be superfluous and arbitrary).

If we use your tortuous redefinition of widely understood terms, then the post Bretton-Woods US dollar remains commodity money (some energy and material was used to make it, even though it can't be converted back into that energy and material at a fixed rate) and a bunch of kids trading Magic: The Gathering cards is a government (they might not have any power over anything, but hey... they're people and they've agreed to trade)

> Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money,

Those two categories that were discussed upthreads are not exhaustive. Non-commodity, non-representative, non-government money existed long before bitcoin -- probably the best known fairly modern example is in Local Exchange Trading Systems and variations on those, which use units of accounts that (while they are often denominated in fiat currencies -- largely to simplify use and tax compliance for users) are neither the fiat currency they are denominated in (if they are denominated in one) nor backed by that currency in the sense that representational money is (in that no issuing entity promises to exchange them for the currency, even if the members of the system agree to treat them as equivalent to the fiat currency in exchange) -- and some variations intentionally divorce their units from the fiat currency entirely.

Bitcoin is not legal tender (i.e., required to be accepted in payment for any debt). Government-issued money is. If someone owes you money you're required to accept payments in U.S. dollars (in the U.S., of course, and the same in other countries with their official government currencies). You're not required to accept Bitcoin.

Legal Tender == Government Issued Money in Jurisdiction

Legal Tender != Money

"Legal Tender == Government Issued Money in Jurisdiction"

No. Legal Tender == "Anything that the government requires to be accepted in payment of debts"

There's a lot of overlap between that and money issued by that specific government, but they are not the same thing. For instance, Spanish milled dollars ("pieces of eight") were legal tender in the United States until 1857.

Your definition of "money" appears to be "anything of value" but that makes the term "money" meaningless.

Money is stuff that accepted by everyone (or almost everyone) as payment for goods, services, and debts. Bitcoin is far from that.

>"There's a lot of overlap between that and money issued by that specific government, but they are not the same thing. For instance, Spanish milled dollars ("pieces of eight") were legal tender in the United States until 1857."

You might notice that I am addressing current phenomena. gold and silver were once legal tender, as were clay tablets in various jurisdictions. For all practical purposes, governments currently only use money they control and issue as legal tender (though there are exceptions suchas Zimbabwe).

>"Your definition of "money" appears to be "anything of value" but that makes the term "money" meaningless."

This is not true. You can see the comments above and below where I specifically stated the criteria for a thing being money are that it is a "medium of exchange". I would not describe steel as a medium of exchange, but bitcoin definitely seems to be.

>"Money is stuff that accepted by everyone (or almost everyone) as payment for goods, services, and debts."

If this is your requirement, then why are currencies used in foreign countries by very small populations considered currency in the USA? There are probably more people using bitcoin in the USA (or the world for that matter) than there are people using Cuban, Chilean, Kazakhstan, or Israeli-issued currency.

For the purpose of a government ruling, the definition of money and legal tender are the same.

Well, no, because foreign currency is considered money but not legal tender (eg. EUR in the US).

Legal tender is what you're allowed to use to pay a debt. If you offer legal tender and they decline it you can consider the debt paid. In the United States all coins and notes of federal reserve banks are legal tender. In the UK some coins are only legal tender for small amounts.

http://www.treasury.gov/resource-center/faqs/Currency/Pages/...

http://www.royalmint.com/help/help/legal-tender-amounts

http://www.royalmint.com/aboutus/policies-and-guidelines/leg...

Scottish bank notes are currency but are not legal tender anywhere in the UK, even in Scotland.

Because that's how money is defined. At least, the first few hits on Google for "money definition" are:

1) <Google> "a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively."

2) <Merriam-Webster> "something generally accepted as a medium of exchange, a measure of value, or a means of payment: as a : officially coined or stamped metal currency b : money of account c : paper money"

3) <Investopedia> "An officially-issued legal tender generally consisting of currency and coin. [...]"

Bitcoin fits neatly into definitions 2 and 3, as well as most other definitions of money. With respect to definition 1, bitcoin is a current medium of exchange, and bitcoins can be printed out. Is the money in your online chequing/savings account any less of money because you do not possess a physical embodiment?

No, it does not. Definition 2 says generally acceptable. Bitcoin is not even close to that.

If you believe otherwise, we could try an experiment. We both head off to the mall with identical shopping lists, me with a stack of $20 bills, you with a machine containing a Bitcoin wallet.

Guess which of us will come back with more of the stuff on the list?

It fails 3 because, as was already pointed out, Bitcoin is not recognized as legal tender by any government.

What if you were using a stack of Haitian gourde? Or a stack of Manx pound notes? I believe you would describe both as currencies.

Guess which of us will come back with more of the stuff on the list?

In fact, take a look at Wikipedia's list of currencies, and tell me which you would and wouldn't prefer over bitcoin at the mall.[1]

edit: #3 does not specify who must "officially issue" it. As far as I can see, I could "officially issue" a money.

[1] https://en.wikipedia.org/wiki/List_of_circulating_currencies

"What if you were using a stack of Haitian gourde? Or a stack of Manx pound notes?"

I wouldn't come back with any of the stuff, because those things are not "money" in the United States. They are convertible to legal tender money at a bank, but they are not money, any more than a used car is money just because you can sell it for cash.

If you cannot use it to obtain the general necessities of daily life in an easy fashion, it is not "money", by any useful definition of that term.

Bitcoin is not legal tender. The money in my checking account is.

Bartering goods/commodities IS pretty much what money is. Only it makes more sense to barter something that's fungible, which is why most currencies in history have been some kind of commodity, like some form of metal, and scarce, like some form of precious metal. Only recently have we been able to create scarcity out of other materials like paper by putting unique identifier marks on them, so that only a small percentage of the paper supply can be money and only the government has (or tries to, anyway) the technology to mark paper with those identifiers (i.e. printing money). Bitcoin is merely the digital variant of that, it's not a physical commodity, it's a scarce and relatively fungible digital entry in a database which can represent money or anything else of value we want to. I don't see how you can say it doesn't fit the definition of money.

Whether it's used popularly mainly as money or mainly as an asset class for investment is a different question, and the answer seems overwhelmingly the latter (although it's getting less lopsided every year). But even here, the two aren't mutually exclusive. An Apple I in a museum is both a museum piece as well as a computer, even if it's exclusively used as the former and rarely as the latter, and these two conditions aren't mutually exclusive.

Paper money is really only an incremental improvement on minted coinage, which isn't really so recent.

You still have to pay taxes on currency transactions that generate a profit, so I don't understand why this would be a tax boon. If I buy a million dollars worth of yen and sell it for two million, the taxman will be around.

I'm guessing he is referring to sales tax or VAT, which currencies are exempt from.

According to this[1] Reddit post by a supposed tax attorney:

Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future.

[1] https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_...

In the same way that a language is a dialect with an army and navy, so is money any commodity that's officially recognized as currency.

In your view, are gold and other precious metals commodities or money? If your answer is commodities, why not money?

The most popular definition of "money" that I have seen is 'a medium of exchange'. I think that gold has been used as a money in the past, as have a number of other precious metals. The question you are asking is a good one, because it asks whether the use as a medium of exchange must be its primary use, and how popular it must be to be considered a money. It seems gold is an edge case, which could (currently) reasonably be judged to be either one.

I disagree. You can't use gold nuggets to pay for your groceries. As a medium of exchange it is sorely lacking. Gold has been mostly a commodity for a very long time. Its main purpose with respect to money nowadays is that it is a store of value useful to backers of currency.

I'd say both and mostly used as an asset class, just like bitcoin, both money and an asset class and mostly used as the latter today. Why must they be mutually exclusive? It's no different from the dollar which is both money and traded as an asset class everyday.

A bitcoin represents a portion of the blockchain, the dominant distributed-consensus protocol. Since the ability to do blockchain-stuff that takes a huge amount of processing power to revert is valuable economic activity, bitcoin is basically a cryptographic commodity.

What you are saying is that bitcoin is a claim on the use of the blockchain, and that the blockchain is a resource. This is not incompatible with the bitcoin itself being money. A US Dollar can buy you a computer which has a huge amount of processing power, but the dollar is no commodity, though the processor may be.

Just off the top of my head, I'm not sure that the blockchain itself could be seen as a resource. However, the mining pool that makes transactions happen (and expensive to cheat) could certainly be seen as a resource. In fact, one might be able to make an argument that the overall mining hashrate sets an upper bound on the value of BTC. It would be related to the cost of the CPU resources necessary to cheat.

Yeah, `/s/blockchain/mining pool` on my original statement. The mining hashrate also helps set the value of BTC in my model as well - it means that other valuable activities can piggyback on the hard-to-forge nature of the blockchain.

"A portion of the blockchain"? How so? The blockchain stores transactions, not Bitcoins.

As a bitcoin 'owner' you have the right to mark the transfer of unspent transaction outputs from one or more addresses to one or more other addresses in the blockchain.

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