Over the past decade, avid digital currency proponents have been in a heated debate. Is Bitcoin (BTC) intended for peer-to-peer electronic money, as explained in Satoshi's groundbreaking whitepaper, or does it serve as a digital store of digital currency? value??Does it look gold? Furthermore, central questions arise regarding the fundamental role of money. Should the ability of money as a medium of exchange take precedence over its properties as a store of value? In the following discussion of knowledge and ideas, I will place particular emphasis on Karl Menger's book The Origin of Money. Learn more about the Austrian School of Economics.
This editorial does not discuss whether Bitcoin (BTC) should serve as a medium of exchange (MoE) or a store of value (SoV), but instead discusses the fundamentals of how something is converted into a monetary unit. The purpose is to explore such considerations. Carl Menger, the father of Austrian economics, in his book The Origin of Money, states that the origin of money is a voluntary social institution that arises from people's desire to achieve personal gain, and that it is not imposed by the state. It is explained that it is not an original product...
According to Menger, this process begins when characteristics such as durability, portability, and divisibility make some products more "marketable" than others. These goods are more accepted in trade because they facilitate the exchange of desired goods. Over time, best-selling products became widely accepted as a medium of exchange. Its high marketability is due to constant demand from parties seeking to exchange it for other goods.
Munger said:
As the movement of the universe expands and the time it takes for material needs to be satisfied becomes longer, each person learns to be careful to exchange unsellable goods for his own, out of his own economic interests. It will be. It showed a wide range of sales in time and space in addition to high sales appeal in specific regions.
Famous Austrian economists Mises and Rothbart discuss the basic functions of money.
In the context of Bitcoin, Menger's theory suggests that Bitcoin's ability to act as a medium of exchange should take precedence over its role as a store of value, especially in its early stages. Fundamentally, Bitcoin (BTC) needs to be widely accepted for transactions before it can serve as a store of value. As Austrian economists Ludwig von Mises and Murray Rothbard have succinctly explained, the functions of the Ministry of Economic Affairs precede those of the SoV in terms of monetization.
In September 2022, authors Christopher Mostyn Hansen and Karas Lambert, writing for Mises.org, elaborated on Mises' views in a detailed article. This emphasizes Mises' belief that before a commodity can become a medium of exchange, a store of value, it must first "transfer value" over time. According to Mises, Menger, and Rothbard, the authors conclude that Bitcoin enthusiasts who follow the Austrian school should prioritize its "medium of exchange" function over its "store of value" function. Because this is a fundamental aspect of money.
Hansen and Lambert argue that "downplaying the importance of active use of cryptocurrencies and favoring the concept of 'HODL forever' suggests that 'only commercial use can transform goods into a common medium of exchange. 'This contradicts Mises's understanding that They also point out that the idea of SoV can be traced back to a letter written by famous computer scientist Nick Szabo. Although the SoV-based view is widely accepted in the crypto world, it definitely deviates from the Austrian school definition of monetary assets.