Philosophy & Economics of Bitcoin

Andrew M. Bailey, Bitcoin Policy Institute

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Week 3: Bitcoin Among Other Monies

Lecture: Bitcoin as Money

Key Themes

• Whether bitcoin is money, what that question means, and why it matters
• Main divisions in the taxonomy of monies, and why they matter
• How bitcoin differs from both traditional monetary offerings and other cryptocurrencies

Focal Readings

• Resistance Money, Chapter 3: 'Where Bitcoin Fits'
• Selgin, 'Synthetic Commodity Money'
• Bailey and Warmke, 'Bitcoin is King’
• Schuster, 'Crypto Cloud Land'

Secondary Readings

• Schneider, 'Decentralization: an Incomplete Ambition’
• Hazlett and Luther, 'Is Bitcoin Money?’
• Butler, 'The Philosophy of Bitcoin and the Question of Money’
• Passinsky, 'Should Bitcoin be classified as money?’
• Baur and Dimpfl, 'The volatility of Bitcoin and its role as a medium of exchange and a store of value’
• Rotta and Paraná, 'Bitcoin as a digital commodity’
• Glazier, 'Enterprise Blockchain Doesn't Work Because It's About the Real World'
• Luther, 'Getting off the ground: the case of bitcoin'
• Passinksy, 'Cryptocurrency: Commodity or Credit?'
• Mäki, 'Reflections on the Ontology of Money'

Reflections

1. 100 words or less: explain why you can own, but not directly possess, digital US dollars, and some key differences between gold and the US dollar (whether in physical or digital form).
2. 150 words or less: explain the significance, if any, of bitcoin’s positive marginal cost of production; be careful to avoid any fallacious reasoning from cost to value.
3. 150 words or less: does bitcoin’s history matter —in particular, the way in which it’s been distributed, and the departure of its founder—to what it is now, or how it is to be evaluated? Why or why not?
4. 125 words or less: prepare exactly three critical discussion questions about any of the focal readings. For each question, be sure to include a specific quotation or citation to indicate how the readings prompt it, and one sentence about why it matters.

Practicum

• Using a block explorer, find some on-chain transactions that open or close lightning channels (if you need to learn what this means, do so). What do you notice about these transactions? How do they resemble or differ from other transactions you’ve investigated on-chain? Do a little reading on bitcoin’s lightning network, and be prepared to discuss it in class, especially in comparison to payment layers built atop other settlement networks.
• Find a cryptocurrency project not mentioned in the assigned readings. In no more than one page, and using any dimensions of evaluation you like, compare and contrast it with bitcoin or with the US dollar. Your goal here is to grow fluent in evaluating monetary species, policies, and institutions, not to advocate for or against any given project, or investment in its token.

Schedule

Tuesday 30 January
Readings	Read Chapter 3 and 'Synthetic Commodity Money' carefully and in their entirety.
Reflections	Complete two of the four reflection assignments, and submit by midnight before class.
Friday 2 February
Readings	Read 'Bitcoin is King' and 'Crypto Cloud Land' carefully and in their entirety.
Practicum Assignment	Complete both practicum assignments before coming to class (post the second one to our Practicum document by midnight before class) and come to class prepared to discuss your findings.