How Does Crypto Stack Up to Aristotle’s View of Money?
During Gilfoyle’s presentation on the history of currency in Silicon Valley, he begins with a slide describing Aristotle’s philosophy of “Good Money.” Although Gilfoyle’s talk was abruptly curtailed, enough of that initial slide shined through and I decided to follow my curiosity and learn a bit more on the original concept.
Much of the main principles and explanations can be found in this succinct summary -
http://www.marketoracle.co.uk/Article10370.html - and I’ll be applying those basic principles to cryptocurrency, which isn’t expanded upon in this older article.
First Principles
Before getting into crypto, we have to understand that ‘money’ has to have a combination or ideally all of the following qualities -
Durable - Money should not be easily destroyed, weathered, or compromised in any easy way.
Portable - Money should be easily transported to one vendor/situation/storage to another.
Divisible - Money should be able to scale both to progressively larger and smaller amounts.
Have intrinsic value - Money should ideally have a value on its own without supporting economic structures. This can be utility value, aesthetic value, and so forth.
In the article I linked above, the author compared and contrasted these specific forms of money - Gold, Fiat, Land, a Business, and Oil. Without referring to his chart, you can imagine how some of these hold various combinations of the above characteristics. Fiat is portable but Oil is not. Land is durable but not infinitely divisable. A business has intrinsic value but is not easily portable. Arguably, only gold checks off all four but only to a certain extent as you cannot transport tons of gold easily and cannot be precisely divided into usable microscopic portions.
2018
Now, let’s consider crypto:
Durable? - Structured with cryptography, it’s more durable than gold or fiat.
Portable? - There’s nothing more portable than digital wallets and globally accessible blockchains. Though this does bring up the issue of if crypto is a bad alternative in regions of the world without access to internet.
Divisible? - Infinitely and better than all of the above examples. Satoshis forever.
Does is have intrinsic value? - Now this is the big Kahuna and the component that even pre-2010 evangelists have a difficult time substantiating. Does BTC (or Steem or Ether or EOS) have intrinsic value?
The above article writer John Lee actually debunks most fiat traditionalists and illustrates how paper money has no intrinsic value. So at the very least, cryptocurrency is a much better for of fiat. Full stop. All of the concerns of its stability and adoptability are simply initial obstacles before nations take it on as a global currency.
For the intrinsic value question, I’ve seen arguments within the blockchain community that are both for and against. For the ‘for’ side, the best one is likely the quality of designed scarcity. There will be a finite and likely ever-decreasing supply of BTC in the near future with, theoretically/hopefully, an ever-increasing demand of its application. This makes it potentially a better store of value than gold, which does not currently have a marked finite-ness and the known exact quantity is unknown. Thus, gold’s value is relatively speculative as well but in a different way.
For the ‘against’ side, we know that scarcity will only work if enough people circulate BTC in the world. If at any given moment, all crypto holders decided to dump their crypto and walk away or sell it for the next hot commodity, BTC will fail to hold any value other than a nostalgic one. This is a very extreme and dystopic future for blockchain but a possible one nonetheless.
So out of the 4 categories, crypto earns a solid 3.5 in its current state and will likely lean more towards 3.75 due to how it excels at many in the checklist.
Not the same Aristotle but nonetheless philosophically relevant. Source
I thought this post was a fun “TIL” moment and I hope y’all enjoyed it. Steem on!
The problem is that there is no intrinsic value, the value is given by man.
What water does not have more intrinsic value than a diamond?
No, because the value is given by scarcity, that is, the supply/demand in the market. If people stop demanding FIAT then it loses all its value, because the supply is greater than the demand. In the same way if the offer is very small, that is, there is scarcity, then the value is higher. Both the FIAT, the gold, and the cryptos, and any other means of exchange, are the same in this point, in fact, any good or service is also the same.
Although I do agree with this argument and that the social structures that buttress fiat or even material currencies like gold and oil have untenable values theoretically, I think this perspective underestimates the immediate productive' value of certain goods. There will likely be no point in the near future where water doesn't have constant demand since it is at the very least a biological necessity. Even if the world were to go full Noah's ark, there would still be a market to transport and distribute the commodity. I guess the argument for other forms of currency - gold, oil, land, gems - is along the same lines since they're backed by a diverse variety of market needs, not just reliant on how many people own and use them. So while I agree that fiat will have little standing in the future and crypto will be an easy global alternative, standing by the current argument that crypto is 'good' because its weaknesses are shared by other forms of currency is a poor current foundation.
Cheers @vieira!
Well, I don't think this is a weakness, neither of cryptos nor of any other currency, the fact is that all goods and services also base their value in this way.
What I am saying is that there is no intrinsic value, and as such, because the value is inconsistent in essence, we should not have it as a determining factor. We should look at the usefulness of the currencies, and the benefit in correlation with their peers, which is where the cryptos have a real advantage.
Cheers!
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