Bitcoin is fiat. Now go ahead, take the time to get it out of your system. Breathe deeply. Is your blood pressure still high? Ok, let’s try it then.
What does fiat mean? An arbitrary order or decree. Fiat currencies receive value from the authority of governments. They have value because the state decides that they have value and will accept them as tax payments. So how does fiat Bitcoin work?
A king gives up his hand and assigns fiat value. But there is no king of Bitcoin. Right? Wrong. It’s us.
We collectively value Bitcoin through our decision to use it. Us bring it into existence through our collective arbitrary decision. Despite all the memes and descriptions of Bitcoin as digital gold, it is not a commodity at all. Bitcoin does not have a distinct use value and exchange value. It is not a physical raw material that can be converted into something else. It is a database that is located on your computer. And mine. And everyone else’s.
First, the only reason Bitcoin is a singular and consistent thing is because of
of everyone arbitrary decision to use the same rules to validate changes to your database. Without this, Bitcoin would just be countless copies of conflicting databases in different states around the world. A Bitcoin would not exist, and therefore it could not have any value.
Its use value AND its exchange value. They are two sides of the same coin, born exclusively through a collective fiat decree.
Bitcoin could be hard money, it could be limited in supply, it could be all of these things with the potential to change economic incentives globally. But it is also fiat. Every property of it, everything that it is, exists solely because of our collective and arbitrary decision to make it exist.
Bitcoin is the world’s first stateless fiat currency.
This article is a Take. The opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.