Compare Bitcoin with iPhone X, Dollar and Gold

We will not be on the side of bitcoin defenders or their opponents. We simply compare Bitcoin with Apple products, national currencies and gold. Conclusions about what place Bitcoin will take in the future, everyone can make himself.

Money is a specific product with the highest liquidity, serving as a measure of the value of other goods and services. One of the functions of money is the role of an intermediary in the exchange of some goods for others.

To begin with, we will take from this definition the consequence of the possibility of comparing sets of goods according to liquidity and drawing conclusions about the greatest ability of a particular product to become or be money.

Bitcoin vs iPhone X

Since money is a commodity, albeit a specific one, let's compare Bitcoin with the iPhone X, which we take as an example of a commodity in the usual sense.
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The price of goods is determined by the ratio of supply and demand. The higher the demand with limited supply, the higher the price. The demand and liquidity of the product depends largely on the strength of the brand.

The brand, as an association in the minds of the target audience, symbolizes any specific product qualities or characteristics of the product manufacturer itself. In essence, this is an understanding of whether you want and need something or not. For this, the brand must be recognizable. Brand recognition Apple iPhone protects the company's smartphones from competitors, and the bitcoin economy from other altcoins.

As a rule, rights to use a brand are protected legally. In the case of Apple, this is true; in the case of bitcoin, there isn’t. With the emergence of altcoin with a stronger brand, bitcoin leadership, and therefore liquidity may be lost.

While the iPhone has the necessary quality for consumers, the value of the Apple iPhone brand and the liquidity of their smartphones is increasing, however, in the event of a mismatch between expectations and reality, liquidity decreases. An example of this effect is the drop in demand for the iPhone X due to the inoperability of the touchscreen at low temperatures.

Apple limited the offer of the iPhone X with a high initial demand for the device, releasing smartphones for sale in small batches, of course, relying on improving the liquidity of the product. The higher the liquidity of the product, the easier it is to exchange it for the most liquid - money. Conducting the volume of supply and demand, Apple succeeds in certain periods of time to bring the iPhone closer to the state in which the product becomes money. The feature of the issue / mining of Bitcoin in the limited supply, regardless of the number of miners. It is easy to see the similarities in the distribution model of Apple products at the beginning of sales and the algorithm embodied in bitcoin.

Money should not significantly change their properties if they are divided into small parts or combined into one large part. Money should be well kept. iPhone is obsolete, prone to breakage and wear. Therefore, in the future, due to the lack of divisibility, combinability and persistence, the iPhone cannot act as money, bitcoin does not have these problems.

If a vulnerability is discovered in the bitcoin system, it will be similar to a lack in the iPhone. In the absence of this problem, in Altcoin with a strong brand or in the presence of an advantage that bitcoin does not have, this cryptocurrency can win back part of demand from bitcoin, reduce its liquidity, price and ability to be money in its favor.

Bitcoin vs National currencies

Monopoly on violence (English monopoly on violence, it is. Gewaltmonopol des Staates) - the concept of the state, outlined by Max Weber in the essay "Politics as a vocation and profession." In particular, he argued that it is impossible to define a state sociologically in terms of its goals or what it does, since it is impossible to historically show that a particular task or function is specific to the state. Therefore, said Weber, a clearly delineated sign of the state should be sought in the means it uses. Such, the legitimate use of which is recognized only by the state, is violence (police, army).

Having a similar monopoly, states have the ability to issue domestic money, ensuring their liquidity by law in the territory in which it operates.

Article 75 of the Constitution of the Russian Federation stipulates that:

1. The monetary unit in the Russian Federation is the ruble. Monetary issue is carried out exclusively by the Central Bank of the Russian Federation. Introduction and issue of other money in the Russian Federation are not allowed.
2. Protecting and ensuring the stability of the ruble is the main function of the Central Bank of the Russian Federation, which it performs independently of other government bodies.

The police and the army must be maintained, which means the country's economy must generate a sufficient amount of goods and services. As a result, the ability of a national currency to be money is determined by the strength of the national economy and indirectly by national security forces. In connection with the violation of the ability of the economy to generate goods and services, the amount of money in circulation required for maintenance, including law enforcement agencies, begins to exceed the service turnover. This is manifested in the well-known inflation process. National money loses liquidity and is supplanted by goods with higher liquidity. The phenomenon of dollarization of crisis economies is also familiar to many. The reason for this is that, by many estimates, the United States has the largest economy.

Bitcoin is not linked to the strength of any country's economy, making it independent of national crises. Its liquidity leads to the fact that in some unstable countries, such as Argentina , Bitcoin replaces the national currency in circulation. At the same time, this is largely due to the further possibility of exchanging bitcoins for dollars.

The prohibition of bitcoins in large economies leads to a loss of its liquidity, however, with a certain weakness of the state, the prohibitions cease to operate, partly due to the weakness of the security forces. Thus, Bitcoin is more liquid than currencies of states with weak economies and monopolies of violence and weaker currencies of strong states.

For fast international payments, Bitcoin is a convenient and effective means of payment, which in the conditions of increasing globalization adds bitcoin “cash abilities”.

Bitcoin vs Gold

Bitcoin is compared to gold. In favor of the similarity, it is often said that bitcoin, like gold, must be mined / mined, which is also an energy-intensive process. However, it is worth noting that bitcoin is created during mining, and gold is only mined, but it is synthesized in very specific conditions.

Many heavy elements are synthesized in the depths of stars, but this is true only for atoms up to iron. The origin of the heavier elements is not completely clear.

“The origin of about half of the heavy elements in the universe is still a mystery,” says one of the authors of the new work, Hans-Thomas Janka (Hans-Thomas Janka) from the Max Planck Institute for Astrophysics (MPA). “For a long time it was believed that they could be produced by supernova explosions, but new models reject this theory."

Now Hans-Thomas and his colleagues from MPA and the Free University of Brussels (Vrije Universiteit Brussel) conducted a detailed numerical simulation, which showed the performance of another version. It says that gold, platinum, thorium, plutonium and other heavy atoms are born from the merging of neutron stars.

According to MPA, the researchers combined hydrodynamic and relativistic calculations with calculations of nuclear reactions in their models. The computer showed what happens in a binary system of neutron stars, when they, circling around each other, come closer and collide.


The convergence of a pair of neutron stars and the first hundredth of a second after a collision. Yellow is the glowing substance that is thrown away (illustration Max-Planck-Institut für Astrophysik).

It turned out that with such a confluence high pressure and powerful tidal forces eject into space a portion of very hot matter weighing several Jupiter. When this plasma clot cools down to 10 billion degrees, numerous nuclear reactions begin to occur in it, creating superheavy atoms, and due to the decay of the latter, they are simply heavy (like gold). In the future, this substance is distributed throughout the universe, becoming building blocks for new stars and planets.

An extremely long way has been made from the state of individual atoms to ingots and decorations that people now possess. But even such a rare and specific process as the collision of stars in itself, the accompanying amount of energy and other resources necessary on a cosmic scale give a clear understanding that the creation of gold is a much more complicated and energy-consuming process than mining cryptocurrency.

Physics vs Mathematics

In the course of studying gold isotopes, an American physicist Arthur Dempster discovered in 1935 that a noble metal has only one stable isotope with a relative mass of 197. It is believed that in order to synthesize it, one must have an isotope with a much larger mass, but nature simply does not exist, and if it is synthesized by artificial means, then for a long time it cannot be in a steady state.

It was possible to get gold only by using the elements mercury and platinum nearest to it. To turn platinum into gold does not make sense, since it is more expensive than it. It remains mercury. If it is hypothetical to imagine how, in industrial conditions, people from mercury will begin to obtain a noble metal, then based on the knowledge of nuclear physics, we begin our argument from the fact that we will use 50 kg of mercury. This amount of substance contains only 74 g of mercury-196, which could theoretically turn into gold.

196Hg + n = 197Hg * + γ

But, the process does not end there and goes on:

197Hg * + e- = 197Au

Suppose from 74 grams as a result of nuclear transformations, we get the same amount of stable gold. After simple calculations, we come to a disappointing conclusion that 74 grams of gold can be obtained by placing a ball of mercury in the reactor zone for four and a half years. And then all that we get, it will be necessary to clear. The resulting gold will be many times more expensive than natural, extracted from the poorest ores in the mine or at the gold mine.

Bitcoin is based on mathematics, which is the descriptive language of physics. The physical process underlying the creation of gold is more complex and much more energy-intensive than mining Bitcoin. For this reason, such functions of money as a means of accumulation and a means of forming a treasure Bitcoin performs worse than gold, the value of which is difficult to question.

Quality homogeneity, portability and recognition speak in favor of gold as a commodity that can be money. However, as a means of circulation, gold is significantly inferior to national currencies and Bitcoin. The spread between buying and selling physical gold in a bank is huge. Creating a competitor to national currencies is unprofitable for banks. A possible solution is a metal account, but at the same time you do not receive physical gold, and the value is in the nature and properties of this element.

findings

Having compared so many different material values, it is easier to understand the economic essence of the Bitcoin system and the place that it occupies and will occupy if it is not replaced by another altcoin or a type of money. However, many questions were not raised in this article, but are already widely discussed. For example, problems of the bitcoin deflationary economy, problems of credit financing in conditions of anonymity and lack of guarantees / protection of the state. Without a leverage, the economy will develop more slowly than a competing economy with loans. A possible solution is a solution based on smart contracts, but this is an advantage of other cryptocurrencies.

The value of gold is justified in the framework of the article primarily by the difficulty of obtaining its atoms with a large number of useful properties. Even more complex, according to the existing scientific data, a rare and more valuable phenomenon is life as a form of existence of matter in the Universe. Because of its widespread use on Earth, this needs to be paid attention to when setting priorities.

Bitcoin is an interesting and promising "product" for the role of money. Having advantages and disadvantages, it will not completely oust either the money of the states or the gold, but it may occupy its important place.

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