These days they do, like BTC, inhabit a digital world, they are mere numbers in our bank accounts. But these numbers mean something, they are evidence that we have a debt from society.
A bitcoin balance means something too, it means someone either directly went to the expense to mine them, or someone else exchanged some fiat, item or service of value for them. We know a balance can't be obtained any other way. I take your point though, they represent something different, they are not born out of debt (which some take as a positive!).
Now with BTC ALL you have is a number in an account. Other than the entitlement to transfer this number to another account there is no other claim on society or anybody else, implicit or otherwise.
Correct.
Is it a fraud? I certainly would not accuse its enthusiasts including those in this forum of being frauds in the colloquial sense. But its terminology is borderline fraudulent. Calling itself a currency in the first place is a bit shaky but where things get distinctly suspect is in the "mining" metaphor.
fpalb has given us an excellent and stark description of the process. Here's how the metaphor goes. The miners expend enormous amounts of electricity and CPU power to extract as the reward for this effort fresh new BTC. This is highly suggestive and seductive. It suggests that an awful lot of effort was needed to find something of value. In fact nothing of value is found. At the end of the effort, if they win the race against other miners, they are alloted new BTC as a simple number in their account. The BTC could have been added without any of this effort. Its a game, an incredibly crude brute force game of trial and error, totally artificially devised to manage the development of the BTC supply. There is no added value whatsoever here, though I will not get on the high horse of the negative environmental value of the electricity usage (after all I am not convinced of that one either
).
I really hope I have not mislead anyone with any of my comments, I've aimed to be clear about technical facts, but have also shared some of my own opinions, which are just that. I agree with what you've said about mining but I have a couple of comments.
Firstly bitcoin originally never called itself a currency, the whitepaper (
https://bitcoin.org/bitcoin.pdf) never calls it a currency and I'm not actually sure of the origin of the term crytocurrency, but I think myself and many bitcoiners would agree by now that it perhaps isn't the best term, though it's unlikely to change by now. If they had just been called blockchains instead of cryptocurrencies maybe it would have been better.
Secondly, we would prefer mining wasn't so energy intensive, we would prefer there was an equally reliable way to ensure the integrity and immutability of the blockchain and the fairness of the distribution of new coins, but no one has figured one out yet. Another blockchain, Ethereum is planning to move from proof-of-work mining to proof-of-stake where the integrity of blocks mined is based on the balance of the ethereum you hold rather mining work. Some people think is a valid approach, others are skeptical, I guess we might find out when/if they try it for real.
You can somewhat imagine the wastage of energy for gold too. We expend a lot of energy to dig it up, melt it into bullion bars only to bury it underground in vaults again. If those bullion bars are never melted down again to be used for industrial purposes (as many are not) then was the mining and expense of storing them useless and waste of energy? Or does the fact that they sat in the vault acting as a store of value act as a valuable service itself.
Duke, I think you've made half of the journey, you've understood the gist of what bitcoin is technically, a decentralised, immutable, transparent digital ledger with a built in transactional system. You can see how it can be used to make transactions and to maintain balances. Though complex to explain this is mostly factual so I would say it might be the easy part. The next part of grasping bitcoin is making the leap to understand that if something can act as a money, and enough people decide to use it as money, then for all intents and purposes it is money, regardless of any unrelated industrial, ornamental uses or backing by an authority. I can't factually prove this, and I'm not confident that I can convince you, but many of us came to this conclusion once we understood how it worked and tried it out. Indeed I see bitcoin as an experiment to see the extent to which it is true. I will make a longer post about this in the "bitcoin is not like gold" thread, I think the discussion belongs there.
