In other words BTC was invented to make long distance payments quicker and less transactionally expensive than conventional banking facilities.
I snipped your opening paragraphs to just this line, but I address all of it: While the whitepaper doesn't explicitly delve into 'Shortie Syndrome' there is other evidence that Satoshi was also pushing the libertarian angle somewhat, this quote for example:
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts
Also the community he first announced bitcoin to and some of the prior work cited by the whitepaper has strong links to the cypher-punk movement. You've probably never heard of this but the cypher-punk manifesto
https://www.activism.net/cypherpunk/manifesto.html is an interesting read particularly when you consider it was written in 1993! before the internet as we know it and all of the privacy and big-data issues that are becoming more relevant.
ANYWAY, I say the above because it might interest you not because I think it matters that much. Satoshi's original intentions are of little practical relevance now that bitcoin is out in the world out of his control. What it does and how it can be used are what is important.
You list out the requirements of a money system and for sure BTC has them, as do fiat currencies. But it lacks at least two key requirements that fiats have....
1. Mises' Regression requirement - that it traces back to something of "real" value. Sorry, the circular argument that it is money because it is money doesn't cut it for me.
2. With fiat money we have a reasonable assurance of what the price of real things will be at least in the short to medium term. If we were to have a poll of what do we think the inflation rate will be over the next year it would show how remarkably trusting we are on this front. To put it in pictures, a company should have no difficulty in recruiting a contractor for one year at say €8,000 per month but I doubt whether even you would contract to work for a year for 0.5 BTC per month.
...I contend that almost all of the "value" it currently has is speculation that it will get even bigger...
I don't think these are requirements, and I think bitcoin is proving it. Bitcoin is showing that people are willing to choose a speculative store of value that offers both more potential upside and more potential downside instead of steady predictable downside (fiat) or less-upside/less-downside (gold, in my opinion).
You only mentioned bitcoin fulfilling the medium of exchange function of money, but I think we can do a brief comparison of all three functions and rate them:
Medium of Exchange
Gold is clearly the worst, it's the least portable, it's hard to divide, it's also arguably harder to verify, it's not widely accepted.
Fiat is the best for the vast majority of cases, especially where you have access to the best fiat (dollars, euros) and 1st world financial services.
Bitcoin is the best when fiat is forbidden, it can also be cheaper and faster in cases where you want to send money across international borders or there are other frictions with fiat.
Bitcoin cannot currently handle transactions at any significant global scale. This MUST improve for bitcoin to ever have any widespread use as a medium of exchange. BUT
IF the lightning network or other such layers on top of bitcoin provide a real solution to this there is potential for instant secure cheap transactions without geographical boundaries, there is potential for micro-payments on a scale we've never seen - it may be better than fiat in many ways, but
it does not work yet and may not.
Store of Value
This is where it gets interesting, I think there are two aspect to this which I'll address separately.
1) Is it likely to maintain it's real value over time
Gold is probably the winner here, it's definitely the winner in terms of robustness, it has a long history, it's recognized globally, it has no exposure to failure of a single state, it's limited in supply by the laws of physics, it has some non-monetary value to provide an almost certain floor as a consolation prize even if its use as money dwindles.
Fiat varies from country to country. In Argentina,or Venezuela it's terrible. USA and Europe not too bad, for now. I guess people thought GBP was not too bad, and then Brexit happened, so you never know. Will the euro exist in 5 years? probably, 20 years? maybe 100? I don't know, not many have lasted that long.
Bitcoin is new with a short history, most would say it has more potential upside and downside than both fiat and gold. There's no non-monetary use to provide a floor. Like gold it is not exposed to risk of any particular state, but any other number of events can cause a loss in confidence. At first glance it's easy to consider it the worst of the 3 here.
2) how practical is it to use as a store of value
This is where I think bitcoin starts to show some advantages over both fiat and gold, and I think this is really important to make up for the other shortcomings of it:
- without counter-party risk you can secure it with a password
- without counter-party risk you can store it in a redundant manner in as many geographical locations as you want (and in sophisticated ways using multi-sig wallets).
- without counter-party risk you can store it cheaply in any amount.
- It is the most transparent, you always know the exact percentage of the total in existence that you hold.
- you can cross international borders with it undetected in any amount.
- you can prove you hold it without giving anyone else access to it.
- it is difficult for someone else to know that you hold it.
Unit of account
Not much to say here, this is much less important than the previous two monetary functions and Fiat wins here. From what I can tell things are almost never priced in gold or bitcoin due to the volatility. Not a big deal for bitcoin as wallets can do the price translation for you anyway. Bitcoin of course has fungible equal units which can be used as a unit of account if desired.
But then there was the missing link - Mises' Regression Theorem or rather Plain 'Ol Common Sense (POCS) - how can it serve as money if it has no (intrinsic) value? He wanted any value at all, you can see that in his musings "value, any value". And then out of necessity he squared the circle and he admits it was circular. He postulates that if even some folk are prepared to accept it as a transaction for real goods then, there you go, it has some value ergo (here's the big leap) it has value for everybody and is a self fulfilling medium of exchange i.e. money.
When wikileaks got cut off from all traditional fiat channels and started accepting bitcoin they had no other choice. Bitcoin was the only option that fulfilled the functions of money for their use-case. This is bitcoin providing value in and of itself. You can call it circular and say it's not enough, but I disagree. In short, I think by now Bitcoin has proven Satoshi's thought experiment to be true - If something can fulfill the functions of money in enough ways that make it stand out from the alternatives it can be enough even in the absence of intrinsic value or government backing, but the hardest part may be bootstrapping it.
My opinion is that bitcoin has already been bootstrapped and reached critical mass, probably since 2013. I know you're thinking that it's in a huge bubble and that everyone holding it now is doing it for short term speculation and that they'll all leave as soon as it stops shooting up. I certainly agree that a lot of people are, but not enough that next bear market will kill bitcoin.
The 2013 bubble
If you haven't already I'd recommend looking back at the 2013 bubble and the aftermath. Look at how bad this chart must have looked in 2015:
https://news.bitcoin.com/wp-content/uploads/2016/12/Mike-Casey-chart1.png I was closely following the whole thing. A lot of things went wrong all at the same time. The Silk road market (which many had assumed accounted for ALL of bitcoins use) got shutdown in late 2013, bitcoin oddly started rallying and shot up from $100 to $1000 in 6 weeks. This was parabolic growth which of course had to crash. The crash coincided with Mt Gox which had up until then been the primary way peopled had traded bitcoin with fiat for years.
This was bitcoins biggest crash to date, and the first one since it had really come into the mainstream media. It got crucified. The price crash, the Goxxing and the shutdown of 'the only place people used bitcoin anyway' was a triple-whammy that saw the price steadily decline for the whole of 2014 with bull trap after bull trap, and plenty of fodder for bitcoin obituaries declaring it dead: [broken link removed] To make things worse the US government had almost 150,000 bitcoins they had seized from Silk Road and planned to auction off, so the market was going to get flooded with supply.
2015 wasn't much better, the price fell to the $200 range and stumbled along with the odd little spurt of hope before falling back. Sentiment was bad, even among some long-time bitcoiners. I posted on this site on the single thread that ever mentioned bitcoin and no-one cared. There was no media hype anymore, and I'm pretty sure there were almost no short term speculators from the 2013 bubble left.
So without all those short term speculators who was left? I was left, and there was enough other long term guys like me to keep it going, developers kept coding, the people who really believed kept building the exchanges, wallets and other services. Infrastructure improved, miners kept mining, transactions kept being made. At $200 and 15.75 in circulation bitcoin still maintained a market cap of about $3 billion without all the bubble speculation. The unique combination of ways bitcoin fulfilled the functions of medium of exchange and was a practical store of value was enough for us.
My opinion on the risk
Given my opinion about why I think bitcoin is money, I also see the main risk to bitcoin being that if it no longer sufficiently fulfills the functions of money it will lose users and eventually will fail. It has to offer enough improvements in certain aspects of the functions of money over gold/paypal/fiat etc to ensure that it remains useful.
While it has actually improved in terms of how easy it is to buy and store securely, I am disappointed that bitcoin has not managed to scale quickly enough to keep up with adoption. It used to be as cheap or cheaper than fiat in all cases, but it no longer is. I don't think it has to be a better medium of exchange than fiat in all cases to survive and have a niche, but it has to be good enough, and certainly better than it is now.