Bitcoin Fallacies

Dismounting common misunderstandings about Bitcoin. Most of them are related to poor understanding of economics (particularly, of the teachings derived from Carl Menger), cryptography, the functioning of Bitcoin itself, and physics. Will expand further, including suggested readings.

Store of Value

Economic value is subjective and dynamic. Value arises from human whims and needs, which aren’t stable or cumulative. If Value were intrinsic, it wouldn’t be able to change (e.g. water intrinsic properties as density never change).

Inflation Hedge

If it’s meant as protection from increase of monetary supply (monetary debasement), absolutely correct.
If it’s meant as protection from changes in the objective exchange value of money (price), false for Bitcoin and any kind of money or asset.

Value from scarcity

Value is a demand and supply driven mechanism. Hence, one side of the equation (supply) is not enough for price to arise.

Absolute security

Higher degrees of security relative to other systems does not imply such degree can be quantified or determined.

Energy Consumption

Energy can not be consumed, i.e. depleted. Only transformed. Changes in useful energy is the correct mechanism, and must be evaluated vis-a-vis with alternatives. Bitcoin results in more efficient energy usage through second-order effects (computation).

Bitcoin is an investment

Bitcoin is savings, accumulation of capital.

Game Theory

Bitcoin does not have any implicit or explicit game theory. Rather a system of risk-sharing protocols in a 100% decentralized network with agents that must comply with rules. Participation in such network comes from external factors where game theory may apply.

Bitcoin is a cryptocurrency

Bitcoin is an entirely decentralized, distributed and consensus-driven digital database that uses cryptography as part of its security and communications protocols. Bitcoin can become money because it is an economically useful good (p2p transactions) evolving into a medium of exchange.

Bitcoin fixes everything

Bitcoin fixes all problems that come from the State. Vast majority of present problems can be sourced to the State, hence the confusion.

Blockchain

Bitcoin is the technological breakthrough that uses a blockchain data architecture (which should be more appropriately known as time chain) amongst other techniques. Hence, it must be evaluated as a whole, its parts on their own may or may not be useful elsewhere.

Digital Gold or Digital Real Estate

Bitcoin is not a commodity, and it’s not existing in the physical world. Bitcoin is software. And software, like math or logic, is speech.

Bitcoin is ideological

Bitcoin is not political, on the contrary, it is anti-politics due to its permisionless and decentralized properties (i.e. no power can arise since it can not concentrate in anyway in the network).

Bitcoin is perfect

Only God can be perfect. All technology has limitations and drawbacks, it’s fit for certain purposes but it’s never flawless. All machines and things created by man need maintenance.

Bitcoin can be stopped

Only humans can be stopped, cease to exist, reproduce, or create and destroy wealth. Bitcoin is not an entity or tangible object.