Bitcoin Cypherpunk

Bitcoin Has Redefined Money

A payment conducted with bitcoin represents a paradigm shift in our concept of money – one where there is no division between currency and the system through which it flows.

Bitcoin is a digital phenomenon that will continue to spread until it is as socially accepted as email is today. In this post, I will explain not only why this rapidly expanding computer network has changed the paradigm on what defines money, but why the blockchain represents a historical image of the digital economy and provides a record of any past activity due to the nature of peer-to-peer timestamp verification.

The Blockchain Is A Monetary Image

For the purposes of illustrating why bitcoin has redefined money, let us assume there exists two users on a blockchain – User A and User B. User A controls 3.0 million bitcoin on the entire network. User B controls 3.6 million. There also exists 14.4 million unmined bitcoin.

User A has used their private key to authorize a transaction to User B worth 1.8 million bitcoin. User A sends this amount to User B’s public key. At this point, the transaction has been authorized by User A and is in the process of being confirmed by miners of the network.

After the transaction has been confirmed, the bitcoin network now reflects the change in hands of the 1.8 million bitcoin User A sent User B.

Note that no currency has moved from point A to point B, but an authorization on behalf of User A to alter the network in a way which increases User B’s control of the blockchain by a measurement of 1.8 million bitcoin at the expense of User A. In bitcoin, this ledger payment system is the money supply and is radically different from any type of money we have previously seen.

When an individual makes a transaction on the bitcoin network, no actual currency is moved. That is – no file has moved. No commodity or asset has moved. No private or public key has moved. Rather, the only thing which changes is the percentage of the blockchain ledger which User A & B claim control over. When a transaction occurs in the realm of bitcoin, the image of the blockchain is altered. Nothing ever changes but the composition of this blockchain record.

The blockchain is a historical record of the bitcoin economy. There is no separation to be made between the blockchain and bitcoin. They are one in the same. Without the blockchain, you have no bitcoin ecosystem. Without an accompanying cryptocurrency, you have no measuring tool to determine the ownership of the blockchain.

Money is now an image, rather than something which can be separated from the system itself. This image of money is being constructed, altered, and verified by the thousands of machines acting as miners across the globe, and it’s a composition on public display for all to see. The miners are the painters of this network composition. The users, the brush and strokes.

In the bitcoin digital economy, money is an image continuously being constructed, verified, and reattributed by way of cryptographic authorization.

“Tangible money, old-fashioned money … is a phantom from the past, an anachronism. In its place is an entirely new form of money based not on metal or paper, but on technology, mathematics, and science. This new ‘megabyte’ money is creating a new and different world wherever it proceeds. Money now is an image.”

– Joel Kurtzman, The Death of Money

With the intrinsically valuable property of decentralization, we have a monetary system that comprises a historical record of purchasing power at any point of time in existence. The timestamping function of the blockchain allows anyone to go back and publicly determine the holdings of any address (perhaps soon any individual).

A payment conducted with bitcoin represents a paradigm shift in our concept of money – one where there is no division between currency and the system through which it flows.

Bitcoin has redefined money. Money is now an image.

By Travis Patron

Travis Patron is the founder of Diginomics Corporation and the author of The Bitcoin Revolution: An Internet Of Money. He was an early adopter of both bitcoin and ethereum technology, and continues to educate audiences on emerging opportunities in the digital economy.

14 replies on “Bitcoin Has Redefined Money”

I get the article, but I can’t understand the following: These companies that you are talking about, they are not only creating their own blockchains, but assets to be stored in these blockchains. In fact, they are not separating bitcoin from the blockchain, they are simply creating their own blockchains with their own assets to be stored on them, assets with properties which are more suitable to their business models. The bitcoin blockchain is simply the most decentralized and most secure, but they will create their own, AND CENTRALIZED ones. So, who in fact is trying to separate bitcoin and the blockchain?

What I cannot understand, is why would a company choose to use blockchain technology if they are aiming for a centralized solution? Decentralization and non-excludability seem to be the tenants of the bitcoin framework.

If a company is looking to create their own network with their own assets to be stored, surely there is a better alternative for this than the decentralized ledger of the blockchain?

If a company is seeking to create a permissioned, controlled network, then why not simply use some sort of enterprise cloud solution?

They can do that, but they have been doing that since…ever. They want to try something new, but also – that is obviously working. That is my guess. It is just a new tech that they see as useful.

From what I can tell, and the conversations I’ve had with large banking institutions, it seems they recognize the potential of this technology but are unclear on how to harness it.

What I am referring to in this article, is how companies who seek to “lock down” the blockchain and make it a proprietary, closed system, will falter. More so, there has been plenty of conversation in the industry lately about how the blockchain is great, but the currency of bitcoin is not needed. I am making the argument that they are one in the same – that separating bitcoin from the blockchain is akin to separating the oxygen molecule from water.

If you do so, you’ll be left with something different entirely.

I agree, and yes, they are trying to use the blockchain without bitcoin, but I am still not 100% sure they cannot do that. Time will tell.

This is a great article. It’s not often you see math translated into its visual form – which is just as valid as its numeric expression – the way you’ve done here. After reading this, I can see Bitcoin/Blockchain almost like a Monopoly board.

Which leads me to a question, do you think in the future there will be some way to monetize that section of the blockchain ‘owned’, like property but in an altogether different form? Of course, in some ways it already is because it has value consensus and can be converted to fiat, but I’m really wondering if there is some other way.

I guess I’m thinking somewhere along the lines of that ‘space’ being something like a billboard space, or a kind of mathematically defined area that can be utilized for some other kind of contract.

Does that make sense?

I think you’ve opened up an entirely new can of worms with this thought David.

What would this ‘space’ on the blockchain which is under control of one entity be capable of?

For one things, this space would represent a given amount of purchasing power (dependent upon the current market price of bitcoin). It would also represent a sort of consumption index of hashing power that is being used to verify the entirety of the blockchain. Perhaps this space could also be used to store files publicly much like a decentralized dropbox.

In my own estimation, over the long-term, we will see very powerful applications built on top of the blockchain network – one of which I believe will be artificial intelligence. When that happens, could control of this space on the blockchain represent a computational index for an artificial intelligence?

‘we will see very powerful applications built on top of the blockchain network – one of which I believe will be artificial intelligence. When that happens, could control of this space on the blockchain represent a computational index for an artificial intelligence?’

That’s a very interesting thought, Travis. AI on the blockchain that governs a persons everyday smart contracts perhaps. One way or another, I think there’ll be some amazing outside-of-the-box applications of the blockchain in the future.

ps: Keep up the good work, your articles are a cut above the vast majority. Really enjoy them. Thanks

David, there was a talk at the Scaling Bitcoin Conference that resembles closely what we are talking about here. Take a look at Peter R’s Transaction Fee Market Exists Without Blocksize Limit.

In this presentation Peter talks about a new sort of commodity – block space. He describes it as the computational data stored in each block mined.

I think we will see artificial intelligence produces actionable results from blockchain data in the not-so-distant future.


Thank you for your work. There a number of very interesting points to discuss here, and it is interesting to think of bitcoin as an image. However, I really don’t understand why you think Bitcoin and blockchain cannot be separated. The way I think of it, it’s similar to an actual real world physical mining operation. The mine needs rails and rail cars to move the rock, but the cars/infrastructure doesn’t care if it’s gold, iron ore or any other type of rock, it just delivers the goods from point A to point B. The blockchain is the digital infrastructure to hold and move assets, and bitcoin is just one of many potential assets. I understand that on the blockchain, it is more accurate to say it changes control from one user to the next, but a transfer in control is really a transfer of an asset, even if the asset does not move. We can digitize the title of any asset, and store any digital title on the blockchain securely (which I think is bound to happen sooner rather than later), and then securely transfer it with no third party trust needed. If it’s on the bitcoin blockchain, yes, it needs a bit of bitcoin for the miners to verify, but this can also be done on other non-bitcoin blockchains, and can be done with other non-proof-of-work methods. Private vs. public is not the overriding issue from a technology perspective, and I suspect we will have lots of both. Simply put, transferring assets takes time and costs money, and can be done more securely, faster and cheaper on a blockchain with smart contracts, such as on the Ethereum blockchain, and these transactions having nothing to do with bitcoin. In your mind, are bitcoin and Ethereum interchangeable, so in essence you are arguing you can’t separate the underlying currency that pays for mining from the innovation of the blockchain, otherwise you have something new and different? This would imply that proof of stake or a Federated Consensus Protocol are different animals from the bitcoin blockchain, which may deserve more scrutiny for security reasons but is still blockchain technology, wouldn’t you agree?

Also, people don’t often clearly think about bitcoin as a currency behaving naturally to the way it was designed (intentional fixed/ limited supply), and that if they had introduced different properties, it would have behaved differently. Limited supply fixes some issues, introduces others, but ‘other’ currencies will behave differently, and real world currencies will behave differently still. The people attracted to bitcoin were a monolithic group in that it was the only option, however many within the group of all those who purchased it were doing so for different reasons. As other options come online that fit their needs more closely, this group will fracture so each person will use the crypto-currency that best suits their needs. I doubt very much most people in China really want bitcoin per se, they just want an asset in the cloud where they can safely store value. If they were offered a secure digital Yuan, my guess is most would prefer that, as it stores the value they have, and the value that they use for purchase money. i understand bitcoin solves specific problems that other digital currencies cannot, but I see a future where every asset has digital title, and those titles are stored and transferred on the blockchain. These will have nothing to do with bitcoin, and long run, the innovation of blockchain will be massive and release tremendous productivity gains/$ savings, while bitcoin will serve an important but limited niche. Separate, not equal, but both important on their own. What am I missing from your perspective?

Just as you mentioned previously Jon, money is a stored productivity measurement. An abstract concept and a proxy for labour. If we remove the abstract measuring tool of a football game (the yard), that game becomes impossible to play. Similarly, if we remove the abstract measuring tool of a global ledger (the bitcoin), that game too becomes impossible to play.

Your analogy of the mining carts needing rails and rocks to operate is accurate. The blockchain is indeed the rails. However, when there be no iron ore (read bitcoin), there be no need for the rails in the first place. Without bitcoin (the unit of account), the blockchain cannot exist.

Everywhere you look, you will find a blockchain that has an underlying incentive mechanism necessary for the network to operate. Without this incentive mechanism, you are dealing with something other than blockchain technology entirely.

It’s possible that we may have private blockchains, but if such a technology is stand-alone, I cannot see how it would compete with open, permission-less innovation. Expecting a stand-alone private blockchain to compete with the bitcoin network is as unlikely as a private company intranet competing with the world wide web.

If such a blockchain is built on the Ethereum platform, it could retain a “walled garden” model and still be effective for niche applications. Ethereum is fundamentally different from bitcoin however, as a sort of fuel (gas as it is called) is necessary to execute the computational cycle of smart contracting systems.

I am not arguing that separating the underlying currency from the innovation of the blockchain is impossible. I’m arguing that this underlying currency does not exist in the first place! What you are buying ownership of is the blockchain ledger (I call this ledger bitcoin)itself – not a virtual currency, but a digital protocol for reattributing ownership of data.

Bitcoin is the beginnings of a 21st century digital land rush.

Your last paragraph mentioning individual identities being attached to the blockchain is a legitimate nightmare and is the reason Monero is gaining ground. Monero, it’s not just for criminals anymore!

Excellent series of commentary by everyone. The growing complexities of the cybercurrency world — as openly discussed here — fully demonstrates the maturing process of “diginomic dollars” in the all-new Diginomic Era. The long-predicted “Friction-Free Economy” is rising fast! What an amazing phenomena to behold.

My question is: What next?

To you futurists in this space — of the two dozen (or so) cybercurrencies out there, does it all eventually merge into a single global digital dollar? Will it be a more robust bitcoin for everyone, or a new “digidollar” hybrid that is a consolidation of the best of them all? At what point does an evolution become a revolution? The Diginomics Era yearns for definition!

Thank you for the commentary Wallace. This article does indeed seem to be one of the popular ones because it visualizes so well how our money has changed.

I think what we will see in terms of merging and consolidation of money supplies, is people experimenting and tweaking the technology behind bitcoin to create new currencies with new use cases. Very much like computer programming languages of today, we will see an intellectual explosion of new cryptocurrencies and that in itself is the revolution!

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