r/cryptocurrency Mar 14, 08:38 AM
The Vocabulary Trick: How Bitcoin Fooled the World When Satoshi Nakamoto unveiled Bitcoin in 2008, his choice of vocabulary, specifically terms like 'cash' and 'coins', was a masterstroke of psychological framing. By using these labels, he hijacked the universal assumption that his creation was a viable alternative to traditional money. Because we instinctively recognize money as a valuable resource, an asset held for the future benefits it guarantees, Nakamoto’s terminology successfully laundered his creation into a familiar financial promise.
However, if we actually examine his creation, we see something entirely different. What we find is not a resource that provides future benefits, but receipts for past energy expenditure.
What Nakamoto created is software and a protocol that connects computers into a peer-to-peer network that maintains a database recording which numbers are assigned to which cryptographic keys. To obtain these numbers, participants use devices to repeatedly guess so-called hashes until a guess happens to meet a target defined by Nakamoto's protocol. This process expends energy, secures the database, allows the reassignment of numbers, and prevents their duplication.
Yet nowhere in this process is a resource created that can provide future benefits. All that is produced are numbers representing energy spent in the past. This is not an asset but a receipt acknowledging the performance of computational work.
To understand this, we must first examine the term cash that Nakamoto used and how cash provides future benefits. Cash refers to banks. Banks issue cash based on the account balances recorded in their systems, and those balances originate from the issuance of loans. Every bank balance corresponds to someone's debt to the banking system.
What makes these balances, and consequently cash, an asset to their holders is the fact that those who owe banks must obtain them in order to meet their loan obligations. Billions of individuals who have taken out mortgages or auto loans need them to prevent the foreclosure of their homes, land, and vehicles. Hundreds of millions of businesses need them to avoid bankruptcy. Governments need them to repay their bonds and avoid sovereign default. Banks themselves need them to close unpaid loans and avoid capital impairment and bankruptcy.
By holding cash or a bank balance, you possess leverage over others. You own something that bank debtors need in order to avoid real-world consequences. This is why they are willing to work for you or offer you products and services in exchange for it. Governments allow you to use it to meet tax obligations, and banks give you access to foreclosure auctions where the property of defaulted debtors is sold.
In short, you possess a resource that provides future benefits, and this is what we call an asset. The larger the number assigned to your balance, the greater the future benefits derived from that asset, because more underlying obligations require debtors and banks to preserve proportionally more of