"What is Bitcoin?" cheat-sheet

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Is Bitcoin a ...

scheme / system?

(as in a ponzi scheme, central banking, communism, capitalism, ...)

Yes. It is an incentives scheme invented by Satoshi Nakamoto. No, he didn't invent 'blockchain technology'.


organization?

(as in a company, firm, ...)

Yes. It is a group of people driven by a common goal, organized by the Bitcoin incentives system invented by Satoshi Nakamoto. The organization is sometimes referred to as the Bitcoin d.a.o. (decentralized autonomous organization)


security / share ?

Yes. By buying bitcoins you are making an investment in the common Bitcoin enterprise, with an expectation of profit, which predominantly comes from other peoples' efforts. By owning bitcoins you even have voting and dividend rights.


payment network ?

(like paypal, visa, ...)

Yes. The product that the Bitcoin organization offers to its customers is a value transfer service.


money / currency?

Yes. Bitcoin is the native currency of the bitcoin network.


commodity?

✖ No. It is not common, i.e. producer independent. Only the Bitcoin organization can issue bitcoins and bitcoins only have value as long as this issuing organization remains operational.

Is BCH Bitcoin?

Yes. Both BCH and BTC are products of the same organization. Same as Messenger and WhatsApp are both Facebook. Same as Coke Cherry and Coke Zero are both Coca-Cola. It is a common practice for one company to offer multiple competing products. The company does not care much which of the products win in the market, same as the bitcoin miners and pre-split shareholders don't care whether BTC or BCH wins. It is also common for one company to have multiple types of shares after a stock split - see for instance GOOG and GOOGL.

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$ 0.01 from @halu

Comments

"Yes. By buying bitcoins you are making an investment in the common Bitcoin enterprise, with an expectation of profit, which predominantly comes from other peoples' efforts. By owning bitcoins you even have voting and dividend rights."

The dividends link does not work (anymore?). I'd love to know what this was about!

In a sense, I understand your logic. Since Bitcoin in both BTC and BCH versions is mostly used as an investment for the time being, the profit expectations in fiat terms are what describe it more than its functionality as money.

There is an oxymoron here, though. If Bitcoin was used as money largely, then wouldn't it also be an investment (expectation for profit)? (I added the questionmark after editing. It was meant as a question).

Traders (and investors) trade fiat currencies while expecting profit. Forex trading (or investing in dollars when you expect for example the euro to drop) is not trading of securities and doesn't make the euro or the dollar a security.

Another issue in the limited timeframe (the 14 years Bitcoin is live) is not what the long-term expectance from cryptocurrencies is about. They are expected to act as money. If not, then Bitcoin (BTC) has to be categorized as an obscure security.

The difference is the timeframe. A longer period of time (e.g. 50 years) can be the judge. If Bitcoin (Cash) fails to find meaningful adoption then it will also fail as an investment.

BTC as well (IMO). Speculation has limits. Pumps follow dumps and it won't survive as a security as it does not offer something besides the store of value illusion.

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1 year ago

traders that make profit by investing in fiat currencies dont make this profit because of other peoples efforts to sell the best product or service. The people running the fiat central banks dont sell any product or service on the market. They are also not trying to make the tokens (fiat currency) as valuable as possible. In fact all the central banks are trying to make the tokens less valuable over time (inflation target). So you cannot make profit based on these peoples' efforts. (You can make profit for other reasons, but that doesnt make it a security.) By holding fiat currency you also dont have any voting or dividend rights from the central bank. This is all opposite to company stock and the BTC, BCH, ETH tokens.

If the central banks would issue stocks then these stock tokens would be analogous to the BTC, BCH, ETH tokens. If the BCH project would issue an official stablecoin, then these stable tokens would be analogous to the fiat currency tokens the central banks issue. As it is now the BCH tokens are both the stock tokens and money tokens.

The link to dividends was to something like EIP 1559, but for BCH. Antpool was burning BCH as a kind of dividend (stock buyback).

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1 year ago

The SEC with the Howey Test that defines exactly what is a security.

In case Bitcoin is named a security, then any capital gains from the price increase will be taxable differently (higher) than now.

It would also be responsible to produce annual reports, accounting statements, balance sheets, and various other paperwork, which will have to also submit to the SEC and other financial authorities.

Since there is no organization in control but a decentralized community, this is not applicable.

Basically, if any cryptocurrency is decentralized enough it is not a security.

Let's say the SEC declares Bitcoin and Bitcoin Cash securities. What will happen is nobody would even care to hire accountants and lawyers to represent them. Nothing will change, mining will not change, and the exchanges will go rogue. The SEC will only lose credibility and the current taxation from crypto users and exchange profits.

It can however dub a security a crypto where a company is behind it and is managing it, minting and selling it to the public.

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1 year ago

a company that issues shares, but does not hire anyone to do the paperwork does not magically cease to be a company that issues shares. Decentralized cryptos are still securities.

You described exactly right why the regulators cannot admit this fact - they would lose credibility.

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10 months ago