Austrian economics defines money as the “commonly accepted medium of exchange”, not what the government dictates, making it a situational concept dependent on market extent.
The regression theorem explains how money becomes money, stating that it’s initially valued as a good before demand increases due to its role as a medium of exchange.
Anything can become new money by establishing a connection to previous monies and piggybacking on their purchasing power, as seen in the transition from the gold dollar to the fiat dollar.
Bitcoin and gold are not currently considered money in our society as they are not commonly accepted mediums of exchange between regular people, unlike the dollar.
The contradiction between holding Bitcoin as a store of value and not using it as a medium of exchange is a major obstacle to it becoming money.
The transition from one currency to another is often driven by a loss of faith in the existing currency, as seen in hyperinflation cases in Zimbabwe and Argentina.
Private money benefits include the ability for banks to issue their own currency, preventing bank runs and maintaining accountability, as demonstrated by historical gold and silver-backed currencies.
Central bank digital currencies (CBDCs) are not mediums of exchange but central ledgers that give people purchasing power, potentially allowing governments to control goods and services distribution.
CBDCs differ from electronic money in that they are programmable and can be restricted in use, such as limiting purchases of certain goods or services.
The stakes are high with CBDCs as they could allow governments to abolish money, a bottom-up phenomenon that is difficult to control, unlike decentralized systems like the bitcoin network.
