Unique Memory: Bitcoin and the Concept of Money

Abstract

The fundamental problem of digital cash lies in deciding on a digital message that represents a coin in a decentralised network. However, money can be accurately defined in terms of a similar problem of communication among dispersed individuals or groups. I show that Bitcoin’s design was successful because it captures the essential signalling property of a monetary token like a piece of gold: namely, its natural uniqueness, as opposed to the artificial uniqueness of a credit token. Therefore, I propose that bitcoins be defined as digital money. On the other hand, cryptocurrency, digital currency, cash and other traditional forms of ‘money’ should be distinguished as credit. This conceptual distinction can be reduced to the difference between ‘proof’ of work and standard cryptographic proof in solving the double-spending problem: digital money is not a product of consensus through computational effort; rather, consensus and computational effort result from digital money.

Keywords: digital money, signals, Bitcoin, credit, proof-of-work, blockchain, double-spending problem