In a post on the X-Platform, Dr. Wright gives a great explanation of bitcoin as electronic cash from a sound and practical legal perspective. Unfortunately, it goes way beyond the cognitive sphere of the BTC and will unsurprisingly bring little enlightenment to that world.
I see Dr. Wright consistently doing a superior type of abstract thinking while BTC followers consistently commit the error of an inferior type of abstract thinking.
There is a need to think abstractly, but there is also danger in thinking abstractly. This is because there are two types of abstraction. The first type is the genuine power of logic that reaches the root and the core of an issue to put concepts and reasoning in order. The second type is fake or pseudo-abstraction, which is a superficial generalization as a result of failing to penetrate the surface of reality’s structure.
It is clear who is doing what. The disparity is so large that there simply is no real conversation.
Bitcoin as cash?
The above is well illustrated in the concept of “cash” in the context of Bitcoin.
If one detaches from practical reality and approaches it from a superficial abstract level, bitcoin simply cannot be cash, as it depends on third-party verification, while real cash does not.
However, if one approaches this with a sound view of the economic and legal reality, a more nuanced structure is revealed.
Cash and instant finality
A key attribute of cash is its instant finality (settlement). Simply put, if the payment has instant finality, it can be regarded as a cash payment. If not, then it is not cash.
But the key is the concept of “finality”.
Instead of defining “finality” in a vacuum devoid of economic, financial, and legal reality, we should define it practically in the context of such reality.
Therefore, I postulate the following definition of “finality”:
A cash transaction is one in which the payee regards near-instant finality.
Before you protest that the above definition is subjective, let me point out the following practical business reality:
In the real world of value transfer, the payee’s subjectivity is the objective reality as long as the following simple condition is met: the payee finds his definition of “finality” is consistently, historically, predictably reliable and satisfying his objective.
With the above definition, now imagine you are a merchant who receives all kinds of payments, among which there is a cohort of payments that satisfies the following condition:
If you assume instant finality of such payments, there is a risk that some of the payments in this cohort may eventually be invalidated (meaning that you will not actually receive those payments even though you have assumed their finality), but you accept it because the loss/success ratio is significantly lower than an acceptable threshold according to your business, say 1/1000.
If the above condition is met, you accept the small imperfection of your definition of “finality”, and you decide not to resort to reversing the underlining business transaction.
In a practical sense, it means that you the payee may have already delivered the goods or service to the buyer who made an invalid payment. Although you might reserve the right to expose the buyers who have made invalid payments, you will not seek a reversal of the underlying business transactions, as doing so would be too costly considering the small value involved in them.
For the above-described cohort of payments, we do have “electronic cash” according to the above practical definition.
Cash and privacy
Another attribute of cash is its privacy. As far as the definition of “cash” is concerned, privacy may not be as fundamental as instant finality, but is still a very important feature of cash.
Ironically, BTC has betrayed the basic principles of Satoshi’s Bitcoin for the sake of being “law-resistant” but, in reality, diminished privacy rather than enhanced it. This again has to do with the economic reality. It is the unbounded scalability and extremely low transaction cost that is the true privacy feature of bitcoin. When a payment, even a relatively small one, can be broken down into numerous micropayments automatically transacted and organized with negligible cost, a “sea” of vast numbers of transactions emerges, making connecting and tracing payments to a payor as an entity increasingly difficult.
This is true practical privacy because, like matters of payment finality and information security, privacy is fundamentally an economic issue. Privacy is enhanced when unauthorized tracing becomes disproportionally unprofitable.
BTC is not electronic cash
Now, here is what’s important:
With Simplified Payment Verification (SPV), Satoshi’s original Bitcoin (now Bitcoin Satoshi Vision -BSV) can indeed serve as electronic cash, as defined above. This does not mean that it can only be used in that way. It can also be used to do other types of transactions in which the parties choose to wait for a certain number of block confirmation(s), in which case sending bitcoin is more like writing a cheque rather than cash (practically, the longer the payee needs to wait for payment confirmation, the less it resembles cash and the more it does cheques).
But here, the ability to serve as electronic cash when the nature of transactions befits such an option is critical.
BTC simply does not have such ability, while BSV does.
This is not a small difference.
Historically, this means that BTC is not the real Bitcoin, while BSV is (at the minimum, look at the title of the Bitcoin whitepaper: “Bitcoin: A Peer-to-Peer Electronic Cash System”).
But more importantly, they offer two different futures.