I was emphasizing that it has some aspects of shareholder equity. Indeed, the keys which hold balances can be used to do things like weighted stakeholder votes: see the ideas for bitcoin-related [proof-of-stake] systems, or [bitcoin colored coins] for stockholder-of-record mechanisms embedded in the blockchain.

Whether this 'speculative equity' aspect actually subverts bitcoin's potential use as a payment system, or instead complements it by creating a community-spirit and aligned-incentives for growth, is something that time will tell.

But trying to shoehorn Bitcoin into any of the traditional categories -- currency, commodity, payment system, cash, unit of account, equity, etc -- risks overlooking how strange and capable it might be. Bitcoin laughs at the old definitions, and extends out orthogonally into utility dimensions that were previously hard to even see.

Your argument is basically a flight to abstraction. Everything can be made to sound good in the abstract. In reality, Bitcoin is first and foremost a speculative bubble.

Fiat currencies have also faced unpredictable discontinuities of value: bank holidays, confiscations, hyperinflation. After decades, some of these were partially ameliorated in well-run countries... but still flare up as risks in times of crisis.

What you call a 'flight to abstraction' I call an interest in the enduring essence of this new thing. Yes, the froth that's in today's headlines is a speculative bubble. So what? Everything grabbing headlines is a speculative bubble of attention. And, there are a lots of speculative financial bubbles. Sometime they precede real, but slower, explosions of value. That's the interesting topic, and calling a 'bubble' has no probative value on that longer-term question.

Pick any particular day in 2014. I'll bet you $100 that the value of 1BTC in USD on that day will be higher than today's pre-freeze MtGox traded price ($124)... which is itself almost double the value on some currently-operating exchanges. If we're on, just let me know your chosen date in 2014.

Because for BTC those points included "all of today and yesterday".

You can see how your reasoning is broken with your 2014 comparison, when you say "pick a day in 2014 and BTC will probably be higher". You don't seem to grasp that upswings are just as disruptive to a currency as downswings.

Even so, Bitcoin can still work as a cheap payment mechanism -- via intermediaries which insulate buyers/sellers from exchange-rate risk, using Bitcoin simply for the fast irreversible software-controlled transfer of value. The cost of such hedging may be less than the cost of traditional fees and chargebacks.

But maybe Bitcoin's not even best understood as a 'currency'. That's just a word, whose broad semantic boundaries were fixed in the early 20th century, before anything like Bitcoin, or even the Internet and general-purpose computers, existed.

So arguing over whether Bitcoin is a good 'traditional currency' is boring. What's interesting is whether Bitcoin is valuable, on its own terms as something new, and whether it will be more valuable in the future.

A bubble this day/week/month/year doesn't tell us much about that question. Volatility only affects some uses -- like your example of publishing prices of other things in Bitcoin. Other potential users are, or could be, indifferent to volatility, as long as the trend is up. Some will even like volatility, if that volatility is usefully uncorrelated with other assets.

And if your pronouncement isn't that it's an overvalued, speculative bubble, but simply that it's going to have upswings and downswings, but is just as likely to be more valuable at any future point as less, then so what? Often ultimately-valuable equity shares in some new project go through wild value swings, because long-term success is so hard to predict and sensitive to so many unknowns.

I'm not a fan of the limited 'payments system' framing of "what Bitcoin is", but maybe you can think of a way to pick a date in the future where we can objectively assess whether Bitcoin is growing as a payment mechanism or not.

At that point we'll know whether the volatility has destroyed Bitcoin's value as a payments system, or whether Bitcoin's use in payments has thrived despite (or maybe even aided in non-intuitive ways by) the headline-grabbing volatility. Offer a testable prediction generated by your insight, and we'll test it!

The test of my insight, that Bitcoin is something valuable whether it's a currency or not, is: is Bitcoin worth more in 2014 than 2013? And further out, are all balances controlled by Bitcoin principals (keys), on the Bitcoin chain or future 'baby Bitcoins', more valuable at future dates than their cost-to-acquire today?

I assume you already grok that anything, from toenail clippings to used tissue paper, can spark a speculative bubble. All you need is a story convincing enough to get the ball rolling, and then momentum takes over.

Innovation has created many things that are valuable, which didn't even have names before they existed, and much of the value comes simply from mutual consensus. Joint stock companies. Intellectual property. Domain names. Mineral rights. Publicity rights. Bonds. And many would say also: fiat currencies themselves are a consensus, but useful, hallucination.

There's always a bit of self-spawning alchemy in this process. "We choose to broadly value this, because when we broadly value this, other good activities ensue."

Again, my framing is: one of Bitcoin's aspects is as (divisible, transferable, even votable) equity in something with interesting novel characteristics. There are a lot of people, working on a lot of interlocking things, for which Bitcoin balances will be the price-of-participation. If that coordinated-action superstructure throws off enough value to its participants to be self-sustaining, each unit will continue to grow in value.

And sure, current volatility makes 4-year-old Bitcoin worse, for many uses, than the best 100-plus-year-old fiat currencies (USD). Bitcoin also has capabilities no 'currency' has ever had before. Your argument seems to be, "it's not been stable enough yet for quoting prices of things, so it's no good for anything" and "it's been in some crazy bubbles, so it can never be useful or valuable".

New hard-to-value things are volatile. Only experience creates stability. As you note, anything can suffer a bubble... sometimes the underlying thing continues to build real value, and sometimes it doesn't. Merely observing that it's bubbly so far is just frothy gossip. Yes, and...?

It's too early to determine what its primary function(s) will be, arising from these qualities. People are doing interesting, potentially valuable things with it, including a bunch of things that are also done with 'currency'.

If Bitcoin turns out to win a fraction of the market for international money transfer, or online purchases, or gray/black market purchases, the existing units could be worth a lot more than now.

If the combination of constitutional counterfeit/inflation resistance, plus consensus adoption for a few other things, makes it attractive as a rare store of value (like gold), it will also become much more valuable.

These are big ifs, but they're not impossibilities, and the way that Bitcoin is like equity is that it has aligned the interests of all its holders to try to create the systems/world where Bitcoin continues to be more valuable, as with founders' shares in any other startup. They start as mere paper, sold at negligible 'par value' under the idea that someday, others will want them too, because they will represent valuable claims on future capabilities. With the incentive-aligned work of the team, that future may come to pass, creating a lot of value. Or not.

So yes, in a sense, one of its purposes is: get all the people who hold Bitcoin working together towards increasing its value (and related things). Like equity shares.

Bitcoin is only 4 years old.

If you want to compare it to the US dollar then you should compare it to the dollar from 217 years ago, not the dollar from 50 years ago.

I think I was being generous by supplying a 50 year window of comparison.

Bitcoin and USD are not the same abstraction. USD is a currency and Bitcoin is an entire monetary system. One that's different enough that initial friction is entirely unsurprising.

It has the potential to change how a core function of society works (money transactions). Much more so than e.g. the invention of the credit card, or electronic banking.

Such a shift is quite obviously not happening within 4 years or anywhere close to it.

At this point it's still a tiny experiment that may very well fail. But apple/orange comparisons don't do it justice. And since this all happens between consenting adults I'm sometimes a little confused by the negativity.