The acceptance of Bitcoin as a form of currency is most certainly a modern dilemma. And while retailers and governments alike need to determine their tolerance for the digital currency's use, there is one group that may have a definitive answer on whether Bitcoin is "money" -- the ancient Greeks. More specifically, the great Greek philosopher Aristotle. By using his definition of "good money," we can once and for all make a determination on the cryptocurrency.
Father of logic
Aristotle was many things, including the tutor of Alexander the Great. But one of his most important contributions to society was the development of his theories on logic. Using our modern logic, we'll apply the four characteristics of good money (according to Aristotle) to Bitcoin to determine whether the great logician would approve of its use as a currency.
According to Aristotle, money must be durable: "Money must stand the test of time and the elements. It must not fade, corrode, or change through time."
Since Bitcoin is digital, there are no concerns that the physical traits of the currency would change. Though there have been some instances of minting Bitcoins, these are viewed as novelty items and do not constitute true, trade-able currency. As long as Bitcoin is not changed within the parameters of its current digital form, the first Aristotelian hurdle is cleared. Check.
Money must be able to hold a high amount of worth, relative to its size and weight.
Of course, since Bitcoin is digital, there is no problem with portability. The only weight users need to worry about is the laptop or smartphone they use to access their Bitcoins. As we all know, a single Bitcoin is capable of holding a large amount of worth ($947 each as of this writing) without the burden of a physical token. Check.
Good money should be "relatively easy to separate and recombine without affecting its fundamental characteristics," according to Aristotle.
Because a single Bitcoin is a large unit of currency, it would make transactions for small purchases very difficult if the currency could not be divided. Think of it as handing over a $1,000 bill for your morning latte.
But since a Bitcoin is little more than computer code for an address, it can be split. You can have Bitcoins broken down to an eighth decimal point, making smaller purchases much easier. Check.
Aristotle asserted that any "good money" would have intrinsic value, without ties to any other object to support its worth. The value of the money should be contained within the money itself.
This requirement is often the sticking point for most Bitcoin bulls. One of the chief complaints against Bitcoin is that its value is not tied to anything but the amount a person is willing to pay for it online. By definition, Bitcoin is a fiat currency since it is not backed by any physical material.
But that very complaint may support the acceptance of Bitcoin based on Aristotle's definition.
Though we are used to the idea that currency should be tied to something of worth, the gold standard was eliminated more than 40 years ago in the U.S. Ever since, the U.S. dollar has been a fiat currency, yet widely accepted across the globe. The only tie associated with the dollar is the good faith promise that its value will be honored. Since the value of Bitcoin is based on the user's perception of its worth, it has a similar promise backing it among the peer-to-peer network that supports it.
Taking a literal view of this last criterion, Bitcoin receives its last check mark on Aristotle's list. But the discussion of whether Bitcoin is a good form of currency will continue, mainly hinging on the acceptance of this last point.