Bitcoin: digital gold or digital cash? Both.

1590s, “money box;” also “money in hand, coin,” from Middle French caisse “money box” (16c.), from Provençal caissa or Italian cassa, from Latin capsa”box”

As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
- boring grey in colour
- not a good conductor of electricity
- not particularly strong, but not ductile or easily malleable either
- not useful for any practical or ornamental purpose

and one special, magical property:
- can be transported over a communications channel

If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.

“Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

(…) Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin based purchases are today.”

“The only way to write complex software that won’t fall on its face is to hold its global complexity down — to build it out of simple parts connected by well-defined interfaces, so that most problems are local and you can have some hope of upgrading a part without breaking the whole.”

You do not build a networking protocol by shoving everything and the kitchen sink all into one layer; trying to solve every single problem for every single use case world wide in one massive giant glob of all encompassing code. That doesn’t work! Instead, you create a series of layers; with each layer focused on solving just one part of the overall problem extremely well, extremely efficiently, and as simple as possible.

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