Third, another poorly understood point. Money does not exist in isolation from the phenomena surrounding it, nor from the rest of the economy. A time traveler arriving in the nineteenth century with a hard drive full of bitcoins would find himself penniless. Money changes and develops alongside the economy; it is inseparable from its infrastructure and practices. For example, metallic money was a significant catalyst for the emergence of banks, which in turn gave rise to regular credit and interest rates. The future, as a fundamental dimension of human activity, became institutionalized in the form of monetary credit, futures contracts, and numerous other obligations. This does not mean that credit and interest rates did not exist before then; they existed from the moment humans emerged as social beings, but these things only became manifest—observable and measurable—then.
The misunderstanding of this was clearly demonstrated in attempts to understand whether bitcoin is money. Some economists sought (and still seek) bitcoin’s “independent value” and found it in the “payment system.” They argue that bitcoin is a payment system, and therefore possesses “independent value.” But paper money is also a payment system, and metallic money is too. A currency’s prevalence—that is, its “monetariness” as a commodity—is inseparable from capabilities that are strangely perceived as additional and optional bonuses, having nothing to do with money as such. That gold can be deposited in a bank in one city and withdrawn in another is integral to the “metallic standard,” as a mass, popular form of money. Bitcoin likewise does not exist “on its own”; it is money not because it is a payment system or blockchain technology, but because these features allow people to use it as money, and they do so because it enables direct payments between individuals, bypassing banks, tax authorities, and other official structures, as well as purchasing goods in markets the state has criminalized—drugs, weapons, prostitution, pornography.
Let me offer more examples. Formally, the same monetary unit can serve different functions under different conditions. For instance, cash dollars in Ukraine in the 1990s functioned as “honest money,” providing monetary stability and enabling Ukrainians to survive. Their volume was limited; there were no centralized, controlled emission sources—in our case, the inflow of dollars from abroad—and that inflow was minimal. The same dollar at the same time in the United States was an ordinary inflating currency (by 1996, the story of the “ukrdollar” had ended). Another classic example is “cash” and “non-cash” money in the USSR (and even today), when emission occurred in non-cash form (which everyone had), while consumption took place mainly in cash (which nobody had). Economically speaking, the dollar in the United States and the dollar in Ukraine at the beginning of the 1990s, and Soviet and post-Soviet cash and non-cash rubles, are four different currencies.