A couple of months ago, a colleague proudly told me that he had purchased “2 whole bitcoins” for $80,000 each. I asked him to show them to me so I could see what he had spent $160,000 on.

He opened his wallet application and pointed to the screen, which displayed 2 BTC. When he claimed that those were his bitcoins, I disagreed, explaining that he was merely showing me a record, i.e. one symbol, not two of something.

To prove my point, I wrote “2 BTC” on a piece of paper, held it up, and joked that I had just created two bitcoins for free.

He laughed and objected, arguing that my paper note wasn’t Bitcoin. He explained that Bitcoin only exists when a network of computers running the Bitcoin protocol records that someone has 2 BTC.

​I accepted his premise and suggested we break down the entire Bitcoin system to see what we could find.

​So, you have the network computers, the software, the protocol, the cryptographic keys, and the blockchain records, including his own “2 BTC.” Yet, despite accounting for all of it, nothing that could actually be defined as “two bitcoins” was there. I pointed out to him that his purchase was no different from what I had written on the paper for free.

At that point, my colleague shifted the argument to fiat currency. He countered that if I had $1,000 in a banking app, he could similarly write “$1,000” on a piece of paper and have exactly the same thing for free.

I rejected his comparison and proposed that we examine the banking system the same way we did with Bitcoin. I explained that while we would find computers, software, and database records showing my 1,000 USD, we would also find the underlying loan contracts that created those dollars. We would find real borrowers who are legally required to repay those loans. Therefore, what I have is a thousand units of a claim on the future production of bank debtors.

I further explained that those debtors must provide actual goods, services, labor, or assets to earn the dollars needed to settle their debts. If they fail to do so, their property is seized and sold at bank auctions to honor the claim.

I noted that when he wrote “$1,000” on a piece of paper, he had only created symbols, not a claim on debtors and their property. Conversely, with his “two bitcoins”, I had created the exact same thing he has: symbols.

I concluded that modern snake-oil salesmens had convinced him to give up actual claims equivalent in value to four new cars for something that anyone can create instantly with a few strokes of a pen or taps on a keyboard.

My colleague then stated that he didn’t want to have this conversation anymore.

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