Method Of Payment Is Not Medium of Exchange

A common error in crypto land is the confusion between method of payment, and Medium of Exchange. They’re distinct concepts!

Let’s use a basic example: I want to pay you $10 AUD. I could do this by either handing you $10 AUD cash, or I could bank transfer it to you. In this example:

  • AUD is the Medium of Exchange
  • The method of payment is either the cash note I give you, or the bank transfer

But people struggle to see it this clearly with Bitcoin the payment network, and bitcoin the money/token. So then people go and commit further ‘knock-on errors’ such as thinking that bitcoin has to scale to 1 bazillion transactions/second right NOW or otherwise we lose to VISA/mastercard!

But they’re mixing it up. They’re confused. Medium of Exchange as a concept is about solving the double coincidence of wants, and also about being a more ‘saleable’ commodity or money. Method of payment is just the technical way we achieve moving that money token around.

While other people might go around making really fast, centralised payment networks – what matters is sound money. This is why bitcoin the money matters, and Ripple’s centralised, premine shitcoin doesn’t (despite Ripple’s Xrapid and Xcurrent solutions having much higher transaction rates).

For more on saleability and the Carl Menger’s work on the origins of money, see the YouTube video I did on this topic here.

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