As Bitcoin became more widely known to the general public, many began to see it as some kind of alternative to the fiat payment system. Not only an alternative but a superior alternative. This superiority supposedly stems from Bitcoin’s “decentralization”, “security”, and “scarcity”. Here we will show that Bitcoin and fiat are different as night and day. And that the first don`t even belong to the same category as the second.

Narratives about Bitcoin are mostly focused on the field of informatics. However, payment systems belong to the field of economics. Here we will therefore focus on the second. Economically speaking, people need goods and services. They need food, clothing, energy, a roof over their heads, clean streets, medical services, etc. This is what satisfies human needs. In that sense, the technical implementation of payment systems, through which goods and services are exchanged, is irrelevant. Payment systems themselves can neither satisfy human needs nor magically create goods and services. They are only auxiliary means for exchanging them and, most importantly, securing their return.

Why is securing the return of goods and services the most important thing in payment systems? Well, suppose you gave up your house and in return, you got units of the fiat system, i.e. you got banknotes or a deposit account that show the number of received units. These units cannot satisfy your needs. They are not goods or services. So, you gave up a house that can satisfy a lot of needs, and in return, you got units that cannot satisfy any need. That is why, if a payment system is legit, it must have a protective mechanism so that in the future you can return goods or services. The fiat payment system has such a mechanism. Let’s see how it functions.

The units of fiat payment systems are created when banks grant loans to individuals and organizations or purchase government bonds. By exchanging goods and services for banknotes or deposits people become holders of those units. The fiat system ensures that holders get goods and services back. It does that through the liabilities of debtors and their collaterals, i.e., by forcing them to pay off their debt.

Namely, to be able to pay off their debt, debtors need banknotes or deposits. And the only way to get them is if they work for their holders, sell them goods and services, or, in the case of governments, accept banknotes or deposits as a tax payment. So, by being forced to pay off debt represented with units of the fiat system, debtors are returning goods and services to holders of those units. Such returns are realized daily by hundreds of thousands of debtors in the fiat payment systems worldwide.

Let’s now turn to Bitcoin. Bitcoin boils down to a network of computing devices linked together to manage a database according to some protocols. That database stores information on the number of units held by users registered on the network. The units are popularly called electronic coins or bitcoins(₿). How do people become holders in the first place? Well initially, they give up electricity in the process of the so-called Bitcoin mining. This gets them the units. So they give up a good that can satisfy a lot of needs and in return, they get units that cannot satisfy any need. That means that users of the Bitcoin network are in the same situation as users of the fiat system – they need to return goods or services.

And now comes the crucial question: does the Bitcoin network have a protective mechanism that enables users to return goods and services? Well, it does not.

And this is the key difference between the fiat payment system and the Bitcoin network. The first has banks, debtors, loan contracts, government bonds, and pledged collaterals to ensure that users return goods and services. The second has nothing. Users just hold the units, and that is it. The network is not there to protect them by ensuring the said return. Instead, the network is there to protect its units. It takes electricity for its own sake.

“Decentralization”, “security” and “scarcity” are just pointless features of the network as none of that protects users. No matter how decentralized, well-protected, or limited the units are, this cannot help anyone to return goods and services. Network maintainers, miners, protocols, the database, and everything else related to the network are entirely focused on the units. It is like these units represent some kind of transcendental value worthy of worship and high protection. The users, on the other hand, are unimportant. They exist only to sacrifice need-satisfying items or protective units of the fiat system to be able to hold that transcendental value.

There is currently an entire army of Bitcoin users. They gave up an enormous amount of valuable items to get units of the Bitcoin network. And this network has nothing to protect them. Consequently, if people outside the network decide they no longer want to give up valuable items in favor of network units, that whole army is doomed. The network cannot help them to return even a bit of what they gave for the units.

To conclude. The units of the fiat system are valuable because they protect holders by ensuring the return of goods and services. The value per specific number of units can be determined by checking the value of collaterals that banks take when issuing that number of units.

On the other hand, the units of the Bitcoin network are worthless because they do not protect holders. The fact that the Bitcoin network is designed to protect its units instead of its users is pretty bizarre. What is even more bizarre is that some people are currently giving up 30,000 protective units ($) to get one non-protective unit(₿). This indeed looks like sacrifice in favor of some transcendental value. And shows that the whole thing is some kind of digital religious practice instead of something related to economics.