Vijay Boyapati, a senior software engineer at Peach Inc., an IT firm based in Greater Seattle, recently argued that Bitcoin (BTC) is “not yet” a store of value (SoV) “because widespread consensus on its value has not been reached.” Boyapti, an active commentator on Twitter and also a strong Bitcoin supporter, referred to criticisms regarding the flagship cryptocurrency as “straw man” arguments.
1/ I hear so many straw man arguments about why Bitcoin is not a store of value because it's too volatile. Well of course it's not yet an SoV because widespread consensus on its value has not been reached. It's in the process of *becoming* a store of value.
— Vijay Boyapati (@real_vijay) September 26, 2018
BTC “In The Process” Of Becoming SoV
The former Google engineer reasoned that Bitcoin is currently “in the process” of becoming a SoV. In order for a currency to function effectively, economists explain that it must serve as an effective medium of exchange, a reliable unit of account, and a usable medium of exchange.
With the introduction of crypto assets, there is now widespread confusion or lack of consensus as to what they actually are. Market analysts frequently question whether cryptos are commodities, currencies, and/or asset class.
Extreme volatility of cryptocurrency prices may be partially attributed to the lack of clarity regarding how to classify them. According to Boyapoti, it is “absurd” to think that any newly introduced SoV “can go from having no value to having massive value [while also] becoming stable.”
Opportunity Cost For Using BTC As MoE
He explained that “price discovery” for SOVs happens gradually and their price movements are “neither linear, nor predictable, nor guaranteed. While giving the example of how silver was demonetized (“crime of 1873”), Boyapti reasoned that Bitcoin cannot yet function effectively as a medium of exchange (MoE) because the associated “opportunity cost” for using it as such is “huge.”
The mathematics and computer science graduate from the Australian National University argued that:
The only people who can stomach [the opportunity] cost [of using Bitcoin as a medium of exchange] are people for whom the transaction cost of not using Bitcoin is even bigger than the opportunity cost (i.e., illicit market trades).
“Economically Insignificant Minority”
Not everyone was in agreement with Boyapti’s claim regarding high opportunity costs associated with using BTC as a MoE, as Twitter user Kurt Wuckert Jr said his business has accepted BTC as payment for many years. Notably, Wuckert also claimed it had been 2 years since he “had fiat income.”
Going on to repudiate Wuckert’s argument, Boyapti asserted that he was “an economically insignificant minority”, while alluding to a Bloomberg article on how Bitcoin Cash’s (BCH) controversial promoter, Roger Ver, is having a tough time winning over “believers.”
For any new type of money to function effectively as a MoE, it must first successfully become an reliable SoV, Boyapti noted. Bitmain co-founder Jihan Wu and Roger Ver’s “economic vision” is “fundamentally flawed” according to the senior software developer. That’s because:
They do not understand that all market based monies must evolve through a store of value phase first, before they can be suitable as a MoE.