WHAT'S IT BACKED BY?

One of the most common criticisms from nocoiners remains, "But bitcoin isn't backed by anything."

This criticism targets bitcoin's dearth of a quality that I term "correlated-redeemability."

The most common rejoinder to this criticism is, "Your U.S. dollar isn't backed by anything either."

The problem with this factually correct response is that it misses a deeper point.

The deeper point is that while bitcoin lacks one traditional quality of hard money (correlated-redeemability), it possesses the primary but less visible quality of hard money: autonomy.

This article is meant to explore the scope of autonomy, how it came to be overshadowed by correlated-redeemability and the relative value of these historically tandem qualities of hard currencies.

A TALE OF TWO QUALITIES

Traditional hard money has had two qualities: correlated-redeemability and autonomy. The first is easier to understand. Conceptually, correlated-redeemability is the quality of a currency that facilitates a rapid redemption for a stable amount of a commodity (traditionally a tangible one). Precious metal coinage illustrates how easily this quality can be understood. If someone pays for your labor with a gold coin, you exchange your unit of labor for a scarce metal that you can hold in your hand. Paper notes backed by precious metals are marginally more abstract, but because of historic exchange practices, they had concrete manifestations. Consider the U.S. government's silver certificates, issued until the 1960s, which allowed mere plebs to exchange paper notes for genuine silver. The physical nature of correlated-redeemability helps make it cognitively accessible for the broader public.