The block size debate is sometimes framed as a debate over whether Bitcoin should be a "store of value" or a "medium of exchange." One way to respond to that framing is to simply answer that Bitcoin should of course be both. As I've said a thousand times now, Bitcoin's entire value proposition is that it
combines the reliable scarcity of a commodity like gold (store of value potential) with the transactional efficiency of a purely digital medium (medium of exchange potential).
But I think another point that's worth making is that "store of value" and "medium of exchange" aren't
really different functions. In either case, we're talking about something that facilitates
indirect exchange, i.e., trading one thing for another (money) with the sole or at least primary intent of, at some point in the future, exchanging that money for something else. The beauty of money is that, in contrast to the simultaneous bilateral exchange of a typical barter transaction, it facilitates real value exchange
across time and
across multiple parties. Instead of A trading his apples to B in exchange for bananas from B today, A can trade his apples to B in exchange for coconuts from C six months from now. And this works without B and C having to know each other, and without A having to trust B or C.
The reason people talk about "store of value" and "medium of exchange" as though they're separate things is because, at least from the perspective of a modern global economy, we haven't had a single form of money that satisfied both of the properties of money mentioned above: reliable scarcity and transactional efficiency. As a result, the choice of which money to use in a particular context would depend on which property was more important -- which would in turn depend on
the length of time you planned to hold the money. If you're only holding the money for a very short period of time, the
per-transaction costs of using money are going to dominate. But if you're holding money for a long period of time, the
per-unit-time costs of using money are going to be more important.
The analogy that comes to mind here is a car versus a commercial jet. The
per-trip costs of using your car (obviously assuming you have one) are pretty low - you just walk into your driveway or garage, get in the car, and start it up. But the
per-mile costs can be comparatively high. If you're trying to go from the east coast of the United States to the west coast, the costs of making that trip via car in terms of gas, vehicle wear and tear, food, hotel stays, and time(!) are going to be significant. It shouldn't be too difficult to find a reasonably priced flight that would make the driving vs. flying decision a no-brainer. On the other hand, while the per-mile costs of commercial flight can be relatively low, the per-trip costs are usually significant. You've got to deal with the ticketing process, actually getting yourself to the airport (which may not be close to home), paying for parking, getting through security, collecting your bags at baggage claim, and then figuring out whatever ground transportation you're going to use to get to your ultimate destination. Thus, for relatively short trips, taking a flight doesn't usually make sense -- and for
really short trips (e.g., going to the grocery store), the idea of flying is simply nonsensical.
One thing to observe when considering this analogy is that while there are obviously some differences between driving and flying, they are not fundamentally different things -- they are both at their core simply modes of transportation. Another takeway from this analogy -- if you're someone who thinks that Bitcoin should just be a "store of value," keep in mind that Bitcoin isn't just competing with precious metals and fiat currencies, it's competing with the best possible version of itself. (
@Zangelbert Bingledack, I think it was you who gave me that phrasing). And in my view, the best possible version of Bitcoin isn't a slightly-improved 747, it's the equivalent of cheap point-to-point teleportation.
