Bitcoin can be understood as a new form of money, not just a new investment. Here is a framework for analysing its role.
Bitcoin is often described as a new asset class. But it can also be understood as a new monetary system, where settlement happens directly between the parties and the books are kept by an open network.
Such a monetary perspective compares bitcoin with traditional money and asks how it can live alongside, or challenge, today's arrangements.
Money is usually described through three functions. It is a means of payment, a store of value and a unit of account in which prices are stated.
Measuring bitcoin against these functions makes it clearer what it already fulfils, and what is missing.
A useful way to analyse bitcoin is to separate three perspectives. The past is about the technical breakthrough: digital money without a central bookkeeper.
The present is about what bitcoin has actually become, first and foremost a store of value with uneven acceptance. The future is about scenarios where bitcoin takes on a larger role as a means of payment or unit of account.
The framework does not say how things will turn out. It helps separate what is established, such as the technology, from open questions about use, regulation and economics.
The next articles in this category follow the framework: Bitcoin's properties as money, what bitcoin has become, and which futures are being discussed.