Is Bitcoin a currency or a commodity?
Bitcoin is hailed as a revolutionary virtual currency. Like any other money, we can use it to buy and sell goods online.
However, the difference is that though fiat money exists in a physical form, virtual currency like bitcoin does not. Cryptocurrency coins exist only in the virtual space, where people can trade in them.
What is a commodity?
A commodity has a value of its own. For example, coffee is a commodity because it is a highly sought-after good. On the other hand, a paper currency bill will not have any value on its own. The bill only obtains value when someone uses it to buy a commodity- hence assigning value to both the bill and the commodity. Hence, we can then buy a kilo of coffee beans with currency, rather than exchanging it with another commodity that may not share the same value.
Trading commodities for one another can be difficult as they are not fungible in a way. For example, we cannot compare the value of one kilo of coffee with one kilo of bananas easily. Both of them need to hence be assigned some value, which currency does for us!
Why is Bitcoin a Commodity and not a Security?
So, if we can use bitcoin to avail goods and services, why is it considered a commodity and not an actual currency? In a way, crypto coins are a commodity, because we buy them with actual money. A person has to invest some amount of dollars to buy one Bitcoin or on