A Comparison of Monies

by Carl Watner and Dave Scotese1
From Issue 174 – 3rd Quarter, 2017, and revised March, 2020


Real Money Counterfeit Note2 Federal Reserve Note Bitcoin
What is it? Coins of gold or silver Piece of paper Piece of paper Generated by computer software
What is its essence? A specific weight and purity of precious metal Paper with ink Paper with ink sanctioned by government  

A cryptographic credit for protecting transaction data

How is it made? Made from a metallic element found in nature Fabricated from a man-made product without government sanction Fabricated from a man-made product at government-approved printing facilities Generated by computer algorithms within predetermined limits

What non-monetary uses does it have?

Industrial and ornamental uses make it valuable to people Has no use except as paper Has no use except as paper None

How do multiples compare to the original unit?


Multiples have proportionally greater weight than originals Multiples have different numbers printed on the same amount of paper Multiples have different numbers printed on the same amount of paper Multiples are generated by the same method as originals
Is acceptance forced or voluntary? Voluntary: historically a medium of exchange for at least 5,000 years  

Functions as a medium of exchange until its false nature is discovered


Functions as a medium of exchange by government edict (legal tender laws) Voluntary: trading began in 2009 after the creation of the computer software
On what does its exchange value depend? Exchange value depends on supply – as determined by the amount mined, and demand. Its exchange value has exhibited a remarkable stability over centuries. Presumed exchange value decreases with amounts created at the whim of the counterfeiter Presumed exchange value decreases with amounts created by the Federal Reserve  

Exchange value is determined by the market participants with reliance on the creation schedule of its finite supply

What special requirements must be met to use or accept it? Accepted by many millions of people all over the world, generally without hesitation Accepted until its counterfeit nature is discovered Accepted until confidence in the issuing government evaporates  

Must have appropriate internet connection and computer software or trust someone who does


Is there risk of counterfeit? Yes, but harder to counterfeit than paper notes. See footnote 2. 100% risk Cannot be distinguished from a perfect counterfeit Computer authentication makes it impossible to spend attempted counterfeits
What are the security risks? Location must be accessible. Must be protected against theft, but is not destroyed by fire, water, or wind. Same risks as Fed Res Note and will be seized and forfeited to the government if discovered. Location must be accessible and be protected against theft, fire, water, and wind. Private keys must be protected from disclosure. Computer communications with others necessary to execute transactions.


1An expansion of “A Comparison,” first published in Issue 115 (4 th Quarter 2002), page 8.
2This comparison only includes counterfeit paper notes, not attempted fakes of metallic coins. During the heyday of real money, numerous devices, described as counterfeit or fake money detectors, existed. In the United States the “Gold Prohibition Act of 1934 calling for the confiscation of all gold coins, except those considered ‘rare,’ marked the disappearance of the fake coin detector.” Their modern counterpart is available through Fisch Instruments. See www.thefisch.com and THE FISCH PRECIOUS METAL BUYERS GUIDE, 6th Edition, July 2012, page 5.

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