Bearer Instrument vs Credit
TL;DR
A bearer instrument is an asset you hold yourself (money), while credit is a promise from a third party (not money).
Bearer Instruments
- Definition: An asset where “possession is 9/10ths of the law.” If you hold it, you own it.
- Examples: Physical gold, cash, Bitcoin (utility through private keys).
- Benefit: No counterparty risk. You don’t need anyone’s permission to spend it.
Credit (Digital “Money”)
- Definition: A ledger entry in a bank’s database. It is a promise that the bank will give you money later.
- Examples: Credit cards, bank balances, PayPal.
- Risk: High counterparty risk. The bank can freeze your account, go bankrupt, or censor your transactions.
Why This Matters
Digital money today is almost entirely Credit. Bitcoin represents the De-virtualization of money – returning to a digital form of a bearer instrument that you can truly own and control without a middleman.