The current price of bitcoin is only justified if there is a significant probability of bitcoin taking over the world, and substantially replacing other assets that are less easily transferable and/or more subject to the caprice and violence of an increasingly disorderly, unpredictable, destructive, and anarchic state.

If it does take over, will rise a hell of a lot further.

For example, investing in real estate rental property is lucrative, with steady modest income and impressive capital appreciation – but it is subject to the Ferguson effect. One fine day you find that the police protecting your investment have been deemed racist, now have a bunch of fat blue haired lesbians from the federal government supervising them at twelve thousand dollars per day per fatso to cure their horrid racism, and the police have pulled back to give the mob room to burn your property, and maim and rape your tenants. Your male tenants then leave, ashamed of their horrible racism, and your female tenants never paid the rent themselves anyway.

It would be nice to have your assets in a form that perhaps was unlikely to generate value, but did not need to be defended.

If, at the time of Caesar, a wealthy Roman invested in income producing properties, what would his wealth be worth now?

Absolutely nothing.

And this has been typical over most of the world throughout most of time, including most of the world during most of the twentieth century. If, on the other hand, he buried gold in a hole in the ground, what would it be worth now?

About what it was worth then.

But right now today, bitcoin is hitting its scaling limits hard. If scaling is not solved, the current price of bitcoin is difficult to justify. If scaling is not fixed, the price will collapse eventually.

The current plan, or perhaps it is merely a hope, rather than a plan, is the Lightning Network. The Lightning Network, if ever implemented successfully, will be able to handle and exceed Visa scale levels of transactions and Visa speed.

But money in the Lightning Network will, like Paypal money or credit card money, like Visa card money, be soft money, soft bitcoin. At the cost of a fee and some delay, you will be able to convert it into hard bitcoin. You will be able to convert hard bitcoin into Lightning Network bitcoin quickly and for no fee. Transfers from Lightning Network Bitcoin to hard Bitcoin will still be subject to scaling limits. But perhaps these limits will be acceptable when we only do such transfers infrequently and for very large sums.

Your hard bitcoin is represented by a secret key and a public key, by a collection of secret keys and public keys. (Unless, of course, it is an account at a bitcoin exchange, as it usually is, in which case it is a promise to deliver bitcoin by some guy whose only known assets are a business suit he purchased from a Chinese supplier on Ebay and two airline travel bags.)

Your Lightning Network bitcoin will be represented by an account at an exchange. And if the exchange goes down, or decides to mess with you, you will be out of pocket. Which makes it soft money. Rather like Paypal or that account on the bitcoin exchange operated by some guy with two airline travel bags who is presently located in the nicest international business hotel in Outer Mongolia, which is not actually all that nice as international business hotels go. (You did put your bitcoin into a wallet where you have real control, right?)

So here is the May Scale of monetary hardness, updated to include Bitcoin and a hypothetical future Lightning Network Bitcoin:

May Scale of monetary hardness Hardness Hard 1 Street cash, gold, US dollars, Bitcoins where you hold the secret keys 2 Street cash, euro currencies, japan 3 Street cash, other regions 4 Interbank transfers of various sorts (wires etc), bank checks 5 personal checks 6 Consumer-level electronic account transfers (eg bPay) 7 Business-account-level retail transfer systems, bitcoins on the hypothetical future Lightning Network Soft 8 Paypal and similar ‘new money’ entities, bitcoins on a bitcoin exchange controlled by your username and password login 9 Credit cards

The difference between hard money and soft money is that people are always happy to take hard money, not so happy to take soft money. Always willing to give you soft money for hard money, not so keen to give you hard money for soft money.