Verifiability
2 min read
Verifiability is a property of a good which can be easily differentiated from impostors and counterfeits. A good must be verifiable in order to maintain its value. Otherwise, individuals in the market will lose trust in the good, be exposed to unnecessary risk, and cease to use it.
For most physical goods, the government takes charge of establishing the verifiability of goods through copyright and fraud laws and other regulations. Governments also attempt to maintain the verifiability of their fiat by incorporating elaborate mechanisms such as watermarks into their paper money. This does not always stop counterfeiters.
Visual and physical indications can occasionally verify legitimate vs. illegitimate paper currency, and more time-consuming chemical tests can be used to further verify the legitimacy of a currency. Processes exist to verify the purity of gold, however, they are expensive, cumbersome, and not scalable.
Bitcoin, on the other hand, maintains the strongest verifiability of any money in history. Any individual can verify their ownership of bitcoin as well as the total supply of bitcoin by running a Bitcoin node. This is what makes Bitcoin such a trustless and trustworthy system.
Notice: River does not provide investment, financial, tax, or legal advice. The information provided is general and illustrative in nature and therefore is not intended to provide, and should not be relied on for, tax advice. We encourage you to consult the appropriate tax professional to understand your personal tax circumstances.