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For a long time now, Bitcoin critics have argued that digital currency cannot be successful due to its lack of intrinsic value. Bitcoin is not for everyone. You can not hold it in your hand, and it can not be used for anything other than trade it for someone else.
Gold bugs are very happy to point out that gold is widely used in various industries, such as jewelry and dentistry, unlike bitcoin. Economists and investors often point out that, unlike bonds and stocks, bitcoin does not produce anything. But the two groups fail to understand that these are not bugs but rather the same core features of Bitcoin.
Intrinsic Value
In order to fully understand Bitcoin’s intrinsic value, it is necessary to first define it. According to Investopedia, in terms of its definition, intrinsic value is a measure of what an asset is worth. It is arrived at by taking into account a complex financial model and an objective calculation.
However, this definition is useless. It does not explain how to calculate an objective or complex model. Who decides which variables and inputs to include in these calculations? Intrinsic value is not a concept that refers to an object’s worth in terms of its objective. Instead, it is a thought experiment that shows how assets such as gold and farmland can be valued based on their intrinsic value.
Now think of it, in a world where humans do not exist, would the existing assets still have value? Of course, the answer is absolutely not because the value is only made sense in the context of human existence.
The concept of intrinsic value is predicated on the idea that the two are interrelated. This false premise implies that the former can be separated from the latter. Without an independent evaluation, value cannot exist. A head-on coin can only exist without tails, and a buyer can not only exist without an independent seller.
For instance, there is a man stranded on a desert island, and he discovers a bar of gold. However, all he has is the bar of gold but no one to trade it with, making it completely useless. If it is believed that gold has intrinsic value, then the bar of gold would retain value to the man. However, the gold does not have the same intrinsic value on an island where the rock is similar in shape to gold.
When we think about oxygen’s intrinsic value, it is tempting to assume that it has intrinsic worth. However, this idea loses its appeal when we remove the evaluation component. Humans need oxygen to survive. Without them, the concept of value in any material object becomes irrational.
Since we all give value to life and presumably will always have it, oxygen is a vital part of us. However, In terms of intrinsic value, it is not the same as having objective value, which is defined by human preference. But the fact that man has the ability to choose his values does not imply that he can avoid the consequences of these values. For instance, if a man values living things, he needs to value oxygen.
It is also absurd to talk about value as either objective or subjective since these are both considered to be transactions. Just as a transaction is not necessarily objective, so is value also not factual. Economists believe that wealth preservation is a vital part of man’s overall strategy. If one values his wealth, then he must save it in money that cannot be debased or inflated. Man values monetary sovereignty, and if one does so, he should use money that cannot be censored or confiscated.
The objective value of a property is determined by its subjective values. This means that any form of money with these criteria will always hold the same objective value to everyone.
Intrinsic Properties
The relationship between the objective and subjective has become more complex. This makes it more relevant to the discussion about intrinsic properties. The question of the intrinsic value of bitcoin is not, “What is it?” but, “What are its values?” We should be asking what are the values that matter to us, and do they meet these?
It is generally believed that most people on Earth value the accumulation of wealth and preservation of it. Aside from its intrinsic properties, gold has a high monetary value. This is because it has been around for thousands of years.
The intrinsic properties of gold, which are highly rare and resilient in the Earth’s crust, triggered a sequence of events that led to humans collecting and using it as money. It was not just gold’s intrinsic properties that inspired people to use it as money. It was also humanity’s desire to preserve the wealth that motivated the creation of money.
In order to determine if Bitcoin can surpass the level of success that gold has enjoyed over thousands of years, we must first analyze its intrinsic properties. Due to the nature of Bitcoin, there are various intrinsic properties that can be considered. This article will focus on four major ones.
The Intrinsic Properties of Bitcoin
Prohibition Resistance
Bitcoin is open to everyone. At a time when Western governments are starting to embrace the idea of censorship, it is clear that Bitcoin is not discriminate. Bitcoin is a platform that prevents people from being censored due to their race, politics, or beliefs.
Although Bitcoin can not distinguish between transactions, it can still include all of them in its blockchain. For instance, if a transaction has a mining fee, it will be included in the network.
Decentralization
Unlike a corporation, which has a CEO, a board of directors, and headquarters, Bitcoin is decentralized. This means that it can be distributed across the globe without the power to make changes to the protocol. The goal of any change in the Bitcoin protocol is to have the input of its users. This process must first take place in their hearts and minds.
Any node in the network that tries to change Bitcoin’s code will be rejected. As the network expands, so does the number of nodes. The more complicated it will be to make changes to Bitcoin’s core design as it continues to grow. Its design is similar to cement, which gradually gets harder to make changes to.
The Finality of Settlement
Bitcoin is a decentralized digital currency that aims to settle transactions in just a couple of minutes. One of its most substantial features is its ability to seamlessly sync across time and space. Through this process, Bitcoin uses the laws of thermodynamics to make sure that the system can be relied upon.
No one can cancel a Bitcoin transaction. However, once a transaction has multiple confirmations, it can be regarded as irreversible.
The Scarcity is Guaranteed
One of the most evident features of Bitcoin is its hard cap, which measures 21 million coins. Due to its digital nature, Bitcoin can offer what no other form of a physical object can. Unlike traditional money, which can be easily expanded by a small group of insiders, the supply of bitcoin will not change for the rest of the time.
Objective Properties and Subjective Value
In order to glimpse a clear overview of Bitcoin’s value, we have to first define its intrinsic properties. This will allow us to unify the various facets of the equation. Money is a tool that helps us achieve specific goals. Bitcoin is a superior alternative to other methods of achieving these goals due to its superior value.
Throughout history, it has been shown that monetary sovereignty and wealth preservation are two of the most common preferences of people. The concept of wealth preservation refers to the protection of the purchasing power and value of wealth. Monetary sovereignty allows individuals to make their own decisions regarding the use of wealth.
Aside from being less robust, modern-day fiat money also falls short of the targets set by central banks. These targets set the value of their currencies against inflation. The failure of currencies to preserve wealth is explained by their design. They are not designed to protect wealth. For instance, in 1970, it would have required over $700 to purchase what was then $100 worth of goods and services.
The nature of fiat money’s structure means that transactions can be censored or denied for any reason. This means that banks and governments can both monitor and close customer accounts. Gold bugs often claim that returning to a gold standard would solve the various problems that plague the fiat system. However, this argument fails to concede that the failure of the gold standard itself was the cause of the current fiat system.
Due to the lavish lifestyles of Americans and other developed nations’ citizens, Bitcoin’s benefits may not be as apparent to the average person in developing countries. The U.S. has been experiencing inflation for the past couple of generations, but it has not been as devastating as some people think.
Due to the recent events in Canada and the U.S., many people are starting to realize that the value of bitcoin is starting to become too obvious to ignore.
Ages ago, people started using gold to stow and transact their value. Unlike the current fiat money, which was not regarded as having value by any authority, gold was chosen by people who both explicitly recognized its monetary properties and had implicit recognition of them. Bitcoin does not need to be forced into existence in order to succeed.
Rational people will eventually gravitate towards it due to its superior objective properties. Over time, people with values aligned with monetary sovereignty and wealth preservation will begin to gravitate toward it.
Bitcoins Is Time
Money is the sum of all economic energy that humanity has stored. It is a representation of the time that humanity has spent. However, the link between money and time is more intriguing. If money does not require a lot of time to create, it does not work well or not for long. This concept is more profound as it implies that we must always keep track of time.
Money has to go digital, and we have to agree on a time-based concept. At first glance, it might seem like telling the time is easy, but it is not. The complexity of telling the time is an arduous task when it comes to synchronizing the state of a global network. How do you tell the time if your system cannot be trusted? What is time anyway?
Aside from being the key to the modern information, timekeeping devices have also transformed various civilizations. For instance, in 1934, Lewis Mumford noted that the timekeeping machine was the key to the contemporary information. This is not a steam engine, nor is it a computer.