Intrinsic value of bitcoin/Bitcoin (2024)

This is an important conversation because of how words are used in the real world. Words are important. For example when Peter Zeihan says that there is no intrinsic value in Bitcoin/bitcoin and that there is no value in the Bitcoin/bitcoin product, I think he is wrong. But is he wrong on both sides of that and?

My claim of value

My claim - the intrinsic value of something is related to the sum of the properties of that something evaluated by rational people in a particular context. Therefore Bitcoin/bitcoin has intrinsic value based on it's scarcity, censorship resistance, early adopter network effects and digital capability (e.g. micropayments, programability and clear/settle simultaneously) - all in the context of money. That is of course as a medium of exchange, unit of account and store of value. I would sum all of these properties of money into the word - governance. (e.g. Proof of work). "Blockchain is not a financial technology but is a governance technology" (quote Shermin Voshmgir)

However, the alternative claim is that the very last thing you want is for your system of money to have any intrinsic value at all. Any value is purely in the eye of the beholder. So no money, be it gold, USD or BTC has any intrinsic value at all.

Which claim is true? Well damned if I know but I favour a world of rational behaviour where truth furthers the human condition. And I damn well think that humanity needs a new system of money for a digital age that is governed with democratic fairness (e.g. Proof of work)

Direct “vs.” Derived properties

Proof of work is a direct property and not a derived property of bitcoin/Bitcoin. It is the way digital ownership is governed for the proof and integrity of an immutable ledger. That is the problem solved here. The ledger is the record of ownership on the internet. "Blockchain is really a governance technology and not a financial technology" (quote, Shermin Voshmgir). It is a system of fair decentralised governance for the recording of transfers of ownership for the buying and selling fairly in the internet age (hint .. it's not fair as it is)

To buy and sell, fairly, on the internet needs ownership and its governance of

1. Stuff to buy or sell
2. Your identity to be trusted
3. Money used in value exchange

bitcoin/Bitcoin (i.e. blockchains) does all three in a truly digital and fair way for the very first time ever. This is only the system of ownership recording of course. It is only one component but a damned important one, of all the things you need to buy and sell fairly on the internet, e.g., did the stuff arrive (you might need IoT for that), is it the stuff I think it it is (you might need a crypto anchor or a physically unclonable function inherent to the stuff for that) and so on. But the system of record for ownership on the internet matters. A lot.

The value metrics of bitcoin/Bitcoin

I was brought up to look at cashflows like a dividend or interest payment. But BTC has no cashflow. So it can have zero value. Movement in a fiat like GBP or USD can be linked to interest rates and that is linked to GDP growth or contraction. We can say that bitcoin/Bitcoin is the money for the internet economy or internet GDP. The metric of the internet buying and selling economy is linked to the number of transactions as a function of network effects. So this should evolve into the pace of adoption for buying and selling on the internet where payment is on Bitcoin in bitcoin. Adoption for internet payments and its link to processing fees can be our future metric of value. This is programmable into apps.

The meaning and use of words

You can’t have a conversation about blockchains (i.e. Bitcoin with a capital B) without talking about bitcoin/Bitcoin. And you can’t talk about the derivation and future of the systems of money (bitcoin with a small b) without talking about rare sea shells, salt, gold or fiat (e.g., USD) and now about bitcoin/Blockchain. I am convinced that we need a new and a fair system of money for the digital age. And when you talk about money then you can’t avoid talking about the words Bitcoin/bitcoin and its intrinsic value or not. This is what I mean by rational behaviour. There are words that we use and words that folks pine on and on about. I'm on the use side of things. I don’t live in a hitchhiker’s laboratory experiment but in the world as it is, for all its. faults. That is what I mean by context.

Did you know that spelling was freeform in Shakespeare's time? Words and their meaning change all the time. Hell, I might even be a damn woman for all I know. What does the most fundamental word or two actually mean? Meaning is just not universally accepted. Up is down, black is white. Meaning is in how folks actually use words - not in a damn laboratory. And folks use the word intrinsic to mean properties.

Simply, bitcoin/Bitcoin has intrinsic value as it has properties with real utility in this new digital world. That is for rational people living in the real world as it is. We are talking about the system of recording of ownership on the internet. As always the best ideas, we hope, will win out because of their utility. Do we trust how these bits and bytes of ownership are governed? At the end of the day we all have to trust something. And my view is that a decentralised governance of ownership on the internet, is better for me, than a centralised one that is governed for the few. And what words should we use to describe e this system? I am happy to use the words intrinsic value. Are you? Or are we all stuck in a circular Catch-22? Damned if I know. The meaning of words is everything. And that meaning is always up for grabs. And to be informed we need to know the arguments, all the arguments, on both sides.

The Trade offs for scale

Are the trade offs needed for decentralisation at scale acceptable? I wish that they will be and I still hope for that but the clock is ticking. Can decentralisation and security be maintained at internet scale? Can decentralised governance scale enough to be useful as money in an internet of value?