After reading numerous articles, having countless debates, and watching enthusiasts going head-to-head with both no-coiners and gold bugs, I feel there’s a few common themes that get picked up by both groups in an attempt to separate Bitcoin from its inherent value preposition.
Being a Bitcoin lover, I cannot stay silent and must join the discussion, as there are a few takeaways I can add which might help you the next time the “Bitcoin has no value” topic is thrown in your face.
The time value of money
Gold, bitcoin, Lightning Network, settlement, and money velocity. An intro to bitcoin’s second layer. https://t.co/U3Ru56ndnl
— Nik Bhatia (@timevalueofbtc) June 27, 2019
Before we dive into the top-three arguments used against Bitcoin, it’s important to cover a quick overview of the money technologies that existed before Bitcoin.
Much like what happens with any money-like technology, humans have mostly chosen to use objects with some underlying value (like gold, silver, or salt) due to the fact that, at the time, they were particularly scarce or hard to come by and could be used outside the monetary-exchange realm (to produce other goods or to satisfy basic needs). Therefore, besides being a unit of account and a way to exchange goods and services, I argue the most important use case for these items was as a store of value.
When food was scarce and hard to come by, people used objects that could preserve said food (salt). After we became mostly an agricultural civilization, humans then moved to objects that would not lose value over time – so said objects needed to have a certain chemistry that allowed them to not decay, like gold and silver.
In addition, when humans learned how to separate currency technology from money technology (fiat currencies), we initiated a new era with the centralisation of currency minting (the Kang empire, Roman empire, and modern society). By default, when a sovereign region imposes legal tender, it means a certain currency must be used by its population on the penalty of imprisonment (or far worse, in some places).
So, when someone asks why Bitcoin has value, try to reverse the question and ask, “How can something not lose value?” It will help the other party to start viewing the picture from your standpoint – one of understanding the time value of money.
Bitcoin has no inherent value
Gold is actually useful for some things, like filling teeth and making pretty jewelry; that's not most of its value, but it does provide a tether to reality, along with a 5000-year history 9/
— Paul Krugman (@paulkrugman) January 21, 2018
One of the most widely used arguments against cryptocurrencies, namely Bitcoin, is the fact it has no apparent use case outside the monetary spectrum and therefore does not possess inherent value (based on a real asset like a mineral or oil).
What proponents of this hypothesis forget to tell you is that:
(a) There is absolutely no need to give this money system an underlying value given the fact it is simply a technology.
(b) Bitcoin gives people the ability to safeguard value as it does have an underlying asset – its energy spending (or expenditure).
In addition, BTC is both a decentralised currency, meaning anyone can participate in minting, and its peer-to-peer, so there are no third parties involved as you can run a full node and validate your own transactions as well. It’s the currency of the internet, free from jurisdiction and government-imposed law.
When people say Bitcoin has no value, it means they lack the necessary knowledge to understand where its value comes from. The best explanation I’ve come across so far has come from my discussions with Roger Ver, Jimmy Song, Mati Greenspan, and Richard Heart.
It seems to me people who have been here longer understand the following to be true: value is always subject to something. That means for something to have value, someone needs to be ready to pay a certain amount for it. Therefore, anything can have value assuming there is a price and a market of at least one buyer and one seller.
Does Bitcoin have value? I could give you a couple billion reasons why it does if I tried hard enough. But let’s just say the market does agree with my view, as Bitcoin is priced over $10,000 per BTC at the time of writing.
Bitcoin is bad for the environment
⚡️ Power use by the $BTC network is on the rise. Positive market sentiment and price action means more proof-of-work miners coming online. Our goal is to incentivize sustainability and energy efficiency with #blockchain. pic.twitter.com/tbWYbWylV9
— BitGreen (@BitGreen_) August 3, 2019
When we say Bitcoin’s security and value comes from the energy spent by miners to secure the network (and validate blocks), we are bombarded with traditional (and sometimes crypto-related) news media sources stating Bitcoin is indeed bad for the environment.
Can we allow the waste of terawatts of energy on something that only exists in the digital realm?
Well, it seems to me this line of discourse brings us closer to a non-democratic, authoritarian view of the world rather than one of freedom of choice.
If people believe Bitcoin has enough value it’s worth using energy for, why not let them? They seem to be paying for the energy consumption, so do we really have the right to say how energy should be spent? Do we have all the relevant information to make such a statement?
(a) Is the energy being used coming from a renewable or non-renewable source?
(b) Would said energy be wasted if not consumed by miners?
(c) What is the fair amount of energy one can use to secure money?
It seems the discussion around the energy expenditure is a pointless one when we consider hashing (how hard it is to perform a 51% long-term attack and change previous history on the blockchain) is a key feature of Bitcoin’s network security.
Bitcoin is expensive to use and no one accepts it
I’m combining both of these arguments into one point given the fact they draw on the same logic. Usually proponents of the above hypothesis argue that “BTC can’t really be used as digital cash because it’s expensive, so no retailer will use it”.
I would argue that there are plenty of services (BitPay and Coinbase Card for example) that convert Bitcoin into fiat to pay for goods, as well as plenty of retailers, especially in Asia, who now accept crypto payments.
In addition, due to the arrival of layer-two solutions like payment channels (such as the Lightning Network and Liquid) and sidechains, as well as with the use of alternative cryptocurrencies (such as Litecoin), one can avoid paying any fees for simple “coffee” transactions.
Personally, I don’t care if the fee is high as long as it goes towards securing my money. But that’s just me.
In conclusion, the main critiques of Bitcoin can simply be answered by explaining the economic factors that arise from Bitcoin being a decentralised digital currency secured by increasing energy requirements that allows for anyone to participate and join in.
Disclaimer: The views expressed in this article are the author’s only. This article isn’t financial advice or promotional material; it represents my personal opinion and should not be attributed to Coin Rivet.