Why is Bitcoin worth? Many find it extremely strange that computer code has a monetary value. Gold has value because it is a commodity that is valued for its metallurgical uses and aesthetic properties. The dollar has value because the United States government decrees that it can be used. The tax must be paid in dollars. And the government spends in dollars. So the whole system is about the dollar. But why is Bitcoin worth?
Bitcoin may have been just a curiosity at first. That is, a cryptographic code in a decentralized network. I assume that the first nodes were installed out of pure scientific curiosity by enthusiastic computer scientists. From an economic point of view, the Bitcoin of the early days was nothing more than a collector’s item.
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We can think of Satoshi Nakamoto, the creator of Bitcoin, as the creator of some collectable tokens or cards that began to circulate within an interest group. The Bitcoin code is certainly very innovative from a cryptographic point of view, but from an economic point of view, the concept of citizen currency is not really new. In fact, Satoshi is more of a computer scientist than an economist.
What is a citizen currency? Well, it’s a coin that was created by a community. Gold is a commodity. And the dollar is a fiat currency (created by a government). However, Bitcoin is a fiat currency managed by a decentralized network. This concept is not entirely new. In fact, the world is full of Citizen Coin Projects. I could mention the Horas de Ithaca project in New York and the Rec project in Barcelona, Spain. Well, Bitcoin is the techno-anarcho-capitalist version of a citizen currency. The code is the substrate. But your community is your essence.
Alternative currencies usually arise out of necessity. Why do casinos use tokens? Well, it’s usually a matter of safety and convenience. The tokens are much more manageable than paper bills. Tobacco, clams, salt, hides, stones, grain and many other things were used as money in the past. But these are substrates. The most important thing is not the substrate itself, but its symbolic value within a social group. Because money is above all a contract between the parties involved. It’s a social pact. It’s an agreement.
Bitcoin was certainly a collector’s item for its early users who showed an early interest in such innovative code. However, over time, other types of users began to emerge. Some users have used Bitcoin because of its great accessibility, portability, and versatility. The traditional banking system has so many limitations. And our actions are in constant vigilance. The authorities can confiscate our money at any time for violating the law.
Alternative currencies usually arise out of the need to operate by different rules. They are instruments of freedom. It’s worth noting how important the dark web is to the early growth of the Bitcoin community. Wikileaks investigated the idea of accepting donations in Bitcoin when their accounts were blocked by banks. And many casinos started trading Bitcoin due to banking restrictions.
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Bitcoin developed into an oasis of freedom. The main attraction lies in this “breakaway” element. Bitcoin doesn’t ask questions. Anyone can open a portfolio. Anyone can make a transaction. That is how the primitive community was formed. The informative bitcoiner. The Bitcoiner utility. And the ideological bitcoiner. The latter is a group of defenders of privacy and the ideal of liberation.
The value of Bitcoin now results from a voluntary agreement. The collective acceptance of this social contract called Bitcoin is really valuable here. Which means that Bitcoin, like all other forms of money, is basically a collaborative project. My Bitcoin has value because others recognize this value. Bitcoin is an instrument and a community. It’s a symbiosis. The code is the language and the community is the country.
We have already talked about the computer bitcoiner, the utility bitcoiner and the ideological bitcoiner. But we also have the investing bitcoin. That is the Bitcoiner believes that the demand for the currency will increase in the future. Here is a dilemma. Because extreme decentralization can lead to atomization. And community growth requires standards, infrastructure and services, which in many cases are centralized. For example, custody services are very important in the financial sector. And in all likelihood, with the arrival of more institutional capital in the Bitcoin space, these services will gain popularity.
Now, escrow services are in direct conflict with the “don’t trust, verify” bitcoin culture. The ideological bitcoin in particular feels a natural rejection of this type of service. However, not trusting has its drawbacks. And if we want a much larger Bitcoin community, we have to increase demand with all kinds of products and services. That means we need to make Bitcoin more attractive. And that is very difficult to achieve when the only valid option is to have our Bitcoin in a cold wallet in the back of a closet.
Much is said about the concept of being in control of our money. And that usually means that we must absolutely keep our funds. In other words, to have our private key at all costs. Never trust a third party and things like that. However, this is an extremely limited vision for a Bitcoin economy as it offers us an economy based solely on individual hoarding.
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And money is by definition a cooperative project. Value arises from the creation of benefits. This can take the form of financial products that require trust in third parties. For example, many investors trust mutual fund managers. Many prefer to invest in a financial institution because knowing that their money is in the hands of knowledgeable people gives them peace of mind. In other words, for some people, trust is not an inconvenience. Indeed, it is seen as a positive thing.
The businessman is essentially a social being. The investor is naturally optimistic. With this in mind, the radical Bitcoin’s paranoia can be an obstacle to Bitcoin’s growth. Bitcoin requires infrastructure, diversity, services and products of all kinds. The Bitcoin community needs serious and reliable companies. As simple as that. The future is not for radicals. The future belongs to the trustworthy.