There are lots of people who think that for something to become a money, it must have some intrinsic, or more correctly, utility value.
Let’s suppose for a moment that you believe in utility value, and think that the reason gold was used as money is because it is shiny and people want to wear shiny things.
Let’s suppose cowry shells were used for 4000 years as money and exchanged in some cases at a rate of a handful of shells for a cow because people found them so attractive and rare (far from their source of production) that they were worth a cow.
From the examples above, we can see the idea of intrinsic value is specific to cultures. In some cultures, shiny metals were valued. In others, shells or beads. What do we value today? Clearly it’s not cowry shells, which can be had for about $5/100 on Etsy.
I posit that what we (most people on Earth at this moment in time) value is liberty and freedom. Freedom from oppressive regimes. Freedom from autocracy. Freedom to do what we please with the money we earn. Freedom to leave our country with our wealth when our country is no longer a welcome environment for us.
Living in a first world economy, it is difficult to understand the value of Bitcoin. Isn’t it just a slower, more expensive way to send money? What’s wrong with PayPal, Chase QuickPay, or any number of options that are free and instantaneous? The answer is: nothing is wrong when liberty is an assumption and when you have a functional banking system and relatively non-corrupt government.
But this is not the case in huge parts of the world. When we immigrated to the US from the former Soviet Union, my parents were allowed to exchange approximately $100 per person of Soviet Rubles to USD. The rest had to be sold on the black market for pennies on the ruble. It was illegal to own US dollars and the government strictly controlled the entire economy.
This kind of currency control is playing out all over the world today, in places like Venezuela, Argentina, Iran, and Zimbabwe. There are cash shortages as the government prints ever more digital money while denying people sovereignty by not issuing cash that you can actually carry with you and exchange even on a black market.
This means you’re completely at the mercy of the corrupt government. They can freeze your bank account, steal your funds, or simply not allow you to leave with the money you’ve worked all your life to save as the economy tanks and the money hyperinflates, you’re left with nothing.
What is the value of Bitcoin in such economies? Bitcoin represents economic liberty. If you own Bitcoin, you have portable wealth. You can walk away from a failing regime and not lose your life savings.
Critics of Bitcoin point to its volatility without realizing that the Venezuelan Bolivar inflation has been between 50 – 150% per month for the last 3 years, topping out at upwards of a million percent per year. The Bolivar has completely failed as money because it no longer stores value, and the people who hold it are now locked into economic despair. What if they were able to hold Bitcoin instead? How much misery in this world would be prevented? In Afghanistan, women previously limited by a patriarchal society, are gaining financial autonomy because of Bitcoin.
What’s more, cash is being eradicated across the world, even in first world countries. Already most transactions we do in the US are done through corporate payment networks like Visa, and settled digitally by our banks. What we gave up during the transition from physical cash to digital payments is privacy and control. We no longer own the money we claim to have, and our data is constantly sold to the highest bidder for the privilege of using these payment networks.
So, what is the intrinsic value of Bitcoin?
Unlike money we’re used to, Bitcoin isn’t shiny, heavy, or made of a cotton/linen blend. But on the other hand, you can carry it without a suitcase.
It’s digital like the money in your bank account and your PayPal account, but unlike those moneys, it can’t be taken from you if the government decides you’ve done something wrong.
Like a credit card, you can use Bitcoin to buy things or send it to someone halfway around the world, but unlike the credit card system you can do so without giving up your identity and financial details to centralized repositories that get hacked.
It can’t be made into jewelry, though by signing messages with private keys you control, you can flaunt your wealth if you so choose, without exposing it to loss.
It is not “backed by” a government central bank complex that decides in a secret room whether it will lose 2 or 4% of its value this year. It does have a guaranteed supply schedule that cannot be manipulated by humans, and a value that is decided purely by the market.
The intrinsic value of Bitcoin is its ability to move across national borders undetected. There is literally no other asset that is both scarce, digital, and portable in your head by memorizing twelve words. Moreover, because of its pseudo-anonymous nature, it is possible for people in any country, regardless of how tightly currency controlled or oppressed, to start earning Bitcoin from anywhere in the world.
This kind of liberty has value that has not even yet begun to get tapped. Stop thinking of Bitcoin as a payment network, and start thinking of it as a tool to take down those who would seek to control us.
For an alternate take on the subject, check out Connor Brown’s article, Bitcoin has no intrinsic value, and that’s great.