Does Bitcoin Have Any Intrinsic Value?

The guest commentary below was written by Yan Pritzker of SwanBitcoin.com. This piece does not necessarily reflect the opinion of Hedgeye. 

There are lots of people who think that for something to become 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 that it is shiny and people want to wear shiny things.

Let’s suppose cowry shells were used for 4,000 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 Russia, 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. Central banks are punishing innocent Russian civilians due to the actions of their leaders.

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 are 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 sums of money, 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 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 is controlled or oppressed, to start earning Bitcoin from anywhere in the world.

This kind of liberty has a 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.

EDITOR'S NOTE

Yan Pritzker is the co-founder and CTO of Swan Bitcoin, the best place to buy Bitcoin with easy recurring purchases straight from your bank account. Yan is also the author of Inventing Bitcoin, a quick guide to why Bitcoin was invented and how it works.