We are on the eve of Bitcoin’s biggest market rally in its history. Retail and institutional investment are growing and adoption seems within reach. All forecasts predict Bitcoin can grow up to 1,000% in the coming years. And yet, despite surviving a multitude of challenges over time, the value of Bitcoin is in question now as much as ever.
Despite all the market growth and the explosion of innovation generated, critics of the digital currency remain convinced that Bitcoin is not worth anything. And the recurring reason is that Bitcoin lacks backing from any tangible form of value like gold or a central bank. Therefore, most struggle to find intrinsic or any other form of value in it. Its followers say its value lies in its utility, cost to produce, and adoption. But maybe the true answer lies beyond convention and experience. It is entirely likely we are at the dawn of a new system of value altogether.
Charlie Lee, the creator of Litecoin, recently stated that the intrinsic value of Bitcoin is found in its “censorship resistance, transaction immutability, cost of production, and fixed money supply.” Basically, he argues that Bitcoin is valuable due to its technological innovation and the costs to produce it. Presently, it is estimated it costs approximately $4,000 USD to create one Bitcoin. This could be considered a base value of each coin. And the advantages in fee reduction and transaction speeds makes it more efficient and just as valuable as money. Since it’s hard to produce and faster to remit, it is valuable. To say that this argument is challenged by the financial industry leaders is an understatment.
Alan Greenspan, the former chairman of the US Federal Reserve called people fools for believing in Bitcoin. He believes that in order for currencies to be exchangeable, they have to be backed by something. In the case of fiat money, currencies are backed by faith and credit from governments. Roger Ver, entrepreneur and CEO of Bitcoin.com believes that value is in the mind of the beholder. And that all forms of value would be worthless without anyone believing that they are so. Other camps place the value in the mining process; whoever controls its supply controls its costs and its value. And the last group links value to adoption; the rate of adoption will determine its value.
The entire point of Bitcoin is to change the way we think about money. To transition from a centralized, mismanaged, and controlled system to a decentralized network where individuals transact with each other in a trustless manner. Maybe the value of Bitcoin lies in the shared effort to use and preserve a method that works for the betterment of humanity and not financial corporations. This new idea may require a leap of faith in letting go of the centuries old establishment of trade. And so the value of Bitcoin may rest in its open source infrastructure that allows anyone to participate in an integrated global economy accessible to all; it is unlimited and unrestricted.
Thus, Bitcoin should not be seen as a source for profit or store of value, but as a medium to interact with each other in a way never conceived before. Its value lies in it being a facilitator for trading interaction without the need for costly intermediaries who put profit above anything else. And the beginning of a new age where the bonds of money are broken and wealth can be distributed freely among all people regardless of borders, culture, language, and abilities.