All bitcoin is, is fake money. Why does it have any value at all?
Anyone can literally just make up their own money!
I could print a ton of monopoly dollars and start selling them to people saying something like, “trust me it’ll be really valuable someday!!!!”
But because the only thing you can do with bitcoin is trade it to someone else, how can you tell if it really does anything? It’s even not legal tender, you can’t really buy things with it.
And the greater idiot comes along someday and you can sell it to them, getting it off your hands and making a killing by being an early adopter $$$
Then these idiots are caught with the bag of fake coins, that don’t actually do anything, ha!
Jack has been sold a few “magic beans” for his cow.
You retail investors come along, paying all of this money for some collectable beanie baby, because someone else said it was “the new money of the world” or some bullshit, and you believed him!
This is what everyone thinks the first time they learn about bitcoin
Or at least those late to the bitcoin party.
Not me of course, I first heard about bitcoin being used as money on the silk road to buy mushrooms. So my first impression was more like, “Oh yeah, of course they invented a money for the internet, that makes sense” and I wasn’t very impressed.
My second exposure was from my anarchist roommate at summer camp who talked about it nonstop as a political tool. I was interested by what he had to say, but didn’t really think it would work. At the time, bitcoin had fallen from almost $1,000 all the way to $250 in Mt. Gox’s collapse, and I assumed it was a failed experiment.
I also saw liberty is losing all over the world and didn’t have much faith in an anarchist money to gain popularity for the masses. Lastly, I just wasn’t interested in monetary policy compared to other political issues.
But this is why this “magic beans” argument confused me for a long time, I never thought of bitcoin as an investment or something that would ever go up in price. I thought of it as a volatile money that probably was too niche to take off.
So for those who can’t see the utility right away, I understand why it’s important to dispel this ‘magic beans’ myth. You probably don’t have the same historical context as I do.
Not only do I understand pushback on bitcoin, but deep down I do respect it. I understand that it’s vital you don’t blindly trust me or anyone in the bitcoin space, but take the time to verify and cross check many sources. It’s recommended that you remain cautious especially with crypto. There’s so many scams out there, and now there are so many coins and marketing ploys, it’s really difficult to understand what’s going on.
Asking if bitcoin actually does anything is totally a legitimate question.
The answer however, might make you go mad.
Bitcoin is Designed Money
Unlike other crypto projects which were spun up over a weekend to make a quick profit, bitcoin was in the works for a very long time. There had been many failed attempts at digital cash, and it was thought to be impossible to create a money in cyberspace not physically tied to the real world.
The creators of bitcoin called themselves cypherpunks. The cypherpunks were a group of mega nerds, all around the world, who communicated via mailing lists and early internet messaging systems in the 90’s. They were techno-libertarians, fans of literature like 1984 and Atlas Shrugged. They were interested in all kinds of privacy preserving technologies, leveraging cryptography to secure freedom in the digital age.
They saw the writing on the wall, and were politically motivated to build freedom technology to combat the inevitable leeching of authoritarianism into cyberspace. The cypherpunks knew “If it’s to be it’s up to me” and were dedicated to action to achieve their goals. The phrase “Cypherpunks write code” in Eric Hughes’s cypherpunk manifesto is their call to action, to apply cryptography and invent technology that preemptively preserves human rights, without asking for permission.
They were working on digital cash for a long time, from David Chaum’s eCash proposal in 1982, through the 90’s and 2000’s until bitcoin was finally released in 2008. The understanding at the time was that preventing copying and duplication of money in cyberspace was impossible, and private eCash could only be possible with a trusted bank or intermediary storing real world assets.
After multiple failures like Liberty Reserve it became apparent that centralizing any aspect of ecash would lead to it’s appropriation by state and authoritarian entities.
Every money throughout history has been subject to human control, manipulation, corruption, and inflation. Even gold and silver have been exploited throughout history, with dictators’ stamped faces into coins.
The designers of bitcoin were experts in distributed systems engineering and economic history,
They solved theses problem, combining 150 years of Austrian economic knowledge and Ancient Greek monetary theory to develop…
The perfect money.
They Invented a Better Money (who does that??)
Bitcoin is the invention of a new digital money, it solves a decades old computer science dilemma, and is the invention of digital scarcity
Bitcoin was created to fit all the fundamental properties of money better than gold or fiat. If you look at all the attributes of a good money, bitcoin is superior in every way
The cyhpherpunks were experts on monetary history and knew all too well that the problems of unbacked fiat currencies create. Bitcoin was designed specifically to fix all of the shortcomings of gold which lead to it being obsolete as global money. Bitcoin is the hardest, soundest, and most perfect money ever developed by mankind
- Bitcoin isn’t just money, it’s isn’t just a digital asset, it’s also a network
- It’s an internet protocol, and a technology stack
- it’s a global monetary system and a global financial system
So What is Bitcoin’s Intrinsic Value?
It doesn’t actually do anything, it’s just internet points. We have credit cards, paypal, venmo, cashapp, kohls cash, heck you can even send money over facebook messenger!
Once you learn what bitcoin is, who made it and why, you’ll see how this argument completely falls apart.
The reason Americans and those in the privileged western economic zones don’t understand bitcoin is because we don’t need to understand bitcoin.
Our financial system is, mostly, inclusive.
Our institutions are the best in the world, and while they definitely aren’t perfect, they’re good enough to where we don’t really pay attention.
Our financial privilege blinds us to the very real and very terrible struggles for BILLIONS of people around the world.
The difference between bitcoin and all other digital monies is that bitcoin is decentralized, meaning no one is in control.
In fact, bitcoin runs on it’s own without any human in charge. Bitcoin is like putting a calculator in charge of a global monetary and financial system, one that is rules based and unchanging.
Bitcoin’s utility is that it allows people to store value outside of any currency system in something with provably scarce units, and to transport that value around the world.
Its founder, Satoshi Nakamoto, solved the double-spending problem and crafted a well-designed protocol that has scarce units that are tradeable in a stateless and decentralized way.
Lyn Alden
No one can change the rules or devalue the currency. No one can enrich themselves by slowly stealing value from everyone else.
It’s a money that can’t be corrupted by humans because no human is in control of it
Solving the concentrated-benefits and dispersed-costs problem affecting all other fiat monies, aka inflation.
Bitcoin is the most neutral and fair money ever invented, and the consequences are profound.
What is Bitcoin Backed by?
Bitcoin is backed by the only thing that backs any form of money: the credibility of its monetary properties.
Bitcoin was designed from the ground up to have the strongest monetary properties of any asset in history.
It solves the shortcomings of gold and fulfils the fundamental properties of money better than fiat.
Fidelity’s digital asset arm produced a great report on Bitcoin’s monetary properties and why they are superior to all historical forms of money. This chart explains why bitcoin has value, you have to judge monetary goods on these monetary properties
Some of these monetary attributes were described thousands of years ago by Aristotle and they still hold true to this day.
The idea that money has to be backed by some other arbitrary thing that it does, is ridiculous because being a good money is already one of the hardest things in economic society to accomplish. It’s an insanely difficult task, that’s why there are so few things that actually manage to pull it off.
- Bitcoin is the first accounting innovation in over 700 years
- The last time there was any big revelation in bookkeeping was double booking accounting, popularized by the Medici and Florentine banking families, setting off an explosion of wealth and the renaissance
- Bitcoin is the invention of the decentralized ledger, of full accounting transparency, and of digital scarcity, which in our internet age will also result in a similar explosion of prosperity
One of the very few topics that all economists actually agree on is that price controls are stupid. It leads to shortages and misallocated resources EVERY TIME ITS TRIED there are thousands of examples. Thousands.
AND YET for some reason, everyone thinks the most important financial asset in the global financial system, money, should be managed by the state and corporations.
Do you really want the bankers manipulating the price of money, AKA the price of time for every human on earth…
AND YET no one stops to think that MAYBE price controls on money, maybe just maybe, are AS ineffective as price controls on everything else that they’re tried on.
All of our money is controlled by the state. And you better believe they manipulate and weaponize it, corrupt it and give hand outs to the elite and well connected. False price signals in interest rates cause the boom and bust cycles of our economy and the buildup of unsustainable debt.
Bitcoin is about more than just being the best money ever made, it’s a protest against the socialism that exists at the heart of our global financial system.
*****I have to spend some time her talking about WHAT IS MONEY and why it’s important, then go into how Bitcoin is better money
It is also worth noting that just like other monetary goods, bitcoin is not a company, it doesn’t pay a dividend or have cash flows. Therefore, its value must be derived from its ability to better fulfill the characteristics of a monetary good compared to traditional alternatives.
With a digital asset like bitcoin, it doesn’t require the use of a payment processor, a bank, or a government to transfer value. For large purchases, instead of using a bank as a middleman and paying its fees, you can securely send funds to anyone all over the world, like you would an email.
From <https://www.gemini.com/cryptopedia/what-is-bitcoin#section-bitcoin-is-a-virtual-currency>
It enables cryptographically secure, censorship resistant payments across borders. It is the first and only form of absolute digital scarcity and is not controlled by any one person or group. As a result it cannot be interfered with by any world government.
From <https://bitcoiner.guide/qna/common/>
- Bitcoin was created by an unknown person or group of people under the name Satoshi Nakamoto
- Bitcoin is the introduction of a totally neutral, independent money to the world economic stage, right now it’s small but in the coming years it will be a major world player. What does that look like when you have all inflationary global fiat monies and this one super sound deflationary money that financially incentivizes savings? The black hole of a perfectly scarce monetary good will absorb value as it gets built out.
- You don’t understand…they’ve created the hardest money of all time….hard money is always superior to soft money, over time there’s no escaping the incentives. Bitcoin isn’t an if but a when…
Refrences
https://nakamotoinstitute.org/mempool/bitcoin-is-not-backed-by-nothing/#selection-3.0-3.461