Intrinsic Value and Bitcoin Maximalism

In this article I will be mainly referring to the use case of cryptocurrency as a form of money.

Many say ‘there is no intrinsic value in bitcoin’. Let us consider this statement. To say that bitcoin is not intrinsically valuable means that in itself, it does not offer value to people. ‘It’ being bitcoin. And what is bitcoin? Bitcoin, technically, is data. If you own x data of bitcoin, you own that bitcoin. But bitcoin is made possible by the technology behind bitcoin: bitcoin’s blockchain, produced by the participation of miners with large pools of electricity and computing power at their fingertips, and users who have phones, computers, and wallets. The fact that bitcoin can go to zero if people sell all of their bitcoin would seem to prove its lack of intrinsic value. Theoretically if everyone sold all of their bitcoin, and there was no activity on the bitcoin blockchain, users would own no bitcoin and miners would have no transactions to validate on the bitcoin blockchain.

Then what value does bitcoin have? Of course, the only thing that gives monetary value to bitcoin is the participation of buyers, sellers, and miners. Prevalent among the crypto space is bitcoin’s subjective value, which naturally exists only in people’s minds. It’s subjective value spans many different ideas and opinions, including its moral superiority to fiat currency and banking in particular. Andreas Antonopoulos has spoken extensively on this topic: everywhere around the world, people have to go through banks to use their own money. A central and provocative question in the creation of bitcoin regarding this reality, is why? Why must you go to another institution, and pay that institution, to move your own money? Why do you have to lend them your money in order to secure it safely, even though security is not guaranteed? This is one aspect of bitcoin’s subjective value: the belief that complete ownership of one’s own money is a righteous way of dealing with money because it places ownership on the individual. Thus being bullish on bitcoin entails believing in the concept of a decentralized, fast, deflationary, low-fee currency, rather than being bullish solely and specifically on bitcoin. Therefore bitcoin is not just data: bitcoin is an ideal. However, this ideal (of a decentralized, fast, deflationary, low-fee currency with near instant transactions) does not exclude other cryptocurrencies that have the same inherent goal as bitcoin — to be money — , and bitcoin maximalism persists.

Bitcoin is an experiment. Why do people warn other investors “be prepared to lose all of your money”? Because it is possible that bitcoin will go to zero, along with every other cryptocurrency. The cryptocurrency market is a competitive environment in which the likelihood of success for all crypto projects is likely not 100%. In order for mainstream adoption of cryptocurrencies, many technical problems must be worked on, such as which protocol(s) works best, scalability, ease and simplicity of user experience, to name a few. The competitive nature within the cryptocurrency market is directly aligned with technological solutions that essentially allow cryptocurrencies to become more efficient and easier to use, yet in the long run cryptocurrencies are not only competing with each other, they are competing with banks, Visa and MasterCard, and fiat (government) currencies. If mainstream adoption occurs, people will use whatever cryptocurrency (or cryptocurrencies) is most efficient and easy to use. As of right now bitcoin is far from being the most efficient, while it is safe to say that any cryptocurrency that exists now is not easy to use as a medium of exchange. The maximalist mindset that says bitcoin not only can be, but should be the one and only cryptocurrency to rule them all, is short-sighted because evidence that this will happen is non-existent, and no one can predict what people will eventually use (no, not even experts). While each coin having their own community is essential to maintaining a competitive environment, there is much negativity in the crypto space, in part due to maximalist thinking.

If there is general agreement on the overarching ideals of cryptocurrency of straying from the existing financial system and reinventing the way people interact with money, hostility towards different communities as opposed to educated and constructive criticism is an approach that does not promote overall progress. The assertion that bitcoin is more valuable than say, Bitcoin Cash, or Litecoin, is, when looked at from a technical perspective, both true and not necessarily true. True because one bitcoin is worth more than one Bitcoin Cash token, more than one Litecoin, and not necessarily true because each coin has their respective protocols which subsequently lead to opinion based on which protocol is better. Where exactly is the value then? Is it in a coin’s market cap (price)? In the efficiency of a coin (its transaction speed)? What I want to point out in this discussion is the value of the idea of bitcoin, Bitcoin Cash, and Litecoin, that remains the same among all three; despite disagreements and hostility between communities, there is general agreement that decentralized, fast, deflationary, low-fee currency is morally and technologically superior to government issued fiat currency with myriad third party intermediation.