Bitcoin's intrinsic value, a bear market thought
Bitcoin is math and code, you can't use it. Well, that can is true but do we need something tangible to believe it has value
Bitcoin Block 783,138
00000000000000000002ce19128385a7aa53a1aecca8b4ade14691bed439729d
WARNING: Hardcore philosophy ahead… well, an attempt…
Humans have transcended as superior to all beings primarily because of their storytelling and then belief in those stories. We reevaluate the past, think about the future, and shape our present from the insights gained. This is all possible because of our ability to design consciousness and feel our presence. According to Yuval Noah Harari, in his book Sapiens, money is the most important story of mankind. It shapes how we interact with each other. A monkey would never give you a banana in exchange for a dollar but your fellow human will do broadly anything to get his hands on some of that paper stuff. Why? Because we have successfully inculcated in everyone the trust offered by the entity backing that worthless piece of paper.
Evolution and adaptation are the drivers
So we interact because it is evolutionarily justified that the one expressing oneself to other peers is likely to have a better chance of flourishing than the one ostracized from the group. But because humans have cognitive biases and specialization has benefitted many, it has led to the creation of diverse societies each perfecting a specific art. To survive, you must be able to fend for all of your needs in the most equitable way possible. This is where a base layer comes in which defines the exchange medium between two individuals. One person has to satisfy all his basic needs and for that, it is important to exchange goods and services for which the other may be more qualified. Above all this interaction allows us to build on the progress that the others have already accomplished.
Now, obviously, this type of peer-to-peer dealing needs a medium of exchange. A suitable measure that quantifies the skill and work of each individual participating in the transaction. We have limited natural resources on the Earth and each one is valued in its specific use case. When any person uses that resource or makes it available for use, he is actually putting in the effort. This effort, obviously, has a price tag that can be used to exchange with his peer. This is where the medium comes in and allows for a just medium of exchange. This medium of exchange should, thus, represent a claim on the Earth’s natural resources and cannot be created out of thin air.
One person wants something the other has. Both can’t reach an agreement because of their conflicts of interest. What will you give in return? This has to be something the other is willing to keep so that he may use it to fuel his future endeavors. This has to be trusted, can be stored for longer use, and can be divisible according to the thing for exchange. Gold has checked all those marks flawlessly for many decades. It has been the trusted medium of exchange, store of value, and unit of account that has gained popularity through the ages. If you don’t need gold, you can use it to make jewelry, use it in electronic gadgets or sell it to someone who can use it like like that.
Dynamics of a society
A sound monetary base reflects the state of society. It has to depict the present economic conditions either in its growth phase, stagnant phase, or recessionary phase. Instead of having a stable value it should inflate and deflate according to the working conditions of the people. If the economy is in its upward trajectory, it deflates, a term we hear quite less often today. That is it increases in value and the extra wealth people create is saved in the form of this currency. However, if the economic conditions are in a downward trajectory, it inflates which allows for more austerity and discipline to come out of the crises. When there are good times, it is able to preserve them and bad times mean inculcating resilience in the people. Sound money does that, it is more than you think it is. It changes our behavior.
Now, obviously, such an ideal system is far from reality and may not have existed ever. Things have been close to principle in the past but humans have this tendency to be carried away and overestimate things. We expand the horizon of our happiness and constrict opportunity during trouble. Hence, we interfere in the ways of nature and make artificial systems. One such system is fiat.
When you deposit your money in banks, it’s not yours anymore. The banks control where to utilize and have full custody. Well, it won’t invest it somewhere else if you say so but when the bank goes under, your deposit enters a shaky situation. Will you be made whole? Ask the ones at SVB.
This happens because the present financial system runs based on the decisions of a few individuals in suits in a conference room with all the amenities. Sometimes, just two or three men have a meeting and make a decision that has the power to change the trajectory of the economy. Nowhere are these people close to the farmer working in the scorching heat or the laborer working day and night to make ends meet. They don’t represent the mechanics of nature’s way but eagerly put themselves in positions where they are entitled to the exact same.
So the eventual result is that your financial interactions are not in your control but are hidden under the false impression of speed and convenience. This results in economic cycles and turbulences in a natural flow that we profoundly experience today.
Party like it’s 1999
With the advancement of technology and the breakthrough services that the internet provides, one thing that has been inculcated in all our lives seamlessly is access to information. Gone are the days that you have to consult a few bright minds or PhDs to get access to knowledge. Type it in the Google search bar and anything will show up. With its accessibility enhanced with mobile phones and the latest innovation i.e. AI chatbots, the dimensions of information access have changed. The people once monopolizing this are either scrambling in other areas or dead.
If you look around, what is an area of your life where you see a revolution is imminent and things need to change? Well, it has to be financed. The old and archaic methods and inefficient accounting procedures are cumbersome for many and many people around the world are unbanked primarily due to a lack of transparency and heavy requirements to enter the financial system. Gold has failed in this regard such that it is unable to upgrade and modernize itself according to the present era. With inflation fears and the decreased reserve requirements of banks, a system is left where money is not backed by anything but false promises and debt reigns supreme.
A financial revolution is inevitable and Bitcoin may be the best bet there is for a sound financial network. It is not a payment service, it is a financial system built on math and code that aligns with the laws of nature. We can point towards it having no intrinsic value. Obviously, you can’t use it anywhere in the real world. However, it is important to note that it is produced after spending real resources and submitting proof of work. The hash rate fluctuates which shows miner involvement and their natural tendency to support the network. Only after work has been done, are bitcoins produced not through a money printer like our buddies at the Federal Reserve have been doing lately.
Bitcoin supersedes gold where it has failed. Bitcoin is non-confiscatable and is surely a peer-to-peer monetary system. The elites will never understand this because they are blessed with an inclusive financial system that has made them riches. But the people in developing nations who have been ostracized from the financial system find real use cases in bitcoin while transferring it without a third party and relying on the trust the network holds.
Bitcoin is volatile and the process of self-custody of your bitcoin is cumbersome but that is the price you pay when becoming part of a defying movement. Things are being built, great minds are at it. Just identify your risk and diversify them.
Hope you liked the topic.