People often argue that there is no intrinsic value to
bitcoin. The subjective nature off the term aside lets talk about the
physical properties of bitcoin. Opponents often bring up the idea that there is
nothing tangible about bitcoin as a flaw, that it is simply digital air. However I argue the opposite, that there are some strong
physical properties.
Tangibility is very subjective in itself, we could of course the functionality and the brand and
reputation of the payment network but we will exclude these utilities and financial properties like spending
transferring and safe storage of wealth as they are by products of bitcoin. Here we take a narrow perspective where tangibility must be of the item itself and where it must be something that physically exists. We need to consider existence in the context of atoms and in the context of time. We consider things more tangible if they hold their form and if the last a long time, for example gold and silver. Bitcoin is a mathmatic code stored on thousands of computers around the world, a shared database, 0's and 1's one electrically charged plates of silicon. Exploring how this code lasts over time is also interesting.
We a don’t find it hard it hard in the IT world to see the
value of a data base. Consider a list of customer email addresses or a library
of knowledge about rocket engines. Often we see a large part of the value in this
type of database in the possibility that you might have exclusive access to this
information. Public databases are slightly different, more like a search engine or public library. Bitcoins block chain is now
supported by "on paper" assets of 100 billion dollars and a similarly large amount of physical infrastructure like computers, miners, apps companies. This value creates strong incentive
for the public database to be permanent. People who hold this value have an
interest in keeping the database around, further to this there is, by today's
math, there is another 24 billion, to be drip fed, incentivising miners to keep it around for the next 100 years. The way bitcoins running costs are structured, the
difficulty adjustment formula and node propagation, mean that just a few
million would be enough to keep the database alive forever and this is by far exceeded with the price even just above $1. This provides a security and permanence rarely
seen in the world. The the database could become alder
than the pyramids. It does not suffer from erosion. We must accept that a database is physical, but there is a special intrinsic value in this.
This database primarily records movement of value over time,
there is value in that just from an economic analysis perspective. This grows as time passes and it remains accurate. More and more information
can be pulled from more data, all stored together in a compatible format. As
bitcoins value increases small transactions in the past become more significant.
People in the future could take pride in discovering that the family fortune
once originated in a cup of coffee purchased in San Francisco at some weirdos
café who was quick to get on to this stuff. There is a powerful economic
understanding to be gained from knowing these money flows. The information is deeper than anything we have ever seen before. We know that information has real value.
Bitcoins blockchain is however not restricted to holding
only financial information, you can put any data in it. It is in this case that
the permanence of the blockchain begins to gather unknowable value. To write data
to the blockchain you need to spend or at least move bitcoin, you need to pay a fee that is equivalent to the amount of kb stored. Here is where owning the 0's and 1's is crucial. Without this code that you hold secrete you are not able to take advantage of the
intrinsic value of the permanent public blockchain. You need to hold these in order to have instant access to this broadcast channel and record for humanity. You can
write your name, a political statement, a photo, records, a wedding you can even
embed code for an application. I’m even considering writing my a blog to it. 1000’s
of people have done it already and what they have done will always be there. The
cost of recording things to the bitcoin blockchain, what we could call the most significant public database is set to rise because the amount of data in one block is limited to about 1mb every 10 minutes. How much is a note written to be held up for all time worth?
So you can see from this very narrow perspective that there is some strong intrinsic value in bitcoins 100 billion dollar public database. Future value is secure based on the value of future miner rewards and current infrastructure. The longer the bitcoin database is around the more the value it in itself as a resource grows and the more attractive those block space and bitcoins them selves become, as a way of stamping your name or your thoughts down, permanently, for all time, like with a pyramid, maybe you can cheat death.
