Bitcoin: No commodity value, why is it natural for value storage?

Bitcoin enables humans to preserve their wealth without storing goods through goods, rather than locking in useful resources to achieve this. This global, permanent, and accessible way of storing wealth is forming a solid foundation for the future of the global economy.

Bitcoin has no intrinsic value – it is something that people who are skeptical about it are talking about. Their arguments are usually as follows: “Bitcoin cannot be used as currency because it does not have any intrinsic value as a commodity. To be a reliable currency, it must first be accepted by people and have certain intrinsic value. The commercial use then slowly becomes a currency over time. For example, because gold can be used in jewelry and electronics, people naturally use it to store value."

Previously, Bitcoiners had made several powerful rebuttals about the above arguments: 1) Intrinsic value is subjective 2) Bitcoin has good intrinsic value in terms of anti-censorship payment methods.

In this article, I agree with the arguments of Bitcoin skeptics. As a commodity, Bitcoin has no "intrinsic value," but it is a great thing for Bitcoin (and the rest of the world).

01 Analysis of the thinking of skeptics

The emphasis on intrinsic value has been around for a long time. Even when Aristotle wrote about the importance of money, he thought that money should be “intrinsically useful and easy to apply to life purposes, such as iron, silver, and the like.” The idea of ​​emphasizing intrinsic value It’s not surprising that there is a long-lasting spread – after all, the value of goods is necessary for humans, which has existed for thousands of years, which is obvious to the layman of cryptocurrency.

Although it has been around for a long time, intrinsic value is not directly related to currency function. A good currency needs to have many qualities—portability and ease of trade, scarcity and storage value tolerance—and is easily classified as a unit of account – but the value of the value of the commodity is not among them. So why do many critics claim that money needs intrinsic value?

There are two main reasons for this:

Inertial thinking

Many skeptics condemn Bitcoin's lack of intrinsic value because they are accustomed to value storage as well as commodities. Simply put – they are still alive. Many people still use the wrong assumptions to make the past trend still effective, and put forward arguments for the improvement of the past technology.

In fact, all forms of value storage in the past have a physical form and do not mean that new value stores do the same. At the time of the rise of the Internet, people have similar views on physical consumption. Here is a funny conclusion made by a contributor to a newsweek in the 1990s who believes that because we have relied on physical retailing in the past, it will not be replaced by e-commerce. Ten years later, the argument that bitcoin skeptics claim that the currency needs to be a useful physical commodity would be equally absurd.

In fact, history shows that the value of goods is far from meeting the requirements of money. Nick Saab explained in his classic book "Blasting: The Origin of Money" that society has used other "useless things" to store and exchange value.

The glass beads in the image below have strong monetary attributes and are used throughout Africa and parts of North America, but are rarely used as commodities. The Rai stone used by the Yap person is another example of being a value store but not being used as a commodity.

Figure 1: Glass beads were previously used as currency in the Oklahoma tribe

Blind superstitious authority

Today, many of the arguments of people who worry about intrinsic value can be traced back to the Austrian economists Menger, Mises, and Rothbard. These people place great emphasis on the importance of money and its impact on society. For them, the value of goods and the currency are inseparable from their early works.

One of Menger's groundbreaking works, The Origins of Money, begins with a description of the fact that money is “a part of a commodity that has become a widely accepted trading medium” (see page 1 of the book). Mises later made further construction in this theory. In The Theory of Money and Credit, Mises writes, “We may refer to things that are both commodities and currencies as commodity currencies, and those subject to a series of special laws. The currency of the regulation is called the legal currency." (See page 61 of the book)

Following the thinking footprints of past Austrian economists, many critics have used these outdated thinking frameworks to attack bitcoin. Niels van der Liden, one of Bitcoin's first skeptics (at the time Bitcoin was 77 cents!), rejected Bitcoin on the grounds that it lacked intrinsic value. He claims that it will not succeed because "it can't be used to trade other things, people can't do other things with it." Therefore, he concluded that Bitcoin can't be used as a commodity or as a currency.

For early Austrian economists, commodity and legal currency were the only two possibilities (outside credit instruments). But the times have changed. In our digital age, the distinction between goods and fiats has lost value. Obviously, Bitcoin does not apply to this dichotomy – it is not used as a physical commodity, nor does it apply to any law. We can now hold and trade digital currencies completely independent of the law. Bitcoin's currency attributes are guaranteed by rules and logic embedded in their code. Through this pure form of digital existence, Bitcoin has become a currency that is not bound by the physical world.

02 bitcoin can solve the paradox of hard currency

In fact, if skeptics do enough homework, they will realize that Mises is also a Bitcoin believer from the heart. He is aware of the inherent problems of commodity currencies, but regards gold as the best of many bad options. In the book Money and Credit Theory, Mises sighs that even a gold-based monetary system is still limited by “a lot of shortcomings”, they “not only have fluctuations in the supply and demand of money, but also gold. Changes in production conditions and changes in industrial demand." (see page 238 of the book).

Mises correctly pointed out the value of the commodity use of the currency, causing it to be subject to price volatility as industrial demand and supply conditions fluctuate. Hard money is always associated with unique physical attributes—in this perspective, the incredible versatility of gold in many different industries magnifies this detrimental effect.

The physical world has also brought other currency restrictions. Things found in nature cannot be regularly distributed over time. The predictable, cyclical release of Bitcoin allows people to calculate their supply for decades to come, which is impossible outside the digital world.

The supply of a physical item cannot be audited as well. Any time someone can discover the amount of gold in the previous position and quickly dilute its value, the current gold holders are not aware of the changes in the supply of gold – similar to the damage caused by European businessmen sneaking shell inflation. The process of African tribal interests. Thanks to the digital nature of Bitcoin, anyone can audit and know their supply at any time.

Taking into account these advantages of Bitcoin, it is very stupid to have a hard copy of the views given by Austrian economists during their historical period. They did not lay down their inherent stereotypes. Even they realized its limitations and wanted a better form of currency than precious metals. The new situation requires a new theoretical foundation – and Bitcoin gives us this opportunity.

03 Bitcoin is the key to unlocking the captured utility

Today, the best value storage is exactly what is the element of commodity utility. The key difference here is that gold, real estate, or any other form of commodity currency, although useful, is not a value store because of its utility as a commodity.

When someone decides to hold gold or other assets for financial purposes, they clearly and consciously decide to call their wealth storage attributes rather than treating them as useful goods. Unlike making gold as part of jewelry or electronics, holding gold bars makes its financial attributes useful. Although this decision may seem harmless, it actually hurts the economy. A large number of people hoarding a particular commodity for the purpose of wealth storage often leads to extreme waste and speculative bubbles.

Real estate is an especially shocking example of this type of effect. Today, speculators pursue "golden concrete" to protect their wealth. Developer Michael Stern explains that “global elites are looking for a safe-deposit box,” and many have decided to invest in Manhattan properties to store their money. They use their luxury apartments to store their value instead of living. Therefore, the journalists stressed that “according to the Census Bureau’s data, the entire city center – from the 49th Street to the 70th Street, between Fifth Avenue and Central Park – almost one-third of the apartments are Ten months in a year are empty.

Similar trends are spreading in big cities around the world. According to the British Guardian, “the world’s super rich have invested in London’s major properties to preserve their wealth without having to ensure a rental income trend, making the number of vacant homes in the Kensington and Chelsea regions up 22.7% over the same period, and since 2015 The figure rose by 8.5%. As the elite continued to invest in these commodities, the bubble began to flock to a high point. A recent report by UBS shows the risk of this situation.

This situation not only makes the house vacant, it also undermines the incentives for a healthy new home development market. The housing market in San Francisco and other parts of California is clearly an example of this phenomenon. The map below illustrates the regulations for different districts in San Francisco. All yellow shaded areas have a building height limit of 40 feet.

Figure 2: Local District Laws in San Francisco

These regulations are clearly obstacles to building new homes that meet market needs and are reasonably affordable. Considering the impact on ordinary residents and rental prices, why do they exist? One big reason is that existing homeowners lobbying members to artificially limit the supply of homes and thus protect their wealth.

A recent report issued by the Legislative Analyst's Office for California emphasizes that “residents may view new homes as a threat to their financial health. For many homeowners, their homes are their most important. Financial investments. Therefore, they may be inclined to limit the supply of new homes because they fear that it will weaken the value of their homes."

Because the average buyer does not have a reliable way to store the value of wealth, the house is considered an ideal investment target. This will naturally cause homeowners to lobby for members to limit the supply of homes, and their wealth will not be diluted. In this sense, the real estate market only has the rarity of value storage attributes artificially manufactured.

Bitcoin does not completely solve this problem, but it gives potential home buyers an alternative way to securely store wealth over time, allowing people to rethink their wealth decisions, which may slow down the pressure to build new homes.

With the development of new affordable properties, cities will be able to increase their residential density and improve the quality of life of all residents. For example, research models suggest that if San Francisco can increase its residential density, it could significantly reduce its carbon emissions, enhance the city's "walkability", and improve the quality of community life – all of which will protect the environment in Sunny California. .

Even protecting the network will be cheaper – and there will be higher quality ASICs!

Gold is another great example. As individuals sell gold in their hands to buy bitcoin, the gold that was previously held to preserve wealth can be used in electronic instruments, medical equipment, and space exploration. The gold stored in all parts of the world can be benefited by the society in the form of more affordable, high-quality products. With Bitcoin, we can really afford the trip to the moon.

So when you hear the goldbugs praise their amazing social uses (they are right) – they are talking about digital gold.

By acting as a global value store, Bitcoin unlocks the utility of stored goods, and we had to put it aside because of the lack of a pure currency.

04 conclusion

Bitcoin enables humans to preserve their wealth without storing goods through goods, rather than locking in useful resources to achieve this. This global, permanent, and accessible way of storing wealth is forming a solid foundation for the future of the global economy.

As funds move from other assets to bitcoin, this new trend will make affordable homes, a new urban environment, and higher quality consumer goods even more accessible.

Yes, Bitcoin has no intrinsic value, and we should be grateful for this!

Special thanks to Karina Kauffman, Dan Held and Bitcoin observers for their great help.

Author: Conner Brown

Translator: Wang Zelong