Bitcoin is one of those topics that ignite discussions between people. News that bounced on the media and the impressive price climbing disoriented those people who failed to understand the correct reading of this phenomenon.
The most common objections we have gathered around are the following:
1) Bitcoin is not worth anything because it doesn’t have an underlying commodity as a reference value;
2) It is a bubble like the Tulip bubble in 1700;
3) Bitcoin technology is complex, dysfunctional and is practically useless as a means of current payment, fees are high and transactions are slow;
4) Governments can ban it and prohibit its use.
We will try to refute all these nonsense.
1) Bitcoin is worth something. If you cannot understand why, then a review of the marginal theory of value can help you. Ask yourself why a diamond and a glass of water, while having almost the same color and the same transparency, have different value and, most of all, they have a still different value if you are in New York or in the Sahara Desert.
The value of things is imputed by whom is willing to deprive himself/herself of something of his/her property in exchange for something he/she considers more useful.
And what will people ever find useful in holding a Bitcoin instead of holding $8,000?
The fact that at this moment it is the only mean available to certify in absolute terms one’s right to possess a certain asset, even if immaterial, to which he/she attributes a value. Incredible, isn’t it?
Nothing compares to such ownership on this planet: neither money that we are obliged to keep in banks (that are no more owned by us, but owned by the bank), nor our houses whose property rights can be exercised only in the ways that are granted by the revenue agency.
This not applies to Bitcoin. The one you own is yours, its private key is yours; only by torture can someone take it away from you.
Nobody can ever falsify, alter, tamper with or modify the connection that binds your Bitcoin to your private key. This is the value of the famous glass of water in the desert.
In a world where the aggression to private property is everyday life, this is a fact of absolute relevance. If you understand the importance of this concept, you will understand why Bitcoin is worth so much. But there are other factors to consider that we shall see now.
2) It is not a bubble like the Tulips one. I accept that the behavior of human beings could be irrational sometimes; I also accept that external factors can modify the perception of events by influencing the rational attribution of value. These facts determine a marked volatility that creates disturbance on the market, above all in the initial phases of a phenomenon. It is understandable and obvious, but there is an important fact to consider: the quantity of this particular asset, desired by many for the characteristics we have seen above, is available only in a fixed number.
In the future, seven billion people will be able to acquire only twenty-one million Bitcoins. If you think that global money supply now amounts to unpronounceable numbers and fiat currencies are being printed by hundreds of billions from central banks every month, you will understand why the price of Bitcoin in fiat currency is a value that does not even make sense to try to determine. In the future, it will be necessary to refer to other parameters such as exchange value, or what will be the quantity of goods that can be exchanged for a Bitcoin.
If it is true that today less than 2% of world population owns Bitcoins, this is the reason why, despite the volatility, I would not talk about a bubble but the building phase of the value of a good. And I don’t think anyone can predict where bitcoin will be when it will come to full maturity.
3) The technology behind Bitcoin is cumbersome and is not functional for payments. This is true. In fact, the community of users and miners continues to show a very heated debate about changes to be made to the protocol code — and yes, the code is also a democratic object, there is a need for a great convergence of users who create a follow-up towards possible changes). The goal is to speed up transactions and diminish fee costs, while maintaining the security feature of the protocol. If these conditions were to be realized, Bitcoin would become an instrument of a might never seen before. But even if, absurdly, this shouldn’t happen, its fundamental characteristics would stand still: certification of ownership, non-modifiability of registrations and the fixed units number. Bitcoin is an asset on which it is convenient to invest and we cannot exclude that it could act as an underlying to other alternative payment instruments that market and technology will bring out.
4) Governments can ban it. True. Governments do these things commonly, almost by nature. They strip their subjects out of economic, social and civic freedoms. In this manner, governments can seize more easily their property and income. To wit, the peculiar activity of governments is to seize the wealth of citizens by force. This is precisely why Bitcoin exists and why is worth so much. Think about it: if these weren’t the current conditions, there would have been no need to invent it. And it is for this reason that every person of good will should commit daily to undermine the consensus on which governments thrive, since they have no function in the development of society and in wealth and technological progress.
If we look at past experiences, governments have done much worse things than banning Bitcoin: in East Germany forbade their citizens to cross the border with the West by imprisoning them behind a wall, gold was attacked several times even in the US where Franklin Delano Roosevelt practically expropriated his fellow citizens, etc. It is precisely for these premises that Bitcoin is a formidable tool to keep under control governments power, because it limits their ability to seize your property.
It is indeed governments, not to mention central banks, which must take note of the inevitability of change and they will be forced to reduce their power and their interference in free markets. In the meantime, people will gain the potential to organize themselves so that they will be able to exchange goods and services by exploiting the Internet, cryptography, cryptocurrencies and smart contracts without the need of states, courts and notaries.
We will live in freer and richer societies thanks to Bitcoin.