Many believe the cryptocurrency’s utility lies in its potential to be a more efficient commodity than we already have. Proponents of bitcoin like it for a number of reasons.
First, bitcoin is decentralized, meaning no government, bank or single person has control over it; it can’t be toppled by corruption at the top. It’s also trivially divisible, meaning you can buy a small item like a doughnut with it as easily as you can buy a house or even a mansion. And finally, the code it’s built on is open source, meaning that it’s available for anyone to look at, scrutinize and even modify. This means bitcoin is constantly evolving and improving.
None of those uses is intrinsic, however. And that’s a point bitcoin skeptics often make. Gold, for example, is thought to have intrinsic value because of its applications in industries like dentistry and electronics. Some people even argue that dollar bills have intrinsic value, since they can be used as kindling or to write on.
But as you break down either of those claims, it becomes clear that gold and paper money don’t have that much intrinsic value either.
According to the World Gold Council, in 2016, only 15 percent of gold was used in industries. The majority went toward making jewelry and gold bars and coins — items that have value mainly because they’re trusted to be valuable.
With paper money, the Federal Reserve says it costs about 16 cents to create a $100 bill.
So the rest of that hundred bucks — the remaining $99.84 — comes from the trust people place in it.
It can be hard to see the digital currency as having value because you can’t hold it in your hand like you can a dollar bill or gold.
As a solution, Lee said to think of bitcoin as a digital business.
“If you ask a baby boomer, ‘Can you justify the value of anything that’s a digital business?’ they probably don’t accept that Facebook, Google, Netflix, Amazon, Apple, these are the largest companies in the S&P 500 and they’re primarily digital businesses built almost purely on digital trust,” said Lee.
“Anyone who thinks digital gold isn’t a store value is overlooking the fact that most businesses today are built around digital trust, including the financial system.”