Let’s continue where we left off yesterday.
2. Bitcoin has the brand
One or two years ago, when you told somebody from the normal world that you were interested in blockchain or cryptocurrency, the reaction you got was similar to you just having announced a pretty unusual fetish. Thanks to last year’s crazy market and the resulting media coverage, this has changed. Now, normal world people look at you and say something like ‘ah, so you’re having Bitcoin is what you’re saying?“.
Bitcoin, in the minds of many, is synonymous with blockchain and/or cryptocurrency. That’s a pretty valuable status. Just ask for a coke, google something, write the result on a post-it with your sharpie and treat yourself to a jell-o.
Moreover, even in the crypto space itself, the Bitcoin brand has a special appeal. Yes, Bitcoin certainly has its fair share of critics and bears. Still, I would bet that the majority of people in the space would still put their money on Bitcoin if it came down to picking the cryptocurrency most likely to win it all (some foreshadowing: I wouldn’t).
Since successful networks and currencies (particularly medium of exchange utility) are built on network effects, Bitcoin’s brand is a real asset. Popularity creates demand and demand creates liquidity. The brand should count when assessing Bitcoin’s fundamental value.
3. Creating Bitcoin requires investments
At some point in the Voorhees vs Schiff debate that I referenced in the intro of yesterday’s post, Schiff makes an argument along the following line: Gold has to be mined. Mining requires the investment of real-world resources. Therefore, the mining costs need to be reflected in gold’s intrinsic value.
You know where this is going, of course. Why wouldn’t the same logic apply to Bitcoin’s intrinsic value? After all, Bitcoin miners invest real resources in their mining operations. That needs to count too, no? Or is the fact that the scarce asset which gold miners source is physical – while Bitcoin is obviously digital – enough of a reason to dismiss the capital invested in mining? I don’t see any plausible argument for that. Especially if you take into account that virtual goods, even if they are neither scarce nor handled on a trustless network, have enormous market value today.
Yes, the concept of scarce digital assets is new and might be confusing. But virtual goods will increasingly be commonplace. Don’t take my word for it. Just ask the next-best 15-year old at your disposal. As such, I don’t think we should look at them as fundamentally different from physical assets. Hence, mining costs should be accounted for when determining Bitcoin’s fundamental value.
Time’s up.
(I’ll continue tomorrow)
Rough Notes 