The Intrinsic Value of Cryptocurrency

It makes me laugh when I read about people like Warren Buffet making claims that cryptocurrency has no intrinsic value. For something to have intrinsic value, Buffet says, it needs to be a 'value-producing asset'.

Suffice to say, I vehemently disagree with the statement that it has no intrinsic value, and here are the reasons why.

In my mind, there are three phenomena that underpin the value of blockchains and the cryptocurrency space. The first is the ability to transfer value, peer to peer, across any border in the world, quickly and inexpensively. The second is the ability to store information permanently and immutably. The third is the nearly infinite divisibility of cryptocurrency, enabling the transfer of value in micropayments.

These three phenomena are converging to bring humanity a fundamentally different, global economic norm.

Peer-to-Peer Transfer of Value

Without question, the Bitcoin network has proven that humans can transfer value directly to one another, safely, quickly and inexpensively. We now know that we don’t need trusted third parties to validate funds ownership and to avoid double spending. We can accomplish this feat with computers, removing the costly financial intermediaries from the equation.

So, the cat is out of the bag! Something as useful as ‘immediate, inexpensive peer-to-peer funds transfer’ is not a capability that human beings are going to give up willingly. Now that we know we can transmit value safely, inexpensively and instantaneously – I don’t see us settling for anything less. If the usual suspects of government, financial institutions and regulatory bodies try to impose restrictions on humanity’s access to this new freedom, I suspect there would come worldwide revolt.

New Data Storage Paradigm

The second phenomenon underpinning the value of the crypto market is a new data storage paradigm.

Ponder this strange fact for a moment: Until Blockchain, humanity did not possess the technology to permanently record information. Anything written to a database before Blockchain could always be appended, changed, erased. The systems that operate our world today are vulnerable to human self-indulgence, manipulation and greed.

Blockchain not only solves the ‘double spend’ accounting problem, but it turns out that being able to permanently record information to a digital ledger is useful in more ways than one. Digital piracy, identify theft, supply chain fraud, electronic voting, there are so many use cases for this new type of data security, listing them would fill nearly a full text.

The Infinite Divisibility of Cryptocurrency

The Internet brought the world an unimaginable amount of new content. Few, if any, could have predicted the proliferation of images, blogs, videos, podcasts, online games, mobile apps - content that we had never conceived of, before the Internet was invented. And we consume the content voraciously - but there’s a flaw in the system.

The publishers of the content almost never get remunerated equitably, sometimes not at all - while the owners of the publishing platforms derive huge economic benefit. 2017 was the first year that digital advertising surpassed TV advertising. $209Bn was spent on digital advertising in 2017, lining the pockets of two of the world’s biggest monopolies, Google and Facebook.

Now it’s easy to blame Google and Facebook for this injustice, but they aren’t the culprits, they’re just exploiting the opportunity. The real problem is the rigidity of our existing financial infrastructure. At a minimum, the cost of processing a credit card payment is €.30. So, charging a penny to read an article or listen to a song isn’t even an option. The infrastructure that underpins the Internet today cannot process micropayments, and so we are forced to bundle information into monthly subscriptions.

In an ideal world, consumers want to pay for exactly what we consume, and nothing more. Cryptocurrency platforms enable the frictionless transfer of micropayments, peer to peer, an economic freedom that humanity has never enjoyed. Enormous innovation is underway, in ways that we can’t even conceive of today, similar to how we couldn’t conceive just a few years ago of a global taxi company or renting rooms in our homes to complete strangers.

Borderless, Infinitely Divisible, Peer-to-Peer Commerce

The new technology infrastructure and the applications that are under development, this vast cryptocurrency ecosystem that’s in its infancy, will marry the Internet that we know today with global, peer-to-peer value exchange allowing consumers to transact directly with each other, with no intermediaries.

How anyone could categorize the technology advances racing towards humanity as not producing value is a complete mystery to me. It literally blows my mind to grapple with the economic consequences of the shift that is underway.

As for the argument whether cryptocurrency has intrinsic value, you can decide for yourself whether these massively disruptive technologies will produce tangible value for society and usher in a new era of equality and abundance that will forever change our deeply lopsided world.