First of all, full disclosure: I am not at all in for high fees or limiting the blocksize to 1MB. Rather I think BTC will do the most good being cheap and accessible for everyone.
Digital gold
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With that out of the way I am going to make an interesting comparison between bitcoin and gold. Gold is the asset bitcoin has been most often compared against. Its a very interesting comparison, especially now that BTC has been experiencing network backlogs and high transaction fees.
With a ~7.5 trillion $ marketcap, you'd be a fool to say gold is not a valuable asset. Does this mean gold also has value as currency/money? No. I'm sure you can imagine how hard it would be to pay for your groceries in gold. This does not make gold worthless, but rather not a practical form of currency.
Golds inability to effectively function as currency is why people came up with paper-notes. These worthless pieces of paper was essentially a IOU saying it could be exchanged for a certain amount of gold, thus giving it value. In a sense you could say, gold is the blockchain and paper-notes is the "layer2" solution.
Using paper to transfer value denominated in gold did not devalue the gold, rather it made it MORE valuable. In the same way BTC does not need to be both a store of value and a common medium of transaction. More on this later.
FIAT - "Trustmoney"
Some decades later and virtually everyone recognized papercurrency as money, it had value. If you gave me a paper backed by 1oz gold, I'd know I can purchase 1oz gold worth of stuff. As we all know, this system has gradually been debased and now we have only FIAT currencies.
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FIAT is a word derived from latin, meaning "it shall be". This is a way of saying; "this is money and has value because we say so!", we being various governments.
Over time people have gotten so used to these papernotes and trustbased systems that they no longer care if the money has real value, or not. What matters is that the next person is willing to accept the currency at face value and so on. You could say that money has been made comfortable and everyone just trusts the system its based upon (basically trust). The intrinsic value of one dollar is the same as toiletpaper with print (it's not even soft..).
Bitcoin as a store of value and X as day-to-day currency
I've heard a lot of people saying bitcoin is the "internet of money". I'd make the argument that bitcoin is the internet of gold, or rather, the internet of storing value. Bitcoin is secured by the worlds most powerful network and this network consumes A LOT of power to keep make sure our BTC is safe. Thus meaning each transaction requires a lot of resources in order to be validated and secure. With the PoW system, it's hard to envision a network that is supersecure , cheap AND fast. Maybe bitcoin should not be currency (yes, I know the whitepaper), but rather a store of value.
As a store of value bitcoin holds a lot of improvements over todays "golden standard", gold. Here's a list of the first few I can think of.
- Cheap transfer for large sums
- You can secure it yourself, no counterparty
- Noone can seize your coins
- No inflation after 21m
- Its digital, easily integrated effectively and transparently with layer 2 solutions.
To sum it up, bitcoin does not need to be the best currency to have value. The value might even be the fact that it's NOT the best currency. Dollars work fine for day-to-day transactions, even considering their intrinsic value is zero. In the same sense, other, less secure and faster (more convenient) networks might be the best to do day-to-day transactions.
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