Bitcoin & Intrinsic Value: The medium is the message.

People love, hate, and are outright confused by Bitcoin, but I’d like to persuade you that the story at the core of this ever-changing conversation and the common thread throughout it is trust — who or what to trust, and why.

When agreeing to accept a currency, you place trust in that currency to be worth trading in the future. Some commodity-currencies, like gold, have intrinsic value, but that value has been magnified by their historical dependability as a medium of exchange. Fiat currencies, like the U.S. dollar, have no intrinsic value except that they are guaranteed as a means of exchange by a government’s laws and, if necessary, its army. Both historical performance and governmental backing can validate a medium of exchange, but what makes Bitcoin interesting isn’t just that it’s created a better means of exchange — it’s that it offers a new source of trust: knowledge.

Knowledge (or trust in knowledge) is what has divided and confused such a broad spectrum of people, and it’s what holds the frightening potential to resegment the haves and the have-nots into the hackers and the laymen. The key question for understanding digital currency is: Do you trust open-source systems or closed-source systems?

Most organizations operate like a proprietary, closed-source system. Their internal activities are a secret, their organizing principles are unknown, and their security depends on secrecy. Trust is granted through authority and through relationships built over time. Most of the world trusts closed-source systems, and it’s not hard to understand why an entirely open and transparent alternative might cause confusion. To someone who sees authority as power and secrets as security, a transparently operated currency run by peers looks crippled from the start. But to someone who’s learned to trust in white-papers and peer reviews, an open alternative to currency looks like a safe haven from human error and influence of every kind.