The value of Bitcoin

While the technical intricacies of Bitcoin may not be easy to grasp for many, its properties are easy to understand. I would like to argue that Bitcoin is the first asset in human history that has the following three properties

1. Scarcity. There will ever only going to be 21 million Bitcoins.

2. Divisibility and transferability. Bitcoin can be divided into small fractions and sent to anyone with a Internet connection.

3. Censorship resistance. There are no political or circumstantial restrictions to whom you may or may not transfer your Bitcoins.

The are many things that are valuable and scarce and they have different degrees of usability. Two such antipodal examples would be real estate and fine art. I would like to believe that the value of Bitcoin lies somewhere in the

intersection between the two mentioned assets. On one hand its value is derived from its usefulness of allowing to store and transfer value trustlessly and on the other hand from our collective agreement on its value, pretty much as with artwork. The value proposition is further engraved by its finite supply.

Many of us do not know how to value and appreciate art but we trust in the consensus of those that have an affinity for that. Similarly, many may not understand the technical aspects of Bitcoin but trust the network of intelligent

individuals that work around Bitcoin.

In addition, one would expect, almost by definition, that over the long term the value of a scarce and useful asset increase in value with respect to an asset whose supply is increasing. Fine art is definitely proving to have this property

and so it seems to be the case with real estate.

While a drawback of Bitcoin is that is not tangible compared to art or real estate it compensates by being (if stored properly) hard to confiscate. It is enough to remember a 12 to 24 word passphrase to have full control of your funds.

It is hard to store fine art safely and also be able to move it around conveniently. With real estate that is even less of an option. Again, I see Bitcoin as mitigating the lack of transferability both assets suffer from.