Does cryptocurrency have value?

Cryptocurrencies are a very hot topic these days, in great part because of many stories we may have heard about early Bitcoin owners becoming multimillionaires. Some are ¹kicking themselves for hearing about Bitcoin but not "getting in on it." Therefore they are looking for the next big crypto coin to "²cash in" on. 

But also due to out of control government spending and the instability of the finacial system i.e. our money.

Yet some are trying to tamp down the "hysteria" saying cryptocurrencies are smoke and mirrors and they have no intrinsic value i.e. it's just another "tulip mania" craze (a common example and analogy used).

So which is it? A great opportunity, a hedge against inflation, an alternative to a fake money system, a hyped-up scam, or maybe even a CIA/bankster honey pot?

The argument is often made that since Bitcoin (or other cryptocurrencies) hold no physical assets, they also have no intrinsic value. This assumes only tangible assets have value. 

However, many things have value that are not physical/tangible.

Intellectual property would be a classic example. Why do folks pay consultants? Because they offer information (knowledge) that can help them do business more effectively, efficiently, and easily thereby enabling their business to become more profitable with the same effort. Is this not valuable? Apparently, some think so since business consultants make a very good living. As the saying goes in business, time is money. Consultants can run upwards of hundreds and in some cases even thousands of dollars an hour e.g. Tony Robbins. Why? They bring value to you or your business, yet no "tangible asset" is involved. Or maybe we should consider the consultant, with their knowledge and expertise, the tangle asset.

A computer app such as Microsoft's Word is nothing more than digital information programmed in such a way that it enables you to write and edit whatever you need to electronically. No more need for Whiteout or endless crumpled papers in the waste basket. This saves time as well as cost of materials.

Microsoft also paid billions of dollars for Skype - a direct messaging platform. Why!? Neither of these are physical/tangible products but ideas applied in the digital arena that offer very significant functional value to the users. 

 

You might even argue a digital program (app) is a tangible asset in the sense that it exists and has valuble benefits when used as designed, like electricity itself. No one would argue electricity doesn't have an effect or value even though it's not tangible/material in the way we normally think. 

The bottom line is anything that allows us to function more efficiently, effectively, securely, and profitability is valuable whether it's a "tangible" i.e. a physical asset, or not. 

To say it simply we value anything that saves us time and money. The better it does, the more we value it. 

So here are some questions to consider regarding this digital technology called cryptocurrency. 

Is there value in offering folks a way to do business transactions privately and securely thereby preventing detection and theft? If there wasn't we wouldn't have safes or banks (physical/tangible assets) to store our money in, would we? They are called "safes" for a reason. Just because it is a "digital safe" doesn't make it less of a safe storage of value. 

This is also why we don't like to carry around large amounts of cash and also why there are security features for credit cards. Privacy and security are important - i.e. these features have real value - because they help us keep the hard-earned fruit of our efforts safe. Both of these are an inherent part of cryptocurrency. 

Is it valuable to have a system where everyone is able to see and verify the amount (though not necessarily the parties doing the transaction) so if anyone tries to make a fraudulent transaction (e.g. "write a bad check") it's detected and rejected by the system/technology itself i.e. no need to trust the sender or have a central "overlord" to verify things if the funds can be 100% verified (unlike an overextended credit card or bad check) by the technology itself before you send your goods or provide services? 

Who we are doing business with may be important but often only to determine if we can trust the funds are there and the payment will be good. If there is a foolproof way of knowing the funds are good, who we are doing business with doesn't really matter as far as the validity of the transaction is concerned.

Aren't we finding ourselves increasingly leery of trusting strangers? The fact is you can't do business without trust. In fact, to have any mutually beneficial relationship, both parties must be trusted or we simply won't transact with them. No trust, no business or relationship.

So what if you have a way to pay for goods and services where you didn't have to trust the one offering the funds because the nature of the transfer had features built-in assuring it was exactly the amount you were told and the funds were 100% good i.e. you knew you were getting exactly the amount you asked for or were offered when you were offered it? With cryptocurrency, the technology verifies the availability of the funds and the amount of the transaction. It is built into the coin itself (it is the nature and backbone of blockchain technology) and doesn't require the trust of the party sending it or a central party confirming its validity such as a bank. It simply needs to be sent.

Is it valuable to enable folks to be able to trust that a transaction is legit without having to take our time, energy, and financial resources to do so because we know with absolute certainty the funds are "good" no matter who they are coming from i.e. we know the "check will clear" so to speak, allowing us to utilize the funds quickly which results in being able to use our time elsewhere resulting in greater? Who hasn't lost money, credibility, trust, or customers due to a delayed transfer of funds?

Is it valuable to enable transactions to occur with minimum to no fees (most crypto transactions are strictly peer-to-peer, without using an exchange (exchanges are used to buy and sell, not necessarily transfer funds? Most transaction fees are very low allowing us to do our financial transactions at a much lower cost per transaction than with traditional institutions such as banks? You can do a transfer of literally millions of dollars from one crypto wallet to another often for less than $5 within only a few minutes, sometimes as quick as a couple of minutes. Ever had to wait for days, much less minutes, waiting for "funds to clear" with an ACH transfer or wire? Zelle is great, but you can only send under 2k at a time.  

If you can reduce your cost of a transaction by cutting out the middleman and go directly to the party you are doing business with i.e. peer to peer (because you no longer need the "middle man" due to the inherent built-in verification of the digital transaction) is that valuable? Banks, brokers, and exchanges are merely middlemen who get a piece of the action i.e. money moving from one party to another, and can take days to do so.  If you can move the money directly to the intended party, no middlemen are needed. 

Is it valuable to be able to do a transaction almost instantly with anyone in the world who accepts cryptocurrency? Especially for the one receiving the funds.

What about all the "unbanked" around the world, particularly those in 3rd world countries. Even they have cell phones. As long as you have a "smartphone" you can do all your financial transactions through your wallet installed on your phone. (Wallets are free to install). You can send or receive funds from anyone else, anywhere in the world who has cell service and a wallet on their phone. No bank is necessary because you in effect are the bank sending money to another bank i.e. another phone with a wallet app installed. 

People want privacy, security, protection, ease of use, and the most cost-effective and quickest way of doing transactions. These are all very valuable to all of us. What best provides these things will have the greatest value. True cryptocurrency (not CBDC) does all of these and more. 

If you probe a bit you will find those who scream the loudest about the lack of value of cryptocurrency are those who stand to lose the most, not unlike those who criticized the combustible engine (such as horse-pulled buggy makers) or the internet (the news business and phone companies). No one has newspapers delivered anymore. Magazines are also going by the wayside. Who uses landlines anymore? You can talk to anyone anywhere in the world for a reasonable monthly fee (or a free connection at a Starbucks or the like) through an internet connection. 

Who would be the ones who have the most to lose with cryptocurrencies? Banks, Brokers, Wall Street, and any middleman whose livelihood is tied to traditional financial services. But the biggest losers may be the Central Bank (the Federal Reserve system in the US) and the governments that depend on the collection of revenues through the traditional money system. I don't give tax advice. However, any system that could possibly allow people to bypass taxes poses a real threat to the system and the powers that be. Using government-controlled transactions via fiat currency feeds the beast of the central banking system. If you've ever tried to take food from a hungry dog with a huge appetite (and lots of puppies to feed) you'll get the idea. 

The fact that cryptocurrencies are still relatively new (only around 4% are involved with or use crypto in some way as of this article. However, with a 500% + increase in usage in 2022 (and 27% on average) it is clear that more and more people are finding cryptocurrency has real value, especially on the most remote areas without any banking available at all. 

How many would have liked to have invested in the printing press, the automobile, and the light bulb before their actual value was fully recognized? Can I see a show of hands?

What is fiat currency and what is its value?

While many express concern over what backs crypto's value few ask what assets back the US Dollar.

The US dollar is a fiat (money by law or decree) currency, which means it is not required to be backed by any physical commodity or asset, but rather by the faith and confidence of its users (we could legitimately call this a "con" - confidence - game). The value of the US dollar is not pegged to any specific asset or commodity (though it was tied to silver at one time up until 1971).

  

Now it is actually an IOU i.e. a "bill" which is a debt instrument and "we the people" and our labor are the pledged collateral. You could say by using their "legal tender" we are slaves on a federal plantation. 

The US dollar is widely held and accepted as a means of exchange, store of value, and unit of account among governments, institutions, and individuals around the world, and yet, it is backed by less than nothing... it is a "Federal Reserve Note" - written across the top of every piece of paper "money" - which is not federal and has no reserves but is a "note"

i.e. a debt instrument.  

Once you understand how our current paper money system works and why crypto has actual intrinsic (if not tangible) value, I predict you will be jumping on the crypto train yourself if you aren't already on board.

For a discussion on what exactly is currency click here.

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¹I was actually given 1/10 of a bitcoin when it was around a dollar per coin just to open up a virtual wallet. I had forgotten about it until years later when Bitcoin jumped past $60000 a coin. During that time my computer crashed and I lost the password to my wallet. So somewhere in cyberspace is a wallet (with the missing key to open it) worth 1/10 of a bitcoin at whatever the price currently is.

²This mindset of cashing in on a coin is why so many people lose their shirts. That is not a strategy it is more like gambling. But that's a separate topic for another article.

 

³another argument against crypto is it won't work without electricity, which is true but the actual data - "physical bits of information" - remains intact (just like the letters and words on a page) whether you have the power to view or transfer it or not. Once you have electricity you are back in action. Plus no one seriously thinks electricity will go away long term. Even if we had a major EMT event, solar (and other alternatives) could have us back up and running in time. If we ever had a total electricity blackout we'd have far greater issues than not being able to use cryptocurrency. 

We run on electricity - brain signals for example. The point is, electricity is all around us and we will always find a way to harness it without the system being the gatekeeper.

 

Possibly the most significant and maybe least understood feature of all cryptocurrencies is they are limited i.e. there is a fixed number of coins issued and no more. If not, it is not true crypto but only a digital alternative look alike, such as the government-proposed CBDC i.e. central bank digital currency (personally I wouldn't touch their digital currency if my life depended on it. And if you don't look into how to acquire and use true crypto, it may). 

One of the key principles of economics is supply and demand. If there are a set number of coins, as they become more scarce and their value becomes more and more recognized, they are used more and more and the price will go up because demand will go up, so you never have to be concerned over a coin being devalued through the creation of new coins. This is the opposite of our smoke and mirrors paper money (and the proposed CBDC) that can be fractionalized into oblivion. This drives the value down eventually to nothing as more "dollars" are printed. This will also be the case with a centralized and controlled "fed coin" or fed digital currency that is now being floated about. The simple solution is don't use their crap. To say it simply, true cryptocurrencies eliminate inflation (and often do the opposite i.e. go up in value). So-called inflation is actually the devaluation of paper money by increasing the supply - i.e. printing more - so it takes more of it to acquire the same goods and services over time.