What gives bitcoin value? To clearly understand the answer to this now sort of old and still somewhat abstract question one has to look at it from a different perspective. To rephrase the question. Bitcoin has value, why? Is value really given to the network or does the network already have an intrinsic value in the first place? Some argue that the utility of bitcoin gives it its value, but the price seems to go up faster and faster in conjunction with fees getting higher and higher. Why is that? Confirmation times are getting slower and transaction fees getting more expensive equals a less valuable network, right? The masses will realize this soon and shift to a more sophisticated altcoin or fork-coin, right?
Dead wrong. The whole point of the invention was to create a means of expressing value without a third party involved at all. To create an environment free from the perils of currency manipulation, which always seems to happen regardless of the policies behind it. The whole point was decentralization. Decentralization would eliminate the hidden taxes of inflation and give us a mathematically secure anchor onto which we could moor our merchantmen and divide up the plunder amongst our fellow pirates when we so saw fit.
Following the chain with the most accumulated difficulty is the whole point. The fact that the bitcoin protocol is so hard to tamper with is the very superpower that brings this new abstract being to life. The consensus rules of bitcoin constitutes the lifeblood of the whole crypto community. If bitcoin fails , all cryptocurrencies fail and it all boils down to the immutability of the network. The fact that no one’s in charge is everything. We already have centralized systems that are a helluva lot faster and cheaper than bitcoin. What would you rather own — A 100 dollars that costed you 1 cent to move or 10 000 dollars that costed you ten bucks to move?
The bitcoin forks and the lion’s share of the altcoins come into being because of someone’s desire to get rich. Maybe bitcoin did too, maybe we’ll never know but we do know that someone or something called Satoshi Nakamoto mined the first coins and then disappeared leaving about a million coins untouched. Selling that million would instantly catapult Satoshi into the realm of the global financial elite, still it remains untouched. Regardless of Satoshi’s intentions bitcoin has managed to stay decentralized and immutable ever since. Should this fail somehow, like if a bunch of miners decided to try to change the protocol by forming a cartel and succeeded, the whole crypto economy would crash. Instantly. If any given entity can fork off from the main chain and mint their own currency every now and then the twenty one million coin market cap will have virtually no meaning. The value of the bitcoin forks needs to be funneled back into bitcoin in order for the whole economy to survive in the long run. What happens before that is just a bigger fool’s game. The same goes for most altcoins as well, except maybe those who have a completely different purpose than bitcoin.
The lack of a central issuer and the predictability of the network is what gives bitcoin its value. It is a beast of it’s own, a new form of life if you will, and the only thing that really threatens that life is human stupidity. This seemingly abundant resource threatens to destroy a lot of beautiful things on our planet including this delicate new being. If you want these new technologies to improve your life don’t study economics or how to predict markets. Study the technology itself, the maths and the game theory behind it. The rest is just a house of cards.
On Immutability was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story. 