Topic: Intrinsic Value of Bitcoin (Read 213 times)

There are myths saying that bitcoin don't have any intrinsic value and is backed by nothing. Here we discuss that there are several ways that proves that it isn't true.

1. Bitcoin is backed by blockchain technology

We are using a technology called blockchain to carry out monetary transaction. The core system of bitcoin is blockchain that allows us to store our money in the cryptographically secured blockchain using unique private key. Broadcasting bitcoin transaction and bitcoin storage is one of the main reasons why bitcoin value rises. If we say that bitcoin that is backed by blockchain technology has no value is just like saying that all softwares (Windows, IOS, apps, gaming softwares) are worthless at all. Bitcoin is only a part of share of the blockchain that allows us to use the bitcoin software. While bitcoin itself has no value, investing in bitcoin directly invests into its system, blockchain. Imagine if current financial system worth trillion upon trillion of dollars, how much is bitcoin blockchain technology worth?

2. Bitcoin is backed by ASICs and resource consumption

"Bitcoins are generated from thin air" statement is false. In current situation, to generate 1 bitcoin requires 10 ASIC ($30,000), 11520 kWh ($1800) and 1 month time. Not to say every month the difficulty skyrockets, reducing your mining revenue by 10%/month. So by end of the year you might only mined 0.1 btc a month. These ASICs and electricity costs is what makes bitcoin generation requires significant capital investment. Bitcoin value will be at least the value of capital invested + demand. Imagine printing fiat cash requires little to no capital at all, who will want fiat cash anymore? Removing electricity and asic costs will significantly impact bitcoin value. Look at these PoS coin, they are not gaining value compared to bitcoin. Just like crude oil will never dip below $40/bbl as the operation costs is $30/bbl. If crude oil dropped below $30/bbl oil production supply will significantly drop, hence rising its price above $40/bbl once again. Similar concept applied to bitcoin mining. ASIC and electricity costs will always backing up the bitcoin price.

Regards,
Chew Zai