The most challenging topic for any bitcoin adopter is to justify bitcoin to an audience of non-believers or cynics who do not understand the language or the technology.
All new technologies necessarily create new language. Imagine traveling back in time to the late 1890s as the automobile was just starting to be seen and talking GPS, anti-lock brakes and airbags to a population that sill saw the horse as the superior mode of transportation; which it was, and they were right, until they weren’t.
To enable a counter point debate about bitcoin’s value proposition, all parties must at least be fluent in the language before a meaningful exchange can happen.
I have yet to meet a fluent speaker of bitcoin that is a cynic. Once you learn, execute and understand the language, you become a believer and a supporter. The few fluent bitcoin skeptics that exist are not against the technology as much as they believe the governance will challenge bitcoin’s adoption because of scalability concerns. But fluent bitcoin skeptics are still bullish on the major features of bitcoin: Decentralized, supply limited, borderless, immutability, censorship resistant, peer-to-peer digital exchange of value.
But what supports bitcoin’s rising price? Well it’s certainly greater than what supports the price of gold or the U.S. dollar. The best forms of money play three roles: A medium of exchange, a store of value and a unit of account.
As a medium of exchange most government money is all we know and as of today is very effective. Bitcoin’s use as money is limited today but that will change as scalability increases and applications allow for point of sale experiences. Advantage USD, but bitcoin is already superior to gold in this regard.
As a store of value the scales start tipping. Bitcoin has a hard cap limited supply of 21 million and the functional supply is probably closer to 13 million today as many were probably frozen due to mishandled and lost keys on the ledger in the early years. Each bitcoin is composed of 100 million sub parts, called Satoshis. A dollar can only be subdivided into 100¢. Also, you cannot counterfeit bitcoin which you can with cash and gold.
What is the total supply of dollars? Since most dollars are not physical what are the political controls meant to limit supply. Ignoring the price rise of the last nine years, bitcoin is king as a store of value since the dollar has been debased every day since 1931.
Gold makes the store of value race but without limit of supply given new mining techniques its future in this regard is suspect.
When it comes to a unit of account, bitcoin wins again. The entire blockchain is public record. If you have the public key (account # of sorts) then you can witness and trust balances. The ownership of the account is mostly hidden until you choose to reveal your address. An individual can create infinite amounts of addresses so you can further choose how much you reveal to the party you are transacting. A new account for a single use transaction is possible to protect identity.
The digital dollar on the other hand requires a third-party officiant that is in total control of the ledger charging lots of fees to maintain the structure. Gold is an atrocious unit of account since you can’t audit supply and it is too soft to be durable.
Finally, bitcoin as money is only its first killer app. When you can program and stream value you can change the world without permission.
Enjoy the learning. And next time a better question may be, what’s the case for government money? If you really want to understand the value of bitcoin, put the 400 year-old Fiat system on trial. Shouldn’t someone attacking bitcoin first have to defend fractional reserve banking and the Federal Reserve