by Jeffrey A. Tucker
The American Institute for Economic Research
Even after eleven years experience, and a per Bitcoin price of nearly $20,000, the incredulous are still with us. I understand why. Bitcoin is not like other traditional financial assets. Even describing it as an asset is misleading. It is not the same as a stock, as a payment system, or a money. It has features of all these but it is not identical to them. What Bitcoin is depends on its use as a means of storing and porting value, which in turn rests of secure titles to ownership of a scarce good. Those without experience in the sector look at all of this and get frustrated that understanding why it is valuable is not so easy to grasp.
In this article, I’m updating an analysis I wrote six years ago. It still holds up. For those who don’t want to slog through the entire article, my thesis is that Bitcoin’s value obtains from its underlying technology, which is an open-source ledger that keeps track of ownership rights and permits the transfer of these rights. Bitcoin managed to bundle its unit of account with a payment system that lives on the ledger. That’s its innovation and why it obtained a value and that value continues to rise.