While sources differ on the number of millionaires in the
world, Credit Suisse estimates the
number at about 35 million. This figure accounts for all
“financial and nonfinancial wealth,” including assets,
collectibles, and homes.
This is a remarkable number when compared to the total number
of Bitcoins that will ever exist. While there are roughly 35
million millionaires in the world, there will only ever be a
maximum of 21 million Bitcoins. That’s right–there will never
be enough Bitcoins in existence for every millionaire in the
world to own even a single one.
Why is Bitcoin valuable?
While you let that thought sink in, let’s consider what gives
Bitcoin its value. Granted that there are numerous features we
could cite, including a global network, an immutable Blockchain
and a means to transfer wealth from one person to another
without ever involving a middleman.
These are all fine features, to be sure. But what really makes
Bitcoin valuable are two properties: scarcity and authenticity.
Bitcoin has value for the same reason gold has value: people
want it and there isn’t enough to go around. New gold
can’t merely be created; one has to find a gold mine and go
through the difficult, capital-intensive and expensive process
of mining and refining the gold. Because neither governments
nor factories can create more of it, gold is scarce. This
scarcity imparts value.
Many unusual items have been used as currencies or stores of
value in earlier societies. One of the more famous is wampum, a necklace made from
a certain kind of seashell that was rare in the Americas. A
currency doesn’t necessarily have to be inherently useful in
order to function, but it absolutely must be scarce.
This requirement for scarcity is the reason counterfeiting has
such severe penalties. In fact, in earlier times,
counterfeiting was punishable by death. Counterfeiters
undermined confidence in a currency by making it less scarce.
Doing so, at scale, could wreck an entire economy.
Gold has another feature that’s extremely important for any
store of value or currency: authenticity. For millennia, gold
has been used as both a currency and as a store of value. It
has been prized throughout its history because of its scarcity.
Gold has been used in money, in jewelry, in crowns and in
palaces. Gold is universally associated with wealth.
Since Bitcoin lacks the thousands of years of history, culture
and tradition that impart so much value and mystique to gold,
it’s easy to write the currency off as inauthentic.
But in a world that’s rapidly moving from analog to digital,
even a “new” technology like Bitcoin can be authentic. When it
comes to digital money, Bitcoin certainly fits the bill. Of the
thousands of different tokens that label
themselves “digital currency,” Bitcoin is the very first. That
grants it an important claim to the property of authenticity.
There are many great altcoins, but none of them were first.
None of them can reasonably claim to be the best. None have a
higher market capitalization. Bitcoin is the first, has the
largest network effect, is the most universally recognized and
Asset or currency?
As Bitcoin inches toward mainstream adoption,
economists and finance experts debate whether it’s an asset or
a currency. In terms of valuing Bitcoin, that argument couldn’t
be more irrelevant. It doesn’t matter how people use
Bitcoin; what matters is why people choose
to own it.
The future of Bitcoin is almost certainly a bright one. Various
analysts and traders have tried to guess the value of Bitcoin
in the future, with some saying it might even reach $15,000 in the near term.
But forget about the near term. If Bitcoin is digital gold,
then its long term value is what really matters. Bitcoin is
rare. Bitcoin is scarce. The vast majority of people don’t own
even a fraction of one.
What’s Bitcoin’s long-term potential? Bitcoin could easily
become so valuable that even millionaires can’t afford an