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.
Digital scarcity
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.
Authenticity
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 is authentic.
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.
Bitcoin’s future
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 entire coin.
