Value of Bitcoin Is not Currency, It’s just a Technology

  If one could combine in a financial asset four key attributes: the anonymity of cash, a guaranty of trustworthiness, the convenience and scalability of digital transfer, and a reliable store of value, you would have an extraordinary product. It would be ideal for champions of individual liberty and anathema to governments seeking to tax and regulate them. That is the promise of bitcoin currency. It has succeeded in assuring anonymity and in enabling strangers to transact without the need for a third party like an Amex, Visa V -1.57%, MasterCard MA -1.08%, or a bank to vouchsafe trustworthiness. So far it is at best adequate on scalability and convenience (the system can handle only 7 transactions a second and takes 10 minutes to confirm transactions, though it appears these constraints are solvable. It requires all but the geekiest to use digital wallets which are far less secure than bitcoin itself). But where it arguably fails is as a reliable store of value. Bitcoin has no inherent value whatsoever. It is not accepted as legal tender by any government. It is not backed by any assets. It does not represent a claim on either tangible or intangible property. Like art, however, it does have the merit of scarcity. There are currently 13 million in existence. New bitcoins are currently being created at the rate of 8 percent or so annually, a rate which will decline over time, and there will never be more than 21 million outstanding. As long as people are willing to exchange dollars for works of art, an art market exists, and art becomes a store...