It was the white rabbit, trotting slowly back again, and looking anxiously about it as it went, as if it had lost something...
Value is somewhat paradoxical, and there are multiple theories which try to explain why we value certain things over other things. People have been aware of this paradox for thousands of years. As Plato wrote in his dialogue with Euthydemus, we value some things because they are rare, and not merely based on their necessity for our survival.
“And if you are prudent you will give this same counsel to your pupils also — that they are never to converse with anybody except you and each other. For it is the rare, Euthydemus, that is precious, while water is cheapest, though best, as Pindar said.” Plato
This paradox of value shows something interesting about us humans: we seem to value things on a subjective basis, but do so with certain non-arbitrary criteria. Something might be precious to us for a variety of reasons, but things we value do share certain characteristics. If we can copy something very easily, or if it is naturally abundant, we do not value it.
It seems that we value something because it is scarce (gold, diamonds, time), difficult or labor-intensive to produce, can’t be replaced (an old photograph of a loved one), is useful in a way in which it enables us to do things which we otherwise couldn’t, or a combination of those, such as great works of art.
Bitcoin is all of the above: it is extremely rare (21 million), increasingly hard to produce (reward halvening), can’t be replaced (a lost private key is lost forever), and enables us to do some quite useful things. It is arguably the best tool for value transfer across borders, virtually resistant to censorship and confiscation in the process, plus, it is a self-sovereign store of value, allowing individuals to store their wealth independent of banks and governments, just to name two.
Bitcoin taught me that value is subjective but not arbitrary.
Down the Rabbit Hole
- Bitcoin Has No Intrinsic Value — and That’s Great by Conner Brown
- Bitcoin Is Not Too Volatile by Parker Lewis
- Bitcoin Is Not Backed By Nothing by Parker Lewis
- Euthydemus by Plato
- Paradox of Value by Wikipedia Contributors
- Subjective Theory of Value by Wikipedia Contributors
- Theory of Value by Wikipedia Contributors
- 🎧 Plan B on Modelling Bitcoin’s Scarcity through Stock-to-Flow Techniques
SLP#67 hosted by Stephan Livera
- 📚 Skin In The Game - Hidden Asymmetries in Daily Life by Nassim Nicholas Taleb