Community Brings Value to Bitcoin & Other Cryptocurrency

An engineer might say that the value of a bitcoin lies in the ability of its unique technology to store an immutable record of transactions, all the way back from the genesis block in 2009 to the end of time immemorial, without even the hint of possibility that someone could cook the books or doublespend the same unit of currency. Bitcoin could become a tasteless, odorless, borderless, soulless store of value that is accepted around the world. And in some ways already is.

They might then or otherwise go into a lengthy description of the role of miners in the process that both secures the bitcoin blockchain and mints new bitcoins. Some kind of verbal equivalent to the following diagram:

These are answers that technologists provide.

But I disagree.

The value of bitcoin does not primarily lie in the billions of dollars of hardware and electricity spent on its pursuit. Don't get me wrong. I believe that a significant portion of the intrinsic value of cryptoassets is derived from the investment of capital and, most importantly, "work" in the manner connoted by bitcoin's proof-of-work protocol. But the value of that "work," as defined, does not exceed the value of the social community that is de facto created around bitcoin.

When you invest in the brand new asset class that is coalescing around bitcoin and cryptoassets, you are not really investing specifically in the cold, hard technology as much as you are investing in the community of creators and visionaries (and users!) that are behind that technology. They are what forms the core of the support infrastructure for the technology to flourish and develop on its own. Because at billion-dollar valuations for blockchains, you really aren't paying for what the technology is capable of today, investors are paying for what the technology could be, in the far, far future.

Although it could end up being quite a lot in terms of valuation, the investors of tomorrow won't be paying up for today's version of the software. Customers who didn't give you the time of day for your first-generation product have to be lining up for a glimpse of your hot new product by the third or fourth generation comes around. So it's the iteration after the iteration (and most of the time, it's some iteration after that!) that is what's going to drive value in the not-too-distant future.

The success or failure of each of those iterations is determined by the people who develop the software.

In short, that's the value of any bitcoin-blockchain-cryptoasset enterprise.

It’s the community.

People that gather together to inspire, to celebrate, to prod, to cajole, to support one another as they strive toward a future that they believe could change the world.

And who's to say they're not right?

Bitcoin, for example, comes with a fantastic community that loves, supports, and nurtures it. For some reason, they even passionately argue about whether its data blocks should be 1 MB or 8 MB, to the point that they even call each other names and get into virtual fistfights about it. That's true passion!

Dogecoin is the perfect example. Named after a popular Japanese meme and cute puppy in general, basically a joke, but a community grew up around the project and now it sports a $500 million valuation.

If the value of a community of cute dog lovers and crypto enthusiasts is $500 million, then what's next? Right?

To some, that might sound crazy. But when you think about what companies are valuable today - the FAANG and BATs of the world - the Facebook Amazon Apple Netflix Google Baidu Alibaba Tencent nexus of the greater globalized digital economy - they are the companies that build, maintain, nurture, and grow user networks like Instagram, Apple Store, Amazon Prime, Tabao, Alipay, WeChat etc. Those user networks are so profitable because they are subject to network effects, which means that companies can grow at exponential rates for extended periods of time as long as they are expanding their network.

What drives those networks? These networks that are literally worth billions and billions of dollars?

Why are new globally connected user media platforms worth so much money?

Facebook, YouTube, LinkedIn and all the others clearly derive their value from their users. Those users are people, not just data, and those people make up a community. Those communities right now have no stake in the FAANG/BAT networks that they are actively creating, maintaining, and growing.

That's wrong.

One of the great goals in crypto is to more equitably redistribute the power of a network. Where gatekeepers once extracted a heavy toll from media-platform users, either in data or attention or both, without including them in any profit redistribution, they will soon no longer be able to retain those margins. Those business models are about to get majorly disrupted.

That's the power of the community that cryptocurrencies build. They are more than just a "Friday night beers" club for locals or some literary book-of-the-month club. These users literally bring the "network" in network effects to the decentralized networks that they frequent on a regular basis. They are literally what their cryptocurrencies derive their value from. It has a certain tautological elegance.

Bringing people around a common cause increases the value of the token that represents that cause.

This concept of value might be difficult to grasp at first. Difficult at least until you begin to think about what the value of any sovereign currency today is based on. Long gone are the days when a king hoarded a stash of gold in a dusty basement stocked with dragon skeletons and mead. Today's modern fiat currencies derive the majority of their value from the exact same place that bitcoin does. From the throngs and throngs of people who believe that those currencies can enable them to buy the necessities of life.

But the difference is that the bitcoin and crypto communities stand stronger together. On the grand human scale, they are a small but vocal few. Fiat enthusiasts are a fractured and disloyal tangled mass grasping for a grubstake in a game they can't win. At least with bitcoin we know approximately how many units that are going to be in circulation at the end of next month!

Let me describe the power of the bitcoin community via one amazing example.

Money 20/20 recently held a payments race where they pitted 5 racers, each with one form of payment method only, to a race across the United States. Against seemingly all odds, do you know who won?

Bitcoin.

Because of a community that has organically sprung up around a revolutionary technology and its "imaginary" currency created by an anonymous man who may or may not be Japanese or even one person.

That’s power.

The value of any bitcoin-blockchain-cryptoasset enterprise is its community.

And THAT is the true value of Bitcoin - the people who love it, the people who fight for it, the people that put their lives and their future on the line to educate, familiarize and proselytize the Bitcoin gospel.

In that sense, Bitcoin is very similar to the fiat money it may one day replace. It is said that the value of a currency can be measured by the number of people who have "faith" that it has certain value. The fiat in fiat money is derived from that same very "faith."

Though that faith be supported by guns, butter, or mere "exorbitant privilege" as the French used to say, one can say that the US Dollar is currently very successful. Its current "market cap," to use the term in the way that the crypto markets employ, is an astounding $13.8 trillion. And it's literally growing everyday.

Though the Bitcoin market cap hovers around $200 billion, a mere 1.4% of today's money stock at the Federal Reserve, I can't help but notice that the Bitcoin community is awash with a lot more than just "faith."

It has fervor.

So when people ask me, "What determines the value of bitcoin?"

I can only respond with one answer and that answer...

That answer is you, dear reader. You must be like the woodcutter in this famous Francis HODLer painting.

It is you - the curious, the ostentatious, the visionary firebrand, the sampler, the educator… You must pick up the axe each day and continue to go to work, and to work with a purpose. You are going to be what makes (some of) these cryptoassets so valuable in the future.

The bitcoin and crypto-in-general community attracts some of the best people in the world. And some of the worst. But most of what I see is a positive, vibrant community that is poised to create

the next Silicon Valley... decentralized.