How Bitcoin Could (Potentially) Have Value

I have written extensively on all the ways that bitcoin does not have the value that people think it does, but I recently discovered a perspective where I think a bitcoin could have actual, fundamental value…

Consider this perspective:

Each bitcoin is a 1/21,000,000th share in an NFT minted by Satoshi.

How is the bitcoin block chain itself an NFT?

  1. The bitcoin block chain has provenance back to Satoshi by definition – Satoshi is the person who created the genesis block, whoever that person might happen to be.
  2. The bitcoin block chain is a singleton by definition – the chain with most work built on top of the genesis block is The Chain, which ever chain that happens to be at any given moment.

These two attributes effectively make the bitcoin block chain itself into an NFT.

But then where does the value come from?

If NFTs can have value, then the bitcoin block chain, as an NFT, can also have value for all the same reasons. If the chain has value, the we can define each bitcoin as being a fractional ownership share of that value.

But do NFT’s have value?

This is a VERY hard question! I do not know the answer, but it is at least possible, in a fundamental and coherent way, that they could have value. So, if NFTs can potentially have value then at least this is a way that bitcoin can potentially have value by way of being itself an NFT. I do not think any of the currently popular other theories of bitcoin value have any path where they could at least even potentially be valid (much less correct).

How could NFT’s potentially have value?

It does seem at least possible (to me at least) that there can be real, fundamental value to singleton-ness. I can also think of (albeit contrived) examples of distributed systems where having a guaranteed universal (as in, there is absolutely provably only one in the universe) singleton could ensure proper operation even in the face of unreliable (and even speed-of-light-bound) communications channels, but this is getting us off subject. At very least it seems possible for something to have value by virtue of being verifiably unique, so it is at least possible that NFTs could have value since they have this property. I believe this is much stronger than any of the other value claims that can be made for bitcoin.

(This is a VERY interesting topic for me that I want to tighten my thinking on, so please do share any criticisms and insights in the comments! Do you know of any examples where singletons absolutely do have fundamental value? Or do you know an argument for why this can not be true?)

Ah ha! So you changed your mind and now admit that bitcoin has fundamental value!

I still strongly believe that no one has ever bought bitcoin for valid fundamental value reasons, and the (even recently greatly diminished) price of bitcoin only reflects misunderstanding and speculation on a massive scale. I still stand ready to bet against anyone who makes claims about the future price of bitcoin over the long term (although there are not as many of these people today as there were when bitcoin was above $60K!). I think this new NFT perspective is interesting (to me at least) because it is the only possible path I have ever been able to think of where bitcoin could even possibly have any valid value claim, no matter how weak.

But bitcoin’s value comes from limited supply/cryptographically secure/easy to transfer/distributed nature/etc…

Yes, I also know the bitcoin pitch sheet and I have written elsewhere about why each of these claims ultimately ends up being invalid, or false, or both. You can not make a valid claim with a preponderance of invalid claims.

If you really understand how bitcoin works (not you read a bunch of websites that make seductive but sloppy claims about what they think bitcoin is rather than what it actually is) and you want to thoughtfully debate this, then pick whatever you think is the strongest of all the value claims and send me your best opening statement (maybe a sentence or two) in the comments below and we can try to find out which one of us is wrong.

Also, if you really understand economics and/or markets and/or political economy and think that bitcoin has value but you do not know enough about the actual technology and system dynamics, then we can also talk. Too many smart people build grand towers of bitcoin theories and ideas on top of non-existent foundations.


  1. Josh Goldstein

    I think you are on the right track, but I think its even simpler. The NFT analogy (or observation) is on track, but unnecessary. Humans place value on things – often tied to utility, but equally often tied to their beliefs (often irrational btw). Whether the beliefs are irrational, misguided, false or incorrect is not the point. There are many humans on this planet that would (and do) die or kill for beliefs that are neither correct nor provable nor practical. There is global and widespread demand for Bitcoin, so it has value. People are willing to pay for it – why? because other people are willing to pay for it. Maybe they believe it could become a global currency or store of value not subject to the whims of politicians – maybe those beliefs are wrong, but thats not the bet people are making – its a bet that those beliefs (or similar ones) will grow over time – not necessarily for eternity. The belief itself is in many respects self fulfilling. What people will be willing to pay for Bitcoin in the future is speculative (as is true of almost everything) – Its a function of whether the belief that inarguably has now existed for a decade will grow or shrink. And yes, because supply is in fact limited (like singleton-ness) the speculative equation is much simpler in that respect than it would be for something like gold where you need to guess right on both supply and demand… and mineral rich asteroids…..

    • bigjosh2

      I think the root claim here is “Bitcoin has value because people will pay for it” with an implied “…because people will pay for it …because people will pay for it …etc”. I think this can be true if bitcoin is viewed as an NFT, which is the point I am trying to make in the article. But if bitcoin is viewed instead as a currency (which is the standard view) then I think it fails. A currency is fundamentally credit instrument used to postpone consumption. When I sell you a banana today for a dollar, what I am really doing is say “I am giving you this banana today and in exchange you are transferring to me an IOU that I may be able to use for consumption at a later date.” The IOU is issued and backed by the US Government. Now many will question the credit worthiness of the US Government, but this is an unrelated issue. The important part is that there is someone who’s credit worthiness can be evaluated. Similarly, I could have accepted a personal IOU directly from you for the bananas, in which case I am extending you credit and can evaluate the likelihood that you will someday deliver back to me 1 banana worth of consumption. In bitcoin’s self-referential value model, there is no credit granted from anyone. The claim is that the value of the bitcoin was created from nothing when the coin is mined, and then that value is transferred in each transaction. When you buy a bitcoin, you are getting a claim on no value. There is no one who’s credit worthiness you can evaluate. There is no claim on value – only a claim of value. It is as if I just woke up one day and said “I have 10 joshcoin” and then you said “I’ll give you $100 for one of those joshcoin!” and you gave me $100 and then I said “OK, one of those joshcoins is now yours!”. Note that at no point do I ever say anything like “…and someday I will deliver consumption to the last person who has ownership of a joshcoin”, so there is no IOU involved – the imaginary joshcoin itself is claimed to be the value. Bitcoin has a lot of math and other complication obscuring the process, but this is fundamentally what is actually happening. If you could create value by just *saying* that you created value, then that leads to all kinds of contradictions. See my article on Nitcoin!

  2. David Grayson

    Hey Josh!

    > Do you know of any examples where singletons absolutely do have fundamental value?

    Maybe this isn’t what you’re asking but hashes are singletons. For example, 894b1e8845550a81eec7d48d7cc9fc85487210f8 is a singleton that uniquely refers to a commit in one of my Git repositories.
    (Too bad Google doesn’t know how to search for it, even though it’s a very public repository.) It encapsulates the entire set of files in the repository, their contents, and the entire history of how they were developed.

    The ability to have the hash, to easily communicate it to another person or your future self, and to know that hash will always refer to the exact same data, is really useful. However, that ability exists already without Bitcoin, so this isn’t really an argument for Bitcoin’s value.

    • bigjosh2

      I’d argue that git hashes are not singletons at all. That hash might uniquely point to your commit at the moment, but it is possible there could be another unrelated git commit that generates that same hash. “But the chances of two commits generating the same hash are tiny!” is true, but not relevant since the whole point of a singleton is that it is *guaranteed* to be a unique and singular thing.

      • David Grayson

        If that’s the level of rigor you have for this discussion, then we must also accept the possibility that someone with a laptop could be lucky at guessing nonces and create a new version of the blockchain where they rewrite the history of all Bitcoin transactions going back several years. The Bitcoin nodes would then start using this new version of the blockchain (unless they still implement checkpoints). Someone could also guess your ECDSA private key and take all of your funds.

        • bigjosh2

          Aha! That is brilliant… but already been thought of and addressed. They prevented the “rewrite all history with a string of lower difficulty blocks” attack by changing the rule in bitcoin-core code from “follow the longest chain” to “follow the chain with most work”. They really had no choice but to do this, but it is clearly in conflict with the official white paper- so presents a problem for bitcoin purists who religiously believe in the biblical qualities of the canon. Luckily no one knows or thinks about this stuff (except people like me who have actually written miner code!). Also just for fun, the bitcoin-core software crew also added *hard coded* checkpoints as you intuited, which again completely violates the whole bitcoin worldview… but again as long as no one talks or thinks about it then it is ok! :)

          BTW, people also can guess ECDSA private keys – which according to bitcoin maximalists must take longer than the history of the universe.

          None of my objections to bitcoin hinge on technical issues like these, but boy there sure are a bunch of technical deal breakers in there if you look too hard! :)

          • David Grayson

            I was saying that the person on their laptop could get astronomically lucky and create a blockchain that actually has more “work” than the one that the thousands of honest miners have been working on, and thus satisfies the consensus rules :-)

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