{"id":9301,"date":"2022-05-20T20:00:00","date_gmt":"2022-05-20T20:00:00","guid":{"rendered":"http:\/\/ci02a1aa15f0002709"},"modified":"2025-01-28T15:44:15","modified_gmt":"2025-01-28T15:44:15","slug":"only-bitcoin-gets-its-value-organically","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/markets\/only-bitcoin-gets-its-value-organically","title":{"rendered":"Like Ruble, Like Shitcoin \u2014 Only Bitcoin Gets Its Value Organically"},"content":{"rendered":"
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This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, and writer on all things money and financial history.<\/em><\/p>\n

All (fiat) monies struggle with getting their users to hold the liabilities of their issuer. Put differently, only issuers with some degree of trust or credibility manage to \u201cmonetize\u201d some part of their debts, by literally having others carry it for them for free. In the extreme, it means that the issuer gets a perpetual, non-redeemable, interest-free loan with which it can finance a portfolio of assets \u2014 the profits of which they may spend as it pleases. The most well-known instance of this is the Federal Reserve Board, and its seigniorage profits<\/a> are remitted back to the U.S. Treasury. <\/p>\n

Commercial banks do this too, but on a lower layer<\/a> in the monetary hierarchy. When you\u2019re depositing Fed notes at a commercial bank, you\u2019re giving up a higher-level fiat liability for a lower-level bank deposit \u2014 and you\u2019re financing the bank\u2019s portfolio, these days usually earning interest rates of zero. <\/p>\n

In the past, commercial banks would issue private bank notes (non-interest-bearing liabilities) that could only stay in circulation if its clients decided to hold them, which they only did if they found some convenience in doing so. British banks of the 1700s and 1800s, for instance, offered highly decorative<\/a> notes, proudly displayed their balance sheets and bragged about their conservative lending<\/a> standards, deep-pocketed owners and other reasons for clients to trust that their hard money was safe. Banks competed for note-issuing business<\/a>, since notes kept in circulation meant interest-free financing of its assets. <\/p>\n

A few steps down in the modern debt-based fiat monetary hierarchy we find a company like Starbucks. While not a bank, it still issues money \u2014 although debt-money of a peculiar kind. Starbucks have dollar-values stored in outstanding gift cards<\/a>: value that consumers have essentially lent to the company at zero percent interest. About 6% of the company\u2019s outstanding liabilities<\/a> are in this form, redeemable and repayable not in dollars but in coffee (which lets it avoid banking licenses or regulations for money transmitters). For promises of future coffee and\/or loyalty rewards, customers are willing to give Starbucks their dollars up front. <\/p>\n

All of this is to show that swaying customers to hold your liability is the secret to monetary superpowers<\/a>. <\/p>\n

All Monies Have Value Because You Hold Them<\/h2>\n

While all cryptocurrencies are outside money<\/em> rather than inside money<\/em> as the trad-fi entities discussed above (i.e., they are assets, owned outright, outside <\/em>the banking system, rather than debt claims on a bank-like entity inside<\/em> that system), they struggle with a similar problem of acquiring liquidity. For your \u201ccrypto\u201d project to be successful, you need to somehow sway clients into holding its tokens \u2014 to hand over valuable financial resources in exchange for a stake in its cryptocurrency. <\/p>\n

As the most mature and secure cryptocurrency, bitcoin has a major (and uniquely distinguishing) advantage over every other cryptocurrency: it doesn\u2019t have leaders in control of the money supply, known founders or venture capitalist backers, pre-mines<\/a> or any other feature that makes cryptocurrencies more like financial securities than the pure monetary asset that is bitcoin. People want to hold bitcoin for its use as (future) money<\/em>, and not for any loyalty reward<\/a> or promise of yield or scammy pump-and-dump promise of future glory. <\/p>\n