If the sum total of your idea of Bitcoin’s value proposition is the promise of profiting from price fluctuations, no doubt you’d find it hard to distinguish it from speculative assets or Ponzi schemes

For this purpose, let’s define speculative assets as those without any inherent value, where investors with a gambler’s mentality buy and sell the market to profit from price fluctuations. A Ponzi scheme is similar in that it tries to sell investors a share in a project which is inherently worthless, only generating a return for early investors by acquiring new investors.

Though the mainstream messaging around cryptocurrency and Bitcoin would like you to believe that it falls somewhere between those two categories, Satoshi’s original design and vision for Bitcoin is vastly different. 

And, what I’d like to illustrate to you today, is that it’s not as complicated to understand Bitcoin’s value proposition and its place in our future economy as you may fear...

Bitcoin as Infrastructure for the Data-Driven Economy

If you can understand the snowball of electrical application invention since the lightbulb, you can appreciate Bitcoin’s role in the future economy. 

So let’s use this metaphor, as Jeff Bezos once used the electric industry to illustrate the Internet’s potential, to see how Bitcoin is about to ignite an explosion of economic growth and development.

Electrical Inventions as Metaphor for Bitcoin

The first application of electricity in the home was the light bulb. When households were first wired to the electric grid, it was for the sake of lighting their households alone. They weren’t thinking of any appliances, so power/electricity sockets were nothing more than light fittings.

Ripping up streets to install this new infrastructure and building power generation stations required a colossal capital layout. But once houses were connected to the power grid for lighting, it opened the door for a whole range of electric household appliances to be invented. The second electrical household appliance to be created was the electric fan, introducing a revolution of appliance invention and development.

Bitcoin’s peer-to-peer cash functionality is similar to the lightbulb. Where the lightbulb runs on an electric infrastructure, Bitcoin transactions (or, data interactions) run on the Bitcoin blockchain. Although the Bitcoin blockchain can power peer-to-peer cash, the infrastructure is like a pipeline that can power any data-based interaction

Bitcoin tokens are the fuel that pushes data through this pipeline. In other words, those who want to use the pipeline to power their data-based applications need to spend bitcoin tokens for the right to use the Bitcoin infrastructure. 

The Future Economy is Data-Based

“Every moment of every day, countless data interactions take place - information transmitted between humans, between humans and machines, and also between machines. A cacophony of noise. Randomness. Chaos.” - Bitstocks CEO-Founder, Michael Hudson

Now, think of the technology that’s undergoing the most prominent growth spurt right now:

In 2017, the five biggest American IT companies had a combined valuation of over $3.3 trillion and made up more than 40 per cent of the value of the Nasdaq 100 (Source” Conor Sen, via Bloomberg Opinion). 

American technology giants - Amazon, Apple, Google, Facebook, and Microsoft –- have already usurped energy corporations at the top of the NASDAQ stock index. Although these companies offer a mix of products and services, they have a key factor in common: they are all investing a significant part of their resources on collecting, analysing and applying data for the development of new products and services.

The future economy will be all about data, and the companies that are best able to capture, interpret, and apply that data will rise to the top. And this is where Bitcoin’s role becomes clear: a secure and immutable pipeline for data that can scale to integrate all data applications, globally!

Bitcoin as an Economic (Not a Speculative) Asset

As the creator of Bitcoin, Dr Craig S. Wright (aka. Satoshi Nakamoto) once said in an interview: “None of this would have worked without Bitcoin, but it’s a wheel and I want to build a car.” 

Given Bitcoin’s capacity to provide the infrastructure to power the data-based economy, and Bitcoin tokens’ role of granting access to this network, Bitcoin holds immense intrinsic value. Investing in Bitcoin is then based on the calculated analysis that the network itself will contribute tremendous value to the economy, and the value of its tokens alike.

That said, there’s a caveat that investors must take into account: The market is rife with Bitcoin knock-offs that lay claim to the title, but hold no semblance to Bitcoin’s original design. How can you tell the difference? Simply put, ask yourself about the value proposition of a particular cryptocurrency or Bitcoin node implementation. Does it merely promise you an increase in price, or does it offer economic value that’s inseparable from the network? For a more comprehensive discussion of this topic, I invite you to download our (free) ebook on Bitcoin myths to help you sort through the distortions.

New call-to-action

You may also be interested in