part 2 #StartInvestingInCrypto
Fiat money also has the following traits:
Durability: Persists across time. Won’t degrade over time
Divisibility: It can be broken down and combined.
Portability: Can be moved.
Recognizability: Verified by someone.
Scarcity: Limited supply.
Fungibility: Interchangeable
As Pomp says Money is a belief system. You and I have faith in the US Dollar bill that we both can transact using it because we have faith in the government printing the bill.
In countries like Lebanon, Venezuela, Iran, etc. people would rather not hold on to their local currency because they have lost faith in their government as they can and probably will further debase the currency.
They would rather hold their savings in a more stable currency like the USD. But the US government has printed so much USD in the last several months that it’s only a matter of time that USD will also lose its stable status.
Similarly, Bitcoin holders have faith in the Bitcoin currency and the blockchain network.
What are Bitcoin’s use cases?
This is a popular claim from Bitcoin critics that Bitcoin doesn’t have any utility and hence it’s worthless. To this, I would say what is the utility of other assets?
Gold has some utility as it’s used in jewelry and a few other things.
But what’s the utility of stocks or bonds? They merely derive their value from the performance of the company and the terms set by the issuer respectively. But they have no utility other than financial instruments that will appreciate in value over time or act as an inflation hedge.
The primary reason so many institutions have gold in their portfolio is to use it as an instrument to hedge other parts of the portfolio. Not because it has any inherent utility.
Bitcoin should be considered no different. Except, it’s so much superior to gold.
Bitcoin is the only digital, decentralized, payment settlement layer in the world. I think it would be foolish to think this won’t be worth something enormously big in the future.
