BITCOIN AS A STORE OF VALUE

Store Of Value 

A store of value is a commodity, an asset or currency that can retain its purchasing power over time. The item can be stored, retrieved, and exchanged in the future without losing its value or usefulness.

A store of value is essential for economic stability and growth. It allows people to save and invest their wealth and to trade and exchange goods and services.

The main criteria for a store of value are that it should be durable, divisible, portable, fungible, scarce, and widely accepted. A store of value is not necessarily perfect, as it may lose some value over time due to inflation, depreciation, or obsolescence.

However, a store of value should be able to preserve most of its value and utility in the long run.

If you purchased a good store of value today, you would expect the asset to be worth just as much as it is now (if not more) in the future.

• The Case For Bitcoin As A Store Of Value
• The Barriers To Bitcoin As A Store Of Value
• Summary

The Case For Bitcoin As A Store Of Value

Bitcoin has been gaining popularity as a store of value, which means that people use it to preserve their wealth over time.

Why is bitcoin a good store of value?

Here are some possible reasons:

Scarcity
Bitcoin has a fixed supply of 21 million coins, which means that there will never be more bitcoins created than that. This makes bitcoin scarce, unlike fiat currencies that can be printed by governments at will.

Scarcity increases the demand for bitcoin, as people perceive it as a valuable asset that cannot be diluted or debased.

Divisibility
Bitcoin is highly divisible, as one bitcoin can be split into 100 million units, called satoshis. This means that bitcoin can be used for transactions of any size, from large purchases to micro-payments.

Divisibility enables bitcoin to be accessible and usable by anyone, regardless of their wealth or location.

Portability
Bitcoin is easily portable, as it can be transferred across the internet, without the need for physical transportation or intermediaries.

Bitcoin can also be stored in various forms, such as hardware wallets, software wallets, or paper wallets, depending on the user’s preference and security needs.

Portability allows bitcoin to be moved and stored anywhere, anytime, with minimal cost and hassle.

Durability
Bitcoin is durable, as it does not degrade or decay over time, unlike physical assets such as gold or cash.

Bitcoin is also resistant to censorship, confiscation, and corruption. A blockchain is secured by cryptography and distributed across a network of nodes that verify and record transactions. The blockchain.

Durability ensures that bitcoin can withstand external threats and preserve its value over time.

Acceptability
Bitcoin is increasingly acceptable, as more and more people and businesses recognise and adopt it as a form of payment or investment.

Bitcoin also has a global reach, as it can be used across borders and jurisdictions, without the need for conversion or compliance.

Acceptability enhances the utility and liquidity of bitcoin, as it can be exchanged for goods, services, or other currencies.

Uniformity
Bitcoin is uniform, as all bitcoins are identical and indistinguishable, regardless of their origin or history.

Bitcoin also follows a set of rules and protocols, called the consensus mechanism. This ensures that all transactions are valid and consistent across the network.

Uniformity guarantees that bitcoin can be trusted and verified, as it eliminates the risk of fraud or counterfeit.

These are some of the attributes that promote bitcoin a store of value. However, they are not the only ones. Bitcoin has other advantages, such as transparency, innovation, and network effects, that contribute to its value proposition.

The Barriers To Bitcoin As A Store Of Value

Bitcoin is not without challenges, such as volatility, regulation, and adoption barriers, that may affect its future performance and potential.

Some of these barriers to Bitcoin as a store of value are:

Lack of understanding
Bitcoin is a complex and innovative technology that requires a certain level of technical knowledge and financial literacy to use and appreciate.

Many people are still unfamiliar with the concept and benefits of bitcoin, or have misconceptions and doubts about its security, legality, and value. This creates a gap between the potential and actual users of bitcoin, as well as a challenge for educating and informing the public about bitcoin.

Complexity and usability
Bitcoin also involves a learning curve and a trade-off between convenience and control.

Users need to find and access reliable and trustworthy platforms and services that support bitcoin transactions. Exchanges, merchants, and payment processors, can be limited or unavailable in some regions or markets.

Regulation and compliance
Bitcoin is subject to the rules and regulations of different countries and jurisdictions. This can affect its legality, accessibility, and taxation.

Regulation can have both positive and negative effects on bitcoin adoption, depending on how it is perceived and implemented by the authorities and the market. For example, regulation can provide clarity, legitimacy, and protection for bitcoin users and businesses. However, it can also impose restrictions, barriers, and costs that may discourage or prevent bitcoin adoption.

Regulation can also vary and change over time, creating uncertainty and inconsistency for bitcoin users and businesses.

Volatility and speculation
Bitcoin is known for its high volatility, which means that its price fluctuates significantly over time.

This can be attributed to various factors, such as supply and demand, speculation, leverage, technology, and external events.

Volatility can have both positive and negative effects on bitcoin adoption, depending on the perspective and objective of the users and investors. For example, volatility can create opportunities for profit and innovation, but it can also create risks and challenges for stability and utility.

Volatility can also affect the perception and confidence of the market towards bitcoin. More specifically, its suitability as a store of value and a medium of exchange.

These are some of the main barriers that explain why bitcoin adoption as a store of value is not as widespread and mainstream as it could be. However, they are not the only ones. Bitcoin faces other challenges, such as competition, scalability, security, and social acceptance, that may affect its future growth and potential.

Summary

The case for Bitcoin as a store of value is strong because it can retain its purchasing power over time and protect against inflation or economic uncertainty.

It also has some features that make it a good store of value, such as scarcity, security, and decentralisation.

From the early days of bitcoin, proponents have made the case for Bitcoin being more akin to “digital gold” than simple digital currency.

The store of value thesis for Bitcoin argues that it’s one of the soundest assets known to man and the best way to store wealth that isn’t devalued over time.

One of the most persuasive arguments for Bitcoin as a store of value thesis is that Bitcoin has a finite supply. There will never be more than 21 million bitcoins.

However, it also faces some challenges and limitations as a store of value, such as volatility, regulation, and adoption.

Bitcoin adoption is not a simple or linear process, but rather a dynamic and evolving one, that may require more time, effort, and innovation to overcome the existing barriers and create new opportunities.

In short, bitcoin is not a perfect store of value, but rather a dynamic and evolving one, that may offer opportunities and risks for its users and investors.