Bitcoin doesn’t have intrinsic or inherent value. This isn’t as serious a handicap as it might seem, because nothing has intrinsic value. Not government notes, not gold, not even grain, or salt.

Intrinsic value cannot exist because value is subjective. Value exists only in minds. A mind imputes value to a particular instance of a thing in accordance with how useful it believes that thing will be in the service of satisfying its wants. Human wants are subjective. Wants, and their relative intensities, vary from person to person, and from day to day.

Carl Menger put it best.

When I discussed the nature of value, I observed that value is nothing inherent in goods and that it is not a property of goods. But neither is value an independent thing. There is no reason why a good may not have value to one economizing individual but no value to another individual under different circumstances. The measure of value is entirely subjective in nature, and for this reason a good can have great value to one economizing individual, little value to another, and no value at all to a third, depending upon the differences in their requirements and available amounts. What one person disdains or values lightly is appreciated by another, and what one person abandons is often picked up by another.

If you feel tempted to talk about a precious metal like gold as having inherent value, or about a crypto asset as lacking it, please consider instead talking about expected demand for non-trade uses. The existence of non-trade uses for an asset — uses that humans care about at least — is economically significant in that each such use makes it less likely that the market price for the asset will drop beyond some minimum.


So what’s the harm in using inherent value as shorthand for expected demand in non-trade uses? The problem is that it makes it harder to get at the truth.

Misleading language makes careful thought that much more difficult. When we can change our language to speak more accurately about a topic without a significant loss of convenience, we should. In this context I claim we can.

Here’s one illustration of a mistake the wrong language can lead to. Talking in terms of gold’s inherent value can obscure the possibility that the demand for gold could drop to zero at some time in our long and uncertain future. Think in terms of radical new industrial processes (affecting gold’s usefulness in industry), changing fashions (affecting gold’s desirability as a decoration or status symbol), or entirely new industries such as asteroid mining (affecting gold’s apparent scarcity). If some proportion of gold’s value were truly inherent, no hypothetical change of our circumstances would bring its price to zero. Yet we can easily imagine such scenarios.

Hidden use value of digital tokens

The idea of inherent value can lead people astray because it suggests a false dichotomy. The illusion that some classes of asset are fundamentally different from the others because of this special quality. But no such hard distinction exists. If you look closely enough, you can find examples of non-trade usefulness of things as ephemeral as quantities of a crypto currency.

In explaining his regression theorem, Mises wrote.

no good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments.

In other words, in order for any proto-money to get its start, it must initially be useful to people - must be in demand - for reasons not deriving from its potential function as money.

Here’s Konrad Graf talking about how the history of Bitcoin easily squares with Mises’ regression theorem.

In other words, mere possession, knowledge, and use can carry social membership signalling functions in various sub-cultures, much as wearing certain styles of clothing does. These are also direct-consumption values to those concerned with such signalling. Direct-use values, whether psychological or sociological, do not have to be recognized by anyone other than those in a given sub-culture actually doing the valuing (according to methodological individualism and subjective value).

In summary, the complaint that crypto assets have no intrinsic value is off the mark because nothing has intrinsic value. Meanwhile, even something as unlikely as a quantity of crypto asset turns out to have use value unrelated to trade. Once this commonality is appreciated, it’s possible to talk more sensibly about the similarities and differences between crypto currencies and more traditional forms of money.

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