Fred Ehrsam writes:
Approaching bitcoin as a currency or store of value is focusing on a single and secondary application of the bitcoin network (analogous to analyzing a single feature built on top of the Internet, like email). The first application of the network which has gained broad adoption is payments, where it can be easily demonstrated that real money is being saved by harnessing the efficiency of the network. Since one must acquire bitcoin to use the bitcoin network, this has given bitcoin as a currency value as a secondary effect…
We find the early days of the Internet to be an instructive example in demonstrating this long-term value creation through network efficiency. The Internet had a core innovation that made it valuable: The ability to disseminate data over a distributed network in a way that was significantly cheaper than the prior methods. Similarly, bitcoin has a core technological innovation: The ability to publicly verify ownership, instantly transfer that ownership and do so without the need for a trusted third party. Just as the Internet brought the cost of disseminating information down by an order of magnitude, bitcoin brings the cost of transferring ownership down by an order of magnitude.
Again, bitcoin as a payment system is just one of the potential applications of the network. To cap bitcoin’s value here would be like saying that the Internet, in the early days, was only as valuable as its ability to send email in a more efficient way than fax or snail mail. Bitcoin is valuable as a currency because of the economic efficiencies the bitcoin network is already creating as transactions flow over it. As with the Internet, more applications will flourish which will make the bitcoin network, and thus bitcoin as a currency, valuable.
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