Can A Blockchain Really Have "Intrinsic Value"?

By The0xFactor | The 0xFactor | 12 Dec 2019

This post is in reply to the post:

Can a blockchain have intrinsic value? Yes. Does Steem have intrinsic value? Yes. I can agree that Steem has intrinsic value. Indeed, I would argue that Steem is one of the very few blockchains that can be said to have intrinsic value. Bitcoin is not one with intrinsic value...

For an asset to have intrinsic value it has to have an underlying value that exists before "means of exchange" and serves as a base value. This is what your standard Austrian economics supporter believes and its what history suggests. That base value comes from utility of some kind, which acts as the foundation of its worth that *means of exchange* usage and speculation can add on top of in a market.

Bitcoin is a network and can benefit from network growth. However, network value can be fleeting and is not reliable for an indication of its value. Network popularity comes and goes, as we see with Myspace, AOL and many other projects. Anyone rocking JUNO internet service? Not for years... Most people on Steem are hoping Steem will replace the current social platforms, further indicating how fragile people view network value.

Bitcoin has no intrinsic value because its first and foremost use case is as a means of exchange, the same as a fiat currency. Like fiat currencies, BTC, BCH, LTC are used for one thing and one thing only: means of exchange. How do they become a means of exchange? Social consensus and nothing more. They are not "representative" assets/money because they are not backed by a real asset such as gold, oil, Nike shoes.

Ethereum was the very first blockchain with what one could call "intrinsic value" because its native currency actually served a purpose beyond simply securing itself. Ether is the fuel that is used by any businesses and users of decentralized applications and DeFi within its ecosystem in order to obtain security and autonomous computation. In this way, Ethereum is sort of a *Security As A Service*, which is not true of Bitcoin simply because Bitcoin truly only secures bitcoins, and not whatever other asset you care about. 

Is there value in network effect? Yes, there is and it can become so real and influential that over time it becomes almost unstoppable for a time. This argument has recently been made by Andreas M. Antonopoulos when he said that the "next Bitcoin" and the "next Ethereum" would be Bitcoin and Ethereum. Because while all smart contract blockchains CAN do what Ethereum does now, they don't have the DeFi ecosystem, the fame, the users and the developers and the developments that Ethereum does have and is likely to keep.

So, why does Steem have intrinsic value? Its not its community... Yes, many accounts have been created, but of the active ones, the community is tiny. There are more people watching Tim Pool, just one Youtube star, every day than there are users on Steem. The number of STEEM holders having more than 500 STEEM is less than 12,000 (last time I checked).

That sounds bad, but again, Steem does have intrinsic value. Steem is a content-oriented blockchain and the content on it gives it value and grows its value. Why is Wikipedia valuable? It is not valuable because lots of people know about it and use it, its because of its intrinsic value, its base value which is information. Its full of precious knowledge that can educate the globe and grow our collective wisdom. Even if only 10 people used Wikipedia for education, to those 10 people the knowledge contained on Wikipedia would be very useful. Steem has the potential to be a decentralized version of Wikipedia and grow in value by accumulating a massive collection of immutable, educational articles.

This indicates that Steem has intrinsic value, one of the few blockchains I can say that about. However, *having* intrinsic value does not necessarily tell you *how much* that value is, just that there is a base value there. Is Steem's intrinsic value of great value? That will depend upon the quality, quantity and demand for its content. 

Steem is going through an identity crisis. It was suppose to be a Proof of Brain consensus system, only, its system is viewed by many to be toxic and aggressive with stake-based voting creating an atmosphere filled by bullies and sycophants. Although its objective was to be an application specific blockchain with the application being as a social network, it is now focusing its attention toward application development on top of the blockchain rather than growth as a decentralized social platform. 

The last consideration for Steem is whether or not it is the true *first mover*. Steem was the first of its kind in the blockchain industry, however, it is going for the social network industry currently dominated by Google, Twitter, Facebook and other giant social networks. Disruptive technology can and should try to take over an industry when it can, but there is an important question we need to ask ourselves. Is it easier for Steem to become as big as the industry giants or is it easier for the giants to create blockchains? Recent news indicates that Jack Dorsey, the CEO of Twitter has goals of decentralizing the platform, which could be a challenge for Steem's growth. 

So, can a blockchain have intrinsic value? It can! Still, that does not tell us how valuable its intrinsic value really is... 

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