I hear the objection now and then that, “Bitcoin has no value because it isn’t backed by anything.” Here’s why I think this claim doesn’t work.

First, what does “backing” really mean? In simple terms, it refers to something valuable behind an asset that gives it worth. Unlike today, the U.S. dollar was once backed by gold; prior to 1933, people were able to trade their dollars for a fixed rate of $20.16 per ounce. This system effectively made it so that the U.S. dollar was not just a piece of paper, but that it was tied to a real and valuable asset.

Next, we’ll dig the question a little deeper: gold is valuable, but what is it backed by? Well, it’s not backed by another asset, but rather its own properties. We know that gold is rare, laborious to mine, shiny and pleasant to look at, and carries with it a symbol of luxury/wealth. These things give it value.

Likewise, Bitcoin’s unique features also contribute to its value. Here’s a list of five core aspects I think are worth noting:

  • Decentralization: Bitcoin operates without a central authority. Transactions are verified by a global network of nodes, making it resistant to censorship and centralized control.
  • Limited Supply: Bitcoin’s supply is capped at 21 million coins, ensuring scarcity. This design protects it from inflation and mirrors the rarity of assets like gold.
  • Transparency: All Bitcoin transactions are recorded on a public blockchain, meaning anyone can verify them. This transparency builds trust without requiring intermediaries.
  • Borderless Transactions: Bitcoin enables peer-to-peer transactions across the globe, bypassing traditional banking systems. This feature reduces fees and increases accessibility, especially in underbanked regions.
  • Security through Proof-of-Work: The Bitcoin network is secured by miners solving complex algorithms, making it extremely difficult for anyone to alter its transaction history.

This conversation is really about the nature of value itself. Gold is a useful comparison, but we could just as easily explore the value of gasoline (energy), insulin (life-saving utility), or labor talent (skills and expertise). The takeaway? Value doesn’t always require “backing” in the traditional sense. It emerges from usefulness, scarcity, and perception. Bitcoin is no exception.

Bitcoin

“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.” - Satoshi Nakamoto