Gold, Ordinals, and Fungibility
I was inspired to write this article while listening to a recent interview Jordan B. Peterson conducted with Roy Sebag where Sebag makes the case that gold is a better money than bitcoin because gold has “intrinsic value” stemming from its ability to be fashioned into jewelry and used in electronics (among other things).
I’ve heard this argument several times in the past from people such as Eric Weinstein and Warren Buffett, and I always had a problem with it, because value is subjective, not “intrinsic”. There is no commodity that “contains” value. Value is granted to a substance or object by someone or something capable of subjective valuation; that is, by something alive, intelligent, or conscious. Inert matter does not have the capacity to “value” since it has no purpose — there can be no value outside of purpose.
However, if we ignore the parts of the universe that aren’t alive (and thus incapable of valuation), then many things suddenly become viewable as “inherently” or “intrinsically” valuable. These are things that are needed by all life: things like water, air, and energy. If we ignore the parts of the universe that aren’t intelligent (or “conscious”), then gold has several properties that make it “intrinsically” valuable: it’s durable, shiny, and scarce. Such properties make gold singly useful to intelligent life.
Many animals such as badgers, birds, rodents, and even insects, are known to collect and hoard shiny objects. The utility of shiny objects is obvious; they attract attention. This makes them highly suited to attracting a mate and signalling status. Gold is especially suited to this use since it is almost entirely inert and thus does not easily oxidize or bond with other elements, so it stays shiny practically forever. It’s also scarce, which means that it takes a relatively high amount of skill to collect and hold. Its extreme salience and scarcity also makes it an attractive target for plunder, so anyone holding large amounts of gold can be assumed to have a high level of physical prowess.
Viewed from this angle, fungible money is the opposite of gold. Most bitcoin enthusiasts want bitcoin to be “fungible”; that is, they want each chunk of bitcoin to be exactly the same, and thus exactly as valuable, as any other chunk of bitcoin of the same size. This makes for very private transactions which protect the identities of the participants.
“Ordinal theory” (a novel way of viewing satoshis, essentially giving each unit of bitcoin a uniquely identifiable serial number) turns this paradigm on its head, as it (purportedly) allows each satoshi to have some unique piece of data attached to it, rendering it non-fungible. Is there something to the idea that gold has value because it can be turned into trinkets? I don’t know the answer to this, but, for better or worse, the use of Ordinals to mark certain satoshis as “NFTs” is granting this property to bitcoin.
I wonder what gold supporters such as Weinstein, Buffett, and Sebag will say about bitcoin’s “intrinsic value” once they learn of this new development.
I also worry that making certain bits of bitcoin more valuable than others is destroying that which makes bitcoin unique and therefore valuable.
