Home-made Store of Value
Some smart folks in the investing and technology space make important and well-argued cases that many protocols and relevant cryptocurrencies may be headed for a lean, rather than “fat”, future, and that the future may be more diverse and application-driven than is suggested by the current “conventional” wisdom. We sympathize with most of these views — they corroborate a more demand-driven (and therefore consumer-centric) value creation for the future digital currencies, which is pivotal to our thinking.
Towards the epilogue of his very helpful essay, John Pfeffer supports the case for Bitcoin’s long-term value and potential to be the winner within its core use-case, provides logic and inputs for specific math — and the results. He asserts that the relevant value upside at “mature equilibrium”, driven by the universal Store of Value (SoV) property, is comprised of a share in the private and official bullion holdings, as well as other forms of international reserves — in fiat currencies, IMF Special Drawing Rights (SDRs) and IMF-related assets. He then concludes that Bitcoin would be worth approximately USD 260,000–800,000 per BTC fully-diluted at maturity. That is a lot of value within reach by the currency with a transparent formula of ascent to its current brand strength and likely escape velocity vs rest of the pack — work/resources traded for social scalability that drove new users and value (that can be stored by investing in the currency). Could/should that not be replicated?
With credible support of Bitcoin’s path to global dominance and some clarity on the size of the prize — in hand, I would like to modestly expand on the above and zoom in on the possible diversity among the yet unborn cryptocurrencies that may rely on SoV properties to fuel their spread. The above compelling case for Bitcoin appears to focus on adoption among institutions (mainly public) and individuals (mainly wealthy, with a current habit and means of investing in the only global SoV medium — gold). So what about the individuals that have smartphones, don’t “practice” SoV (other than hoarding cash occasionally), do participate in large cross-border economies, are unexposed to cryptocurrencies and could certainly use more income and financial freedoms? One could focus on emerging markets (thinking in traditional geo-economic context) or turn to global location-agnostic future networks of individuals who are active online, absent in crypto space and drive large consumer spend — repetitively and with common patterns. Like, for instance, various parts of the entire global female population…
As I wrote before, we view Bitcoin as a consumer phenomenon and contemplate what it may precede in the same light. Some of the existing socio-economic networks are global and arguably far bigger than the current Bitcoin population. We firmly believe that many current non-users have broad and ample use-cases, will want and can support “their own” Bitcoin.
These untapped users can be presented with alternatives more directly relevant to their own values, interactions and shared lifestyle, where they can have an immediate and meaningful impact on proliferation and value of the currency native to their network, essentially repeating the path of Bitcoin’s early adopters. Economic incentives underlying the SoV utility are plentiful, as per above, there is also plenty of current intrinsic value (like content work/attention and ad revenue in existing social networks) to support new currencies.
