We are getting closer to the point of Bitcoin SV (BSV) becoming money. There is still a long way to go and we are not even close yet, but concrete steps are being made. It took hundreds of years, perhaps thousands, for gold to become money. It took hundreds of years for unbacked paper dollars to become money, from the point when paper dollars came into existence as gold receipts until 1971. It will take many more years for BSV, the original Bitcoin, to become money as well. Perhaps not hundreds, but still quite a while.
The prospects for BSV’s long term value depend ultimately on it becoming a bona fide money, and in order for that to happen, it needs an objective use-value outside of its value in exchange. That use-value is slowly becoming evident in the gaming industry, among others of course.
We’ll get back to that use value in a minute, but first here’s why it’s logically necessary. BSV, just like any good or service, is not somehow separate from the laws of economics, just like nobody on Earth can ever be separated from the law of gravity, or physics generally.
Why money has exchange value
The laws of economics require an intrinsic use-value for something to be money. Ludwig von Mises explains why this is so through his Monetary Regression Theorem. The Theorem isn’t so much an argument that tries to prove something (namely that money must have a use-value) than a solution to a logical problem inherent in assessing the exchange value of any money from the start. It seems to require assuming the conclusion before proving it, otherwise known as begging the question.
The problem is like this. Why does money have purchasing power today? Because people expect it to have purchasing power tomorrow. But what explains that? Take out the temporal clauses and the argument boils down to: Money has purchasing power because money has purchasing power. That is begging the question. It is a logical fallacy, so something else must be giving it its value.
What is that something else? That’s where Mises traces money back to its original use-value, when it was valued for what you could do with it intrinsically, how the thing itself can make your life better, outside of exchanging the thing for something else. That gives us an exit from the circularity of proving purchasing power from purchasing power itself. For example, gold has purchasing power because it can be used to make things.
Paper dollars have exchange value because of the past
Then what about paper dollars? From a purely logical standpoint, they have value because at one point in the past they were gold receipts, so we can trace dollars back in time to original use value, hence regression. What about other paper currencies? They are backed by the dollar, the literal meaning of the term “the world’s reserve currency.” It all regresses to the original use-value of what originally backed the dollar. The connections become ever more distant and oblique, true, which is why the purchasing power of money is continually eroding. But it’s still there. Barely.
BSV has exchange value because of the present
But BSV is a different animal. It is not backed by anything. Not by dollars, not by gold, not by anything else with any degree of connection to any intrinsic use-value. Being unable to link BSV to the past through any causal chain, Mises’ Regression Theorem cannot apply, and we are back to begging the question. Unless — again speaking from a purely logical standpoint — we do not have to regress anything, and the value of BSV stems from some kind of inherent use-value now, in the present, not in the past.
What is that inherent use-value now? What can someone actually use a BSV unit for, other than exchange it? Well, my colleague Becky Liggero reports on this very topic in her Day 1 recap of iGB Live. Simit Naik of nChain, discussing the intersection between blockchain and iGaming, gives us one concrete answer: provably fair gaming.
BSV can be used now as a verifier of fair gaming. This is totally independent of its exchange value. Says Naik:
“You then get away of having regulators who come in and certify your pure random number generating systems. Everything is on-chain, everything is independently verifiable and that’s a key thing for the next evolution in gaming.”
That’s just one use-value. Firms like nChain are in the business of discovering new ones all the time. The more that are found and applied, the higher BSV’s use-value becomes. That in turn becomes its value floor. The remainder is speculative. The higher the floor, the more stable the total value.
Here we come to a very interesting yet theoretical question. Which cryptocurrency has the highest floor? Since speculative and inherent value is blended into the price of any coin, it’s impossible to know precisely. But it is clear that BSV must have a higher use-value than BTC for example, and therefore a higher floor. In fact, the direct use-value of BTC may be very close to zero, since the chain is relegated to 1MB-sized blocks. That’s precisely why its supporters now contend that it is only a “store of value.” But if that’s the case, then we are back right where we started, begging the question again. Why is BTC a store of value? Because it is a store of value. That does not work.
We can see this point more clearly if we take a small step back and look at Ethereum (ETH). It can be used directly to store ownership records for assets like gold as the Digix gold token (DGX) does. That gives Ethereum a floor in use value today. Where is that floor? Nobody knows, but it’s there.
Use-value alone though is not enough for something to be a money. Software for example has use-value, but software is not money because it is not easily divisible into homogenous units with an ultimately fixed supply. BSV is software, but it is also divisible and has a fixed supply. That’s why BSV can logically become money, and is slowly getting closer to that point. Once BSV has a logical basis for becoming money, the only question that remains is which one is best?