Last week, while the price of Bitcoin was surging toward $10,000, I posted a simple question on social media: “What is the value of a bitcoin?”
The answers I received ranged from purely practical and economic calculations to more philosophical ones. Sure, the value of bitcoins — or anything, for that matter — is partly driven by scarcity and the amount of work one must put into creating more of them. But is it something else too?
Responding to the original question, Isaac Morehouse, founder of Praxis, a disruptive apprentice-based education service, asked, “What’s the value of freedom?” From working with our chapter directors around the world, I believe this is the central question. The value of Bitcoin and other decentralized, largely anonymous digital currencies is far greater than the sum of their parts.
While those in developed economies are fixated on the rising price of these currencies, millions of perfectly normal people around the globe are discovering them for other reasons.
To put it simply: these technology-driven currencies offer freedom — the freedom to start a business, trade across borders, accept payments, and transfer funds online. Many may take this liberty for granted, but to others, cryptocurrencies may be the key to unleashing prosperity in their countries.
As Max Gulker and Benjamin Williams point out in a recent AIER research brief, “With 68 percent of the population [of Nigeria] lacking access to financial institutions, blockchain brings hope for more financial inclusion.” This was the focus of a recent conference cohosted by the Bastiat Society of Nigeria and Africa Blockchain University. Merchants and entrepreneurs gathered for three days to discuss using cryptocurrencies in their businesses.
The Bastiat Society of Nigeria’s chapter director, Adewale Bankole, said, “Most African currencies are very volatile and lose value on a quarterly basis. This drastically affects businesspeople engaged in international trade. However, cryptocurrencies with low transaction costs allow us to make deals, set prices, and make longer-term business decisions. While Bitcoin remains somewhat volatile, its value is trending in a positive direction, and is serving a very real purpose for us.”
While many African countries are discovering financial and economic freedom for the first time through digital currencies, entrepreneurs in Venezuela are using them to recover freedom by escaping from their country’s failing political system. Leonardo Brito, founder and director of the Bastiat Society of Venezuela, reminds us, “Venezuela was once the freest and most prosperous country in Latin America, but socialism has changed all that. Now we are just working to save ourselves. Bitcoin and other online services make it possible for us to keep our businesses running and operate largely outside of our failing economy.”
Getting caught up in the price of Bitcoin can sometimes make us forget about its true value. Cryptocurrencies are being used by normal people to create wealth via trade. Nowhere is this more important than in places where doing business is difficult because financial systems are undeveloped, or where trade is restricted by dictators and socialist regimes.
As the director of the Bastiat Society program, a global network of liberty-minded businesspeople, I’ve witnessed Bitcoin go from a whisper at a regional Students for Liberty conference in Liege, Belgium, to being a household word. For nearly 10 years, I’ve watched its adoption, evolution, struggles, and recent meteoric rise. I just wish I’d invested in it!
But, for a moment, forget about the price of Bitcoin and understand that the real value digital currencies create is not measured in US dollars but in global freedom and economic opportunity.
Cryptocurrencies are disruptive, decentralized, innovative, and here to stay — something top-down and authoritarian governments have a hard time accepting because much of their power is derived from monetary policy. Digital currencies obviously undermine this power, so one must ask what this means for the future of money. Could currency competition force governments to adopt sounder monetary policies? Could digital currencies replace government-backed money altogether?