Even though I was aware of Bitcoin since close to its inception, I only really started paying attention to cryptocurrencies late last year, when Bitcoin broke through $20,000 a coin.

I have since watched the crypto space with interest, but from a distance, not really getting involved.

I am convinced that Bitcoin – and all cryptocurrencies that I am aware of – should fail as currencies.

The reason is simple: they have no intrinsic value. By that I mean, the answer to the cryptographic puzzle that is represented by a Bitcoin has no intrinsic value, and that renders it unsustainable as a currency. They are digital fiat.

Yes, it’s the same with dollars, euros and Swiss francs – they all derive their value from government fiat, a simple declaration that they are valuable

It’s unfortunate that this is the case, because I’m very sympathetic with the original vision of Satoshi Nakamoto. I remember the 2008 financial meltdown well, and understand the motivations behind the cypherpunk and anarcho-capitalist roots of the movement. Unfortunately, they tried to combat a fiat monetary system through a digital fiat monetary system – albeit a much more sophisticated and efficient one at that.

So until the data in each Bitcoin, or Ripple, or Ethereum, is representative of something actually valuable, I believe all these will suffer the same eventual fate as government coins. Much sooner, actually, since they lack the governmental weight that at least lends some credibility to government fiat.

Compare Bitcoins to data which does have inherent value, such as:

  • Transaction records during an escrow process.
  • Votes during an election.
  • Tracking and tracing of raw materials, or manufactured goods, or food.

Ultimately, I’m convinced that the blockchain will survive and thrive in the above applications, where we already have data that is worth protecting – and now we have an excellent distributed trust paradigm to help us do so.

Lastly, I have lived too long on this planet to know the difference between should happen, and will happen. I have little doubt that humanity is capable of entertaining the idea that Bitcoin is valuable for much, much longer: well beyond it’s expiry date.