Tokens and Networks

Two years have now passed since the libertarian author and Bitcoin enthusiast, Jeffrey Tucker, pointed out the true value of Bitcoin. His argument was that Bitcoin derives it value from the network it resides on. Bitcoin tokens give access to the Bitcoin network. The tokens can therefore be seen as a special kind of network ownership that can be transferred from one person to another.

This is in my mind the correct view, and I have used it in my own reasoning ever since. However, this does not mean that I share Tucker's enthusiasm. On the contrary, once Bitcoin reached 7500 dollars, I felt confident that it had become vastly overpriced. There was no reason to believe that the Bitcoin network was worth tens of billions of dollars.

Since then, it has become increasingly clear that the Bitcoin network is both slow and inefficient. Furthermore, there's the unresolved issue of time decay. It's unclear how the network will survive once the miners no longer turn a profit on their activities. Unless resolved, the network will decay, dragging the value of Bitcoin down with it. Yet Bitcoin is again trading above 7500.

Jeffrey Tucker

By Gage Skidmore, CC BY-SA 3.0, Link