Warren Buffett recently again, saying that it has no value, unlike farmland or real estate, except for what people will pay for it. And he may have a point—but as with most things, it’s more complicated than that. Crypto supporters quickly shot back at Buffett, stating that what he is describing may be true because it is a currency. What value does any currency have, except for what people will pay for it? What value is the USD today compared to other currencies?
We think of many countries’ currencies as stable within a small margin, but this isn’t always true. What value was the German Reichsmark in 1923? At its worst, it took 4 trillion Reichmarks to equal one USD. This is an extreme example & a cautionary tale that any currency is built around the collective trust in its value.
What Is Value?
There is another angle to consider, however. Currency generally has no value except as a method for exchange by two parties that agree on the said value, making it more convenient to buy and sell things without barter. You might sell me your three goats for one of my cows, but if I only want to buy two goats, some uncomfortable decisions have to be made for the poor cow. Buffett is undoubtedly an intelligent and proven genius when it comes to investing.
However, one key element that he and many other fiat-focused investors don’t consider is that cryptocurrency has utility beyond normal currency. If you consider that when taken on a global scale, using fiat currency of any type has significant challenges. Still, we’ve never known anything else, so we don’t even see them anymore. As I write this, I am two days into my 3-4 day waiting period to transfer a modest $200 from a US bank to an EU account.
Bad luck caused the transfer over a weekend, so it’s likely to take an additional 1-2 days. I won’t even know until the transfer has gone through because, during the transfer itself, there is zero information available on its status. I’ve essentially paid $200 into a black hole, with a hefty fee on the US side and a hefty (and unfavorable) exchange rate on the other. I have to live by faith that as little as 80% of it will eventually reach the targeted account.
If I had transferred cryptocurrency from one wallet to another, gas fees would indeed be involved. There wouldn’t be the massive fees paid on both sides, in addition to the non-currency cost in the form of having to trust two separate banks, the software that connects them, and the two separate regulatory bodies involved at a government level. If you want to discuss value, there is very real value in eliminating all of that and paying a single modest fee for the freedom of sending a global currency directly to a peer, with zero trust required, thanks to the power of blockchain.
Taking Value Further
Whether you agree with Buffett or not, there is another way that tokens can become valuable far beyond treating them like a currency. The typical approach for many blockchain platforms is to develop an idea (usually in the realm of DeFi, gaming, data, or NFTs). As part of fundraising, create an ICO (initial coin offering) as a way for users to get involved and contribute to the project to earn rewards. Sometimes the tokens are purchased when there is little to show on the platform, and other times the platform is freshly launched. However, in some cases, this process is completely reversed.
Bitcoin.com’s VERSE token launch was completely different and, in many ways, removed a large amount of the uncertainty that startup platforms carry. The platform was first launched with a traditional business model, and it has become one of the blockchain giants in terms of news and the depth of educational resources. Though it has “Bitcoin” in the name, the platform covers all things blockchain, and its usage has grown exponentially year over year. 2021 saw an average of 2.5 million unique monthly visits, and it gained 2.4 million followers on Twitter.
Growing to provide more services, the platform’s app allows for in-depth analysis of tokens and a full exchange for readers to apply their knowledge without going elsewhere directly. The platform’s growth for news and education was impressive, but after 29 million wallets were set up with over 5 million monthly active users. It was clear that the Bitcoin.com community was doing much more than just learning about crypto; they were actively doing so pursuing opportunities. The platform, from a traditional business perspective, was a success. And only then did they launch their VERSE token.
Why is this so significant? Because before they offered up VERSE, they had proven a successful business model without the need for users to provide funds through token sales. This takes tremendous pressure off both the platform and token buyers and allows the token buyers to immediately benefit from the long list of utility features, which are often promised when a platform is in pre-development but usually years away from being realized. Users get discounts on various services when they use VERSE, extra rewards for activities like staking, referral rewards paid in VERSE, and the ability to trade it for other crypto tokens.
While there is a fierce debate about the value of cryptocurrency and the greater reminder that no currency is completely safe without asset backing, it is hard to know what side to trust. There are valid points, and time will tell how cryptocurrency might onramp its way into mainstream finance. However, those platforms like Bitcoin.com are in a different camp altogether, much akin to more traditional business models, applying value to their token on multiple levels and at the top: an already successful business.