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Some people say they cannot trust Bitcoin because it is just intangible information. Although this concern is somewhat natural, it is wrong because the form of money doesn’t matter.

According to “Money: The Unauthorized Biography–From Coinage to Cryptocurrencies”, it is most likely that a birthplace of the metal coin was Lydia in the fifth or sixth century BCE. Actually, gold and silver have always been the most common choices in practice. This is understandable because in general something is widely used in society if many people believe in the value of it. Otherwise, no one would have wanted to exchange it for their goods. Plus, their durability, malleability, portability, and scarcity made them optimal as a form of money.

However, the problem was that, unfortunately, those metals were not infinite. So, what happened when people ran short of precious metals such as gold?

For example, in 1565, the Knights of Malta were forced to mint coins using copper when the supply of gold and silver began to run short. At the first sight, it seems to be a problem because it might diminish the value of money. Nevertheless, it still worked out pretty well. The motto that they stamped on them in order to remind the population of the source of their value helped people to trust its authenticity.

Besides, around 410 BCE, in Ancient China, people used paper bank notes that served as receipts of value stored elsewhere [1]. This was the earliest form of paper money. If we think about it, it’s weird that they used a plain paper to store the value because it clearly doesn’t have any value by itself. However, a paper money was a legit money for the same reason why people later accepted copper. People in Ancient China believed that it had a value just like we believe in fiat currency.

It doesn’t matter whether it’s a metal or a piece of paper.

Think about what it means to be valuable. What is the value? Why does gold have a value? It’s simply because of people’s belief that it has a value. Money has a value once people believe it has a value. There are no price tags in nature. It’s our beliefs that put a price tag on the object. There is an optimal form of money that is durable, malleable, portable, and scarce, but in theory, money could be anything as long as it reaches a point where enough number of people trust it.

Therefore, it doesn’t matter even if Bitcoin is intangible as long as people trust it [2]. People trust the value of Bitcoin, and that is simply why bitcoin has a value.

Notes

[1] Martin, Felix. (2015). Money: The Unauthorized Biography–From Coinage to Cryptocurrencies. Vintage.
[2] As a matter of fact, according to Statistics from the Federal Reserve Bank of St. Louis and the Bank of England for November 2011, around 90 per cent in the U.S. and 97 per cent in the U.K. has no physical existence at all.