The Value of Bitcoin

I've seen it said one or two places that the value of bitcoin is in its anonymity, or its lack of corruption due to the lack of centralized banking. I don't believe this to be the case. Dollar transactions can be anonymous, too, and gold has no central bank, but the value of bitcoin is different than the value of gold or dollars. I think the value of bitcoin has to do with the nature of the tangible thing which is coined.

Dollars are pieces of paper with art printed on it. The art is printed in such a way that it is difficult to forge. The value of the dollar is enforced by the United States government, and the open market. It can go up or down, depending on the quality of things bought with it. When a thing is put into circulation in the open market, the value of the dollar is affected by the amount people are willing to pay for the thing. If the thing contributes to the value of the economy, then the value of the dollar goes up.

The value of the dollar bill itself that you carry in your pocket depends on its availability for use in transactions. This depends on the armored vehicles, bank vaults, printing centers, and so forth which manage and create dollar bills. As a physical thing, it is very difficult to create and very difficult to transport when compared to bitcoins. Bitcoins are easy to create and to transport. But they are comparatively more difficult to transfer. It is more difficult to pull a bitcoin out of your wallet and hand it to someone else than it is to pull a dollar out of your pocket and hand it to someone else.

The overhead of transportation and creation of bitcoins is very low, while the overhead of transferrence is very high. This indicates a couple things for the value of bitcoins. For one, complex, long-distance infrastructure of transactions are easy to maintain, provided the "buy it now" attitude is not too highly stressed. I believe this means that bitcoins are good for small, independent businesses that deal primarily in quality of service and quality of product, while dollars are good for more simple, standardized businesses like franchises that deal in immediate products where the quality and service doesn't carry too high a premium. Dollars are good where things remain the same, as with MacDonalds. Bitcoins are good for where things are different, as with Main St. Pawn.

What is needed currently for the value of bitcoin to be optimized, I think, is a decentralized banking infrastructure. This banking infrastructure would provide backing for the businesses that choose to use the bitcoin, so that they are all benefitted by the growth of the bitcoin economy. What I'm talking about is a radically decentralized system of investment banking that anyone can use but that promotes wise investment. Something that connects investors in a way that does not require a "stock market" or any other kind of limiting institution which tries to rule out companies to invest in. This would have to simultaneously fulfill the needs of an investment community of small, diverse businesses, and also prevent "boom/bust" cycles in the bitcoin economy. If such a system were developed, bitcoin would be a great boon to the artisans and small business owners that make up the middle class.