Digital Scarcity

Bitcoin is a breakthrough in computer science. A way to establish digital scarcity in an online environment. Similar to how cash you keep in your wallet works. You know that there’s only so many US dollars out there in circulation and that are available to trade. Their scarcity, or at least perceived scarcity, are what give them value. Their value makes them trade-able.

Cash in a Digital Environment

This same concept applies to any healthy financial market where assets or products are actively being traded. Scarcity gives stocks, bonds, currencies and other financial commodities value and thus they become trade-able. Bitcoin, as a technological breakthrough, allowed for financial assets and other commodities to be traded in a digital environment. A digital environment that allowed for value to be exchanged on an instantaneous and global scale. Traditional global financial barriers didn’t apply anymore.

Value could now move as simply as a text would. Suddenly anyone could leverage blockchain, the open-source technology behind Bitcoin, and create financial instruments on top of it and trade it in a global, borderless digital environment. Bitcoin just happened to be the first financial instrument built on top of it. Which brings us to our next point; bitcoin as it relates to monetary policy.