Bitcoin’s Proof of Work Value and Marx’s Labor Theory of Value (Marxism)
What is bitcoins actual value? Ordinarily, this is one question that would be quite easy to answer, as all you would need to do would be to check the leading cryptocurrency websites. But what is behind its value? This is one question that varies from one person to another, depending on who you approach.
Proof Of Work
There are those that seem to have the answer to this question at their fingertips. Bitcoin is valuable as there is an attributed cost in the form of energy, and processing power used to mine it. Well, this is an answer based on the Marx’s Labor Theory of Value.
In the theory, Marx claims that every item has a value that is created by the labor/effort/amount of work that goes into creating it. So based on this statement, it means that bitcoin’s value is bound to keep rising, as long as its mining costs continue to increase.
In reality, this does not apply to bitcoin, as Marx’s value of labor is a complete misconception. Although you can, in reality, price something based on the total amount of work that has gone into creating it, its total value is derived from something else altogether.
There exists a relationship between the price of bitcoin and the accompanying mining costs, but this is a relationship that actually flows in opposite directions. An increase in its price encourages more people into joining the mining pool.
An increase in the number of miners increases the hash rate, which in return makes it even harder to create blocks. This is a scenario that then causes the cost of doing this to increase significantly.
There are those that have gone on to make valid comparisons between the cryptocurrency and the characteristics that are associated with fiat and gold valuables. Of these, there have emerged up to nine shared characteristics, which include widely used, scarcity, hard to counterfeit, durability, fungible, portability, easily stored, divisibility, and easily recognizable.
In many of these shared characteristics, bitcoin appears like gold valuables on steroids—a point that is often pointed out by many of its enthusiasts, including Winklevii. However, although close to all these characteristics can, to some extent be used to provide an explanation on what might make something more or less valuable, there is still one important word missing-desirability
That beautiful piece of furniture sitting in your living room, gold, and bitcoin all have a single thing in common—desirability. Regardless of how beautiful they are, they will be worth nothing if no one wants to own them. Their actual value is obtained from their desirability.
The price of an item or cryptocurrency may be based on a given value, but its value cannot be truly identified by its pricing. That is something that can only be established when something is acquired and then sold. As a result, the market gets to dictate its value and will continue to dictate its value and that of everything else. May it remain desirable for a long time to come.