Which Made Mobick Possible, Utility or Cost?

• Taemin Oh, the founder of BTCMobick

Bitcoin is not something that will disappear. However, the reason for Bitcoin's enduring presence is not due to its special utility. Of course, Bitcoin has unique utility, but even this utility exists because of Bitcoin's enduring presence.

When something can be transmitted at the speed of light and is the original, preventing duplication, people will use it to transfer valuables. To do this, they will have to assign it the function of storing value. The utility that some people see in Bitcoin only becomes clear once it is confirmed that Bitcoin will not disappear. You can’t be sure of its utility right after hearing about Bitcoin.

Many people have asked themselves what the use of Bitcoin is and did not get satisfactory answers. This question has often prevented them from moving forward. Not only did they miss a once-in-a-lifetime economic opportunity with Bitcoin, but they also missed the intellectual insights that could help create similar opportunities. The question itself is wrong because utility isn't the issue. The real question of the Bitcoin phenomenon is this: Why does Bitcoin have a price at all instead of being worthless? Because of people's madness? That might be true once. If that’s the case, when the illusion fades, Bitcoin should not just crash but quickly retrace its steps, rendering it worthless again. Bitcoin, however, has shown its sustainability as a valuable asset. There is no doubt about this.

But the argument that Bitcoin has value because of its utility does not sound convincing. Retrospectively, we can assign utility to this fascinating phenomenon, and it is indeed gradually gaining utility. However, Bitcoin started to have a price regardless of its utility. More importantly, it maintained its price for a long time despite having no utility at all. Even after periodic crashes and periods of indifference and neglect, Bitcoin has continued to expand its reach.

Bitcoin is resilient because of the costs involved. From the beginning, people had to do something to obtain Bitcoin: turn on their laptops, install programs, and mine bitcoins while enduring noise. Later, they had to use graphics cards and eventually buy dedicated equipment, secretly mining in basements and enduring neighbors' complaints about the noise. In countries like Venezuela, where individual freedom is oppressed, mining could lead to imprisonment. In China, many people colluded with power plant officials to steal electricity at first, which made mining almost free, but later it became an adventure, risking equipment confiscation, losing all earnings, and facing imprisonment.

People had to pay a cost to obtain Bitcoin. Because of this cost, Bitcoin holders did not sell or abandon it cheaply, not because they were convinced of Bitcoin's utility but because of their sunk costs. Some people mined Bitcoin for fun and forgot about it, only to later realize they had struck gold when Bitcoin prices soared years later. Some were unlucky and could not recover their discarded computers. The former group helped send the price down, and the latter helped drive up the price.

The argument that costs are the source of value goes against common sense and economic principles. Goods gain value from their utility, not their cost. If cost were the basis of value, more expensive products with the same performance would lose competitiveness and disappear from the market. Also, past costs, or sunk costs, should not influence future choices. Economic choices affected by past costs fail to maximize profit.

What is the truth? Is Bitcoin resilient because of the costs incurred to obtain it? Or does Bitcoin, like other goods, have a price because of demand, which justifies the costs of mining it?

For Bitcoin, the latter seems more accurate now. Competition is so fierce that industrial-scale miners naturally consider Bitcoin's price, calculating capital and electricity costs to make decisions. However, it is hard to argue that this rational economic principle operated 13 years ago when Bitcoin surpassed $1. Back then, Bitcoin had no demand, or at least there was no lasting demand. If miners invested costs, they would have tried to realize profits before Bitcoin's price dropped to zero. This would have caused the price to plummet, leading Bitcoin to repeatedly surge to $1 and crash to zero. However, Bitcoin's history is not like that. While it has experienced booms and busts, it has steadily risen.

Which came first, the chicken or the egg? There is a way to resolve this cyclical dilemma: a reproducible experiment. What if we distributed something with no utility and thus no inherent price, similar to Bitcoin? If people paid a cost to obtain it, as they did with Bitcoin mining, and if we could get people to pay a certain cost to acquire it, we could argue that costs led to a price and eventually created demand.

If we create something with no utility and no price and get people to pay a cost to obtain it, they will not sell or discard it cheaply. Those who planned to sell or discard it cheaply would not have participated in the game in the first place. Once it has a meaningful price, it can create demand and follow a virtuous cycle of expansion and appreciation, much like Bitcoin.

Of course, the question remains: why would people come to receive something with no demand and no price? This, too, can be scientifically resolved. We learned from our experience that human diversity is wide.

Let’s say we call people to a mountain to give them "something worthless". We can safely assume that 1% of people would participate in this strange experiment. It is not impossible to gather 1,000 such people. While it may seem like meaningless labor, people hike up mountains anyway. Informing 100,000 people about the experiment makes this feasible. With our own experience and simple statistics, we make the first leap without questioning why people would willingly pay a cost to obtain something worthless.

We successfully got thousands of people to invest costs to obtain something useless and without price. After that, they themselves have created a price and demand for it, proving that costs were central to the Bitcoin phenomenon.

This is what the BTCMobick experiment is all about.

#Mobick #Bitcoin #BTCMobick