There are many definitions of what a store of value is but let’s keep things simple here and let us proceed from this common definition of the term store of value:
“A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. More generally, a store of value is anything that retains purchasing power into the future.”
Bitcoins property as an exchange medium has been questioned several times in the past. Especially, since Bitcoin’s scalability problems became evident last year in December. When transactions fees rose to over 50 USD and the average transaction time peaked at more than 40 hours. It was at this time that a narrative began to establish itself that dubbed Bitcoin as a store of value. It might not be the best exhange medium with only 3 to 7 transactions per second, but people would invest in it to store the value of their work, investment, etc.
Where does Bitcoin’s myth of being a store of value come from?
The most renowned store of value is gold. It’s a classic commodity that has proven to be valuable since ancient times, in different cultures and across the ages. It was and is deemed valuable for various reasons. It is rare, it can be formed and melted easily and with its shiny and shimmering appearance, it looks quite attractive.
Bitcoin does share some of these properties with gold. Like gold, it is rare, there is a limited supply and the production or in both cases, mining costs are extremely high. However, there are of course huge differences between gold and bitcoin. The most of them are obvious. So let’s talk about the most important one. The use cases.
Value storage is no use-case in itself and cannot be designed
All stores of value that we have were not designed to be such stores of value. At least not primarily. Gold, other precious metals and commodities of every kind serve purposes in the industry and retain their value through these. Also, publicly traded shares serve firstly to grant a private person partial ownership, a share of a company. Only secondarily can some stocks be seen as a store of value, but not even the Coca-Cola company or Amazon can guarantee you that their stocks store value in long-term or even in short-term. So a store of value has to have some other quality or function to serve as a store of value in the first place. This is why the Bitcoin core developers work hard on second layer solutions to solve Bitcoin’s scalability issues.
An ideological war during the early adoption of Cryptocurrencies
We are still in the early adoption phase of cryptocurrencies and we don’t know yet which crypto projects will emerge successfully out of it. A result of that is the rivalry between Bitcoin and Bitcoin Cash and the argument over which fork has more right to the claim of being the real Bitcoin. The argument between Bitcoin and Bitcoin cash is the simple argument between on- or off-chain solution to Bitcoin’s scalability problem. Roger Ver’s and Rick Falkvinge’s involvement and representation of Bitcoin Cash is so dominant that it seems inevitably strange to anyone who knows Bitcoin and it’s facelessness in the early years. On the other hand, Blockstream, a company that takes care of developing second layer solutions, wallets etc. for Bitcoin, and its decision to make a profit out of Bitcoin is highly questionable, to say the least. While no one doubts that the Lightning network can perform well regarding the transaction rate, there is much doubt going on whether it is going to be a practical solution.
Bitcoin is currently not a good store of value and if it will be in the future is questionable
The reason why people say Bitcoin is a store of value is that they cannot imagine that some other cryptocurrency becomes bigger than Bitcoin. It is the first cryptocurrency and has the biggest market capitalization. But will it able to keep this title? What will happen once Ethereum’s token economy starts to really kick off? Or once Iota has established itself as the Backbone of IoT? Or once Ripple’s network replaced all its Fiat competitors? How much will Bitcoin’s symbolical value as the first cryptocurrency be worth in these cases? As of now, we can constitute that Bitcoin is much too volatile to be dubbed a store of value. Whatever the future holds for Bitcoin. Maybe the Lightning Network will be successful, maybe Bitcoin does become more valuable in the future. Unless other cryptocurrencies fail and lose all there value, there would be no reason to give the title ‘store of value’ exclusively to Bitcoin.