1

Bitcoin is Already a Derivative

by Dan Robles on March 23, 2015

derivativeMany a Bitcoin company executive seeks a way to hedge the balance sheet risk of their business.  It would be useful to have a liquid (ostensibly, dollar backed) futures and options exchange market that would provide hedging opportunities for speculators while providing much needed price stability.  It sounds like Bitcoin is already a derivative.

What is a Derivative:

In the most basic definition, a derivative is something whose value is derived from the value of something else. Derivatives have no intrinsic value in and of themselves. Their value is based on the expected future price movements of the underlying asset.

Bitcoin is Already a Derivative

A bitcoin does not have an intrinsic value in and of itself, rather, the value of a Bitcoin is derived from the value of all the glorious things you can do with Bitcoin which cannot be done without Bitcoin.  Indeed this value is significant: bitcoin adoption promises to eliminate the gatekeepers of banking, insurance, law, and even governance.

Hey wait, Aren’t all those gatekeepers derivatives too!!!

Bankers, insurance brokers, lawyers and politicians do not have any intrinsic value in and of themselves either.  They produce nothing intrinsically edible, healing, nor comforting for anyone.  Like Bitcoin, the value of banks and insurance companies and legislators is derived from all the things that you can do with them which cannot be done with out them. These include capitalizing seed or machinery for growing food, or constructing a home or factory for increasing human productivity, or providing a salary to a teacher or doctor (in the conspicuous absence of a currency not of the gatekeeper’s design).

What isn’t a derivative?

The food we eat, the clothes we wear, the building that keep us warm and dry, the machinery that transports us and makes us healthy and the teachers that show us how to do useful things are NOT derivatives.  They have intrinsic value in and of themselves.

What is an Integral?

In mathematics an integral is the a function of which a given function is the derivative.  Creating an integral is the reverse of creating a derivative. That is the direction we should be headed in.

For example, integral of a teacher may be the school building within which everyone gathers.  As such, the value of the teacher can be derived from the change in value of the building that keeps everyone warm and dry during their lessons.  The integral of the food we eat is the machinery that allows the farmer to be more efficient.  In this case, the value of the food (nutritional) is derived from the quality of the farming practiced that created it.

The Opposite of a Derivative is an Integral.

When all is said and done and we’ve followed the integral to its origin, we will always find an Ingenesist. An Ingenesist is someone who invents, creates, designs, envisions, and brings forward into reality something that supports the health, welfare, and safety of people and environment.  Those are the only intrinsic values that truly exist.  Seriously, what else is there?

So when the financial world is contemplating derivatives of derivatives of derivatives of derivatives, we are contemplating the integrals of the integrals of the integrals.  Bitcoin is already a derivative. Ingenesist is already an integral.

Leave a Comment

{ 1 trackback }

Previous post:

Next post:

y_E9iq8ed_y-mePfNA3-ToSm2pufnr10TiW-rx6U-ls