What is intrinsic value? And what does it mean in relation to gold and bitcoin?
Intrinsic value refers to the perceived or calculated true worth of an asset, based on its fundamental characteristics rather than its market price. Itโs a concept often used in investing and economics to assess whether something is overvalued or undervalued.
In the context of gold:
Gold is often said to have intrinsic value because it has physical properties that make it usefulโit's durable, malleable, and conductive. Itโs used in electronics, dentistry, and jewelry. But interestingly, only about 10% of goldโs value comes from these industrial uses. The rest is largely based on its monetary premiumโthe value people assign to it as a store of wealth and a hedge against inflation.
In the context of Bitcoin:
Bitcoin doesnโt have physical form or industrial use, so critics argue it lacks intrinsic value. However, supporters point to its scarcity (only 21 million will ever exist), decentralization, security through blockchain, and global accessibility as intrinsic properties that give it value. In this view, Bitcoinโs worth comes from its utility as a digital store of value and the trust people place in its system.
So while goldโs intrinsic value is tied to its physical properties and long-standing cultural role, Bitcoinโs is rooted in its technological design and economic principles. Both rely heavily on perception and trust, which makes the debate about their โtrueโ value as much philosophical as financial.
In Islamic finance, intrinsic value plays a crucial role in determining whether something qualifies as mal (a valuable, lawful asset). Traditionally, gold and silver were accepted as money in Islam because they had intrinsic valueโthey were tangible, widely accepted, and not dependent on any third party for their worth.
Gold is considered ribawi (a commodity subject to specific rules in trade), and its use as money is deeply rooted in Islamic tradition. Its intrinsic value comes from its physical properties and historical role as a medium of exchange. Because itโs tangible and not speculative by nature, gold is generally seen as compliant with Shariah principles.
Bitcoin, being digital and intangible, initially raised concerns. Critics argued it lacked intrinsic value and was too volatile, resembling gharar (excessive uncertainty) or even maysir (gambling), both of which are prohibited in Islam.
However, many scholars and experts now argue that Bitcoin does have intrinsic valueโjust not in the traditional, physical sense. Its value lies in:
- Scarcity (limited to 21 million coins)
- Decentralisation (no central authority)
- Security and transparency via blockchain
- Utility as a borderless, censorship-resistant store of value
Some Islamic scholars now recognise Bitcoin as mal (valuable property), especially when used in spot transactions (immediate exchange), which aligns with the hadith requiring gold and silver to be exchanged โhand to hand".
Bridging the Two:
So, while goldโs intrinsic value is physical and historical, Bitcoinโs is technological and systemic. Both derive much of their worth from trust and consensus, which Islamic finance acknowledges as valid when grounded in ethical, transparent systems.
๐This evolving view is part of what makes the Bitcoin Is Halal book so timely and important. Get your copy now from Amazon in paperback and Kindle formats.
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