Modeling Bitcoin’s Value with Scarcity

Satoshi Nakamoto published the bitcoin white paper 31/Oct 2008, created the bitcoin genesis block 03/Jan 2009, and released the bitcoin code 08/Jan 2009. So begins a journey that leads to a $70bn bitcoin (BTC) market today.

Bitcoin is the first scarce digital object the world has ever seen. It is scarce like silver & gold and can be sent over the internet, radio, satellite, etc.

” As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: boring grey in color, not a good conductor of electricity, not particularly strong.., not useful for any practical or ornamental purpose .. and one special, magical property: can be transported over a communications channel”

— Nakamoto


Surely this digital scarcity has value. But how much? In this article, I quantify scarcity using stock-to-flow and use stock-to-flow to model bitcoin’s value.