5 ms·

Seems like a decent overview of the technical aspects. But doesn't it miss something important: whence cometh the value? Why would I, or anyone, actually want

Seems like a decent overview of the technical aspects. But doesn't it miss something important: whence cometh the value? Why would I, or anyone, actually want to own Bitcoins?

mirimir 10y ago
Value is determined by what others will pay, as in any market. But additionally, the hard-coded long-term decreasing rate of production imposes deflationary bias. That manifests as underlying exponential price increase, with various speculative bubbles superimposed.
- aethertron 10y ago
  >Value is determined by what others will pay Yes, assuming that others will pay for it. And perhaps an increasing number of productive individuals will. But that just pushes the question back one step. Why do those other people want to own Bitcoins? You see the infinite regress problem here? (With fiat currency, there's a finite regress. It terminates with specific facts like historical government actions, gold, taxes.)
  - mirimir 10y ago
    As far as I know, there are no hard limits for Bitcoin value, in either direction. But with a large enough user base, regression to the mean guarantees some stability. Also, many traders have hard-coded buy/sell targets, and I gather that damps out large fluctuations. I don't speculate in Bitcoin. I just use it.
    - aethertron 10y ago
      I don't see why the value couldn't just drop and keep dropping to zero, as users lose confidence. (I will investigate 'regression to the mean')
      - RandomInteger4 10y ago
        Bitcoin is has a supply limit, so that taken together with it's technical features such as a proof of transaction and digital-ness makes it highly valuable in an economy where more and more transactions take place in the digital rather than the physical space. I'm sure there's a better answer, but that's the best I can muster with my current knowledge on the matter. I think a better question is "given the rarity of bitcoin, why wouldn't people value it?" Also, as for the confidence thing, bitcoin is no different than anything else in our economy. Our economy is built on confidence.
        aethertron 10y ago
        >"given the rarity of bitcoin, why wouldn't people value it?" Because rarity in and of itself doesn't confer value. Or every altcoin would be valuable. >Our economy is built on confidence. Yes, but not only that. Use of fiat currency is made legally compulsory. Maybe Bitcoin-demanding ransomware plays a useful role in the BTC economy, as it gives people a negative/fear-based reason to obtain BTC.
        mirimir 10y ago
        I suspect that it was just that Bitcoin had a head start. Regarding drivers for using Bitcoin, consider that 99% of Bitcoin is now traded in CNY.[0] I doubt that ransomware plays a substantial role there. [0] https://www.bitcoincharts.com/charts/volumepie/ https://www.bitcoincharts.com/charts/volumepie/
      - mirimir 10y ago
        Yes, that could happen. By 'regression to the mean', I just meant that Bitcoin prices come to reflect average desirability. So even huge events like the pump/dump bubble that Mt Gox (or its infiltrator) created eventually damp out. Right now, I gather that it's largely Chinese investors who are pushing Bitcoin prices up.
lumberjack 10y ago
I was also having this problem. But I think one must just do away with the self imposed condition that the use of Bitcoin must abide by the law. Bitcoin is useful against capital controls. One then wonders if that was the real motivation behind Bitcoin. It's maybe not a coincidence that it has widespread use in China. I don't want to speculate any further. Just having this thought right now.
- aethertron 10y ago
  >Bitcoin is useful against capital controls. True if any only if, and the degree to which, possession of BTC is considered desirable. If it's a sought-after 'commodity'. Otherwise it's just a decentralised simulation of money, no matter how many desirable qualities it simulates. MMO games have simulated internet money, and various transfer features too. People who got into BTC early, did so because they wanted it to fulfil its potential as a better sort of modern money. They knew nobody else would accept it as payment at the time. They hoped it would become valuable in the future... and it has. The early adopters essentially gave it its initial kick start by role-playing as if it was money. I don't know if this basis of playing pretend can be a solid foundation for an invented money's value. It seems too ephemeral. It's based on belief in belief, ultimately based on pretending. Maybe it would be beneficial, for the sake of stability, to invent a powerful mythological origin story for BTC. Maybe that's what they are trying to do with this still-mysterious Satoshi avatar.
  - ska 10y ago
    I think your "role playing at the beginning" is interesting, but "belief" is in a whole different category. As far as I can see all useful monetary systems are essentially backed by consensus and belief.
eppeltert 10y ago
Anything that's rare can be used as a token of value.
statoshi 10y ago
The original use case with Bitcoin is to protect your financial sovereignty. Over the years more people have discovered that the features inherent to cryptocurrency can disintermediate many economic interactions and we're seeing more and more use cases built upon the technology. I catalogued a few use cases here: https://medium.com/@lopp/the-multifaceted-nature-of-bitcoin-94d79c95b9ef#.yg3b157m7 https://medium.com/@lopp/the-multifaceted-nature-of-bitcoin-...
CyberDildonics 10y ago
The value comes from how strong its properties of ideal money are. Lots of people don't see the value of bitcoin when they pay for their coffee with their credit card and go about their day. There are many uses but just to begin, bitcoin has already outlasted several countries' currencies (Venezuela, Zimbabwe) and it has no boundaries. It can't be controlled by a government (India, Cypress) and it's inflation will slow and stop (unlike Russia, Argentina, Japan). Some ideas are big picture ideas. They don't help people take selfies, find a restaurant or communicate with celebrities, but their impact will be massive over a longer timeline.

Seems like a decent overview of the technical aspects. But doesn't it miss something important: whence cometh the value? Why would I, or anyone, actually want to own Bitcoins?

mirimir 10y ago

Value is determined by what others will pay, as in any market. But additionally, the hard-coded long-term decreasing rate of production imposes deflationary bias. That manifests as underlying exponential price increase, with various speculative bubbles superimposed.

aethertron 10y ago
>Value is determined by what others will pay Yes, assuming that others will pay for it. And perhaps an increasing number of productive individuals will. But that just pushes the question back one step. Why do those other people want to own Bitcoins? You see the infinite regress problem here? (With fiat currency, there's a finite regress. It terminates with specific facts like historical government actions, gold, taxes.)
- mirimir 10y ago
  As far as I know, there are no hard limits for Bitcoin value, in either direction. But with a large enough user base, regression to the mean guarantees some stability. Also, many traders have hard-coded buy/sell targets, and I gather that damps out large fluctuations. I don't speculate in Bitcoin. I just use it.
  - aethertron 10y ago
    I don't see why the value couldn't just drop and keep dropping to zero, as users lose confidence. (I will investigate 'regression to the mean')
    - RandomInteger4 10y ago
      Bitcoin is has a supply limit, so that taken together with it's technical features such as a proof of transaction and digital-ness makes it highly valuable in an economy where more and more transactions take place in the digital rather than the physical space. I'm sure there's a better answer, but that's the best I can muster with my current knowledge on the matter. I think a better question is "given the rarity of bitcoin, why wouldn't people value it?" Also, as for the confidence thing, bitcoin is no different than anything else in our economy. Our economy is built on confidence.
      - aethertron 10y ago
        >"given the rarity of bitcoin, why wouldn't people value it?" Because rarity in and of itself doesn't confer value. Or every altcoin would be valuable. >Our economy is built on confidence. Yes, but not only that. Use of fiat currency is made legally compulsory. Maybe Bitcoin-demanding ransomware plays a useful role in the BTC economy, as it gives people a negative/fear-based reason to obtain BTC.
        mirimir 10y ago
        I suspect that it was just that Bitcoin had a head start. Regarding drivers for using Bitcoin, consider that 99% of Bitcoin is now traded in CNY.[0] I doubt that ransomware plays a substantial role there. [0] https://www.bitcoincharts.com/charts/volumepie/ https://www.bitcoincharts.com/charts/volumepie/
    - mirimir 10y ago
      Yes, that could happen. By 'regression to the mean', I just meant that Bitcoin prices come to reflect average desirability. So even huge events like the pump/dump bubble that Mt Gox (or its infiltrator) created eventually damp out. Right now, I gather that it's largely Chinese investors who are pushing Bitcoin prices up.

lumberjack 10y ago

I was also having this problem. But I think one must just do away with the self imposed condition that the use of Bitcoin must abide by the law. Bitcoin is useful against capital controls. One then wonders if that was the real motivation behind Bitcoin. It's maybe not a coincidence that it has widespread use in China. I don't want to speculate any further. Just having this thought right now.

aethertron 10y ago
>Bitcoin is useful against capital controls. True if any only if, and the degree to which, possession of BTC is considered desirable. If it's a sought-after 'commodity'. Otherwise it's just a decentralised simulation of money, no matter how many desirable qualities it simulates. MMO games have simulated internet money, and various transfer features too. People who got into BTC early, did so because they wanted it to fulfil its potential as a better sort of modern money. They knew nobody else would accept it as payment at the time. They hoped it would become valuable in the future... and it has. The early adopters essentially gave it its initial kick start by role-playing as if it was money. I don't know if this basis of playing pretend can be a solid foundation for an invented money's value. It seems too ephemeral. It's based on belief in belief, ultimately based on pretending. Maybe it would be beneficial, for the sake of stability, to invent a powerful mythological origin story for BTC. Maybe that's what they are trying to do with this still-mysterious Satoshi avatar.
- ska 10y ago
  I think your "role playing at the beginning" is interesting, but "belief" is in a whole different category. As far as I can see all useful monetary systems are essentially backed by consensus and belief.

eppeltert 10y ago

Anything that's rare can be used as a token of value.

statoshi 10y ago

The original use case with Bitcoin is to protect your financial sovereignty. Over the years more people have discovered that the features inherent to cryptocurrency can disintermediate many economic interactions and we're seeing more and more use cases built upon the technology. I catalogued a few use cases here: https://medium.com/@lopp/the-multifaceted-nature-of-bitcoin-94d79c95b9ef#.yg3b157m7 https://medium.com/@lopp/the-multifaceted-nature-of-bitcoin-...

CyberDildonics 10y ago

The value comes from how strong its properties of ideal money are. Lots of people don't see the value of bitcoin when they pay for their coffee with their credit card and go about their day. There are many uses but just to begin, bitcoin has already outlasted several countries' currencies (Venezuela, Zimbabwe) and it has no boundaries. It can't be controlled by a government (India, Cypress) and it's inflation will slow and stop (unlike Russia, Argentina, Japan). Some ideas are big picture ideas. They don't help people take selfies, find a restaurant or communicate with celebrities, but their impact will be massive over a longer timeline.