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It's amazing to me how many people on HN don't really get why Bitcoin is valuable. The simplest way of putting it: if one doesn't believe gold is going to immi

It's amazing to me how many people on HN don't really get why Bitcoin is valuable. The simplest way of putting it: if one doesn't believe gold is going to imminently plunge in value, then there you go. That's why Bitcoin is valuable. It's digital gold. The analogy isn't perfect, but as far as analogies go, it is a very good one.

mcv 10y ago
It's not digital gold, and it has plunged in value far more dramatically than gold ever has. That said, I don't grok the value of gold either. It doesn't have any intrinsic value, it's only valuable because people agree they need something that has value. Bitcoin is the same, except without the centuries of history of people irrationally relying on its value.
- dwaltrip 10y ago
  Value is socially constructed by people wanting things for complex, dynamic reasons -- it is entirely dependent on the context, which is never static. My understanding is that the concept of "intrinsic value" is flawed and leads people astray. Gold has strong money like properties [0], which is why it has remained valuable for so long (ornamental and industrial usage are a small fraction). Bitcoin has all of these properties as well (perhaps with minor caveats about fungibility), plus some of the very interesting benefits that come from being digital. Being digital brings a few negatives as well, but it seems the positives more than compensate. There are other considerations -- gold is found in the ground and has limited alternatives (platinum and silver, for example), while anyone can create their own cryptocurrency. It appears to me that the huge network effects, first mover advantage, and the principle of "well, it's good enough" are very important dynamics that counteract the near infinite possible competitors. [0] Recognizable, durable, fungible/uniform, and very hard to counterfeit. Two other big ones are portability and divisibility, which it's alright at.
  - mcv 10y ago
    Intrinsic value is a real thing. Land has it. Labour has it. Companies and machinery do. Anything that can produce useful things. And of course the useful things themselves. The real reason for the value of currencies is not the gold backing up that currency, but the economy backing it up. And when that economy goes down, so does the currency. And that's the problem with bitcoin and other cryptocurrencies: they only have value when people accept them as payment for something valuable. Without that, they are worthless, as shown by both the history of bitcoins and other cryptocurrencies, and by the fact that anyone can make a cryptocurrency. Bitcoin works as long as there are enough people who have faith in it, and as long as there are a lot of people accepting it as payment. But when nobody accepts it because nobody trusts it, then bitcoin is worthless. Trust is the only thing it's based on. Of course being able to pay digitally is tremendously useful, but you don't need bitcoin for that.
    - dwaltrip 9y ago
      Hey, I meant to reply earlier but got caught up. > Intrinsic value is a real thing. Land has it. Labour has it. Companies and machinery do. Anything that can produce useful things. And of course the useful things themselves. These things all have value but that value is not static or independent of the context. The word intrinsic implies otherwise, which is problematic. Valuable beach front property may become essentially worthless if the sea level rises and the area becomes flooded. Varieties of labor can become mostly irrelevant (and thus much less valuable) if technology provides a more effective solution. > Trust is the only thing it's based on. People trust bitcoin as the protocol and immutability of its ledger have proven to be impressively reliable, to name a few reasons. It isn't blind trust. Of course, it is an open question to see how this will play out in the future. But the bitcoin experiment has been quite successful so far.

mcv 10y ago

It's not digital gold, and it has plunged in value far more dramatically than gold ever has. That said, I don't grok the value of gold either. It doesn't have any intrinsic value, it's only valuable because people agree they need something that has value. Bitcoin is the same, except without the centuries of history of people irrationally relying on its value.

dwaltrip 10y ago
Value is socially constructed by people wanting things for complex, dynamic reasons -- it is entirely dependent on the context, which is never static. My understanding is that the concept of "intrinsic value" is flawed and leads people astray. Gold has strong money like properties [0], which is why it has remained valuable for so long (ornamental and industrial usage are a small fraction). Bitcoin has all of these properties as well (perhaps with minor caveats about fungibility), plus some of the very interesting benefits that come from being digital. Being digital brings a few negatives as well, but it seems the positives more than compensate. There are other considerations -- gold is found in the ground and has limited alternatives (platinum and silver, for example), while anyone can create their own cryptocurrency. It appears to me that the huge network effects, first mover advantage, and the principle of "well, it's good enough" are very important dynamics that counteract the near infinite possible competitors. [0] Recognizable, durable, fungible/uniform, and very hard to counterfeit. Two other big ones are portability and divisibility, which it's alright at.
- mcv 10y ago
  Intrinsic value is a real thing. Land has it. Labour has it. Companies and machinery do. Anything that can produce useful things. And of course the useful things themselves. The real reason for the value of currencies is not the gold backing up that currency, but the economy backing it up. And when that economy goes down, so does the currency. And that's the problem with bitcoin and other cryptocurrencies: they only have value when people accept them as payment for something valuable. Without that, they are worthless, as shown by both the history of bitcoins and other cryptocurrencies, and by the fact that anyone can make a cryptocurrency. Bitcoin works as long as there are enough people who have faith in it, and as long as there are a lot of people accepting it as payment. But when nobody accepts it because nobody trusts it, then bitcoin is worthless. Trust is the only thing it's based on. Of course being able to pay digitally is tremendously useful, but you don't need bitcoin for that.
  - dwaltrip 9y ago
    Hey, I meant to reply earlier but got caught up. > Intrinsic value is a real thing. Land has it. Labour has it. Companies and machinery do. Anything that can produce useful things. And of course the useful things themselves. These things all have value but that value is not static or independent of the context. The word intrinsic implies otherwise, which is problematic. Valuable beach front property may become essentially worthless if the sea level rises and the area becomes flooded. Varieties of labor can become mostly irrelevant (and thus much less valuable) if technology provides a more effective solution. > Trust is the only thing it's based on. People trust bitcoin as the protocol and immutability of its ledger have proven to be impressively reliable, to name a few reasons. It isn't blind trust. Of course, it is an open question to see how this will play out in the future. But the bitcoin experiment has been quite successful so far.