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"Digital currencies have no fundamental value" That argument never made any sense to me. What's the fundamental value of $1? People assign value to all things

"Digital currencies have no fundamental value" That argument never made any sense to me. What's the fundamental value of $1? People assign value to all things based on how desirable they are (the demand). There are rare exceptions, like when a government ties their national currency to something like the dollar, but that immediately creates a black market, where it trades for its real value, and because of that, the government exchange only works one way (to buy or to sell). See Bolivar as a current example.

TACIXAT 9y ago
The dollar is tied to the American government and the American economy. It is not created for profit, but rather for stability. I see this as a sharp contrast to Bitcoin, which is created for profit (by miners) and only supported by speculation and the online drug trade. It is incredibly deflationary while the dollar is incredibly stable. While the dollar doesn't have a tangible 1:1 backing, it is backed by 330 million people (+many others who do business with the US) participating in the largest world economy.
optimuspaul 9y ago
I think fundamental is the wrong word. Dollars have a fundamental value. There only purpose is to transfer debts. You can argue that if the government(s) fell that the value is diminished or reduced to zero, but that doesn't remove that fact that it has fundamental value. I think that the same argument could be held for digital currencies, they were created for a similar purpose and then would also have fundamental value. The value that digital currencies has is far more tenuous than fiat currencies or gold. But don't get me started on the value of gold. Gold has the same issues as fiat, it's just more likely to be stable after the complete breakdown of society.
m_mueller 9y ago
I think the comparison to gold does make more sense than to Fiat. Fiat has inherent value in that you can buy all kinds of goods with it. Crypto so far has hardly another use than to trade against Fiat, which atm. is similar to gold (which does have industrial applications but its price would also collapse if all the reserves got dumped). This may change in the future, albeit probably not with BTC given its tech stack and the strange philosophy of the core devs.
- imaginenore 9y ago
  Do you realize Bitcoin is accepted in orders of magnitude more places (as in physical stores) than gold as a direct method of payment? And then Bitcoin is accepted in tens (maybe hundreds) of thousands of online stores. Also only something like 10% of gold is used industrially, the rest is regular hoarding. And Bitcoin has other uses as well. But even if you ignore all that, you still can't answer what the fundamental value of 1kg of gold is - it's value is determined by the supply/demand, and has a lower limit, which is it's mining cost, which also changes all the time due to depletion, fuel costs, technological advanvements, land costs, etc.
rm_-rf_slash 9y ago
The fundamental value of $1 is the full faith and credit of the United States Government and the economy of America. The fundamental value of cryptocurrencies is a shared agreement of value amongst investors. I imagine some snotty 14-year old would argue that there is no fundamental distinction between the two but that's not being economically serious.
- dclowd9901 9y ago
  Yep. This has been my problem with it since the beginning. A dollar isn't just a dollar. It's a monetary unit that is intrinsically tied into the power and faith of hundreds of millions of people in the idea of a country. If people stopped believing in America, the dollar would go. How little would have to fail for Bitcoin to have the same problem. I've heard that if the person who owns the large stake in Bitcoin were to transact even one of their coins, all hell would break loose. That doesn't spell stability to me. Neither does "forking" the currency.
  - googletazer 9y ago
    >If people stopped believing in America, the dollar would go. Interesting, considering that the purchasing power of the dollar has been long in decline. It holds its place against other currencies, but with dollars you can't buy as much stuff/assets today as you could yesterday.
- imaginenore 9y ago
  I'd argue more, according to your definitions, the "fundamental value" of the dollar (which you conveniently didn't specify) relies on violence (as in, pay up of guys with guns will put you in prison). Whereas the fundamental value of Bitcoin is determined by the free market. It's quite clear to me which one is a more moral system. Again, based on your own definitions.
  - Goronmon 9y ago
    I'd argue more, according to your definitions, the "fundamental value" of the dollar (which you conveniently didn't specify) relies on violence (as in, pay up of guys with guns will put you in prison). Whereas the fundamental value of Bitcoin is determined by the free market. It's quite clear to me which one is a more moral system. It's not really clear to me how this word salad you've thrown out is supposed to be an actual argument.
kpommerenke 9y ago
The fundamental value of $1 is $1, since it allows you to pay off $1 of your tax liability to the U.S. government.
- imaginenore 9y ago
  Ok, then the fundamental value of 1BTC is 1BTC, since it allows you to pay of 1BTC of any liability to whoever accepts Bitcoin.
  - Double_a_92 9y ago
    > to whoever accepts Bitcoin That's the difference.
    - imaginenore 9y ago
      Yes, in your case it's "whoever accepts the dollar". Huge difference /s
      - provost 9y ago
        > to whoever accepts Bitcoin Double_a_92 is pointing out a distinction -- USD is pure legal tender, that is mandated by the US government to be accepted for payments of debts. Bitcoin is not.
      - petters 9y ago
        Don't you see the difference? The value of the dollar at least partly comes from a government that has forced a demand.
      - Infernal 9y ago
        In case you're honestly approaching this and misunderstanding, the value of the dollar lies in that the US gov't transacts taxes in dollars. It's not just "whoever" - if BTC had a reasonably equivalently vital transaction that it could be used for (OPEC switches to BTC, EU switches to BTC) then it would be a bit more apples to apples.
VarFarYonder 9y ago
It could be argued that cryptocurrencies' value is their ability to store value and to act as a medium of exchange.
jules 9y ago
The fundamental value of the dollar is that it can be used to not go to prison for tax evasion. That is something that many people want to do. Bitcoin has no such anchor.
lightedman 9y ago
"What's the fundamental value of $1?" I can wipe my butt with a dollar bill. I can use that dollar bill to snort a line of cocaine. I can make a paper football out of it. I can use it to help roll a joint. I can fold it into a small coin purse to hold change and keep it from rattling in my pocket. The dollar bill, being a physical object, has some utility, and thus some value. Can you do any of those things mentioned above with a Bitcoin?
Marazan 9y ago
The dollar is backed by the full faith and credit of the United States Government. You can settle $1 of government debt with $1.
- saalweachter 9y ago
  You can settle $1 of debt with $1, in the United States. If someone owes you $1, you can offer to take other amounts of other goods or currency, but you are required to take cash dollars.

TACIXAT 9y ago

The dollar is tied to the American government and the American economy. It is not created for profit, but rather for stability. I see this as a sharp contrast to Bitcoin, which is created for profit (by miners) and only supported by speculation and the online drug trade. It is incredibly deflationary while the dollar is incredibly stable. While the dollar doesn't have a tangible 1:1 backing, it is backed by 330 million people (+many others who do business with the US) participating in the largest world economy.

optimuspaul 9y ago

I think fundamental is the wrong word. Dollars have a fundamental value. There only purpose is to transfer debts. You can argue that if the government(s) fell that the value is diminished or reduced to zero, but that doesn't remove that fact that it has fundamental value. I think that the same argument could be held for digital currencies, they were created for a similar purpose and then would also have fundamental value. The value that digital currencies has is far more tenuous than fiat currencies or gold. But don't get me started on the value of gold. Gold has the same issues as fiat, it's just more likely to be stable after the complete breakdown of society.

m_mueller 9y ago

I think the comparison to gold does make more sense than to Fiat. Fiat has inherent value in that you can buy all kinds of goods with it. Crypto so far has hardly another use than to trade against Fiat, which atm. is similar to gold (which does have industrial applications but its price would also collapse if all the reserves got dumped). This may change in the future, albeit probably not with BTC given its tech stack and the strange philosophy of the core devs.

imaginenore 9y ago
Do you realize Bitcoin is accepted in orders of magnitude more places (as in physical stores) than gold as a direct method of payment? And then Bitcoin is accepted in tens (maybe hundreds) of thousands of online stores. Also only something like 10% of gold is used industrially, the rest is regular hoarding. And Bitcoin has other uses as well. But even if you ignore all that, you still can't answer what the fundamental value of 1kg of gold is - it's value is determined by the supply/demand, and has a lower limit, which is it's mining cost, which also changes all the time due to depletion, fuel costs, technological advanvements, land costs, etc.

rm_-rf_slash 9y ago

The fundamental value of $1 is the full faith and credit of the United States Government and the economy of America. The fundamental value of cryptocurrencies is a shared agreement of value amongst investors. I imagine some snotty 14-year old would argue that there is no fundamental distinction between the two but that's not being economically serious.

dclowd9901 9y ago
Yep. This has been my problem with it since the beginning. A dollar isn't just a dollar. It's a monetary unit that is intrinsically tied into the power and faith of hundreds of millions of people in the idea of a country. If people stopped believing in America, the dollar would go. How little would have to fail for Bitcoin to have the same problem. I've heard that if the person who owns the large stake in Bitcoin were to transact even one of their coins, all hell would break loose. That doesn't spell stability to me. Neither does "forking" the currency.
- googletazer 9y ago
  >If people stopped believing in America, the dollar would go. Interesting, considering that the purchasing power of the dollar has been long in decline. It holds its place against other currencies, but with dollars you can't buy as much stuff/assets today as you could yesterday.
imaginenore 9y ago
I'd argue more, according to your definitions, the "fundamental value" of the dollar (which you conveniently didn't specify) relies on violence (as in, pay up of guys with guns will put you in prison). Whereas the fundamental value of Bitcoin is determined by the free market. It's quite clear to me which one is a more moral system. Again, based on your own definitions.
- Goronmon 9y ago
  I'd argue more, according to your definitions, the "fundamental value" of the dollar (which you conveniently didn't specify) relies on violence (as in, pay up of guys with guns will put you in prison). Whereas the fundamental value of Bitcoin is determined by the free market. It's quite clear to me which one is a more moral system. It's not really clear to me how this word salad you've thrown out is supposed to be an actual argument.

kpommerenke 9y ago

The fundamental value of $1 is $1, since it allows you to pay off $1 of your tax liability to the U.S. government.

imaginenore 9y ago
Ok, then the fundamental value of 1BTC is 1BTC, since it allows you to pay of 1BTC of any liability to whoever accepts Bitcoin.
- Double_a_92 9y ago
  > to whoever accepts Bitcoin That's the difference.
  - imaginenore 9y ago
    Yes, in your case it's "whoever accepts the dollar". Huge difference /s
    - provost 9y ago
      > to whoever accepts Bitcoin Double_a_92 is pointing out a distinction -- USD is pure legal tender, that is mandated by the US government to be accepted for payments of debts. Bitcoin is not.
    - petters 9y ago
      Don't you see the difference? The value of the dollar at least partly comes from a government that has forced a demand.
    - Infernal 9y ago
      In case you're honestly approaching this and misunderstanding, the value of the dollar lies in that the US gov't transacts taxes in dollars. It's not just "whoever" - if BTC had a reasonably equivalently vital transaction that it could be used for (OPEC switches to BTC, EU switches to BTC) then it would be a bit more apples to apples.

VarFarYonder 9y ago

It could be argued that cryptocurrencies' value is their ability to store value and to act as a medium of exchange.

jules 9y ago

The fundamental value of the dollar is that it can be used to not go to prison for tax evasion. That is something that many people want to do. Bitcoin has no such anchor.

lightedman 9y ago

"What's the fundamental value of $1?" I can wipe my butt with a dollar bill. I can use that dollar bill to snort a line of cocaine. I can make a paper football out of it. I can use it to help roll a joint. I can fold it into a small coin purse to hold change and keep it from rattling in my pocket. The dollar bill, being a physical object, has some utility, and thus some value. Can you do any of those things mentioned above with a Bitcoin?

Marazan 9y ago

The dollar is backed by the full faith and credit of the United States Government. You can settle $1 of government debt with $1.

saalweachter 9y ago
You can settle $1 of debt with $1, in the United States. If someone owes you $1, you can offer to take other amounts of other goods or currency, but you are required to take cash dollars.