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"There are two main reasons to doubt bitcoin's viability as an investment....Another is more philosophical: Digital currencies have no fundamental value, so hav

"There are two main reasons to doubt bitcoin's viability as an investment....Another is more philosophical: Digital currencies have no fundamental value, so have no place in a portfolio." There is no such thing as an objective theory of value. ALL value is subjective (meaning each person values the same thing differently). The more you learn about what money is, the more you realize that there are qualities of money that make it valuable/appealing to be used AS money (e.g. fungibility, low to no inflation, difficult to counterfeit, scarce, easy to verify authenticity). This is why things like sand and hair make for poor money, and this is why the free market essentially chose gold as money before governments co-opted, confiscated, and controlled it. Gold would most likely be the primary money today if people had been free to transact using gold as money [0]. Governments stopped the use of gold as money because they can use fiat currencies to fund the operation of the government (by increasing the supply of fiat and buying their own debt with it), reducing the purchasing power of their own currency and acting as a tax on savers. Bitcoin is a serious threat to that because unlike gold, it is orders of magnitude more difficult for governments to confiscate and control. [0] https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_curr... EDIT: Spelling

ballenf 9y ago
The article does a surprisingly good job of addressing this issue as well: > What, though, is the value of a digital currency? > It's a fair question, but one that could equally be leveled at gold. Since Richard Nixon ended the fixed $35 an ounce convertibility of gold in 1971, its value has risen at times (the 1970s, the 2000s) and fallen at others. The best argument to justify investing in gold these days is not that it's an eternal "store of value" but that its very weirdness makes it special: According to modern portfolio theory, you should buy the shiny stuff not for its superior investment returns, but because it doesn't correlate much to other asset classes such as stocks, bonds and commodities. One can argue about the validity of the "gold is equally worthless" argument, but I was just impressed that the article didn't shy away from these hard questions.
- sbenitoj 9y ago
  Agreed - for an article in MSM, I was surprised it wasn't completely terrible! But I'm tired of the BS line that "gold has no value" continues to be repeated as nauseam. If people value it, then it has value. If people don't, then it doesn't. End of story. Things don't have value because some Minister of Value makes a proclamation about what has value and what doesn't (USSR tried that, didn't work!)
  - vasilipupkin 9y ago
    that's not quite the case. There is such a thing as objective value. Stocks have objective value because they pay dividends. Real estate in warm climates has objective value because it's pleasant to be in a warm place in winter. BMW costs more than a honda civic because it is objectively a better driving experience. Etc. Etc. So, no, it's not true that there is no objective value
    - ktta 9y ago
      Each one of your cases can be debunked. Stocks only have value when SEC deems that it can have value. There are people who would love to live in a cold climate for whom land in a warm climate has no value. BMW costs more than Honda because people are willing to pay that much for it, which is how BMW sets the price. All of your cases are about subjective value. Take out the buyer with personal interests on the other side of the transaction and see if it has any value. A good test is to take what you think has value and move 10000 years into the future or the past and consider if everyone you encounter will value it. Do you think it will have value? If not, then no, it doesn't have any 'objective' value.
      - sbenitoj 9y ago
        Bingo!
      - vasilipupkin 9y ago
        ehhhh, no. Stocks do not only have value when SEC deems that it can have value. That is completely incorrect. SEC simply regulates equity issuance, it doesn't set the price of each stock. BMW costs more than honda because it is objectively a better car. By objectively identifiable metrics. Yes, it's true there are some people who love cold climates. But in the US people are moving from cold climates to warmer climates, on average - so real estate in warmer climates is growing in value faster. So, no, you are completely wrong.
igammarays 9y ago
>Bitcoin is a serious threat to that because unlike gold, it is orders of magnitude more difficult for governments to confiscate and control. Nonsense. Nothing stops China from seizing all of the largest bitcoin mining operations tomorrow, and building some additional miners to conduct a 51% attack. They would then effectively control the network. Bitcoin is actually easier to control than fiat currency or gold because it requires network access.
- sbenitoj 9y ago
  This is a common misconception, the Bitcoin network would not be harmed by governments seizing control of Bitcoin mining operations, there are many options in such of an event. All seizing mining would do is prove how resilient Bitcoin is to government efforts and further decentralize the currency. Also, implicit in your statement is the belief that miners control the network, which is not true. They're an important part of the ecosystem, but they don't control the network (if they did, the blocksize would've increased a long time ago and there probably never would've been a fork).
  - simias 9y ago
    >This is a common misconception, the Bitcoin network would not be harmed by governments seizing control of Bitcoin mining operations, there are many options in such of an event You'll have to give us some sources for that I'm afraid, it's not at all obvious from my point of view. Should China merely shutdown the miners the disruption shouldn't be too massive and only temporary while the difficulty adjusts to the new hash rate. But if they actually decide to use the miners "offensively" they could make a 51% attack and double spend bitcoins. Such an attack would greatly reduce confidence in bitcoin and would probably tank its value pretty hard. That sounds pretty harmful to me.
    - sbenitoj 9y ago
      Here are two short talks (both ~7 mins) by Andreas Antonopoulos related to this: Bitcoin Q&A: Could governments take over exchanges? https://www.youtube.com/watch?v=9PrJQeKl9w4 https://www.youtube.com/watch?v=9PrJQeKl9w4 Bitcoin Q&A: Will governments ban cryptocurrencies? https://www.youtube.com/watch?v=LIQkuF_I5Xo https://www.youtube.com/watch?v=LIQkuF_I5Xo
trgv 9y ago
I agree with you that there's no such thing as objective value. But my feeling is that there is still something important that differentiates "real" currencies (fiat or not) from bitcoin/gold/etc. Namely, there is a government backing the "real" currencies. Dollars are "guaranteed" to have value because they are "legal tender," ie you can pay your taxes and buy things with them. As long as the US government has power, that will continue to be the case. I can definitely see btc being a viable currency in situations where a government's power is limited but, for stable countries, it seems more like a commodity, and that's definitely (at least it seems to me) how people are treating it.
- sbenitoj 9y ago
  Have to pick a bone here: dollars do not have value because they are "legal tender" -- see Zimbabwe hyperinflation [0]. Zimbabweans stopped valuing their national currency years before Zimbabwe recognized any other currencies as legal tender. Dollars (and all fiat for that matter) have value because once upon a time paper money was tied to a specific weight of gold / silver stored in a bank vault. Over the past 100-ish years that link was slowly eroded until the point where there was no backing whatsoever. Inertia is the only thing keeping fiat currencies going, and it's not going to last forever now that alternatives (like cryptocurrency) exist and governments can't shut them down (like they did with the Liberty Dollar [1]). After a couple more financial crises in the West and bank bailouts I suspect ALL governments will have limited power in this domain, people aren't going to let their savings be inflated into oblivion for the rest of eternity. [0] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe [1] https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...
  - trgv 9y ago
    The point that I meant to get across was that dollars have value as long as the government has power. You're right that it doesn't matter what the government says. Rather what matters is whether or not the government can back up what it says. If you don't pay your taxes, you will be jailed. How do you pay your taxes? Well that's up the government, and they went with dollars. I don't agree with your explanation of why dollars have value. You seem to have a bone to pick with every fiat currency, which I think is very silly.

ballenf 9y ago

The article does a surprisingly good job of addressing this issue as well: > What, though, is the value of a digital currency? > It's a fair question, but one that could equally be leveled at gold. Since Richard Nixon ended the fixed $35 an ounce convertibility of gold in 1971, its value has risen at times (the 1970s, the 2000s) and fallen at others. The best argument to justify investing in gold these days is not that it's an eternal "store of value" but that its very weirdness makes it special: According to modern portfolio theory, you should buy the shiny stuff not for its superior investment returns, but because it doesn't correlate much to other asset classes such as stocks, bonds and commodities. One can argue about the validity of the "gold is equally worthless" argument, but I was just impressed that the article didn't shy away from these hard questions.

sbenitoj 9y ago
Agreed - for an article in MSM, I was surprised it wasn't completely terrible! But I'm tired of the BS line that "gold has no value" continues to be repeated as nauseam. If people value it, then it has value. If people don't, then it doesn't. End of story. Things don't have value because some Minister of Value makes a proclamation about what has value and what doesn't (USSR tried that, didn't work!)
- vasilipupkin 9y ago
  that's not quite the case. There is such a thing as objective value. Stocks have objective value because they pay dividends. Real estate in warm climates has objective value because it's pleasant to be in a warm place in winter. BMW costs more than a honda civic because it is objectively a better driving experience. Etc. Etc. So, no, it's not true that there is no objective value
  - ktta 9y ago
    Each one of your cases can be debunked. Stocks only have value when SEC deems that it can have value. There are people who would love to live in a cold climate for whom land in a warm climate has no value. BMW costs more than Honda because people are willing to pay that much for it, which is how BMW sets the price. All of your cases are about subjective value. Take out the buyer with personal interests on the other side of the transaction and see if it has any value. A good test is to take what you think has value and move 10000 years into the future or the past and consider if everyone you encounter will value it. Do you think it will have value? If not, then no, it doesn't have any 'objective' value.
    - sbenitoj 9y ago
      Bingo!
    - vasilipupkin 9y ago
      ehhhh, no. Stocks do not only have value when SEC deems that it can have value. That is completely incorrect. SEC simply regulates equity issuance, it doesn't set the price of each stock. BMW costs more than honda because it is objectively a better car. By objectively identifiable metrics. Yes, it's true there are some people who love cold climates. But in the US people are moving from cold climates to warmer climates, on average - so real estate in warmer climates is growing in value faster. So, no, you are completely wrong.

igammarays 9y ago

>Bitcoin is a serious threat to that because unlike gold, it is orders of magnitude more difficult for governments to confiscate and control. Nonsense. Nothing stops China from seizing all of the largest bitcoin mining operations tomorrow, and building some additional miners to conduct a 51% attack. They would then effectively control the network. Bitcoin is actually easier to control than fiat currency or gold because it requires network access.

sbenitoj 9y ago
This is a common misconception, the Bitcoin network would not be harmed by governments seizing control of Bitcoin mining operations, there are many options in such of an event. All seizing mining would do is prove how resilient Bitcoin is to government efforts and further decentralize the currency. Also, implicit in your statement is the belief that miners control the network, which is not true. They're an important part of the ecosystem, but they don't control the network (if they did, the blocksize would've increased a long time ago and there probably never would've been a fork).
- simias 9y ago
  >This is a common misconception, the Bitcoin network would not be harmed by governments seizing control of Bitcoin mining operations, there are many options in such of an event You'll have to give us some sources for that I'm afraid, it's not at all obvious from my point of view. Should China merely shutdown the miners the disruption shouldn't be too massive and only temporary while the difficulty adjusts to the new hash rate. But if they actually decide to use the miners "offensively" they could make a 51% attack and double spend bitcoins. Such an attack would greatly reduce confidence in bitcoin and would probably tank its value pretty hard. That sounds pretty harmful to me.
  - sbenitoj 9y ago
    Here are two short talks (both ~7 mins) by Andreas Antonopoulos related to this: Bitcoin Q&A: Could governments take over exchanges? https://www.youtube.com/watch?v=9PrJQeKl9w4 https://www.youtube.com/watch?v=9PrJQeKl9w4 Bitcoin Q&A: Will governments ban cryptocurrencies? https://www.youtube.com/watch?v=LIQkuF_I5Xo https://www.youtube.com/watch?v=LIQkuF_I5Xo

trgv 9y ago

I agree with you that there's no such thing as objective value. But my feeling is that there is still something important that differentiates "real" currencies (fiat or not) from bitcoin/gold/etc. Namely, there is a government backing the "real" currencies. Dollars are "guaranteed" to have value because they are "legal tender," ie you can pay your taxes and buy things with them. As long as the US government has power, that will continue to be the case. I can definitely see btc being a viable currency in situations where a government's power is limited but, for stable countries, it seems more like a commodity, and that's definitely (at least it seems to me) how people are treating it.

sbenitoj 9y ago
Have to pick a bone here: dollars do not have value because they are "legal tender" -- see Zimbabwe hyperinflation [0]. Zimbabweans stopped valuing their national currency years before Zimbabwe recognized any other currencies as legal tender. Dollars (and all fiat for that matter) have value because once upon a time paper money was tied to a specific weight of gold / silver stored in a bank vault. Over the past 100-ish years that link was slowly eroded until the point where there was no backing whatsoever. Inertia is the only thing keeping fiat currencies going, and it's not going to last forever now that alternatives (like cryptocurrency) exist and governments can't shut them down (like they did with the Liberty Dollar [1]). After a couple more financial crises in the West and bank bailouts I suspect ALL governments will have limited power in this domain, people aren't going to let their savings be inflated into oblivion for the rest of eternity. [0] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe [1] https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...
- trgv 9y ago
  The point that I meant to get across was that dollars have value as long as the government has power. You're right that it doesn't matter what the government says. Rather what matters is whether or not the government can back up what it says. If you don't pay your taxes, you will be jailed. How do you pay your taxes? Well that's up the government, and they went with dollars. I don't agree with your explanation of why dollars have value. You seem to have a bone to pick with every fiat currency, which I think is very silly.