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> What future does an asset have if people don't actually buy stuff with it? I look at it (maybe naively) like a solid gold bar. You're not going to walk in to

• 0xcafecafe 9y ago
  Gold as a metal has an inherent value though. If not only for jewelry, it also has important uses in electronics. The value associated with bitcoin seems purely sentimental.
  • nxsynonym 9y ago
    This is why I hate the comparison of crypto to gold or any other "value asset'. Houses are lived in. Stocks act as a cashflow for companies. Even if the world economy collapses you can still use a solid gold bar as a blunt instrument to kill an animal and eat it. Cryptocurrencies have exactly 0 secondary uses.
    • deleted 9y ago
      [deleted]
    • criddell 9y ago
      What's the secondary use of all the shares of AMZN one might have in their eTrade account? That's also just data, right?
      • throwaway2312 9y ago
        Those shares represent the stake in value of a corporation that exists in the real world with real services. Very very different than Bitcoin.
      • notatoad 9y ago
        the value backing AMZN shares is the value of the utility that amazon, inc provides to society.
        • nxsynonym 9y ago
          Exactly. The value of the shares are tied directly to the output and monetary value of the company they are backing - and not hype and word-of-mouth.
          • notatoad 9y ago
            there's definitely some hype and word of mouth involved in corporate valuations. but it's at least somewhat based in reality.
        • neosavvy 9y ago
          I agree, I was discussing the total market cap of all coin offerings in general as being around $500B which is just over half of the value of Apple. I'd take ownership in Apple all day over any coin, as I suspect more people out there value the Apple Stock over the ever-increasingly tough to exchange Bitcoin.
        • criddell 9y ago
          Yeah but if the world economy collapses so completely that the main value of gold is as a weapon to hit people with, your shares of Amazon will probably be about as useful as your Bitcoin wallet.
      • ggg9990 9y ago
        The United States government enforces, with lethal weapons, the right of Amazon shareholders to Amazon’s assets.
      • schoen 9y ago
        I guess their secondary use is offering them in support of a prospective acquisition (or dissolution) of Amazon, in exchange for which the acquirer or trustee would offer some other value at that time. These events both seem very unlikely right now, but they provide a last-resort value for an ownership interest in Amazon. (I don't mean to support other people in this thread who are criticizing cryptocurrencies for their lack of inherent value, but stocks do have a particular basis for their value that cryptocurrencies commonly don't.)
    • paulddraper 9y ago
      Okay....livestock bludgeoning explains 0.001% of gold's value.
      • nxsynonym 9y ago
        It's a ridiculous example, of course. But it's something. Not to mention the actual real applications that were mentioned above. The point is - crypto-currencies are fairy dust. There is nothing real or tangible about them.
        • noir_lord 9y ago
          > The point is - crypto-currencies are fairy dust. There is nothing real or tangible about them. Most money in circulation is 0/1's on hard drives. I'm bearish on cryptocurrencies because frankly the entire thing is hilarious but modern currencies aren't entirely dissimilar.
          • notahacker 9y ago
            Those 0/1s on hard drives are backed by trillions of dollars of debt and tax obligations people are obliged to trade labour and physical goods for though. Being backed by demand from the entire economy of a stable polity is certainly better than being backed by sunk (energy) cost fallacy and speculator enthusiasm.
          • wtetzner 9y ago
            > I'm bearish on cryptocurrencies because frankly the entire thing is hilarious but modern currencies aren't entirely dissimilar. I think this thread started out with someone saying that crypto-currencies aren't very useful as currency, but as assets (like a gold bar) instead. And then it was argued that they're not very good as assets either.
        • zolthrowaway 9y ago
          I don't have a horse in this race, but what about pyrite? It has most of the aesthetic properties of gold (which I think everyone agrees is where most of the value comes from), but almost none of the value. Pyrite is a real, physical thing that will not disappear tomorrow. However, it has almost no value. I guess what I am trying to say is that there is a lot more that goes into value than utility. That's why I do not think that people always act rationally. Clearly there is something irrational about people's relationship with gold that makes it valuable. I don't see why crypto cannot have a similar irrational evaluation. Sure, it could go "poof" tomorrow, but I don't know if that will stop people from seeing it as valuable.
    • newintellectual 9y ago
      That's false. Google up Ethereum and you'll immediately see thousands of uses besides currency for it, because of its full programming language and massively distributed processing power.
    • dr_win 9y ago
      Bitcoin token's (secondary) value is the right/ability to write a new row into a global eternal immutable append-only decentralised censorship-proof spreadsheet table (blockchain). It is valuable not only in economic context to create a border-less cash-like digital commodity. It could be used for proof of publication or proof of existence and in many other useful ways (smart contracts). In other words, owning a non-dust amount of Satoshis gives you some useful property. Anything scarce and useful will have value and market will price it. Anything with a price and good properties to become means of exchange, unit of account or store of value could under some circumstances become a form of money. Similar as with gold. You can use it in electro-industry. That's its secondary value for people who see value in electronic devices. If you were to explain why gold is valuable in electro-industry to a member of native african tribe, he would not see that value, because electricity and electronic devices is something not considered in his mind. You are in the same boat with Bitcoin here :-)
  • nkkollaw 9y ago
    How about stock.
    • appleiigs 9y ago
      Not stock. With stock you have a share of physical assets and cash flow.
  • UnbornSoul 9y ago
    That's the case now, but that was certainly not the case in the late 19th century when gold fever struck. The only use back then was jewelry and the fact that is was rare.
    • janekm 9y ago
      And teeth.
    • kgwgk 9y ago
      Gold has been used in dentistry for centuries (and millenia).
  • piyh 9y ago
    Jewelry doesn't have inherent value. Guns, cars, food and shelter has inherent value. Gold has been a luxury good long before it had any practical applications.
    • ImSkeptical 9y ago
      If you want to make this argument, then guns, shelter, food etc have no inherent value, if you don't value survival. Gold, and jewelry, have been appreciated for millennia as pretty objects. Pretty objects improve life quality - and so, if you care about life, you can say that gold has some inherent value. Finally, you could also reduce it to the fact that possession and distribution of pretty objects can increase your likelihood of reproduction. From an evolutionary standpoint, access to reproduction is an inherently valuable thing.
    • neosavvy 9y ago
      I do think the value in all these currencies is that it will change the value Banks in general bring to society. If we see a widely traded and daily useful crypto-currency in use for general goods and services, we'll see a deleveraging of the banking system. Right now how often do you exchange a real Dollar or Nickel for goods or services. Chances are your token of exchange is your credit or debit card, with a balance maintained by a bank. Would be very interesting to imagine the world we will live in if the banks are no longer keeping the ledger for society.
      • JumpCrisscross 9y ago
        > If we see a widely traded and daily useful crypto-currency in use for general goods and services, we'll see a deleveraging of the banking system Based on what? Cryptocurrency markets went from zero to doing practically every financial fraud, scam and deception in the book in a matter of months. Excessive leverage? See Tether. Ponzi scheme? See Bitconnect. Backroom dealing to help the well connected? See Ethereum. Banks don't lever up, lie about the value of their holdings and borrow short to buy long because they're evil and destructive. They do it because there are massive monetary incentives to do those things. Those same incentives are present in cryptocurrencies. The only difference is the regulators haven't tuned in yet. > banks are no longer keeping the ledger for society Banking laws would be updated to regulate Coinbase, Bitfinex, et cetera.
  • serg_chernata 9y ago
    While true, a gold bar to me has no inherent use. I am not going to smelt it and make jewelry. It is simply a store of value. I think the gold comparison is quite close.
    • EpicEng 9y ago
      But you're not the only person in the world, so I don't see how this is an accurate portrayal at all. To _you_ it's a value store. To electronics companies it's a consumable used in manufacturing. Same to a jeweler, and to a jewelry consumer it's desired. Crypto has exactly zero real world utility or inherent value. You, Joe Schmoe, do not by yourself and your own desires dictate what does and does not have inherent value.
      • nileshtrivedi 9y ago
        Some tokens have non-zero utility. Example: FileCoin, Ethereum etc.
      • oculusthrift 9y ago
        that’s fine. stay away from crypto then.
        • EpicEng 9y ago
          well reasoned reply, thanks for that.
      • mythrwy 9y ago
        Abstract mediums of exchange/wealth storage usually decrease in real world utility the more abstracted they become. But they are also more "advanced" so to speak, or useful for modern purposes. Maybe that's not put very well. Look at it like this. Primitive civilizations (some of which still exist today) may store their wealth in something like cattle. Often exactly cattle in fact. Obvious real world utility. But cumbersome to trade, can't grow the economy fast, lots of drawbacks and it limit how complex the culture can become. As civilization gets more complex it moves on to other mediums. Next might be useful metals (tin, bronze, iron). Less immediate use than cattle, slightly more abstracted. Then maybe precious metals or stones, less practical use then the previous stage, even more abstracted. But easier to move around, trade, store and calculate with. Then currency, even more abstracted and even less practical use. Then digital currency in the form IOUs and ledger balances which is essentially what we have now. 0 practical use. Essential for any modern economy. Point being, "real world use" has nothing to do with value as a currency, a store of wealth or an economic unit in this time and place. The worth is abstracted functionality. And it's entirely possible, in fact even likely in my opinion that blockchains are an evolution along these lines, a next step in abstracting units of trade and ledgers of wealth.
  • psyc 9y ago
    Its usefulness as a metal/ornament is not why it's priced as it is. That's due to rarity, authenticity, and acceptance as a value store. And that's just another way of saying it's good for debt accounting. Bitcoin, seashells, obsidian, and gold share(d) those properties. The price is what people are willing to pay for N units in the literal or de facto “ledger”.
    • Goladus 9y ago
      The question is, if gold did not have properties that made it useful as an ornament and symbol of high status (and therefore high mate value), would it have ever become accepted as a store of value?
  • deleted 9y ago
    [deleted]
  • andybak 9y ago
    > Gold as a metal has an inherent value though. The price of gold isn't really related to it's use in electronics however. > The value associated with bitcoin seems purely sentimental. Scarcity is a factor. Admittedly not all things that are scarce are valuable but it's a necessary precondition. There are other examples of items that lack inherent utility but have value and they too are often used to store wealth: art, antiques etc. spring to mind. If everyone decided tomorrow that Ming Vases were rubbish they would cease to be valuable. That's surely as "sentimental" as Bitcoin - value based on scarcity and consensus.
    • ceejayoz 9y ago
      The scarcity argument would be great if Bitcoin Cash didn't exist to disprove it.
  • LeonM 9y ago
    So is gold. Most gold ends up in vaults (see [0]), where absolutely nothing is done with it. If we would price it for practical stuff (for it's thermal and electric properties), it would be worth much, much less. Also, gold is not scarce by any means, just expensive to mine. [0] https://www.youtube.com/watch?v=CTtf5s2HFkA https://www.youtube.com/watch?v=CTtf5s2HFkA
    • teilo 9y ago
      The difference is that cryptocurrency is ephemeral, and gold is not. One can create a new crypto-currency at any time. One cannot conjure up gold at any time. Crypto-currency can be wiped out with a hard drive crash or a lost password because it is a social contract. Gold cannot because it is physical. That still makes a difference.
      • Jommi 9y ago
        ..What? 1. You can't create new bitcoin at any time - not after all blocks are mined 2. Same as bitcoin, Gold needs to be mined. This is basically "conjuring" gold. 3. Wiped cryptocurrency can be returned. 4. Gold can be destroyed as well.
        • ceejayoz 9y ago
          > You can't create new bitcoin at any time - not after all blocks are mined Bitcoin Cash did exactly that. New value was conjured up out of nowhere - Bitcoin didn't drop, and every owner of a Bitcoin suddenly had $2-3k worth of Bitcoin Cash. > Wiped cryptocurrency can be returned. ... What? Are you sitting on a SHA-256 exploit we don't know about?
          • conanbatt 9y ago
            New value was not conjured up. A new crypto was created, but the value of it was proportional to its expected use and some other features. There are plenty of bitcoin forks, but you dont hear about the other ones as much because they flopped entirely.
  • marshray 9y ago
    Very little though. If the demand for gold were merely industrial it would not need to be mined in such quantities as it has throughout history. I would put jewelry in the 'sentimental' category as well. Not only is Bitcoin purely sentimental, it represents has huge costs in the form of raw energy. Bitcoin's only claim to value is that it is an artifact of an act of ritual sacrifice. One might imagine a precedent in some system of tokens issued by some ancient priesthood.
    • alanfalcon 9y ago
      I love this imagery. Probably what Neal Stephenson was going for in Reamde, though your simple analogy resonates with me more.
    • walterbell 9y ago
      Has the ritual sacrifice angle been explored elsewhere? Would make for good video.
      • loeg 9y ago
        In the TV show "Sherlock," the titular main character's self-deprecating videos for the "Everyone" collective (spoof on Anonymous) are a sort of ritual sacrifice as a medium of payment.
        • pwinnski 9y ago
          I think you're meaning to reference "Elementary," the other show about Sherlock Holmes.
          • loeg 9y ago
            Ah, you're absolutely right.
      • roywiggins 9y ago
        Charles Stross' Laundry novels, at least, posit a connection between number-crunching and the occult, though unfortunately the series predates Bitcoin, which would have been perfect fodder.
  • peterjlee 9y ago
    Whatever inherent value gold has is far below it's current price though. If gold wasn't seen as an asset and was purely valued based on it's utility like iron and copper, it'll be priced far below the current price.
  • PascLeRasc 9y ago
    That's only recently. Gold had a perceived asset-value for thousands of years before we knew what electricity was.
  • grahamperich 9y ago
    Gold is not valuable because you can make jewelry with it. Jewelry is valuable because it's made of gold. Important distinction.
    • notahacker 9y ago
      Use of gold for jewellery and other status symbols appears to have occurred independently from its use as currency/bullion though (several centuries prior in the case of Eurasian cultures, entirely independently in the case of the Aztecs who used it as jewellery but found the Spanish desire for bullion rather baffling)
    • aje403 9y ago
      A bunch of dudes with spears in separate parts of the globe found some shiny rock that looked really cool. Then they probably started stabbing each other to fight for who gets to keep it. This phenomenon likely continued on for thousands of years, with gradually less spears involved.
    • evgen 9y ago
      I believe you are incorrect and have the causality backwards. Gold has several characteristics that, when combined, make it an ideal material for ancient jewellery and whose properties remain to this day. It can be found in its elemental form and is easy to refine using primitive technology. It is extremely malleable and easy to shape for artistic purposes. It’s ductility makes it easy to draw through a die or pound into leaf so it can be made into chain links or leaf to be applied to another material. It resists tarnish and is non-reactive in the presence of most acids. It is rare compared to most other metals available to pre-industrial societies so it has scarcity value. All of these properties make it better than alternatives for jewellery and for thousands of years gold was valuable because it could be made into appealing jewellery while metals of equal rarity were not hoarded and made into jewellery.
  • chadash 9y ago
    Some things are valuable because of their inherent utility. Soliris (which has the distinction of being one of the world's most expensive drugs) is valuable because it has obvious utility: it treats medical conditions and saves lives. Even if it has inherent value for things like electronics or tooth fillings (it has inherent value for jewelry too, but a large part of why we use it in jewelry is because of its high price), gold is mainly seen as valuable because everyone seems to agree that it's valuable. Even if I live in a culture that doesn't particularly value gold, I know that it has a high market value and I can trade it for things that I do value. Still, is extremely valuable and has been extremely valuable for hundreds of years. It's got the added benefit of being something that people can show off to display their wealth. Even if it's arbitrary why we value gold in the first place (I think aliens looking at our society would find our gold obsession strange), it's probably not going anywhere as a store of wealth. If I buy gold today, unless Armageddon happens, it's very very likely that it will still be highly valuable in 10 years times. Bitcoin might be valuable in ten years, but like many manias in the past (for example, tulips in 1637 Holland), its value will probably fade at some point unless it has some inherent usefulness as a medium of trade for other useful goods. Gold might eventually lose it's value as well, but it's been artificially inflated for millennia so I'm not betting on it collapsing anytime soon.
  • oculusthrift 9y ago
    golds inherent value is worth like 10 percent of the value people put in it for speculation purposes. If gold was only used for electronics it’d be worth a lot less. in fact, there are things far rarer than gold and actually used more but worth a lot less.
  • richardw 9y ago
    Gold is a greater-fool asset, just like Bitcoin. We buy it hoping a greater fool will pay us more for it later. Most of the value is what we ascribe to it. Close on 80% is used in jewelry. It doesn't actually make you money, there's no universal law that makes it more valuable over time. It's just stuff we like, same as art or classic cars or Bitcoin. We've just liked it for longer than those things, so we trust it more. but that isn't guaranteed. You can use non-greater fool assets to make money. A stock is a piece of a business that earned you money over time. A truck can be used to make money. Gold can be fashioned into more-valuable stuff but the real assets are the craftsmanship and tools. Gold is the commodity.
    • sumedh 9y ago
      > We buy it hoping a greater fool will pay us more for it later. Well not exactly, the largest consumer of gold are Indians and they buy gold jewellery to show affluence. Most of the jewellery is passed down generations.
      • richardw 9y ago
        Even less of an investment then. As an investment it's a greater fool one. If you buy it for non-investment purposes then the investment definition doesn't apply. Same as art or classic cars. If you buy it to resell, that's when it applies. If you buy it as an input into a business process then it doesn't, but that's not the common case.
  • stale2002 9y ago
    Dirt also has intrinsic value. If you don't have enough dirt, then you can't grow food and everyone dies. But why is dirt not valuable? Well, that's because the supply of dirt vastly outstrips demand. The same could happen for gold.
    • dane-pgp 9y ago
      For completeness, it should also be pointed out that, in the future, the supply of usable (for growing food) dirt maybe be outstripped by demand, making it become more valuable than gold. Actually, if the price started trending that way, I imagine other factors would have a bigger effect on the economy before it reached that stage.
• rb808 9y ago
  Who ever buys a solid gold bar? nobody. Even gold coins etc as an investment are very unusual.
  • rkuykendall-com 9y ago
    Watch more Fox News and Info Wars. Somebody is paying for all those ads.
• EnFinlay 9y ago
  Reading your comment finally made it click to me why cryptocurrencies (specifically Bitcoin) are distinct from a gold bar or other non-currency stores of value. A gold bar is going to remain a gold bar forever, people's perception of its value will change even though the supply will remain mostly steady, but it will stay a gold bar no matter what. Bitcoin may change in value based on perception, it's supply will remain constant after it has all been mined, but it's existence and integrity relies on a large network continuing to exist. To put it differently, in 50 years a gold bar is a gold bar, but in 50 years a Bitcoin may have no value because everyone stopped mining and the blockchain was destroyed by 51% attacks.
  • emodendroket 9y ago
    To be fair, people could also stop thinking gold is worth much. Maybe a modern-day alchemist finally figures out the formula. I don't know. Probably far less likely than the Bitcoin scenarios though.
    • masklinn 9y ago
      > To be fair, people could also stop thinking gold is worth much. They've already noted that: > people's perception of its value will change But as they say, a gold bar will remain a gold bar, until and unless it is actively destroyed. Not so for bitcoins, which only remain so as long as they're actively maintained (not just individual coins but the mining networks which allows the creation of new transactions)
      • emodendroket 9y ago
        I imagined that was talking about a certain level of fluctuation in the exchange rate of gold to dollars, not a radical change like happened to, say, aluminum (considered rare and precious at the time it was put on top of the Washington Monument; not so much today).
      • egeozcan 9y ago
        How do you think the story would end for gold, if it became unpopular and the exchanges closed? You can sell your gold bar, and you can sell your private key. I see them as the same and no, I don't own Bitcoins.
• peterjlee 9y ago
  I agree with the gold comparison. Gold is priced far higher than it's industrial usefulness because it's seen as an value holding asset. The properties that make gold a good value holding asset is: 1. It's rare and supply is limited (holds value in low physical volume) 2. It doesn't decay or rust 3. It's easy to split into smaller pieces or combine into a larger one. Bitcoin is good at all three plus added benefit of easy, fast, cheap global transaction (compared to gold at least).
  • microtherion 9y ago
    I'll grant you (2) and (3), but (1) seems more debatable. Even though the overall number of Bitcoins is fixed (By fiat ;-), cryptocurrencies are multiplying like rabbits. Each Bitcoin fork alone creates 21 million potential new coins. New elements, in contrast, are added rarely, and stable new elements seem rather unlikely at this point.
• TeMPOraL 9y ago
  The difference between Bitcoin and gold isn't in how either stores value. It's in maintenance costs. For gold to retain value, you need to maintain human civilization, so that gold can be used in trade. For Bitcoin, you have to maintain it too, plus you need to keep paying an unbounded, ever-increasing, absurdly high price in energy use. This is IMO why cryptocurrencies are a serious problem, and also why they're unsustainable in the long run.
  • Jommi 9y ago
    You're only talking about proof-of-work cryptocurrencies, and bitcoin especially. You should research more on currencies that use a less power intensive PoW algorithm, or a different algorithm altogether that might not use anything more than the energy of one computer.
• joosters 9y ago
  'Fraud Protection' ??? I'd love to hear how they think they can justify that.