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My question is: what is the value of a Bitcoin? It looks to me like a great way to transfer currency and facilitate exchange of goods, but not much more than th

My question is: what is the value of a Bitcoin? It looks to me like a great way to transfer currency and facilitate exchange of goods, but not much more than that. So 'investing' in this digital currency itself does not make much sense to me, because intrinsically it has no 'real' value. I might be misinformed about the subject, in which case I would gladly like to be shown my error. For example, why don't I invest in Yuan or the Pound instead of Bitcoins? From my perspective the only thing driving up the price of Bitcoin is the demand for it by 'crypto-investors', which is completely artificial and they are not chasing any tangible value. Can anyone enlighten me?

Leszek 9y ago
What is the value of anything, really? The value of a metal brick, or a shiny stone, far exceeds any practical utility of the physical object itself. Even the value of a "real" currency is based, in broad strokes, on what you can exchange it for.
- kelvin0 9y ago
  Water is immensely valuable. It has an intrinsic value to human life. Land to grow crops for food is also valuable for the same reason. Construction materials to build shelter/homes are definitely valuable. Some metals and minerals are important to our technology driven society. You need these raw materials to build your technological infrastructure. Bitcoin? I don't see it ...
  - ricardobeat 9y ago
    I don’t see the internet either. The value of bitcoin is its decentralisation. As long as there are people running nodes, the network is alive, regardless of what any government or entity in the planet thinks. Being global also means it’s used by people who do not have a stable money store (countries with unstable currencies), and for transfers between borders that would otherwise be impossible.
- deleted 9y ago
  [deleted]
stinkytaco 9y ago
Currency is a tool that exists to facilitate economic transactions and though it's value varies depending on the confidence people have in it, your first point is true. I would say the only difference with Bitcoin is that it's fixed and fundamentally deflationary. There are people who invest in Yuan, Pounds and Dollars. Forex trading is a real thing and I expect it's often dabbled in by the same people that invest in Bitcoin. Though not as unstable as Bitcoin, it's still a gamble, a bigger gamble that most investment given that the only real payout is, as you say, imaginary (as opposed to the possibility of dividends that a stock might give you).
conanbatt 9y ago
I like to compare Bitcoin to Land. When people migrated over to america, land was basically worthless: there was too much of it and too few people. As the more fertile and better located land was taken, prices started to rise. As land supply is inelastic, the price can only tend to go up as long as the demographics expand. Bitcoin has a limited amount and even more has a diminishing supply (as coins get lost, stolen, broken). Its use case is less valuable than land but its supply way more limited. The only thing bitcoin needs to increase price is inelastic demand. IF there is just a single use case that uses bitcoin everyday, its price will tend to infinity.
- seanhunter 9y ago
  The problem with this argument is that while supply of bitcoin itself is inelastic, anyone who wants to do so can create an altcoin, meaning the supply of altcoins in general is infinite, and since they are functionally extremely similar to each other if people can't buy bitcoin at an attractive price, they can simply buy something else that works the same way.
  - conanbatt 9y ago
    You need inelastic demand as well.
- human 9y ago
  I’m sorry but your point of view could not be further from the truth. First and foremost, land has intrinsic value. You can grow food, build shelter and have access to water. If you’re very lucky there might even be oil below it. On the other hand, Bitcoin won’t help you survive very long. Second, Bitcoins can be divided infinitely. Today I pay 1 BTC for a car. Tomorrow I pay 0.5 BTC. It really does not matter how many BTCs is the maximum. Land, on the contrary, loses value proportionnaly as you divide it. 50% of the land means 50% of food, water, shelter, etc. Finally, Bitcoin price will never reach infinity because there is a physical limit to the real value Earth and humans can produce.
  - conanbatt 9y ago
cwkoss 9y ago
What is the value of the bank wire system? Bank wires are currently Bitcoin's closest competitor, and in aspects each has advantages. The bank wire system has had a lot of technical debt built up over the years, and has left a market opportunity by being risk averse and slow to innovate. People used to speak about paying for a cup of coffee with Bitcoin, but that isn't really a great use case for how it is designed. It has an inherent latency of about an hour and fees don't scale with price. If you want to transfer a lot of money in less than a day to someone who may not trust you, it's great. If you don't mind it being slower, have trust, or need to transfer small amounts, other systems are likely better for your use case.
qudat 9y ago
> It looks to me like a great way to transfer currency and facilitate exchange of goods > because intrinsically it has no 'real' value You have answered your own question. The value is the technology. It has a real-world use.
mrhappyunhappy 9y ago
The value of Bitcoin is in the global store of value. It is the network itself and the trust put into this network that gives it value, much the same as your trust in your local currency except on a global scale which makes it all that more valuable - this is without even going into the topic of trust and central authority.
tim333 9y ago
The price is somewhat determined by the cost of mining in the same way that the cost to buy a chunk of some obscure element is determined by the cost of getting it, not the utility. Want a gram of californium and it'll cost you even if it's not much use for anything.

Leszek 9y ago

What is the value of anything, really? The value of a metal brick, or a shiny stone, far exceeds any practical utility of the physical object itself. Even the value of a "real" currency is based, in broad strokes, on what you can exchange it for.

kelvin0 9y ago
Water is immensely valuable. It has an intrinsic value to human life. Land to grow crops for food is also valuable for the same reason. Construction materials to build shelter/homes are definitely valuable. Some metals and minerals are important to our technology driven society. You need these raw materials to build your technological infrastructure. Bitcoin? I don't see it ...
- ricardobeat 9y ago
  I don’t see the internet either. The value of bitcoin is its decentralisation. As long as there are people running nodes, the network is alive, regardless of what any government or entity in the planet thinks. Being global also means it’s used by people who do not have a stable money store (countries with unstable currencies), and for transfers between borders that would otherwise be impossible.
deleted 9y ago
[deleted]

stinkytaco 9y ago

Currency is a tool that exists to facilitate economic transactions and though it's value varies depending on the confidence people have in it, your first point is true. I would say the only difference with Bitcoin is that it's fixed and fundamentally deflationary. There are people who invest in Yuan, Pounds and Dollars. Forex trading is a real thing and I expect it's often dabbled in by the same people that invest in Bitcoin. Though not as unstable as Bitcoin, it's still a gamble, a bigger gamble that most investment given that the only real payout is, as you say, imaginary (as opposed to the possibility of dividends that a stock might give you).

conanbatt 9y ago

I like to compare Bitcoin to Land. When people migrated over to america, land was basically worthless: there was too much of it and too few people. As the more fertile and better located land was taken, prices started to rise. As land supply is inelastic, the price can only tend to go up as long as the demographics expand. Bitcoin has a limited amount and even more has a diminishing supply (as coins get lost, stolen, broken). Its use case is less valuable than land but its supply way more limited. The only thing bitcoin needs to increase price is inelastic demand. IF there is just a single use case that uses bitcoin everyday, its price will tend to infinity.

seanhunter 9y ago
The problem with this argument is that while supply of bitcoin itself is inelastic, anyone who wants to do so can create an altcoin, meaning the supply of altcoins in general is infinite, and since they are functionally extremely similar to each other if people can't buy bitcoin at an attractive price, they can simply buy something else that works the same way.
- conanbatt 9y ago
  You need inelastic demand as well.
human 9y ago
I’m sorry but your point of view could not be further from the truth. First and foremost, land has intrinsic value. You can grow food, build shelter and have access to water. If you’re very lucky there might even be oil below it. On the other hand, Bitcoin won’t help you survive very long. Second, Bitcoins can be divided infinitely. Today I pay 1 BTC for a car. Tomorrow I pay 0.5 BTC. It really does not matter how many BTCs is the maximum. Land, on the contrary, loses value proportionnaly as you divide it. 50% of the land means 50% of food, water, shelter, etc. Finally, Bitcoin price will never reach infinity because there is a physical limit to the real value Earth and humans can produce.
- conanbatt 9y ago

cwkoss 9y ago

What is the value of the bank wire system? Bank wires are currently Bitcoin's closest competitor, and in aspects each has advantages. The bank wire system has had a lot of technical debt built up over the years, and has left a market opportunity by being risk averse and slow to innovate. People used to speak about paying for a cup of coffee with Bitcoin, but that isn't really a great use case for how it is designed. It has an inherent latency of about an hour and fees don't scale with price. If you want to transfer a lot of money in less than a day to someone who may not trust you, it's great. If you don't mind it being slower, have trust, or need to transfer small amounts, other systems are likely better for your use case.

qudat 9y ago

> It looks to me like a great way to transfer currency and facilitate exchange of goods > because intrinsically it has no 'real' value You have answered your own question. The value is the technology. It has a real-world use.

mrhappyunhappy 9y ago

The value of Bitcoin is in the global store of value. It is the network itself and the trust put into this network that gives it value, much the same as your trust in your local currency except on a global scale which makes it all that more valuable - this is without even going into the topic of trust and central authority.

tim333 9y ago

The price is somewhat determined by the cost of mining in the same way that the cost to buy a chunk of some obscure element is determined by the cost of getting it, not the utility. Want a gram of californium and it'll cost you even if it's not much use for anything.