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> If Bitcoin is not backed by government force, then why is it worth anything? > Because no one can be compelled to accept Bitcoin to extinguish my debts to th

> If Bitcoin is not backed by government force, then why is it worth anything? > Because no one can be compelled to accept Bitcoin to extinguish my debts to them (i.e. by the courts) and I can't pay my taxes in Bitcoin to my local government (no, "just-in-time currency exchange doesn't count). Imagine that! People are willing to accept my bitcoin as a payment for their services voluntarily, and not because they are forced to? Turns out that there are quite a large number of people who like the idea of economic freedom and dislike the idea of this big cartel telling them what they can or can't do, who they can or can't trade with. They might dislike it so much that they're willing to make the hurdles, and take risks, in order to exchange between currencies to meet their obligations under such repressive systems and achieve some level of financial sovereignty outside it. People want the choice. They want the choice because the government who holds a monopoly over many businesses in the geographical region they reside often does a bloody awful job, and their prices are too high (a giant chunk of ones earnings, then another chunk of everything they buy). Private enterprises could offer far better service at lower costs and have them delivered on time. If they under-perform, people could pull out their money and pay someone else for the services. The main obstacle for this kind of voluntary trade is the men with guns saying "That kind of business can't operate here because this is our turf."

XorNot 8y ago
Unless the electricity company accepts Bitcoin, then you've got a problem. In fact you have a problem even if they did - because the hard-cap on the number of Bitcoins means eventually, every Bitcoin will be held by the electricity company. In fact it's worse then that - since the value of early Bitcoins is less then the value of later Bitcoins, but all Bitcoins are going up in buying power, the electricity company is eventually the richest entity in Bitcoin without even having to be malevolent. Of course, this doesn't happen because none of them can pay their taxes (or their suppliers taxes) in Bitcoin. In fact no one using Bitcoin can - everyone eventually has to sell all their Bitcoins to someone to recover the currency they need to do that. But who's buying it then? There's a finite amount - if it stays in use it's worth more then you sold it for when you try to get it back - or, since everyone eventually has to sell it, it's worth less - and less again.
- sparkie 8y ago
  The electricity company has bills to pay. If some company can find a way to make unlimited energy without expending resources, then yes, they will become the richest entity in the world, regardless of the presence of Bitcoin or not. Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible. It will be flawed in many places fairly soon, because governments don't want to miss the boat either. But Bitcoin maximalists don't actually care about this government thing. They would rather it collapse in on itself so that they can instead spend their money with businesses which make much better use of it than politicians. For that reason, there is a demand for Bitcoin, and while the demand exists, people are willing to pay more to acquire it. At this point, they have to pay more because they're buying from a market with reduced liquidity, largely because existing hodlers would rather keep hold of it because they're pretty confident it will continue to appreciate in value over time. And in the current world, where the government sanctioned financial services (paypal, mastercard etc) are actively unpersoning people for having unorthodox political views, there is clearly a growing market for an alternative financial instrument which this cartel does not control.
  - XorNot 8y ago
    > The electricity company has bills to pay. If some company can find a way to make unlimited energy without expending resources, then yes, they will become the richest entity in the world, regardless of the presence of Bitcoin or not. There is a finite amount of Bitcoin total by nature of the protocol. The electricity company is vital to Bitcoin being usable since it's a digital currency. The miners might be necessary too, but they need huge amounts of electricity - which if they had to pay in Bitcoin, means they are paying some portion of the dwindling number of Bitcoins to the electricity company. As is every Bitcoin user. And every bit of Bitcoin they get is worth slightly more after they get it then it was when it was paid, so their purchasing power is going up and up and up. You can't even found a new electricity company and try to compete on price, because beyond some point the original buyer can buy your new cheaper electricity without measurably reducing their spending power, and to capture the market they need to somehow not enrich you too much while doing it. And then of course, best case you just have 2 big electricity companies controlling all the wealth forever. Deflationary currencies are bad. > Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible. "Just in time" Bitcoin -> currency conversions do not count. They don't count because they depend on an exchange rate (and are provided by a private company in all examples). The government's tax office is not accepting Bitcoin - it's letting someone act as a payment provider but the payment provider is still paying them in the local currency (and taxes are being assessed in local currency, not Bitcoin). If the price of Bitcoin collapses, you'll owe more Bitcoins. If my local currency collapses, I'm still only taxed on the portion of my earnings in that currency. > But Bitcoin maximalists don't actually care about this government thing. However governments care a lot if you don't pay your taxes. And the utilities care a lot if you don't pay them.

XorNot 8y ago

Unless the electricity company accepts Bitcoin, then you've got a problem. In fact you have a problem even if they did - because the hard-cap on the number of Bitcoins means eventually, every Bitcoin will be held by the electricity company. In fact it's worse then that - since the value of early Bitcoins is less then the value of later Bitcoins, but all Bitcoins are going up in buying power, the electricity company is eventually the richest entity in Bitcoin without even having to be malevolent. Of course, this doesn't happen because none of them can pay their taxes (or their suppliers taxes) in Bitcoin. In fact no one using Bitcoin can - everyone eventually has to sell all their Bitcoins to someone to recover the currency they need to do that. But who's buying it then? There's a finite amount - if it stays in use it's worth more then you sold it for when you try to get it back - or, since everyone eventually has to sell it, it's worth less - and less again.

sparkie 8y ago
The electricity company has bills to pay. If some company can find a way to make unlimited energy without expending resources, then yes, they will become the richest entity in the world, regardless of the presence of Bitcoin or not. Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible. It will be flawed in many places fairly soon, because governments don't want to miss the boat either. But Bitcoin maximalists don't actually care about this government thing. They would rather it collapse in on itself so that they can instead spend their money with businesses which make much better use of it than politicians. For that reason, there is a demand for Bitcoin, and while the demand exists, people are willing to pay more to acquire it. At this point, they have to pay more because they're buying from a market with reduced liquidity, largely because existing hodlers would rather keep hold of it because they're pretty confident it will continue to appreciate in value over time. And in the current world, where the government sanctioned financial services (paypal, mastercard etc) are actively unpersoning people for having unorthodox political views, there is clearly a growing market for an alternative financial instrument which this cartel does not control.
- XorNot 8y ago
  > The electricity company has bills to pay. If some company can find a way to make unlimited energy without expending resources, then yes, they will become the richest entity in the world, regardless of the presence of Bitcoin or not. There is a finite amount of Bitcoin total by nature of the protocol. The electricity company is vital to Bitcoin being usable since it's a digital currency. The miners might be necessary too, but they need huge amounts of electricity - which if they had to pay in Bitcoin, means they are paying some portion of the dwindling number of Bitcoins to the electricity company. As is every Bitcoin user. And every bit of Bitcoin they get is worth slightly more after they get it then it was when it was paid, so their purchasing power is going up and up and up. You can't even found a new electricity company and try to compete on price, because beyond some point the original buyer can buy your new cheaper electricity without measurably reducing their spending power, and to capture the market they need to somehow not enrich you too much while doing it. And then of course, best case you just have 2 big electricity companies controlling all the wealth forever. Deflationary currencies are bad. > Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible. "Just in time" Bitcoin -> currency conversions do not count. They don't count because they depend on an exchange rate (and are provided by a private company in all examples). The government's tax office is not accepting Bitcoin - it's letting someone act as a payment provider but the payment provider is still paying them in the local currency (and taxes are being assessed in local currency, not Bitcoin). If the price of Bitcoin collapses, you'll owe more Bitcoins. If my local currency collapses, I'm still only taxed on the portion of my earnings in that currency. > But Bitcoin maximalists don't actually care about this government thing. However governments care a lot if you don't pay your taxes. And the utilities care a lot if you don't pay them.