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Not one word here about why BTC should be worth anything at all. Who cares if someone spent time and electricity to mine it? The USD is, along with every other

Not one word here about why BTC should be worth anything at all. Who cares if someone spent time and electricity to mine it? The USD is, along with every other major, government-backed currency, already an almost 100% digital currency. I don’t see any advantage there. In fact, BTC has the disadvantage of no major government backing it. If nobody is required to accept it, and I can’t do anything with it otherwise, what good is it?

sedeki 7y ago
What exactly does it mean when people say that a currency is backed by a government? ”Backed” to me implies, e.g., redeemable for gold which is clearly not the case for the US dollar. Is it that the government issue bonds denominated in that currency? But that has nothing to do with the money supply per se...? Please explain.
- Pinckney 7y ago
  The US government accepts payment for taxes in USD. Even if an American wants nothing to do with USD, and conducts all their exchanges through bartering, they will need to acquire some at some point in order to make tax payments. The value of USD can't fall to 0 as long as the federal government retains the ability to impose taxes.
  - Udik 7y ago
    That sounds like a strange argument. Nobody can pay their taxes in gold, still gold has a value, right? And on the other hand, the value of the USD can fall to practically zero, as it happened to many other currencies before, despite the governments of the respective countries imposing taxes in those currencies. Bitcoins are, of course, nothing. But it's a nothing that is pretty guaranteed to stay, to be in rigidly limited supply, and that is easily exchangeable. People give it a value that depends on their expectations of other people's willingness to buy them. Would you buy 10 bitcoins from me at $1000 each? I bet you would without hesitation. We're talking of giving a $1k value to something that is useless and completely immaterial, yet you just know it's an excellent deal.
    - pmiller2 7y ago
      Gold has value because it’s useful, among other things. That base level of value is why people started making coins out of it in the first place. It’s properties as a physical metal make it easy to store, transport, and protect, all of which are good properties to have as a currency.
      - mopsi 7y ago
        Industrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global stockpiles of gold are well known, annual production is small and predictable. This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most of its value almost overnight if government turns on printing presses or fucks up in some other way (see Turkish lira or Venezuelan bolivar). Cryptocurrencies mimick the same properties of gold. Their "base value" comes from the speed/ease of transactions and other useful features (eg cannot be confiscated). Their supply is algorithmically limited and well-known in advance.
        pmiller2 7y ago
        Industrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it. I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation. > ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/us-house-to-silver-ratio-us-home-to-gold-ratio/ https://www.jmbullion.com/investing-guide/pricing-payments/u... Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-has-seized-nearly-200000-bitcoins-to-date-global-confiscations-are-up-to-453000/ https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...
  - mopsi 7y ago
    So do cryptocurrencies acquire their value through market demand. For example, XRP is the cheapest and fastest way of sending money between the EU and China. Standard wire payment would not arrive before Monday the earliest, but XRP is there in seconds for a fraction of a cent. In military, even a pack of cigarettes functions well as a currency. It does not need to be government-backed. It needs some kind of useful property to ensure demand.
- pmiller2 7y ago
  It means it’s legal tender for all debts, public and private.
  - sedeki 7y ago
    The Zimbabwe government forced everyone to use their currency (Zimbabwe dollar, up until 2008 iirc, pretty sure they still have problems today...). Of course forcing everyone to use this currency created artificial demand for it. However, I don't see why adding "artificial demand" is an argument against bitcoin. EDIT: But sure, if government-backed means they force people to accept the currency, then it will have value. I don't see this as a good selling point though. Not trying to be sarcastic.
    - pmiller2 7y ago
      Having value isn’t a selling point? You’re digging yourself into a hole here.
      - sedeki 7y ago
        I was referring to government force. "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
        pmiller2 7y ago
        You said it had value. That’s literally what you wrote. The reason is irrelevant. Value is value. If you could think of a way to show BTC has value, I’d accept that as a selling point of BTC.
        sedeki 7y ago
        By that reasoning the Zimbabwe dollar had value, because it was ”””backed by the government””” according to your own definition! Of course it did not! Money or money supply should not be determined by government, it should be a result of market mechanisms!
- ProblemFactory 7y ago
  Backed by a government means that it's backed by the ability of a government to tax work and production happening in the country. Every year the US government collects about 25% of all economic activity as taxes payable only in USD. Every person and business in the country must sell on average 25% of their productive output for USD, and you can buy all those things with USD.
- mdorazio 7y ago
  In addition to the other responses here, the US government (through FDIC) guarantees that you won't lose your money in a bank account if something bad happens to the bank. That's a lot more important than most people give credit for.
  - icebraining 7y ago
    That gives value to the banks, not to the currency. I could create my own currency and give you the exact same guarantees as the FDIC (since I can always print more), yet that wouldn't give it value, because all you get is more units of the same thing. If you disagree, I have some $IBs to sell you, and an insured account to store them!
    - pmiller2 7y ago
      No, it doesn’t give value to the banks. Banks only have value because you can use them to store and borrow money which has value. Your theoretical bank has no value because your theoretical currency does not, either. FDIC insurance reinforces the value that banks (and the currency one can access through them) already have.
- simonsarris 7y ago
  > What exactly does it mean when people say that a currency is backed by a government? I think the de facto meaning of backed, despite what people say about gold/silver/etc is actually this: American dollars have value because the US Government taxes things, like land, and if you do not pay those taxes they will send you mean letters (trust me) before resorting to other means (trust Al Capone). You pay these taxes in US dollars. You just having dollars does not make them valuable. And dollars are not valuable because they are backed by gold or silver or sea shells. What makes dollars valuable is that the government wants them back. From something I wrote a while ago about why being "backed" is important: https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f779309a718 https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f77930...
Lordarminius 7y ago
Wait until there is a crisis and see how 'backed' your currency is.
- ulzeraj 7y ago
  Its going to happen soon. The signs are all around.
Toine 7y ago
I agree, right now Bitcoin and other cryptocurrencies are nothing more than pure speculative assets. Until they're completely decoupled from other currencies and are used as a real national/international currency, I'll stand here wondering what the hell is going on with all of this.
- icebraining 7y ago
  What do you mean by "decoupled from other currencies"?
nikanj 7y ago
It's proven to be very, very useful for anonymous blackmail à la Cryptolocker. Also quite useful for buying all sorts of contraband, from guns to drugs.
- tim333 7y ago
  Also as Warren Buffett put it: "It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything." But it's a good gambling device and people like to gamble. I both think it's kind of nuts and hold a few bitcoins.
  - Lordarminius 7y ago
    Warren Buffet is biased and ignorant. I'd give an arm to hear what he said about Google, FB and other dotcoms when he passed on investing in the 2000's
    - tim333 7y ago
      He's always used to say he didn't understand tech and was sticking to things he understood. Which has served him well though he now is invested in Apple and regrets missing Amazon.
deleted 7y ago
[deleted]
sanbor 7y ago
It doesn't have to be backed by a government to have value, just as gold or diamonds have value and are not backed by governments.
icebraining 7y ago
> Not one word here about why BTC should be worth anything at all. There's no "should". Moral theories about the propriety of the value of currencies are not material. Bitcoin has value because people are willing to trade valuable stuff for it
- pmiller2 7y ago
  “Should” is not a moral judgement. Substitute the word “logically,” if you want. What can you buy with BTC besides drugs and the occasional coffee at a Silicon Valley coffee shop? How does that compare to what you can buy with USD? Call me when you can buy a house with BTC reliably.
  - icebraining 7y ago
    Are you saying nothing has value unless it can be directly and reliably used to buy houses? If you're saying "BTC is less useful than some other currencies", then I don't disagree, but then you should have said that in the first place, rather than motte-and-baileying.
    - pmiller2 7y ago
      Nice straw man. I’m saying it’s value is equal to its utility for facilitating transactions, and there’s nothing worthwhile you can buy with it. If I can’t buy a pizza, a bus ticket, a TV, a house, a car, a beer, or dinner with it, then what good is it?

sedeki 7y ago

What exactly does it mean when people say that a currency is backed by a government? ”Backed” to me implies, e.g., redeemable for gold which is clearly not the case for the US dollar. Is it that the government issue bonds denominated in that currency? But that has nothing to do with the money supply per se...? Please explain.

Pinckney 7y ago
The US government accepts payment for taxes in USD. Even if an American wants nothing to do with USD, and conducts all their exchanges through bartering, they will need to acquire some at some point in order to make tax payments. The value of USD can't fall to 0 as long as the federal government retains the ability to impose taxes.
- Udik 7y ago
  That sounds like a strange argument. Nobody can pay their taxes in gold, still gold has a value, right? And on the other hand, the value of the USD can fall to practically zero, as it happened to many other currencies before, despite the governments of the respective countries imposing taxes in those currencies. Bitcoins are, of course, nothing. But it's a nothing that is pretty guaranteed to stay, to be in rigidly limited supply, and that is easily exchangeable. People give it a value that depends on their expectations of other people's willingness to buy them. Would you buy 10 bitcoins from me at $1000 each? I bet you would without hesitation. We're talking of giving a $1k value to something that is useless and completely immaterial, yet you just know it's an excellent deal.
  - pmiller2 7y ago
    Gold has value because it’s useful, among other things. That base level of value is why people started making coins out of it in the first place. It’s properties as a physical metal make it easy to store, transport, and protect, all of which are good properties to have as a currency.
    - mopsi 7y ago
      Industrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global stockpiles of gold are well known, annual production is small and predictable. This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most of its value almost overnight if government turns on printing presses or fucks up in some other way (see Turkish lira or Venezuelan bolivar). Cryptocurrencies mimick the same properties of gold. Their "base value" comes from the speed/ease of transactions and other useful features (eg cannot be confiscated). Their supply is algorithmically limited and well-known in advance.
      - pmiller2 7y ago
        Industrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it. I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation. > ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/us-house-to-silver-ratio-us-home-to-gold-ratio/ https://www.jmbullion.com/investing-guide/pricing-payments/u... Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-has-seized-nearly-200000-bitcoins-to-date-global-confiscations-are-up-to-453000/ https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...
- mopsi 7y ago
  So do cryptocurrencies acquire their value through market demand. For example, XRP is the cheapest and fastest way of sending money between the EU and China. Standard wire payment would not arrive before Monday the earliest, but XRP is there in seconds for a fraction of a cent. In military, even a pack of cigarettes functions well as a currency. It does not need to be government-backed. It needs some kind of useful property to ensure demand.
pmiller2 7y ago
It means it’s legal tender for all debts, public and private.
- sedeki 7y ago
  The Zimbabwe government forced everyone to use their currency (Zimbabwe dollar, up until 2008 iirc, pretty sure they still have problems today...). Of course forcing everyone to use this currency created artificial demand for it. However, I don't see why adding "artificial demand" is an argument against bitcoin. EDIT: But sure, if government-backed means they force people to accept the currency, then it will have value. I don't see this as a good selling point though. Not trying to be sarcastic.
  - pmiller2 7y ago
    Having value isn’t a selling point? You’re digging yourself into a hole here.
    - sedeki 7y ago
      I was referring to government force. "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
      - pmiller2 7y ago
        You said it had value. That’s literally what you wrote. The reason is irrelevant. Value is value. If you could think of a way to show BTC has value, I’d accept that as a selling point of BTC.
        sedeki 7y ago
        By that reasoning the Zimbabwe dollar had value, because it was ”””backed by the government””” according to your own definition! Of course it did not! Money or money supply should not be determined by government, it should be a result of market mechanisms!
ProblemFactory 7y ago
Backed by a government means that it's backed by the ability of a government to tax work and production happening in the country. Every year the US government collects about 25% of all economic activity as taxes payable only in USD. Every person and business in the country must sell on average 25% of their productive output for USD, and you can buy all those things with USD.
mdorazio 7y ago
In addition to the other responses here, the US government (through FDIC) guarantees that you won't lose your money in a bank account if something bad happens to the bank. That's a lot more important than most people give credit for.
- icebraining 7y ago
  That gives value to the banks, not to the currency. I could create my own currency and give you the exact same guarantees as the FDIC (since I can always print more), yet that wouldn't give it value, because all you get is more units of the same thing. If you disagree, I have some $IBs to sell you, and an insured account to store them!
  - pmiller2 7y ago
    No, it doesn’t give value to the banks. Banks only have value because you can use them to store and borrow money which has value. Your theoretical bank has no value because your theoretical currency does not, either. FDIC insurance reinforces the value that banks (and the currency one can access through them) already have.
simonsarris 7y ago
> What exactly does it mean when people say that a currency is backed by a government? I think the de facto meaning of backed, despite what people say about gold/silver/etc is actually this: American dollars have value because the US Government taxes things, like land, and if you do not pay those taxes they will send you mean letters (trust me) before resorting to other means (trust Al Capone). You pay these taxes in US dollars. You just having dollars does not make them valuable. And dollars are not valuable because they are backed by gold or silver or sea shells. What makes dollars valuable is that the government wants them back. From something I wrote a while ago about why being "backed" is important: https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f779309a718 https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f77930...

Lordarminius 7y ago

Wait until there is a crisis and see how 'backed' your currency is.

ulzeraj 7y ago
Its going to happen soon. The signs are all around.

Toine 7y ago

I agree, right now Bitcoin and other cryptocurrencies are nothing more than pure speculative assets. Until they're completely decoupled from other currencies and are used as a real national/international currency, I'll stand here wondering what the hell is going on with all of this.

icebraining 7y ago
What do you mean by "decoupled from other currencies"?

nikanj 7y ago

It's proven to be very, very useful for anonymous blackmail à la Cryptolocker. Also quite useful for buying all sorts of contraband, from guns to drugs.

tim333 7y ago
Also as Warren Buffett put it: "It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything." But it's a good gambling device and people like to gamble. I both think it's kind of nuts and hold a few bitcoins.
- Lordarminius 7y ago
  Warren Buffet is biased and ignorant. I'd give an arm to hear what he said about Google, FB and other dotcoms when he passed on investing in the 2000's
  - tim333 7y ago
    He's always used to say he didn't understand tech and was sticking to things he understood. Which has served him well though he now is invested in Apple and regrets missing Amazon.

deleted 7y ago

[deleted]

sanbor 7y ago

It doesn't have to be backed by a government to have value, just as gold or diamonds have value and are not backed by governments.

icebraining 7y ago

> Not one word here about why BTC should be worth anything at all. There's no "should". Moral theories about the propriety of the value of currencies are not material. Bitcoin has value because people are willing to trade valuable stuff for it

pmiller2 7y ago
“Should” is not a moral judgement. Substitute the word “logically,” if you want. What can you buy with BTC besides drugs and the occasional coffee at a Silicon Valley coffee shop? How does that compare to what you can buy with USD? Call me when you can buy a house with BTC reliably.
- icebraining 7y ago
  Are you saying nothing has value unless it can be directly and reliably used to buy houses? If you're saying "BTC is less useful than some other currencies", then I don't disagree, but then you should have said that in the first place, rather than motte-and-baileying.
  - pmiller2 7y ago
    Nice straw man. I’m saying it’s value is equal to its utility for facilitating transactions, and there’s nothing worthwhile you can buy with it. If I can’t buy a pizza, a bus ticket, a TV, a house, a car, a beer, or dinner with it, then what good is it?