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Call me old fashioned but I feel like bitcoin is similar to fiat currencies simply because it's not backed by anything. It has invented scarcity. If I just crea

Call me old fashioned but I feel like bitcoin is similar to fiat currencies simply because it's not backed by anything. It has invented scarcity. If I just created giraffe coin and there were only 5 coins it doesn't mean it has any value. Would someone please explain why on earth I want to own bitcoin? I really don't understand the bull case for it.

iso1210 6y ago
The US Dollar is backed by 20 aircraft carriers, thousands of nuclear weapons, 350 million Americans who think they have a manifest destiny, and a government with a long history of invading countries that threaten the dollar. What's bitcoin backed by?
- the_giraffe 6y ago
  CNBC and Grayscale Bitcoin Trust
- hackernudes 6y ago
  Source code and miners.
- creepto 6y ago
  Bitcoin is backed by the printer called Tether.
- dmtroyer 6y ago
  carbon emissions.
RyanShook 6y ago
Bitcoin is valuable as an investment in the same way that gold is valuable. It is scarce and the benefit it currently has over gold is it is completely portable and can be instantly be used as a means of exchange if necessary. Bitcoin has very little value as a currency.
rcoveson 6y ago
You don’t have to want it, other people want it. You want to have a pile of lightweight, secure doodads that other people want, because that’s easier to exchange than terminal wants like cars and sheep. What’s really crazy is the only reason other people want it is this same reason; it’s circular. It takes coordination to bootstrap, but once it’s set up it can be stable. Like those circles of people all sitting on each-others laps.
- the_giraffe 6y ago
  Yeah the greater fool theory doesn't sound too appealing to me.
  - rcoveson 6y ago
    It's not the "greater fool" theory. It's more like language. A new word doesn't have to have a real connection to its meaning. The word "cat" isn't structured like a cat, and when spoken aloud doesn't sound like one either. But we still like to be able to refer to cats without pointing, so we agree on something inherently meaningless and tie to to that. Fiat currency is the same way. Rather than point a giant network of contracts together in order to create some monster transaction that satisfies a few hundred people evenly, we just agree to respect the unique-but-valueless papers produced by the crazy guy who will imprison anybody who tries to produce those same papers. It didn't have to be these papers; it didn't have to be bitcoin. It just had to be something that had the necessary properties: unique, scarce, lightweight, secure, and, most importantly, used by as many other people as possible.
castlecrasher2 6y ago
I'm as skeptical as you are but the recent article by Ray Dalio explained well its value, which is still rather unconvincing to me. Still, I liken it to Monopoly money a group decided was worth actual money, obfuscated by technology, distributed systems, and other buzzwords.
yrral 6y ago
The first question to ask is what is money? Money is just an efficient means of transferring value between strangers and storing value over time (second point could be debated, since the value of fiat currencies have almost always degraded over time due to inflation). Why do we give USD value? Because most the population trusts the US government to keep the value of USD stable and we know it is widely used and accepted. What has happened recently? Most fiat currency supplies have ballooned tremendously. This has undermined the collective view of the storing value over time argument. Bitcoin adoption has increased, which means more and more people recognize it as money and that it has value. Also since the supply is capped, it becomes more apparent that it will be a better store of value than USD. If you have excess USD, why would you not want at least some exposure to bitcoin over USD?

iso1210 6y ago

The US Dollar is backed by 20 aircraft carriers, thousands of nuclear weapons, 350 million Americans who think they have a manifest destiny, and a government with a long history of invading countries that threaten the dollar. What's bitcoin backed by?

the_giraffe 6y ago
CNBC and Grayscale Bitcoin Trust
hackernudes 6y ago
Source code and miners.
creepto 6y ago
Bitcoin is backed by the printer called Tether.
dmtroyer 6y ago
carbon emissions.

RyanShook 6y ago

Bitcoin is valuable as an investment in the same way that gold is valuable. It is scarce and the benefit it currently has over gold is it is completely portable and can be instantly be used as a means of exchange if necessary. Bitcoin has very little value as a currency.

rcoveson 6y ago

You don’t have to want it, other people want it. You want to have a pile of lightweight, secure doodads that other people want, because that’s easier to exchange than terminal wants like cars and sheep. What’s really crazy is the only reason other people want it is this same reason; it’s circular. It takes coordination to bootstrap, but once it’s set up it can be stable. Like those circles of people all sitting on each-others laps.

the_giraffe 6y ago
Yeah the greater fool theory doesn't sound too appealing to me.
- rcoveson 6y ago
  It's not the "greater fool" theory. It's more like language. A new word doesn't have to have a real connection to its meaning. The word "cat" isn't structured like a cat, and when spoken aloud doesn't sound like one either. But we still like to be able to refer to cats without pointing, so we agree on something inherently meaningless and tie to to that. Fiat currency is the same way. Rather than point a giant network of contracts together in order to create some monster transaction that satisfies a few hundred people evenly, we just agree to respect the unique-but-valueless papers produced by the crazy guy who will imprison anybody who tries to produce those same papers. It didn't have to be these papers; it didn't have to be bitcoin. It just had to be something that had the necessary properties: unique, scarce, lightweight, secure, and, most importantly, used by as many other people as possible.

castlecrasher2 6y ago

I'm as skeptical as you are but the recent article by Ray Dalio explained well its value, which is still rather unconvincing to me. Still, I liken it to Monopoly money a group decided was worth actual money, obfuscated by technology, distributed systems, and other buzzwords.

yrral 6y ago

The first question to ask is what is money? Money is just an efficient means of transferring value between strangers and storing value over time (second point could be debated, since the value of fiat currencies have almost always degraded over time due to inflation). Why do we give USD value? Because most the population trusts the US government to keep the value of USD stable and we know it is widely used and accepted. What has happened recently? Most fiat currency supplies have ballooned tremendously. This has undermined the collective view of the storing value over time argument. Bitcoin adoption has increased, which means more and more people recognize it as money and that it has value. Also since the supply is capped, it becomes more apparent that it will be a better store of value than USD. If you have excess USD, why would you not want at least some exposure to bitcoin over USD?