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Bitcoin Has Zero Intrinsic Value. Some People Are OK with That
- miguelmota 6y agoIntrinsic value is completely subjective. I can't make anything physical out of the internet, does that mean the internet is worthless?
- quattrofan 6y agoSo does any fiat currency. This is such an old chestnut.
- miles 6y agoplock succinctly summarized[1] the "intrinsic value" of the dollar (at least to those responsible for paying U.S. taxes): "If we take 'intrinsic value' to mean 'having some use other than to simply trade away again to someone else, or being backed by something with intrinsic value', then the dollar has intrinsic value in that it is backed by freedom from being prosecuted by the US government for non-payment of taxes." Of course, not even gold can be said to possess "intrinsic value".[2] [1] https://news.ycombinator.com/item?id=7098034 https://news.ycombinator.com/item?id=7098034 [2] https://medium.com/@mormo_music/bitcoin-has-no-intrinsic-value-neither-does-gold-464584a505e6 https://medium.com/@mormo_music/bitcoin-has-no-intrinsic-val...
- cle 6y agoBased on that argument, I'm not sure why it's incorrect to characterize Bitcoin as having intrinsic value that is backed by the guarantee that you can provably transfer them directly to another party by a mere exchange of information. (Yes, there is a lot of BS that is currently involved in Bitcoin's market prices, but I don't think it's correct to characterize it as having zero intrinsic value.)
- _red 6y agoThere is no such thing as "intrinsic value" all value is subjective. A glass of water would be priced differently in the middle of the desert as opposed to next to the ocean.
- NateEag 6y agoGiven that the ocean is saltwater and thus not potable, I'd expect the glass of water to have roughly the same value by the ocean and in the desert. What defines the glass of water's price is how easy it is to get potable water where you are - in both your contexts, that's largely defined by whether there is civilization nearby. Either way, the glass of water still has intrinsic value - it will help humans and animals stay alive when drunk. Fiat currency has almost no such practical value (toilet paper and textile applications are two I've seen elsewhere in this thread, which is true for paper money but not cryptocurrencies). That's the point of the phrase "intrinsic value." It's not an _objective_ value, where the price is strictly-defined or inherent to the object. It's intrinsic, meaning that all participants in the economic system have a use other than trade for the item in question.
- davidivadavid 6y agoIt seems like whenever it's mentioned, the term "intrinsic value" just introduces confusion, since people need to redefine it differently from the common use of the word "intrinsic", as that would be incompatible with subjective value. What you're suggesting here sounds closer to "practical value", maybe?
- Brian_K_White 6y agoThat just means there is no specific amount of value. Water has intrinsic value, in the form of it's many direct utilities. You could trade the water for some other good or service, or you could drink the water. You can't do anything with a dollar except trade it to get something else that has some intrinsic value. The dollar is only a symbol for some value. It has no value directly itself.
- baybal2 6y agoYou can use it as a bathroom tissues in an emergency
- mey 6y agoDurable goods even. Example of people in Venezuelan making bags. https://m.youtube.com/watch?v=f3tpehKSJwA https://m.youtube.com/watch?v=f3tpehKSJwA
- cyode 6y agoWhile I didn't learn anything useful from the article, TIL the idiom "old chestnut". What an excellent expression!
- mattmcegg 6y agoNothing has intrinsic value.
- webwielder2 6y agoPeople want to possess physical objects or digital tokens or digital representations of physical objects so they can buy stuff or not have to worry about buying stuff in the future. What’s so complicated?
- asdev 6y agoso does gold. but gold supply grows annually, causing devaluation in any investments while Bitcoin's is fixed. typical FUD article.
- canadianfella 6y agoGold has value, WTF.
- JMTQp8lwXL 6y agoThe gold was always there in the ground. Nobody 'made gold' -- the Earth has a fixed quantity.
- deegles 6y agoUntil asteroid mining companies bring home a trillion kg gold nugget one day :)
- asdev 6y agopeople determined and chose that precious metals had value through trade. same way people are determining Bitcoin's value now. Okay if Earth has a fixed quantity, what is it? Yeah you don't know. What's Bitcoin's limit? 21 million, defined by code.
- fragsworth 6y agoYou also don't know how much gold is actually above ground. How much has been stolen, historically? We don't know. And where is it stashed? We don't know. Some powerful people could have hoarded 90% of the world's gold and we wouldn't even have the slightest clue. There are no records for this.
- Nevermark 6y agoPurified gold in usable form is "made". One ingredient is gold ore in the earth. Other ingredients are research, metallurgy, labor, etc.
- ffggvv 6y ago“this time” is always different until it’s not. can’t wait till it crashes to read the bag holders statements about fud
- Nevermark 6y agoMaybe put more thought into a more enlightening comment? Baring a really good thesis, I think simple views at this point (positive or negative) are uncreative and uninformed. I don't think it is as simple as "Bitcoin is worthless", "Bitcoin will be the the global reserve asset", "Bitcoin is digital gold", or "Bitcoin is digital cash". The simple summary of Bitcoin is not emerging quickly. And nobody has hit a ceiling on new ideas and use cases for the new properties that cryptocurrencies have relative to other assets. And it has already achieved acceptance as the global "standard" representing the new asset class it brought into being, both for supporters and detractors.
- galenderor 6y agoCrashes to 20k? Wow that would suck so much. Still 20x up
- 11thEarlOfMar 6y agoWhat percentage of Bitcoin transactions are used to purchase goods or services, in dollar value?
- JMTQp8lwXL 6y agoPaper Currency Has Zero Intrinsic Value. Some People Are OK with That.
- jfim 6y agoThe IRS would like to differ. If you have to pay taxes, they have to be paid in US dollars, not chickens or Bitcoins. As such, it has at the very least the value of being the sole currency that can be used to pay US taxes.
- hurril 6y agoThat is a misunderstanding of the term intrinsic on your part.
- googamooga 6y agoYou can pay taxes in Bitcoins here in Canton Zug, Switzerland.
- magoghm 6y agoThe IRS asking for taxes to be payed in dollars is one of the factors that gives value to those paper dollars, but it is not intrinsic to those pieces of paper it is an extrinsic factor.
- jfim 6y agoI'd argue that it is intrinsic, and to argue about that, we have to think about what it is that makes a US dollar a US dollar, and not anything else. It's clearly not the piece of paper, because I can get many pieces of paper at the store for much less than a dollar. It's not the ink either, since even if I were to get the same ink that's used to make US dollars, mine would be worthless. It's not the pattern of the ink on paper either, as even a photocopy of a bill is worthless. It's not the combination of the paper, ink, and pattern of the ink on paper either, as even if one were to were to pay their taxes with a facsimile of a real bill, they would get rejected. The intrinsic value of a US dollar comes from the fact that the US government is saying that these specific pieces of paper and metal are special. These special pieces of paper and coins are the only ones that they will accept for payment of taxes, and that's the intrinsic value of them.
- forty 6y agoMy understanding is that real money (let's say USD) have value because, thanks to loans/mortgages that are done in USD, you have a garantee that some people will always be really motivated to get some USD, to pay their loan/mortgage. Since those tends to last 20-30 years, that's good because in 20-30 years you know that your USD will have value to someone (to many people even) On the other hand, no one really need to get bitcoins. It would not be surprising than in 20-30 years, no one cares about it (and it is actually the most likely scenario IMO).
- rabidrat 6y agoThe real base reason fiat currency has value is because the government requires taxes to be paid in it, and they can use force to imprison you if don't pay your taxes. Everything else is a follow-on effect from that.
- billytetrud 6y agoI don't really buy that argument. Yes, taxes force some level of demand, but that doesn't ensure any particular value of a dollar. The value of a dollar could shrink to arbitrarily low values, taxes only prop up the value of the entire monetary base. The value of the dollar is a follow on effect of what amounts to basically brand recognition from the days when the dollar actually had a commodity backing.
- miguelmota 6y agoFiat money, by definition, has value because the government says so. It's backed by police military. Government can run the money printing machine whenever they please. You can work hard all your life placing your savings in a bank account but the purchasing power will be a lot less in the future because of inflation. Bitcoin is fixed supply and Ethereum could even be deflationary in the future.
- billytetrud 6y agoAn actual monetarily deflationary currency would be just as bad as a monetarily inflating currency because it would distort the market just as much.
- john_alan 6y agoZzzz. I have no Bitcoin as I value privacy. I use Monero. That said if you cannot see the value of a strongly secure, decentralised, self sovereign, permissionless money for the internet then you must live in a place where banking has always been adequate. Many don’t. So it has intrinsic value if it enables a use case not filled by other things. How is this not tacitly obvious.
- ctdonath 6y agoStamp collecting used to be a big thing, with people willing to spend substantial sums for rare stamps. This value only existed insofar as people had an interest in owning a rare stamp; today, few indeed really see monetary value in a small sticky paper from 1930’s Lithuania or depicting an airplane upside down due to a printing accident. The value existed only because buyer & seller agreed there was value. Ditto Bitcoin, but without the physical novelty. Bitcoin is useful as you say, but only insofar as owner & buyer decide to impute value on that conceptual medium, and don’t get bored and decide to use some other construct. If nobody is willing to buy your Bitcoin, it’s worthless - and an ethereal construct requiring a large network of supporting cooperators (blockchain management) can see such imputed value disappear real quick. ... which is demonstrated perfectly by the fact you use Monero, not Bitcoin.
- billytetrud 6y agoComparing bitcoin to stamps is silly. A rare stamp is valuable because of novelty and entertainment value basically, as you said. Neither of those things give bitcoin value, rather bitcoin gets it's value from it's properties that give it greater utility than alternatives in many situations, and it's network effects.
- ctdonath 6y agoGiven there are many alternatives to Bitcoin, and considering how many juggernaut technologies I've seen vanish with hardly a trace, I'll stick with the position that Bitcoin isn't inherently & durably valuable precisely because john_alan (posting above) doesn't use it. There's plenty of other products that do the same, perhaps better, and the only reason Bitcoin is in use now is because it isn't not used.
- 127 6y agoBeing resistant to debasement is good enough intrinsic value for me.
- TheBlight 6y agoI guess we could use dollars for paper mache if we stopped believing those have value.
- deleted 6y ago[deleted]
- debaserab2 6y agoSomeone on HN once said (sorry I forgot who): The only intrinsic value of Bitcoin is that it is an artifact of ritual sacrifice.
- luxuryballs 6y agoBut is it really any more or less intrinsic than gold? Gold can be used for jewelry and electronics, Bitcoin can be used for trustless transactions, and rapidly moving value across borders. Gold bullion represents the work it took to bring it out of the earth and refine it, Bitcoin represents the equipment and electricity it took to mine the next block. I at least can see that proof of work is closer to gold than proof of stake in this regard, you can quantify the value of obtaining the thing against the actual cost of obtaining it. However they do adjust the process to try and keep a steady rate, gold is of course something that mining more of varies greatly in terms of success based on the terrain and equipment and all that jazz.
- physicsguy 6y agoGold is also highly conductive and so can be sold on for things other than jewellery; it’s useful for various industrial applications.
- luxuryballs 6y agobingo that’s why I said jewelry and electronics, to give a sense of the breadth
- tom_mellior 6y ago> Gold can be used for jewelry And people will buy that jewelry because gold is fashionable. But if fashions shift, people might not want that gold anymore, tanking the "value". Doesn't sound very intrinsic to me. Compare to diamonds and their use in jewelry, which famously became popular and "valuable" only because De Beers found a good advertising company, not because people wanting diamond jewelry is somehow a universal human constant. > Gold bullion represents the work it took to bring it out of the earth and refine it That work justifies asking for a certain price. It doesn't guarantee that someone else will buy it off you at that price. In other words, that work doesn't give the gold value. > I at least can see that proof of work is closer to gold than proof of stake in this regard, you can quantify the value of obtaining the thing against the actual cost of obtaining it. You are arguing that gold that was mined less efficiently (thus at higher cost) is more valuable that gold that was mined more efficiently. This is not a convincing argument.
- hoverbrain 6y agoThe hourly price swings of Bitcoin is far too erratic to use it for mom and pop retailers to price and sell basic goods, or say, a Tesla. The price of an item has to be set in a stable currency, like the good old dollar, and only at the moment of purchase can the conversion between bitcoin and USD can be made. In this sense Bitcoin can never be a real currency for day to day staples - it takes 10 minutes to complete a blockchain transaction, and prices have to be quoted in something else. Of course middlemen who assume the price risk can offer immediate conversion, but at a high cost per transaction.
- miguelmota 6y agoBitcoin is scarce asset and it's more like digital gold and a store of value, rather than a currency. People hold gold to maintain value and don't go to retailers to pay for things in gold. It's the same idea with Bitcoin. However people can Bitcoin across the world pretty instantly which you can't do with physical gold. There are better cryptocurrencies for cheaper and faster payments that are more inline with traditional currencies. For example, VISA is launching credit card that will allow you to spend USDC cryptocurrency which is a non-volatile stable coin.
- twice_benny 6y agoPeople in general don't hold gold though. Tresuries hold gold, but everyday people are not very interested in preserving the value of their 200k in savings. They want a decent yield of at least 3%/annum.
- miguelmota 6y ago2-3% yield is the minimum needed just to keep up with inflation. Right now anyone can convert their USD to a stable-coin and get a safe yield of 8-12% with automatic lending protocols [0]. Gold is physical material people need to keep safe and converting back and forth from fiat is not something that's instant. If it was more convenient then people would hold it. Bitcoin solves this. https://defirate.com/lend/ https://defirate.com/lend/
- 1vuio0pswjnm7 6y agoPay tech workers in Bitcoin instead of government-backed currency. Are some people OK with that.
- galenderor 6y agoI am getting tired of listening to 10 year old FUD. Its literally pointless to keep mentioning that Bitcoin has zero intrinsic value. By now everyone who hasnt moved on from this deserves whats coming next. Value is subjective and Bitcoin is extremely valuable to some people. If thats not your case, well HFSP-
- fragsworth 6y agoIt's the only asset in the world that you can prove lots of important things, from basic first principles: 1) how much of it exists and will exist, 2) that you actually own what you think you own, and 3) nobody can take it from you These things seem incredibly high value to me, for financial assets, creating the opposite of FUD, but it rarely gets discussed in this context
- tom_mellior 6y agoThe "only" asset in the world with these properties, except for countless clones.
- injustice 6y agoH