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Bitcoin and other cryptocurrencies have ~zero inherent value, due to their non-speculation use-cases like payment being very limited or still early development

by dtech 5y ago

Bitcoin and other cryptocurrencies have ~zero inherent value, due to their non-speculation use-cases like payment being very limited or still early development (smart contracts). Unless you count BTC in black market I guess. USD has inherent value, it's the only currency where you can pay taxes in, and if you want to do business with government or government employees - who are ever only paid in USD - you must accept USD.

sschueller 5y ago
But it's not a Ponzi scheme. It's a currency with small adoption like that of a third world nation.
- dtech 5y ago
  I'd say Ponzi-scheme is a justified classification, since returns are funded by new entrants or additional purchases, instead of the asset producing value itself like a company stock or a house. Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.
  - sschueller 5y ago
    You could say the same for overvalued stock like TSLA but I don't think anyone would call Tesla a Ponzi scheme. Most of it's value is speculation not actual profits or sales.
    - acdha 5y ago
      > Most of it's value is speculation not actual profits or sales. “Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation. A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.
- lupire 5y ago
  It's not a currency for anyone who is holding it long term, by definition.
  - tim333 5y ago
    Does that also apply to anyone who has money in the bank long term?
Fnoord 5y ago
> USD has inherent value, it's the only currency where you can pay taxes in I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.
samarama 5y ago
Bitcoin’s inherent value is 1. Immutability 2. Limited supply 3. Censorship-resistance 4. Independence of governments, nations, banks, institutions, corporations 5. Accessibility You can also pay your taxes in crypto in many countries. The dollar’s inherent value is very weak and not really tangible. It’s 2022 and people still don’t get that.
- danaris 5y ago
  That's not "value". Those are "attributes". A person may value those attributes or not, but they do not have inherent monetary value. The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business. Bitcoin is backed by nothing but other people holding Bitcoin. As for the attributes you list: 1. Immutability is a double-edged sword. There are legitimate situations where you want mutability. 2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it. 3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely. 5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.
- psyc 5y ago
  Bitcoin supply is not effectively limited until a satoshi is no longer adequate to express the price of a good. The 'supply' of Bitcoin doesn't only increase with mining, it effectively also rises with Bitcoin's price. Say I need to order one pizza per week. In late 2011, one BTC lasts me one week. At today's price, the same coin lasts me more than 50 years. There's no need to bid up the price of a whole coin in a (hypothetical) world where whole coins are scarce. You just buy less of it, because nothing is actually denominated in BTC - that would be unsustainable. Everything is still denominated in fiat.
- CabSauce 5y ago
  All of those things are true (to varying degrees) of all of the thousands of crypto currencies. That's inherently the problem. As soon as another one comes along, the *value* of the earlier iterations gets reduced. There's no limit on the creation of new crypto currencies.
ulzeraj 5y ago
There is no such thing as inherent value. Value is subjected to the individual who makes decisions on the margin.
- Swenrekcah 5y ago
  Maybe there isn’t inherent value in currencies, which crypto is not. In assets there is can of course be inherent value (food, a sturdy house, land, etc.).
  - ulzeraj 5y ago
    Its more complicated than that. If you already have some maybe having more of that specific thing is more a hassle than a benefit. Or maybe you don't value that thing at all. What value has a premium steak to a vegan? If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice. Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?
    - Swenrekcah 5y ago
      Inherent value is real. Market value of the thing is dependent on a million things but an axe has inherent value in the same way a feeble banknote hasn’t. The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being. Your secondary point is about the law of diminishing returns, it’s a non-sequitur. Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value. The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.
DarylZero 5y ago
By the same logic though, many internet drug dealers only accept BTC. "Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.
ch4s3 5y ago
A Ponzi scheme is a specific type of scam where new investors are lure in with the promise of great returns and portions of their deposits are used by the scammer to pay off early investors who ask to realize some of their returns. The central scammer pockets the difference and eventually runs off with all of the deposits. Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.
sunshinerag 5y ago
“ who are ever only paid in USD - you must accept USD” Are you saying it’s inherent value comes from it being a protection racket.?
UnpossibleJim 5y ago
I'm curious about one thing as far as this statement goes... it's a little bit of a nonsequiter though. When/if the US starts to tax crypto and crypto gains, does that show that they have more of a legitimate value?

by dtech 5y ago

sschueller 5y ago

But it's not a Ponzi scheme. It's a currency with small adoption like that of a third world nation.

dtech 5y ago
I'd say Ponzi-scheme is a justified classification, since returns are funded by new entrants or additional purchases, instead of the asset producing value itself like a company stock or a house. Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.
- sschueller 5y ago
  You could say the same for overvalued stock like TSLA but I don't think anyone would call Tesla a Ponzi scheme. Most of it's value is speculation not actual profits or sales.
  - acdha 5y ago
    > Most of it's value is speculation not actual profits or sales. “Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation. A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.
lupire 5y ago
It's not a currency for anyone who is holding it long term, by definition.
- tim333 5y ago
  Does that also apply to anyone who has money in the bank long term?

Fnoord 5y ago

> USD has inherent value, it's the only currency where you can pay taxes in I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.

samarama 5y ago

Bitcoin’s inherent value is 1. Immutability 2. Limited supply 3. Censorship-resistance 4. Independence of governments, nations, banks, institutions, corporations 5. Accessibility You can also pay your taxes in crypto in many countries. The dollar’s inherent value is very weak and not really tangible. It’s 2022 and people still don’t get that.

danaris 5y ago
That's not "value". Those are "attributes". A person may value those attributes or not, but they do not have inherent monetary value. The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business. Bitcoin is backed by nothing but other people holding Bitcoin. As for the attributes you list: 1. Immutability is a double-edged sword. There are legitimate situations where you want mutability. 2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it. 3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely. 5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.
psyc 5y ago
Bitcoin supply is not effectively limited until a satoshi is no longer adequate to express the price of a good. The 'supply' of Bitcoin doesn't only increase with mining, it effectively also rises with Bitcoin's price. Say I need to order one pizza per week. In late 2011, one BTC lasts me one week. At today's price, the same coin lasts me more than 50 years. There's no need to bid up the price of a whole coin in a (hypothetical) world where whole coins are scarce. You just buy less of it, because nothing is actually denominated in BTC - that would be unsustainable. Everything is still denominated in fiat.
CabSauce 5y ago
All of those things are true (to varying degrees) of all of the thousands of crypto currencies. That's inherently the problem. As soon as another one comes along, the *value* of the earlier iterations gets reduced. There's no limit on the creation of new crypto currencies.

ulzeraj 5y ago

There is no such thing as inherent value. Value is subjected to the individual who makes decisions on the margin.

Swenrekcah 5y ago
Maybe there isn’t inherent value in currencies, which crypto is not. In assets there is can of course be inherent value (food, a sturdy house, land, etc.).
- ulzeraj 5y ago
  Its more complicated than that. If you already have some maybe having more of that specific thing is more a hassle than a benefit. Or maybe you don't value that thing at all. What value has a premium steak to a vegan? If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice. Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?
  - Swenrekcah 5y ago
    Inherent value is real. Market value of the thing is dependent on a million things but an axe has inherent value in the same way a feeble banknote hasn’t. The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being. Your secondary point is about the law of diminishing returns, it’s a non-sequitur. Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value. The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.

DarylZero 5y ago

By the same logic though, many internet drug dealers only accept BTC. "Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.

ch4s3 5y ago

A Ponzi scheme is a specific type of scam where new investors are lure in with the promise of great returns and portions of their deposits are used by the scammer to pay off early investors who ask to realize some of their returns. The central scammer pockets the difference and eventually runs off with all of the deposits. Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.

sunshinerag 5y ago

“ who are ever only paid in USD - you must accept USD” Are you saying it’s inherent value comes from it being a protection racket.?

UnpossibleJim 5y ago

I'm curious about one thing as far as this statement goes... it's a little bit of a nonsequiter though. When/if the US starts to tax crypto and crypto gains, does that show that they have more of a legitimate value?