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Its real value is being a medium of exchange. For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN. There are many, many w

by steve19 14y ago

Its real value is being a medium of exchange. For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN. There are many, many ways people who wish to deal in bitcoins can find a way to convert them into USD. Even if that means buying prooducts from overseas using bitcoin, importing them, then selling the products on ebay for USD.

betterunix 14y ago
"Its real value is being a medium of exchange" Value is the result of supply and demand. What is the demand for a medium of exchange? Why not just use monopoly money, or acorns, or lumps of clay? For that matter, why do US citizens not use CAN instead of USD? What drives the citizens of a country to use the currency issued or authorized by that country's government? "For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN." Yeah, and what do you think the VPN provider is paying its bills with? When the government says, "Pay us the tax on your energy use," what does the VPN provider reply with? "Here are some Bitcoins?" Unless the government is accepting Bitcoin for tax payments -- which would effectively turn Bitcoin into a fiat currency -- your service provider is either going to need a way to convert their Bitcoin currency into some other currency, or they will require that you pay them with something other than Bitcoin.
- retrogradeorbit 14y ago
  I think bitcoins real value to people is it's a P2P solution to the double spend problem. "monopoly money, or acorns, or lumps of clay" can be created almost indefinitely. Of course BTC can too, but must be done by forming consensus amongst the majority of the P2P systems. Lumps of clay you don't need consensus. Just more clay. "What drives the citizens of a country to use the currency issued or authorized by that country's government?" Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law.
  - betterunix 14y ago
    ""monopoly money, or acorns, or lumps of clay" can be created almost indefinitely" Make an acorn for yourself in that case. Acorns are pretty similar to Bitcoin in that regard: you need Oak trees to produce acorns, just like you need CPU time to produce Bitcoin. "Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law." Not all countries have such laws. There is, however, another important category of law that gives fiat currencies their value: taxes. The fact that law-abiding citizens must pay their government periodically creates a large demand for whatever the government accepts as a tax payment. Typically, governments accept a currency they issue, or else they authorize the use of some other currency.
- argonaut 14y ago
  1. Your economics are wrong. Value is not the market price. Value is subjective; the value of something to a given person is the maximum price the person is willing to pay. Value is not the same for each person. 2. BTC's unique feature is the instantaneity and anonymity of transactions.
  - betterunix 14y ago
    "Value is not the market price" Who said it was? "the value of something to a given person is the maximum price the person is willing to pay" Which is dependent on the supply and demand of that "something." "BTC's unique feature is the instantaneity and anonymity of transactions." "Instant" in the "10-30 minutes" sense, and anonymous in the "you can be tracked" sense...
    - endoself 14y ago
      The maximum price that people are willing to pay isn't "dependent on" demand, it is demand. In particular, it has nothing to do with supply; if something is available for much less than the maximum price someone is willing to pay, then that just means that they get it for a lot less, it doesn't change how much they are willing to pay in principle. (There are a few subtleties here, such as that willingness to pay should be measured in terms of opportunity costs rather than dollars, but all this stuff can be found in an economics textbook.)
      - betterunix 14y ago
        "The maximum price that people are willing to pay isn't "dependent on" demand, it is demand. In particular, it has nothing to do with supply" What the is maximum you willing to pay for breathable air? How much would you be willing to pay if you could not find free air everywhere you went? Demand is not "the maximum price people are willing to pay," it is "the willingness and ability to pay a given price."
    - argonaut 14y ago
      Endoself is correct. That's the problem with HN. It is clear when someone's arguments have no foundation in modern economic theory and practice, yet these arguments get thrown around with a false sense of certitude. I cited the textbook definition for "value," and yet you argue that it's dependent on supply and demand, which ignored the fact that the definition of value that I cited is precisely what makes up demand. Person A is willing to pay $200 for a watch. Yet the market price of that watch is $20. Just because that person saved $180 does not mean that value of the watch to person A suddenly and magically fell by $180. Clearly this person found $200 worth of utility in that watch, or else s/he wouldn't have been willing to pay for it at that price. > "Instant" in the "10-30 minutes" sense, and anonymous in the "you can be tracked" sense... Now your arguments are focusing on semantics. EDITS: clarity and less snark.
- white_devil 14y ago
  > What is the demand for a medium of exchange? People accept a medium of exchange in exchange for their goods and services because they trust that they can later exchange it for something they want. The "demand" for a medium of exchange lies in direct bartering being inconvenient, because whoever wants something you have, might not have something you want, right then and there. In this case, instead of a trade not happening, you can just accept a medium of exchange, and use it later to get what you want. > Why not just use monopoly money, or acorns, or lumps of clay? If people knew they could exchange lumps of clay for goods and services, they would accept them as payment for goods and services. > What drives the citizens of a country to use the currency issued or authorized by that country's government? That very same government?
- danmaz74 14y ago
  > Unless the government is accepting Bitcoin for tax payments -- which would effectively turn Bitcoin into a fiat currency It would turn Bitcoin into legal tender. Legal tender can be fiat or not (for a very long time, gold was the legal tender).
kaonashi 14y ago
Actually, it's value as a medium of exchange is limited, as the creators of Bitcoin have placed arbitrary limits on their creation; limits put in place to prop up Bitcoins' ability to be used as a store of value.
- tempestn 14y ago
  It's nearly infinitely divisible, so not really limited as a medium of exchange.
  - kaonashi 14y ago
    It has a strong deflationary bias. http://www.moneycrashers.com/deflation-definition-causes-effects/ http://www.moneycrashers.com/deflation-definition-causes-eff...
lolcraft 14y ago
I am afraid this is incorrect. The problem is, you seem to have a very basic, early 19th century, Jean-Baptiste Say style concept of money. This early school was, too, of the opinion that money's only role in the economy is as a medium of exchange, barely abstracting how the underlying economy is just the exchange of commodities. Thus Say's law as corollary. But this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment. I look at it and see a massively deflationary currency, dependant on a empirical rule of thumb (Moore's Law), that is even today failing to accommodate the mildest exponential growth. When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. Don't get me wrong, I see value in an automated currency that can provide at least an amount of anonymity [2]. In my opinion, Bitcoin is just not it. When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. No sane modern-capitalist economy can be given birth by faulty economics. [1] Unless of course you belong to the school of the Austrians, like whomever wrote the "deflationary currency" joke of an entry in Bitcoin's Wikipedia. For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. [2] Maybe with a fixed 4% inflation rate, like Milton Friedman suggested. It could also be a fiat currency, and simultaneously decentralized and anonymous, if we could take the principles of the free-banking era, see why they failed (because they failed by themselves, no amount of austrian self-bullshitting will change that) and fix them. Who knows, I'm not an economist.
- white_devil 14y ago
  You sure are biased against Bitcoin and the like. > this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment So we went straight from an analysis (what was it btw?) "missing the time dimension of money" - according to you - to Bitcoin being a brain-damaged experiment. What exactly was the logic there? > a massively deflationary currency .. that is even today failing to accommodate the mildest exponential growth How does a currency "accommodate exponential growth", and why should it? Are you saying Bitcoin can't be used for lending etc because it's "deflationary"? Don't you think it would be possible for lenders to estimate the risk involved in using (deflationary?) Bitcoins, and then pricing their loans accordingly? > When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. If it were losing value by the hour, well then, yes, people would be reluctant to trade in it. > When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. Care to tell us what's wrong with the gold standard, and why is anyone who supports it a robber baron? > For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. Care to explain why the government and fractional reserve banking are good for us all, then?

by steve19 14y ago

betterunix 14y ago

"Its real value is being a medium of exchange" Value is the result of supply and demand. What is the demand for a medium of exchange? Why not just use monopoly money, or acorns, or lumps of clay? For that matter, why do US citizens not use CAN instead of USD? What drives the citizens of a country to use the currency issued or authorized by that country's government? "For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN." Yeah, and what do you think the VPN provider is paying its bills with? When the government says, "Pay us the tax on your energy use," what does the VPN provider reply with? "Here are some Bitcoins?" Unless the government is accepting Bitcoin for tax payments -- which would effectively turn Bitcoin into a fiat currency -- your service provider is either going to need a way to convert their Bitcoin currency into some other currency, or they will require that you pay them with something other than Bitcoin.

retrogradeorbit 14y ago
I think bitcoins real value to people is it's a P2P solution to the double spend problem. "monopoly money, or acorns, or lumps of clay" can be created almost indefinitely. Of course BTC can too, but must be done by forming consensus amongst the majority of the P2P systems. Lumps of clay you don't need consensus. Just more clay. "What drives the citizens of a country to use the currency issued or authorized by that country's government?" Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law.
- betterunix 14y ago
  ""monopoly money, or acorns, or lumps of clay" can be created almost indefinitely" Make an acorn for yourself in that case. Acorns are pretty similar to Bitcoin in that regard: you need Oak trees to produce acorns, just like you need CPU time to produce Bitcoin. "Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law." Not all countries have such laws. There is, however, another important category of law that gives fiat currencies their value: taxes. The fact that law-abiding citizens must pay their government periodically creates a large demand for whatever the government accepts as a tax payment. Typically, governments accept a currency they issue, or else they authorize the use of some other currency.
argonaut 14y ago
1. Your economics are wrong. Value is not the market price. Value is subjective; the value of something to a given person is the maximum price the person is willing to pay. Value is not the same for each person. 2. BTC's unique feature is the instantaneity and anonymity of transactions.
- betterunix 14y ago
  "Value is not the market price" Who said it was? "the value of something to a given person is the maximum price the person is willing to pay" Which is dependent on the supply and demand of that "something." "BTC's unique feature is the instantaneity and anonymity of transactions." "Instant" in the "10-30 minutes" sense, and anonymous in the "you can be tracked" sense...
  - endoself 14y ago
    The maximum price that people are willing to pay isn't "dependent on" demand, it is demand. In particular, it has nothing to do with supply; if something is available for much less than the maximum price someone is willing to pay, then that just means that they get it for a lot less, it doesn't change how much they are willing to pay in principle. (There are a few subtleties here, such as that willingness to pay should be measured in terms of opportunity costs rather than dollars, but all this stuff can be found in an economics textbook.)
    - betterunix 14y ago
      "The maximum price that people are willing to pay isn't "dependent on" demand, it is demand. In particular, it has nothing to do with supply" What the is maximum you willing to pay for breathable air? How much would you be willing to pay if you could not find free air everywhere you went? Demand is not "the maximum price people are willing to pay," it is "the willingness and ability to pay a given price."
  - argonaut 14y ago
    Endoself is correct. That's the problem with HN. It is clear when someone's arguments have no foundation in modern economic theory and practice, yet these arguments get thrown around with a false sense of certitude. I cited the textbook definition for "value," and yet you argue that it's dependent on supply and demand, which ignored the fact that the definition of value that I cited is precisely what makes up demand. Person A is willing to pay $200 for a watch. Yet the market price of that watch is $20. Just because that person saved $180 does not mean that value of the watch to person A suddenly and magically fell by $180. Clearly this person found $200 worth of utility in that watch, or else s/he wouldn't have been willing to pay for it at that price. > "Instant" in the "10-30 minutes" sense, and anonymous in the "you can be tracked" sense... Now your arguments are focusing on semantics. EDITS: clarity and less snark.
white_devil 14y ago
> What is the demand for a medium of exchange? People accept a medium of exchange in exchange for their goods and services because they trust that they can later exchange it for something they want. The "demand" for a medium of exchange lies in direct bartering being inconvenient, because whoever wants something you have, might not have something you want, right then and there. In this case, instead of a trade not happening, you can just accept a medium of exchange, and use it later to get what you want. > Why not just use monopoly money, or acorns, or lumps of clay? If people knew they could exchange lumps of clay for goods and services, they would accept them as payment for goods and services. > What drives the citizens of a country to use the currency issued or authorized by that country's government? That very same government?
danmaz74 14y ago
> Unless the government is accepting Bitcoin for tax payments -- which would effectively turn Bitcoin into a fiat currency It would turn Bitcoin into legal tender. Legal tender can be fiat or not (for a very long time, gold was the legal tender).

kaonashi 14y ago

Actually, it's value as a medium of exchange is limited, as the creators of Bitcoin have placed arbitrary limits on their creation; limits put in place to prop up Bitcoins' ability to be used as a store of value.

tempestn 14y ago
It's nearly infinitely divisible, so not really limited as a medium of exchange.
- kaonashi 14y ago
  It has a strong deflationary bias. http://www.moneycrashers.com/deflation-definition-causes-effects/ http://www.moneycrashers.com/deflation-definition-causes-eff...

lolcraft 14y ago

I am afraid this is incorrect. The problem is, you seem to have a very basic, early 19th century, Jean-Baptiste Say style concept of money. This early school was, too, of the opinion that money's only role in the economy is as a medium of exchange, barely abstracting how the underlying economy is just the exchange of commodities. Thus Say's law as corollary. But this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment. I look at it and see a massively deflationary currency, dependant on a empirical rule of thumb (Moore's Law), that is even today failing to accommodate the mildest exponential growth. When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. Don't get me wrong, I see value in an automated currency that can provide at least an amount of anonymity [2]. In my opinion, Bitcoin is just not it. When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. No sane modern-capitalist economy can be given birth by faulty economics. [1] Unless of course you belong to the school of the Austrians, like whomever wrote the "deflationary currency" joke of an entry in Bitcoin's Wikipedia. For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. [2] Maybe with a fixed 4% inflation rate, like Milton Friedman suggested. It could also be a fiat currency, and simultaneously decentralized and anonymous, if we could take the principles of the free-banking era, see why they failed (because they failed by themselves, no amount of austrian self-bullshitting will change that) and fix them. Who knows, I'm not an economist.

white_devil 14y ago
You sure are biased against Bitcoin and the like. > this analysis misses the time dimension of money: lending, borrowing and interest [1]. Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment So we went straight from an analysis (what was it btw?) "missing the time dimension of money" - according to you - to Bitcoin being a brain-damaged experiment. What exactly was the logic there? > a massively deflationary currency .. that is even today failing to accommodate the mildest exponential growth How does a currency "accommodate exponential growth", and why should it? Are you saying Bitcoin can't be used for lending etc because it's "deflationary"? Don't you think it would be possible for lenders to estimate the risk involved in using (deflationary?) Bitcoins, and then pricing their loans accordingly? > When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions. I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency. If it were losing value by the hour, well then, yes, people would be reluctant to trade in it. > When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. Care to tell us what's wrong with the gold standard, and why is anyone who supports it a robber baron? > For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong. Care to explain why the government and fractional reserve banking are good for us all, then?