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Bitcoin intrinsic value: It can be transferred (spent) electronically over a decentralized network without double-spending risk, chargeback risk, inflation ris

by gasull 14y ago

Bitcoin intrinsic value: It can be transferred (spent) electronically over a decentralized network without double-spending risk, chargeback risk, inflation risk and confiscation/bailout/haircut risk. How can anyone say this has no intrinsic value? You can say that you don't care about this properties, like I don't care that gold is shiny, but that doesn't mean it has no value. I think many analysts confuse intrinsic value with being tangible.

millstone 14y ago
Two comments: 1. Without the decentralized network that you mention, a bitcoin has no value. But the decentralized network requires some level of acceptance for anyone to run it. So bitcoin's value depends on its acceptance, in a way that gold does not. 2. Bitcoin certainly incurs inflation risk - the large recent drop in the purchasing power of a bitcoin is inflation, after all. Perhaps you meant "without risk of manipulation by the currency issuer," but currencies may move for many other reasons.
qengho 14y ago
First, as has already been pointed out, nothing has intrinsic value. Things only have value inasmuch as somebody values them. Value is a relationship between the subject and the object, not a property of the object. Gold has a 'base value' that arises because of its demand for non-monetary uses, such as its industrial uses or use in jewellery. This base value is what makes it suitable as a medium of exchange as the base value sets gold's initial non-zero exchange rate vis-a-vis other goods. Once gold (or any other commodity) starts being used as a medium of exchange, it generates further demand AS a medium of exchange, and this will increase its price in relation to other goods, giving it a currency value higher than the base value. It's like mathematical induction - where the general case is predicated on the base case. If there is no base case (or base value) there is no foundation for the general case (or for a currency value). Bitcoin has no base value. Yes it "can be transferred (spent) electronically over a decentralized network without double-spending risk, chargeback risk, inflation risk and confiscation/bailout/haircut risk". But so can Bitcoins based on an alternate blockchain. What makes the 'official' blockchain Bitcoins have any higher base value than the worthless bitcoins on an alternate blockchain? In fact, I expect there will be alternate blockchains in the near future, and that is what will burst the bubble as people start to realise that the number of bitcoins may be limited, but the number of bitcoin-like currencies is unlimited, so really, the limit on the number of possible bitcoins is entirely illusory and meaningless. A free-market, decentralized fiat money is still more useful for many purposes than statist fiat money, and for this reason Bitcoin will enjoy some popularity until a proper anonymous, gold-backed free market e-currency comes along. When that happens, there will no longer be any use case for Bitcoin and its currency value will collapse to its base value of 0.

by gasull 14y ago

millstone 14y ago

Two comments: 1. Without the decentralized network that you mention, a bitcoin has no value. But the decentralized network requires some level of acceptance for anyone to run it. So bitcoin's value depends on its acceptance, in a way that gold does not. 2. Bitcoin certainly incurs inflation risk - the large recent drop in the purchasing power of a bitcoin is inflation, after all. Perhaps you meant "without risk of manipulation by the currency issuer," but currencies may move for many other reasons.

qengho 14y ago

First, as has already been pointed out, nothing has intrinsic value. Things only have value inasmuch as somebody values them. Value is a relationship between the subject and the object, not a property of the object. Gold has a 'base value' that arises because of its demand for non-monetary uses, such as its industrial uses or use in jewellery. This base value is what makes it suitable as a medium of exchange as the base value sets gold's initial non-zero exchange rate vis-a-vis other goods. Once gold (or any other commodity) starts being used as a medium of exchange, it generates further demand AS a medium of exchange, and this will increase its price in relation to other goods, giving it a currency value higher than the base value. It's like mathematical induction - where the general case is predicated on the base case. If there is no base case (or base value) there is no foundation for the general case (or for a currency value). Bitcoin has no base value. Yes it "can be transferred (spent) electronically over a decentralized network without double-spending risk, chargeback risk, inflation risk and confiscation/bailout/haircut risk". But so can Bitcoins based on an alternate blockchain. What makes the 'official' blockchain Bitcoins have any higher base value than the worthless bitcoins on an alternate blockchain? In fact, I expect there will be alternate blockchains in the near future, and that is what will burst the bubble as people start to realise that the number of bitcoins may be limited, but the number of bitcoin-like currencies is unlimited, so really, the limit on the number of possible bitcoins is entirely illusory and meaningless. A free-market, decentralized fiat money is still more useful for many purposes than statist fiat money, and for this reason Bitcoin will enjoy some popularity until a proper anonymous, gold-backed free market e-currency comes along. When that happens, there will no longer be any use case for Bitcoin and its currency value will collapse to its base value of 0.