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This line of reasoning works when you have a fixed number of shares that represent ownership in something real, but I don't see how it works with bitcoins that
by nimble 13y ago
This line of reasoning works when you have a fixed number of shares that represent ownership in something real, but I don't see how it works with bitcoins that have no intrinsic value. Bitcoins only hold value by inertia. People think they have value because they're accepted by other people because other people think they have value. I see no rational mechanism by which this feedback loop should jump 5% when 5% of bitcoins are lost.
- drcode 13y agoThe mechanism: Prices of any commodity are determined by supply and demand. If supply goes down, prices go up.
- nimble 13y agoAgain, flawed reasoning. If all bitcoins were destroyed except for one, how much do you think it would be worth? There is no intrinsic demand for bitcoins, only inertia behind perceived value. And it looks to me that the inertia is mostly behind the price per bitcoin rather than total value of all bitcoins.
- drcode 13y agoThe current bitcoin economy is worth about 1.5 billion, so that one coin would be worth about 1.5 billion, if that were to happen. Where is my flawed reasoning?
- nimble 13y agoThat would be a fun conversation to see. You with your 1.5 billion dollar bitcoin trying to haggle someone down from 0.2 bitcoins to 0.00000002 bitcoins for a pair of pants.
- shasta 13y agoFiat currencies (which bitcoin is in one sense) are largely rooted in psychology. Recall this story: http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake...
- brazzy 13y ago> There is no intrinsic demand for bitcoins, only inertia behind perceived value. Not true; anyone who sells something for bitcoins creates some amount of intrinsic demand. Silk Road did, and was probably by far the biggest generator of such demand, but not the only one.
- deleted 13y ago[deleted]
- aestra 13y agoThat's how all fiat currencies work. For example, to use your words: People think dollars have value because they're accepted by other people because other people think they have value. You accept your paycheck in whatever currency you accept it in and believe it has value because you have faith that other people will accept that currency for whatever goods and services you want. It all works as long as everyone believes the currency will keep having value in the future. Bitcoins are no different. As long as a group of people believe they have value in the future, and will be accepted as payment for goods and services, they will continue to have value.
- nimble 13y agoAll true. Now explain why if 5% of bitcoins were destroyed that would result in a 5% increase in the value of the remaining bitcoins.