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> If BTC starts collapsing, perhaps all that infrastructure will go on to do great things for society, but how does that help Bitcoin? If the infrastructure go
by yohanatan 13y ago
> If BTC starts collapsing, perhaps all that infrastructure will go on to do great things for society, but how does that help Bitcoin?
If the infrastructure goes on to do great things for society then it has (and has always had) intrinsic value and thus the price of BTC rebounds (or more likely never collapses in the first place).
- icambron 13y agoNo, it doesn't. BTC isn't a good value store (or have intrinsic value) just because the infrastructure that processes it is--in a different sense of the word--valuable. If a bitcoin conferred a fraction of ownership of that infrastructure to the coin's holder, you'd have a point, but it doesn't; the holder just has the coin. The parts of the infrastructure you might actually sell are owned by someone else, and the open source parts of it are owned--in the sense relevant here--by everyone, so it doesn't provide the coin any value. It's like saying gold is a good value store because mining and ore extraction equipment are useful. Doesn't make any sense. Of course, you can say the infrastructure makes the coin more useful as a medium of exchange, but that's a totally separate point, as Krugman points out. My personal view is that none of these things--gold, dollars, or bitcoin--has enough intrinsic value to make a useful value floor, and that as value stores they all just rely on a shared convention. So I'm not sure Krugman is right, and perhaps bitcoins will work out without that floor feature, and perhaps without ever really being used as a store of value. But this argument about infrastructure just doesn't work.
- yohanatan 13y agoI was considering the blockchain itself as part of the infrastructure. If the [rest of the] infrastructure (i.e., the mining equipment) becomes (or is) useful, it is only inasmuch as it is a good shepherd of the blockchain. It is both the mining equipment (at any point in time) and the blockchain which make possible the use of BTC as both a storage of value and a medium of exchange. As long as there exists both a globally-distributed secure ledger and a network capable of maintaining it, then the individual accounts within its purview obviously have whatever values it records them as having.
- icambron 13y ago> then the individual accounts within its purview obviously have whatever values it records them as having. I think there's a basic disconnect here about what we mean by "store of value". The simplest way to put it is that something stores value well if I can buy a predictable amount of stuff with it in the future. That the ledger does a good job of establishing that I have N bitcoins is different from telling me how much those bitcoins are actually worth.
- yohanatan 13y agoI'm using the standard definition of 'store of value' (see: http://en.wikipedia.org/wiki/Store_of_value http://en.wikipedia.org/wiki/Store_of_value). The only requirement to have a store of value (aside from ability to store and retrieve) is that there exist a floor; i.e., that an entity 'merely have economic value that is not known to disappear even in the worst situation' or in other words 'be predictably useful when retrieved'. Of course, we can easily imagine scenarios where Bitcoin loses all value but I think a sufficient imagination can produce scenarios for the other stores of value listed on that page as well. So, this is obviously a bit subjective territory (i.e., different people can assign different probabilities to each of the circumstantial propositions) but there is a strong argument from consistency for the designation of Bitcoin as a 'store of value'. I personally think that mathematically-interesting (and rare) numbers do have an intrinsic value (even if only as a novelty or perhaps antique/collectible).