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> The erratic price prevents it from being a store of value Not true in itself. Consider the stock market: it's value has been unstable for the past two decade

by marcell 12y ago

> The erratic price prevents it from being a store of value Not true in itself. Consider the stock market: it's value has been unstable for the past two decades, yet it is still one of America's most popular stores of value. Consider also gold and housing, two other popular stores of value that also have unstable pricing. The erratic price does however prevent it from being a unit of account.

derefr 12y ago
I don't know if stocks themselves are really stores of value. There are synthetic products based on the value of certain stocks (index funds, hedged futures, options, etc.) that are stores of value, though. Which makes me think that you could probably build stable stores of value on top of BTC if you wanted, without losing the decentralization of BTC. You could even take the price of one of those products as a unit of account.
qznc 12y ago
Most stocks are a poor store of value. That is why people widely diversify. This makes Bitcoin more of a hedge against failings of our bank systems.
onion2k 12y ago
The value in the stock market requires many different stocks so the risk from volatility can be averaged away. That's why every good investor spreads their portfolio across different stocks in different markets. If there was just one stock traded on an exchange very few people would use it as a way to store their investment value.
sgt101 12y ago
Housing is a store of value in a way that gold and bit coins aren't; if the price of housing crashes to 0 you can still live in the houses. Also, the price of housing is highly likely to only crash to the cost of building a new house - wear and tear + scarcity costs for land. There is a speculative component in house prices, and this is a concern for anyone who is "storing value" in them, but there are fundamental uses for housing far beyond the fundamental uses for gold. Equities have a value story too. The dividend on stocks represents a future earnings value which is tradable. Also Equities provide voting rights which have value. Fiat currency has a value story; the states monopoly of violence provides it with the ability to collect tax from economic activity where that monopoly holds true. Tax revenues are a future income stream that has value; hence the underpinning of fiat. Bitcoin has rarity and speculation only.
- rythie 12y ago
  Are you sure you can live in a house worth 0? - most places with low house prices also have no jobs, broken infrastructure (electric, water, roads, shops etc.) and high crime. For a house to drop to 0 the location would have to be really bad and you wouldn't and perhaps couldn't live there anymore.
  - peteretep 12y ago
    No idea why you're getting down-voted. The assumption that houses are some kind of special asset because they always give a dividend of "you're able to live there" ignores an almost infinite number of exceptions to that.
- zaroth 12y ago
  Well, the key difference is you pay property taxes on a house. And as long as you keep doing that, and paying all associated upkeep, you can hopefully see appreciation. Oh, and you can live in it. The point is, there's no analog to the digital nature of placing a conversion value based on the bits of a certain integer value stored in a distributed blockchain. The latest round of blockchain technology is showing, bc is good for a lot more than currency. In fact, there are many things that BC can do much better even than it can be a currency. My point is, I bet on the long-term value of bc technology, but actually not on the long term value of Bitcoin as a digital asset. For example, very soon enough you will be able to cheaply, easily, and freely store your USD or whatever currency you want on a blockchain, and use it to spend and trade freely. Choose any blockchain and conversion rate / resolution you want and issue a legally binding IOU. Of course the trick is handling redemption!
  - sgt101 12y ago
    Totally agree that block chain technology is very interesting and I think valuable. I think that particular block chains will gain value as they begin to underpin particular applications, but of course if the value of a block chain becomes an impediment to the application the users may disrupt that application and move to new blockchains. For my education could you expand on your thoughts around "The point is, there's no analog to the digital nature of placing a conversion value based on the bits of a certain integer value stored in a distributed blockchain". I think that you are making an interesting point here but I haven't quite grasped it so am intrigued.
nroets 12y ago
Investors have historically demanded a large premium before storing value in the stock market. "To quantify the level of risk aversion implied if these figures represented the expected outperformance of equities over bonds, investors would prefer a certain payoff of $51,300 to a 50/50 bet paying either $50,000 or $100,000." https://en.wikipedia.org/wiki/Equity_premium_puzzle https://en.wikipedia.org/wiki/Equity_premium_puzzle
glesica 12y ago
Housing prices were stable until the mid-90s.
- jtbigwoo 12y ago
  Except for the 1930's. And didn't California have a bumpy ride in the 1990's?
  - glesica 12y ago
    There were definitely blips and long-term appreciation. Here's a paper [1] on housing prices around the world, pretty interesting stuff. I guess my point was, having seen some of these graphs, there is a pretty clear transition in the 90s where the "role" of housing in the economy seems to change (although the graphs in the paper I referenced show the growth starting as early as the 60s, so who knows). [1] http://piketty.pse.ens.fr/files/Schularicketal2014.pdf http://piketty.pse.ens.fr/files/Schularicketal2014.pdf

by marcell 12y ago

derefr 12y ago

I don't know if stocks themselves are really stores of value. There are synthetic products based on the value of certain stocks (index funds, hedged futures, options, etc.) that are stores of value, though. Which makes me think that you could probably build stable stores of value on top of BTC if you wanted, without losing the decentralization of BTC. You could even take the price of one of those products as a unit of account.

qznc 12y ago

Most stocks are a poor store of value. That is why people widely diversify. This makes Bitcoin more of a hedge against failings of our bank systems.

onion2k 12y ago

The value in the stock market requires many different stocks so the risk from volatility can be averaged away. That's why every good investor spreads their portfolio across different stocks in different markets. If there was just one stock traded on an exchange very few people would use it as a way to store their investment value.

sgt101 12y ago

Housing is a store of value in a way that gold and bit coins aren't; if the price of housing crashes to 0 you can still live in the houses. Also, the price of housing is highly likely to only crash to the cost of building a new house - wear and tear + scarcity costs for land. There is a speculative component in house prices, and this is a concern for anyone who is "storing value" in them, but there are fundamental uses for housing far beyond the fundamental uses for gold. Equities have a value story too. The dividend on stocks represents a future earnings value which is tradable. Also Equities provide voting rights which have value. Fiat currency has a value story; the states monopoly of violence provides it with the ability to collect tax from economic activity where that monopoly holds true. Tax revenues are a future income stream that has value; hence the underpinning of fiat. Bitcoin has rarity and speculation only.

rythie 12y ago
Are you sure you can live in a house worth 0? - most places with low house prices also have no jobs, broken infrastructure (electric, water, roads, shops etc.) and high crime. For a house to drop to 0 the location would have to be really bad and you wouldn't and perhaps couldn't live there anymore.
- peteretep 12y ago
  No idea why you're getting down-voted. The assumption that houses are some kind of special asset because they always give a dividend of "you're able to live there" ignores an almost infinite number of exceptions to that.
zaroth 12y ago
Well, the key difference is you pay property taxes on a house. And as long as you keep doing that, and paying all associated upkeep, you can hopefully see appreciation. Oh, and you can live in it. The point is, there's no analog to the digital nature of placing a conversion value based on the bits of a certain integer value stored in a distributed blockchain. The latest round of blockchain technology is showing, bc is good for a lot more than currency. In fact, there are many things that BC can do much better even than it can be a currency. My point is, I bet on the long-term value of bc technology, but actually not on the long term value of Bitcoin as a digital asset. For example, very soon enough you will be able to cheaply, easily, and freely store your USD or whatever currency you want on a blockchain, and use it to spend and trade freely. Choose any blockchain and conversion rate / resolution you want and issue a legally binding IOU. Of course the trick is handling redemption!
- sgt101 12y ago
  Totally agree that block chain technology is very interesting and I think valuable. I think that particular block chains will gain value as they begin to underpin particular applications, but of course if the value of a block chain becomes an impediment to the application the users may disrupt that application and move to new blockchains. For my education could you expand on your thoughts around "The point is, there's no analog to the digital nature of placing a conversion value based on the bits of a certain integer value stored in a distributed blockchain". I think that you are making an interesting point here but I haven't quite grasped it so am intrigued.

nroets 12y ago

Investors have historically demanded a large premium before storing value in the stock market. "To quantify the level of risk aversion implied if these figures represented the expected outperformance of equities over bonds, investors would prefer a certain payoff of $51,300 to a 50/50 bet paying either $50,000 or $100,000." https://en.wikipedia.org/wiki/Equity_premium_puzzle https://en.wikipedia.org/wiki/Equity_premium_puzzle

glesica 12y ago

Housing prices were stable until the mid-90s.

jtbigwoo 12y ago
Except for the 1930's. And didn't California have a bumpy ride in the 1990's?
- glesica 12y ago
  There were definitely blips and long-term appreciation. Here's a paper [1] on housing prices around the world, pretty interesting stuff. I guess my point was, having seen some of these graphs, there is a pretty clear transition in the 90s where the "role" of housing in the economy seems to change (although the graphs in the paper I referenced show the growth starting as early as the 60s, so who knows). [1] http://piketty.pse.ens.fr/files/Schularicketal2014.pdf http://piketty.pse.ens.fr/files/Schularicketal2014.pdf