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The Fair Price of a Bitcoin is Zero

neweconomicperspectives.org

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Re: The Fair Price of a Bitcoin is Zero

#51

Post by bitcoin-truth »

dragonwriter wrote: post #31
msandford wrote: post #29

Earlier quoted context omitted.

One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. My point wasn't so much that money has to be a commodity with an underlying value. It was to point out that the notion that "money is an asset to the holder and a liability to the issuer" might be the author's definitio…

> One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. "Rapidly becoming a marketable commodity" is vastly different than being "the most marketable commodity".

The process of rapidly becoming a marketable commodity is called monetization.

Bitcoin is in a hypermonetization melt-up phase.

Re: The Fair Price of a Bitcoin is Zero

#52

Post by bitcoin-truth »

letstryagain wrote: post #30
voyou wrote: post #20

Earlier quoted context omitted.

So what can you make out of your bitcoins when you melt them down? The argument of the post is that gold-as-money is worth more than gold-as-commodity, and, if gold doesn't have an issuer, its value falls to that of the physical commodity. Because bitcoin, unlike gold, has no use except as a medium of exchange, if a bitcoin's value fell in the same way in the absence of an issuer, unlike gold, bitcoin's value would f…

If gold suddenly fell out of favour as a money it would lose more than 90% of its value. Bitcoin would lose 100%. Yes there's a difference but not much.

\o/ this guy gets it!

Re: The Fair Price of a Bitcoin is Zero

#53

Post by dragonwriter »

bitcoin-truth wrote: post #51
dragonwriter wrote: post #31

Earlier quoted context omitted.

> One definition of money is "the most marketable commodity" and bitcoin does tend to pass that test. It's rapidly becoming a marketable commodity as so many people will accept it for goods or services. "Rapidly becoming a marketable commodity" is vastly different than being "the most marketable commodity".

The process of rapidly becoming a marketable commodity is called monetization. Bitcoin is in a hypermonetization melt-up phase.

> The process of rapidly becoming a marketable commodity is called monetization.

No, its not. That's the process of printing money to pay off a debt. Or the act of a government making something legal tender. It might even be a tenable name for something becoming money (which isn't just a marketable commodity.)

Things often become marketable commodities -- even rapidly, especially when they are newly discovered or new uses are discovered for them -- without becoming money.

> Bitcoin is in a hypermonetization melt-up phase.

What is that even supposed to mean?

Re: The Fair Price of a Bitcoin is Zero

#54

Post by altoz »

tzs wrote: post #45
altoz wrote: post #25

> They should be easy to create (bitcoins are) BUT ALSO easy to destroy if demand declines; You can provably destroy bitcoins by sending them to an address with no private key (this is provable). Believe it or not, this is actually useful for stuff like http://www.proofofexistence.com/ Hence the premise of this article, even if you take the underlying economic theory at face-value, is flawed.

How do you prove that an address has no private key?

The actual number of public addresses that correspond to the generated group from the elliptical curve function is not 2^256, but slightly lower, since the cardinality of the group needs to be a prime number. Hence, if it's in that small gap, it would provably have no private key.

Re: The Fair Price of a Bitcoin is Zero

#55

Post by foobarqux »

foobarqux wrote: post #46
colinbartlett wrote: post #2

I'm so tired of every Tom, Dick, and Harry throwing his hat in the ring to declare Bitcoin worthless. Can't we just agree that this is a new thing nobody quite understands and stop making prognostications about it's value or lack thereof? Let those of us who are interested in furthering the Bitcoin economy do so unencumbered by pundits.

I'm tired of every Tom, Dick and Harry taking that Bitcoins are worth $BIGDOLLARS as self evident and the idea of having to provide justification is repulsive.

That should read "as repulsive"

Re: The Fair Price of a Bitcoin is Zero

#56

Post by Lazare »

jeza wrote: post #35
Lazare wrote: post #27

...does "new economic perspectives" mean wrong ones? This article is lunacy. I started to skim it, but after the fifth or sixth ridiculously wrong assertion in as many sentences, I stopped. This article is so, so wrong. It's littered with idiosyncratic phrases and simply incorrect definitions. For example: > Second, all financial instruments have a fair value that is defined as the discount value of future streams of…

You can't claim that the Euro isn't a financial instrument just because you don't live in Europe. They are issued by the European Central Bank and national central banks of Eurosystem members, who in turn share the liability (explained briefly here: http://en.wikipedia.org/wiki/Euro#Issuing_modalities_for_ban... ). This makes the Euro a traditional currency which bitcoin isn't. That's not to say bitcoin is worthless,…

> You can't claim that the Euro isn't a financial instrument just because you don't live in Europe.

Indeed, I can't claim that. Nor am I. It definitely is!

> This makes the Euro a traditional currency which bitcoin isn't. That's not to say bitcoin is worthless, since its value is really whatever someone is willing to pay for it.

I don't think we disagree. :)

Re: The Fair Price of a Bitcoin is Zero

#57

Post by Lazare »

Rimpinths wrote: post #33
Lazare wrote: post #27

...does "new economic perspectives" mean wrong ones? This article is lunacy. I started to skim it, but after the fifth or sixth ridiculously wrong assertion in as many sentences, I stopped. This article is so, so wrong. It's littered with idiosyncratic phrases and simply incorrect definitions. For example: > Second, all financial instruments have a fair value that is defined as the discount value of future streams of…

> And so on, and so forth. The author makes a big point of arguing that they aren't financial instruments so much as they are real assets. There's some truth to this; if I own a bitcoin nobody is obligated to give me anything in exchange; it doesn't exist as a liability on anyone's balance sheet. And? The same is true of a gold ingot. Or, largely, or a share of Apple stock; nobody is obligated to give you anything fo…

> Gold has some intrinsic value. If nothing else, it has some industrial uses.

The value of gold is not based on its intrinsic industrial uses. It shares this characteristic with bitcoins.

> So owning AAPL shares does come with obligations from Apple.

Not in the sense OP used. He was very explicit:

> One is that they are convertible into something else, another is that the issuer will accept them as final means of payment from his debtors.

Apple stock is not convertible on demand into gold or cash, nor is Apple obligated to accept Apple stock in payment of its debts. By OPs definitions, Apple stock is not a financial instrument, and thus has no value. (Note: Of course, as ever, OP has used an incorrect definition, but that's neither here nor there.)

But again, according to OP Apple stock is not a financial instrument; it shares this characteristic with bitcoins.

> You can pay debts and taxes in euros.

No, I actually can't, no more than I can pay them in bitcoins. If I had some Euros I could trade them for my local currency and use that to pay my debts and taxes, but the same is true for bitcoins. We can argue that the market for euros is much more stable and liquid than the market for bitcoins (very true!), but this is a difference of degree, not a difference of kind.

The differences between bitcoins and gold, euros, or Apple shares are real and significant, but OP has failed to articulate them.

Re: The Fair Price of a Bitcoin is Zero

#58

Post by bitcoin-truth »

jstalin wrote: post #14
msandford wrote: post #3

The Fair Price of an Ounce of Gold is Zero! Since there's no issuer of an ounce of gold it can't be worth anything. Q.E.D. EDIT: Some context: "First, all financial instruments are accounting creatures. They are the asset of the bearer and the liability of the issuer. Gold coins were the liability of, e.g., the King, Federal Reserve notes are liability of the Federal Reserve, and coins are the liability of the Treasu…

I found this odd as well. The US Dollar was essentially a unit of weight for much of its early history. Much of the money circulating was in fact silver Spanish dollars, issued by the Spanish empire as a result of the gigantic silver mines in central and southern America. Anyone could bring a unit of gold or silver to the treasury and be issued a silver or gold dollar. It was not a liability of the government in any…

a) the treasury would take seignorage.

b) money is a free-market good as in your example above. all the government was doing was weights and measures standardization.

c) only fiat (paper) money is a liability of the government because the original deal (FRNs) was that the notes would be exchanged for coin. That is why the note says promise to pay the bearer a dollar (which is a denomination of weight of silver or gold).

Re: The Fair Price of a Bitcoin is Zero

#59

Post by grinnbearit »

voyou wrote: post #22
fragsworth wrote: post #12

Earlier quoted context omitted.

These posts are entirely the result of authors who didn't buy bitcoins when they were cheap. They want it to fail, and try to find any flaws in it that they can, because if it succeeds then they'll really feel like shit because they missed out. There is extreme bias in the news community (on both sides) because of their investment (or lack thereof)... And possibly a certain amount of attempted market manipulation as…

"These posts are entirely the result of authors who didn't buy bitcoins when they were cheap." That's nonsense. The post is a result of applying a particular economic theory of how money works to something that is apparently trying to be a form of money. This theory of money might be wrong in general, or it might for some reason not apply to bitcoin specifically. But to dismiss it simply as "bias" is willed stupidity…

The best model I've found that explains Bitcoin is Moldbug's Monetary theory.

If you had to read just one article I'd recommend http://unqualified-reservations.blogspot.in/2011/04/on-monet...

But if you have the time you could read all his articles on economics conveniently collected at moldbuggery.blogspot.com (under economics)

Re: The Fair Price of a Bitcoin is Zero

#60

Post by nutate »

schmichael wrote: post #24

Excellent post, although as usual the title could be a be less sensational and more precise. "Bitcoins are Purely Speculative Assets" would be an excellent line from the article to use as a title. Or perhaps as a comment put it: "Bitcoins are an Intangible Commodity Asset"

I agree it was a great post from someone who doesn't necessarily understand the finer points of bitcoin, but does understand money writ large. I think the comments section actually ironed out a fair amount of the misinfo, etc. I quite liked it.
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