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Why Bitcoin Matters

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Re: Why Bitcoin Matters

#211

Post by plock »

infinii wrote: post #210
plock wrote: post #79

Earlier quoted context omitted.

If we take 'intrinsic value' to mean 'having some use other than to simply trade away again to someone else, or being backed by something with intrinsic value', then the dollar has intrinsic value in that it is backed by freedom from being prosecuted by the US government for non-payment of taxes.

The topic of debate is whether bitcoins have intrinsic value. Taxes are not the deciding criteria here. If the government did away with taxes, currencies (whether it be USD, Euro, BTC, etc) would still have value as an instrument used in barter.

The argument I'm putting forth is that:

'Intrinsic value' meaning 'objective value' is a useless concept because all value is subjective.

What I think people generally mean when they say 'intrinsic value', especially when talking about currencies, is something more like 'having some uses other than to simply trade away again to someone else, or perhaps being backed by something which has intrinsic value'.

Dollars have intrinsic value according to that definition, because they are backed by the fact that there are many people who must give the US government dollars in order to avoid being prosecuted for non-payment of taxes. That's where taxes come in. Without taxes, and perhaps some other things like legal tender laws, dollars would have no 'intrinsic value' according to this definition, just like BTC.

Both USD and BTC could still have value, even if they don't have 'intrinsic value' according to that definition.

Re: Why Bitcoin Matters

#213

Post by pbreit »

atmosx wrote: post #98
ye wrote: post #36

Earlier quoted context omitted.

Yeah, you described pretty much the worst case scenario where everything goes through fiat. But once Bitcoin penetration is significant and people start getting paid in Bitcoin (already happening) and accept it as payment (also already happening), all these exchange fees go away. With fiat you're stuck with the fees forever. Also your 0.5% assumption is wrong. You can place a buy ad on LocalBitcoins and actually buy…

> [...] But once Bitcoin penetration is significant [...] I think we passed that point, there is an adoption of bitcoin, but it will NEVER be used as a currency IMHO. I really hope the price stops fluctuating so we can use it as a value storage medium, but even that can be disputed.

I could see the opposite: use of bitcoins for transacting and some of the other interesting applications Marc mentions. But it strikes as being a horrible value store given the volatility and lack of any underlying value.

Re: Why Bitcoin Matters

#214

Post by Nashhhh »

scott_s wrote: post #69
eatitraw wrote: post #6

Earlier quoted context omitted.

> I don't understand this. Someone is taking the risk right now. Correct. > Currently it's the exchanges and merchants directly, because they rely on the exchanges. Incorrect. There is the solution: https://bitpay.com/ , which automatically does conversion for a small fee. Buyers pay in bitcoin, but sellers receives fiat money(e.g. USD). The risk is taken by bitpay, sellers always receive fixed amount in fiat money,…

How "automatically"? Seconds? Minutes? Hours? In other words, how much time passes between the customer paying X bitcoins, and those are converted into Y USD?

Instantly. Zero exchange risk for the merchant (Bitpay considers their hedging strategies as part of their core-competence-- they don't always convert to USD/Euro/GBP [1], they sometimes stay long bitcoin). All payments for the day are aggregated (in USD/Euro/GBP [1]) and sent to the merchant (as long as it's more than $20, I believe. So it's much quicker than credit cards (and don't forget money from credit cards can be automatically pulled from the merchant account up to 120 later, whereas these ones are irreversible.) [1]Note: This is why it's easier to say "fiat" when referring to national currencies. :)

Re: Why Bitcoin Matters

#215

Post by Nashhhh »

vladd wrote: post #78
Guvante wrote: post #71

> The practical consequence of solving this problem is that Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to over…

The reason I feel bitcoin is a scam is due to such misunderstandings. Bitcoin is not what makes any of this possible, the research happening for 20+ years in the background is. Bitcoin is just a marketing term, a specific implementation of those principles that derives its power just from the number of clients installed across the world with it. All the arguments that Andreessen gave are not Bitcoin's, but are rather…

"Fiat currency is sustained by our obligation to pay taxes in it..."

I often see this argument, but it neatly ignores, for example, the Argentine Peso, which is losing 46% of its purchasing power (last few months, annualized) vs. US Dollars (or tomatoes, or cars, or whatever you want, on average), yet taxes are just as high as they ever been (higher, in fact: 35% tax just implemented on all cars above a certain threshold, for example). So where is that value-sustaining-tax effect I hear so much about?

Come to think of it, in 1989 when the Argentine Austral's value went to essentially zero (1-1 with the USD to 1-10,000 in a little over a year), taxes weren't low... so what happened? In fact, you could still pay taxes just fine with all that worthless paper with a bunch of zeros on it. Why didn't taxes and legal tender give it value?

Re: Why Bitcoin Matters

#216

Post by Nashhhh »

Spooky23 wrote: post #90
jt2190 wrote: post #9

> The criticism that merchants will not accept Bitcoin > because of its volatility is also incorrect. Bitcoin can be > used entirely as a payment system; merchants do not need to > hold any Bitcoin currency or be exposed to Bitcoin > volatility at any time. Any consumer or merchant can trade > in and out of Bitcoin and other currencies > any time they want. I'm having trouble understanding this point of view because…

No and no. One of the big reasons that the US moved towards central banking and eventually paper currency is stability. Any finite commodity is subject to rapid swings when supplies are constrained. In recent memory, copper, silver and electricity are all commodities whose price went crazy when either demand got wacky high, or supplies got very limited. In history, the economy was traditionally very vulnerable to eco…

This is true, but the end of your post implies that recessions have become rarer and less pronounced in a fiat system. They haven't. In other words, sure, central banks "flooded the markets with capital and blunted the impact of the crisis and avoided panic", but what system was in place that allowed the manic colossal 1995-2008 housing bubble to take place? Did it not have anything to do with central banking policies, say, I dunno, incredibly low interest rates for a decade?

The interesting part about your post is that it is in response to OP asking if people would be willing to buy BTC at any price (to which you responded no). But you gave the perfect example of mass psychology encouraging people to hoard an asset they believe to be safe: in this case, in 2008, it was the USD. Despite 'printing' (yes, I get it, it's not literally printing) massive amounts of USD, the world ate it up because the USD it the world's reserve currency and they (correctly) assumed that if the US is in trouble, every one else's currencies were in waaaaay worse shape. Thus the insatiable demand for something that was becoming 5x less scarce.

Now, if Bitcoin ever reaches that level of belief in its capacity as a store of value (for example, based on the fact that for the first time ever you have a currency/scrip/asset/commodity whose entire supply is predetermined, fixed and immutable politically, could you not conceive that it might to have buyers flock to it? (not asking if it's probable, only if it's possible; I'd agree that at this stage this isn't the case)

Re: Why Bitcoin Matters

#217

Post by sirsar »

SilasX wrote: post #173
comex wrote: post #56

Future email systems and social networks could refuse to accept incoming messages unless they were accompanied with tiny amounts of Bitcoin – tiny enough to not matter to the sender, but large enough to deter spammers, who today can send uncounted billions of spam messages for free with impunity. Heh. Talk about historically backward: http://en.wikipedia.org/wiki/Hashcash#Bitcoin

I was thinking the same thing. If you want to impose costs on people who send you emails, you can just strip out the proof of work component of bitcoin (which indeed predated it), and use that as a challenge/response system.

Implemented in Bitmessage, with free anonymity on the side.

Re: Why Bitcoin Matters

#218

Post by arthurcolle »

pbreit wrote: post #213
atmosx wrote: post #98

Earlier quoted context omitted.

> [...] But once Bitcoin penetration is significant [...] I think we passed that point, there is an adoption of bitcoin, but it will NEVER be used as a currency IMHO. I really hope the price stops fluctuating so we can use it as a value storage medium, but even that can be disputed.

I could see the opposite: use of bitcoins for transacting and some of the other interesting applications Marc mentions. But it strikes as being a horrible value store given the volatility and lack of any underlying value.

There is value in the network of people already using bitcoin, as well as the six years of existence backing up the fact that it works.

Re: Why Bitcoin Matters

#219

Post by brc »

lectrick wrote: post #200
pyvpx wrote: post #46

Earlier quoted context omitted.

does bitcoin have an intrinsic value? if so, what?

This is the best article/explanation I've found to explain how currencies, which have no value in themselves (like paper dollar bills), have a "fundamental value" based on the trade volume and the rarity (read: lack of counterfeitability): http://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-re... The shocking truth is that almost nothing has an "intrinsic value". But things DO have "subjective values." The cons…

The historical reasons for Gold and Silver being used as a store of value (and as a currency) are:

1) Divisibility : it is easy to divide a large amount of the metals into smaller amounts (ingots->coins) 2) Durable : as noted, it doesn't corrode. You can bury it in the ground for a thousand years, and it comes up shiny and new 3) Rarity : There isn't that much around. All the gold mined since the beginning of history would fill an Olympic sized swimming pool.

The intrinsic value of gold as a store of value are from lack of competition. It's the best thing for the job, simply by being best at those three criteria. Add in cultural history and it's a lock.

Other things have higher usage as a store of value - prime agricultural land - but it's hard to sell 1/150th of an Acre to buy some bread. Other things as just as durable (rocks) but don't have rarity. Some rocks are durable and rare (opals, diamonds) but aren't easily divisible.

It's easy to get existential about Gold - 'it's just a shiny metal, WTF?' but countless societies have valued it highly as a store of value and as a trading currency, and that is not likely to go away anytime soon, because of a lack of alternatives. Societies and economies need stores of values, and Gold continues to fit the bill.

The fact that Gold is worth $1200/oz says more about the $ than it does about the oz. It's the $ market price that you're commenting on.

Re: Why Bitcoin Matters

#220

Post by sirsar »

panabee wrote: post #207

this may be a stupid question, but how does the cap of 21 million coins affect bitcoin? does it not matter because each bitcoin is infinitely divisible?

Divisible to 8 decimal places. There are thus 2 quadrillion atomic units.
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