probably > 99% of the people who own BTC do so because they want to sell it for a profit, not because they need it to buy crack on the dark web. it will respond to supply and demand over the long term.

No fiat currency has intrinsic value. It is built on the faith of the people using it. Brazil, for example, changed it's currency to fight off inflation and restore faith from the people. That's very different than gov't enforcement. The US dollar is accepted nearly everywhere, including North Korea (continue long list) because the people have no faith in the value of their native paper currency.

North Koreans Turn to Dollar, Yuan.

How Fake Money Saved Brazil

A major difference between USD and BTC is that BTC can't grow using credit, whereas the USD can be built from vapor on a moment's notice. I'm not sure how BTC would ever work without credit, but the cap on it's growth rate seems more like a liability than a feature to me.

Right sorry I should have separated my arguments a little more clearly. I didn't mean for one to lead to the other.

1. It's not currency because no government will accept it as taxes or guarantee it's value.

2. It has no intrinsic value such as commodities like gold which have value outside of it's cost.

It's simply a mechanism to store value that has nothing tagenible tied to it.

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Bitcoin itself might not be the thing that 'makes it'. It could end up being the Friendster/Myspace/whatever of crypto currencies. But it's definitely not a fad. Especially when you start looking at some of the other use cases popping up like smart contracts.

I definitely don't know enough to judge what players are doing well/will be the winners. But its pretty clear this is the foundation of something really powerful.

Btw Tulipmania lasted for 44 years. Although in internet times it's hard to imagine something lasting that long. https://en.wikipedia.org/wiki/Tulip_mania

This isn't really a problem. The only important thing about a currency is that everybody agrees that it is a proxy of value. Part of the reason bitcoin is increasing in value is that more and more people (and more mainstream people) are accepting bitcoin as a valid way to make/take payments.

That is true but those 2 points illustrate pretty big reasons not to believe it has a value storage mechanism I guess was my main point.

I agree the underlying technology and ideas are pretty cool and it is the start of something that isn't going away. Also I will point out these are just arguments I am trying to paraphrase from economic articles I read several years ago and may be doing a terrible job of explaining their thesis.

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Neither of these thoughts are correct, at least not how I understand economics.

Gold, at least until the advent of electricity, has no intrinsic value outside of looking pretty. People over the centuries has attached a high value to gold, despite the fact that it is less rare than silver, for example. Diamonds is another item with no intrinsic value. It is a common rock that is artificially rarefied, but people put a large value on diamonds.

A government accepting taxes in the currency is moot. I can pay taxes in Mexico by exchanging my USD for pesos. The banks value my USD currency. The restaurants and bars accept my currency and presumably exchange for pesos or leave the money under their bed.

In either case, it comes down to the faith of the people. There are a handful of countries that have no currency at all, and officially use, for example, the US dollar. If the step is paying taxes, all a country has to do is accept taxes on crypto. I'm sure the US gov't is looking at crypto very seriously and trying to figure out how to work out the taxes. I'm sure Overstock is paying taxes on it's BTC sales.

You can build things out of gold that aren't just pretty. Also the luster of the metal can be of intrinsic value.

I agree that any sort of economics is based on value each of the parties involved see with the things being exhanged but it's easier to have faith in something that is tangible or backed by a 3rd party (i.e. fiat currency).

Diamonds though not rare are incredibly durable and could be used and fashioned into a variety of tools so I am not sure I see your argument. Are their prices in line with normal demand and supply curves? No I will agree to that.

I will admit this is where the limits of my memory falls apart but I believe the argument was that in part the dollars value is supported by the fact the US government accepts dollars to pay taxes so guarantees it's value as a currency. Scanning fiat money on Wikipedia would indicate something more what you describe as faith in the currency with whoever is exchanging the currency.

To add one other thought. One of the reasons the gold standard ended was because it was difficult to expand the money supply.

You can actually replace BTC with a little variations (US has more available electricity than Zimbabwe):

https://en.wikipedia.org/wiki/Gold_s...#Disadvantages

The next section discusses how BTC and gold standard are similar. But in any case, all of this is very complicated, but I tend to think that gold standard, and by extension BTC, is not viable.

Gold is very soft and terrible for building much of anything.

The diamonds used in drill bits are real, but have very little value relative to the jewelry market. There is no intrinsic value to jewelry-grad diamond, which I suppose I should have specified.

If every person in the US decided to trade in carved stones, the US dollar would collapse. That's all fiat is.

I have a bitcoin, bought it after the first crash @ 400. Dunno why exactly and haven't touched it since.

Friend of mine is super into this stuff and went in on the ethereum pre-sale and supposedly has 800k in it.

I'm not sure if we're talking past each other or what but I probably won't respond to your replies anymore on this subject.

I don't think what you're saying is wrong I'm just not sure we're both talking about the same thing.

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j_g,

I gotta agree with daveT in this argument. Value isn't clear cut, and its definitely not as strongly linked to utility as you seem to suggest.

It is not just taxation in USD that gives the US dollar value, it is the backing and management of the currency by the US gov and it's military power. All money is based on confidence, not intrinsic value.

The question is how many people are actually using BTC as $$ and how many are using it to get rich?

There's real progress in the acceptance of Bitcoins. ATMs, bank accounts, merchants, etc. So there's obviously demand for services related to it being a currency. But I have no idea the relative growth of people that want to use Bitcoins and people that just invested "to get rich".

I am sorry I didn't mean to shutdown conversation. I was going to post a further reply. I feel I was being rude earlier but I thought the conversation was escalating further away from the main conversation and more towards who can point out something wrong in the last post.

I will preface this post with I am simply sharing arguments from what I had read in the past and I am not an expert in economics. Most of the articles I remember reading were from Ars Technica or published from universitities (though not necessarily scholarly reviewed). This is by no means to say they were accurate nor credible.

The arguments of the articles weren't necessarily "how do we determine the valuation of bit coin?" but "why bit coin won't make it as a currency".

The arguments are probably more like "why won't people want to adopt in bit coin".

So to answer that question the first argument is it's intangible. You literally have nothing if no one will trade you for currency that you can use to purchase things. With tangible goods you could perhaps in theory bargain or trade for them.

A rebuttal to that argument would be what about fiat currency? It is intangible and only good because parties in the market agree to it's value.

The counter argument to that is that fiat currency is backed by a sovereign government that guarantees it's currency. They create a demand for their currency by requiring people to pay taxes in that currency so there is incentive to continue to use it. The article below goes into more depth. It makes logical sense to me but cannot guarantee the credibility of the author:

http://neweconomicperspectives.org/2...rspective.html

The author even explicitly mentions bit coin though that is not what I was looking for when searching for related materials.

Sorry if this seems like shifting goal posts. That was not my intention. I did not previously state the context of the arguments I was sharing.



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I agree with many of the things said about bitcoin both in terms of thinking it's a pretty solid idea in terms of technology, while seeming to have many drawbacks that have to be overlooked.

The biggest opportunity and current issue to me is that VISA can do 50k transactions per second. Lightning network and similar things seem really interesting, but I think a good direction to scale is looking at more transactions of smaller sizes, with almost no transaction fees.

Imagine paying for an inexpensive item using the combined balances of multiple bitcoin addresses, a complete nightmare.

But when you get fast transactions, at tiny fees, I think adoption could become incredibly accelerated, making the current valuations look like nothing.

If you are selling something, a non reversible, incredibly cheap, quick liquid transaction is going to be something you love to use and figure out what it takes to accomplish.

The taxes comment is a bit weird to me. A country's currency is typically "legal tender", meaning it has to be accepted as a means of settling a debt. Taxes are just one part of that. That's what drives its 'inherent' value. It's not just that we all believe in it. It's that even non-believers can be forced to take it to settle debts.

Now, if we all stop believing in it, lots of bad stuff can happen, but...

My basic issue with BTC is that, with it's artificial cap, it looks too much like gold standard. History has shown why the gold standard didn't work. Though we all like to blame Nixon for that one, that's not how it went down.

In fiat currency, you create money by giving and taking loans. That is instant, and it helps fuel the economy. Most people can't buy a car or a house with cash. This cash goes to many other workers. Of course, this can get into a wild tangent about who owns the money, where it ends up, and so on.

The problem is that, with an artificial cap, the only people who can own BTC are the people who a) can afford it, and b) live in areas with infrastructure. This unfortunately pushes the rest of the world.

To get the rest of the world on board, there would have to be a mechanism in place to expand BTC, and that would likely require loans, and loans are controlled by a central authority, which well, BTC doesn't have one. Also, what protection do people have from another MtG, and so-on? Sometimes, central authorities aren't a bad thing.

you think? silk road was a thriving market. figure something has replaced it by now.

nerds like drugs too. and ppl who are more cautious, and have less relationships, and are more wary of being ripped off fill a pretty large market.

Very well put.

If anyone is interested in this kinda thing, I've been programming my own Android game. It's a top-down, 2D, sci-fi roguelike.

Play Store link is here

I'm technically calling it in "beta" right now, since there's a few very minor bugs, and I'm just kinda still occasionally adding features, but it seems pretty solid/done to me. If anyone has any comments/suggestions/questions/whatever I'd love to hear/answer! Thanks.

While the number of bitcoin created does have a limit to a whole coin, there isnt an issue with its divisibility. It can go down to a satoshi which according to the stackoverflow response:

"A Satoshi is the smallest fraction of a Bitcoin that can currently be sent: 0.00000001 BTC, that is, a hundredth of a millionth BTC. In the future, however, the protocol may be updated to allow further subdivisions, should they be needed. A Satoshi is 0.00000001 BTC and currently the smallest transaction unit"

Besides that, Mt.Gox was a magic the gathering exchange not a bitcoin or a 'central bank' like its getting referenced to here. The concept of bitcoin is to be the anti-central bank. Mt.Gox somehow lucked box its way into being the place to trade coins and when they started becoming valuable they got hacked into. Go figure, same thing goes for Target and other stores that get hacked for their client's credit card information. But thats not an attack on Targets ability as a store, rather it should work better at security. Thats something that a non-technical magic the gathering site would have a hard time with.

Lastly, most of the movement in pricing in coins, ICOs, etc in this cryptocurrency space is really coming from speculators who want something quick to flip. The tech side of the blockchain hasn't become viable yet. There are companies trying to work on the unique properties to solve certain problems which is why the nerdy/bleeding edge tech guys are all dreaming of possibilities.

I think that bitcoin might become the 'gold' while other currencies are backed by it. Bitcoin is having some issues with transaction fees becoming higher and higher as well as speed of verification which other currencies can do much better like ethereum.