Bitcoin Forum

Nobody ever complains in a casino "my chips aren't made of precious metal". You don't need to make casino chips out of precious metal... as is proven by the lack of any complaints in a casino chip system. The tokens are issued 1:1 with collateral. Inflation in this way... is impossible. Yet the tokens themselves are used to transact real value... upwards of millions of dollars and there is never a problem. How is it that a valueless token can facilitate the transaction of so much value with nary a problem? Because that is what money is designed to do. It's simply meant to make exchange easier. The value of the tokens is so consistent because the supply of them is controlled in an exact manner. They are simply not fabricated and given out on whim.

What makes gold valuable and useful for money is it's scarcity. And that scarcity means that if gold is what is backing a money supply, then the scarcity of that money supply is also controlled. A gold backed money supply puts automatic limits on the creation of that money... much like how bitcoin has automatic limits based off the rules of the network which everyone participates in because of their own self interest.

http://www.reddit.com/r/Bitcoin/comments/1ay8pe/the_intrinsic_value_myth/

I consider the belief in intrinsic value to be a form of magical thinking at best, or a self-serving strategy of inflating the exchange rate for gold at worst.

The "intrinsic value", "final demand", "regression theorem", "backed by X" arguments are all correct arguments if they say that something must be intrinsically useful for it to become a currency. Indeed, any non-useful (non-demanded) thing will vanish from the economy by-definition, so these arguments are not as constraining as they may initially appear.

For some strange reason, though, people do not understand Bitcoin's huge intrinsic value. Just as gold can be made into jewelry, Bitcoins have intrinsic properties that let them zoom far away into another country, produce unfakeable signatures or timestamps of documents, and/or vanish entirely and become stored in your mind. They can contain and execute their own last will and testament, they can be assembled into a contract and legal system. They are born into the world at a perfectly predictable rate, and they are indestructible.

To justusranvier 's point: Indeed, the myth that 'Bitcoins have no intrinsic value' (which is obviously untrue) is put forth by sheep from the gold world. They are losers who repeat the arguments of the Austrian school without understanding the logic that originally generated them. That's the end of the story.

What puzzles me is why this 'Useless Bitcoin' theory is lasting this long. Can anyone explain that?

I found that most people only concentrate on 1 or a limited number of aspects of the Bitcoin ecosystem. They cannot comprehend the "full picture" and what it brings to our lifes.

My point is that "intrinsic" value does not exist. All value is subjective and depends on the needs and desires of a particular individual at a particular time.

Gold has no value unless there's a person around who wants some property that gold possesses. Therefore the value is not intrinsic to gold.

You can replace gold with any other "store of wealth" in the above example.

I quite agree, but it seems to me there is an implicit logic along the lines of:
High intrinsic value: can be used for many tasks that we can be expected to perform during our lives.
Low intrinsic value: can only be used for few or esoteric things (eg "I enjoy looking at my Bitcoins") that are done infrequently.

...and this logic has some underlying objectivity, doesnt it? Food has intrinsic value to all humans because all humans prefer to eat food by-definition.

My point is that Bitcoin DOES have crazy amounts of value for things that we need to do right now, so even allowing nonsubjective value the argument for 'Useless Bitcoin' is obliterated.

I agree with the approach, but think the word "intrinsic" should be replaced with something else more suitable because it tends to confuse people.

Using "intrinsic" you get people saying things like, "Gold has been valuable for 6000 years therefore it will always be valuable."


I agree.

Utility value.

I saw this kind of crap pop up on the recent Slashdot Bitcoin article.  (but what can you expect from commenters on Slashdot).  The funny thing about it is that one of the reasons that gold is such a good medium for storage of value is because of how limited its utility actually is.  There is certainly argument that it would be used more if it were cheaper, but the fact that it is not used and held up or otherwise "destroyed" from the perspective of gold supply is what keeps the supply more stable and makes it a good means of wealth storage.  Gold has more value as a currency than it does as a material of industry.

Bitcoin is the same way just to a more extreme degree.  Its utility as a currency far exceeds its utility as anything else.  I think people underestimate the importance of currency utility and I think people really overestimate the value of the non-currency properties of gold.  For instance, jewelry isn't worth crap beyond its melt value and that statement gets more and more true when people have to part with luxuries.

We don't really know what the market price of gold would be if central banks didn't hold huge quantities it, a fact that a lot of the "free market" Austrian economists conveniently ignore when they sing the praises of the gold standard.

it's all makebelieve  ;D

+1 Gold has no value unless people want it. That being said, gold is real, tangible, and cannot be counterfeited either by government, or by others.

Are you sure about that?

http://www.businessinsider.com/tungsten-filled-gold-bars-found-in-new-york-2012-9 (http://www.businessinsider.com/tungsten-filled-gold-bars-found-in-new-york-2012-9)

Haha, in general. ;D What I mean is 7% new gold can't pop out of thin air like what the fed does to the dollar.

Actually, we can take a good guess based upon the floating market value of silver.  Since silver is a commodity that is currently used by industry (unlike gold) a portion of silver is "consumed" by the production of consumer products.  Meaning that some amount of silver is incorporated into consumer products, and the recovery of much of that silver is (presently) difficult and expensive.  Silver mining has failed to keep up with industrial demands for decades, so the "above ground" stocks have declined over the past decade or two despite ongoing silver mining projects.  Silver, however, no longer has much of a monetary premium, if at all.  It's simply not what most people think of when they think of 'hard money'.  Currently, there are fewer above ground troy ounces of (economicly recoverable) silver stocks than that of gold. 

Yes, gold is more abundent in a mined and refined form than silver in our modern world. 

So if gold were to suddenly and completely lose it's monetary premium the world around, it's safe to assume that it's exchange value would seek a market value at or below that of silver over time.  As it does so, more industrial uses will become economicly viable until it finds a new place as an industrial metal just as silver & platinum have already.

To some degree, gold is already used in very niche industrial products, but only where it's use outweighs the cost and difficulty of developing a cheaper alternative material input.  I have no doubt, that if gold were less than silver per ounce, we'd see gold plating on ocean ships quickly.  It's immunity to saltwater corrosion would not be of small value.

+1 for the self-serving strategy of inflating the exchange rate for gold.