Bitcoin Forum

About every ten minutes, a lot of computing power competes to find a data-specific solution. The solution is a time-marker that incontrovertibly proves that anything that uses that solution could not have existed before that moment, and that all the data specific to it must have existed before. We get one every ten minutes. That is what the consumed energy produces, and it's far more valuable than the energy used to create it.

A bitcoin mined since November of last year is worth 1/25th of one of these markers.  A bitcoin mined before then is worth 2% of one of them.  This is real intrinsic value.  It's potentially more valuable than anything I can imagine backing any kind of money.

I'm looking for better, simpler, more concise and obvious ways to explain this so that people who have trouble understanding why bitcoins have value can see it more clearly.

I'll go right brain for a sec.  You know those photos of a person holding a newspaper with a date on it that are used to prove that something happened after the date on the newspaper?  That's what bitcoin does, but it makes one of these snapshots every ten minutes.  The photo shows lots of stuff that was very obviously in existence on or before the newspaper's date.  Everything that incorporates the photograph very obviously was made on or after the newspaper's date.  Bitcoin makes one of these photos every ten minutes, but they aren't susceptible to corrupt newspaper manufacturers or even photo-shopping.  What is the value of the level of certainty provided by this system regarding the timing of whatever anyone wants to record with a timestamp?

Or really right-brained:  Bitcoin digitizes the timestream so that any information can be permanently recorded as existing before or not existing until a given point in time.

I thought of this after watching this youtube video: Bitcoin vs Gold&Silver (http://youtu.be/lRpwRpLdLDc).

You can't redeem that Bitcoin back for the computing power used to create it.  The computing power spent to create a block doesn't create any more intrinsic value than the paper and ink costs at the Federal Reserve does.

You could say the UTILITY creates intrinsic value but it is a broader definition that most people would use.  The ability to transfer wealth anywhere in the world without restrictions and at high speed and low cost is valuable.  The network or what the network allows has value.   

Also see:

http://buttcoin.org/wp-content/uploads/2013/05/BitcoinWorthless640.gif

A Bitcoin is 1/25th of the reward for creating a block.

Bitcoins have value because there are people who are willing to trade goods or other currencies for them. That's not intrinsic value. Bitcoins don't have any. If nobody else was using Bitcoins, they'd be useless.

What intrinsic value does a car key have? It's useful for driving, but intrinsically worthless.

Perhaps intrinsic is the wrong word.  The block reward is the set of bitcoins that are produced (as specified in the protocol) for creating the marker.

Does the hash in the blockchain that can be incorporated into data to prove that the data was compiled at a point in time after the the block was solved have any value?

Does the hash in the blockchain can (and does) incorporate data to prove that the data existed before the point in time that block was solved have any value?

This has has value to me, and it seems it has value in establishing timelines of all sorts, even though we're all using it only to keep track of when bitcoins moved from one address to another.  I suppose it isn't intrinsic because I can use it whether or not I have any bitcoins at all, but the value is produced because of the (miners') desire to get the bitcoins, and the bitcoins they get are intimately (and permanently provably) tied to that hash.

Mike Maloney's contention was that the energy used to create a bitcoin is actually a loss (to the world, I imagine he implied).  My contention is that while the energy is lost (though paid for by the miners - a point which he seems to overlook), what the world gets in return is that very valuable timestamp hash.  I suppose it would be wrong to say everyone holding bitcoin has consciously agreed to dilute the value of their holdings to pay each miner who solves a block, but they have certainly agreed implicitly.  What of people who have no holdings and don't care?  Does the value of that timestamp more than make up for the loss of energy for them? Probably not yet, even though the miners pay for that energy.

Maybe that is where my thinking is going, and why I started this thread. 

In a sense yes. Not on itself but the ability to do so.

Regarding Bitcoins and gold, it's important to keep in mind that neither has "intrinsic" value.
Rather, both are valued by men for their unique properties.

Gold is:
* Divisible.
* Fungible.
* Value dense.
* Recognizable.
* Durable.
* Zero counter-party risk.
* Stable in supply, yet minable.
* Liquid.
* International.
* Non-manipulatable. (Non-centralized.)

By comparison:
* Diamonds, while valuable, are NOT divisible, nor are they fungible.
* Water, while valuable and divisible, is not value-dense enough to compete with gold as a form of money, on the free market.
* Food, while valuable, is not durable.
* Dollars, while liquid, do not represent zero-counter-party-risk (rather, they are debt-based.)
* Dollars, while recognizable, are not stable in supply (inflation is a worry).
* Dollars are also not minable. (Production is available only to a monopoly cartel, versus gold, which anyone can produce.)
* Food, which anyone can produce, is not liquid, especially in comparison to dollars or gold.
* Dollars, while you can hold them in your pocket, a board of bankers still has the power to reach into your pocket and manipulate its value. (This is not the case with gold.)

Soon it becomes very clear that gold was never "declared" to be a form of money by any "authorities" but rather, became money due to natural market forces.

If gold became money strictly due to natural market forces (as a result of its unique properties) then clearly the only reason it has been supplanted by dollars is due to artificial restraints imposed on the market by government force. (Such as legal tender "laws", tax "laws", money laundering "laws", etc.)

Such forces must be constantly active, otherwise, natural market forces would immediately resolve back to gold again as they have for thousands of years.

Now let's consider Bitcoin's unique properties:
* Divisible.
* Fungible.
* Value dense.
* Recognizable.
* Durable.
* Zero counter-party risk.
* Stable in supply, yet minable.
* Liquid.
* International.
* Non-manipulatable. (Non-centralized.)

AS WELL AS:
* Non-confiscatable.
* Accounts cannot be frozen.
* Anonymity is possible.
* Electronically transferrable.

As you can see, Bitcoin's unique properties are similar to those of gold, although it adds new properties due to its ethereal nature.

Those new properties (non-confiscatable, non-freezable, pseudonymous, transferrable electronically) all serve to route-around the artificial forces that are currently being used to supplant gold with the dollar. After all, the various immoral, legal-tender legislation in place today uses the force of a gun to impose fiat money onto an economy that would otherwise resolve to gold by natural forces. That artificial force depends on the government's collusion with banks and their collective monopoly on the ability to issue, store, freeze, confiscate, track, and transfer dollars.

Bitcoin has no greater intrinsic value than any other currency but it has greater utility in the modern world, the same way email has greater utility than traditional mail.

The intrinsic value is its features and utility. This is why precious metals became currency for thousands of years, because it had features and utility that are good for being used as a currency, therefore gaining intrinsic value. Some thing that is rare does not equal to intrinsic value, for example a 800lb human is rare, but not really valuable.

I'm with you 110%. It's an example of the paradigm shift that bitcoin can bring. It's the coalescing of the tcp/ip stack and html.

You are taking a peak under the covers. EVERY 10 minutes irrefutable proof of what was before and what is not after is generated. What value does that have? I don't know, but I know it does have value.

looking at a bank note from a real working human beings perspective. i personally dont see a bank note as being x grams of gold, or y worth of government debt. or even z worth of computer parts or bread i can buy.

i see it as the A amount of minutes/hours i had to work to get it in my salary plus the quality of that time based on my expertise/skills.

so for me the best guess for the lowest intrinsic value of a bank note is mimimum wage..

look at gold. the miners dont just throw a random number out, they look at the price of the excavators, the deisel used, the costs of digging on the land and the time taken to then get gold.

they set this as their minimal value of selling it to traders. ofcourse they will try for more.. but for the lowest value point the  is basically the labour costs of digging gold.

no one, unless insane or having no other choice would happily sell at a loss compared to creation costs.

the same with bitcoin, there is speculation (bitcoin high price) but if you look at the low price and put some thought behind it, no sane person would sell bitcoin cheaper then the electrical/time costs of making that coin. making mining costs the intrinsic value, much like minimum wage is for bank notes

so don't worry about bitcoin high prices as they are pure speculation. use the low price as your bases of value. bitcoin bubble of 2013 never burst as the true value has been on a constant rise
http://i41.tinypic.com/2hzwpf.jpg

Not true. See Uses of Gold in Industry, Medicine, Computers, Electronics, Jewelry (http://geology.com/minerals/gold/uses-of-gold.shtml).

No, as said these are entirely different things.
Golds intrinsic value comes for its inherent usefulness which any physical material has to some extent.
Intrinsic value does not apply to goverment issued money there it is backing which is a guarantee of the ability to settle debt with it and it is required to pay taxes, both of which is enforced.

Neither intrinsic value nor backing does apply to Bitcoin. However Bitcoins have utility, that is the amount of people interested in acquiring them and the economic activity associated with it.

Now this I can agree with, Regardless the momentum and rate of adoption should keep things bubbly. I still question bitcoin when transactions with a .003fee still take 30+minutes to clear, and the fact so few people use bitcoin for daily goods/store of value.

The store of value will take atleast 10-15 years to determine if the people want this.

 

Definition of 'Intrinsic Value'
1. The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value.

golds true value comes from its costs. its then the markets that play around with the price due to how useful it is... hint supply and demand.

EG.
gold miners would mine it. and sell it to markets. they would NEVER sell it at a loss of how much it cost to dig it up. so thats its actual intrinsic value.

the markets will THEN see there is lots of demand so the markets will see an opportunity to raise the price because of demand (usefulness). this is not true value... that's market value

EG. a business may have a billion dollar idea.. thats its market value. but currently the actual assets of the business are only worth 10million. thats its intrinsic value

bitcoin miners asset are its gpu's, electricity and time taken. calculate that together to get its intrinsic value. once sold the markets can play around with the price due to demand.

So here we are today a bitcoin is worth 117. Yesterday it was worth 130. What changed?

speculation price/market price changed.

intrinsic value has not.

check out my chart. u will see each month the low (intrinsic value). now draw a line to June and that will put a estimated intrinsic value of about $110.

meaning the point where no one is dumb enough to sell below..

so expect price swings ABOVE $110 but if it goes below $110.. then that is where you should be asking what the big problem is.

anything else is just speculation based on supply and demand

franky1 you are confusing 'value' with 'cost'.
Value (economics), a measure of the benefit that an economic actor can gain from either a good or service (http://en.wikipedia.org/wiki/Value)

Bitcoins does not provide a gain based on the effort that is taken to create them. A bitcoin on it's own does not even provide any benefit, only the properties of the network can provide one.

addendum: You can also not imply that the value must always be larger than the cost, it is normally true under sound economical conditions, but this is not always the case. Certain "renewable" energy sources for example, like alcoholic fossil fuel substitutes take more energy to create than they provide historically. This is possible because of irrational market participants like politicians who provide subvention for these technologies.

Value is a subjective concept, just like intrinsic value of USD, some people think it has lots of value, while some others don't

Currency's value is a consensus, what you can benefit from a bitcoin depend on how many other people are accepting it as a payment medium, and how high they value the bitcoin

But you can't really compare a miner's work with a baker's work and get a rough estimation of the value of one bitcoin. Mining, especially customized hardware mining is a complex job, involves lots of computer and network skills. And no matter how many smart miners are working, the amount of coin generated per day is always the same

So it is impossible to value bitcoin from a cost perspective, electricity and hardware investment is only part of the cost, people tends to forget about the man hours that put into mining

Only through supply and demand, there is a way to roughly decide the value of bitcoin

There are some fundamentals that affect bitcoin's demand:

We are entering a deleveraging era, after financial crisis, many people start to pay back their loan and save for their pension, bitcoin is a good candidate for saving due to controlled and limited future supply

Central banks can not exit their QE easily, people already get used to free money, if they stop it, economy will fall back to recession, this means fiat money will get constantly inflated in the foreseeable future

More and more people start to discover the FRB and banks' scam through money printing, they will find alternative to spread the risk, gold/silver have already been lifted quite a lot but bitcoin is even better suited for the task

So, supply is fixed and demand is increasing, that is the intrinsic value of bitcoin

Value, to its root, is a psychological phenomenon: "I like it, I want it", just because people like it, want it, it has value

Does electricity have intrinsic value?

It's 2013, we live in the "information age". Tangibility has become irrelevant.

value is as you say and the value to a miner has to be above its COST or is not any beneficial value to them to mine any more. hense the LOW price is the beneficial value to miners to keep producing.. same story goes with farming too, there is a cut off point where farmers will give up making and selling their harvests. and thats the intrinsic value of the food you eat.

not the retail price you see at walmart!!

this is where market makers and profiteers have warped peoples minds to make you believe their inflated prices are of value.
where you see retail shops offering food items £$1 more expensive then their competitor but if they put a "value price" sticker on the price tag, the sheeple think its automatically the best price they will find as its not worth the retailer selling it if it was any cheaper.

plus i never said the price will never go below $110 what i SUGGESTING is that if it goes below the mining cos profitability then that is the point to start asking questions about bubbles bursting or whats the big news story that could cause this. anything above mining cost/value/profitability line. is based on mark makers playing with the price. which you should all calm down about and not 'worry' about the swings, just use them to your advantage to gain profit from if day trading

No the intrinsic value of the food I eat is the calories, vitamins, proteins, taste, texture and smell. Intrinsic value is always at the consumer end. Items can have the same intrinsic value if it costs a fortune to make or is practically free.

God guys,

Sorry I used the term.  "Intrinsic" is just another word that we attempt to use to communicate.  Apparently, it's not a very useful one as an adjective for "value".  Perhaps because value itself is subjective.

It always bothers me to see people arguing about the meanings of words.  It's so academic and pointless.  The important stuff is what the person who wrote them meant.  If all they mean is "the meaning of this term is not what you think it is," nothing more needs to be said, and the speaker can be a bit more philosophical about it (Sorry Inugo Mantoya): "That word does not mean to me what it means to you."

What I meant to point out is that since November, every new bitcoin represents 1/25th of a marker that can be used to prove data existed before or after a point in time, and that said marker is valuable to me.

THANK YOU MINERS!

No, what you describe is an intrinsic property, not intrinsic value.

The economic definition of intrinsic value goes along the lines of: "a property that has immediate and non-economic value to you".

So say you have a gold coin.
You can use it as relative value in an economy by bartering it.
But it has an intrinsic value of being made of gold and you can use that to make a nice ring or to appreciate its shinyness.

Another example: a potato.
If you eat it you use it for its intrinsic value.
If you sell it you use it for its economic value.
And then the buyer can use it for its intrinsic value (eat it) or for its economical value (sell it on).

This all becomes confusing with bitcoin because bitcoin is information and its purpose it to offer economic value.

I think that with bitcoin you need to make a distinction in what you call bitcoin.
There is bitcoin as in how many you currently own and there is bitcoin the p2p currency system.
If you own a couple of bitcoin then their intrinsic value is basically nothing. They are just some numbers in the blockchain and they are not usefull outside of the bitcoin system.
But this system surrounding the blockchains (the clients, the miners and the networks) does have some intrinsic value.
It provides for a mechanism that has some definite numerical properties that can be used for other things than bitcoin.

This system, this confidence it provides, also provides a foundation for merchants and traders and consumers to come together towards an increasingly frictionless means of trade.

YES!
Let's just agree that whatever someone else says is just the same thing as everybody else says but with their words having different meanings.
That way everyone will understand each other all the time and the world will be a better place...

Sure, but that is still its economic value.
Opening this space is an important property of the bitcoin system as a currency.

Sorry I skipped over most of the thread. What about the philosophy that lies behind Bitcoin? Is that not an intrinsic property of the protocol, that we should not be subject to tyranny under the money controllers?

Definitions are important!

I think you're spot on calling this an intrinsic value.
You take some property that is not strictly economical and use it for another purpose.
The only thing that is kindof unclear is whether intrinsic value requires to be consumable.
What i mean is whether the fact that your re-use of the chain does not consume the information you use means it is not intrinsic anymore.

I mean, take a photograph.
It can have intrinsic (emotional) value for you.
If you then sold a copy of it to someone, would that per se reduce its intrinsic value to you?

I don't think so because intrinsic value in some way should contrast with economic value. That is the purpose of defining something as intrinsic value. It is that part that is not used to act in an economy.
It gets interesting with information because you can copy it. So you can enjoy the informations intrinsic and economic value at the same time.
So i guess that with information we need to take this overlap for what it is.
Intrinsic value then becomes simply that what you can extract from a piece of information that is beyond its economic value. And economic value is simply the value for which you can barter the information.

Can you not extract the freedom and flexibility that this provides over our current alternatives? How else do you send money to another country without paying fees (assuming Bitcoin is a money)? The value of a bitcoin is almost universal as you can trade it anywhere, which would be an economic value, but  the freedom of actually transmitting that value is beyond the economic value that the value of that bitcoin has (ie what it can buy).

I think :) Let's keep going

The freedom you talk about is part of the bitcoin currency. So i would still call it economic value. It is a value that flows from the use of bitcoin as a currency.
Think of it this way: The fact that you can sell a sandwitch in every country in the world does not give it more intrinsic value. It gives it more economical value.

Regarding intrinsic value, *shameless plug*:  http://www.whyisntbitcoinworthless.com

Already noticed.
https://bitcointalk.org/index.php?topic=223120.msg2345390#msg2345390

Cash (or many kinds of coupon) does not have any intrinsic value, but as long as someone is backing it and provide some utility, its value is recognized

Bitcoin also need a strong entity backing it, that's the people who are willing to accept bitcoin as a payment and provide products/services

That GIF link hasn't worked before, and still doesn't. Keeps giving 504 errors. Because people who use "buttcoin" know computer stuffs really good like.

Counter questions: What is the intrinsic value of an ounce of gold?

Gold does not have "intrinsic value" per se. Rather, men value it subjectively due to its unique properties (which are objective.)

Thank you. You answered the OP's questions as well. /thread

No, not /thread


In my opinion what (potentially) makes bitcoin valuable over other currencies is definitely its intrinsic value:
privacy, decentralization, unregulated with option to "opt in" to regulation, peer validation, universality, as op mentioned "digitizing the timeline."

It has other intrinsic values that (potentially) makes bitcoin borderline useless:
need for non-laziness, tech awareness and requirements, security... for example.



I don't think there is any vagueness with the term "intrinsic" ... there are properties to a bitcoin that are not removable from bitcoin. They're not arguable, they're part of the definition of a bitcoin.

What those values are worth? Of course that's subjective. You might as well say the intrinsic value of a bitcoin is TREE FIDDY.


other currencies don't necessarily have intrinsic values, but they can. You can stretch the definition of a currency, aka,"iPhones as currency."

Intrinsic value-ness has nothing to do with subjective vs objective.

Eating a sandwich for its intrinsic value is very objective if you can't barter it for more food.

It depends on the personal choice of either using the object for your own needs or use it as an instrument in the economy.

I think that originally it ment to signify what percent of a good would be rotating through the economy as a token of value and what part would 'stick' in the hands of the traders with the intentio of being consumed.
Its a kind of liquidity index.
You get interesting questions like what happens to the trade of foods during a famine.

A Bitcoin's intrinsic value is 0
A car's intrinsic value is the metal (and other material) it is built of

This is how it is in the real world and even if you would like to believe otherwise, you can't change it

You are confusing intrinsic properties with intrinsic value. (don't worry, happens all the time)
These are two completely different concepts.
One is physics and one is economics.

Intrinsic property is stuff like that lead is heavy or that grass is green or bitcoin requires tech awareness.

Intrinsic value is when you can do something with your bitcoin that would prevent you from using the bitcoin as an exchange of value.
So, if you would break apart your hard drive with the blockchain and you would mount a magnetic head on the disc and play back the bits as if they were sound then that may have intrinsic value for you.

So intrinsic value is about choice.
Do you barter away the object as an economical instrument or do you keep it and make use of its intrinsic value?
There is nothing about this choice that is inherently objective or subjective.

What's the use of that metal if it just sits there and doesn't do anything? I don't see any value in that at all.

To sum it up, bitcoin has zero intrinsic value. But the fact it can be used to hold wealth in an intangible space. That is beautiful.

Bitcoin pushes the limits of universal properties of money. This is one of those inverse relationships. intrinsically worth nothing, yet it holds a very deep value... Especially how new bitcoin is.

You cannot decide if bitcoin has intrinsic value simply because whether something has intrinsic value is decided by the owner.
So at most you can claim that you find no intrinsic value in your stash of bitcoin.

No it's only something universally recognizable which can consist of intrinsic value. So it's quite the opposite.
Only under your definition your latter statement makes even sense.

I don't think you could come up with a satisfactory definition of 'universally recognizable'.
Basically what you're saying is that something can only have an intrinsic value if the rest of the humans would agree (if asked) that it has this value.
According to your definition, if someone eats a collection of spiders because she's hungry then those spiders as food would not be intrinsic value because there is no universal consensus on individual basis that spiders are valuable as food.  Yet, i can imagine situations where someone would find intrinsic value in eating them.

I think that intrinsic value is per se in the eyes of the beholder.
Then, of course, you can start playing the game.
Do i value it less for the intrinsic value than someone else and can i gain more economic value out of the object by selling it for its intrinsic value.

But i don't think it is nessesary or wise to make 'universal recognition' part of the definition.

What this universal recognition actually is is the basis for the economic value. It is how valuable something is to the market in general.
You may not like fish, so it has no big intrinsic value for you. But you also know there are lots of people that do see this intrinsic value in fish.
It means you can sell the fish for its economical value (the value the market in general gives it).

Intrinsic value as used in 'economics' vs subjective value used in your thought experiments.

Yeah works out.  ::)