Bitcoin Forum

http://www.businessinsider.com/the-fair-price-of-a-bitcoin-is-zero-2013-12

This is a great article and very "to the point" about bitcoin.
Many people will complain about it, detractors who support bitcoin, but the article makes 100% perfect sense to me.

What do you guys think?

My main argument right now against the $1000 value, despite how many I hold and the increased profits I have attained, is the following:

Bitcoin is mainly for 2 purposes.
For a relative amount of anonymity.
For the ability to send transactions, full proof, over thousands of miles, virtually cost free.
Both of those are key values of bitcoin.
However, now there are many alternative cryptocurrencies that accomplish the same thing.

All we need is (1) to work with at any given time and it does not have to be a single chosen "ONE", like bitcoin.
It can be almost any of them that are built to last.

So, if the value is not in the bitcoin itself, then it has no specific value other tha nit's primary purpose for which it's most useful. the ones I just outlined.
Thought?

The actual price is highly speculated. Nobody is buying bitcoins to buy pizzas, they are buying bitcoins to sell them at a higher price for real money like dollars and euros. Maybe in the future this fact will change but i doubt so.

No.

Bitcoin is established.  For people to switch to one of the scamcoins, that scamcoin needs to provide more value than bitcoin does.  So far, none of them provides more value, and almost all of them provide less value, sometimes even negative.

For me, the funny part was when he quoted someone saying they didn't know what the fair price for bitcoin was.  So much wrong with that...

Not making sense as far as my argument is concerned.

I'm saying this....

If you are in Paris, and I am in Africa, and I need a virtual currency to save time and trouble and expense, then I can use any of the dozens of crypto currencies available.
If the price I owe you is $1000, I can send you (1) bitcoin valued at $1000 or (1000) feathercoins valued at $1, it does not matter as long as you get paid.
Now, if you place the feathercoin on the exchange, you sell them and get your $1000 value out of it, or if you cannot do that, you sell them for bitcoin on an exchange and then cash out. the point is, that i'm making, is that bitcoin is being used to speculate on, and currencies that are volatile and do not have intrinsic value that can actually be measured somehow (bitcoin has intrinsic value, but it cannot be measured against the dollar or any other currency necessarily), only serve a purpose for the transfer of money safely and accurately, which bitcoin also does. That means any crypto currency will serve this purpose.

No, he is right. The Majority of people are not buying bitcoins to transact with them, they are speculating on them, which gives nothing but "imaginary value" to something.

Bitcoins have ZERO established value. You cannot value bitcoins at all.
Whatever you say, is pretty much emotional opinion, unless you can state how bitcoins have a established value and how it would be measured, and WHY?

The purpose bitcoin serves, is also served by other crypto currencies as well. You must remember, money is only a medium of exchange unless it also has intrinsic value like gold.
Gold is valued because of the exactness of it's extraction. Bitcoin started off being extracted for next to nothing and tens of thousands were mined for next to nothing, now they are mined with extreme difficulty and cost, and with much less earned. This is NOTHING like gold, in it's mining features, despite how much Satoshi tried to make it similar.

Without an intrinsic value that can be measured, it still serves purpose and has value, but it's different. It has value in it's ability to serve as a medium of exchange. It's speed, accuracy, inability to chargeback, and anonymity and low transaction fee costs. That is bitcoins value, but it cannot be measured in dollars consistently unless all bitcoins were mined at the same value and cost.

Ageed!
And I agree it's value cannot be $0. It has to be something. But it can also be $1.00, or $1000.00 No difference.

You are absolutely right. That's a great point. Bitcoin will expand to whatever it needs to. However, most buying and spending with bitcoin is also based on speculation and issues surrounding speculation. Like mining for example. many miners would not have been sold, and all those bitcoins then never redeemed were it not for the speculation. Nobody is buying 12 million worth of drugs on silk road at a time.

Most of the altcoins do have improvements over bitcoin

Bitcoin is not worth zero. And here is why:

I promise I will buy every bitcoin for $ 0.0001 each. Yes, I have $2,100 set aside and I will buy all 21 million coins for 1/100th of a penny, I guarantee it and will put it in writing if necessary. There, we've established a lower limit for the price of bitcoin because I will buy all your bitcoins for 1/100th of a cent at any time purely for the collectors value of them in case they fail.

But you are not buying them to use them, you are buying them to sell at a (hopefully) higher price, so your argument is not valid. Or at least, not sincere.

This should not be about bulls vs bears, okay folks?

It's about the true value of bitcoin, and speculation is welcomed. But lets not be biased here, please. It's a simple argument, stating that bitcoin is great for transferring value, and even storing value, but it's not valuable in itself to be valued at $1000 or more. It does not make sense to me. Everyone is welcome to post their argument though. Please be concise and sincere.

For any altcoin to do the job as well as Bitcoin does it, that altcoin must have too much mining power for an attacker to outvote the network.

Are there "many alternative cryptocurrencies" with hashrates high enough that I couldn't get a couple hundred thousand dollars worth of hardware and double-spend with impunity?

Which blockchain are miners throwing computation power at? That's the one that you can actually have confidence is atomic and irreversible.

Right now, that's Bitcoin.

All value is "imaginary".  That is, value is a byproduct of mass psychology.  A bar of gold is worth something because other people agree.  I don't care if it has industrial applications.  The value of it is still a human consensus.

And regarding alt coins .. what makes BTC the "best" bitcoin-style currency out there is the mining power.  That hashrate is what makes it the gold standard of crypto.  Without that backbone, BTC is nothing special.

Yes, however, if you are only using it for a transfer of value and not a store of value, any crypto currency will do as long as it has not been hacked, and so far, none of them have been, without the community knowing about it. Correct?

This is patently false.

If even two people have Bitcoin wallets, the value has been established. One phone on earth is useless, as is one computer with internet, but once there are two, things get interesting.

True, however, many products in our society get their retail and wholesale values from the cost of manufacture. And as I stated, with bitcoin, it fluctuates too much from some people to other people, based on when they started mining.

In other words, a bar of gold is worth at least $400, say, because it took that much to mine it, and it never goes below that value, in our society, no matter what. Then you add, shipping fees, and retail costs etc. and everyone is stuck with a small degree of profits and they can decide how much to make and how much to discount, from that. But bitcoin cost some people $100 to mine 10,000 of them while other cost $10,000 to mine 10 of them.

That's the point, simply stated.

I did not say they have NO VALUE, I said they have no "established value" which is completely different.

Top, top answer. +1. Succinct and to the point.

Wow, chuck poo. Read my post.

Can you name a time in history when gold cost less to purchase than it did to mine it?
Just asking.

Market forces determine the value mate. This is how it is established. Therefore, because there are exchanges.. because there is a 'going rate' determined by the 'market price'.. this is in fact established value. The value established by market forces.

No fuck you, suck my dick.
Now can we actually get some communication done?

Sorry, that was an overreaction. Define 'established value' for me, I must be missing something here.

Yes, but market forces may be reality to some people, but that is the same as federal reserve dollar IOUs. I'm talking about what is REAL, and what is imaginary and constructed from the hopeful thoughts and dreams of our competitive capitalistic currency dominated society structure.

When reality sets in....  all those who were hopeful, must come back to reality, and realize that there is no real value in numbers and computational data. It can be used to convey currency or value, by encryption, but it is not currency or value, inherently. Most people here failed at Money 101, I can state that with certainty.

I agree with the first point, and that's why people are prepared to pay more for Bitcoin than say, the equivalent share of Feathercoin.

But I wouldn't go so far as saying its "fair price" is $0... it's like saying "hey, an online payment gateway only has any value if tonnes of places accept it... and that's why the value of paypal is $0"

On another note, say something with genuine improvements on Bitcoin come along, like Peercoin or Zerocoin, the improvements are not going to be so dramatic that every vendor in the world switches at once.

So if in some distant future when some new cryptocurrency comes out that solves some huge problem that cannot be solved with Bitcoin, the price of Bitcoin will still not suddenly drop to zero; people will take their time switching, because all the benefits of Bitcoin will still exist, and it will still be the most widely used.

is scamcoins the new monopoly money?  :D

Thank you.
  Two people can establish value easily. I can say I want to pay you $5 million to dig 2 holes in my backyard, and you can agree to that. I can pay you an IOU for 5 Million dollars. Did we just create 5 Million dollars in debt? Yes! But does that debt have real value? Not much, in the realistic marketplace of commercial paper. It;s usually discounted by 90% or so. Commercial paper can sell at a 90% discount on the open markets.

So, established value is what MOST people agree something is worth, whereas accepted value would have more to do with agreed upon values between smaller groups of people.
Magic the Gathering cards have some agreed upon value between collectors, but are those established market values?
  As long as there are collectors for those cards, yes. So, it's very relative, and just because the cards are worth $10,000 to some people, they are not worth at to most people and that card will NOT get you a tank of gas in Texas if your car is stuck in the desert. But a dozen dollars will get you that because it is widely accepted AT THAT VALUE.

Now, the card is made of paper and ink, and so far, THAT IS ALL it's established value is the value of the paper and ink.
But gold has some more value in tha tit can be used, so it has a bottom, of sorts, and some top, too. But bitcoins do not have a top or a bottom. No values based on anything.

In court cases, in order to get a value for a settlement. one must state what they lost. Everything is factored and itemized.
 If you lost your car, there is a general market value for it, and also whatever was in it, and maybe the investment into it.
 If you were robbed, each item has some value in the market place.
 if you were damaged, your physical goods cost a certain amount to replace.

But with bitcoin, there is no "established" value for it. It is valued at whatever someone paid for it, x what they want to make from it when they sell it.

If it costs you $10 to mine 1000 coins you sold them for $100 because it costs you $10. If you mined them and it costs you $10,000 for the miner, you sold at no less than $1000 because you needed to . That is relative value not established value.

That's what I mean.  :)

I can accept the rest of what you said pretty easily, but the part I bolded gives me pause.

Where do you draw the line between 'smaller groups' and 'MOST people'? Based on what you said, virtually nothing has an established value. I am certain, for instance, that if I brought a one ounce gold coin to 10,000 random people, one at a time and asked them what they would pay for it, I would get wildly different answers. A man in kenya might offer me two goats, a man on wall-street might offer me $1300. If 'most people agree' is the requirement, then no, Bitcoin doesn't have an established value.

I think what is much more relevant though, is the agreed upon value that most people who actually own Bitcoins, and those who wish to, have reached.

Why would it matter what somebody who doesn't own, or even want to own Bitcoins thinks the value is?

My first response, comparing Bitcoin to early telephones seems to address your point.

Ok, well, then that makes sense. Value within a relative time perceived.
The value of bitcoin might be $1000 today, but in 1 week, $100 because there are many other alternative cryptos around to "fill in the gaps".
And please do not assume i'm a crypto alt promoter. I own only btc at this time.

Yes, the pager was valuable for a few short years. It sold hundreds of millions and now, nobody has one anymore, because all phones have them built in, kind of. So, it's been made obsolete. Bitcoins may not be far off from that.

My response is to the article, not to the OP and discussion that followed.  They are two separate things and I decided to leave the latter as there are plenty doing a good enough job refuting the OP's points.  This refers to Eric Tymoigne:

Rarely has one who 'knows' so much understood so little!

Greenspan couldn't get his head around 'no intrinsic value' either but at least he didn't take forever to get to it!

'Bitcoin is supposed to be this and here's a complex equation that proves it isn't this therefore Bitcoin is rubbish'!

This is a classic, even beautiful illustration of how those stuck in incompatible economic paradigms will be the last to accept this thing simply works!

The bolded part.. thank you for that. My feelings exactly.

The fair price of Bitcoin is zero dollars.

Because eventually there will be no more dollar, but there will be bitcoins.

OP, please watch again the Matrix movie on what is real and what is imaginary, could help a tiny bit :)

Hmm, I have to disagree here.  Just because I spend a million dollars to excavate clay from the ground doesn't make it valuable.

That bar of gold isn't worth $400 because it took X number of dollars to mine it.  Rather, its value is what prompted a business to mine it for a profit, taking expenses into account.  If a profit can't be made, it doesn't get mined.

And it's interesting that you use gold as an example here, because this is precisely what we see in the gold market.  It takes more and more money to extract gold from the ground.  The easy pickins are long gone.  So, if someone wants gold, they will have to pay a premium because for someone to mine it, you have to spend that much more.  But make no mistake, it isn't the act of mining that makes it valuable .. it is the scarcity and expectation of future value that incentivizes the miner to mine for a profit.  You could blow a billion dollars trying to find a perfectly square rock .. and let's say you find it.  Is that perfectly square rock worth the money squandered to find it?

My point, simply stated .. is that value is an illusion.

Imagine if bitcoins were backed by a hard asset like gold or megawatt-hours.  They would only be as valuable as their underlying asset.  People tend to like this because it limits inflation.  However, there are downsides to it.  If the market is flooded with gold due to a better refining process or there is a breakthrough in energy production, your currency crashes.  As crazy as it sounds, it is better to have a currency insured by nothing more than a protocol.  

Yes it was $0 on the launch day and a few days from then. Once the first few groups of people read about it, used it, they started valuing it.
I have no idea how this dude comes to a fair price of $0 with some random math equations out of an economics text book.
Current Economics is voodoo science at best. These are the same kind of acads who like to simply everything and model regular people  as rational agents.

Nothing has intrinsic value.  Much like smell or taste or beauty, the value of a thing exists inside the brains of humans, not in the thing itself.

At first glance to the untrained eye, this idea would seem logical and make sense.  However, taking a look at gold, we can see that it is one of the most precious metals, yet it doesn't necessarily have the most usefulness nor rarity out of existing metals.  Why? because the masses acknowledge it, and it is a snowball effect that is hard to break.  Bitcoin is similar, but much more fragile.

Well, there is one thing can be fairly accurately measured. And thats the amount in fiat currencies backing bitcoin directly via buy orders in exchanges.
Currently there are about $35M worth of buy orders on Mt. Gox. Gox trades about a quarter of all bitcoins so for a ballpark estimate assume it also holds 25% of all fiat backing BTC via buy orders.
So we get about ~$140M backing backing ~12M BTC. No matter how many BTC you have, it is impossible to sell more than $140M worth of BTC currently.
Or, on average ~$12/BTC. Thats the average everyone would get per coin if everyone sold out right now.
So, basicly what a BTC was worth about a year ago ...

I might be misinterpreting your definition of "hacked", but I still disagree.

First off, using it as a store of value is irrelevant; transfer of value is exactly the scenario in which a 51% attack (or a probabilistic 30% attack or so forth) matters. Once the coins are in your wallet and buried hundreds of blocks down, reorgs are not really useful to an attacker except as an act of terrorism.

Second off, a lower-hashpower, lower-confirmation-time blockchain (e.g. nearly every altcoin in existence right now) is more likely to reorg in regular use, which means it's easier to claim (while wearing your mining hat) that it was a bug or an error rather than a deliberate 51% attack to facilitate a double-spend.

So, you're completely ignoring first mover advantages and network effect?

I could make five million sites just like amazon.com with very similar properties to Amazon.com, yet only Amazon.com will succeed.

*YAWN*

The next question is volume of trade of specific coin, your friend is less likely to get back $1000 from the feathercoins than bitcoin. Alt coins are much more risky to price manipulation