I agree with posts complaining that the comparison to Gold is confusing and off-point. But the claim that each bitcoin may soon be worth hundreds of thousands is computationally reasonable. It is not at all a stretch...

Raol Pal echoes my philosophy. It all hinges on broad adoption, which, for me, seems a fait accompli. We’re not there yet—but the network effect is underway.

If one can convince themselves that Bitcoin will be at the heart of (at least) a universal money transmitting system—not necessarily a recognized currency—then the value is determined by the daily float needed to lubricate the wheels of commerce. That is, just how thin must we shave the 21 million coins so that consumers can buy gum, gifts and homes and so that businesses can move oil, airplanes and software?

I posted this same comment in a LinkedIN group (also discussing the Raol Pal interview), to which Michael Bouchier asked: “How could Bitcoin be at the heart of a universal money transmitting system, and NOT a recognized currency?” Good question! I have observed three schools of thought on Bitcoin:

1. Extreme Skepticism—even derision: Since Bitcoin has no intrinsic value and no authority requires Bitcoin denominated taxes, it is simply a Ponzi scheme...a house of cards.

2. Money Transmitting Instrument: Since the block chain offers bookkeeping and simple division (pocket change) for a provably limited resource, Bitcoin is supremely useful as a low cost money transmitting instrument. But like a debit card or an Amazon gift card, there is some other "real" money that backs it, such as dollars, Yuan or Pesos. It is a money instrument, but not the money itself.

3. The Libertarian View:

Bitcoin is both a transmitting instrument and the money itself. It derives intrinsic value from supply, demand and its own critical mass (the fact that a growing body of individuals value ownership and believe that someone else will value their stake).

In this view, items can be priced in Bitcoins independent of national currency. The wild fluctuations will lessen as a growing number of individuals hold their bitcoins pending their own spending needs, rather than converting immediately into their own regional currency.

Some individuals believe that Bitcoin may eventually destabilize central banks and national treasuries. (If this happens, it does not necessarily mean that Bitcoin would threaten governments or even their ability to tax. It only hastens the redundancy of centralized bodies for monetary policy and control). New York is chomping-at-the-bit to reign in cryptocurrency and issue “Bit licenses” (inadvertent pun). But, in fact, our nation’s Federal Reserve has issued signs of concluding that Bitcoin may represent more of an opportunity than a threat. Nowhere is it written that a prosperous and free nation must control its monetary policy. Ascribing durable value to something that is traded and prized, and yet cannot be printed or unreasonably leveraged may build trust and respect.

Like Raoul Pal, my view leans toward #3. I have also speculated on the natural value of a Bitcoin:

• Calculate Bitcoin Value: Modest assumptions: http://awildduck.com/?p=3223
• Bitcoin Adoption: Series of reactions: http://awildduck.com/?p=3121