Strangely enough, your argument is sound because your premise is false and your conclusion is true 1) FALSE: "the sun's intrinsic value is based on a human's need for it to survive" 2) TRUE (more or less): "the sun's value to a particular human is dependent on that human's valuation of his own life".

Your argument is valid only because every false premise logically implies every true conclusion. For example: If the sky is pink with green poke-a-dots, then dogs are mammals.


Yes, the sun's value is subjective. But its value is not intrinsic.

Agreed, but I can't believe this discussion has gone on for so long. Nothing has INTRINSIC value. It's ridiculous. As shown above, "intrinsic" refers to the inherent or immutable properties of a thing that are in its very nature - regardless of who or what is or isn't in relationship with that thing. Things like mass and temperature are intrinsic properties. The fact that people grow old and die is an intrinsic property of being human. I like chocolate more than strawberry not because of some intrinsic chocolate-superiorty property of the ice cream. Little Veronica may be pretty, but she is not intrinsically pretty. Value, like beauty, is in the eye of the beholder.

To the people on the other side of this argument, saying that something has intrinsic value to someone, is a self-contradictory statement. You're basically saying that the value of a thing is both immutable and unchanging regardless of observer AND also has some variable and relative relationship with the observer depending on who that someone is. You can't have it both ways. But, of course, the sentence makes perfect sense if by "intrinsic" you mean "widely agreed upon" (which is what I think you mean). Intrinsic has a very narrow and precise meaning. It's tough enough discussing complex topics, but being hampered by disagreements about the basic definition of words is a serious waste of time.

But you're wrong. There is no such thing as intrinsic value. You need an economic actor to be involved. And everyone assesses value differently. But yet you still seem to dimly understand that value is subjective: "It [the sun] has intrinsic value to us". You simply assume that everyone values the sun equally (due to some property of the sun called "value"). Not true. A suicidal person - seconds before putting a bullet into his own head - does not value the sun at all. To him, the sun has no value. So, if even one person thinks the sun has no value, and someone else thinks the sun is very valuable, then logically the sun can have no intrinsic value.

Economically speaking, there is nothing special about survival. The desire for, manner of, and value of one's survival is subjective, and so too is the value we subjectively assign to those things that facilitate that survival. As an aside, our differing assessments of value is what makes economic trade possible. In economics it's called "double coincidence of wants".

For example, if I want a cancer drug to cure my cancer, and you have a bottle of it you are willing to sell to me, then I need to value my money less than your cancer drug and you need to value my money more than the cancer medicine that you possess. We must value each others possessions more than we value our own. Only then can trade occur.

This was Aristotle's mistake. He (and all the ancients) believed that trade occurred when two people recognized the equality of the intrinsic value of each others possessions. But this failed to explain commerce satisfactorily and also led to the classic paradox of value (http://en.wikipedia.org/wiki/Paradox_of_value) also known as the diamond-water paradox (since water is essential to life, and diamonds are not, why are diamonds considered more valuable than water?). Carl Menger solved problem. The answer is here specifically: http://mises.org/Community/blogs/lilburne/archive/2009/07/12/231498.aspx, and here generally: http://mises.org/Community/blogs/lilburne/pages/224503.aspx.

Sounds normal. I usually hover between 50 and 60 connections, but I limit my entire network outgoing bandwidth in my router (my ipcop linux box, actually) to 500kbps. I leave my machine on 24x7.

I'm also on Win7x64 SP1. Using Bitcoin v0.8.1-beta Build date: 2013-03-17 15:35:36 -0400.
No problems.

All value is subjective: http://wiki.mises.org/wiki/Subjective_theory_of_value

I think this is a very important area of research. I, for one, do not mine, but I keep a 24x7 v0.8.1-beta client running (to strengthen the network). It usually has 50-60 connections. I limit my total upload bandwidth to 500kbps. I would be very interested in knowing many of the things you alluded to. Maybe the client could be enhanced to gather and display network data in the same way that it gathers and retains Bitcoin transaction data. That way everyone would know that they were running on the same network (no bifurcation had taken place) - among other many other things.

agentbluescreen,

I have struggled mightily through several of your posts, both here and elsewhere on this site, and I humbly request that you drop down your 165 IQ a few notches for us mere mortals. Your poetic prose seriously obscures your (presumably) intended topics of discourse, namely, "pyramid schemes", "slavery", "equivalence of  labor and value", "securitization", "stability of the value of money", "speculation", and on and on.

Maybe you could provide a "TL;DR" for each of your posts. It would be really helpful.

The problem I have is that you are right about many things, but wrong about others, and you mix them all together and then salt them with such arcane and charming phrases as "The Bilderberg Gold Pharaohs of Liechtenstein", "National Economic Labour-Exchange Currency Token", "BTC-securitized Future Derivative Contract", and "private Tory-Bilderberg Trotskyite Menshevik gang of wealthy boardroom(or stock market)-socialist Pharaohs". It's just damned hard to sort it all out and respond to any of it. But I'll try. First, what I agree with (I will try to dumb this down to 140 IQ levels):

1. Yes. Many commodities were experimented with as money over the centuries. What's your point again? They all became pyramid schemes? No.

2. Yes. Bitcoin is just a speculative oddity at the moment. It won't be money until it is relatively stable.

3. Fiat currency is bad. Duh. It allows some of us to eventually own everything (when enforced by the state). I hope we have the same definition of "fiat".

Now, my disagreements:

1. Gold was never a tool of the elites. It evolved as money slowly (and widely), thus making it very egalitarian. There is nothing wrong (and everything right) about a "physically" limited (but widely dispersed) money supply. In fact, the elites hated gold because it was honest and widely used money (society didn't need the state). They only enslave us when they "take away" (physically, psychologically, or legally) our ability to use it as money. They do this by forcing us to use their fiat money instead. The real enemy is our belief in political authority (but that is a very big and separate topic).

2. You make the same mistake that Marx made in his "Labor Theory of Value" by assuming some inherent relationship between labor and the value of money. The labor of one person or the labor of a nation cannot give money any inherent value. The value of money is completely subjective (just as is the value of anything). You may value $1000 a lot or a little. It all depends. It's the relative rank of your valuation of $1000 that matters. I once paid three or four of guys $400 to shovel two feet of snow off of my roof. At that moment I valued their 45 minutes of labor more than I valued my $400. That same group of guys River Dancing for my entertainment for 45 minutes would be worthless to me. Each is 45 minute of labor, but very different values (to me). All value is subjective. The only thing that "stabilizes" the economic value of anything is the historical record of what other people pay for things. When you want to buy or sell some used item on Ebay or though the local paper, you look to see what others are paying. But every transaction is independent and subjective. The stabilized value is a constantly changing historical aggregate. I agree that the "price" of money should not change much. But that is a consequence of its ever-widening use as money (as opposed to a speculated commodity) and millions of independent, voluntary, free-market transactions, and not some decreed system of fees to dampen speculation. Speculation will either level out over time or it won't. There is nothing we can (or should) do to control it.

3. You use "security" incorrectly. Security for a loan or contract is collateral not something that "guarantees and certifies provenance and unforgeability".

I discuss Bitcoin's and gold's money properties elsewhere, so I won't repeat myself here. I will just summarize by saying that gold was money once, but is unlikely to be so again. Bitcoin is not money now, and is unlikely to be so in the future. One major difference between them is that gold was "always there", whereas Bitcoin just popped into existence. This explains why gold was never a speculated commodity (while it was money), and why Bitcoin IS currently a speculated commodity. The only way for either of them to become money (again in the case of gold), is for fiat currencies (and states) to "get out of the way". That will require the dissolution of state power (and a major paradigm shift about the imaginary nature of political power) around the world. Maybe someday, but probably not in my lifetime.

Backing fiat money with bitcoin (or gold or anything else) would convert the fiat money into an honest money substitute (and no longer fiat) again. Fiat money is "money by decree". It is in a very real sense fake. The only things which gives it value are the cultural memory of "dollar-ness" coupled with the legal tender laws which make it illegal to issue private competing currency.

Bitcoin has most of the properties necessary to make it money. If and when it is widely considered to be money, then it could conceivably be "kept" in a safe place (e.g. the distributed network in which it currently exists) as backing for some unspecified, more transportable surrogate. In the heyday of private and state banking, the checks cross-written against groups of banks were cleared every day at a clearing house. The differences at the end of the clearing calculations were then settled between the banks by physical gold transfers. This was done continually all over the world in a local, regional, national layered fashion with the final clearing done in London. Only the interbank differences were settled in gold.

The days of the gold standard did not mean that everybody carried gold around in their pockets. It only meant that their "paper money" was fully backed by gold. And "at the end of the day", all accounts were settled. It worked beautifully. This may be a good model to think about with respect to Bitcoins. We don't all have to deal directly with Bitcoins, as long as the accounts are settled in Bitcoin periodically. This leaves us free to invent an honest bitcoin substitute that may be more convenient to use, but is backed by Bitcoin (like gold used to back bank drafts).

Gold was never a pyramid scheme. But it was at the top of the pyramid of acceptable commodity monies. And everybody used and accepted it.

Translation: Central bankers control the world because they control the money supply.

True that.

Bitcoin is not a derivative of anything. Neither is gold. And neither has any inherent value.

Securitized Future Derivative Contract. Really? What are the terms of this contract? What is "securing" this contract? Are you just trying to say that holding Bitcoins is bit of a gamble?

Translation: Bitcoins will never be good money because their value will never be dependable. Maybe, but not for lack of convention, systematic mechanism or well-regulation.

I enjoy parsing circumlocutory prose as much as the next guy, but seriously, that was a lot of work.

Beyond excellent point.

Very interesting question. The answer is no. Bitcoin does not need and should not be "backed" by anything. To really understand the issue, however, we need a little history lesson. Gold used to "back" paper money because everyone knew that gold was money and paper money was just a money substitute. Gold was perfectly good money for thousands of years. Paper money was originally (starting in the middle ages for the sake of argument) just a warehouse receipt given to the owner of gold who chose to store his gold in the goldsmith's safe. The goldsmith gave the customer a receipt. That was the first paper money. That receipt was redeemable on demand for the quantity of gold printed on the receipt. In other words - gold backed the paper.

Over the years, people got used to carrying around and trading paper receipts (which were more convenient than gold) and would use them as a substitute for actual gold. But everyone was acutely aware that the paper was not the money. The gold that backed it was the money. In those days (and before that as well), gold's value was overwhelmingly based on its ability to be money. See my post https://bitcointalk.org/index.php?topic=169517.msg1871316#msg1871316 on inflation and the properties of money. As time went on, people started to forget about gold and started to believe that the paper receipts were money. The problem with paper money is that it is much easier to debase (inflate) than gold. Governments hate gold (as they will hate bitcoin) because then cannot simple "print it" to fund their welfare/warfare states. There are numerous examples in history of governments (in bed with the goldsmiths) creating paper currency (out of thin air) divorced from any real gold and thereby destroying their own economies. (I include all modern electronic versions of official currency when I say "paper money".)

The reason history and common sense says that paper money needs to be backed by gold is that gold is the market winner (over thousands of years) in the contest of what is the best money. Its money properties were almost single-handedly responsible for the advancement of civilization from barbarism to the modern world.

So, when x backs y, x is money and y is the money substitute. As long as people honor the one-to-one relationship between x and y, it's perfectly ok for gold to back paper money or even for bitcoins to back paper money. So, nothing should back gold because gold is (or was) money. Sadly, society has been so far removed from gold for so long, that gold no longer really qualifies as money. And while Bitcoin doesn't quite qualify as money yet, it may someday, and as such it might back something else (even informally). Something as simple as an IOU on the back of an envelope that says IOU 4BTC qualifies as paper money backed by bitcoin.

Final thought on gold. I read a few years ago that if gold were still commonly understood to be money it would be worth over $20,000 per ounce. The reason for this is that the nominal value of all the goods and services in the world divided by the weight of all the gold in the world comes out to about $20K. I could be way off here, but you get the point.

You are right. Context is everything. OP is definitely wrong in his use of the word inflation. Proper usage of inflation refers to monetary inflation - more specifically; the increase of the money supply. With modern fiat currencies controlled by central banks, this is easily accomplished by simply "printing money". The result of inflation is an increase in the price (the money cost) of goods and services and the decrease in the price of money (you will be required to supply fewer real goods and services to "buy" a dollar - i.e. the dollar buys less). This is because more money is chasing fewer goods. If you magically doubled the amount of money in circulation (with everyone instantly having twice what they had just a moment ago), very quickly you would see prices for everything basically double. No new wealth is created. All that happened was a massive trauma to the economy as everybody scrambles to adjust to the sudden halving of the value of the dollar.

In reality, central banks inflate much more slowly, but it is not a natural (or even desired) phenomenon. Let's say it's 2-3 percent per year for decades on end (as it basically has been). People get used to it and plan their lives around that rate. However, if the rate changes (specifically, increases) over time, then it's harder to plan for the future. People are more likely to spend now rather than save for spending later simply because their saved money will be worth less (and unpredictably so) in the future. This has numerous consequences. One of them is society's capital stock starts to dissipate (gets eaten away by present consumption). We become a consumerist society with less and less investment in the future. Eventually, we collapse as we have no more capital for long term projects.

Hyper-inflation is the doubling of the money supply on a yearly, monthly or even weekly basis. Imagine prices of groceries doubling every week (or worse). In Germany in 1923 wives would wait outside their husbands' places of employment on pay day. As soon as the paychecks were handed out, the wives would take them and run to the bank, get cash and then run to the market to buy food because it would be significantly more expensive the next day. In a hyper-inflationary economy, people spend money quickly (i.e. don't want to hold cash) because prices are rising. Not the other way around. Spending doesn't cause hyper-inflation. The government printing press causes hyper-inflation. And hyper-inflation causes rapidly rising prices of goods and services.

As for Bitcoin, it can never hyper-inflate because of the very nature of its mining process. While it will continue to technically "inflate" (increase in supply), that inflation is slow (and slowing), well understood, and ultimately limited. This allows for the possibility of rational assessment of its value, and will not (in and of itself) incite people into panic buying or selling. The value of Bitcoin must properly be measured by what goods and services it can buy (and has bought historically) over a wide range of products. Unfortunately we don't have a lot of historical data on what people are buying with Bitcoin (so we don't know its true value). Until we do, and as long as we are measuring Bitcoin against the dollar (a currency that itself is susceptible to state tampering and hyperinflation), we will see wild fluctuations in Bitcoin's "value". But such rises and falls do not constitute deflation or inflation. Such rises and falls are just speculation birthing pains associated with an unknown, unproven commodity.

Yes, Bitcoin is a commodity. Just like gold. So is all money. But not all money is created equal. The demand (and thus the value of any money) is based on its usefulness as a relatively stable lubricant for commerce (and its value can change over time just like any other commodity). The transparent, effortless ability to convert any good or service into any other good or service (even across spans of time - think futures contract) is what makes a money good. Money is barter butter. Good money allows barter of anything to anything across time and space with little or no loss of economic energy (low "economic friction"). Good money does not inflate much (the less the better). Zero inflation is best (as Bitcoin will eventually be). Good money is infinitely divisible, easily transportable, relatively rare, non-perishable, and accepted almost everywhere. Gold fulfilled all of these requirements. Bitcoin isn't quite there yet (it's lacking in the transportability and acceptance categories). The other area of challenge for Bitcoin is the so-called legal tender laws. If governments feel threatened by Bitcoin, they will fight it. This may be a big roadblock in the future.

Gold enabled the industrial age to flourish world-wide. It was eventually "stolen" from us and replaced with government paper. Read Murray Rothbard's "What has Government Done to Our Money" for a description of how we lost the use of gold. Also, read Leonard Read's "I, pencil" to understand the global economy. Now, Bitcoin threatens to become the new digital gold. We just need some entrepreneurs to come up with ways to make Bitcoin very transportable and the acceptance will (hopefully) follow. To paraphrase Jeff Goldblum in Jurassic Park, "The free market finds a way".

I actually tried mining in 2011, but the client I downloaded was buggy, and I didn't have the patience to deal with it. But that experience is not the reason I don't mine today. And it's not because it's mathematically so much harder now to find new bitcoins. It is because I expect to acquire bitcoins like most people will acquire them in the future: by buying them with goods and services. But that time will have to wait for something else to happen. We need to start thinking in bitcoin.

Most people fail to realize that money is not wealth. Goods, services and leisure are wealth. Money is a medium of exchange (the buying and selling of different forms of wealth). Money is the essential facilitator of trade in the modern world. Without it, we would live in a subsistence, barter economy. With it, we have infinitely fine-grained global division of labor that makes our amazing modern world possible (read Leonard Read's "I, Pencil" for a visceral explanation of this), and a decentralized, market-regulated price system that allows economic calculation (the essential planning tool of civilization). "Good money" is the magic stuff that makes all this possible. Bitcoin is potentially good money. It's not there yet. It may never get there, but I am hopeful.

Going back to Mises, we see that money was originally some commodity or another. And it remained unquestionably so up through the classical gold standard period. As long as it was some commodity (or paper backed by a commodity), and as long as it was universally (or at least widely) accepted as a medium of exchange, it had value (i.e. it was sought after) as money. The top of the money food-chain turned out to be gold. It turned out to be the best money for various reasons. The market chose it over a very long period of time. Its value was not intrinsic. Its value was not fixed by a central authority. Its value was not measured in terms of some other abstract unit (like the Dollar, Euro or Yen). Its value was measured implicitly in terms of what other commodities it could be exchanged for (i.e. "buy"). Of course, what it could buy was - anything. That's what money does. It can buy any other commodities. So, for example, and ounce of gold could buy a nice men's suit. It might also buy some number of farm animals. And so on. Over the centuries, people subconsciously absorbed the "value" of an ounce of gold in terms of any and all other goods - at the same time.

Quick comment on "hoarding". This applies to all kinds of money. The value of gold was not constant. What it could "buy" depended on the supply of gold in circulation and on how badly people wanted it (and were prepared to actually buy it with goods and services). Remember, people only want money in order to buy stuff now or to increase their "cash holdings" to be able to buy stuff in the future. If people "hoarded" gold (increased their cash holdings), it only made the remaining circulating gold more valuable (causing prices of other things to generally drop). As the hoarders (cash holders) saw the value of gold rising in the market, they had a natural incentive to hold less (to buy the cheaper other stuff). And then prices would rise again as more gold became available. In other words people only "hoarded" enough to make them comfortable that they would have enough in a future of uncertainty. If the future looked bright and/or the value of gold was high, people held less. If the future looked grim and/or the value of gold was low, people held more. Hoarding (holding cash) is not a problem. It is actually a self-regulating natural (and more or less steady-state) economic phenomenon.

Here's a test. How much do the following things cost in terms of "dollars": car, house, cigarettes, TV, dinner out. We can all instantly assign a rough dollar figure to those items. (Of course, if you're Japanese, you think in Yen. You have to translate to dollars). In the old days, people would think in terms of gold weight. If Bitcoin is ever going to be real money, a critical mass of people will have be able to instantly "valuate" it terms of other goods. As long as we "translate to dollars" (or Yen, or Euros, etc) in our heads first, we will forever be held captive by the vagaries of the fiat money of nation-states. It would be like trying to learn a foreign language and never getting past the internal translation phase. We have to start "thinking (and dreaming) in Bitcoin".

Finally, Austrian monetary theory tells us that a fixed (or nearly fixed) money supply is actually ideal. It will cause a gentle and steady general drop in prices. Keynesian screeds notwithstanding, this is a good thing. I'll leave this as a research exercise for the reader. So, as bitcoin mining peaks, and the 21 million bitcoins begin to trickle and diffuse into the world, the holders and exchangers of bitcoins will (hopefully) eventually make the mental shift away from nation state money and toward seeing bitcoins on its own terms in relation to the goods and services of the world. And as more and more real goods and services are produced in the world, everything will slowly get cheaper over time (because the bitcoin money supply will be fixed).

Somewhere along in that process, people will stop saying things like "a bitcoin costs $100", and start saying things like "a house costs 10BTC", "a hamburger costs 3 microBTC", etc. If we're lucky, people will have to look back on the dollar in history texts and first translate what the dollar could have bought in terms BTC before they understand.

If you found that any of this was worthy of the time you spent reading it, please toss me a micro BTC or two at: 1C6XHVQeBV1FYSU7ykWvc79mgNnPdMa1eq

You can usually limit upload speed with a setting in your router. It depends on your router's firmware. I know that DD-WRT can do it. I suspect that various stock firmware also has that ability. It might under something called QOS (Quality of Service). Personally, I use the Traffic Shaping feature of IPCOP. I limit my upload speed to 500 kbps (a bit over 60KB per second), and I typically have 50-60 peers. They have to share the 60KB, so each is getting on average about 1KB per second.