I'm looking for useful constraints from below, not guarantees against supernovas.

In one type of lower bound that I would find useful, some major stakeholders could publicly commit to placing a floor on the BTC.  Say, the EFF holds a small fund-raising drive and then uses the proceeds of 21k USD to place a floor on the BTC price in a sustained way via a set of bids and a public 20-year commitment.  Now we have a floor of USD0.001 or so.  Yay!

I was also thinking that an analysis of the constraints of the bitcoin system might shed some light.   Perhaps a certain market capitalization is required for the system to function for transactions of size X and rate Y, based on how quickly transactions can plausibly be processed?

If we can discover (or describe a way to create, at a reasonable cost) a plausible lower bound that's within a constant factor of a plausible upper bound, then we'd be getting someplace pretty good:  a degree of assurance that the system will continue to function as a medium of exchange.


Latha

I haven't seen the words "upper bound" used yet in this discussion, but the costs of coin mining can only place an upper bound on the value of BTC.  Not a strict upper bound, either, since speculation can go where it wants; more of a strong hint at one of many possible upper bounds.

If we're trying to pin down a fundamental value for BTC, we'd better develop a lower bound too. 

Smooth (post #6) mentioned some reasons for BTC to have value, primarily based on perceived value of the currency system as a whole.  That's a start.  However, I'm concerned with how weak our lower bound is right now.   

Question:  why shouldn't BTC be worth USD0.01 ?   Even if the currency system as a whole is valuable, maybe the system is just as valuable with a low price on the BTC.

One attempt at an answer:  at a price of USD0.01, all the coins that will ever exist would only cost 210k USD.  If that imposes undue risks to a highly valuable payment network, then its participants will likely put a floor on its value that is higher than USD0.01.  I'm a little vague on what those risks might be, though, and why they couldn't be reduced to zero in a way that doesn't require a lower bound on the BTC price.

I wish my lower bound were a lot better than this.

Cheers
Professor Latha Serevi