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Author Topic: 2013-02-02 Thomas Edison, Bitcoin, and Intrinsic Value  (Read 1249 times)
jimbobway
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February 03, 2013, 01:28:07 AM
 #1

Discuss.

http://www.bitcoinblogger.com/2013/02/thomas-edison-and-bitcoin.html
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February 03, 2013, 02:12:45 AM
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I'm tired of these stories about Robinson Crusoe and the value he gives to things he finds on his island.

Money, not just bitcoin, not just gold, is pretty much useless when you're alone.   Lots of things are useless when you're alone.  Basically, communication tools.  Had Robinson Crusoe found a mobile phone, it would be the same (assuming he has no network, of course).   A phone is useless if you can't call anyone nor receive calls.


And yet, has anyone ever claimed that a mobile phone has no intrinsic value?
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February 03, 2013, 02:29:00 AM
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Here is a question: Do services have an intrinsic value? If they do so does Bitcoin. The intrinsic value of Bitcoin lies in the service of the facilitation a transaction at a distance where both the sender and receiver use Bitcoin only for the purpose of facilitating the transaction.

For example: Person A in Canada purchases say 70 CAD worth of Bitcoin and immediately sends it to person B in Kenya, who then sells the Bitcoin upon receipt for 6150 KES. They use Bitcoin because the cost is less than the alternatives; however both parties go out of their way to minimize their exposure to BTC because they fear the BTC price in terms of CAD and KES will drop.

The Robinson Crusoe example becomes irrelevant if the intrinsic value of Bitcoin lies in the facilitation of money transfer in small amounts across international borders.  

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
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February 03, 2013, 03:26:43 AM
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The writer is an idiot.

If Tommy can interact with the blockchain then he's (informationally) not really on an island, now is he?
Why the hell not call for help in the first place?
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February 03, 2013, 04:28:55 AM
 #5

The phrase "non-monetary usefulness" seems more helpful than the somewhat nebulous "intrinsic value." Does Bitcoin have non-monetary usefulness? I don't know, maybe. But if it does, it's pretty insignificant compared to Bitcoin's incredible usefulness as money. More importantly, does Bitcoin need significant non-monetary usefulness to be valuable as money? Does a dessert topping need to be useful as a floor wax?
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February 03, 2013, 07:34:12 AM
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The topic being discussed is called the Regression Theorem, which basically states that in order for a form of money to be considered "sound money" it must have value outside of, or more specifically, prior to, its use as money. The idea is that money that passes this test cannot lose all of its value, even if the economic system collapses. The fact that the theorem was put forward by Mises gives it a lot of weight.

So, according to this theory, Bitcoin is not sound money because it has no value other than as money. Some (including the author of this article) have tried to show that Bitcoin has some esoteric value, but I find the contrived situations and the twisted logic to be very unconvincing. One could also make the argument that bitcoins are an integral part of the Bitcoin payment system and therefore they have value even if you don't consider a bitcoin itself as money. That's a tough sell, though.

Probably a better approach is to simply reject the Regression Theorem. Some argue that it is not a very good theory because the evidence is anecdotal. In fact, you could argue that the success of Bitcoin shows that the theorem is not true, though it might be too early for that.

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