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Author Topic: Why Bitcoin Fails as Currency of the Future  (Read 4177 times)
the joint
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July 02, 2011, 11:35:26 PM
 #1

Here's a current problem I'm having with the Bitcoin model.

We all know, or have a basic understanding of, the fallacies of the current economic model that Bitcoin is designed to address.  But, one issue that I argue Bitcoin does not resolve is the idea of 'intrinsic value.'  I have read on these forums where others argue Bitcoin has intrinsic value, yet I fail to understand how this is so.  Why is it so important for a currency to have intrinsic value?  The answer is simple; without intrinsic value, a currency has absolutely zero value unless some external subject recognizes value in it.  In the past, this problem has attempted to be solved by 'pinning' the value of a currency to something else (e.g. USD to gold; Bitcoins to USD).  In any of these 'pinning' attempts, the value of the currency becomes increasingly abstracted from that which is valuable to humans.  So, what is valuable to humans?  I would argue two of the most fundamental values are the value of living, and the value of happiness.  Philosophically speaking, living and happiness are 'ends' in and of themselves; quantitatively, living fulfills the purpose of life (to live), and qualitatively, happiness relates to the quality of that life.  I propose that a currency worthy of continuance into the future must be 'pinned' as closely as possible to these intrinsic human values.  In this way, the currency must always retain some value because it would be entwined with that which is fundamentally valuable to humans.  Let's use crop seeds as an example.  Crop seeds, if used as currency, address both fundamental human values.  If you plant the seeds, you will reap food which immediately provides quantitative value (you get to continue to live and not starve to death) as well as qualitative value (satisfaction/content in being full).  Now, while a very hungry man may ascribe the seeds a higher value than a full man, the seeds never relinquish their value absolutely.  Even if every person on Earth were temporarily 'full,' the seeds retain future value as someone will eventually become hungry.  Gold and USD do not retain value in the same way.  All that is required for gold and USD to absolutely lose all value is for all persons to agree they have no value.  Try picking up some gold and eating it and see how valuable it is.  Try the same with paper currency, or roll yourself a Bitcoin Burrito. 

But, even a currency like crop seeds fails ultimately for one reason:  ANY attempt to establish a globally-recognized currency leads to an overextension of relative value.  Nobody will want crop seeds for a new car since the person owning the new car would obviously have satisfied any immediate threat to quantitative human value.  This applies to any other global currency.  The poor will stay poor, the rich will stay rich.

What is the solution?  Well, I think it's already been done.  Straight bartering.  Bartering incorporates both quantitative/qualitative value as well as absolute/relative value.  Since the process of bartering is distributed globally, the process itself has absolute value, but it also allows for each person to set their own relative quantitative/qualitative value on each bartered object.  Isn't this what Bitcoin does?  Wouldn't bitcoin operate in this way if it were to be globally accepted as a currency?  NO.  Global acceptance of a valued currency is much different than global acceptance of the process of exchange.  Think of the difference between cognition and meta-cognition.  Cognition as a process is absolutely valuable to anybody and anyone.  My ideas allow me to function and navigate life how I please.  Does this mean that another person values the product of my cognition?  Again, NO.  Through meta-cognition, I place my own relative value on the product of my cognition.  Similarly, one values the process of bartering, but may place relative values on the bartered objects.  Bitcoin, along with all other global currencies, fail in that they are the product of some other process, and thus have relative value only.  Were all bitcoins, gold, USD, etc. to be eliminated, there are still other ways to satisfy intrinsic quantitative/qualitative value requirements.  In a social world, bartering and exchange can never be eliminated.

My conclusion-
Any attempt to establish a global currency (centralized or decentralized) fails as people rely on the absolute value of the product when it has none.  I think the only way for a successful economic future is to place absolute value on the process of exchange, leaving relative value to be decided between exchanging parties.  This also seems like a way of escaping the "poor will stay poor, rich will stay rich" problem.  Where absolute value is placed on the process, then the distinction between poor/rich becomes relative, not absolute.  Hence, this also solves the problem of overextension of relative value since relative value is defined by the exchanging parties and not globally.

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Agozyen
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July 02, 2011, 11:39:39 PM
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Blah blah blah another new guy with under five posts predicting the end of the bitcoin.

Come back to this forum in five years and then you can say 'I told you so'...assuming bitcoin isn't around then.

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the joint
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July 02, 2011, 11:41:46 PM
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Blah Blah Blah and 32 posts is > 5 posts how?

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July 02, 2011, 11:44:03 PM
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Blah Blah Blah and 32 posts is > 5 posts how?

 I'm not predicting the end of bitcoin.  I am not proclaiming to be an expert in anything.  

Every couple of days someone like you comes along and tries to save us from Bitcoin.  

This one is my favorite.  Notice the number of posts he has...

http://forum.bitcoin.org/index.php?topic=21880.0;topicseen

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the joint
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July 02, 2011, 11:47:29 PM
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Haha is rational questioning a threat to your investment?  I'm not responsible for saving you.

the joint
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July 02, 2011, 11:49:50 PM
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Haha be careful not to establish an absolute value on the product of that guy's cognition.  Or mine.  Value the process.

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July 02, 2011, 11:54:24 PM
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So, actually, most people don't really care what money is... They don't even ask them selfes about source of value of gold and other commodities... It's just because their neighbours use "normal" money and feel happy about this, and moreover, always need some more.
If their neighbours and friends will trust in bitcoins or something else like that they may use it as well... Even if several "trusted" people (like goddamed Ste-eve Jo-obs) will say that they trust (again) they will be as popular as iphones... No questions beyond,  it's all about popularity, nothing else. It's not a religious thing, but, let's say philosophical. Money is always about trust and nothing else... Nothing.  Bitcoins are good enough to atract attention of smart people and then smart prople may pursuade others to use it...  And it's already begun.
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July 02, 2011, 11:57:13 PM
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He's posing a good question, sure it happens a lot but your "blah blah blah" post and your post count shows an immaturity much more so then the original poster.

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July 03, 2011, 12:12:26 AM
 #9

Posts count don't set the character, it's just there to filter out trolls, so please don't use as a argument.

The main post is a bit hard to read, you may might need to break it up a little better (dyslexia whoo hooo).

That out of the way I have to say that it's very hard to figure out the value of things, as some people might even value flying into towers as a greater value than their wife, kids and friends. What is the value of a currency? It's all about how many people use it, and that's all we can really say, and then in the future we can tell what really happened.

Even if there is something wrong with Bitcoin it does not matter, there is something wrong with religions and statisme, and they are super big. There are some really skilled people on Youtube that produce amazing content, and they have few viewers, and there are these who get 100000 subscribers underservingly.

Value is a unknown variable, only testing can take samples of it, and only marketing can alter it.

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Agozyen
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July 03, 2011, 12:27:01 AM
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Haha is rational questioning a threat to your investment?  I'm not responsible for saving you.

  The only investment I have in Bitcoin is about $25 worth of electricity.  I already had all the hardware in place for gaming.  I have under 4 BTC to my name.  How much have you mined or bought?  What's your Mhash?  Or does your knowledge come merely from reading news articles, blogs and forums?

  

 

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Agozyen
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July 03, 2011, 12:46:45 AM
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He's posing a good question, sure it happens a lot but your "blah blah blah" post and your post count shows an immaturity much more so then the original poster.

I never said I was an expert, or mature.  I don't really care what your opinion is of me and my 30-odd posts.  If you want to call me immature because of my post, that's your right.

My blah blah blah was a direct response to his post count and what his topic is. I don't believe he came here to learn about bitcoin, he just wanted to warn/scare/trash/preach (take your pick).  Having said that, I don't care who comes here and posts, provided it's relevent to the forum/subforum.  His topic is relevant, and so is mine.  If he stays and becomes a part of the community, then I'll eat my words.

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gochk
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July 03, 2011, 04:01:55 AM
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I don't know what's there to debate / argue about. If you believe in the future of BTC, then by all means join in and get some. If you don't believe in the future of BTC, then no one is pointing a gun to your head to accept it.

I think all of us here are matured people with an able and sound minds to make up our own decision about BTC. If we want to go into mining BTC or even exchange the current USD / GBP / EUR for BTC; then who's to stop them? No one can tell the future. And if in the near future, BTC were to crash and burn, everyone involved get burnt with however much he / she has put in; then so be it. That's the risk for willing to try new things. On the other hand, if BTC takes off in the future, then all of us ( or some of us) will benefit from it. And That's the reward for willing to try new things.

I really don't see the need to debate / argue about it now. The future is what it is ... have fun, learn things, try new things. Frankly, I'm in it fully aware of the potential of losing everything I have put in ... but even if BTC goes to nothing; I have enjoyed the ride and I wouldn't have any regrets.
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July 03, 2011, 04:08:57 AM
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i only read your conclusion, and it sound fair enough. it doesnt mean the end or fail of bitcoin, and your title is misleading. where you have barter exchange there is no third party currency involved

Quote
 I think the only way for a successful economic future is to place absolute value on the process of exchange, leaving relative value to be decided between exchanging parties.


theres nothing to stop people trading between themselves without bitcoin, for everything else there's mastercard. (bitcoin)

maybe in the future when the world is f'd up and there is no international trade and at that point there is no internet.

till then people are going to need some way to receive the equivalent value of a pack of goats from the middle east who make kebabs.

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July 03, 2011, 04:44:56 AM
 #14

Bitcoin doesn't have intrinsic value, but then, neither does USD (or gold, for that matter). Hasn't been much of a problem historically...

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July 03, 2011, 06:33:16 AM
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The only value that ANYTHING has, currency or not, is what people are willing to trade for it.

Right now BTC has a value that floats between $15-$20 (USD.)  So I'd say that Bitcoin, at least for the short term, has more value than the US dollar.  For the long term?  Only time will tell.

(Read Rich Dad Poor Dad, this is explained pretty well, and it's an amazing book. Grin)

For now, there are repeaters for Amazon, and Newegg, and there are a couiple of "ebay"-like auctioning sites, and if you want to make some dough, setup a mirror for an existing site that doesn't accept BTC, or build a clone.  There are BTC classified-ads sites with tons of programmers looking for work (assuming you're not a programmer.)  So, there's no excuse. Wink

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July 03, 2011, 07:10:12 AM
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Bitcoin not will fall soon. More and more website, goods and services start to use a bitcoin. This will keep the live of the currency. If people can use it then it have a live else you have a nothing. If you not have a options to use the bitcoin you have a one big nothing.

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July 03, 2011, 08:01:45 AM
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Here is why it won't fail.

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the joint
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July 03, 2011, 09:31:06 AM
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Haha is rational questioning a threat to your investment?  I'm not responsible for saving you.

  The only investment I have in Bitcoin is about $25 worth of electricity.  I already had all the hardware in place for gaming.  I have under 4 BTC to my name.  How much have you mined or bought?  What's your Mhash?  Or does your knowledge come merely from reading news articles, blogs and forums?

  

 
~385 mhash with a 6990.  I invested enough $ to profit but not enough that I would be devastated to lose it.  And yes, I read the forums so I can learn.  I'm just trying a philosophical approach.  The topic was about something as abstract as value.  Anybody else ask the same question I did?

the joint
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July 03, 2011, 09:41:37 AM
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i only read your conclusion, and it sound fair enough. it doesnt mean the end or fail of bitcoin, and your title is misleading. where you have barter exchange there is no third party currency involved

Quote
 I think the only way for a successful economic future is to place absolute value on the process of exchange, leaving relative value to be decided between exchanging parties.


theres nothing to stop people trading between themselves without bitcoin, for everything else there's mastercard. (bitcoin)

maybe in the future when the world is f'd up and there is no international trade and at that point there is no internet.

till then people are going to need some way to receive the equivalent value of a pack of goats from the middle east who make kebabs.

Haha agreed.  Maybe you can give him 5 bitcoins for one of his goats.

the joint
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July 03, 2011, 10:00:09 AM
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Posts count don't set the character, it's just there to filter out trolls, so please don't use as a argument.

The main post is a bit hard to read, you may might need to break it up a little better (dyslexia whoo hooo).

That out of the way I have to say that it's very hard to figure out the value of things, as some people might even value flying into towers as a greater value than their wife, kids and friends. What is the value of a currency? It's all about how many people use it, and that's all we can really say, and then in the future we can tell what really happened.

Even if there is something wrong with Bitcoin it does not matter, there is something wrong with religions and statisme, and they are super big. There are some really skilled people on Youtube that produce amazing content, and they have few viewers, and there are these who get 100000 subscribers underservingly.

Value is a unknown variable, only testing can take samples of it, and only marketing can alter it.

Consider this scenario.  Let's say you have a guy who likes to work on cars.  He wants to run a mechanic shop.  Let's also say that there's a global currency, x.  Who are the customers that are going to be able to have their cars repaired?  The ones with greater amounts of x and x only.  But, if there's no global currency, then the mechanic is going to have to be much more thoughtful in what he could accept as payment that would be of value to him.  It seems like this may help eliminate the huge gap between the very rich and very poor over time.  I agree with you that figuring out the value of something is relative.  And that's why I think that any global currency will fail under the weight of its own problems.  If you place value on the process of exchange, then it places value on the relationship between exchangers.  I just think it might promote social harmony.  Global currencies create classes of social rank, and with it, greed.

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