The PRICE is the VALUE! The Value of Bitcoin EXPLAINED. (really)

[aynstein]

Bitcoin has no intrinsic value, the network does. Thats what everyone is missing altogether and or misrepresenting.

The networks value is derived from it's ability to send value across political and geographic borders, nearly instantly and dirt cheap, with minimum effort. Additionaly it enables this without the risks commonly found in traditional financial instruments and value stores. Risks like hyper-inflation, manipulation, ceisure or other meddling by governments or institutions for whatever reason.

The ability to move value is enormously valuable. The value of a secure medium of exchange can be seen in how the use of coin money transformed mankind's concept and use of trade. The value in mobility can be seen in paper money's quick and ubiquitous integration into the human world. The value of easy access can be seen in the way "modern" civilization made credit cards an acceptable form of payment worldwide in mere decades.

Coin assured the value being exchanged was recieved.

Paper money had mobility at the cost of assured value.

Credit Cards added access and dramatically increased security while but have all the risk with significantly less assurance then Paper.

The Bitcoin network has all of the assurance and all of the mobility and enables totall access. Bitcoin is the ONLY unit of exchange that will ever be available for use on the bitcoin network,which is what ensures its value.

A higher price makes larger value easier to exchange.

The price of bitcoin only adds to the VALUE to bitcoin, as it makes its utility greater then before.

This bubble is inside out.

Maybe I am wrong, but this is obvious stuff people.

Why so much confusion!?

Why so much doubt?

Bitcoin is dirt cheap, and slightly less useful today. But that is only because of fear. Fear the fear. Not the coin.

 

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[bg002h]

How the big fish see it:
https://www.documentcloud.org/documents/885843-banks-research-report-on-bitcoin.html

[franky1]

anyone who shouts out bitcoin has no value are simply metal hoarders that are getting hurt because the customer base that they use to sell their metals to at a premium are now buying bitcoin..

thats the more simple answer.

bitcoin has the same value as investment gold.(not to confuse with the intrinsic value of manufacturing gold)
initial price is set by the costs of mining the gold (excavators, sluice machines, labour, transportation, storage, security)

bitcoin is similar. bitcoin miners spend alot of money on equipment, electricity.. and added to that the time.

say a bitcoin miner had free electric, free mining equipment. but no other job. if it took 2 weeks to make a bitcoin. he would still only sell his bitcoin for a price to cover 2 weeks of living costs. EG $300.($150 / week minimal living cost)
now add on price of electric for the miners that dont get free electric. this may equate to $60.
now looking at the difficulty. the cost of equipment to be able to mine a bitcoin in 2 weeks is about the same as a 4 module avalon averaging $2000. and knowing that every difficulty increase over the last 3 months as been near 40% lets say that the miner would be required to buy a new unit every month($800 at 40%). just to break even.

so lets combine it all $800+$60+$300=$1160

this $1160 would become the minimal price a career miner would sell their bitcoin for which would increase in price as difficulty increases or would decrease as difficulty decreases.

prices above the 'cost' would be where value (usefulness and desirability) is added and other factors known as profit or speculation. prices below this are known as panic, loss, stupidity, or more accurately. people that dont know the true value or cost.

you will find early investors that 'got' their coins cheaper more willing to sell for less, but until people start realising that bitcoin does have value and costs, they will continue to panic sell at absurdly low prices, instead of hoarding for  few days to let the panic subside.

i can see one possible knit pick reply. which is that gold miners do not set their prices based on labour&cost. they accept whatever their gold purchase contacts offer them.

well this is where bitcoin is different. bitcoin is peer-2-peer there is no middle man who sets the price and demands miners hand over the hoarded at the middle mans prices. miners and hoarders have direct contact with customers. so there is no price fixing.

same story as gold as it is for farmers, if only farmers had the freedom of 'barter' trade that bitcoins offer. they would actually be able to sell milk and meat at its true value. and not at the reduced rate supermarkets force upon them

rant over

[DerKorb]

anyone who shouts out bitcoin has no value are simply metal hoarders that are getting hurt because the customer base that they use to sell their metals to at a premium are now buying bitcoin..

thats the more simple answer.

bitcoin has the same value as investment gold.(not to confuse with the intrinsic value of manufacturing gold)
initial price is set by the costs of mining the gold (excavators, sluice machines, labour, transportation, storage, security)

bitcoin is similar. bitcoin miners spend alot of money on equipment, electricity.. and added to that the time.

say a bitcoin miner had free electric, free mining equipment. but no other job. if it took 2 weeks to make a bitcoin. he would still only sell his bitcoin for a price to cover 2 weeks of living costs. EG $300.($150 / week minimal living cost)
now add on price of electric for the miners that dont get free electric. this may equate to $60.
now looking at the difficulty. the cost of equipment to be able to mine a bitcoin in 2 weeks is about the same as a 4 module avalon averaging $2000. and knowing that every difficulty increase over the last 3 months as been near 40% lets say that the miner would be required to buy a new unit every month($800 at 40%). just to break even.

so lets combine it all $800+$60+$300=$1160

this $1160 would become the minimal price a career miner would sell their bitcoin for which would increase in price as difficulty increases or would decrease as difficulty decreases.

prices above the 'cost' would be where value (usefulness and desirability) is added and other factors known as profit or speculation. prices below this are known as panic, loss, stupidity, or more accurately. people that dont know the true value or cost.

you will find early investors that 'got' their coins cheaper more willing to sell for less, but until people start realising that bitcoin does have value and costs, they will continue to panic sell at absurdly low prices, instead of hoarding for  few days to let the panic subside.

i can see one possible knit pick reply. which is that gold miners do not set their prices based on labour&cost. they accept whatever their gold purchase contacts offer them.

well this is where bitcoin is different. bitcoin is peer-2-peer there is no middle man who sets the price and demands miners hand over the hoarded at the middle mans prices. miners and hoarders have direct contact with customers. so there is no price fixing.

same story as gold as it is for farmers, if only farmers had the freedom of 'barter' trade that bitcoins offer. they would actually be able to sell milk and meat at its true value. and not at the reduced rate supermarkets force upon them

rant over

While i generally think this is an interesting point of view, there seems to be one huge flaw with this logic.
To mine gold you need a somehow fixed amount of effort.
The effort to mine bitcoin instead is dependent from the amount of people trying to mine bitcoin.
Higher price of bitcoin -> more people mining -> higher difficulty -> higher cost of hardware -> higher price of bitcoin -> repeat
It is more likely it's the other way around: price of bitcoin dictates how much effort and money people put into it.

[Light]

While i generally think this is an interesting point of view, there seems to be one huge flaw with this logic.
To mine gold you need a somehow fixed amount of effort.
The effort to mine bitcoin instead is dependent from the amount of people trying to mine bitcoin.
Higher price of bitcoin -> more people mining -> higher difficulty -> higher cost of hardware -> higher price of bitcoin -> repeat
It is more likely it's the other way around: price of bitcoin dictates how much effort and money people put into it.

For nearly everything the price dictates the amount producers are willing to make and sell, not only for Bitcoin. Using your example of gold, if gold was to fall to $1 overnight for some reason (highly unlikely but this is theoretical) I would guarantee you that all the gold mines would at least temporarily stop production as it is no longer viable and profitable for them to do so. So basically it holds true for nearly everything that the price will affect how much "effort" producers are going to go to.

[DerKorb]

While i generally think this is an interesting point of view, there seems to be one huge flaw with this logic.
To mine gold you need a somehow fixed amount of effort.
The effort to mine bitcoin instead is dependent from the amount of people trying to mine bitcoin.
Higher price of bitcoin -> more people mining -> higher difficulty -> higher cost of hardware -> higher price of bitcoin -> repeat
It is more likely it's the other way around: price of bitcoin dictates how much effort and money people put into it.

For nearly everything the price dictates the amount producers are willing to make and sell, not only for Bitcoin. Using your example of gold, if gold was to fall to $1 overnight for some reason (highly unlikely but this is theoretical) I would guarantee you that all the gold mines would at least temporarily stop production as it is no longer viable and profitable for them to do so. So basically it holds true for nearly everything that the price will affect how much "effort" producers are going to go to.

well you are right there, but the difference is, with gold this would lead to less gold mined - with bitcoin there would be the same amount mined. It's not like you necessarily need 7 Petahashes to mine 25 bitcoins every now and then.

[Mylon]

Personally I think the OP is right, and the the bank report link from the first comment "sorta" agrees with it. (the document is only interest in the value now, they are not going into detailed speculation what the price might become)

But yea

bitcoin value = bitcoin network + the price of an individual bitcoin

You can't ignore the network, but you can't ignore the price either. Together they define how valuable bitcoin is. (security for example is part of the value)

[pbody]

While i generally think this is an interesting point of view, there seems to be one huge flaw with this logic.
To mine gold you need a somehow fixed amount of effort.
The effort to mine bitcoin instead is dependent from the amount of people trying to mine bitcoin.
Higher price of bitcoin -> more people mining -> higher difficulty -> higher cost of hardware -> higher price of bitcoin -> repeat
It is more likely it's the other way around: price of bitcoin dictates how much effort and money people put into it.

Same with gold. The more people excepting it as a precious metal (back to its origins), the more people trying to mine it and the harder it gets to find.

[Mylon]

While i generally think this is an interesting point of view, there seems to be one huge flaw with this logic.
To mine gold you need a somehow fixed amount of effort.
The effort to mine bitcoin instead is dependent from the amount of people trying to mine bitcoin.
Higher price of bitcoin -> more people mining -> higher difficulty -> higher cost of hardware -> higher price of bitcoin -> repeat
It is more likely it's the other way around: price of bitcoin dictates how much effort and money people put into it.

For nearly everything the price dictates the amount producers are willing to make and sell, not only for Bitcoin. Using your example of gold, if gold was to fall to $1 overnight for some reason (highly unlikely but this is theoretical) I would guarantee you that all the gold mines would at least temporarily stop production as it is no longer viable and profitable for them to do so. So basically it holds true for nearly everything that the price will affect how much "effort" producers are going to go to.

well you are right there, but the difference is, with gold this would lead to less gold mined - with bitcoin there would be the same amount mined. It's not like you necessarily need 7 Petahashes to mine 25 bitcoins every now and then.

I actually think you are missing the point here. There is an economic incentive to mine gold. There is an economic incentive to mine bitcoins. Remove the economic incentive (aka drop the price to $1 or even $0) And both will see significant decline in producing power.

The upper limit of bitcoin, and thus the fixed amount being mined, have a different reason, and should not be included in this. (The reason being political, we can't trust our central banks/politicians, to not print more money)

I wish everybody would stop attempting to negate an point in economics with an argument in IT or politics. These 3 are distinct and have been very cleverly combined into bitcoin. When analyzing bitcoin, it should be pulled apart and each studied on its own.

[aynstein]

say a bitcoin miner had free electric, free mining equipment. but no other job. if it took 2 weeks to make a bitcoin. he would still only sell his bitcoin for a price to cover 2 weeks of living costs. EG $300.($150 / week minimal living cost)
now add on price of electric for the miners that dont get free electric. this may equate to $60.
now looking at the difficulty. the cost of equipment to be able to mine a bitcoin in 2 weeks is about the same as a 4 module avalon averaging $2000. and knowing that every difficulty increase over the last 3 months as been near 40% lets say that the miner would be required to buy a new unit every month($800 at 40%). just to break even.

so lets combine it all $800+$60+$300=$1160

this $1160 would become the minimal price a career miner would sell their bitcoin for which would increase in price as difficulty increases or would decrease as difficulty decreases.

While I like this breakdown I disagree with its direct relationship to the actual price of bitcoin. As I attempted to describe in my post, the price value relationship is uniquely correlated. In addition to this price-value relationship, bitcoin has added benefits that are central to its success but secondary to its value. Benefits I went into above regarding assured value, no risk of seizure without direct participation, no risk of artificial hyper-inflation, and unmatched security best possible assurance of impartial validation and transaction authenticity verification.

 

[aynstein]

The similarity of gold an bitcoin does not extend to production as bitcoin is not produced and the effort is irrelevant in the availability. Bitcoin is distributed on a regimented schedule that adjusts according to time, not effort. It may become more expensive to earn a reward but it will be distributed at the same rate and conversely if almost everyone stops mining, for whatever reason it would be distributed in just the same amounts at just the same intervals (skipping extraordinary exceptions for the sake of clarity in this discussion). Unlike gold, which new supply is increased based on effort and decreased in the same way. Bitcoin supply is being reduced in a predictable manner, and no matter how hard you try it will not change. Your individual portion may change with effort, but not the overall available amount.

[amencon]

Personally I think the OP is right, and the the bank report link from the first comment "sorta" agrees with it. (the document is only interest in the value now, they are not going into detailed speculation what the price might become)

But yea

bitcoin value = bitcoin network + the price of an individual bitcoin

You can't ignore the network, but you can't ignore the price either. Together they define how valuable bitcoin is. (security for example is part of the value)

I see it more as individual bitcoins are valued because of the network of which they are the only units of account to transact in, not containing a separate value in addition to the network.

Though this might just be a minor disagreement that mainly boils down to semantics, and I believe I agree in essence.

[porc]

Price: What I need to give up (pay) to get bitcoin! (currency (dollar), goods, services).

Value: What I can do with my Bitcoin once I bought it.

Question: What can I do with my Bitcoin once you have transferred it to me?

[porc]

Bitcoin has no intrinsic value, the network does. Thats what everyone is missing altogether and or misrepresenting.

The networks value is derived from it's ability to send value across political and geographic borders, nearly instantly and dirt cheap, with minimum effort.

So you incurred a cost (something) to send me nothing (1 bitcoin has no value as you correctly state)? What a waste.

[Kreigyr]

Bitcoin has no intrinsic value, the network does. Thats what everyone is missing altogether and or misrepresenting.

The networks value is derived from it's ability to send value across political and geographic borders, nearly instantly and dirt cheap, with minimum effort.

So you incurred a cost (something) to send me nothing (1 bitcoin has no value as you correctly state)? What a waste.

I'll take those Bitcoins of yours off of your hands for 20$ each, as they have value to me for their utility ("ability to send value across political and geographic borders, nearly instantly and dirt cheap").

[aynstein]

Bitcoin has no intrinsic value, the network does. Thats what everyone is missing altogether and or misrepresenting.

The networks value is derived from it's ability to send value across political and geographic borders, nearly instantly and dirt cheap, with minimum effort.

So you incurred a cost (something) to send me nothing (1 bitcoin has no value as you correctly state)? What a waste.

I'll take those Bitcoins of yours off of your hands for 20$ each, as they have value to me for their utility ("ability to send value across political and geographic borders, nearly instantly and dirt cheap").

I will pay you a tulip and $21, cause I am nice.

I did overly e,phases the idea of bitcoin not having value. Which was a mistake. There is value, but my point was the value of bitcoin, which anyone calling it worthless misses, is the features of the network. I mean, there isn't really a bitcoin anywhere, its a reference to the control of a unit able to be exchanged securely and this reference is recorded and stored safely...


but back to my offer .. how about $30? But it has to be a quick deal I don't have a lot of time ....

[pand70]

Price: What I need to give up (pay) to get bitcoin! (currency (dollar), goods, services).

Value: What I can do with my Bitcoin once I bought it.

Question: What can I do with my Bitcoin once you have transferred it to me?

Pretty much everything you can do with something that has value but with the added benefit of the bitcoin network.
On top of that you can use bitcoins as a currency to buy staff or services in one of the thousands of merchants around the world.