Why Does Bitcoin Have Value?

[o_e_l_e_o]

One object has value, because of mainly 2 reasons:

1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather,  or computer to reduce the physical paper work)

This is far too simplistic a way to look at things. There are plenty of very expensive things out there which do neither of things. Pretty much the entire entertainment industry (television, cinema, music, video games) neither contains useful energy nor reduces energy loss (in fact, they all use up energy and increase energy loss, without a tangible "benefit"). Drugs, including things such as alcohol and nicotine, also don't fit in to your definition, despite being the second largest market in the world. Luxury goods, sports cars, watches, jewelry, precious metals, the list goes on.

it does not give you any scientific measure about the value of the object.

But the scientific measure of the value of an object is irrelevant if nobody is willing to pay that. Look at a sports car, for example. Thousands of dollars in design costs, in raw materials, in production and manufacturing costs, in testing, in labor, etc. which is reflected in its price. But then look at a Jackson Pollock painting - a few hundred dollars for a canvas and some paints, sells for over $100 million. The "scientific cost" means nothing.

Just look at what's going on at the moment. Toilet paper, with a production cost of maybe 30-40 cents per roll, is being sold for $30-40 dollars instead. Supply and demand is all that matters.

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[fiulpro]

When there is a currency being invented and people using it more and more , it increase the value of that Currency after a long period of time.

With time when people realize it is worth something and can be used beneficially it does become more popular, the more people buy it , the more the value rises.

If there are 10 coins and 10 people want to buy it , 1 coin will go for 1 x

If there are 10 coins but this time 100 people , the value will increase substantially , I don't think the demand and supply rule is abstract.

It's like you are asking why do stocks or gold has a value ?

Bitcoins are not generated out of thin air without any external interference.

[johnyj]

One object has value, because of mainly 2 reasons:

1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather,  or computer to reduce the physical paper work)

This is far too simplistic a way to look at things. There are plenty of very expensive things out there which do neither of things. Pretty much the entire entertainment industry (television, cinema, music, video games) neither contains useful energy nor reduces energy loss (in fact, they all use up energy and increase energy loss, without a tangible "benefit"). Drugs, including things such as alcohol and nicotine, also don't fit in to your definition, despite being the second largest market in the world. Luxury goods, sports cars, watches, jewelry, precious metals, the list goes on.

If you look at it closely, it always fall into two of the above categories. This is because, human as a living being, require constant energy input to maintain its activities throughout its life, so anything that contains usable energy or reduce the energy loss is of value to human

Entertainment for example, is used to reduce energy loss: Although they don't directly provide energy, but they reduce the inefficiencies inside your body, thus makes your mental status more healthy. You can compare with another case: The same energy input but pure loud noise through speakers, that will make you tired and lose energy quickly. A high level of mental status can come from reduced energy loss, which can be caused by drugs, drinks, luxury goods, holiday, etc...

it does not give you any scientific measure about the value of the object.

But the scientific measure of the value of an object is irrelevant if nobody is willing to pay that. Look at a sports car, for example. Thousands of dollars in design costs, in raw materials, in production and manufacturing costs, in testing, in labor, etc. which is reflected in its price. But then look at a Jackson Pollock painting - a few hundred dollars for a canvas and some paints, sells for over $100 million. The "scientific cost" means nothing.

Just look at what's going on at the moment. Toilet paper, with a production cost of maybe 30-40 cents per roll, is being sold for $30-40 dollars instead. Supply and demand is all that matters.

True, supply and demand do affect the price of goods and services, but that can also be explained with energy theory

The paint art's value does not only decided by the original production energy input. When it is scarce, the energy input to acquire it in open market competition will become prohibitively high. It is the same for bitcoin, its value now increased mainly due to the increase of energy input in competition

It is similar for the toilet paper example. A demand surge in a short time increase the energy input for end consumer to get the goods because of competition, but in the long run it is the energy input in making of the product decide its base value, or cost. And that cost is not easily changed by supply and demand, thus relatively stable

It is intereting that in bitcoin's case, that the constant competition in mining makes the energy input higher and higher, so its value is purely driven by the competition, it does not have a base value, or the least amount of energy input to make the product.

And this explained the phenomenon that there are always people asking the question like "Why does bitcoin have value", since they just can not see that base value component in bitcoin, and they feel uncertain

[o_e_l_e_o]

Entertainment for example, is used to reduce energy loss: Although they don't directly provide energy, but they reduce the inefficiencies inside your body, thus makes your mental status more healthy.

What inefficiencies? You are suggesting that watching a moving somehow makes the human body more efficient at metabolizing glucose? Ok, what about a gym membership then? That doesn't help to reduce energy loss - in fact, the exact opposite. It promotes energy loss. Why is that valuable?

When it is scarce, the energy input to acquire it in open market competition will become prohibitively high.

You are mistaking scarcity for demand. When there is demand for a product, its price increases. Scarcity alone is meaningless. There is only one pair of dirty socks I wore yesterday in the whole world. Only one! It would take a huge amount of energy for someone to track me down, break in to my house, fight me, and steal the only pair of my dirty socks in the whole world. None of this makes them valuable in any way.

It is intereting that in bitcoin's case, that the constant competition in mining makes the energy input higher and higher, so its value is purely driven by the competition, it does not have a base value, or the least amount of energy input to make the product.

If this were the case, that the price of an object was driven entirely by the amount of energy required to obtain said product, then the price of bitcoin would directly correlate with the hashrate.

[johnyj]

Entertainment for example, is used to reduce energy loss: Although they don't directly provide energy, but they reduce the inefficiencies inside your body, thus makes your mental status more healthy.

What inefficiencies? You are suggesting that watching a moving somehow makes the human body more efficient at metabolizing glucose? Ok, what about a gym membership then? That doesn't help to reduce energy loss - in fact, the exact opposite. It promotes energy loss. Why is that valuable?

Entrophy is always going to increase, that is the underlying inefficiency in the universe. You can fight this trend by input lots of energy. Human are complicated living being, since we have brain, and the brain coordinate all our behavior. Many of the human's behavior, seems like a waste of energy, but improve some efficiency. Going to gym for example, will make you much less likely to be sick and in hospital. That is a huge reduce of the potential energy loss. Of course brain can do missjudgement (like gambling), but generally it tries to make wise decisions based on your own energy requirement, that is also the basic assumption in modern economy. If human have a tendency to waste energy instead of getting energy or reduce energy loss, then the theory of modern economics will never work

When it is scarce, the energy input to acquire it in open market competition will become prohibitively high.

You are mistaking scarcity for demand. When there is demand for a product, its price increases. Scarcity alone is meaningless. There is only one pair of dirty socks I wore yesterday in the whole world. Only one! It would take a huge amount of energy for someone to track me down, break in to my house, fight me, and steal the only pair of my dirty socks in the whole world. None of this makes them valuable in any way.

Demand is the basic prerequisite, then scarcity decide the level of competition

It is intereting that in bitcoin's case, that the constant competition in mining makes the energy input higher and higher, so its value is purely driven by the competition, it does not have a base value, or the least amount of energy input to make the product.

If this were the case, that the price of an object was driven entirely by the amount of energy required to obtain said product, then the price of bitcoin would directly correlate with the hashrate.

I do hope so. Imagine that there is no exchange, the only way to get bitcoin is through mining, then mining cost will be a very good indicator of the bitcoin value. But unfortunately since most of the people are using fiat money to measure the value, and bitcoin is traded against fiat money, then bitcoin's value will be heavily affected by the supply and demand of fiat money

And the reason I want to use energy to measure value is trying to get rid of the affect of fiat money supply, that might increase its price stability a lot

[o_e_l_e_o]

Many of the human's behavior, seems like a waste of energy, but improve some efficiency. Going to gym for example, will make you much less likely to be sick and in hospital. That is a huge reduce of the potential energy loss.

So what about all the obese people in the world. It is a massive waste of energy to work extra hours to buy all that extra food, it is a huge waste of energy to do simple tasks while significantly overweight, and it is a huge increase in potential energy loss by suffering a heart attack or diabetes.

If human have a tendency to waste energy instead of getting energy or reduce energy loss, then the theory of modern economics will never work

What is procrastination if not wasting energy? The majority of social media wastes time and impacts negatively on mental health. What a massive waste of energy, and yet a hugely valuable industry. Your analogy does not hold up.

Imagine that there is no exchange, the only way to get bitcoin is through mining, then mining cost will be a very good indicator of the bitcoin value.

But it won't. That's the point I'm making. It doesn't matter how much energy is used to create or build something. What matters is how much demand there is for that thing. I could create an altcoin which requires $10,000 of electricity to mine a single coin. That doesn't mean a coin is worth $10,000. If all I can sell a coin for is $1, then it's only worth $1, regardless of how much energy was used to create it.

The price of bitcoin is based on the supply and demand of the market, and not on the hashrate or the difficulty.

[ballerin and giroud]

Bitcoin is like money in my thought, you can see the characteristic of money and you can compate them. One thing that I know bitcoin have a value it was because its unique, since the price of bitcoin based on supply and demand then if there is people who know the ins and out of it then they buy it and use them as the wish. This is why bitcoin price reach the price as of now. The people will not buy bitcoin if there is no an unique thing, and it will be like anither shitcoin other digital curreny that was created like the coin who has created by facebook.

[johnyj]

Many of the human's behavior, seems like a waste of energy, but improve some efficiency. Going to gym for example, will make you much less likely to be sick and in hospital. That is a huge reduce of the potential energy loss.

So what about all the obese people in the world. It is a massive waste of energy to work extra hours to buy all that extra food, it is a huge waste of energy to do simple tasks while significantly overweight, and it is a huge increase in potential energy loss by suffering a heart attack or diabetes.

You are giving an example to disaffirm the basis of mainstream economy theory: Rational person hypothesis. I don't think those people intentionally want to get fat. Of course there are some economists that deny the rational person hypothesis, but that will also mean the supply and demand curve will not work, since any irational banker would suddenly buy anything in the market and raise their price for magnitues, and crash it in the next minute

My theory does not diviate too much from the classical supply and demand theory but I just do not use fiat money to measure the supply and demand, but using energy instead, that is the fundamental difference. In fact fiat money is also exchangeable to energy, but the difference is that it is highly manipulative

If human have a tendency to waste energy instead of getting energy or reduce energy loss, then the theory of modern economics will never work

What is procrastination if not wasting energy? The majority of social media wastes time and impacts negatively on mental health. What a massive waste of energy, and yet a hugely valuable industry. Your analogy does not hold up.

Maybe you are only seeing the energy wasting part, which is a small part of whole picture. The overall result might still be plus on energy, otherwise the activity is not happening. You can just exchange energy to USD, if that fits your habit

Imagine that there is no exchange, the only way to get bitcoin is through mining, then mining cost will be a very good indicator of the bitcoin value.

But it won't. That's the point I'm making. It doesn't matter how much energy is used to create or build something. What matters is how much demand there is for that thing. I could create an altcoin which requires $10,000 of electricity to mine a single coin. That doesn't mean a coin is worth $10,000. If all I can sell a coin for is $1, then it's only worth $1, regardless of how much energy was used to create it.

The price of bitcoin is based on the supply and demand of the market, and not on the hashrate or the difficulty.

You still want to sell the coin for USD, so USD is still your biggest religion, that is what I'm seeing, and all my theory is just to avoid this religion

The demand is not from the exchange, but from the people that need bitcoin, even there is no USD in this world. My point is that people should get rid of the habbit of using fiat money to measure value, otherwise they will not see the real demand but a demand that is manipulated on exchanges by whales that is full of fiat money, very speculative

Another example, now oil price crashed to less than 20USD a barrel, but the energy content remains unchanged. In my model, the value of one barrel of oil remains unchanged, while USD's value doubled. And if you use oil as a standard unit of value, then many things' value actually get pumped a little bit

[pixie85]

Didn't watch the video but the reason is basic and valid and without the technical jargon the value of btc comes from us being ready to pay whatever price is there leading to demand and retaining it's value in the process.

Why? are you that lazy?

I hate TLDR people.

Too long to read/watch but not too long to comment?

I wish that it can achieve this economic independence but for now we're still far from it (depending on stocks, government policies, fiat prices, the Internet).

[xiboothrezi]

Op provided a pretty technical explanation. In a simpler perspective, I see quite a lot of psychological strategies that are implemented in bitcoin marketing. By utilizing a system that is different from conventional systems, bitcoin becomes controversial with a decentralized system, providing the freedom that has been restricted by third parties in the transaction process. This is attractive to some people who want freedom. On the other hand, the limited amount, the halving system, makes the BTC price development more unpredictable. Economically, the presence of interest will definitely lead to demand, right? that's what makes up the price of bitcoin.

[o_e_l_e_o]

I don't think those people intentionally want to get fat.

It doesn't matter. You can't say energy is directly linked to value. A sirloin steak and a month of gym membership might both cost $20. They have the exact opposite effect on the person in question in terms of energy input and output, yet both have value. The energy required to create a product, or the energy the product provides or uses, are not directly correlated with its value.

but I just do not use fiat money to measure the supply and demand, but using energy instead

I understand what your theory is. My point is that it doesn't hold up as I've explained above. There is no direct link between energy and value.

My point is that people should get rid of the habbit of using fiat money to measure value

I would love to move towards more things being priced solely in bitcoin, but this does not require your energy theory to do so. 1 bitcoin = 1 bitcoin is all that is required.

[royalfestus]

Yeah, you are right. Bitcoin does have value because it is scarce and has utility. But, you forgot the main thing. Demand. Bitcoin and other crypto currencies have demand for which they also have a value. As long as there is a demand for bitcoin, there will be a price. With the demand rising the price also starts to rise. But, as the demand falls and goes to zero, the price will also eventually fall and then become valueless even though if it is scarce and has utility. Look at those coins that have failed. They now worth almost nothing since they don't have any demand.

The scarcity is base on demand, if there are no demand it cant be qualified scarce. I also think it is a global means of exchange with the internet, which provide a wide variety of traders and investors. The value is also in the portability and volatility. The scarcity and utility helps the volatility, volatility of bitcoin is so attractive to increase and keep millions traders

[johnyj]

I don't think those people intentionally want to get fat.

It doesn't matter. You can't say energy is directly linked to value. A sirloin steak and a month of gym membership might both cost $20. They have the exact opposite effect on the person in question in terms of energy input and output, yet both have value. The energy required to create a product, or the energy the product provides or uses, are not directly correlated with its value.

but I just do not use fiat money to measure the supply and demand, but using energy instead

I understand what your theory is. My point is that it doesn't hold up as I've explained above. There is no direct link between energy and value.

My point is that people should get rid of the habbit of using fiat money to measure value

I would love to move towards more things being priced solely in bitcoin, but this does not require your energy theory to do so. 1 bitcoin = 1 bitcoin is all that is required.

Animals never need gym, gym is a higher level demand that reduce the energy loss of human body: less sick, longer life. The biggest energy loss is desease or die

There is also no direct link between dollar and value, but people get used to it. So it will be the same, as long as people get used to it, energy will work the same as USD. If you adopt an energy coin that always equal to 1KWH to measure value, then things will be priced like 1 ENE, 100 ENE, etc...

Bitcoin is not a good unit to measure value, since its production cost rises too quick thus its value changes too fast. Energy on the other hand, is like Lbs, Foot or Second, it is very objective and stable. In some other theories, labor time like man hour had also been considered a good unit of value, but it is not very objective, since different people have diffrent ability

[kryptqnick]

It is a simple yet not easy question to answer: why does bitcoin have value?

The answer, we believe is summarized in this video: https://www.youtube.com/watch?v=Vv2-6KDlZSE

Bitcoin has value because it has both scarcity and utility. It is a limited and useful resource. It is important to note that something must be BOTH in order to command a market value, NOT either.

It doesn't sound right to me anyway. Bitcoin has value because people put it in it because people trade it at certain prices. I don't think it has an inherent value, perhaps just a bit of it that comes from what's needed to generate BTC (electricity, equipment, maintenance), but that's not how we measure the value of money these days anyway. You're talking about scarcity I'm sure there are many scarce things on the planet nobody cares about. As for utility, it's kind of dubious because you can't really do anything with Bitcoin apart from generating it and making transactions... I mean, in terms of utility something like animal skin which used to be money about a thousand years ago had way more utility. But in terms of being money Bitcoin is kind of useful, I agree with that.

[CarnagexD]

Bitcoin is like money in my thought, you can see the characteristic of money and you can compate them. One thing that I know bitcoin have a value it was because its unique, since the price of bitcoin based on supply and demand then if there is people who know the ins and out of it then they buy it and use them as the wish. This is why bitcoin price reach the price as of now. The people will not buy bitcoin if there is no an unique thing, and it will be like anither shitcoin other digital curreny that was created like the coin who has created by facebook.

Bitcoin is the same like the fiat currency because it is converted j to digital currency still it has the same process or method of payment but the difference is it is faster and secure than the traditional way of earnings and still we are looking forward to the more use of it because today still there are some people does not want to use it because they are doubting the use of it a there are a lot of people support the use of bitcoin to becomes more profitable and popular. Slowly but surely the bitcoin is gaining a lot of popularities today because it is more convenient than the traditional way.

[Bitcoinislife09]

It is a simple yet not easy question to answer: why does bitcoin have value?

The answer, we believe is summarized in this video: https://www.youtube.com/watch?v=Vv2-6KDlZSE

Bitcoin has value because it has both scarcity and utility. It is a limited and useful resource. It is important to note that something must be BOTH in order to command a market value, NOT either.

Bitcoin is limited to the software-imposed hard limit of 21,000,000 bitcoin units ever in circulation. It is useful because it allows payment information to be secured by a decentralized computing network backed by magnitudes of raw hashing power. That raw hashing power is energy (electricity) converted into digital utility. Each transaction must compete (fee market) to be included in the next block of transactions which has a limited [block space] due to the block size limit (2MB) imposed on each ~10 minute block.

We can expect both the value to increase and the number of users to increase exponentially so long as the current technology maintains itself and remains both useful and in a limited abundance.

Bitcoin will always retain market value so long as miner nodes are actively contributing their hashing power to secure the network (proof of work).

Learn more about bitcoin at http://diginomics.com

It was just owning something that you don't really have since it is a digital currency and it was just portray by a numbers in your bitcoin wallet. The bitcoin have its value was just pretty simple, it was just depending it the supply and demand of bitcoin that is why it has its own value, but in real life their is no collateral or any assurance of this bitcoin that is going to prove that you have something unlike like for example in the stock market of a company somehow you have a part of the company that is yours. It is the opposite in bitcoin since you don't really have something meaning you could just lose your bitcoin at any moment since it could lost its value at any time.

[GrayFullbuster]

When there is a currency being invented and people using it more and more , it increase the value of that Currency after a long period of time.

With time when people realize it is worth something and can be used beneficially it does become more popular, the more people buy it , the more the value rises.

If there are 10 coins and 10 people want to buy it , 1 coin will go for 1 x

If there are 10 coins but this time 100 people , the value will increase substantially , I don't think the demand and supply rule is abstract.

It's like you are asking why do stocks or gold has a value ?

Bitcoins are not generated out of thin air without any external interference.

It is simply because there are people who want to patronize it and that is why it has value. The demand is continue to grow over the years while its popularity is also increasing. There are also many uses of bitcoin and there are many people who became interested to it. I'm a bitcoin fan since 2017 and I use it in price appreciation and also in some utility uses like paying bills and buying load.

[Cryptoreflector_666]

Bitcoin is like money in my thought, you can see the characteristic of money and you can compate them. One thing that I know bitcoin have a value it was because its unique, since the price of bitcoin based on supply and demand then if there is people who know the ins and out of it then they buy it and use them as the wish. This is why bitcoin price reach the price as of now. The people will not buy bitcoin if there is no an unique thing, and it will be like anither shitcoin other digital curreny that was created like the coin who has created by facebook.

Bitcoin is simply the most popular of the existing coins and therefore it has such a huge demand and its value is greater than that of other coins. The point is not at all its uniqueness, namely, that her PR is a great labor-intensive event. This must be understood and taken into account.

[squatter]

Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective.

Yes, it's an oversimplified example, but your point only seems to reinforce that valuation is subjective -- based on supply and demand, not the cost of production.

Yes, that's why using supply and demand model is too abstract and flexible, it does not give you any scientific measure about the value of the object.

Of course it's not scientific. No economic model is scientific -- there are too many variables to consider, none of which can be isolated and tested in an empirical way. It would be nice if we could fit things into scientific models like a labor theory or cost-based theory of value, but we can't. Market pricing simply is not predictable, which is why we just shrug and say "supply and demand."

So I think in this case, an objective measure will be the energy input (e.g. cost) required to make the food. Using energy as unit of account will make the valuation more objective, since no amount of fiat money printing can change the energy input of making a beef filet, thus its value (measured by energy content) is not affect by the supply and demand of fiat money

Is that a valuable metric, if it doesn't line up with actual market prices?

[buwaytress]

Bitcoin is so much old coin and this coin will change the life of the peoples whihc will invest in it at the start and now they are billionaire, So many peoples will invest their money and they just wait for the bull and also almost peoples will deal i the Bitcoin than the other ALT coins and they trust on just the Bitcoin in the crypto market.

This kind of attitude is what's going to get you in trouble, my friend. If you see Bitcoin as a get-rich-quick scheme, ask the many people who jumped headfirst since the end of 2017, putting their house and shirt off their back, going all-in on Bitcoin. Telling their friends and family the same.

Learn about it first. Put in what you can afford to lose. And use it as much as possible throughout. Only your using of it, and encouraging others to do the same, while believing in it, can help it get to the value it should be at.