Bitcoin's value: From Network or Scarcity?

[TradingBull.io]

We can argue that what is giving value to Bitcoin isn't only its properties as a scarce p2p e-cash system.

The network is actually extremely valuable by itself, as an immutable time-dependent database.

"Imagine SQL under firewall operating as a new kind of internet."
A network applied to transact instantly with anyone, anywhere and without middlemen.

Then the question coming next is the one of the chicken and egg:

Is it Scarcity --> Network --> Price ?

Or Scarcity --> Price --> Network ?

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[hatshepsut93]

The network is actually extremely valuable by itself, as an immutable time-dependent database.

You can write only a little of bytes, and it costs a lot. Maybe there are some theoretical use-cases for Bitcoin as a database, but on practice no one is using it as such. There's no way that the database use-case is giving Bitcoin more than a dozen of dollars of value.

Scarcity is the factor that amplifies the value. Decentralization is the origin of value, it makes Bitcoin unique compared to all other electronic money. Even if Bitcoin was inflationary, it would still be worth a lot.

[Upgrade00]

Bitcoin's value comes primarily from the demand and supply forces. A higher demand with a disproportionate movement in supply would likely result in an increase in the price and vice versa.
There are of course other secondary factors which influences demand and supply, under which you'll get finite supply/halvings and network features.

We can argue that what is giving value to Bitcoin isn't only its properties as a scarce p2p e-cash system.

There's no singular aspect which dictates the price, it's a combination of both primary and secondary factors.
• There can only be so much Bitcoins in circulation, so demand would always grow against supply,
• Users who want financial autonomy which the decentralized network offers would also want to buy in,
• Media coverage plays a part and can lead to a increase or a decrease in the price,
• General market sentiments such as fomo and fud also influences the value.

[TradingBull.io]

The network is actually extremely valuable by itself, as an immutable time-dependent database.

You can write only a little of bytes, and it costs a lot. Maybe there are some theoretical use-cases for Bitcoin as a database, but on practice no one is using it as such. There's no way that the database use-case is giving Bitcoin more than a dozen of dollars of value.

Scarcity is the factor that amplifies the value. Decentralization is the origin of value, it makes Bitcoin unique compared to all other electronic money. Even if Bitcoin was inflationary, it would still be worth a lot.

The main use case for the database is BTC (transactions). Exclusive usage in the case of Bitcoin.
Ethereum is a way more useful network than Bitcoin (as a database and a network), for example, yet isn't as strong (in terms of computing power). MCap wise neither.
More networks to come will be more optimized and allow more and more use cases as DB/Network.

But BTC is a symbol, and has the stronger network so far (computational power)

[Bitcoin_bullish]

We can argue that what is giving value to Bitcoin isn't only its properties as a scarce p2p e-cash system.

The network is actually extremely valuable by itself, as an immutable time-dependent database.

"Imagine SQL under firewall operating as a new kind of internet."
A network applied to transact instantly with anyone, anywhere and without middlemen.

Then the question coming next is the one of the chicken and egg:

Is it Scarcity --> Network --> Price ?

Or Scarcity --> Price --> Network ?

Security, immutability, scarcity, p2p transactions are some of the features of Bitcoin.
The most important of all is decentralization and the effect of financial freedom it brought to the world.
hatshepsut93 explained the value of decentralization.
Somehow a few people mistake financial freedom with making a lot of fiat from their investment. I have seen that mistake made even from a big exchange leader.
What financial freedom means is to be able to do whatever you want with your money. To send them to absolutely anybody, no matter where he lives, no matter who he is and what he did, not wondering if the network will have a black list file, or a hundred rejection codes to give you.
Now if Saylor that traded Bitcoin in 2013, comes after seven years to say decentralization shouldn't be discussed because the big money doesn't like it, then I don't like the big money.

[DooMAD]

I'd argue it's too simplistic to say it's just one thing or the other.  There are a multitude of factors that all work in unison.  If you start removing certain ingredients, the value proposition changes.

[Twinkledoe]

I'd argue it's too simplistic to say it's just one thing or the other.  There are a multitude of factors that all work in unison.  If you start removing certain ingredients, the value proposition changes.

What more can I say? The value that we have now in the market is combination of various factors. We can't just eradicate one or two of them, because that is the reason why we are experiencing its current worth. Those variables, even if they are in minor contribution with the growth of bitcoin, are vital in the overall market price. So yes, removing even one of them is not a good idea on its overall impact in the market.

[pixie85]

Is it Scarcity --> Network --> Price ?

Or Scarcity --> Price --> Network ?

Is the price really giving it value? Price is just a representation of value. It doesn't give it and it doesn't take it away.

Scarcity by itself doesn't give any value to things. You could see it in play when altcoin developers tried to make coins even more scarce than bitcoin and with even higher price per coin or token.

Some of the most important factors that give value to bitcoin are utility and uniqueness. It was the first to do it, the first idea of this kind of private money that was at the same time fast safe and secure. It caught people's attention and there you have it. The rest is history.

[Darker45]

I don't think you can make it linear. The design of Bitcoin is the very reason why it is of high demand. At least, everything starts from there. And by design, it includes its scarce nature and using a decentralized network. Scarcity and network don't follow either one of them. They're both there at the same time right from the start. It is not as if one becomes so valuable and the other consequently shared its value.

So I don't see a chicken and egg dilemma here. From the three aspects that you mentioned, I guess it would always be Scarcity & Network --> price.

[TradingBull.io]

I don't think you can make it linear. The design of Bitcoin is the very reason why it is of high demand. At least, everything starts from there. And by design, it includes its scarce nature and using a decentralized network. Scarcity and network don't follow either one of them. They're both there at the same time right from the start. It is not as if one becomes so valuable and the other consequently shared its value.

So I don't see a chicken and egg dilemma here. From the three aspects that you mentioned, I guess it would always be Scarcity & Network --> price.

The whole reflection is revolving around also considering upgraded forks of Bitcoin, which, on paper, have a higher value proposition:

- LTC is processing transactions faster (blocktime 2.5m) + scrypt algo
- XMR also has a lower blocktime (2min) + privacy
- BSV should also eventually be more optimized for scaling.

Then, if we are rational on the value proposition itself, Bitcoin should be valued less than them.
But still differentiates on a couple points:

1- The symbol it represents for the industry
2- The base pair for most other crypto (progressively loosing it for stablecoins)
3- The most known and advertised
4- The biggest network

Since we would all prefer to think it has real value and isn't a pure speculative instrument built out of hype, point 4 should prevail.

[Wind_FURY]

We can argue that what is giving value to Bitcoin isn't only its properties as a scarce p2p e-cash system.

The network is actually extremely valuable by itself, as an immutable time-dependent database.

"Imagine SQL under firewall operating as a new kind of internet."
A network applied to transact instantly with anyone, anywhere and without middlemen.

Then the question coming next is the one of the chicken and egg:

Is it Scarcity --> Network --> Price ?

Or Scarcity --> Price --> Network ?

Good question! The answer might be different for different people, depending on their perspective. For me, I believe Bitcoin as a self-bootstrapped cryptocurrency network was established through altruism, then grew from there. Then, Network --> Scarcity --> Price --> Network?

[pooya87]

We can argue that what is giving value to Bitcoin isn't only its properties as a scarce p2p e-cash system.

I disagree, what gives anything value is their utilities meaning bitcoin value comes from its utility as the decentralized currency. Scarcity is only a contributor to increase of that value not its reason.

The network is actually extremely valuable by itself, as an immutable time-dependent database.

Not the network but the "blockchain" is immutable. And it is not time-dependent, it is timestamped.

Then the question coming next is the one of the chicken and egg:
Is it Scarcity --> Network --> Price ?
Or Scarcity --> Price --> Network ?

Neither. It is:
Utility > value (then it is ) more adoption > higher value (then it is) fixed supply > deflationary > increasing value.

Whereas in contrast for altcoins such as ethereum:
Lack of utility > no value and dumping in long term (then) less adoption or no adoption > lower value (and finally) unlimited supply > inflationary > decreasing value.

- LTC is processing transactions faster (blocktime 2.5m) + scrypt algo
- XMR also has a lower blocktime (2min) + privacy
- BSV should also eventually be more optimized for scaling.

- LTC has been around nearly as long as bitcoin and it doesn't even have 10% of bitcoin's adoption. Conclusion: faster block time means absolutely nothing when the coin is the exact copy of bitcoin
- XMR has terrible scaling issues but since it is the only decent "anon coin" it has a niche use case hence has value.
- BSV is a shitcoin and is the exact copy of bitcoin hence it is completely useless as it is evident from both its price and the number of transactions it has been processing.

upgraded forks of Bitcoin

Your mistake is that you think these are "upgrades" when actually these are simply changes each targeting arbitrary things that have actually added vulnerability to the otherwise secure protocol.

[acquafredda]

It is a virtuous cycle of many factors: Network -> Scarcity -> Mining -> Price.
The more players inside the bigger the network.
Scarcity was enforced from day 1 and now it is time of shortages in the market.
The higher the hashrate the better the security of the information written in the ledger.
All these factors together move the price forward.

[amishmanish]

What gives bitcoin value can be understood on the basis of comparison with those that try to copy it. The first thing that gives bitcoin value is its novelty. It solved a novel problem.

The second thing is a community of committed and like-minded individuals. There was and still is the core community which believes in Bitcoin not the way that shills "believe" in their respective ERC-20 token on their telegrams, just for the sake of price. They honestly believe in Bitcoin's ethos of finance without middlemen and central banks.

The third obviously is scarcity.

So, Novelty + Community > Network > Scarcity.

[cryptomaniac_xxx]

But we also have to remember that the narrative has change over time,

Proof of Concept => Payment system => Digital Gold => Now as an financial assets.

But I guess it boils down as being as scarce as anything we haven't seen before, just comparable to precious Gold. So for me, it's: Scarcity --> Network --> Price.

[TradingBull.io]

Quote
Your mistake is that you think these are "upgrades" when actually these are simply changes each targeting arbitrary things that have actually added vulnerability to the otherwise secure protocol.

Eventually everything is an actual upgrade of Bitcoin, even Bitcoin itself.

The Segwit implementation/upgrade and block size debate has split it in 2:
Bitcoin and BCH without none really being the Original Bitcoin anymore.

So yes, upgrades, modified versions, whatever it is.
Their value proposition is evolving slightly along the way.

Not the network but the "blockchain" is immutable. And it is not time-dependent, it is timestamped.

Timestamp is a form of time dependency (time-stamped).
The network is "writable" only for a 10 min window after which it becomes immutable.

I disagree, what gives anything value is their utilities meaning bitcoin value comes from its utility as the decentralized currency.

But Bitcoin isn't yet optimized for this purpose: High transaction time & fees, network congestions, no privacy, no other use cases (utility) for the network like ETH or EOS.

[pooya87]

Eventually everything is an actual upgrade of Bitcoin, even Bitcoin itself.

Creating an exact copy of something and changing its name while decreasing its security is not an upgrade.

The Segwit implementation/upgrade and block size debate has split it in 2:

Wrong. Bitcoin has never split into anything. People have been creating poor copies of it for ages but they are not "splitting bitcoin".

Timestamp is a form of time dependency (time-stamped).
The network is "writable" only for a 10 min window after which it becomes immutable.

Wrong. That is not how Proof of Work works. There is no "10 min window" at all in PoW.

But Bitcoin isn't yet optimized for this purpose: High transaction time & fees, network congestions, no privacy, no other use cases (utility) for the network like ETH or EOS.

Bitcoin is as optimized as it gets and so far there hasn't been anything better in having faster cheaper transactions while remaining decentralized.
BTW creating tokens to scam people (ie. what ETH, ... do) is not called "utility". Smart contracts exist in bitcoin and if any more advanced contracts were needed and had any real world application they would have been added to bitcoin. There is also sidechains (eg RSK) and a ton of other things built on top of bitcoin (eg. Omni layer) with much more advanced smart contract capabilities.

[DooMAD]

no privacy

How do you figure?  Granted, it's easier to trace than physical cash is.  But it gives you more privacy than a credit/debit card does.  The level of privacy you attain with Bitcoin is largely dependant on how you use it.

- BSV should also eventually be more optimized for scaling.

Who cares?  When a coin gets delisted from exchanges because the figurehead of that coin is creating drama and causing friction, that coin is obviously useless.  Having a lead developer is acceptable, but having some crazed cult personality to be a "public face" of the coin is completely misguided.  Any coin with a single individual holding that much influence over its acceptance is a weak cryptocurrency.  Ideally, there shouldn't be a figurehead at all, let alone one that's a habitual liar and gets involved in technical matters they clearly can't even comprehend.  If you put a clown at the helm, the coin is naturally going to be seen as a joke.

[TradingBull.io]

Wrong. That is not how Proof of Work works. There is no "10 min window" at all in PoW.

You are jumping a topic to another here with in mind consensus.
The blocktime is the window during which transactions are still verified and included to the block.
It goes the same with consensus mechanisms others than PoW.

Bitcoin is as optimized as it gets and so far there hasn't been anything better in having faster cheaper transactions while remaining decentralized.

Got you're a maxi.

The level of privacy you attain with Bitcoin is largely dependant on how you use it.

Level of privacy you get is largely dependent on regulators, forensic tools, mapping agencies and government's involvement.
Thus, decreasing over time up to transparency.

Who cares?  When a coin gets delisted from exchanges because the figurehead of that coin is creating drama and causing friction, that coin is obviously useless.

Set aside the judgment of value and personal opinion, a product goes beyond than just its "Founders" or "Public Face".
If some Exchanges are playing politics instead of remaining neutral, it is their own positioning.

We could also discuss Facebook, Mc Afee or Kalanick but better to keep it to the technical analysis of the product.

[davis196]

Is it Scarcity --> Network --> Price ?

Or Scarcity --> Price --> Network ?

I think that both of the above are wrong.The correct one is:

Network-->Scarcity-->Price

The price is just a result of many factors,including scarcity,market supply and demand,the current state of the network,FOMO,etc.We can't put the result of an equation in the middle of the equation.The result is always at the end.
The Bitcoin Core blockchain has some value,but it would be quite difficult to measure that value.
Without Bitcoin as an asset and a medium of exchange,the value of the Bitcoin Core blockchain is questionable.