The intrinsic value debate.

[BlackHatCoiner]

There's lot of debate about this topic from both haters and supporters and to be honest, it's reasonable. Some people believe that if something isn't intrinsically valuable, it isn't valuable at all or shouldn't be. In this thread I'll explain why Bitcoin has no intrinsic value and why that shouldn't be a concern at all.

First things first, I ought to define what “intrinsic value” is. It turns out that it's a tough term; it can be separated into three different meanings:

1. Finance.
2. Ethics.
3. Numismatics.


In finance, intrinsic value refers to the profit that could be gained by exercising an option. For example, if the current market value of the underlying instrument is $110, but the strike price of the option was called at $100, then its intrinsic value will be $10, ignoring what may happen to it in the future (due to price fluctuations). For example, if you bought 1 BTC at $44,000 and then sell it at $50,000, then you've gained $6,000 profit and thus, the intrinsic value of that option was $6,000.

Note that the option has intrinsic value; not the stock/product. In this case, Bitcoin doesn't have intrinsic value financially, despite the fact that people find it valuable. Same thing happens with stocks. Their intrinsic value isn't originating from the value of the company, but from the options' profits.


In ethics, intrinsic value is a property of an object that is valuable on its own. Pretty misleading definition, isn't it? How can you measure or understand that an object is “valuable on its own”? Wikipedia, though, puts it as following:

Intrinsic value is always something that an object has "in itself" or "for its own sake", and is an intrinsic property.

So here's the problem with Bitcoin. It isn't an object. We could theoretically create a ledger which is censorship resistant from anyone and each person could manually debt each other using it, but that wouldn't make it intrinsically valuable. The people created it out of nothing; it has nothing “in itself” or “for its own sake”. I like thinking it that way: If you have two ounces of gold, you own a more intrinsically valuable total of objects that someone who owns only one ounce. But, with Bitcoin that is not true. The only thing that changes is the debt size which is paid out between humans.


In numismatics (or commodity money), intrinsic value is the constituent metal or, simply, the “essence” that makes a medium of exchange useful beyond its exchanging purposes. A gold coin is probably the greatest example of a currency that is intrinsically valuable. Bitcoin doesn't have any essence (nor banknotes) and thus, we conclude that it is neither intrinsically valuable as a commodity money.


So, why that madness to name its value “intrinsic”? Well, obviously, if you own Bitcoins, it is a matter of time until you make your own network effect on it; to protect your wealth! That's what we all do sometimes, aren't we? It seems that this debate had started many years ago from haters to... justify why Bitcoin has no value (?). It is completely utopian to state such thing; just think that these definitions were made long before virtuality became a commonly used word. Long before intangibility, in certain circumstances, became valuable. (e.g., Internet, Bitcoin)

Anyway, fans had to support the choice they made with some co-arguments whether those made any sense after all. I personally think that this thing with the intrinsic value should not be brought as an argument from now on. It isn't good for neither the fans and the haters.

• If you're a fan, you aren't proving anything by justifying why Bitcoin has intrinsic value.
• If you're a hater, you aren't proving that Bitcoin has no value, just because it isn't intrinsically valuable.

Peace

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[Zilon]

Classifying good as an commodity with intrinsic value because it has a legal backing and claiming Bitcoin isn't intrinsic sounds a bit baise.
Wikipedia

Intrinsic value is always something that an object has "in itself" or "for its own sake", and is an intrinsic property.

It's a clear indication that Bitcoin has value in it's self regardless of the fact it's been projected by it's investors. It's clear it has no legal backup but since the masses which make up a democratic government prefers it as a means of storing value then it automatically has intrinsic value.

The law of demand and supply is what makes a commodity intrinsic. Bitcoin lately has been on a high demand and it's making new highs increasing constantly in value. From what I see we are gradually coming into an era where the government no longer monitor the asset of it's citizens through regularised authorities since every one is gaining autonomy of his personal funds

[defi-Dany]

Whether an item has economic value depends on whether it has a certain purpose and is scarce. Whether currency has intrinsic value should depend on whether it can become a medium of exchange to facilitate transactions and maintain a certain degree of scarcity.

If you understand that the sovereign-endorsed paper currency has an intrinsic value, then it is not difficult to understand that Bitcoin has an intrinsic value. Bitcoin guarantees scarcity through a distributed consensus protocol, and has more advantages over legal currencies, and is more conducive to exchange. Therefore, it also has an intrinsic value-the value of currency.

[yenhuang]

Intrinsic Value (Intrinsic Value) is also known as: Non Use Value (NUV)

Intrinsic value is also called non-use value, which is the value that is inherent in the thing itself and does not exist or change due to other related things outside of it. Existence value (EV) is the most important form of non-use value. Existence value is obtained from the satisfaction of only knowing that the asset exists, although there is no intention to use it.

1.The intrinsic value of an enterprise is the present value of future cash flows. The basic variable that determines the intrinsic value of an enterprise is not the past book asset value and current book surplus, but the size and speed of the company's future free cash flow. The ability of an enterprise to obtain cash is the basis of value evaluation and the main basis and core of financial risk evaluation.

2.The intrinsic value of stocks refers to the present value of future cash inflows from stocks. It is the true value of stocks, also called theoretical value. The future cash inflow of stocks includes two parts, one is the expected dividend, and the other is the income from the sale. The calculation methods of the intrinsic value of stocks include discounted cash flow and price-earnings ratio valuation. However, the actual trading of stocks may not necessarily reflect their own intrinsic value, and it is also affected by factors such as market sentiment.

3.The intrinsic value of a warrant refers to the difference between the price of the relevant asset and the exercise price, that is, the profit from the exercise of the warrant. It is equal to the positive difference between the strike price and the current price of the relevant asset after considering the conversion ratio. The intrinsic value of each unit of the warrant = (related asset price-strike price) / conversion ratio The intrinsic value of each unit of put warrant = (strike price-relevant asset price) / conversion ratio is impossible due to the inherent value of the warrant It is a negative number. If the calculated value is negative, it will be replaced by 0.

The root of the intrinsic value of Bitcoin comes from people's need for property sovereignty, and their desire for property not to be violated by power, which is a fundamental need of man. Bitcoin provides the perfect solution and is the killer application of Bitcoin 1.0, which gives Bitcoin the function of electronic gold.

Bitcoin and its blockchain technology will have a revolutionary role in economic, information, politics and social forms, and will promote human society to freedom, democracy, equality, harmony and global integration.

When the central power of the economy and social networks is weakened and the value distribution mechanism changes, all aspects of human society will change accordingly, which will be beyond imagination.

This is Satoshi Nakamoto's vision. This process will give the answer when there is time. This is also the intrinsic value of Bitcoin. The intrinsic value of Bitcoin lies in the huge driving force that changes the future.

[DapanasFruit]

Classifying good as an commodity with intrinsic value because it has a legal backing and claiming Bitcoin isn't intrinsic sounds a bit baise.
Wikipedia

Intrinsic value is always something that an object has "in itself" or "for its own sake", and is an intrinsic property.

It's a clear indication that Bitcoin has value in it's self regardless of the fact it's been projected by it's investors. It's clear it has no legal backup but since the masses which make up a democratic government prefers it as a means of storing value then it automatically has intrinsic value.

The law of demand and supply is what makes a commodity intrinsic. Bitcoin lately has been on a high demand and it's making new highs increasing constantly in value. From what I see we are gradually coming into an era where the government no longer monitor the asset of it's citizens through regularised authorities since every one is gaining autonomy of his personal funds

I would always prefer to think that we should let the people be the final arbiter whether something is valuable or has intrinsic value in itself. Bitcoin has ushered an era where we should not be trusting the self-professed experts in economics and finances as these were the people that failed us in the past. The question on intrinsic value is always brought out by people who seem could not accept the fact that Bitcoin eventually thrive and flourished and so they are trying even today to diminish its value and warn others never to take up Bitcoin not even to think about it...well these experts will wake up one day mesmerized that Bitcoin has been already so big that there is no other way to do but recognize it. That day is coming soon.

[franky1]

intrinsic value is not profit.
its value.

value is not the PRICE. please take a moment to really let that sink in

value and values are not the same thing.

value is the economic financial measure
values is the feature/benefit measure

bitcoins intrinsic values are:
system of moving funds without bank account or registered ID
system of payment without middlemen or other party authorisation
and such

bitcoins value is:
the underlying cost below the price.
such as gold mining cost of ~$900 is the value, and the $1800 is the price

if it cost only $2 to mine gold in everyones back yard using just a coffee filter and a spoon. gold would not be valued at thousands. but instead at most $20. fluctuating between $3-$20
gold value is over $1k because its mining cost is over $900

[slaman29]

I won't get into the argument of what counts as intrinsic value and what doesn't. All I need to know is that the US dollar isn't actually backed by what is traditionally called intrinsinc value, but no one questions the value of USD simply because America is America.

But now in defi with hacks continuing to happen, and on altcoins 51% attacks getting more and more common, is the security of Bitcoin not provably its intrinsic value?

[BlackHatCoiner]

The law of demand and supply is what makes a commodity intrinsic.

I don't think that I deserve this response after I wrote this whole thread. It is nowhere stated that the law of demand and supply makes something intrinsically valuable. It does affect its marketing value, though.

The definitions of what's intrinsic value were very strict, in my opinion, and Bitcoin does not satisfy their criteria.

If you understand that the sovereign-endorsed paper currency has an intrinsic value

It doesn't.

gold value is over $1k because its mining cost is over $900

It is over $1k, because of the demand and the supply. If there wasn't that demanding for gold, it wouldn't cost $1k just because it's expensive to mine it.

[davis196]

Let's simplify things a little bit.
To me,Scarcity+Utility=Value
I assume that all the Bitcoin haters think that the intrinsic value is the value of BTC,which remains,if we remove all market price volatility,price manipulation and hype around Bitcoin.
They think that:

Market price - Hype,volatility,inflation=Intrinsic value.

I don't know whether or not this is right or wrong.This just a theoretical debate.
By the way,not only options have intrinsic value.Businesses and Stocks also have an intrinsic value formula,but I don't want to get in depth,because I don't care.
From a strictly financial point of view,intrinsic value means all the future income,which an asset can bring to it's owner,minus the inflation.This is my explanation,it might be wrong.

[aoluain]

I dont think any Bitcoiner ever said stated that Bitcoin had "Intrinsic" value, this is a
term used by the establishment to knock Bitcoin  but only by comparing it to traditional
investments etc.

Bitcoin is a different technology, investment and  finance system its value or "intrinsic value"
has to be calculated in
a different way, a way the traditional stocks, bonds, metals and other investments
cannot be calculated in.

I quoted this before and im quoting again as an example

"Bitcoin is a bank in cyberspace, run by incorruptible software, offering a global,
affordable, simple, & secure savings account to billions of people that don’t have the option or desire
to run their own hedge fund.

[franky1]

The law of demand and supply is what makes a commodity intrinsic.

I don't think that I deserve this response after I wrote this whole thread. It is nowhere stated that the law of demand and supply makes something intrinsically valuable. It does affect its marketing value, though.

The definitions of what's intrinsic value were very strict, in my opinion, and Bitcoin does not satisfy their criteria.

If you understand that the sovereign-endorsed paper currency has an intrinsic value

It doesn't.

wow.. seems your stuck in the ELI-05 .. grade school 'supply and demand' tl:dr;
you do realise there are actual things that are involved in supply.. and in demand.
and you need to understand whats actually involved in supply and demand

after all i have a limited supply of dog faeces. a pet dog take 2 plops a day for 15 years is a limited supply
only 11,000 bags of a specific dogs 'brand' of poo
.. if it was as simple as "supply.demand" then you should demand bags of dog poo..
.. oh wait. not interested. .. guess its not as simple as a supply=demand..

grossed out at that thought.. ok lets take fruit farming..
if you think a banana is only valued for demand. then you have no clue about farming/shipping costs

learn that things have TWO "prices"
a value and a sale
the value is BELOW the sale price.
when you can learn price and value are 2 metrics and not the same thing. you can learn beyond grade school stuff

golds VALUE is over $900.. gold PRICE is over $1600
when the PRICE is over valued by multiples. its deemed as inflated/bubble/speculated

its why gold struggles to stretch beyond a 2x price of value

never confuse value with price

gold value is over $1k because its mining cost is over $900

It is over $1k, because of the demand and the supply. If there wasn't that demanding for gold, it wouldn't cost $1k just because it's expensive to mine it.

ill remind you again

value is not the PRICE. please take a moment to really let that sink in

golds PRICE is not $1000
golds PRICE is over $1600..
the PRICE is above the VALUE because there is demand.
its the demand that makes it over $600 more than VALUE

[StanleyBoyle]

In many cases, we cannot say whether internal value and external value appear at the same time, or which one comes first and which comes after. At least Bitcoin now has storage value, technical value, exchange value, payment value, and may also have political value, religious value, and cultural value in the future.
When both the inner value and the outer value are reflected, that should be the true light of Bitcoin.

[DannyHamilton]

intrinsic value is not profit.
. . .
bitcoins value is:
the underlying cost below the price.

Please make up your mind.

Wouldn't the difference between cost and price BE "profit"?
It seems you first say that "intrinsic value is not profit", and then you turn around in the exact same post and say that bitcoin's value is it's profit.  Or are you saying that "cost" and "value" are synonyms?  If that's what you're trying to say, then you are obviously and clearly incorrect. It could easily cost someone $1000 to create something which has a value of much MUCH less than $1000.

such as gold mining cost of ~$900
. . .
gold value is over $1k

Ok, so now you are indicating that the "value" is the PRICE?

There are a lot of words here, and I don't think you've even decided for yourself yet what they mean to you, let alone what society as agreed as the standard definition of these things.  Here are some terms to think about a bit in case you get involved in discussions like this one in the future:

• Intrinsic Value
• Market Value
• Personal Value
• Supply Curve
• Demand Curve
• Equilibrium Price
• Market Price
• Personal Price
• Opportunity Cost
• Use Cost
• Storage Cost
• Aquisition Cost
• Bid
• Ask
• Consumer Surplus
• Producer Surplus

.. if it was as simple as "supply.demand" then you should demand bags of dog poo..

You clearly have no understanding of how the terms supply and demand are used.
The fact that a supply of something exists NEVER means that an equal demand for that thing will exist at all prices.


Supply and demand are two separate curves.  The equilibrium price for that thing is the point where the supply curve and the demand curve cross each other.

In the case of dog poo, the demand curve crosses the supply curve at a price very close to $0 (or perhaps somewhere below $0, since many people are willing to accept negative dollars in exchange for the poo that their dog creates, and there are quite a few people that are willing to pay negative dollars to acquire that dog poo).

.. oh wait. not interested. .. guess its not as simple as a supply=demand..

Nobody in this conversation (other than YOU) ever said (or even implied) that supply and demand are synonyms.  Supply only equals demand when the price is at equilibrium.

grossed out at that thought.. ok lets take fruit farming..
if you think a banana is only valued for demand.

Not sure what you are trying to say here, but yes, Those that supply bananas only value it BECAUSE there is demand for it at a price that is higher than their costs.

then you have no clue about farming/shipping costs

Those are part of the supply costs. They play a part in how much supply will exist.

learn that things have TWO "prices"

Things have a lot more than just two "prices".

a value and a sale

A "value" may or may not be a price.  A "sale" is an instantaneous price at a specific moment in time. There are many factors that can influence what that sale price is at that moment.  

the value is BELOW the sale price.

All types of "value"? Always?  Nah.

when you can learn price and value are 2 metrics and not the same thing. you can learn beyond grade school stuff

Most grade schooler's already understand that.  It seems you may need to learn a bit beyond that though.

golds VALUE is over $900..

Depends a bit on what type of value you are talking about.  I'd argue that its "intrinsic value" is FAR less than that. For me, it's "personal value" is probably closer to $500 per ounce.

gold PRICE is over $1600
when the PRICE is over valued by multiples. its deemed as inflated/bubble/speculated

its why gold struggles to stretch beyond a 2x price of value

never confuse value with price

Certainly, but you just pointed out that cost (which you keep calling "value" for some reason) does constrain price.

the PRICE is above the VALUE MINING COST because there is demand the demand at that price is equal to the supply at that price.
its the combination of supply and demand that makes it over $600 more than VALUE MINING COST

FTFY.