How did bitcoin obtain it's value?

[bcoinbilly]

The currency obviously has been given it's value somehow. I know it is preached to be different than regular fiat currency, but I am very curios how it went from an idea to now being able to be used for purchases, and given a value in relation to USD.

Me and a group of friends cannot come up with an idea for something to be used for transactions and then have that idea be able to transform into a countries currency. We can trade amongst ourselves but there is no way we can give it a value to be used to trade it into dollars. There has to be some type of government involvement in order for bitcoin to have a value in relation to a nations currency.

My question is how is the original concept of bitcoin given a value in dollars? Does this mean there is significant government involvement in bitcoin?

[Cryptour]

Power bills, difficulty rate, mining rigs cost etc

[bcoinbilly]

Power bills, difficulty rate, mining rigs cost etc

I mean the permissions to be able to transfer that bitcoin value into USD - Doesn't the governments have to allow that bitcoin value to be allowed to transfer into there currency? Does this mean there is significant government involvement in bitcoin since they allow it to be traded into the nations currency?

[myohmy81]

Chinese

[Soros Shorts]

Power bills, difficulty rate, mining rigs cost etc

I mean the permissions to be able to transfer that bitcoin value into USD - Doesn't the governments have to allow that bitcoin value to be allowed to transfer into there currency? Does this mean there is significant government involvement in bitcoin since they allow it to be traded into the nations currency?

No, it just means that there are enough people willing to pay fiat currency for bitcoins. People don't need permission to do that. Just like collectibles - you don't need a government's permission to trade them for money. If the market is large enough and liquid enough, then the price will be more or less uniform globally.

[bcoinbilly]

Chinese

Yes - China accepts bitcoin to be traded into Yen. Didn't the emperor and chinese government of China have to allow bitcoin to be traded into YEN BEFORE it was allowed to be traded back into there currency?

[AJinNYC]

The currency obviously has been given it's value somehow. I know it is preached to be different than regular fiat currency, but I am very curios how it went from an idea to now being able to be used for purchases, and given a value in relation to USD.

Me and a group of friends cannot come up with an idea for something to be used for transactions and then have that idea be able to transform into a countries currency. We can trade amongst ourselves but there is no way we can give it a value to be used to trade it into dollars. There has to be some type of government involvement in order for bitcoin to have a value in relation to a nations currency.

My question is how is the original concept of bitcoin given a value in dollars? Does this mean there is significant government involvement in bitcoin?

Things are given value simply on Supply/Demand. First, people are taking a risk that Bitcoin will maintain any value at all by accepting it as a form of payment.

However, once we get past that, individuals are simply saying I value this product I'm producing at such a price and a certain amount of other people will value it at the same arbitrary price. At that price you have an equilibrium and enough people to institute a trade of bitcoin (or any other currency) for the product.

The difference between BitCoin and USD (for example) is BitCoin's "printing press" will eventually be turned off. That's built into the way the system works. USD (or another countries currency) on the other hand has no control on having the printing press turned off, other than the government arbitrarily determining to stop printing.

There's no government involvement backing up the value of bitcoin. In part, the exchange rate is driven by the amount of people using BitCoin, with the express knowledge that the printing press will be turned off eventually. And in another part with the way other currency values and commodity prices move relative to one another. People can freely exchange and trade currencies on the FOREX market. You have free markets determining the values of currencies relative to one another.

Honestly, I'm trying to explain something far to complex to state as clearly as possible. And I am in no way an expert on currency markets or the like. I'm just a business management major that's taken macroeconomics and microeconomics. The valuing of a currency has many constantly moving, complex parts. I think you head would explode at the first watching of a business network segment on currency trading.

Here's a CNBC video for example: http://www.youtube.com/watch?v=wSodzBHN7Y4

[AaronJacalyn]

Hi

I think so that Payment freedom - It is possible to send and receive any amount of money instantly anywhere in the world at any ... Bitcoin allows its users to be in full control of their money.

Buy bitcoin

[bcoinbilly]

Power bills, difficulty rate, mining rigs cost etc

I mean the permissions to be able to transfer that bitcoin value into USD - Doesn't the governments have to allow that bitcoin value to be allowed to transfer into there currency? Does this mean there is significant government involvement in bitcoin since they allow it to be traded into the nations currency?

No, it just means that there are enough people willing to pay fiat currency for bitcoins. People don't need permission to do that. Just like collectibles - you don't need a government's permission to trade them for money. If the market is large enough and liquid enough, then the price will be more or less uniform globally.

I see. So it's like jewelery? Baseball Cards? Stamp collection? etc. Since I am able to trade these materials into money than bitcoin acts the same way.

But isn't bitcoin fairly larger than these other items? I can't buy a rig and begin making collectibles and then trade those collectibles back into real cash.

I know China can print YEN and then trade that printed YEN into USD. I mean can't other countries do the same exact thing?

bitcoin almost acts like the same way except the beauty is it can't be counterfeited right?

[AJinNYC]

Chinese

Yes - China accepts bitcoin to be traded into Yen. Didn't the emperor and chinese government of China have to allow bitcoin to be traded into YEN BEFORE it was allowed to be traded back into there currency?

No... First, the Chinese use the Yuan, the Yen is the currency of Japan.

People that have Yen for example sell their Yen for BitCoin to people that have BitCoin and want Yen. Or People that have USD sell their Dollars for BitCoin to people that have BitCoin and want Dollars. All markets have Buyers and Sellers free from government involvement. What gives the currencies their values is the buyers and sellers agreeing on a price, on their own. That's why currencies values, relative to one another, vary on a second to second basis, or trade to trade basis.

[bcoinbilly]

The currency obviously has been given it's value somehow. I know it is preached to be different than regular fiat currency, but I am very curios how it went from an idea to now being able to be used for purchases, and given a value in relation to USD.

Me and a group of friends cannot come up with an idea for something to be used for transactions and then have that idea be able to transform into a countries currency. We can trade amongst ourselves but there is no way we can give it a value to be used to trade it into dollars. There has to be some type of government involvement in order for bitcoin to have a value in relation to a nations currency.

My question is how is the original concept of bitcoin given a value in dollars? Does this mean there is significant government involvement in bitcoin?

Things are given value simply on Supply/Demand. First, people are taking a risk that Bitcoin will maintain any value at all by accepting it as a form of payment.

However, once we get past that, individuals are simply saying I value this product I'm producing at such a price and a certain amount of other people will value it at the same arbitrary price. At that price you have an equilibrium and enough people to institute a trade of bitcoin (or any other currency) for the product.

The difference between BitCoin and USD (for example) is BitCoin's "printing press" will eventually be turned off. That's built into the way the system works. USD (or another countries currency) on the other hand has no control on having the printing press turned off, other than the government arbitrarily determining to stop printing.

There's no government involvement backing up the value of bitcoin. In part, the exchange rate is driven by the amount of people using BitCoin, with the express knowledge that the printing press will be turned off eventually. And in another part with the way other currency values and commodity prices move relative to one another. People can freely exchange and trade currencies on the FOREX market. You have free markets determining the values of currencies relative to one another.

Honestly, I'm trying to explain something far to complex to state as clearly as possible. And I am in no way an expert on currency markets or the like. I'm just a business management major that's taken macroeconomics and microeconomics. The valuing of a currency has many constantly moving, complex parts. I think you head would explode at the first watching of a business network segment on currency trading.

Here's a CNBC video for example: http://www.youtube.com/watch?v=wSodzBHN7Y4

Interesting. Why does there have to be a cap? Is it possibly that bitcoin is being used as a test for a possible Global Currency? Is it possible for the Cap to come off? If it doesn't come off, is it just a precursor to a bitcoin alternative that is uncapped?

It seems that bitcoin would blow all other forms of payment out of the water uncapped. If it's capped, then the price would skyrocket when it comes to an end (and near the end), especially if it's widely accepted. So it's either going to become more and more extinct when it comes near the 21 million mark or its going to skyrocket and be a hotly traded commodity in the next 10-20 years.

It's almost like everyone should be buying as much bitcoin now while the price is so low especially as bitcoin becomes more and more widely accepted.

[Elwar]

What gives a painting value? Does it require government intervention to convert a painting to USD?

Like you said, you and your friends can trade things. You can also trade things for dollars. No government required.

[sobitcoin]

Demand. If everyone was to stop purchasing, the price would fall. As buy orders come in, it rises.

[Elwar]

You put far too much focus on governments. Is this how things are taught these days, government needs to allow everything first in order for us to be able to do it?

We are all born free, able to do what we want. It is government that steps in and prevents us from doing certain things.  Not the other way around.

[btcbug]

You put far too much focus on governments. Is this how things are taught these days, government needs to allow everything first in order for us to be able to do it?

We are all born free, able to do what we want. It is government that steps in and prevents us from doing certain things.  Not the other way around.

You're absolutely right. Sadly I think many, if not most people believe that government needs to grant permission. Most have not a clue what money is and it's easy to fool them into socialism and other nonsense for that simple reason.

OP please, please, please watch some of Mike Maloney's Hidden Secret of Money, read some Murray Rothbard and study some Austrian Economics.

[bcoinbilly]

You put far too much focus on governments. Is this how things are taught these days, government needs to allow everything first in order for us to be able to do it?

We are all born free, able to do what we want. It is government that steps in and prevents us from doing certain things.  Not the other way around.

I wasn't trying to put to much emphasis on governments. I was only trying to learn more about how bitcoin received it's permission to be able to exchange it into a nations currency.

I mean lets be honest, if the government wanted to shut down bitcoin tomorrow they could. They might not be able to shut down the exchanging of a paintings value exchanging hands between two people but they certainly can shut down a virtual currencies method of exchanging it into there currency.

Isn't that what Russia is doing or has done?

[TinaK]

Chinese

what's your meaning?

[phillipsjk]

Power bills, difficulty rate, mining rigs cost etc

This was initially true. Because people were mining with their PC at the time (with the difficulty being low), that worked out to something like $4/1000BTC.

In my opinion, the 10,000 BTC pizzas are what started convincing people that Bitcoin actually had value.

[Elwar]

You put far too much focus on governments. Is this how things are taught these days, government needs to allow everything first in order for us to be able to do it?

We are all born free, able to do what we want. It is government that steps in and prevents us from doing certain things.  Not the other way around.

I wasn't trying to put to much emphasis on governments. I was only trying to learn more about how bitcoin received it's permission to be able to exchange it into a nations currency.

I mean lets be honest, if the government wanted to shut down bitcoin tomorrow they could. They might not be able to shut down the exchanging of a paintings value exchanging hands between two people but they certainly can shut down a virtual currencies method of exchanging it into there currency.

Isn't that what Russia is doing or has done?

If you need a government's permission on how to use their currency...why use their currency?

[Krona Rev]

To answer how bitcoin obtained its value, I'd suggest reading about Mises' Regression Theorem and the debate about whether or not bitcoin violates it.

I mean the permissions to be able to transfer that bitcoin value into USD - Doesn't the governments have to allow that bitcoin value to be allowed to transfer into there currency? Does this mean there is significant government involvement in bitcoin since they allow it to be traded into the nations currency?

I can't say how things work everywhere else, but here in Germany that's exactly what happened. The Chancellor here is Oskar Lafontainne who came to power by working with the East German Communist Party (Hail The Party!). Since then, before any of us buy or sell anything for the legal currency, Euros, we use our government provided (and tracked) smart phones to call the relevant bureaucrat to check if we are allowed to trade Euros for the item in question (e.g., bitcoin) and what exact price we are allowed to use. That's how the EUR/BTC price is set. Since Lafontaine's minions can listen in to the mandatory smart phones even when they are turned off, they quickly find those class traitors who are trading without permission. As usual, Germany is showing the way forward and hopefully those other backwards nations of the world will soon start catching up.

The previous paragraph isn't true, but might be in a few years.