How did bitcoin obtain it's value?

[ebliever]

There has to be some type of government involvement in order for bitcoin to have a value in relation to a nations currency.

This is false. Do you think shoes only have value because some government decreed that they have value? What about gold? Did it have no value until some early ruler decreed it should be used as a unit of barter? Of course not.

Bitcoin's value is a function of its scarcity (the fixed supply and impossibility of counterfeiting it), and demand for it. That demand is based on the trust people have in it, and the utility for bitcoin for various functions, as a very efficient medium of exchange and store of value. Government has nothing to do with it. Governments can attempt to distort the value of something through legal decrees that the value of something is X, not Y (the value established by the free market), but they cannot come up with a more "real" value than Y. Once the government's influence ebbs, the price will revert  back to Y accordingly. The same is true for an organized crime cartel, economic monopoly or any other group attempting to distort the market value/price of something.

[ebliever]

This might seem a bit obvious, but it would be so much easier to get bitcoin if I got paid in it.  Now to convince my boss...

Use Bitwage.co like the previous post to yours advised. I've been looking into them myself.

[Billbags]

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

Great answer....here are some good links...

http://nakamotoinstitute.org/shelling-out/

http://web.archive.org/web/20070618142414/http://szabo.best.vwh.net/scarce.html

http://szabo.best.vwh.net/ttps.html

http://unenumerated.blogspot.com/2008/04/bit-gold-markets.html?m=1

http://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html?m=1

http://unenumerated.blogspot.ca/2008/06/commodity-hysteria-overview.html?m=1

[Jordan23]

Your government has currency? I'm from America and we use Federal Reserve notes not US government currency.

[phillipsjk]

Your government has currency? I'm from America and we use Federal Reserve notes not US government currency.

In Canada, the Bank of Canada is a Crown Corporation. That means it operates at an arms length, but is still owned by the government.

[rollingMyCar]

Your government has currency? I'm from America and we use Federal Reserve notes not US government currency.

In Canada, the Bank of Canada is a Crown Corporation. That means it operates at an arms length, but is still owned by the government.

Hum.... Here in EU it is more complex.. We have BCE

[bcoinbilly]

If you bought the internet domain name sex.com in the early 1990ies, you'd be a rich man today.

You can't touch it (ahem), it's entirely virtual, and it obtained its value without any government decree.

Bitcoins are also a virtual good, limited in amount, thus intrinsically valuable, they're just more fungible than internet domain names (and less centralized, not administered through the centralized DNS by organizations like the ICANN).

Very good point

[Meuh6879]

Your government has currency? I'm from America and we use Federal Reserve notes not US government currency.

  https://www.youtube.com/watch?v=tGk5ioEXlIM

[BayAreaCoins]

It got its value through being able to buy drugs of course....

Ever hear of the Silk Road?

[BDSM-Fetish]

It got its value through being able to buy drugs of course....

Ever hear of the Silk Road?

Partly, and the shameless criminal behaviour of some exchanges, not just Gox, who operate in markets that are unregulated and believed this gave them the right to pump the fuck out of bitcoin, then dump on people that were paying mortgages and feeding kids.

They must be worried, though, as bitcoin gets a lot of attention now. A market not regulated by law is not a market that can break the law. A lot of people don't realise that, including some of the players (thick people often make money, it's one of life's little jokes).

I would love to see someone apart from Karpeles get his stubby fingers chopped in half.

[BDSM-Fetish]

Bitcoin is starting to suck, though The block time, the huge blockchain. It is not user friendly any more.

I had a 2 hour transaction lately, merely because no blocks were discovered. Litecoin is following that pattern.

Buy BDSM, it is cheap as fuck at AllCrypt, and only 6.9 milion coins.

We are hafway through that, and I plan to make mining far more difficult.

It will get rare. Try 0.05, and I guarantee that I believe you will have near to 1 bitcoin within a few months.

[harrymmmm]

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?

If you make cookies, people might pay for them.
No permission required, yet then they have value, right?

[ReserviorHunt]

Wily bot and mt.gox manipulation. Pump and dumpers played it.

[vinda]

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

good point, demand creates market. that's the value of all products

[JaredStein]

OK so how i think it took it's value is from supply in demand for multiple things. The coins main value was based on how many people wanted the coin and how much they were willing to pay for the coin. That is how i think it came to be so valued from what i know from multiple things.

[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

Great answer....here are some good links...

http://nakamotoinstitute.org/shelling-out/

http://web.archive.org/web/20070618142414/http://szabo.best.vwh.net/scarce.html

http://szabo.best.vwh.net/ttps.html

http://unenumerated.blogspot.com/2008/04/bit-gold-markets.html?m=1

http://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html?m=1

http://unenumerated.blogspot.ca/2008/06/commodity-hysteria-overview.html?m=1

These are some great links - thank you for sharing

[bitnanigans]

Adoption and mining costs.

[Coin_Master]

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?

The question you should be asking is "what gives the US dollar value?"

[Flashman]

Oh that's easy, faith and trust and pixie dust.

[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?

The question you should be asking is "what gives the US dollar value?"

Yes that was one of my biggest questions as I go older