A simpler explanation, please...

[mewantsbitcoins]

Apparently I need some gold in my body. I've been feeling poor for a long time

[MoonShadow]

i hate when people compare bitcoins to gold... gold has intrinsic value in manufacturing, chemistry, and even as a vital nutrient in the body supposedly.
bitcoin is something beyond gold, gold is an old archaic form of currency that has fallen out of favor.

This is not true in practice.  Not only is gold still trading like a money, it's value has nearly nothing to do with it's industrial utility.  Silver is vastly more useful in industry, is more rare in a refined state in the modern world, and is one-three-hundredth the market value per ounce.

[Nesetalis]

er, i never said gold didnt have trade value. I said the a huge between gold and bitcoins is the fact that gold has intrinsic/industrial value while bitcoins dont.

[flamesong]

It has been said a number of times and referred to in the FAQ that the value of fiat currency comes from gold.

The last pretence of gold backing fell away in 1971.  Look for the video "Money as Debt" or the (lengthy) audio series "Wizards of Money" for an understanding of fiat.

I meant that it had been said a number of times in this thread in answer to my question. Perhaps I should have said originates from instead of comes from. I am not under any illusions about money being backed by gold which I would have hoped my post made clear. As I said, there simply is not enough gold to back the cash nor is there enough cash to back the electronic deposits. I read somewhere either in the wiki or on this forum as part of the background to Bitcoins that governments issue money. That simply is not true. In the US it is the Federal Reserve which issues money - and as has been comically stated ad nauseam, it is neither federal or a reserve. In England, it is the Bank of England. In Scotland, where I live, money is issued by three banks, the Bank of Scotland, the Royal Bank of Scotland and the Clydesdale Bank - they are all completely different in appearance!

In its simplest form, the banks issue the money as a loan to the governments who then have to pay it back in interest. That debt cannot nor will not ever be repaid. The resultant inflation is in effect a tax which we have to pay in order to pay back the interest. It's a bit like living off a maxed out credit card month in month out - nobody in their right mind would do this unless they had to.

And yes, I have seen Money as Debt and several other films which cover the same ground.

[flamesong]

i hate when people compare bitcoins to gold... gold has intrinsic value in manufacturing, chemistry, and even as a vital nutrient in the body supposedly.
bitcoin is something beyond gold, gold is an old archaic form of currency that has fallen out of favor.

Er... I think you just compared Bitcoins with gold.

[Nesetalis]

har.. har.. thanks for being completely obtuse.

[edd]

har.. har.. thanks for being completely obtuse.

I think you mean facetious.

[flamesong]

The value of bitcoins isn't being "injected artificially," it's been agreed upon by a group of individuals who see the benefits to using a decentralized, encrypted, electronic currency.

So, basically, this is a system in which the value has been decided by the designer. That's only as valid as me putting an empty jar on eBay with a Buy It Now price of £250. It does not answer the question of where the value originates.

You offered me a pound of coffee for BTC 1.95. I don't have BTC 1.95, I would have to acquire BTC 1.95 to proceed with the transaction. As I have no sense of where the value is in Bitcoins, I cannot see any value in the transaction.

The real question is not why is a pound of coffee worth BTC 1.95 but why is a BTC 1 worth 0.513 pounds of coffee?

[Nesetalis]

har.. har.. thanks for being completely obtuse.

I think you mean facetious.

possibly, i should have said deliberately obtuse.. but facetious does make more sense.

[flamesong]

har.. har.. thanks for being completely obtuse.

I think you mean facetious.

I think I was being quite accurate. Dictionary.com:
Compare: to examine (two or more objects, ideas, people, etc.) in order to note similarities and differences

[Nesetalis]

sure, but deliberately misconstruing what I'm saying is hardly helpful.

[flamesong]

Then why do you hate it when people examine the similarities and differences. Surely, if there are differences, that is helpful.

[flamesong]

And I was not misconstruing what you said, I was pointing out that you were making your point by doing what you object to other people doing.

Sounds a lot like US foreign policy! 

[Steve]

So, basically, this is a system in which the value has been decided by the designer.

No, the value is set by the marketplace.  The designer just created a system that is valuable.

The real question is not why is a pound of coffee worth BTC 1.95 but why is a BTC 1 worth 0.513 pounds of coffee?

For many of the same reasons that gold is worth a certain amount of coffee (and for those that think gold has in any way "fallen out of favor", I suggest you investigate the top holders of gold in the world).  The vast majority of gold exists in above ground stock stored in vaults and protected by armed guards.  Or, as Warren Buffet puts it: “Gold gets dug out of the ground… we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”  Yes, martians would be scratching their heads, unless they actually understood what money is.

[Ricochet]

The real question is not why is a pound of coffee worth BTC 1.95 but why is a BTC 1 worth 0.513 pounds of coffee?

Your 1 Bitcoin is worth my 0.513 pounds of coffee because I believe that I can spend that 1 BTC on some other good or service with the approximate same value as 0.513 pounds of coffee.  It has value because people believe it has value, as is the case with every other currency used in the world today.  It's just that this number of said "people" is much lower than you're accustomed to, that's all.

Consider this counter-example:  why is your 1 US dollar worth my bottle of Coca Cola?  After all, you're offering me some paper with ink on it, and I don't need the writing space or the visual appeal of the artwork, so I don't see why you're offering that in exchange for a beverage you can drink to quench your thirst.  But I accept the dollar for the trade because I believe that I can take it and put it in a vending machine to buy a Sprite.  And the owner of the machine accepts it because he believes he can use it to buy a lotto ticket, and the gas station attendant believes he can exchange it for some resistors for his hobby electronics project, and so on.

Paper and ink alone have uses, but millions of people have collectively agreed that specific chemical and physical combinations of them can be used as a medium of exchange with a set value.  They trust some higher authority (country government or your 3 Scottish banks or whatever) to be the only ones making the medium so that people can't simply print their own money.  Similarly, bitcoins are in actuality just tiny fragments of data sitting on data storage units worldwide.  Surely I don't believe that any random combination of 1000^* bits on my hard drive is worth $7, but thousands of people have collectively agreed that a specific combination of 1000 bits, arranged in such a way that I can prove they're mine, can be used as a medium of exchange to buy something worth $7.  We trust each other not to be printing our own money or using the same 1000 bits more than once, and in fact the system is designed to make that impossible.

Now of course, it's going to be a long time before I can stand in front of a machine in the break room, send it a Bitcoin, and have a soda pop out.  But that's only because as a money system, Bitcoin is still in its infancy.  The market is small, and most people in the world will not accept Bitcoin as a payment method because they don't believe in its value.  But at this moment, just enough people are willing to accept it that things are truly starting to get rolling, and as more people start accepting it, its perceived usefulness (aka value) will rise.

* arbitrary number used for the sake of example

EDIT:  I should add that the main reason people even gave it a value in the first place is because it has several advantages over traditional currencies, which have already been brought up earlier in the thread.  If it was simply another Paypal clone, nobody would care.  Since then, it's just been a matter of volume.  As more people are made aware of Bitcoin's existence, more people see its advantages and want to buy into it, which drives the price up.  Now of course there are the pure speculators looking to make a profit in their native currency, but we don't really have any good way of knowing what percentage of the growth is attributed to that.

[hazek]

OP it's pretty basic really.

It's value comes from the trust in it's features:
-limited supply
-digital form
-peer2peer decentralization
-security through cryptography
-easy and fast transfer around the glove
-easy and secure storage
-ect

Because people trust it will retain these obviously valued and wanted features it has intrinsic value. If it should ever lose them, Bitcoins will be worthless.

[Nesetalis]

And I was not misconstruing what you said, I was pointing out that you were making your point by doing what you object to other people doing.

Sounds a lot like US foreign policy! 

here let me say it in a way that is more clear.
I hate when people say bitcoin is just like gold.
Now shut up.

[flamesong]

@ Nesetalis

Who the hell do you think you are, Bill O'Reilly?

I don't really care who you are, if you can't take a bit of banter - especially when you make a dumb statement the way that you did - perhaps you should take a few deep breaths before you enter a discussion.

Are you only so aggressive because you have your keyboard to hide behind? I don't respond to orders barked at me by anybody, let alone some anonymous person who doesn't seem to think before they rant.

Incidentally, I just read through the thread and didn't see any claims that Bitcoin is just like gold (I read some similarities and lots of differences - just comparisons), so I don't know what you are getting so irate about.

Anyway, don't blister your fingers angrily firing off another furious post.

If something is so complicated that only an intellectual elite can grasp it, I'm suspicious. Think derivatives. Nobody has been able to explain where the value comes from, other than saying that they believe in it, therefore it has value. That is not tangible. All the arguments about how secure the system is and how technically brilliant it is do not add one grain of proof that a Bitcoin has any value.

Until there is some explanation that somebody outside the murky world of financial speculation can understand, I think I'll invest in my local credit union.

[Nesetalis]

Its hard enough for people to understand what some one is trying to say on the internet, without some one else coming up and trying to muddy your words. So, I put it as clear as i possibly could, if you don't like that, I don't care.
I told you to shut up, because you are being a pedantic annoyance, which is not helping the issue in the least.
also "Anyway, don't blister your fingers angrily firing off another furious post." is exactly the same as telling me to shut up. So, there goes your high ground :p if you ever had any.

As for who or what i was responding to? I simply believe its misleading and dangerous when people come around saying 'bitcoins are like gold' it doesn't matter if they then follow up and qualify that statement.

If you have a problem with that, fine, but how about next time you pose a counter argument instead of trolling me for not spelling it out as clear and as concise as humanly possible.

[sammoocow]

Ugh, this thread gives me so much headache.

So many people have explained where the value comes from. Stop saying nobody has.

-_-