I'm a sceptic, convince me!

[bitteeinbit]

I have to admit that I'm sceptical about Bitcoin. I'll give you my reasons, then please convince me!

Bitcoin is not backed by anything. It would probably not exist in a free market. Money in a free market has always been some kind of commodity. Something that has value beyond its use as a currency. The problem with Bitcoin is that it has no value beyond its use as a currency. Why should it then be regarded as money? Money came into being as a medium of exchange, so that if you got stuck with it it was useful in some way. It wasn't just a piece of paper. It was something that was useful in and of itself. Like gold. Like silver. Bitcoin has none of that. It's just a string of 0s and 1s. Where does it get its value from? I don't think in a free market it would be valued.

Something like Bitcoin could be used as a currency if it was backed by some commodity to do anonymous/quick transactions, but there would be a standard, ultimately, for exchange. It would always be exchangeable into e.g. gold. So that the banks who issued the Bitcoins were contractually obligated to redeem them into gold. Then Bitcoin would serve as a currency, but the money would be the gold.  

There's also the problem with Bitcoin of inflation. Yes, there's a fixed amount of Bitcoins qua Bitcoin, but anyone can create alternative cryptocurrencies. I don't see why Bitcoin has any unique features that cannot be replicated by others, and therefore you will create massive inflation in a digital coin space.

So why do I think Bitcoin is still valued today? I think it is because people are fearful of the dollar. They think it's gonna get useless, and they're looking for alternatives. Bitcoin is a product of this fear. Also, I think people are worrying about their privacy. And with good reason, given the growing government intrusion in our lives. People are looking for ways in which to remain private. In which to remain outside the government's abitily to monitor them. Bitcoin provides that. So right now it's providing a value. The value as privacy. The value that it's not paper money. But in a fre market, which we are all working to realize, I do not believe Bitcoin would exist.

[pedrog]

Bitcoin is backed by the laws of Nature:

[Blazr]

Bitcoin is not backed by anything.

What is the US dollar backed by? and don't say gold because it hasn't been for a long long time. Like the US dollar, Bitcoin is backed by the people who use it. You can take your Bitcoin and you can exchange it for goods at Dell etc, this is what gives it value.

Money came into being as a medium of exchange, so that if you got stuck with it it was useful in some way. It wasn't just a piece of paper. It was something that was useful in and of itself.

Not entirely true. Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, perhaps, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered money. (pasted from wikipedia)

One of the first types of money used by ancient humans was sea shells. Properties of a good money are something easily transferred, divisible, durable, scarce and fungible, and widely accepted as a means of exchange,.

There's also the problem with Bitcoin of inflation. Yes, there's a fixed amount of Bitcoins qua Bitcoin, but anyone can create alternative cryptocurrencies. I don't see why Bitcoin has any unique features that cannot be replicated by others, and therefore you will create massive inflation in a digital coin space.

Inflation caused by other cryptocurrencies do not have a significant effect on Bitcoin, much in the same way inflation caused by Bitcoin doesn't really have a significant impact on USD.

[bitteeinbit]

Bitcoin is backed by the laws of Nature:

http://miguelmoreno.net/wp-content/uploads/2013/05/fYFBsqp.jpg

I don't doubt the technology. It's genius. I just doubt that it would be valued as a currency in a free market when it's not backed by a commodity.

[knight22]

It's backed by our trust on sound math.

What backs banks ledgers?

[bitteeinbit]

What is the US dollar backed by?

Pure force only. But I'm not here to defend the dollar. Paper money wouldn't exist in a free market either. Only paper currency, backed by gold (or other commodities).

Like the US dollar, Bitcoin is backed by the people who use it.

Nobody would use paper money in a free market. The dollar is backed by force. Bitcoin is backed by fear. That's my view until I'm convinced otherwise.

You can take your Bitcoin and you can exchange it for goods at Dell etc, this is what gives it value.

But WHY can you exchange paper money for goods at Dell? Because the store is forced to accept it! No way they would accept worthless paper notes backed by nothing in a free market.

Inflation caused by other cryptocurrencies do not have a significant effect on Bitcoin, much in the same way inflation caused by Bitcoin doesn't really have a significant impact on USD.

If everybody started using Bitcoin, it would have a huge impact on the dollar.

[pedrog]

I don't doubt the technology. It's genius. I just doubt that it would be valued as a currency in a free market when it's not backed by a commodity.

In this particular case, not being backed by something physical is an advantage, and a big one, check E-gold.

[knight22]

Pure force only. But I'm not here to defend the dollar. Paper money wouldn't exist in a free market either. Only paper currency, backed by gold (or other commodities).

The only reason to back paper currency with gold is to enforce scarcity and this method failed over and over again through history because it is too easy to cheat and manipulate. Bitcoin solves that.

[jonald_fyookball]

Bitcoin is not backed by anything. It would probably not exist in a free market.

I assume you mean a free market doesn't exist today.  I would agree although
a quasi-free market does exist, and Bitcoin exists in it.

But I need no reason to assume that the more free the market gets, the less people would use Bitcoin.  Just the opposite. 

You do have a point that something like Gold is more attractive because it has uses other than a medium of exchange.  However, it not not easily divisible, transferable, or portable like Bitcoin.

[bitteeinbit]

Good point about confiscation (e-gold). What about stability? Without being backed by a commodity, how do we keep the value of Bitcoin stable? Under a gold standard, the stability of the money is pegged to the value of gold.

I assume you mean a free market doesn't exist today.

Of course it doesn't. Central banks and fiat money have nothing to do with a free market. In a free market there's a complete separation between state and economics.

Since the number of Bitcoins is constant, the value will be determined by the demand. But the demand can change, and then there are no mechanisms to correct it.

[knight22]

Good point about confiscation (e-gold). What about stability? Without being backed by a commodity, how do we keep the value of Bitcoin stable? Under a gold standard, the stability of the money is pegged to the value of gold.

Stability is relative.



Bitcoin is now unstable (short term) because it has low liquidity and is used primarily as a speculative asset. I expect it will stabilize with broader usage and better liquidity over time as it becomes more and more useful.  

[odolvlobo]

I have to admit that I'm sceptical about Bitcoin. I'll give you my reasons, then please convince me!
...

Anyone that uses the "bitcoin is not backed by anything" argument is truly ignorant. Nothing will convince you because you wish to remain ignorant. Your skepticism has already been addressed hundreds of times over the last 6 years. Learn to read.

[agath]

I have to admit that I'm sceptical about Bitcoin. I'll give you my reasons, then please convince me!

I think nobody but you should convince yourself about this.

Bitcoin is not backed by anything. It would probably not exist in a free market. Money in a free market has always been some kind of commodity. Something that has value beyond its use as a currency.
[...]
Bitcoin has none of that. It's just a string of 0s and 1s. Where does it get its value from? I don't think in a free market it would be valued.

Bitcoin has a network behind that performs a really huge number of operations to keep itself secure. This is value.
Bitcoin can be used without registering/opening an account somewhere. It means ANYONE can use it. Even if there is not banking infrastructure like in Africa. This is value.
Bitcoin allows quick and cheap transactions anytime anywhere without needing third party consensus. This is freedom and this is value.
Bitcoin opens the doors for new hardly-imaginable technologies (like automated-open-source-companies owned by nobody, but it's too early to talk about this). Innovation is value.

Something like Bitcoin could be used as a currency if it was backed by some commodity to do anonymous/quick transactions, but there would be a standard, ultimately, for exchange. It would always be exchangeable into e.g. gold. So that the banks who issued the Bitcoins were contractually obligated to redeem them into gold. Then Bitcoin would serve as a currency, but the money would be the gold.

It would be a huge error. Imagine that one day someone finds a chemical way to turn matter into gold. Everything would lose value instantly.

There's also the problem with Bitcoin of inflation. Yes, there's a fixed amount of Bitcoins qua Bitcoin, but anyone can create alternative cryptocurrencies. I don't see why Bitcoin has any unique features that cannot be replicated by others, and therefore you will create massive inflation in a digital coin space.

It's not enough to create a new cryptocurrency: something like bitcoin miners are needed to make it safe. Up to date no altcoin is safe as bitcoin is, so I wouldn't say that inflation is unlimited. Bitcoin has a planned inflation and it's well known in advance. You can create your funkycoin, but the day it may become interesting, only one small bitcoin miner is enough to turn your crypto upside down.

So why do I think Bitcoin is still valued today? I think it is because people are fearful of the dollar.

I don't agree. Bitcoin's value is like a rollercoaster, I am not sure people could trust it more than the USD yet. However people can trust it for what it is: something complete new that has so many innovative features that it can change and improve the world.

[bitteeinbit]

Your skepticism has already been addressed hundreds of times over the last 6 years.

The fact that I don't accept your arguments doesn't make me "wish to remain ignorant".

[p2pbucks]

bitcoin is backed by

1. the stable mathematical laws behind it

2. the believers use it

3. bitcoin's own economic eco system (global anonymous market )

4. its unique features ( anonymous , can't be frozen by third party Or Gov , almost no transaction fee )

[bitteeinbit]

Imagine that one day someone finds a chemical way to turn matter into gold. Everything would lose value instantly.

That's like saying "Imagine that one day someone finds a way to make Bitcoin insecure?" This is highly speculative. No reason to believe that it's even possible.

[mercistheman]

No need to convince you... this train is rolling with or without skeptics... fortunately enough folks have done the research to see the opportunities... slow adapters will simply kick their own ass.

[MineForeman.com]

Imagine that one day someone finds a chemical way to turn matter into gold. Everything would lose value instantly.

That's like saying "Imagine that one day someone finds a way to make Bitcoin insecure?" This is highly speculative. No reason to believe that it's even possible.

Actually, transmuting material to gold is already possible.  You need to remember, even the gold we have today was not originally gold.

It is not very economical at the moment but billions are being spent on cold fusion research that has the potential to poop gold bricks out as a waste material.

[bitteeinbit]

bitcoin is backed by

1. the stable mathematical laws behind it

2. the believers use it

3. bitcoin's own economic eco system (global anonymous market )

4. its unique features ( anonymous , can't be frozen by third party Or Gov , almost no transaction fee )

bitcoin is backed by

1. the stable mathematical laws behind it

2. the believers use it

3. bitcoin's own economic eco system (global anonymous market )

4. its unique features ( anonymous , can't be frozen by third party Or Gov , almost no transaction fee )

The technology is rock solid, but the value is not backed by other commodities. One must compare Bitcoin to something, otherwise prices will be arbitrary.

If one wants to have a stable currency and thereby avoid inflation and deflation, it must be stable in value against something else. Value is always relational.

That being said, you guys have made some valid points, and I'll actually buy 10 Bitcoin today. Hope they will increase in value. What do you think?

[bitteeinbit]

No need to convince you... this train is rolling with or without skeptics... fortunately enough folks have done the research to see the opportunities... slow adapters will simply kick their own ass.

The fact that people believe in it doesn't make it true. Most Bitcoin buyers have little knowledge of economics.