>Is a $20 bill something of value? No, it's merely somewhat hard to forge, and accepted as currency by lots of people.
I think perhaps you and I are using different definitions of "value". If someone is willing to accept something in exchange for something else, that act reveals that they value it, either for its use value or for its exchange value (i.e., as money).
>The only reasons the $20 bill or the entry in the computer retain value are because there's a central entity that limits the creation of too many of them
Why do you think that? It's certainly true that artificial scarcity raises prices (for money, in terms of all other goods), but that scarcity is not what is being subjectively valued.
A $20 bill today is valued (as money) based on what it could buy yesterday. And yesterday's valuation (as money) was based on the day before that. Go back far enough and the money valuation will have spawned from the commodity valuation.
Bitcoin is flawed in largely the same ways that fiat currencies are flawed, namely that the commodity has no use value demand, and the supply is not subject to market forces.
The difference with fiat currencies is that they have quite a few things going for them that keep them around: taxes are demanded in them, a raft of laws eliminate competition, and a central bureaucracy actively manipulates the market.
Bitcoin is flawed in largely the same ways that fiat currencies are flawed, namely that the commodity has no use value demand, and the supply is not subject to market forces.
Granted, gold doesn't have any use value demand either. Its only advantage is that its rare and shiny. You can't eat gold, burn it as fuel, use it for tools, or build shelter with it. The only industrial application of gold is in specialized electronics processes, and even in those, gold has substitutes.
The only difference between gold and fiat currency is that gold has a finite supply, while fiat currency does not.
Bitcoins can be transferred between accounts without a need for an intermediary financial institution, whilst maintaining an equivalent level of security. That in itself has significant value.
> I think perhaps you and I are using different definitions of "value". If someone is willing to accept something in exchange for something else, that act reveals that they value it, either for its use value or for its exchange value (i.e., as money).
I meant intrinsic value in that context. Of course I agree that it has value based on what people are willing to exchange it for. That's precisely the point I was trying to make; in your original post, you had claimed that bitcoin was flawed because it wasn't based on a commodity originally, and I was pointing out that that really has no bearing on its present value.
> Why do you think that? It's certainly true that artificial scarcity raises prices (for money, in terms of all other goods), but that scarcity is not what is being subjectively valued.
> A $20 bill today is valued (as money) based on what it could buy yesterday. And yesterday's valuation (as money) was based on the day before that.
You trimmed out my next sentence in your quote in which I said almost exactly that. My only point about artificial scarcity is it limits the rate at which value can be lost due to inflation; it helps it retain its value, because you know that someone else won't be able to just go and get more for themselves, but instead will be more likely to want to trade you something for the currency you are trading.
> Go back far enough and the money valuation will have spawned from the commodity valuation.
It doesn't really matter how far back you look; just because a currency was originally based on a commodity has no bearing on its value now, other than as a historical artifact. What matters is what it will buy you when you spend it, which is in the future, and while not entirely predictable, in the near future tends to be close to what it would buy you in the recent past.
All I'm saying is that there is as much intrinsic value to a bitcoin as there is to a dollar, or a euro, or what have you. The difference is mainly in how they are transferred, and how the supply of them is constrained. I'm not entirely convinced that a deflationary currency is a good idea, but I think that bitcoin is a technically, economically, politically, and socially interesting experiment.
I generated a few back in the day when I could do so on my laptop in a few hours without dedicated GPUs running constantly, and I'm going to hold onto them for a while to see how this whole thing pans out. Who knows, with only 21M in existence, if this thing takes off the few I have could wind up being pretty valuable later on; and if not, well, I just lost a few hours of CPU time, no big deal.
If you don't think that bitcoins will hold their value, I'll gladly take any you have off your hands. Just send them to 1Lz9u29gLLUJ3yH6GrMeSuRUmbUounXinG ;)
"All I'm saying is that there is as much intrinsic value to a bitcoin as there is to a dollar, or a euro..."
The intrinsic value of a dollar is that the United States Government is obligated to accept a dollar as a payment of tax and other obligations you may have towards the government. A dollar is not an arbitrary thing, it fundamentally profoundly is a warrant to discharge a debt obligation against the United States Government. The rest of its value emanates out transitively from that.
A BitCoin is fundamentally more arbitrary than a dollar. (At least at the moment. Hypothetically this could change.) Perhaps it will make it anyhow, despite my skepticism, but it is absolutely, empirically true that a dollar is not an arbitrary value store. It has a base case for its value chain. BitCoins do not have this.
I think perhaps you and I are using different definitions of "value". If someone is willing to accept something in exchange for something else, that act reveals that they value it, either for its use value or for its exchange value (i.e., as money).
>The only reasons the $20 bill or the entry in the computer retain value are because there's a central entity that limits the creation of too many of them
Why do you think that? It's certainly true that artificial scarcity raises prices (for money, in terms of all other goods), but that scarcity is not what is being subjectively valued.
A $20 bill today is valued (as money) based on what it could buy yesterday. And yesterday's valuation (as money) was based on the day before that. Go back far enough and the money valuation will have spawned from the commodity valuation.
Bitcoin is flawed in largely the same ways that fiat currencies are flawed, namely that the commodity has no use value demand, and the supply is not subject to market forces.
The difference with fiat currencies is that they have quite a few things going for them that keep them around: taxes are demanded in them, a raft of laws eliminate competition, and a central bureaucracy actively manipulates the market.