decent chance it's worth 100x by the time you retire.
It's a piece of software running a database/blockchain. There's now several hundred blockchain service networks up and running.
Why should anyone pay more than a few cents for a bitcoin or database-backed-blockchain-token where the supply was produced for minimal effort and is now being artificially inflated by unregulated exchanges suckering in people who don't know what they're buying?
Maybe blockchains will someday be efficent, but as they stand the only proven use case is speculation due to psychological assumption that the supply is limited .
In economics, the Gini coefficient is the standard measure
of how inequitable a society is. This is tricky to
determine for Bitcoin, as it's not quiet a "society" in
the Gini sense, one person may have multiple addresses and
many addresses have been used only once or a few times.
(The commonly-cited figure of 0.88 is based on one small
exchange in 2011.) However, a Citigroup analysis from
early 2014 notes: "47 individuals hold about 30 percent,
another 900 a further 20 percent, the next 10,000 about
25% and another million about 20%"; and distribution
"looks much like the distribution of wealth in North Korea
and makes China's and even the US' wealth distribution
look like that of a workers' paradise
Dorit Ron and Adi Shamir found in a 2012 study that only
22% of then-existing Bitcoins were in circulation at all,
there were a total of 75 active users or businesses with
any kind of volume, one (unidentified) user owned a
quarter of all Bitcoins in existence, and one large owner
was trying to hide their pile by moving it around in
thousands of smaller transactions. (Shamir is one of the
most renowned cryptographers in the world and the "S" in
"RSA encryption")"
However, it's good data regarding how much of the currency being held is put to use and how much is just hold-and-pray/FOMO.
As a supporter of bitcoin, I recognize that there's so little backing its value. Once some piece of devastating news would be released, it could send bitcoin tumbling all the way down to zero. There would not necessarily be any residual value to the currency if the news were bad enough. The only thing I could imagine that would obliterate all the value might be "algo for PoW is vulnerable to trivial double-spend, no software workaround available". The next most significant thing would be "global consensus among UN member states to outlaw cryptocurrency transactions, transactions to carry criminal penalties including imprisonment." But then it would just slip to merely black market use, which would likely preserve some residual value.
Bitcoin's power/lure is: invulnerability+deflationary+novelty+utility+ubiquity.
Invulnerability: its value will fluctuate as demand cycles, but the network will continue to churn out new transactions regardless.
Deflationary: yes, as everyone says this is a bad quality for a currency, but it helps explain why people keep investing.
Novelty: there's some things that you can do with bitcoin that you can't/couldn't ever do before.
Utility: it's a truly useful technology and there's innovation going on to find new ways to leverage it.
Ubiquity: why bitcoin and not other cryptocoins? Its marketing/brand/ubiquity is its strength. Admittedly it is not irresistibly strong. Support for some other coin could easily overtake it (and that's why there's some investors hedging on other coins).
You can do the same things with a variety of other cryptocurrencies for a fraction of the cost, though.. and it will usually be a lot faster, too.
I'm sorry, but you can't brush that subject off with a single sentence. It's a huge problem. If you want a real currency, that is.
You might hope that the free market will fix this problem, but I have my doubts. The current whales don't have a real incentive to sell.
And if Bitcoin would reach its goal, we would have some new, anonymous and untouchable overlords that would make the feudal ones look like amateurs. No thanks.
Sorry, I suppose I should've been clearer. Inequity is a problem, but not for bitcoin. I meant that since it doesn't (and might never) represent overall wealth that it's not very interesting how some slice of the population holds it.
> If you want a real currency, that is.
I'm okay with Bitcoin being something unlike any previous currency. I'm okay with bitcoin only being used by rich people, only being used by poor people, only being used by technophiles, or only being used by technophobes.
> And if Bitcoin would reach its goal
I doubt there's any consensus on whatever goal that might be. Bitcoin [supporters] like the idea of adoption, but I don't think many would assume it would eliminate the use or need for fiat currencies.
> ... we would have some new, anonymous and untouchable overlords that would make the feudal ones look like amateurs. No thanks.
I don't know how we got here. There's never been a more enabling technology. If in this odd analogy the "serfs" decide they don't like bitcoin they can use some-other-coin-that-they-prefer.
What exactly is backing its value? Is it just marketing fluff?
1 scarcity - limit on supply, difficult to counterfeit
2 fungible - all coins are the same
3 divisibility - 1 / 100 millionth of a bitcoin is smallest unit. crypto is high divisible, an important feature if there is deflation.
4 durability - dollar bills get old and torn up. whereas, computers and drives crash and you can lose your private key.
5 transferability - cash and gold require physical transfer. banking: ACH, credit cards, wire transfers have fees. bitcoin: global internet transferability. transaction time should be less than 10 minutes. fees were low initially but have been going up due to network congestion.
However they main thing that makes a currency valuable is willingness to exchange it for goods and services. That is the useful part about the bitcoin "bubble." It serves to increase adoption of it's usage.
edit: formatting and note about losing keys mention in comment below
A blockchain is not a database - you're just trolling.
Additionally the shiny metal is limited in supply, that is there is a finite amount and you nor I are going to make anymore of it. As OP suggested bitcoin is manmade, it may be artificially limited (21M coins) but anyone can just create a new blockchain and/or cryptocoin for next to nothing.
I myself learned how to create smart contracts and deploy them on the Ethereum blockchain and I have created YC Coin; Reddit Coin; Facebook Coin and Instagram Coin. For just a few fractions of an Ethereum Coin I have decentralized karma and likes across networks with billions of users combined. Separately, I have created tokens backed by real life assets allowing users to buy/sell/trade interest in actual assets on exchanges.
I’ve even begun offering coin/token creation as a service so anyone or any business who wants it’s own community cryptocoin can have one. Now I don’t question why my coins/tokens are worth less than bitcoin, but at the end of the day “why is bitcoin worth more than other coins when they are both artificially finite stores of value functioning on immutable blockchain technologies, providing the same functions” is a fair question. Once precious metals can be reproduced for next to nothing, like blockchains and cryptocoins, then it’s fair to challenge their worth until then I think it’s easy to argue their worth as a store of value.
... and I can take my shiny metal (gold) and mould it into a replica spanish gold ingot, it doesn't mean my gold bar is worth the same as the original in fact it's worth substantially less.
By creating YC Coin, Reddit Coin or Facebook coin you're not increasing the supply of the original Bitcoin you're creating a replica of the original.
In fact, by creating the vast array of coins you have you're actually demonstrating why none of them have value, they're a dime a dozen and none of them are the original bitcoin. But a 'KarmaCoin' adopted by those websites might have substantially more value (but good luck with that!).
As to your point, I agree any of the coins I mentioned would gain value if adopted by the websites, but that’s the beauty of decentralizing, users don’t need permission. And if there was any doubt about the underlying concept I believe Kik just launched its own community cryptocoin, creating 10 trillion and raised $100M on an ICO selling roughly 40%.
Also, I’d be the first person to acknowledge and promote the function of bitcoin and blockchain technologies too, but I think it’s ok to support bitcoin/blockchain while simultaneously questioning how the monetary value of bitcoin is derived and drawing a distinction between value/worth/function of precious metals and cryptocurrencies. It’s like smart contracts, I’m the first to support and promote self executing programs hosted on blockchains, but I’m also the first to challenge when people market them as functioning outside the legal system or in other ways inconsistent with reality.
I say if you can, own a little of all of them, sheep too. After all gold is only worth something until it’s worth less than a can of soup.
A store of value is, of course, useful, but that doesn’t mean that it should gain a high price. Is there a shortage of value storage, or are there already plenty of ways to store value?
It's not rare, and the supply was minted for substantially minimal energy/capital input. Satoshi designed an economic model for Bitcoin to reward himself and the small pool of users who ran the software. Anyone buying a Bitcoin for more than it cost to produce it in 2009-2014 is hoping they'll find a greater fool to sell their coin to.
Is litecoin a store of value? Monero a store of value too? Maybe 42 coin is more valuable because there's only 42 instead of "21 million"... oops the network forked and now there's twice... wait four times... wait the network forked again... oh dear.
I don't agree with any of that.
I suppose the internet is really just a bunch of 1s and 0s and not of any value either using that reasoning.
Gold is quite a good comparison to bitcoin. Gold has very little "intrinsic" value and isn't backed up by the government.
That reminds me of a story from the dot-com boom, about an investor who knew it was time to get out when a grocery store clerk asked how to get in.
My friend who is all over Bitcoin, yet is technology inept, used one of these
This is why Bitcoin is winning.