People like to compare bitcoin to gold, which has an estimated current market cap of $6,000,000,000,000. Will gold ever generate more value than Google or several Big Energy companies combined with more than a factor 10? Or does it hold value simply because it's rare?
Gold is also quite unique and "best" or close-to-best in its collection of properties. Bitcoin is not really rare and many other recent variants are "better" in a number of ways. Would the network effect be sufficient for its valuation to come close to physical gold? Warren Buffett, Robert Shiller, a well-known Nobel prize winner in economics, and several other respected economists say unlikely [1] [2] [3]. Basic logic says the same.
[1] ""It has no value at all unless there is some common consensus that it has value. Other things like gold would at least have some value if people didn't see it as an investment," Shiller told CNBC in an interview ahead of the World Economic Forum in Davos, Switzerland, where he will be speaking next week."
https://www.cnbc.com/2018/01/19/bitcoin-likely-to-totally-co...
[2] https://www.project-syndicate.org/commentary/cryptocurrencie...
[3] https://www.project-syndicate.org/commentary/cryptocurrencie...
I'd argue that jewelry is also a store of value. It doesn't serve a practical purpose, and was traditionally given as a gift for hard times. Industrial applications, fair enough. This also plainly written in your quote from [1]
> Bitcoin is not really rare and many other recent variants are "better" in a number of ways. Would the network effect be sufficient for its valuation to come close to physical gold? Warren Buffett, Robert Shiller, a well-known Nobel prize winner in economics, and several other respected economists say unlikely.
Bitcoin is exceedingly rare. Only 21 million will be created, and a non trivial portion of them is lost in wallets that no one controls. In [1] he states that "doesn't know what to make of bitcoin ultimately.". In [2] one of the main arguments seems to be "Practically no one, outside of computer science departments, can explain how cryptocurrencies work." which is true for the modern banking system too. Besides, it really isn't hard to explain the idea and workings, without going into the technical details.
One of the things that could super charge bitcoin is LN. The potential is enormous if adopted by companies.
The article in [3] shows a fundamental misunderstanding of bitcoin when it claims
> Bitcoin will be “mined” in diminishing quantities until it is exhausted in 2040, having delivered 21 million digital coins. In other words, there is no elasticity in the currency. This means that long before the mine is exhausted, the currency will run into the same problem as the gold standard: not providing enough money to support a growing economy and population.
Gold is limited by the smallest amount of gold you can reliably trade. Bitcoin have no such restriction. As the value of a whole bitcoin increases, you can trade a smaller and smaller fraction. At the current value 130 "Satoshi", which the name for the current smallest fraction possible to trade, is worth $0.01, so bitcoin can reach a value of $1,000,000 and still have the same monetary "resolution" as the current USD.
The last paragraph might on the face of it seems to contradict my statement about the rarity earlier. But there is a key difference. Because bitcoin is in limited supply, but possible to trade very small fractions of it, and ability to allow smaller fractions if needed, means that the currency is more likely to be deflationary, i.e. the money I save will not automatically be worth less because I do not use them.
At this point in time the current hashrate of the bitcoin network is 32.500 PH/s, up from 5.000 PH/s a year ago and 1.400 PH/s two years ago. If you rent 51% of the network it's going to be rather obvious that something is happening, that will however not prevent an attack. Let us assume that you can rent capacity because the miners are greedy, what price would you have to pay? Let's assume that you can buy from miners that want to exit the mining business, so they do not care about deprecating the value of their hardware nor the bitcoin value itself.
So the assumptions are that 51% of the available capacity don't care if bitcoin tank and burn as long as they profit enough, and you're able to buy that. A 0.43% difficulty increase daily (average over last 2 years), bitcoin price of 7.600$, a 4MW powerdraw, and electricity prices of $0.08/KWh
Miners controlling 51% would profit north of $1.000.000.000 yearly, and if they just want to be compensated for that one year, you have to pay $1.000.000.000 to rent 51%. That is a lot of money, and at $20.000 high it would be tripple that value.
However, why would 51% of the capacity suddenly exit? Rather they want to be compensated for multiple years of profit, lets say 5 years and it's not unreasonable to expect bitcoin to reach $70.000 in that time. So we're looking at a $50.000.000.000 cost to coordinate the attack. That's expensive, and with that kind of money there are other ways to make them multiply. Who would pay that to ensure destruction of the thing we know as Bitcoin? After all, the success means it's likely that another *coin takes over, where you cannot 51% as easily.