Something that might be considered an "intrinsic" value of bitcoin is its ability to instantly and securely transfer wealth across large distances at zero or near-zero cost. This is an feature not present in some of the incumbent currencies and store-of-value assets.

For example, physically shipping hundreds of kilograms of gold (or physical, folding USD) is a costly exercise fraught with security risks, and the risk profile varies depending on many factors, for instance the political situations in the sending and receiving countries.

Transferring large amounts of electronic USD across international borders via the traditional banking system is going to invoke all kinds of reporting requirements, and possibly higher transaction costs (though you can do large wire transfers for like $25 I think).

Transferring arbitrary amounts via bitcoin is easy, secure and the transaction itself is cost-effective (notwithstanding the current relative difficulty/expense of moving large amounts of fiat currency into and out of bitcoin in the first place, which problem I'd expect to ease as the btc economy matures).

This intrinsic value can be mirrored by any cryptocurrency or even just a parallel network of Bitcoin. It is no justification for $1000/coin the way overzealous BTC investors claim.

$1000, for 1/12000000th the total current supply of bitcoins in existence? Sounds like a deal to me. The same fraction of USD is $100,000. There are 313 million people in the US. These are the majority of people using the dollar. There are 1.35 billion in China and another 1.2 billion in India. The former has already started using bitcoin. But only just barely. The market for bitcoin is enormous.

Now let me ask you: do you really feel a global currency is worth less than $12 billion USD? The market cap for Facebook is $113 billion. Call me crazy, but I think there is more long term value in a digital currency with the properties of Bitcoin than a social network.

In order for bitcoin to be useful, it's going to have to grow. If it grows fast (network effects) then you'll get instability. I don't think there is a solution to this unique problem. The fiat solution of printing more money doesn't apply here. There has never been a sudden rush to USD like there is to bitcoins. If you can even call a few billion dollars a "rush". If bitcoin is to be used, then it's going to see $1000/coin and beyond.

my god this is psychotic.

i'm sorry, i try to be polite but.... jesus.

i am 1000% confident that this particular bitcoin implementation of global currency is worth less than $12 billion USD. you are treating this currency like we are dividing up slices of the world money supply. We are not. People are paying $1000 and basically receiving an IOU from no one, with the hope they will be able to sell to future speculators.

If Bitcoin succeeded as an actual currency, it would be trivial to implement new blockchains and many such systems would exist in parallel (Litecoin, Ripple?). But so far, Bitcoin has proven nothing regarding stability, it is just wowing naive investors by increasing in value rapidly.

The problem in your analogy is that Facebook never sold accounts for $1000 because people are not that stupid, except when they start seeing $$ signs flash in front of their eyes. And why does it need to keep increasing in value if its divisible to like 6 decimal places? It's perfectly usable as a currency now. This is the internet, who the fuck needs WHOLE NUMBERS.

Just....... jesus, man.

Is there any chance of you giving it a rest? We get it. You think Bitcoin and Bitcoiners are stupid. You passed Intro to Econ in college. You've drawn completely arbitrary lines in the sand and given nothing to justify them but emotional appeal. You, like many others, seem to waltz into every thread thinking that you've just independently come up with the fatal flaw of Bitcoin as it chugs along it's third year of existence.

You display a nearly D-K effect when you act as if these are foregone conclusions with your "Just....... jesus, man." Especially after the catastrophe that was the last paragraph about price&divisibility. It's completely nonsense from an economic perspective. And there are clear benefits in using a highly divisible currency (and especially since it can be represented as a whole number... rather than a float. Ironic, whoops).

Also if you want to be more interactive than your peers, will you answer a scenario for me? Now, I am actually asking for your opinion on this, not being a smart-ass. Ready? Let's go.

If we had a bunch of "units" of something we have 1 each and there are 10 total. We use them to buy melons and each 1 is roughly valued as 1 melon. Then people see the success our new system is having and want to use our units to buy melons as well. So, one of the 10 friends decides its a smart idea to sell his unit for 2 melons to someone who really wants to be a part of our cool club. The next day someone else sells their unit for 4 melons because even more people want in.

Is every unit now worth 4 melons now just because someone sold one for 4 melons to an outside trader? If I go to the store where I used to buy a melon for 1 unit and tell them now that I think I deserve 4 melons for a unit, what will they say?

Explain to me how you think storeowners should react or how Bitcoin is unlike this. Sincerely, I will listen as best I can.

> Is every unit now worth 4 melons now just because someone sold one for 4 melons to an outside trader?

Well, yes. That's why currencies increase in value, because they're in demand. That's why the value of the pound or dollar or whatever goes up and down.

> If I go to the store where I used to buy a melon for 1 unit and tell them now that I think I deserve 4 melons for a unit, what will they say?

Who knows? They might refuse to sell at that price. They might see that if they don't sell to you, you're likely to import melons more cheaply than you can buy them locally.

The storeowner should react by buying melons in bulk using his units and then selling them to you more cheaply than you can import them yourself. Bitcoin is not unlike this. It's the same. Things are worth what people are willing to pay for them.

My intuition says that the storeowner has no reason to accept. I think what a lot of the merchants are doing is using 3rd party processors, basically just saying "Fine yeah I'll take it" as long as a Bitcoin buyer is already lined up (which is essentially what a 3rd party exchange functions as). That way they get cash less transaction fee.

But really even if they accept Bitcoin for 4 melons that doesn't mean they have embraced Bitcoin. It is just a credit to the power of Bitcoin's infrastructure that the trading network is there to accept the coins, no?

That's my biggest worry. Bitcoin culture seems to believe that at a certain point all individuals will give up resistance and embrace/adopt Bitcoin, whereas there are many many barriers standing before that and I believe it is only the trading network that is strong. However, I do not believe Bitcoin is a stock, so I'm not sure what it is.

What do you think, sir/madam phaemon?

> My intuition says that the storeowner has no reason to accept.

Well, of course they don't. Things have just got worse for them. But that's exactly what happened to many local retailers when their customers realised they could get stuff cheaper by ordering over the Internet than they could buying locally. It's just how things go.

> However, I do not believe Bitcoin is a stock, so I'm not sure what it is.

It's an infrastructure. It happens to have a currency built in on top of it, but at heart it's an infrastructure. Its worth depends entirely on what people do with it, like the Internet itself.

So, it's a little meta to consider what a currency that's an infrastructure is worth in it's own terms, but no-one has to decide that....just let people pay what they want for their share.

eh you lost me, man. he still has the option to only take USD or use a 3rd party payment processor. At the moment, it seems that this approach is not costing any businesses in sales, since Bitcoin is still used infrequently as currency. The only point it actually becomes a currency itself is when the shop owner stops using a 3rd party processor and says "you know what? I'm comfortable just holding onto these". With the market volatility of Bitcoin this is unlikely to happen for a while, unless they are among the believers who think the value can increase indefinitely and accurately represented by trading prices.

I definitely understand the value as an infrastructure, but this is the web. Better solutions will emerge and could just co-opt the Bitcoin infrastructure. Like the way ISPs came in and bought access to the data lines of phone companies, same idea.

> eh you lost me, man. he still has the option to only take USD or use a 3rd party payment processor.

Uh, no he doesn't. He only takes Units. We're talking about your hypothetical melon salesman, remember?

> Better solutions will emerge and could just co-opt the Bitcoin infrastructure.

Probably. I would certainly hope so! That doesn't stop Bitcoin being valuable right now and new solutions being more valuable in the future. There's no reason not to have several competing digital currencies on the go.

Eh I get where you're coming from, but I'm tired of this shit too. this one really got to me. It's not that I think Bitcoiners are stupid, it's a combination of a few things --

All these threads are "Yay Bitcoin reached a new price plateau, proof that it's perfect!". So finally they pick an article that says it's a mess, but the thing is it's pretty much the dumbest article ever.

So then the Bitcoiners use it as a straw man, coming on saying "See this article's author is dumb he doesn't have our enlightened view of economics.... If you divide all the world's money by the number of Bitcoins I'm so rich!!!"

I'm sorry but even 3 years existence proves nothing, as there are many screwed up things in history with longer lifespans than that.

So yeah I'm frustrated as hell because this is pretty much the spam of the tech world now but it's front page news on HN every 20 minutes with some new story like "Researchers believe Bitcoin founder once visited zoo in Denmark". One could argue that it is a cargo cult, one could argue that it is a success, a failure. Many things could be argued.

The one thing that I think is for sure is that this whole phenomenon is tabloid-esque garbage that is mostly servicing greedy arrogant Bitcoin holders and their machine, since publicity seems to be one of the only true price correlates (nothin odd about that, huh?). I'm probly gonna get off this bent just because it's not worth the time but without the detractors Bitcoin is just like a digital Jonestown - every post is met with more mindless optimism and every criticism with a response that is a complete non-sequitur followed by boo-hooing about hurt feelings and poor etiquette. I'm not on an online forum to get popular agreeing with everyone I'm here to test the waters and see what kind of knowledge is floating around.

Those I've had arguments with fail to articulate even simple points. For example -- I agree that using a highly divisible currency is good. That was, in fact, my point. My issue is that a frequent explanation for the rapid price increase is "Well it's natural that the coins are going to gain a lot of value. Heck, maybe Bitcoin will surge in the real estate market and 1 coin will be worth a whole house!". With a highly divisible currency, why would the unit price have to increase to represent some arbitrary figure in the market (a house in this case). Because it seems logical to people? Because there are only a limited number of Bitcoins in circulation so of course there is scarcity and rather than using a different currency that can release more we simply have to bid the price up because "well, SN is god after all"?

If anything the fact that I want to argue should show that I do respect the potential of the community in that I actually want to take my time to interact with them. It shows that I give them the benefit of the doubt that even though I disagree I still think "well let's not write it off as a cult just yet". But when I get responses that are as cock-eyed and zombie-ish as the one above ("why analyze supply and demand curve when soon the entire planet will soon be bitcoin?!! i will own your country merely for investing now.") i will probably continue to lose my shit. So yes, I will need to stop looking.

But the value floor for the USD is effectively the tax obligations denominated in USD, which is 5.5 trillion. Meaning a hell of a lot of powerfull people have a legal obligation to collect -at least- 5.5 trillion USD.

This provides a much higher value floor, no ?

Any protocol could come along and displace http, or a parallel internet could come along and displace it. But we're going on 22 years now and that's how we're communicating.

What if these protocols are not so easily displaced as you imagine?

yeah as ars mentions, it's already happened... plus there is litecoin, buttcoin, etc etc

When people compare to internet & DNS & things like that I get kinda pissed off. Those are standard protocol that we agree to because it helps ensure successful communication. Bitcoin is not anything like this stuff, it falls more into the category of "some code that runs on the internet".

Think of it more like a website (Facebook) instead of providing the false analogy that its like the internet itself. If Facebook were an open-source trading platform and it started looking askew, what do you think people would do? (hint: open-source)

Bitcoin is a (peer-to-peer) protocol. It runs on port 8333/TCP. It "helps ensure" transactions are recorded successfully and permanently.

Very much fits the analogy with Internet or the web.

Actually there is no buttcoin (other than the website), which is the proof that you are a troll.

if making a mild semantic error regarding the universe whose fundamental premises i believe are flawed makes me a troll, troll i am

ad hominem is bad enough dont bring in semantics please. in bitcoin there are 3 types of people -- hypemongerSpeculators, techDesigners, nonBelievers. The hypemongers call all the nonbelievers trolls, the trolls talk trash to the hypemongers for blindly defending a greedpile, and the techDesigners (who are supposedly the enlightened HN readers) generally don't care.

The only reason I even bring these arguments here is cuz all the HN headlines are hypemonger trash. I'm readying myself to accept this model of Bitcoin forums and move on, lol

The chain has already forked before. The community so far has managed to agree on which to follow. That might not be the case if a government like China interferes with the protocol, splitting it into two very active forks.

Bitcoin's security against double-spending is proportional to how many clock cycles are spent mining, which is affected by the price of Bitcoin. A parallel network with a far lower market cap would be less secure.

$1000 per coin is speculation, but it's not particularly different from a startup people are buying into purely because of where it might be in five to ten years. The effect on Bitcoin is magnified somewhat because the maximum number of shares is capped.

Unless something radically better than Bitcoin comes along, I don't see it being replaced any time soon.

Network Effect

I think you misunderstand me. I am talk about non-currency use. If the Bitcoin network collapses, you have nothing. The market for gold by definition cannot collapse to zero as it has non-currency industrial and decorative value.

If the electricity collapses, the light goes out. Stay away from LEDs.

Every bitcoin thread = groundhog day.

Seriously, in these threads there's hardly any middle ground between, "eventually these young fools will see they are standing at the foot of a pyramid of tulips," and, "fuck the police fuck fiat currency eventually dollars will be obsolete." Both sides are ignorant IMO.

Nope. Gold is used in limited quantities for plating pins in electronics, covering space helmets, and probably a few other things. It's really not that valuable for getting shit done and need a lot of it type of stuff.

The use of gold in industry is discouraged by its high price - if it were the same price as copper, you'd see more uses for it.

If by limited quantities you mean "about 400 tons a year" (and that's not counting dentistry or jewelry) then yes.

11,666,666 troy ounces

$15,108,332,470 at today's prices.

If you do count jewelry, increase those figured by approx. an order of magnitude.

400 tons a year is nothing compared to other industrial metals. By comparison, world production of copper is 17 million tonnes per year.

$150 billion a year is nothing?

I think you mean $15 billion?

http://www.wolframalpha.com/input/?i=400+tons+of+gold+in+dol...

The 150B figure is including jewlery/decorative use, for a total of 4k+ tons/year.

That price is due to the rarity of gold. If it were as common as copper, 400 tons would be worth a lot less than $150 billion a year.

What's your point? Sounds to me like you're trying to win the debate by inventing your own set of "facts"

The original point of discussion was the quantity, not the price.

For bitcoin it's easy to argue that it's useful for almost zero-cost transactions, world wide, with relatively short confirmation times. Other applications are being invented: cryptographic proof-of-existence (on top of the block chain) or perhaps also distributed/anonymous DNS.

You really need to see it as a powerful idea, not just a speculative asset