You simply don't understand bitcoin. It is not like Satoshi couldn't come up with "useful" computations with "intrinsic value". He deliberately chose "useless" computations. Why? Because these computations serve very important role in the network: they make fraud(like double-spending) very costly(you have to control 20-30% of network computing power to have even smallest change to execute your attack, and 50%+ to have 100% chance of doing it). Computations having "intrinsic value" == extra incentive to attack.

Also, you miss all the work done by armed guards to protect large piles of cash( https://en.wikipedia.org/wiki/Cash-in-transit ). Do you think they do their work for free? And this is only obvious work. How much does current banking costs to us in total?

> Gold has industrial uses due to its physical and chemical properties, and it is desired in the consumer space as a material to make jewelry out of.

Gold was used for thousands of years long before it had some uses in the industry. It has no really special chemical properties: it doesn't react much with other chemical elements (which is actually awesome for a currency: it means it can preserve its value for many many years). Jewelry - maybe, but isn't it so desired for jewelry because it is scarce? You could make jewelry out of less noble metals.

As a physical good, the desirability of gold is simply to own it and stare at it. We can get into a philosophical debate about how you define utility, but for some people the fact that they find the appearance of gold aesthetically pleasing is enough. It's hard to find much aesthetic value in a Bitcoin. If people decided to stop using gold to store value tomorrow, it would still have industrial and asthetic uses. If people decided to stop using Bitcoin to store value tomorrow, the Bitcoins just lose all value.

Current banking is most certainly a product with associated value -- it's just not a currency. Bank checks are issued in USD, wire transfers are denominated in EUR, etc. I'm saying that Bitcoin, as it exists currently, is a digital asset with a high market value but no intrinsic value. It's not really a currency though, because modern currency is almost by definition controlled by a central bank to make it more useful as a transactional tool. If you have regular spikes and drops in the value of the currency, you don't know whether to buy bread on Tuesday or Friday. Everyone starts trying to time the market and you fall into a boom-bust cycle that is excruciatingly painful for individuals who get the timing wrong (see the US economy of the mid-to-late 1800s).

Actually, gold's lack of chemical interaction is one of its prized properties, which is part of why it is so desirable in jewelry, electronics, and medicine/biology--it doesn't corrode or rust or otherwise diminish over time. Few other elements even come close, and most of them are gases.

You're right, people want it because it's shiny and rare. That makes demand for it. People can and do make jewelry out of other metals, but it's not as "prestigious". You highly underestimate how materialistic the majority of the world is.

You're right that bitcoin completely lacks the properties of gold that give it use outside of being a currency. But is gold's use in electronics really why it became used as a store of value? It has other properties, too: it doesn't corrode, it's quite rare, it can be easily tested for purity. Bitcoin adds to those the ability to be stored on a piece of paper, the ability to be transferred in minutes anywhere, and a difficult-to-obfuscate ledger.

Of course bitcoin loses the price floor granted by its real-world applications, but that doesn't necessarily mean it's as doomed as dogecoin (the world's first internet-meme based cryptocurrency).

The difference between the cost of printing paper money and the cost of Bitcoin mining is that, to the best of our knowledge, paper money cannot be made significantly cheaper. However, electronic payment systems can be made significantly cheaper than the cost of Bitcoin mining. We already know how to do that from a technical point of view. The hurdles tend to be of a regulatory nature.

Those regulations have good reasons to exist, but if Bitcoin becomes sufficiently successful and practical simply as an electronic payment system, one of two things will happen: either, regulation will expand to cover Bitcoin to such an extent that Bitcoin loses advantage, or regulation will be reduced. In any case, there will be a market opportunity for non-Bitcoin systems to provide the same functionality, but cheaper.

This would then lead to Bitcoin's decline.

So if you want to argue that such a decline based on market forces will not happen, you have to have an argument that is not based on Bitcoin simply being an electronic payment system.

It seems very popular to argue that the decentralized nature of Bitcoin is what gives it a sufficient edge, and that the properties arising from its decentralized nature are impossible to replicate at a lower cost.

I'm not sure that I buy the line of argument that the decentralized nature causes a sufficient appeal. The public at large doesn't seem to care too much about that kind of thing.

Obviously, it was sufficient to spark the initial uptake of Bitcoin, which seems to have been driven by a mixture of cypherpunks, Libertarian and Austrian ideologues, and drug traders -- all three are groups that care much more about the properties that come with decentralization than the general public. And that initial spark was enough to attract broader interest, which may even be sufficient to carry Bitcoin over into long-term viability in a number of niches (similar to what happened to gold). So, if you personally have skin in the game, your investment may be safe.

Because this is just like Bitcoin. Except Bitcoin's data is decentralized, not centralized, and the rules for its slow release into circulation are fair (IMHO) and unchangeable (at least without 51+% agreement of the entire node network).

The work miners do has 2 utilities:

1) A computer can reliably estimate how much work was done by the output. This is "proof of work." You unfortunately can't use something like folding@home for this purpose, because the latter requires a human agent deeming what good "work" in that area is, and Bitcoin can't have any centralization and most certainly can't have any human agents involved making decisions about what "worthy work" is or not.

2) The "work" is nearly the same "work" that a brute-force attacker would do if such an attacker were trying to attack the network itself. Rewarding mining therefore incentivizes mining OVER brute-force hacking because the likelihood of a mining reward (given the same computing work) is much higher than the likelihood of a brute-force "reward."

I'm not saying that that Bitcoin was poorly designed or anything; just that there are some big challenges with issuing currency if you don't have a nation-state backing it up. Nation-states have the ability to issue currency by policy, to remove currency from circulation through taxes, and resolve international disputes (with military force, if necessary.) Bitcoin, through its decentralized nature, has none of this.

And before anyone checks in saying that it's impossible to get 51+% of the Bitcoin node network... you don't understand the level of resources that banks can bring to bear if they have the right motivation. I wouldn't be surprised if we see one or more of them collude to take over the Bitcoin cloud and print money for their own purposes. If they could do it with LIBOR, they can do it with Bitcoin. Goldman Sachs has been driving up the price of Aluminum by controlling a significant portion of the global stock and keeping it out of circulation. It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it.

This is also its Achilles' heel if this central authority acts poorly. There are MANY worldwide currencies which are very poorly managed.

> you don't understand the level of resources that banks can bring to bear if they have the right motivation

The Bitcoin mining network is now more powerful than ALL of the top 500 fastest computers COMBINED. So, good luck with that!

> It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it.

There isn't, but consider this: If word got out that this happened, people would flee Bitcoin, eliminating any incentive to do so, unless your only goal is destruction, and that's a pretty shitty motivation to do anything by.

/sarcasm

I think you're essentially comparing fiat currencies guaranteed by governments with the fixed supply of Bitcoin that isn't guaranteed to be stable.

That doesn't mean it's not a currency, just an unstable one with fixed supply.

Instead the activity of Mining should be thought of as minting new coins and miners are people trying to get lucky; similar to how someone mining for gold. Remember even the worthless paper dollar needed to start somewhere.

Without this ability to adjust on-the-fly, the exchange rate of Bitcoin will continue to be very volatile. There's a reason we don't use gold as the basis of our currency anymore: every time the value of gold rose, waves of people went out looking to dig it out of the ground. They were successful, and suddenly there's a lot more money floating around. But not any more bread, oil or cloth, so a loaf of bread that used to cost $1 now costs $2.

With a fiat currency, you have a store of value that is created by decree, not by the efforts of any individual in the system. So now, if there's an gold rush, the value of gold (denominated in dollars) will rise. People will probably go mine more gold and the value of gold will decrease again, but the value of wheat (as denominated in dollars) will stay more of less stable. If you can take $1 million worth of servers, electricity, etc. and are able to mine $5 million worth of Bitcoin, you get the same effect.