Re:Norway Rejects Bitcoin As Currency; Taxes As Asset, Instead
by exelius on Monday December 16, 2013 @02:12PM
(#6917075)
I'm speaking in pure economic terms. The production inputs to mining Bitcoin have real market value and thus there is an opportunity cost to mining Bitcoin. I'm not arguing that Bitcoin has no value (because obviously it does if people are willing to trade them for USD) -- just that it has no intrinsic value.
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).
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).