This is the fundamental answer to "why is any representative money valuable?" If people don't have confidence that they can offer the money in the future, they won't accept the money today.

> To me the real currency would have to be something in the realm of Folding@home. I'm not sure how it would work of if its computationally feasible, but I do know people would pay for the results of useful computations such as that.

As far as I know, that can't happen, at least not in a proof of work system. The work in a proof of work system can't be severable from the specific information it is designed to secure (in Bitcoin, that would be transactions on the block chain). This isn't exactly a scholarly source, but it's from the "Chief Cryptographer for the Ripple protocol": http://bitcoin.stackexchange.com/questions/11649/intrinsical...

I'm not very familiar with other cryptocurrency systems, like proof of stake, but I know there are some attempts at cryptocurrencies that use computation with unrelated useful side effects.

The US government is a powerful entity that levies taxes and accepts tax payments only in dollars. Gold has various uses in industry and fashion and therefore a certificate entitling one to ownership of gold would have some value independent of gold's use as a currency. None of these are true for bitcoin.

Right. That's just a more detailed explanation for why most people are willing to accept USD in exchange for their goods. There are similarly detailed explanations for why people are willing to accept bitcoins. The reasons are different, but they still (obviously) exist. If no reasons existed, then people would not be willing to accept bitcoins in trade.

I'm pretty amazed that people still think it's a scam when huge companies with massive legal departments are accepting it. That's some pretty extreme skepticism.

BTW, there are plenty of easy, legitimate ways to short Bitcoin, but given your extraordinarily high threshold for "non-scam", I won't bother mentioning them.

PS: Bitcoins are valuable because people are willing to buy them. Despite what most people think, money is not magic, it's just an agreement.

Sub-prime real estate was a scam. Huge companies with massive legal departments protected themselves from the illegal part of the scam - all those loan officers telling people to lie on their loan applications. In fact these banks got their lobbyists to get them TARP bailouts after the scam had run its course.

Banks are willing to trade subprime "liar loans" once legally insulated, so big companies willing to deal with Bitcoin doesn't really mean much.

I didn't say it was impossible to short Bitcoins. They are not FX traded alongside the dollar, euro, yen etc. though.

The central question is, why do Bitcoins have value? Why did subprime real estate loans, pets.com stock and Dutch tulip blubs have value? Actually, both these things were hypothetically more valuable than Bitcoins. Bitcoins are worthless.

When the price of a Bitcoin drops below $100, are people here going to learn a lesson about how value works? I don't think they will. That's the thing - Bitcoin will crash, and those talking it up here won't have learned a thing. If they did, these scams (subprime, pets.com stock, dutch Tulip Bulbs) couldn't keep popping up over time suckering people in. People have no concept of the relation of price to value, and thus are easily fooled.

I mean, at least Prof. Bitcorn gave us a date. An open ended "it's a scam and you people are going to learn...someday" is not very useful.

And speaking of value, after years of paying $30 a pop to receive a few thousand dollars from Europe in 3-5 business days, being able to effortlessly send a few digits, pay a few cents, and receive that money in less than an hour is...highly valuable.

For Bitcoin I need to:

* Get the requisite amount of bitcoins, plus a percentage extra to protect against fluctuations (BTC crashed is not a valid excuse for non-payment of rent)

* Help said friend set up a BTC wallet, plus security

* Find a trustworthy person willing to exchange USD for BTC at some agreed value

* Send friend to person and hope the exchange goes as planned.

I'd love to use BTC in place of IMT but it's just not easy enough yet.

- Investigate which PC she should buy

- Find someone willing to sell a PC at a fair price. This is a problem because PCs get old really quick, and some vendors will try to sell you old PCs at their original prices. I don't know how they expect PCs to be useful if they go down in value so fast. Why buy a PC today, when you can buy it at half its price in a year?

- Ask someone for help to connect all the wires

- Fail to send an email. Learn that she also needs an internet connection

- Investigate which ISP she should hire

- Etc...

With traditional mail, she just writes the letter and drops it in the post office.

When someone tries to use bitcoin and fails, they can lose their home. When silk road 2 lost their users' bitcoins to theft, there was a comment on Reddit about a silk road user who became homeless because they had converted their savings into bitcoin and stored the coins in silk road's webwallet. When the coins were lost, so was their home, since they could no longer afford rent.

Bitcoin needs to become pro-consumer with strong protections and convenience. There are dozens of ways to lose your money, so no one wants to convert a sizable portion of their wealth into bitcoin, which means no one has bitcoin on hand to spend at a whim. Eventually merchants are going to start wondering why they're bothering to let people buy their products via bitcoin since very few people buy anything via bitcoin.

If bitcoin becomes safe and convenient, bitcoin adoption will follow.

That number of Bitcoin users is only increasing with each passing day.

If someone accepts PayPal while insuring against the possibility of not being paid "not accept PayPal"?

If a non-US vendor uses forward/option contracts to maintain cash flow in the local currency, do they "not accept" USD?

People always overestimate the short term consequences and underestimate the long term consequences of such technologies.

Currency is only one way to express the protocol.

I chuckled a little bit when he said hashes people are willing to pay hundreds of dollars for... annd those dollars are printed on paper with old dead guys on it. Ahh the world this guy lives in must be an interesting one.

You can commit nearly anonymous transactions over long distances with it. It's value over international currencies is in proportion to the size of the black market transacted via BtC.

There are many people out there who don't try to get rich, they simply mine a handful to buy small amounts of drugs on the internet. The "convenience" of that service raises the utility and value of BtC over e.g. dollars.

Of course, I say nearly b/c a dedicated sleuth could investigate a transaction, but ask yourself as a practical matter, will federales go after an 18-year buying a gram of weed via BtC? of course not. The complexity of the BtC transacation obscures such small transactions well into the realm of "safety."

Fast, nearly anonymous and free long distance transactions are a pretty big deal for non-criminals as well.

Did you ever try transferring a bigger amount of money to a country outside the EU and US? You'd be astonished by the fees and timescales involved.

Services like Western Union and Moneygram are not just used by criminals.

Interest is the keyword here. Banks collect it on their customers' money while they declare it to be 'in-flight'. This is the main reason why transactions that should take seconds are still deliberately delayed for days.

Eh, I think in the long run that will be more of a hindrance than a help, as it will give governments in many places a plausible reason to attempt to ban or limit its use (which would tend to lead to a vicious cycle of only criminals--however you define that--using it).

On a more practical level, I can't remember a time my credit card has been refused for local or international transactions (and any additional fees are largely invisible to me, the consumer). Paying with a credit card also carries certain advantages: If the goods aren't delivered, I spend 2 minutes on the phone and get my money back.

For the vast majority of consumers, the headache of converting local currency to BtC, learning how to use it, and finding a reliable escrow service will greatly outweigh the benefits of being able to buy drugs (especially as states decriminalize drugs). That keeps BtC firmly in the grasp of speculators.

I donated to wikileaks. Except I didn't, because the US put pressure on VISA+MC, and reversed my transaction. That whole business convinced me of the need for decentralised currency.

The value of any fiat, piece of gold, diamond etc isn't falsifiable either. You are assuming that other types of currency has inherent value. They don't.

With my theory of value, Bitcoin has to collapse. Keynes talked about how markets could remain irrational longer than he was able to remain solvent, but that said, with my theory of value it has to collapse. So my theory of value is falsifiable.

The theory which says Bitcoin is valuable is "its valuable because its valuable". It's not really falsifiable. They say it's valuable because people find it valuable. If it loses value, they'll say it was because people stopped finding it valuable. How is that theory falsifiable? Whether it goes up or down, they can claim they were right. It's a tautological argument.

Gold is valuable because it is useful. It can be used to fill teeth, it can be used in electronics, for industrial purposes etc. Geologists spend time looking for where gold might be, then speculators spend time looking there, and if they're right, miners spend time mining it. As gold has a use, and has been useful for thousands of years, investors have a fairly certain (but not absolute) idea that they can exchange the gold they mine for other things.

Gold does have an inherent value. Compare an ounce of gold to a 1971 dollar. The 2014 dollar is worth a fifth of what the 1971 dollar was. An ounce of gold did not have it's value removed. Gold has an inherent useful value. The Papiermark, dollar etc. depend on the shifting winds of governments. The US government can fire up the printing presses and half the value of the dollar in a few days. You can't half the value of gold as easily, you'd have to make some kind of major scientific breakthrough.

There's absolutely no risk to a vague claim like that. It's unfalsifiable. Either we witness Bitcoin collapse, in which case you made an amazing prediction, or we don't witness Bitcoin collapse, and on your deathbed you can be proud that you haven't been proven wrong yet.

To make a meaningful prediction, name a time (preferably within most of our expected lifetimes) and a market price. Of course, if you could do that with any confidence, you should also trade with that same confidence.

The fact that gold now has industrial uses makes it less suitable as money or a store of wealth than it had been for thousands of years, because saving/hoarding/speculating artificially reduces supply and increases its cost.

I can grant that people might be more trusting of bitcoin if it had some kind of intrinsic value to insure against collapsing 100%, but realistically it wouldn't be more than a tiny fraction of the market value, anyway. And as with gold, those other applications would be more expensive than they ought to be.

One might argue that the use of crypto hashes to certify documents or perform escrow-like services is comparable to the physical utility of gold and "paper" money. That seems a more apposite objection to my point, but hey ...

You are confusing historical with universal facts.

For example, Gold is more readily worked than other metals and it's relative inertness makes it useful for carrying charge without causing a reaction (such as oxidation), additionally it has low resistance - these innate properties give it an inherent value by virtue of it's suitability for electrical connections.

If you're speaking on a the level of "value is a human construct"; well that's as may be but doesn't really aid in the discussion of human economics. I'm more than happy to discuss that but it seems we should stay within the locus of human experience here.

Or ...?

For instance for remittance Bitcoin has immense value compared to for instance gold.

Context defines value not the thing itself.

Simple answer: Supply and demand. There is demand, you just have to research for more than 20 minutes to find the reasons for the demand aside from the artificial one created from people using it as a means for returns in investment.

Why do you jump to conclusions on topics in which you are clearly uninformed?

If that's the long term future for Bitcoin (as many people believe it is, and ignoring the value of the blockchain as a contract / consensus based negotiation mechanism for a moment), then the Bitcoin's value will eventually settle on a level that reflects its long term transactional use and "time in flight" - there is a non-zero period of time between when I purchase the bitcoin, and the recipient translates it back into local currency, in which the bitcoin will need to be purchased. Take your total daily transaction volume, and that time in flight - and you start to get a good sense of what the inherent value of bitcoin is.

That's the simple story as to why people are comfortable purchasing and holding it - it's going to be the global digital currency of choice, and as transaction volume increases, the value of the bitcoin will increase.

There is an eventual fixed supply of coins (21 million), with currently ~13 million in circulation (http://blockexplorer.com/q/totalbc). Given that the 13 million isn't increasing at any meaningful rate as it relates to the money supply, we can almost consider the supply fixed (at least on any short term perspective).

With this fixed supply, if more people become interested in using bitcoin as a unit of exchange and buy it in order to use it, then they will increase the demand and thus the price. If they used it to transfer money back home (i.e. remittances), and their family their exited the position back into cash, then the demand would be neutral. In reality, their is some cost of carry where by holding it for a period, you still increase the demand.

That would an explanation for the price were it governed by an actual underlying value.

In reality, the price is mainly governed by speculators hoping that it will be used by people as a unit of exchange eventually and thus the speculators are buying and holding coins.

That factor alone obviously doesn't prevent every currency collapse, but it is a key difference between "government fiat" and "geek fiat" currencies.

http://monero.cc/