Quote from: flug on June 12, 2011, 05:41:34 PM

what is the intrinsic value within the Bitcoin currency that will stop it going to zero?

Personally, I think the sheer time and energy focussed on and invested in Bitcoin in mining and trading produces that intrinsic value, which forms a valid base for its value as a medium of exchange.

"Intrinsic value" is a myth... it's like saying something is intrinsically beautiful. Value, and beauty, are always subjective and in the eye of the beholder (though many people tend to agree on what is valuable and what is beautiful).

Bitcoin's value comes from its efficacy as a money-commodity (fancy econ term). Its properties simply make it excellent money, and thus the free market has been valuing it higher and higher as people try to figure out just how valuable Bitcoin actually is. The same is true for gold - its value is not "instrinsic," but rather comes from its properties which make it an excellent money (scarcity, homogeneity, divisibility, durability, etc.).

Cars are valued for their use in transportation. Food is valued for use in human sustenance. Xbox is valued for entertainment. Gold, and now Bitcoin, are both valued for use as a medium of exchange. Cars will never be useful as money, and Bitcoins will never be useful for transportation. Both are valuable for their specific properties and the functions that those properties permit. The open market will decide, over time, the exchange rate between all goods, and you can bet that something as revolutionary as Bitcoin will swing wildly up and down in price as the market labors to value it appropriately according to its usefulness as a money.