Post
Topic
Board Economics
Re: Bitcoins are more like domain names than any other asset
by
bhu
on 01/09/2013, 15:26:39 UTC
It's a decent comparison. What you're describing is really an extension of basic supply and demand, not necessarily only related to what happened with .com domains. The lower something's price the more demand for that product there will be. Giving something with a fixed supply away for free (or nearly free) naturally attracts a ton of people's interest if that asset could eventually have any value.

It's beyond this. From personal experience, when I heard of bitcoin being described as a currency that was a threat to sovereign currencies, I rolled my eyes and was dismissive (still am.) Once I heard it described as a low-level communication protocol like SMTP, I understood bitcoin's implications and commercial potential. Most VCs and entrepreneurs are betting on the latter.

From personal experience, I have never bought gold (it's archaic), but I have bought 4-figure, 5-figure (BondFunds.com), and higher domain names (MunicipalBonds.com), etc.

The difference in the initial value is this: Almost all sovereign currencies were initially either pegged to gold or to another established currency; as such the initial risk of adoption was neutralized. (The pound and dollar were pegged to gold for a long time. Many Arab currencies are pegged to the dollar currently.)

With both bitcoin and .com domain names, the initial value is a speculation on the eventual ubiquity and adoption of a protocol. And just as people used to scoff at a person spending a thousand dollars on a domain name, many look at bitcoiners in the same skeptical way. And people complain about bitcoin hoarders the same they used to about domain squatting.

Bitcoin and domains also are not actually owned by the individual; it is a record in a ledger. (Yes, paper money is also largely digital, but it can be held in widely, immediately identifiable paper form.)

Lastly, if the bitcoin protocol is not adopted, bitcoin is worthless. Just as .net or .biz domains largely are. The bet is on protocol adoption driven by network effects.

What is easier for people to understand: "Yo, bro, bitcoin is an electronic currency that is going to take over the world," or "uh, it's like buying domain names before everyone knew what to do with .com domains, bro." The first is grandiose; the second sounds plausible.