Post
Topic
Board Economics
Re: Medium of Exchange vs Store of Value - and effect on BTC worth
by
deisik
on 07/12/2013, 19:42:16 UTC

At the level where it matters for the question discussed (i.e. subjective utility), there is not much difference between these two concepts. Actually, at this level security becomes what gives the currency some value (indeed this is not enough) because it all finally boils down to trust. As a counter-argument, I can just as well say that backing up by gold is simply preventing government from abusing their power. And security all of a sudden now begins to play in the same field...

Simple mental exercise, suppose you have to pick up between two currencies. One can be counterfeited more easily that the other, otherwise they are on a par. Which currency would you choose?

Their is a lot of difference, something can not be an effective store-of-value if it lacks EITHER.  For a person to store value a person needs to do two things, they need to RETAIN an asset and the asset needs to RETAIN purchasing power.  If I had an object with perfect ability to retain purchasing power but it could be stolen very easily it would be a poor store-of-value, alternatively something that's very hard to steal but which has unstable in purchasing power would likewise be bad.  My total risk of loss is Retention Risk (losing the asset) + Valuation Risk (asset loses value).  So any logical and subjective personal assessment of an assets store-of-value is going to need to take both risks into account.

So, in short, you didn't actually say anything that would support your position. Retention of purchasing power (that is what matters here) ultimately depends on what the majority think about something as a store-of-value, whether it is worth being used as that (there is no god out there). And security of a currency does add to this subjective judgment in a positive way, whether you like it or not (see example in my previous post)...