Re: Can Bitcoin replace the dollar?

1) Pricing Something in Something.

What is a Price?

"In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services." WIKI

I can price something in something.

Example 1: A ocean front villa costs 10 Ferrari.

This statement has meaning and everybody will have an opinion on whether this price is to high or to low as the good (villa) and the price (10 ferrari) have value (to society, not necessarily the individual). A Ferrari has value because it is pretty, a form of transport and fast.

Exampe 2: A ocean front villa costs 1000 ounces of gold.

This statement also has meaning and everybody will have an opinion on whether this price is to high or to low as the good (villa) and the price (1000 gold) have value (to society, no necessarily the individual). Golds value is that it is pretty and rare. Everybody can understand the concept of pretty.

1) a) When people judge how fair a trade is for a villa for 1000oz of gold they aren't judging the villa against how "pretty" gold is. If that were the case then something (villa in this case) would always be judged to be worth the exact same amount of gold since gold has remained equally pretty for as long as we've used it. b) In fact what happens is that people think of what other things the villa is worth as well as what other things the gold is worth to determine if the trade is fair or not. In this case "other things" would be money of some sort most likely (that's essentially it's job after all).

2) Much of gold's value is speculative, it is not valued based on it's utility or "intrinsic value" as some like to call it. So the villa is being compared to a speculative value placed on something, replace that with it being compared against the speculative value of bitcoins and it's really the same difference.

1) a) No because sometimes people judge the worth of the villa higher and sometimes lower. The same goes for gold. Sometimes pretty things are in high demand and sometimes they are in low demand.
b) money is not the point at this moment. I am only displaying how a comparison of the value of valuable things (somethings) has meaning.

2) No its not. I am not referencing the price of gold. Yes the price of gold can change. But its value for society cant change. We will always think its pretty (this has been burnt into our brain). Its like water: It will always be necessary for humanity. Now the price of water can change. But we are not talking about this. Again in the section you quote I am showing how you can compare the value of somethings with one another. This has nothing to do with price.

Now Bitcoin itself has not value. I cant do anything with a bitcoin. That I can give it to you at little cost does not change this fact. This part comes later (Something for Nothing). Bitcoin does however have a price. This price can change in future just like golds price can (we are in agreement here).

For people using Gold as a store of wealth, isn't it's "value" really just determined by what someone can trade for it on the market (price)?

If someone stores their wealth in Gold they will want to someday trade back that Gold for something else again. What they can trade that Gold back for will be determined by the speculative price of Gold and not Gold's utility or how pretty it is.

2) If anything all Gold's utility, industrial usage and being pretty (what you consider it's "value" right?) does is put a floor on Gold's price if it's speculative value were to shrink away some day. A floor low enough that Gold would no longer be considered a good store of value and where most of it's holders would have dumped it on it's way to the floor price.

2) See people holding gold bars like gold for itself. They like the look of it. Yes they have not made jewelry out of it. But that is irrelevant. You can not say what part of the market price is down to it being held and what part is down to it actually being used for jewelry. People who hold it only hold it because they know that it has value in and of itself. Because they know its pretty and decorative and thus has value. If it had no value to begin with they would not be able to use it as a store of value, as something that has no value can not have value in the future when you want to retrieve the value.

Again NOBODY would be holding gold, is it has NO value. Therefore every bit of golds market price is dependent on it being pretty. Nobody would have started to save something that is nothing (no value).

Gold became valuable because it possesses various qualities that make it useful as a medium of exchange and a store of wealth, let's call this Gold's utility. It's an element that is scarce, prohibitively costly to create, doesn't tarnish or corrode over time, more malleable than other metals making it more easily divisible etc.

Most people hold gold for it's speculative value that was built up due to it being ideal to fit the medium of a store of wealth due to it's utility.

Bitcoin became valuable because it possesses various qualities that make it useful as a medium of exchange and a store of wealth as well. Some direct parallels can be drawn.

I think the problem is that you have some antiquated notion that only corporeal utility traits should be counted as "value" when in reality value is subjective and is whatever the collective marketplace decides on for any asset, virtual or otherwise.

I think we have fundamentally different definitions of what constitutes value and the role it plays in a commodity or currency's price. 1) To sway me to your side of the argument you will have to demonstrate how the value of Gold to be used in jewelry is fundamentally different than the value in a given utility trait of the Bitcoin network. Gold being used as jewelry and Bitcoin's ability to transfer wealth over large distances almost instantly between any 2 parties with no third party intermediary are both judged as valuable by various people. Why does one impart "value" to Gold while the other doesn't for Bitcoin?

1) The best question asked to me since I registered to this board. Great! Yes Bitcoin is scarce (though possible replacement by other cryptocurrencies make less safe), divisible and so forth.

However money has always been valuable for itself (as you seem to recognize). The reason for this is that money is one part of the transaction. If I give you something (good) I want something that is valuable in return. If you give me nothing, I must fear that nothing will eventually not be accepted for something.

Now why is gold something? As you stated it can be used for jewelry and it looks great even in bar form.

Now Bitcoin cant just cheat this requirement. You say you have identified the value of bitcoin:

" Bitcoin's ability to transfer wealth over large distances almost instantly between any 2 parties with no third party intermediary"

The problem is that 1 BTC has no value for itself. The network however, (Bitcoin) is transferring BTC. (I am using the signs now to differentiate between the network and 1 bitcoin).

Thus the network does not have the ability to transfer wealth as bitcoin is not wealth but nothing.

I jokingly (I hope you forgive me Wink

) describe it like this:

"ability" of Bitcoin network: transfering nothing at a cost.

I have already argued this with another bitcoiner. See below if you are interested:

Quote from: porc on December 09, 2013, 04:48:54 PM

You say bitcoin has value. You say I have to just read this post to understand:

Quote from: aynstein on December 09, 2013, 02:52:20 AM

1) Bitcoin has no intrinsic value, 2) the network does. Thats what everyone is missing altogether and or misrepresenting.

3) The networks value is derived from it's ability to send value across political and geographic borders, nearly instantly and dirt cheap, with minimum effort. Additionaly it enables this without the risks commonly found in traditional financial instruments and value stores. Risks like hyper-inflation, manipulation, ceisure or other meddling by governments or institutions for whatever reason.

The ability to move value is enormously valuable.

1) He agrees with me that Bitcoin has no value for itself (like for example water that quenches thirst, food to feed my children). This statement is obviously true, as I cant do anything with 1 bitcoin.

2) He says the network of miners gives bitcoin value (how? the bitcoins are not a claim on the mining equipment. I cant sell the mining equipment or take it in my possession. Again dollar bills once where a claim on gold that I could take in my possession).

3) He says "the networks value is derived from its ability to send value instantly and dirt cheap".

Now when he refers to "sending value" he is talking about bitcoins. Because after all you are sending bitcoins. However as he has established in the first part of his first sentence "Bitcoin has no (intrinsic) value". So he is contradicting himself.

To summarize the information he gives us: 1 Bitcoin has no value (=nothing) and this absence of value can be sent at a cost.

Now how exactly is this convincing?

As I said previously: Incurring costs (energy which is something) to send nothing does not make nothing valuable. It is a waste of energy.