Post
Topic
Board Economics
Re: Medium of Exchange vs Store of Value - and effect on BTC worth
by
deisik
on 12/12/2013, 10:09:43 UTC

Ok, let's start again. A currency in the gold standard is backed up by gold, right? Gold has some value, but this value is subjective in nature as well as for all other goods. This means that it is not determined by some property of gold (or amount of labor required to produce it, for that matter), but is determined by the importance an individual places on it for the achievement of his aims. Without this subjective valuation shared by the majority of people gold would be worth next to nothing. Now, if you agree that security of Bitcoin has value in the eyes of the individual as it does, you inevitably come with logical necessity to the conclusion that security IS backing up Bitcoin. Actually, anything inherent to a store of value that has subjective value will be backing it up, and the more people share this attitude, the more strength the store of value gets

It's a pity really that you went on a path of obfuscating and confusing matters here...

Yes all value is subjective including that of gold, even the many industrial uses that we now have for gold ultimately fulfill desires that are subjective (like having a cell-phone).  Heck even FOOD can be considered to have subjective value, we might all desire to be Anorexic Yogi ascetic tomorrow and the value of food would plummet though probably not to zero unless everyone were really planning to starve to death.

But security and backing are still two different things.  Security is a guarantee of ownership, backing is a guarantee of value.  In the case of a commodity backed currency the guarantee rests upon the value of another commodity, it won't ever be less valuable then a set quantity of said commodity, but obviously the underlying commodity could still collapse.  Also states can enforce legal-tender laws and accept only their currency in payment of taxes, this is a very strong backing if the state is strong but it is still dependent on something that can ultimately fail just like a commodity.  Perfect backing is an impossibility, as is perfect security, but it's wrong to confuse of substitute them.

If we follow your logic, then taxes and backing are yet more different things. If security gives value to bitcoin through positive feedback making it more useful than without it, then taxes add value to legal tender in the opposite way, i.e. through negative feedback. Legal tender gets value by taxes because you will be forfeited for not having it through prosecution due to an alleged tax evasion...

It is absurd really that you deny security in backing bitcoin and at the same time easily accept that taxes are backing legal tender