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Comment by acdha | Hacker News Reader

Bitcoin is a pure fiat currency, which means it only appreciates if you can talk other people into believing it's worth more since it lacks intrinsic value or the inherent demand of a sovereign currency. The theoretical basis for its value is the network of other people who have also bought in but if you're using the credit card network to make transactions in USD you're not giving merchants a reason to accept it directly or seeing any advantages from using Bitcoin.

If you enjoy speculation, that's no more weird than keeping your money in a stamp collection but you don't grow into a real part of the financial system by giving people fewer reasons to care.

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I don't think you're using the term Fiat currency properly. Gold is only worth something if other believe it is worth something. It's use in electronics and industry only makes up around 7% of total supply [0].

Yet, gold isn't a fiat asset because its value is anchored to its physical properties. It is finite and cannot be freely created. It doesn't oxidize, is resistant to most acids and other corrosives, and has the highest specific gravity of any naturally occurring element. It is a naturally good store of value because of these properties.

Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics. Take that as you will, but both assets are much more solid than Fed Coin (USD) which is effectively backed by the government's commitment to enforce the federal reserve act while trying their best--and failing--to resist printing more and more money to perpetuate an unsustainable system.

[0] - https://www.statista.com/statistics/299609/gold-demand-by-in...

Other elements have higher specific gravity than gold (iridium, osmium, maybe tungsten and Platinum, id have to check the last two. )

Presumably what gvhst means is "It's useful gold is dense, as if there were cheaper denser metals you could create fake gold bars by gold-plating alloys of equal density"

After all, you can already get gold-plated tungsten bars [1] from companies like chinatungsten as 'novelty paperweights' [2] - even though tungsten is fractionally less dense than gold.

As iridium and osmium are traded in very low volumes and toxic/acidic, platinum is more expensive than gold, and tungsten is fractionally lighter, fake gold is seldom undetectable.

[1] https://www.google.com/search?q=tungsten+gold+bar&tbm=isch [2] http://www.paper-weight.cn/products-show.html

Here’s the definition of the term I’m using - note that the term does not require government backing:

https://en.m.wikipedia.org/wiki/Fiat_money

The source of your misunderstanding is here:

> Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics.

The Bitcoin algorithm has some interesting properties but they don’t have much practical value to balance the enormous inefficiency and, far more important to this topic, that doesn’t make any particular blockchain valuable - anyone who wants those properties can set up their own for free without enriching the current Bitcoin holders. The only reason why you would consider those hashes to be worth paying money for is the community belief that they have a certain value - nobody has any need to use it otherwise. That’s why Bitcoin is an especially pure fiat currency: the community consensus is quite literally the only thing backing it’s valuation. In contrast a currency like the US dollar has curbs on fluctuation not just from much greater usage but also because millions of people receive it from government salaries and purchases or need that currency to pay taxes — unlike Bitcoin, which has value only to the extent that you can find someone else who thinks it’ll be worth more in the future.

Bitcoin is digital gold, essentially a reserve currency but not very useful for small daily transactions. All of the criticisms of Bitcoin can be equally leveled against gold, and have been (“barbaric relic” as Bernanke called it). And yet even central banks still hold massive amounts of gold. So I don’t see any reason why Bitcoin can’t fill the same role that gold does in the modern financial system.

Unlike gold, Bitcoin has zero intrinsic value and hasn't been used by as currency by civilisations throughout human history.

Central banks would be crazy to hold Bitcoin. If a better technology came along which had mass adoption Bitcoin could be made worthless overnight. Many people predicted this could happen in 2017 during the rise of Ethereum.

Personally I can't ever see bitcoin surpassing the the market cap. of gold.

There is no such thing as "intrinsic value".

There is only the law of supply and demand. Econ 101.

Even the argument that something has intrinsic value because you have a use for it is flawed: how much is a gallon of breathable air worth?

A gallon of air is tremendously useful. How much does it cost ?

Infinite Supply = Zero Value.

There is no such thing as "Intrinsic Value".

You might want to read this:

https://en.m.wikipedia.org/wiki/Intrinsic_value_(numismatics...

Gold has intrinsic value based on the industrial and jewelry uses: you could lose a lot more over the industrial demand point but it won’t go below that point because people use it for things other than speculation.

In contrast, random hashes have no value outside of a particular community consensus. You can’t do anything with them and the ones in the Bitcoin blockchain have no more inherent value than those in any other network.

>[Bitcoin] only appreciates if you can talk other people into believing it's worth more

I would say the same about gold (though you probably disagree). Gold has some "intrinsic value" (e.g., as a plating on electrical conductors) but would be worth much much less if no one believed that it is a good way to store money.

But perhaps more importantly, Bitcoin differs drastically from most fiat currencies in that its rate of inflation is capped: over 85% of all bitcoin that will ever be created have already been created.

The same BTW cannot be said of gold, which is being mined at an increasing rate:

https://fee.org/media/30406/figure-1_bitcoin_inflation.png

https://fee.org/media/30407/figure-2_inflation_bitcoin_gold....

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