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Comment by ignifero | Hacker News Reader

Bitcoin is a commodity. Nobody issues it, it is mined and has a predictable, limited supply. People aspire to use bitcoin as fiat money, but that's impossible, there is no one to provide liquidity when the market runs out and there's no underlying economy it will be based upon. Commodities like gold, silver, petrol have been used or tied to money for centuries, but at some point their use was deprecated by the needs of the people. Adopting bitcoin as currency is like going back to the 19th century. It's an interesting idea for geeks, and maybe it will be used in special applications, but it's not an advancement for the economy, its a step back.

He might as well have paid with (numbered) paperclips if there was an MtGox for paperclips, does that mean that paperclips are the future?

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You are building a straw man. There are plenty of reasons why paperclips are unsuitable as money. They are easy to forge and there is no guarantee of how many will ever be in existence to name a few.

Trading oil or gold directly is obviously impractical. But Bitcoins are not. You can store an unlimited amount of Bitcoins on your smartphone or USB stick and you can securely and anonymously transfer them to someone else within a few seconds.

How is it different from ordinary coins? (Obviously, in a hypothetical gold-coin economy credit cards would be in gold, too).

Btw, practicality was not the reason the world abandoned the gold standard, political and economical needs obviated it.

P.s. obviously, paperclips are not a good figurative example. The central banks might just give you a list of banknote numbers to exchange (and an API to verify their uniqueness)

Giving someone coins is similar to Bitcoin. Still, Bitcoin is more practical than carrying around a bag of coins.

You can send them instantly across the globe without fees and keep as many as you want in your pockets to name a few.

"Giving someone coins is similar to Bitcoin." It is quite a stretch to compare bitcoin to gold or other useful metals. Gold has significant inherent value, bitcoin is inherently worthless. The value of gold can't fall to very low levels since it is scarce and is valuable for industrial uses (excellent conductor that doesn't corrode, etc.). It is unlikely that there could be much of a change in the scarcity of gold. (This hasn't taken into account the demand for gold for jewelry)

Since Bitcoin has no inherent value, those initially creating and trading it for something of value would seem to have gotten something for nothing, or nearly so.

I was thinking about issuing pellets as a currency. It takes work units (gathering/mining and processing food) to create them. Much of the work is carried out by an organic machine called a rabbit. The currency has more inherent value than bitcoin since it has inherent value as a fertilizer. The maximum amount of currency is finite since it biodegrades and the Earth can only support a finite number of rabbits. As with all physical currency, it is wise to wash your hands after handling it.

Various units are possible for convenience. The smallest are individual pellets. They can be compressed rolled and cut into "sheet" currency, and made into bricks. For still higher value currency the rabbit may be replaced with a bull. Some bull-sheet currency should be available soon.

Gold's inherent value (industrial uses) is nowhere near the price it trades at. You could say that gold can't fall to zero because of that, but if it still devalues even 10 times, you can bet that people will panic.

Bottom-line - nothing is absolutely safe as a savings medium, and gold is not as axiomatically special as many people hold it to be.

Value is ultimately determined by what people are willing to trade for - by supply and demand.

Obviously, Bitcoin is not worhtless to thousands of people. They are being traded at $14 at Mt Gox right now.

Why is gold valued at $50/gram today and was valued at $30 in 2007? Is it because we are creating more jewellery and need more for industrial applications and the supply cannot match the demand? It´s not - the value is increasing because people see gold as safe way to store money. To quote Wikipedia: "the price of gold is mainly affected by changes in sentiment" http://en.wikipedia.org/wiki/Gold_as_an_investment

You might also want to read: http://en.wikipedia.org/wiki/Subjective_theory_of_value

How about a credit card? It's simple. Those fees aren't just there to screw you (albeit, some places do, doesn't mean fees are inherently bad). They also help support the infrastructure required to create a stable and easy way to use money. People expect protection against fraud, bank runs, etc. That doesn't just happen magically, it happens with organization and processes. Look at some of the other comments coming from supporters of bitcoin here, creating a bank running on transaction fees (or a nation was the example). It's the same thing, except it's trying to poorly mimic something that already exists and quite frankly, works fairly well.

Definitely true. There is nothing stopping anyone building a credit card network on top of Bitcoin. Again, Bitcoin is still an experiment. It might even be the case that certain groups of people require such a scheme to use it.

We abandoned the gold standard because governments wanted to spend money (usually on war) that they didn't have.

But even before the gold standard was officially abandoned, devaluation was a regular feature of gold- and silver-based currencies.

I once saw an exhibit in the Israel Museum showing a sequence of ancient coins, all stamped from the same die over a period of some decades, where the gold content gradually declined from about 99% to about 1%.

Yes, because it was possible and practical for the gov't to do so. Governments have always devalued their currencies, and citizens are rarely happy about. Just because it happens doesn't mean "we" chose it.

so what's your suggestion when a country runs out of money? (practical example today: greece)?

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