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Comment by dakial1 | Hacker News Reader

You might also ask what is the underlying value of gold. You can do nice stuff with it and has some industrial applications, but it held value historically because of its scarcity. That's why countries changed it, because they realized their economies were more valuable that their gold stash (and it gave much more economic policy freedom)

An economist might give you a more intricate answer, but basically the underlying value of the (fiat) money today is basically the power of the issuing country's economy and government (who is the one guaranteeing the fiat validity)

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> That's why countries changed it, because they realized their economies were more valuable that their gold stash

Then it is interesting that, with gold being less valuable nowdays than fiat money, central banks (or countries) are still the largest buyers of gold.

So gold had value because of its scarcity. Why can't bitcoin have value due to its scarcity?

Because the former scarcity is real, and driven by economic factors, and the latter is a fiction that burns energy to create noise.

I'm not sure I understand why expending energy to mining more gold than we actually need, so that the excess can be used to represent money, is worse than expending engery to verify scarcity and transactions. If the argument is efficiency then there are so many other examples of society being inneficient, why is it an issue for bitcoin but not for other industries?

In the case of BTC and gold, mining puts downward price pressure as new "resources" are "discovered". Miners need to sell the gold/BTC to recoup the cost associated with mining. In BTC it's energy, in gold it's equipment/labor.

In a free market, we would expect the inefficiencies to be removed from the economy over time. New competition, new ideas, etc.

In the case of BTC, removing PoW would remove the downward price pressure it sees today. The miners don't really want BTC, they want USD.

The world hasn't used the gold standard for 50 years, and arguably even the Bretton Woods arrangement itself is a pretty significant departure from the gold standard. It's not like the gold standard proved to be historically a very effective basis for economic activity, so trying to say that Bitcoin is exactly like the gold standard isn't a strong argument.

Historically, the main advantage of the gold standard is that it doesn't require a high degree of state capacity to function, and of course throughout most of human history, state capacity was pretty damn low. But we live in an era where states largely have high state capacity, which allows us to move to economic standards that require that capacity to function effectively. Trying to argue for a system that increases inefficiency so that it can eliminate the need for a high state capacity government feels like a step backwards to me.

I don't think I'm arguing for inefficiency, but I'm saying why is bitcoin called out for it specifically?

Apropos of anything else, no one is arguing for a return to the gold standard, yet Bitcoin enthusiasts love to talk about its role as an alternative to fiat money. Sure, you can make the argument that gold mining is as inefficient as Bitcoin [1], but it's a strawman argument at best because there's no advocacy for the gold standard.

[1] I don't think this is a good argument, tbh.

The gold actually exists. I have some in my computer and my phone, it can be used for jewelry, decoration, and has thousands of years of provenance to ensure its value is roughly stable.

Bitcoin is none of those things, it's a cryptographic exercise in waste, producing nothing of value.

That's why.

Well, it can. The value is in the eye of the beholder. If there is demand for it, it has value.

But don't expect countries/societies to go back to anything resembling the Gold Standard (as leaning on bitcoin would be), as it was clearly a worse deal than issuing their own fiat currency.

Gold has scarcity, demand, and a certain use in electronics that puts in a price floor.

BTC has only demand, really. The number of circulating BTC doesn't affect demand for it. But given the number of failed crypto currencies out there, we do know that the True Price of crypto is 0. There is no use for it once demand has whittled away to nothing.

If I invented my own currency and no one wanted it, the true price of my currency would be 0, but that doesn't then mean that the true price of all other currencies is 0 does it? The demand for USD and the agreement of the population to use it to trade gives it its value, I dont really understand why the same cant be said for people agreeing to trade with BTC, other than that the supply is governed by an algorithm that everyone has agreed upon, whereas the supply of the USD is governed by the government, international politics, lobbying, etc.

Answering your questions here. Assuming you're not a crypto shill:

> If I invented my own currency and no one wanted it, the true price of my currency would be 0, but that doesn't then mean that the true price of all other currencies is 0 does it?

For crypto the true price is zero. There are an infinite number of possibility and cryptographically secure numbers. There are an infinite number of potential crypto currencies.

LUNC is pretty much zero. Why? Demand? Was demand the only thing propping up the price? Despite all the potential utility that LUNC gave users? Does the utility of bitcoin only depend upon demand?

https://coinmarketcap.com/currencies/terra-luna/

USD has very high demand, and despite the Democratic president or Republican president, the volatility of the value has been much less than BTC.

> I dont really understand why the same cant be said for people agreeing to trade with BTC, other than that the supply is governed by an algorithm that everyone has agreed upon, whereas the supply of the USD is governed by the government, international politics, lobbying, etc.

I personally didn't agree to the algorithm. The US population didn't vote on it. Why does a minority of people get to affect the price of energy for the majority?

BTC is now at 2% of energy use in the US. So what value do I get other than paying higher prices for my energy when ethereum PoS seems to have worked just fine without issue and uses orders of magnitude less energy?

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