Comment by cs702 | Hacker News Reader

Comment by cs702 | Hacker News Reader

Imagine that a thief breaks and enters into a warehouse which is holding physical gold for its customers, and the thief steals all their gold. The warehouse and/or its customers will suffer losses, but every single ounce of the gold stolen by the thief will continue to be as valuable as any other ounce of gold. In other words, gold will continue to be the same exact commodity.

Essentially the same thing has happened here, but in the digital realm. A thief (or thieves) broke into the backend systems of an exchange which was holding bitcoins for its customers, and the thief stole all their bitcoins. The exchange and/or its customers have suffered losses, but every single bitcoin stolen by the thief will continue to be as valuable as any other bitcoin. In other words, Bitcoin will continue to be the same exact commodity -- its integrity has NOT been compromised.

The moral of this story: if you own bitcoins, make sure they are stored in a truly secure system. Many Bitcoin exchanges claim to be -- but really aren't -- truly secure!

> its integrity has NOT been compromised

Shesh. A Bitcoin has no inherent value. If such incidents become common enough, nobody will be willing to buy bitcoins for dollars or accept bitcoins as payments for goods,which means that the thieves will sit on a bunch of useless bits.

...which is also no different than paper money, or the money we store digitally in our banks...

The difference is, you can't pay your taxes in bitcoin.

You can't pay your taxes in gold. Or yuan for that matter. That doesn't invalidate it as a currency.

Chinese people can pay their taxes in yuan. When there was a gold standard you could pay your taxes in gold, but now there isn't, which is why gold is just a commodity, not a currency.

A USD has no inherent value since it is also a FIAT currency. At least BitCoin's algorithm is locked into a growth curve that eventually stops. The US can continue to print money. THe way I see it, BTC is going to increase in value.

> If such incidents become common enough, nobody will be willing to buy bitcoins

No, that would only be true if people were forced to store their bitcoins on vulnerable bitcoin exchanges, which they're not.

Gold does not have that much of inherent value either.

Gold is inherently useful as a tangible object with exploitable physical properties. Gold, for example, has good conductivity and is used to plate electrical connections. Gold is also useful for its rust-resistance.

Thus, on this basis, like all useable physical goods, gold has some inherent value as a commodity.

Bitcoin has inherent value and "physical properties" that far exceed what Gold can offer.

1. Bitcoins can't be counterfeited. If you receive them with even just a few confirmations on the blockchain, it's probably going to be there forever.

2. You can confirm the legitimacy of Bitcoins, en masse, without any cost.

3. You can store bitcoins without any cost.

4. Bitcoins are much easier to transfer to other people.

5. You can form contracts and advanced redemption conditions for transferred coins.

If Bitcoin had no "inherent value" then it should be worthless. Maybe Mises Regression Theorem is wrong?

None of these points have anything to do with an intrinsic value for bitcoin; all of them presuppose that bitcoin is intrinsically valuable.

Bitcoin can be worthless and yet hard to counterfeit; I can sign a random number right now and it's worth nothing. I can Tweet that number or create a permanent record in any number of other ways.

Your second point is the same as your first; it again presumes that there is some value to bitcoin.

I can store a lot of things without meaningful cost. That doesn't make them valuable. My application server with seven gigs of dev logs isn't a treasure trove either, despite the ease with which I managed the data relative to bars of gold.

Bitcoins are easier to transfer than gold coins. That is true. But spent facial tissue is also easier to transfer than gold.

You can form contracts with all manner of instruments, from cows to gravel to pork bellies. Every commodities trader in Chicago has a story about a friend of a friend who ended up with a garage full of pork when they failed to sell a futures contract in time.

What fraction of gold's current value is based on its physical properties?

I don't know the answer, but I can tell you it's miniscule.

> Gold is inherently useful as a tangible object with exploitable physical properties. Gold, for example, has good conductivity and is used to plate electrical connections. Gold is also useful for its rust-resistance.

Do you really mean to say gold's rust-resistant properties are to blame for it's exceedingly high price on the market?

Fact: In 2013, Bitcoin is the world's easiest way to send a standardized indicator of wealth from one person to another. Forget anonymity, forget open source, forget deflation, forget amateurs building Ruby on Rails websites poorly!

Bitcoin's #1 benefit is the ousting of intermediaries. Because Bitcoin transactions can occur directly between two people without any third party involvement, the platform upon which people trade Bitcoin for goods and services becomes irrelevant. With Bitcoin, the platform only matters to the extent it aids in the market discovery process.

I for one see inherent value in a currency I have control over 24/7, that I can literally park in my brain never to touch the public Internet, carry with me everywhere I go, send to anyone, anywhere at any time, instantly and without an intermediary. If you see no value in that, honestly, what is there to say. Good luck with your financial goals in 2013.

> The moral of this story: if you own bitcoins, make sure they are stored in a truly secure system. Many Bitcoin exchanges claim to be -- but really aren't -- truly secure!

Then how do you know what storage locations are truly secure? If you have to be a computer security expert to safely use bitcoins, then that will surely decrease the demand for the currency and therefore reduce its value.

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