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Comment by gdw2 | Hacker News Reader

I just thought about something I'd never thought before:

Could it be said that bitcoins _do_ have an intrinsic value equal to the marginal amount of electricity and equipment needed to produce one?

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> Could it be said that bitcoins _do_ have an intrinsic value equal to the marginal amount of electricity and equipment needed to produce one?

No, that's an intrinsic cost. It would only be an intrinsic value if that electricity and equipment could inherently be extracted back from the bitcoin. The intrinsic value of gold comes from what you can use gold for other than a medium of exchange. Bitcoin has neither the intrinsic value of commodity currencies nor the sovereign backing of fiat currencies.

That isn't an intrinsic value. Waste heat does not have an intrinsic value equivalent to the cost of producing it- it is waste heat.

Intrinsic value is derived from what you can do with something, not what you did to get it.

> Intrinsic value is derived from what you can do with something

So then, the market price of any good is its intrinsic value? Under this definition, if I can sell a bitcoin for x USD, then its intrinsic value is x USD.

The ability to sell an item for x USD is not one of the "things" you can do with it that contribute to intrinsic value. Let's put it a different way; if the market value for a bitcoin was $0, what could you do with it? Compare that to an apple. If the market value for an apple was $0, you could eat it. Thus (unless someone has a clever use for bitcoins outside of currency) an apple has greater intrinsic value than a bitcoin.

That's a new definition of "intrinsic," not the one I was responding to.

I'd say that's use-value. Intrinsic implies it's not relative to each person, which clearly isn't true in that case (e.g., I could be allergic to apples, then the value would be nil to me).

...which illustrates the inherent absurdity of the word "intrinsic." If allergies make some quality extrinsic, then doesn't the very existence of humans also make all qualities extrinsic? If humans are extinct, the apple can't even be eaten by any humans, so it must have no intrinsic value.

Fine, not water. Apples. Are you allergic to water?

What if I'm not thirsty? What if I have plenty of water already? What if I'm trying to commit suicide by not drinking water?

Intrinsic value and market price are slightly different. I imagine the difference brings us back to the fact that bitcoin is unbacked by any government. There is a worst case scenario that bitcoins are worthless. Government backed currencies despite not being tied to the standard of a physical good have a sovereign entity responsible for their value thus they are as valuable as your trust in that sovereign.

What does it mean to trust in a sovereign in this case? If I take a $20 from my wallet down to the county court house, or any other government building you like, what should I trust to happen?

Actually when I used the word "trust" I was thinking of countries with their own currency that have unstable governments and/or economies. So imagine country X exists in South America and you have 20 country X dollars. A week ago one country X dollar was worth 2 US dollars. But today country X decided to introduce into circulation hundreds of trillions of dollars in new currency to deal with their massive debts and it completely devalues your 20 country X dollars.

Or today there is a communist coup in country X and the new regime declares the old currency worthless.

That's what I meant by "trust."

The intrinsic value is the bitcoin protocol which provides a framework where transactions become effectively irreversible in about an hour, you don't have to go through a middle-man to pay someone, and it provides anonymity if you need it.

Not sure you can consider that an intrinsic value. I could be wrong, but my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero. The bitcoin protocol does you no good if the market value of a bitcoin is zero.

You do present an interesting conundrum though.

> my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero

That seems like a fairly artificial mental exercise. Why would market value be zero if intrinsic value is greater than zero? I suppose the only situations would be if a good has a unique property that can provide utility to you but no one else, like a food that for some reason only provides nutrients for you, or any good in a truly post-scarcity society or region, or if the market is extremely uninformed or irrational.

I think the real problem is with the metaphysical implications inherent in the word "intrinsic." You can always go "one level higher" and say that the value at the previous level was not intrinsic or "as intrinsic." Does an apple have intrinsic value if there are no humans alive anymore, and if not, is the value really "intrinsic" in the apple?

As far as I can tell, the specific term used in finance is based on predictions of the future value that can be derived from the good, regardless of its current market price. Of course, I would suspect that most market participants already make predictions about the future and that those predictions affect the price they are willing to buy or sell a good at. Granted, some people will be able to predict the future more accurately than other people, but does that mean we can only tell what the intrinsic value of something was in hindsight?

I think the real problem is with the metaphysical implications inherent in the word "intrinsic."

There it is, folks. We aren't talking about a simple concept, we are talking about the metaphysical and the deeper implications of words. What is a "word", anyway? Let's take a moment to consider.

No, let's not at all consider the meaning of words, because the meaning of words is of no importance in a discussion.

You've really got in in for me, don't you. You're like half the comments in this comment block.

No, because you can't go from Bitcoin back to electricity in the same way you could smelt a gold coin.

Maybe you could give someone a bitcoin and they'd give you x amount of compute time on their cluster equal to the time they'd need to generate a new bitcoin. ?

That's a transaction based on market value, not intrinsic value. Someone might take you up on that, but it would depend on their valuation of your bitcoin, not some kind of inherent equivalence between bitcoins and other assets.

Intrinsic value doesn't have anything to do with cost/effort necessary to produce something.

I don't know if intrinsic value is the right term, but I've been thinking along the same line.

A Bitcoin is essentially a tradable hashcash, which has direct value in spam filtering.

"Isn't it enough that I ruined a pony, making a gift for you?

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