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Comment by spodek | Hacker News Reader

Say it's a bubble. People still buy tulips, internet stocks, and houses. Their bubbles didn't kill those markets. As long as a few people value what bitcoins offer, a market will exist for them. You may not value them, but no market needs your personal involvement.

As for economists' views on something they've never studied, I'm reminded of I. Fisher, Prof. of Economics at Yale, saying in 1929 "Stocks have reached what look to be a permanently high plateau." ... and how many people told me with utter certainty and hifalutin credentials how stupid Wikipedia was and how much it would fail. Or Linux, for that matter.

Some things work better in practice, not in theory. Or at least need time for the theory to catch up.

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Bitcoins are just special numbers--there's no inherent value in them. If everybody decides tomorrow to use a different blockchain they will become completely worthless numbers.

A tulip looks pretty in your garden, (many) internet companies make money, and houses are a basic necessity. Bitcoin, on the other hand, is a purely social phenomenon. It has value only because other people think it has value.

The argument trotted out at this point is some variation of "but there is value in having an anonymous, decentralized currency." And that may well be true. But the high valuation and extreme volatility of bitcoin (not to mention its inherent deflationary character) is actually a hindrance to its use in that manner. Who will accept bitcoin if its value can fluctuate 100% in an hour, and who will spend them if their price just keeps going up?

Your argument applies equally well to any form of money. Money is a purely social phenomenon. It has value only because other people think it has value.

There's no "inherent" value in any form of money. Whenever you hear someone say "inherent" or "intrinsic" when talking about money, run the other way.

(Yes, even commodity money. It may have direct-use value in addition to exchange value, but both kinds of value are market phenomena, and totally dependent on the surrounding society and capital structure.)

Fiat currencies have value because of the law, not some wishy-washy magic agreement that people wake up with. Tax laws, debt laws, torts, fees, fines, etc. are what create the demand for fiat currencies.

Bitcoin does not have such a source of demand. It has no particular utility at all; nobody will ever suffer for lack of Bitcoin money.

> Fiat currencies have value because of the law

The law is simply the threat of violence, which is what makes it so distasteful. http://en.wikipedia.org/wiki/Executive_Order_6102

> not some wishy-washy magic agreement that people wake up with

Agreements are voluntary and magical, what's not to like? It's the other stuff that's wishy-washy (involuntary arrangements).

> Tax laws, debt laws, torts, fees, fines, etc. are what create the demand for fiat currencies.

There's no reasons these same things won't work for bitcoin. Private mediation and arbitration already exist that support bitcoin. Things like contracts are built into the bitcoin protocol and will facilitate many of the things you list.

> Bitcoin does not have such a source of demand. It has no particular utility at all; nobody will ever suffer for lack of Bitcoin money.

Pretend the bitcoin market is only used for black market activity, it would still have a large utility. Plenty of people on the market would see one less revenue stream.

> Fiat currencies have value because of the law.

So when the value of the Euro swings 30%, it's because somebody passed a law changing its value?

Zimbabwe's government wrote a law saying its currency's value was now zero?

No. Any money has value because there's a market for it. Legal tender status helps by guaranteeing certain markets, but even that is no guarantee.

Bitcoin has plenty of utility. In fact lots of it is directly related to your little list above.

You'll be surprised: http://www2.egovlink.com/press-release-bitcoin.cfm

> Who will accept bitcoin if its value can fluctuate 100% in an hour[?]

If it can be cashed out immediately into another currency, that's not too big a problem, I think. Note that there's a huge difference between accepting bitcoins and listing prices in bitcoins, though.

It's pretty simple to work around the price fluctuations. You keep your money in a USD denominated account in a bitcoin exchange (MtGox or whatever) and convert just what you want to spend whenever you need to pay for something in bitcoin. It's instantaneous and easy.

How's the market for Beanie Babies these days?

Egads! You've definitively proven that Bitcoin will go the way of the Dodo! Congratulations! See the receptionist on your way out to receive your prize. </sarcasm>

On a more serious note, you've really contributed nothing here. The parent post is saying that a crash does not necessarily imply that something is useless and going away, giving examples of where crashes haven't affected whether or not people still value something.

You're anecdote doesn't even work. Like tulips there was a market bubble for Beanie Babies which burst, but Ty still sells them.

Ty hasn't gone out of business, and the sole owner of the company is worth 2.5 billion. I would say pretty good.

Now that's fanboyism at its worst. I mean, equating A with something X when it is not clear, how even remotely similar those are, but where X conveniently failed some time ago.

But to reply in kind, how are greenbacks these days?

Greenbacks are doing great, comparatively speaking - the US government continues to demand tax payments exclusively in dollars and jails those who don't pay. Only in another branch of the multiverse would the govt. ever allow tax payments in beanie babies or bitcoin.

First let me explain, what I was replaying to.

The OC argument to seems to be, bitcoin and beany babes are expression of the same idea and beanie babes flopped. Ergo bitcoin will fail.

Hence the question about greenbacks, which are now not worth a continental.

Yes, you can say that greenbacks are doing great, comparatively speaking, but than if greenbacks ~= dollars and beanie babies ~= bitcoins, than you are bound to say that.. beanie babies are at least moderately successful

Which if I understood the OC correctly it is exactly the opposite of what was implying.

Cheers

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