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Comment by dageshi | Hacker News Reader

Commodity that can be used as a currency, same as gold.

In fact I'd say that's what bitcoin is, digital gold. Just as gold still remains an important holding for central banks, I have to wonder if at some point a second digital/crypto currency will be developed that somehow uses bitcoin as its stable base/commodity but which solves the issues that all the economists are whining about.

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Gold has demand/supply based on industrial/ornamental value. But, what value does Bitcoin have?

Bitcoin provides for secure transmission and storage of value independent of a trusted 3rd party (and backed by the largest distributed super-computer in the world). Isn't that enough?

That explains it's currency nature. But, does it have any intrinsic value of a commodity like gold?

I think thats an interesting perspective. Just as gold is a finite quantity so will Bitcoin be a finite quantity when it reaches 21Mil coins.

I can imagine that in future Bitcoins can be used as a "reserve" currency that backs another currency

Gold is constantly mined, the amount increasing. It was acceptable as a currency-backer only because the amount mined tended to grow at the pace of the rest of the economy, although there were years when more or less was mined and this caused issues.

Bitcoin has these issued baked into the protocol.

A major problem with BTC as a reserve currency is the way it is generated (mining) and reclaimed (fees). An entity with significant computational power would be able to maintain significant control over the reserve currency. It's feasible that early adopters, then, would be holding significant percentages of the reserve currency. What would motivate later adopters to convert when they have perfectly viable reserves already (gold, USD, etc) that's more equitably (well, from their perspective at least) distributed?

Second problem, it requires a major shift in the motivation of many adopters (anti-fiat, anti-fractional reserve banking).

Bitcoin is a protocol. There is nothing stopping the UN from creating their own currency using the Bitcoin protocol with all the characteristics they require of a reserve currency.

It's also a thing that is attempting to be a currency/commodity. I suppose in any discussion we should make clear which aspect we're talking about. I was talking about the currency/commodity aspect as that's what this entire thread was started on. For the protocol, I agree with you.

Except gold has intrinsic value for various applications(though that value is much less than the market price).

You could also argue that physical currency also has intrinsic value for various applications too. Paper currency can be used as quasi-Post-It notes, kindling, etc. Coins can be melted down and used for manufacturing goods, etc.

So other than trade and accounting, what is Bitcoin useful for?

"but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order... what have the Romans done for us?"

That's not the point. If Bitcoin has no uses other than trade and accounting, it is not a commodity.

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