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Comment by eridius | Hacker News Reader

> It has all desirable values of gold

No it doesn't. Bitcoin is only valuable as long as it's valuable. Yes, that's tautological, but it's also true. Bitcoin is only valuable as long as people are willing to pretend it has value. However, gold has an intrinsic value that it possesses whether or not people are willing to invest in it, because gold is useful for more than just investing (for example it's used in jewelry, dentistry, electronics, etc). If everyone in the world decided tomorrow to stop investing in gold, you could still sell any gold you had for an amount based on its utility. But if everyone in the world decided tomorrow to stop investing in bitcoin, its value would immediately plummet to $0.

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AFAIK, gold's value for non-investment use (i.e., "intrinsic" value) is a small fraction of its actual price today. I don't have a citation for that, but investment buddies have told me that. (Maybe someone reading this can give a citation?)

So, basically, gold has ceased to be priced at all based on intrinsic value, and entirely based on the projected fact that people will continue to want to use it as a store of wealth in the future, so therefore, you will be able to trade your gold for something else valuable. (Which is exactly the projected fact that is keeping Bitcoin going.)

Arguably, Bitcoin's property of being easily transferred and stored greatly outweighs the property of gold that there are real-world uses.

But if everyone in the world decided tomorrow to stop investing in bitcoin

If.

At this point, it's pretty clear (to me) that that will never happen, short of global government intervention. If there is a major dip in Bitcoin price, investors will buy it back up. Bitcoin has established itself as a useful way to store and transfer value for investors. For everyday transactions, I think it's in the process of proving itself.

Never? It's faaaar too early to make that claim. What if the cryptography is broken? Or if another crypto-currency comes along that's demonstrably better, to the point that everyone stops buying bitcoin and starts buying this new currency instead? These are but two scenarios that would cause bitcoin to lose its desirability, and therefore its value.

> Never? It's faaaar too early to make that claim.

It will never be more certain than it is right now. What are you waiting for?

> What if the cryptography is broken?

Sorry, but I trust ECDSA and SHA256. Quantum computers may be a concern eventually, but I think there are mitigation strategies for that.

> Or if another crypto-currency comes along that's demonstrably better, to the point that everyone stops buying bitcoin and starts buying this new currency instead?

What if a unicorn flies out of the sky and starts pooping rainbows? There is no possible crypto-currency that is demonstrably significantly better.

This is a common misconception. Because a bitcoin is fundamentally a proof of work, it has some "intrinsic value" in the same sense that gold has "intrinsic value." A bitcoin is proof that a certain amount of difficult computation has been performed by or on behalf of its owner, which can be used anywhere proof-of-work systems like Hashcash can be used.

The work itself is completely meaningless though. The only reason the proof of work is worth anything is because people place a value on bit coin, and bitcoin relies on the proof of work. So the proof of work's value is dependent on bitcoin, not the other way around.

Proof-of-work systems have nothing to do with the "meaningfullness" of the actual work being done. The work just has to be difficult. Hashcash existed long before bitcoin, so your last sentence is incorrect. In fact, Bitcoin is itself based on Hashcash, and the idea of using POW as a means of exchange also predates bitcoin. See this:

http://en.wikipedia.org/wiki/Proof-of-work_system#Reusable_p...

In today's economy, gold is rarely used for its intrinsic value. Most of the gold in the world today is used simply as a store of value. The value of gold on the market today is not tied at all to its uses outside of investing.

Realistically, however, gold's utilitarian value does not even come close to accounting for its actual value. Sure, you wouldn't lose all your investment if the gold market suddenly collapsed, but you would still lose the vast majority of it.

Even in Misesian economic theory, the utilitarian value is primarily accountable for originally popularizing a commodity's use as one or more of the three uses of currency (store of value, transfer of value, measurement of value), not for its continued use in those roles.

> If everyone in the world decided tomorrow to stop investing in gold, you could still sell any gold you had for an amount based on its utility.

The worth of that guarantee depends on what that amount is. If the utility-based price is 1% of the price I paid for the gold, then I'm still ruined; it might as well be 0%.

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