Comment by vijayboyapati | Hacker News Reader

Comment by vijayboyapati | Hacker News Reader

Sam writes: "It just means that for it to succeed, we’ll need significant external buy pressure. As I wrote awhile ago, I think the key thing we need for this is people actually using bitcoin for transactions instead of speculation (and merchants willing to hold bitcoin balances). "

I think this is a very common meme about what success means for bitcoin and it's tied up with a misunderstanding of what money is; most people think money is valuable because it's used transactionally. Rather, money is valuable because it has reservation demand. An increasing level of transactional usage might increase reservation demand but it doesn't need to. On the other hand increasing reservation demand can occur even without any new transactional demand. Moldbug explained this best in his discussions on bitcoin and how money is a bubble phenomenon:

http://unqualified-reservations.blogspot.com/2013/04/bitcoin...

http://unqualified-reservations.blogspot.com/2011/04/on-mone...

Bitcoin can be "successful" even if it's not the preferred medium of exchange for most, or even many transactions. It can act as a store of value just as gold does. Except it is superior to gold is almost every way - more fungible, more verifiable, more divisible, easier to transport (especially across borders) and easier to transmit. A success case for bitcoin is that it becomes Gold 2.0. Gold's market cap is approximately 7 trillion. Bitcoin's market cap is approximately 6 billion. If Bitcoin were to replace gold as an alternatively medium of savings (say, in 50 years), its price could be hundreds or thousands of times higher than it is now without needed much, if any, increase in transactional use. Gold has almost no transactional use but it has a great deal of reservation demand.

"...it is superior to gold is almost every way"

Except for the part where you can actually make things with gold: it is shiny, easy to work with and highly conductive. So worst case, if the value of gold plummeted you could still make some awesome jewelry, electronics, dental fillings, etc.

While it may not be proportional to the current price, gold does have intrinsic value: Bitcoin has none.

Gold's use value is much, much lower than the current price reflects. Most of the price of gold is explained by its reservation demand - i.e., monetary demand, both by individuals and central banks.

And you're incorrect that bitcoin has no "intrisic value". As this author explains: http://blog.oleganza.com/post/42262765318/direct-use-value-o... ------ Bitcoin network has very interesting properties that allow you to use it not only as a currency. For example, the block chain (decentralized transaction history) is designed to be extremely hard to forge and very easy to verify. This, with some crypto features, allows it to be used for secure time-stamping, proving ownership of tangible property, decentralized DNS and new ways to sign contracts without having to fully trust any one party. Some of these things are already possible using existing software, some require already planned and compatible modifications. --------

There are a great many things that are now possible with the creation of bitcoin and the solving of the Byzantine Generals' problem that were previously impossible. If that's not "intrinsic value" then nothing is.

If somebody has a single bitcoin they can't sell, there is nothing else they can do with it. Therefore, the bitcoin itself has zero intrinsic value.

The value of the idea of the blockchain is not relevant to the value of an individual bitcoin, just as the value of the patents behind autonomous mining trucks (these really exist) has no bearing on the price of an ounce of gold.

The blockchain makes Bitcoin less fungible than gold, think of blacklisted addresses for example. Of course using something like open transactions improves things substantially.

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