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Comment by jdreaver | Hacker News Reader

> Ah, yes. This is classic. The orthodox economists might tell you that Bitcoin shouldn't have any value at all. Yet, I can sell 1 BTC and pay for months of gas. I'd rather have a running car than an economist's opinion.

I still don't understand how economists can say that BTC has no "intrinsic value," so should be worthless, but the fiat currencies around the world are just dandy.

The whole concept of "intrinsic value" is nonsense. If you can make a Bitcoin transaction faster, cheaper, and with fewer people knowing about it (if you value anonymity), then BTC has value. You can send Bitcoin to someone overseas without anyone else knowing. How powerful is that?

> Ultimately, anything sellable is "worth" what other people will pay for it.

Precisely. I wish we could teach people this before they dismiss Bitcoin for unfounded reasons.

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> I still don't understand how economists can say that BTC has no "intrinsic value,"

It really annoying to me that people keep putting up this straw man. What economist is saying that BTC has no intrinsic value and is thus worthless? Really? You learn in ECO101 that currency only has value because of what you can exchange it for. Money demand is not a fringe concept in economics--its a core concept that anyone in any branch of economics that deals with currency and money thinks about several times a day.

The fact that you can only do business with the vast majority of american society in USD is what gives the USD value. We got to that point because the US government said that US currency should be acceptable to pay off any debts in the US, including taxes. The fact that dollar exists and is the common currency in the US is tied to the law, but its exchange rate and purchasing power is (aka its 'value') is tied to other factors completely.

You can make the argument that the long term value of BTC is zero because there's nothing that guarantees it continued existence, like US law guarantees the existence of the dollar. But thats totally separate from the value and exchangability of BTC to US.

This one does...

http://smilingdavesblog.blogspot.hk/2012/08/bitcoin-all-in-o...

...not an economist. He's a blogger.

> You can make the argument that the long term value of BTC is zero because there's nothing that guarantees it continued existence, like US law guarantees the existence of the dollar.

The Internet guarantees the continued existence of BTC.

Fiat currencies have intrinsic value due to taxation.

The issuer of a fiat currency collects taxes in that same currency.

The issuer^H^H^H^H^H^H ledger algorithm of bitcoin collects taxes^H^H^H^H^H transaction fees in that same currency.

Intrinsic or not isn't really the question - it's not really a binary.

I'd rather have bitcoin than Zimbabwe's fiat currency.

Taxation definitely gives legitimacy, but so does the ability to pay for things anonymously. If enough people are willing to take a currency, than it gain value - period. The gov't wanting it in taxes is just a really big provider of liquidity providing those network effects.

It's not a question of legitimacy, isn't about demand. Currency is a token. You need tokens to play the game. The difference with taxes is that you don't choose to participate. You must play, so there is always demand for tokens.

Yea, but demand isn't all created equal right? I'm trying to capture more than raw demand - unless we're just defining terms differently (which I suspect)

It's not just the taxation (which is true), it's the fact that they are backed by a particular entity. In the case of USD, it's the United States government. Dollars may not be "backed" by anything tangible, but they are accepted because the US is (largely) a trusted entity. That's what makes USD useful to people internationally.

Bitcoin doesn't have the advantages of having a government backing it, but some would probably argue that that is an advantage.

Considering how many trillion definitions people may mean when they say a currency is "backed by" something, I don't think your explanation is an improvement.

For that reason, I recommend listing the specific things that make the USD valued: in this case, the need to pay USD in taxes, and a very wealthy entity (US government) prefers to trade in that currency, or whatever specific thing you mean with "backed by" in that statement.

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