Topic: Evaluation of Bitcoin as a store-of-value (Read 430 times)

 According to my assumption,even though gold is considered useful as a store of value and also  Bitcoin can be said as a store of  value it is a digital decentralized currency change.Bitcoin is said to be the future of money bitcoin has the potentiality to change the way we bank since bitcoin is a peer to peer form of transaction accepted over the global system..Bitcoin relies completely on computer network bitcoin is completely free from manipulation and no intermediaries such as any central authorities to control .the value of bitcoin fluctuates and it is based on the law of supply and demand   Time  will prove the future of Bitcoin..

Why would anyone really want to use bitcoin, or any crypto for that matter, as a medium of exchange when they anticipate, as most in the community seem to, that the price will just keep appreciating? Less than a month ago bitcoin was worth, in dollars, around 3.2k. Today it's 4.2k. So in a month the dollar value of bitcoin has appreciated by around 30%. That's a substantial increase in such a short space of time by any investment standards. A store of value where the value just keeps on rising like a hot air balloon! So bitcoin holders, believeing that this is what happens as it often does if you have a long term view, are far more likely to retain their bitcoin rather than exchange it for pizza or shoes!

I wrote an article before on the same concept you are trying to mention. https://hackernoon.com/are-we-about-to-redefine-money-again-4bed5344ebaa

Yes, sea shells, tally sticks, do not need to have a store of value to be a medium of exchange. The reason is due to "Community agreed barter". As long as there exist, people who treat it as a medium of exchange, it can be used as a medium of exchange. Please keep in mind tally sticks and seashells didn't suffer volatility issues hence could be adopted easily.

Could you elaborate on the theory that production cost is important here? I'm sympathetic to the labor theory of value, but I don't see how it applies to money.

Stores of value are essentially faith-based. Take gold, for instance. The reason it can sustain its value is because the market believes it's a store of value, hence why central banks hedge with it. Central banks don't have gold reserves because of its use in dentistry. If reduced to its actual utility in industry, the market would be tiny by comparison.

In this context, the subjective theory of value seems appropriate. "Value" is what anyone else is willing to pay. If no one is willing to pay the production cost, the price will inevitably fall, and unprofitable miners will be forced out of business. It's the same for Bitcoin as it is for gold -- this is from a few years back:


If price falls low enough for long enough, bankrupt Bitcoin miners will fold just like bankrupt gold miners. At least with Bitcoin, unprofitable miners can be squeezed out of the market, and then difficulty can reset to allow lower mining costs.

Bitcoin is an immutable ledger of proof-of-work and transactions trading any fraction of the rewards from the said proof-of-work, which is completely trustless and is instead secured by cryptography.

What does this mean?

It's basically a permanent list of "rewards for solving a really hard math problem", and transactions trading these rewards. And it's secure because math guarantees no one can create it from thin air.

It's value is whatever value people choose to give it (dictated by the prices it's traded at in exchanges). And people apparently choose to value it now at around US$7000 each.

agree! bitcoin is everything, it can be an store of value an asset, a medium of exchange etc. a;most everything can be apply now in the blockchain.

The original utility of bitcoin as a medium of exchange has changed towards the store of value. Bitcoin possesses high self-sufficiency, resistance to censorship, and security. That’s why people consider bitcoin as a stable and independent store of value. I don’t see anything terrible in it. Bitcoin is a decentralized cryptocurrency with broad functionality, so everyone can decide for themselves how to use it.

anyway. back to the point

something does not need to have a store of value to be a medium of exchange
sea shells.
tally sticks.
fiat

their creation cost nothing. you can stare at it all day, study it under a microscope and see no store. all you can assume is a PERCEPTION store of value. EG fiat and tally sticks. because they have some recognition of being handed out originally by kings(tally) and government(banknote) that there then becomes perception of its importance

but to actually be a store. thats based on acquisition and creation cost
but going deeper. why is physical or digital item being acquired/created as oppose to something similar.. well that about UTILITY.

if something has no utility function, then no one will want it. the desire stalls out. thus the creation costs decrease due to competition depletion.

"store of value coz store of value" is an empty and nonsense argument to attempt to make for why store of value exists.
killing off features such as utility inevitably kills off its desire.

you cannot have one without the other
you cannot just have btc as a reserve without function,
bitcoin will not be a IMF reserve SDR because china(ltc) is not measured solely in it
bitcoin will not be a IMF reserve SDR because canada(bch) is not measured solely in it
bitcoin will not be a IMF reserve SDR because america(btc) is not measured solely in it
bitcoin will not be a IMF reserve SDR because europe(eth) is not measured solely in it

bitcoin needs to be a medium of exchange(utility) to be a store(real intrinsic)
bitcoin needs to be a be a store(real intrinsic) to be a medium of exchange(utility)

they mutually benefit each other and mutually fail without eachother
again killing off medium of exchange and hoping btc can be real intrinsic store of value is stupid beyond even economics a 5yo could understand.

yea some monarch/government. can do percieved store. but thats just the fake crap of fiat/tally sticks
again store coz store is empty of real logic. and thats why fiat is bad(popular but bad)

bitcoin was created to not become fiat

you have less clue than the usual tribe of core supporters
its funny that its the same group of people supporting core devs but not the bitcoin network
if you think the bitcoin network is dead and cant scale. thats you failing to support bitcoin.

so you can play games being a dev supporter all you and your buddies like. but im more interesting in supporting the bitcoin network

maybe its you that should go play with another separate network that the same devs support. its called LN.
P.S LN is not a bitcoin feature. its a separate network the devs love that any coin can can use, as long as that coin has been manipulated to be compatible to it

now stop getting emotional because bitcoin CAN scale and you hate the idea that it can as it defeats your dev support system of wanting another network to be the "killer app" of multicoins

I am not sure whether you are retarded or simply don't understand anything at all..

Onchain scaling can NEVER be a solution. A simple increase of the blocksize (for example) is not scaling.
Doubling the size can never be called scaling. That's more of postponing the problem (and creating a lot of additional ones) than solving it.

Instead of shit-posting with zero substance, what about logging off and joining the bcash-echo-chamber ?

Noone forces you to support BTC. If you believe some shitty fork does better, then go for it. Go and support them.
But don't fool others with your 'opinion'.

ask yourself why are the fee's high
1. devs took out the fee formulae years ago,
2. devs increased the dust/minrelay instead of reducing it when deflation occured
3. devs avoided increasing the real transactional data space
(dont be fooled with bitcoin cant scale. thats the devs not wanting to scale. 256gb storage is the size of a fingernail not a server rack)
(dont be fooled with bitcoin cant buy coffee, yes it can. but instead of locking $50 of BTC into LN channels you just buy a $50 starbucks card using btc and know you can have 10 coffee's)

ill give you a hint. bitcoin did not fail devs.. devs failed bitcoin.
bitcoin can scale. but devs seem to have put their hands in the air and just said no, they wont develop it onchain

Your article seems interesting and I guess you are right that bitcoin is something people buy and expect to grow in price in the future. It's a shame that this is the case, though, because it was created for transactions without trust to third parties. I know it turned out that sometimes bitcoin is incapable to perform fast enough when there's a big amount of simultaneous transactions and the fees are sometimes quite high for small purchases, but there are still many cases in which it could be used perfectly rather than stored as something of high value.

I don't think bitcoin is bitcoin if it only acts as a store of value. True that it can hold value over time but to make it exclusive as such is only for those who think that bitcoin cannot function as a medium of exchange as well. That's why it's wrong to say that bitcoin is "advertised as a store of value" since no one really is saying that it is exclusive to such function as it will lose the essence of a peer-to-peer digital currency that was its original intended use-case.


Exactly. Rarity doesn't dictate the price of an object. It needs to have a certain niche before it sells. A stone could be as rare as a diamond but if it's just a normal stone with some normal properties just like other rocks, it will not sell and rich people will not try to hoard their assets on the said stone just because it's rare.

Like humans bitcoin has also gone through evolution, like humans it also follows phylogenetic tree, now its been a decade after the introduction of bitcoin and since then bitcoin has gone through a lot has gone through many ups and downs and faced many obstacles in its path of success and now it is on the top of crypto ranking so no doubt bitcoin has made a tremendous progress and this success is in the form of evolution also as from having millions of haters to millions of investors, bitcoin has evolved in this decade.

these two arguments are  different:
- bitcoin is a store of value
- bitcoin is a currency that can also be a store of value.
what that statement is saying is that it is talking about the first narrative of saying bitcoin is not a currency, it is just a store of value. and when we remove the only reason why bitcoin exists (being a currency) then we are killing bitcoin with our own hands, in my opinion.

I fully agree with your statement in the attached link to the article that an object can become a reliable repository of value only if it has great liquidity in the short term and converges to stability in the long term.
Bitcoin does not now have high liquidity and in the future will not lose its high volatility and will never have price stability. Therefore, as a repository of value, it is pretty bad. For example, ask about the reliability of Bitcoin as a repository of value from those who acquired Bitcoin at the end of last year at a price of about $ 20,000 and where their repository of value has now gone.

and it is not easier just to create value on the basis of cryptocurrencies, if you already dream of this idea

Advertised by who, exactly? The end game is still utility for payments, which is why scalability is being worked on. It just so happens that it fulfills the store of value role better at the moment.


Umm...what is your basis for this statement? I don't like to use market dominance as a metric, but if you're referring to that, Bitcoin isn't struggling in the least. It's been getting better in recent months, even. Nothing has really even come close.

Nice, detailed read otherwise.

It's a never ending discussion whether bitcoin is a "store of value" or a "medium of exchange" and both parties have good amount of viable arguments in their kitty so it is impossible to actually determine the type here! However, I really like the article, hope to read more from you!

Franky made a valid statement - "bitcoin moving away from real bitcoin medium of exchange, to just being a 'store' is the foolish narrowminded thoughts of those who dont understand the complexities of finance and asset valuation."  

I somewhat agree with the statement, but at the same time, I want to ask, if a particular asset (Digital or physical) doesn't have a store of value, or if it is not promissory by some regulatory body, how can it be used as a "medium of exchange"?? Why would someone be interested in accepting that asset as a medium of exchange??

Like Franky mentioned that gold has a store of value because of the cost of acquisition, same goes with bitcoin as well. Similar to Gold, bitcoin also has a cost of acquisition (Mining) and that's how the bottom line value of bitcoin can be derived. And because it has a "store of value due to cost of acquisition", it can be used as a "medium of exchange"! Both goes hand in hand if the rule of economy implies!

having a store of value thats only function is a store of value is a store of nothing..

the reason gold has a store of value. is because of the cost of acquisition. which stems from the cost of production and the desire/need of it for industry/fashion

for instance its not just about rarity.
i have a dog, it will only do 4000 bowel movements (bags of dog poo) in its life.
may the bidding begin? nope. because rarity/scarcity is not enough

function. features, adoption, desire are needed.
by me just saying a bag of dog poo is $20, doesnt make it $20 and doesnt make it the bottomline

bitcoin moving away from real bitcoin medium of exchange, to just being a 'store' is the foolish narrowminded thoughts of those who dont understand the complexities of finance and asset valuation.