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Topic: Everyone Who Believes In Bitcoin Should Try To Answer This Question (Read 2692 times)

hero member
Activity: 518
Merit: 521
The value (and stability) of the dollar and gold has nothing to do with the controlled supply. It is all about the liquidity of the medium-of-exchange. Both happen to be widely accepted, which means they have a high utility and thus in high demand.

Try to move even $10 trillion of the world's $250 trillion net worth into the Chinese yuan and then you will understand why liquidity matters. Or for a microcosm example, try to buy 25% of the market cap of a pink sheet stock and then try to sell.

Now I've just demonstrated to you who is a real economist here.
sr. member
Activity: 245
Merit: 250
Quote
Underpinning the value of gold is that if all else fails you can use it to make pretty things.

I'll let you into a little secret: this is bollocks.  Or at least it doesn't nearly justify the valuation put on gold.  You can make pretty things out of many other materials, some more durable than gold with modern alloys or polymers.  It does of course have an intrinsic value like any other material - even dirt is worth something.  Its value is in non-tangibles, its history, its luster, its more psychological than economic.  Its worth what it is because that's what people will pay.

So a bit like Bitcoin.  Its got no real value, except maybe trust that the coin is not duplicated, so another may have trust in it too and accept it as a medium of exchange. 
full member
Activity: 140
Merit: 100
Let's also not be so negative on all Governments.  There are peaceful Governments that levy no Capital Gains Tax like Singapore and Hong Kong that will naturally attract Bitcoin users (they are funded mainly by consumption taxes).

Other countries like Germany and most of Europe are embracing Bitcoin because they see the benefits of a hard currency.  It's not like all Governments everywhere are going to ban Bitcoin overnight.  

Bitcoin will have value in these jurisdictions and amazing innovations will come from the implementation of decentralised exchanges.  And the GDP of these nation states will prosper because of it.
full member
Activity: 140
Merit: 100


Bitcoin is decentralised and no third party is required.  Therefore, banks/surveillance/government are not able to impede Bitcoin transactions.
Not true - not "can able"- they do not want. As well as do not hinder circulation of money in the game "Linage" or chips in "Zynga Poker".
How many burgers you can buy Zynga- poker chips from? Zero.

Bitcoin cannot be seized.  Bitcoin has no physical presence and cannot be physically seized unless someone is able to compel you to disclose your private key.  Contrast gold and money, which can be physically seized if the government was so inclined.
Seriously? Tomorrow will close all exchanges and your Bitcoins become as Zynga-poker chips  or coins from Linage.

Bitcoin is pervasive.  Where these is internet, there is Bitcoin.
As well as game Linage . Wink


As I said, only Governments stand in the way of Bitcoin.  If Governments think they can stop Bitcoin by banning exchanges, they are mistaken.  Micro exchanges will pop up like localbitcoins and other innovative solutions.  Sure the adoption rate will slow and sure the value of Bitcoin will fall but in a prohibition scenario, it still remains true that Bitcoin is a superior currency.  And;

1. It still remains true that the government cannot impede the transfer of Bitcoins. 

2. It still remains true that Bitcoins cannot be physically seized.
newbie
Activity: 14
Merit: 0


Bitcoin is decentralised and no third party is required.  Therefore, banks/surveillance/government are not able to impede Bitcoin transactions.
Not true - not "can able"- they do not want. As well as do not hinder circulation of money in the game "Linage" or chips in "Zynga Poker".
How many burgers you can buy Zynga- poker chips from? Zero.

Bitcoin cannot be seized.  Bitcoin has no physical presence and cannot be physically seized unless someone is able to compel you to disclose your private key.  Contrast gold and money, which can be physically seized if the government was so inclined.
Seriously? Tomorrow will close all exchanges and your Bitcoins become as Zynga-poker chips  or coins from Linage.

Bitcoin is pervasive.  Where these is internet, there is Bitcoin.
As well as game Linage . Wink

newbie
Activity: 14
Merit: 0
you can't really make anything pretty out of a dollar either besides origami swans and frogs...
I said about gold not dollar. Bitcoin is often compared to gold. Say that Bitcoin as well as gold is mined, etc. And I wonder: how many rings or bracelets can be made of thousand of Bitcoins?
full member
Activity: 140
Merit: 100


At the core, his argument is that the dollar has value because it has this specific utility. Well, Bitcoin has (a much broader) utility
Which is/are? Please, I'm sincerely eager to know.


Bitcoin is decentralised and no third party is required.  Therefore, banks/surveillance/government are not able to impede Bitcoin transactions.

Bitcoin cannot be seized.  Bitcoin has no physical presence and cannot be physically seized unless someone is able to compel you to disclose your private key.  Contrast gold and money, which can be physically seized if the government was so inclined.

Bitcoin is pervasive.  Where these is internet, there is Bitcoin.

Bitcoin is fixed in supply.  No one can make new Bitcoins out of thin air.  

Bitcoin is deflationary.  Due to a fixed supply, lost coins, productivity increases and general population growth.  Bitcoin is deflationary in the long term and it is difficult if not impossible to create a fractional reserve banking on top of Bitcoin.  In the short term, Bitcoin is massively deflationary due to the exponential growth of Bitcoin at the moment.

Bitcoin is fairer. Over time, once we have moved away from debt based fiat, Bitcoins have to be spent to derive economic value.  It will be difficult to hoard Bitcoins, create more Bitcoins out of thin air via fractional reserve banking and dilute everyone else's wealth.  The gini coefficient of Bitcoin will decrease the longer we use it versus fiat debt based systems where the gini coefficient is ever rising.

Bitcoin is more cost efficient.  As all transactions are done without a third party, the fees charged by these third parties are permanently removed. Micro payments will be made possible.

Bitcoin is global.  Bitcoin is a global currency versus all other currencies which are based on government fiat. One bitcoin in Iceland will be one bitcoin in Kenya.  If someone tried to seize your Bitcoins, you can instantly transfer it to another wallet somewhere else on the planet.

Bitcoin is infinitely divisible.  Right now the smallest unit is 0.00000001 of one Bitcoin, but this can be extended.  Infinite divisibility provides infinite liquidity for people when they convert from fiat to Bitcoin.  We will never run out of smaller units of Bitcoin.

Bitcoin can be stored on virtually anything.  This makes banking services possible for billions of people who don't have banking services right now.  It is now possible for them to save money through their mobile phone using SMS.  

Bitcoin is transparent.  Anyone can have access to the source code and if they have the appropriate skills read it.  This makes Bitcoin reliable and trustworthy.  It cannot be corrupted because everything was set in motion from day one.  It's like the Constitution of the US, except it is much more robust and cannot be changed by human interpretation.

I've probably scratched the surface.  I have not covered multi signature support and simple contracts within Bitcoin (mainly because I don't fully understand it yet).  

Bitcoin is the ultimate, most efficient, most trustworthy, most incorruptible platform for the exchange of value on the planet. The only thing that stands in its way is Government.  Specifically, corrupt Governments funded by bank lobbies and the top 1% of the population.
legendary
Activity: 1106
Merit: 1007
Hide your women
bitcoin has "intrinsic" value as a time stamp.
member
Activity: 112
Merit: 10
Bitcoin's floor is in the third world where it promises to replace cell phone minutes and bullets as a currency in Africa and reduce foreign currency fees for Assam tea traders.

The bitcoin's value lies in the network, this network enables value transfer across the globe. A bitcoin without network worth nothing, just like a telephone disconnected from the line

These are the kind of thoughts I hoped to be able to read and learn from when I signed up to these forums.
I'd almost gave up hope in here but it has definetively been worth the wait, thanks.

At the core, his argument is that the dollar has value because it has this specific utility. Well, Bitcoin has (a much broader) utility
Which is/are? Please, I'm sincerely eager to know.

If I choose to believe in Bitcoin then I have chosen to believe in the infallible idea that Bitcoin represents and further supports. People will support Bitcoin for as long as they desire freedom.
A very romantic point of view.  Smiley
hero member
Activity: 1470
Merit: 504
I already replied in a comment to this earlier this evening... This is what I said.

I don't see the point in debating ideologies. Neither side will ever concede to the other. This is a perfect example.
You fail to understand that Bitcoin is backed by a belief; just not by a belief in a single government.

There are certain truths about humanity which can't be disregarded. The truth to which I'm referring is that above all else, the greatest desire of all humanity is freedom. People will sacrifice life, wealth, love, even happiness for the pursuit of freedom.

What does this have to do with Bitcoin you might ask? This is the belief of which Bitcoin represents. If I choose to believe in Bitcoin then I have chosen to believe in the infallible idea that Bitcoin represents and further supports. People will support Bitcoin for as long as they desire freedom. A national government can regulate Bitcoin until the legislators are blue in the face but an unenforceable regulation is no regulation indeed. They have no power to enforce regulation of Bitcoin and the means to acquire said power would be unpalatable for a citizenry built upon freedom. The acquisition of that power alone would be Authoritarian and the government would do well to realize that such action would be crossing the line which serves it's own existence.

Simply to ask about the "floor" of Bitcoin is foolish. There is no floor to Bitcoin, but to assume there is ever a floor is only to admit how spoiled one has become having lived in a time where such a fail-safe could even be perceived to exist. There is no such fail-safe in anything of value; that I can assure you.

The only thing you can feel certain will ever retain value is the labor you can perform with your body or mind.

Bitcoin is the next evolutionary step in the history of money and it will be worth more than you will ever believe. Mark my words.


Here's the link:
Read more: http://www.businessinsider.com/everyone-who-believes-in-bitcoin-should-try-to-answer-this-question-2013-12#ixzz2qGzdCrar
legendary
Activity: 2268
Merit: 1278
(yes, I know).
If you do, then stop there. Untrustworthy backing is untrustworthy.

Besides that, I would challenge his premises. Broken glass shards are pretty, but hold no value for their prettines. It's an ignorant argument. And why precisely is deflation bad? "Because it is" seems to be the common official answer, but in practical terms it is only bad for people with debt - so, don't take on debt and it suddenly becomes positive.
legendary
Activity: 1456
Merit: 1001
This is the land of wolves now & you're not a wolf
you can't really make anything pretty out of a dollar either besides origami swans and frogs...
full member
Activity: 140
Merit: 100
Economist Brad DeLong poses a question about Bitcoin:

Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).

Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.

Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

At the moment, it’s only a $10 billion bubble–or, if you are going to convince me that it is not a bubble, you are going to have to find me a market player willing to become a bitcoin sink…


The bitcoin sinks will be global open ended trusts that buy bitcoins for the very, very long term. And the fact that millions of people will use bitcoins as a deflationary store of value as the bitcoin economy expands.

Problem solved. Let's move on and buy bitcoins.
newbie
Activity: 14
Merit: 0
Bitcoin is the Yang, together with gold, form the other side of the rising balance beam.

He's a tool.
Are you serious? How many rings or earrings can make gold? And from Bitcoin?
How many Bitcoins need to make one computer? Bitcoins good conduct electricity?
legendary
Activity: 4466
Merit: 3391
First of all, Brad Delong is a respected economist. He is not stupid and certainly not a troll like Krugman. His concerns are valid, but in this case his arguments are weak and poorly formed.

The crux of his argument against Bitcoin is poorly formed in that he says that if Bitcoin is not better than all aspects of the dollar or gold, then it is ultimately worthless. Of course, this is a poor argument because every form of money can be perceived to have strengths and weaknesses, including Bitcoin. He wants to hold Bitcoin to an impossible standard, higher than anything else.

His individual arguments are weak. They fundamentally argue that Bitcoin ultimately has no utility that will support its value, but I can demonstrate that he is wrong.

He argues that the dollar has value primarily because it must be used to pay taxes and that Bitcoin has no such equivalent. At the core, his argument is that the dollar has value because it has this specific utility. Well, Bitcoin has (a much broader) utility, therefore it has value for the same reason that he claims the dollar has value. Furthermore, his statement that "the Federal Reserve is a potential dollar sink and has promised to buy them back ... (yes, I know)" is an argument that even he doesn't take seriously.

He argues that gold has an intrinsic value due to its non-monetary utility. Firstly, if gold's value were based solely on its use in jewelry, then its value would be a small fraction of its current value. Secondly, Bitcoin has tremendous utility beyond the monetary aspects, including escrow and contracts. There are applications of the Bitcoin protocol that have not been discovered yet. Even if people didn't use bitcoins as a medium of exchange or a store of value, the bitcoins would still have utility.

Finally, regarding his search for a market player willing to become a bitcoin sink. I challenge him to find a market player willing to become a gold sink. I gold ever went out of favor, which is possible but unlikely, I doubt that there would be any single entity willing to step in a buy all the gold in the world.
hero member
Activity: 529
Merit: 501
Brad DeLong is a shrill for the financial industry.

The floor under Bitcoin is formed from central banks and countries devaluing their currencies. The more worthless fiat becomes, the more bitcoin will rise.

It's all in balance.

That's the Ying.

Bitcoin is the Yang, together with gold, form the other side of the rising balance beam.

It's really very simple. Brad DeLong simply doesn't get it, because his bread is buttered by the elitists who control Berkeley, Harvard, and the financial system.

He's a tool.



legendary
Activity: 4228
Merit: 1313
Perhaps if this economist had done some research about bitcoin prior to this question he wouldn't ask something that just makes him look unprepared and foolish.

[edit: I see some good responses above,a and many more have been discussed ]

Economist Brad DeLong poses a question about Bitcoin:

Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).

Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.

Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

At the moment, it’s only a $10 billion bubble–or, if you are going to convince me that it is not a bubble, you are going to have to find me a market player willing to become a bitcoin sink…

http://equitablegrowth.org/2013/12/28/1466/watching-bitcoin-dogecoin-etc

legendary
Activity: 3430
Merit: 3080
Simple.

The best money is no good to use as anything else. If it is useful for something else, that use competes with the monetary use. I thought everyone knew this by now?
legendary
Activity: 1988
Merit: 1012
Beyond Imagination
The bitcoin's value lies in the network, this network enables value transfer across the globe. A bitcoin without network worth nothing, just like a telephone disconnected from the line

But with network, bitcoin can be used to store/transfer value, it is like some kind of value transfer container with limited supply but unlimited capacity. Each container's floor of value depends on how much value they store/transfer daily, divided by the number of containers available daily, so it is very volatile

However, to make this logistic system working, there is an operating cost (mining infrastructure), which decided the production cost of each container, means you normally can not get a coin at a lower price than the mining cost, that is the floor of bitcoin's value in reality

Currently people are trying to collect as many containers as possible, since they foresee that those containers will be used to store/transfer large amount of value in the future

By the way, there is no floor of value for dollar, only a consensus, since it cost nothing to make. Once this consensus break and people refuse to accept dollar as payment medium, they might be forced to accept dollar by man with guns Cheesy
legendary
Activity: 1414
Merit: 2174
Degenerate bull hatter & Bitcoin monotheist
There is no floor on the Zimbabwe dollar.

It remains to be seen if there is a floor on the Argentine peso.

Bitcoin's floor is in the third world where it promises to replace cell phone minutes and bullets as a currency in Africa and reduce foreign currency fees for Assam tea traders.

Maybe Brad Delong cannot think outside the USA's borders but bitcoin is bigger than that.

*edit* here is a link to the 10 year chart of the Argentine peso v USD on xe.com.  As you can see, the value of the Argentine peso is exponentially shrinking:

http://www.xe.com/currencycharts/?from=ARS&to=USD&view=10Y  
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