this is my response to odolvlobo and sunnankar in this thread:
https://bitcointalksearch.org/topic/2013-04-12-the-great-gold-vs-bitcoin-debate-casey-vs-matonis-174784
I also agree that the intrinsic value of a bitcoin lies solely in its utility as a medium of exchange. Where I differ with Doug Casey is his argument that if you take away trade, a bitcoin has no value. The flaw with this argument is that you cannot take away trade. It will always exist, so a bitcoin will always have intrinsic value as long as it is useful as a medium of exchange.
That is irrelevant. There is a Bitcoin Magazine article titled, if I remember correctly, Why Useless Money Is Good Money. It really answers that question very well.
Really what Doug wants is a monetary unit with a 'put option' which is the alternate use besides its monetary use. This actually makes the monetary unit less efficient because market participants then have to factor in this to the economic calculation and the monetary use crowds out alternate uses which may be useful to humanity but are not at the higher price due solely to speculative and not industrial demand.
i see it differently. i think most of the intrinsic value of a bitcoin lies in its store of value properties.
my sense of the situation is that if a Bitcoiner had to choose the most important economic reason as to why they have invested in Bitcoin it would be b/c of the fixed supply. i know this is why i invested and its also why you see so many addresses that have no tx activity in them. investors are saving their coins, not only in expectation of appreciation, but perhaps more importantly to prevent debasement. this, i would argue, is the more sophisticated reason ppl buy Bitcoin; as a store of value and less as a medium of exchange. this imbalance will last until Bitcoin reaches its full equilibrium pricing which will be years from now once all the coins have been issued.
as evidence of this, look at what has happened in Cyprus and Spain and everywhere else where currency debasement and stealing of deposits exists. i highly doubt those ppl were fleeing into Bitcoin to use it as a medium of exchange.
its just when you first look at Bitcoin the medium of exchange argument jumps out at you. its the palpable attraction of Bitcoin involved in sending and receiving with Bitcoin that seems so cool and compelling. but honestly, ask yourself how many medium of exchange tx's have YOU made in the last month despite all of Bitcoin's tx convenience? i'd guess minimal and perhaps zero if you're behaving like the majority.
of course, making long distance tx's across borders and for micropayments Bitcoin can't be matched. but for tx's at your local Starbucks, i'd disagree. currently when i buy coffee, i just whip out my cc, swipe, and i'm done. don't even have to sign anymore. with Bitcoin (assuming Starbuck's took Bitcoin), you have to turn on the smartphone, open Bitcoin Spinner (the most efficient phone app imo), scan a barcode, punch in the amount, click send, then wait perhaps 10 min if they're not using Bitpay. not a huge deal but not as efficient as the card swipe. this ignores, of course, all the underlying cc infrastructure BS that goes on.
i like to think of store of value concepts in terms of the blockchain. when you store a large # of coins initially in an address you can be sure your coins are safe. however, there is even more safety that is gained the deeper into the blockchain that tx gets buried by the creation of subsequent blocks. this has to do with the proof of work concept. for a 51% attacker to rewrite your tx history they'd have to redo all the hashing that took place in your tx and in every subsequent block which becomes computationally astronomical. this is what is so compelling to me when i make the store of value argument.
the analogy would be building an 80 story skyscraper. its easiest to change the inner beam structure if you're only on the first floor. but when you're finishing the 80th floor and someone complains about the beam structure, he is summarily dismissed. its b/c of all the built up work that has gone into building the previous 79 floors in terms of labor, time, energy, money, and engineering. all that value has been built or stored up and can't be changed.
Bitcoin is an ideal store of value.
