Nobody agrees on what intrinsic value means because value is completely subjective.
To me, intrinsic value is the value you might assign to something assuming you could not exchange it. By that definition, dollars and bitcoins have no intrinsic value because they are good for nothing but exchange. On the other hand, the ability to exchange dollars and bitcoins gives them extrinsic value.
Topic: Intrinsic value of bitcoin: do you agree with my explanation? - page 2. (Read 2215 times)
I've been thinking hard today about the issue of "intrinsic value of bitcoin", whether it does have it or not.
I have found out somewhat dubious (at first sight) quote in one older Bussiness Insider article:
"[...]fiat currencies have tremendous intrinsic value because governments say they do. That's why they're called fiat currencies. They have value by government fiat."
According to the dictionary, intrinsic means "belonging to the essential nature of a thing", so initially I though that there is a contradiction in that sentence - intrinsic means something "innate", and not that someone external (government) declared that it has the value. Because, fiat is just that, a declaration.
But thinking about it more, the sentence is actually correct: the government declared how that fiat currency will work, and maintains the rules and the technology surrounding it, so it can be successfully used as a medium of exchange and a store of value. So, the intrinsic value of state money, like USD for example, is not that it can be exchanged for other thing, the intrinsic value is indeed the fiat itself, and its other characteristics are just a consequence of this government backing. The fiat is an innate characteristics of the fiat currency.
Now, my main understanding is this: fiat currency is to government what bitcoin currency is to the bitcoin community. Government gives intrinsic value to currency by issuing fiat, and the bitcoin community (mostly the main developers) gives intrinsic value to bitcoin currency by issuing the source code of the bitcoin network. To simplify it a bit, this is the corresponding relationship:
fiat money - bitcoin
fiat, government laws - bitcoin source code
government officials, bankers - bitcoin programmers, miners
Now, if I am reading this correctly, since both fiat money and bitcoin can be used as a medium of exchange and a store of value, it's now more clear to me, that the bitcoin network is basically a direct competition to the government in the area of finance, in exactly the same way as for example email is a competition to a postal service. If both options will be freely available in the future (fiat and crypto-currencies), everyone will have to decide whom one believes more, government or bitcoin network, or how much trust one gives to each one.
To sum it up, intrinsic value of the bitcoin currency lies in the bitcoin technology, the same way as the intrinsic value of dollar lies in the government fiat. Or if we take the more strict definition of the word "intrinsic", neither dollar nor cryptocurrency has any. But there isn't any fundamental, "intrinsic" difference between them.
Now of course I don't say I am correct, it's just my current understanding, but at least let's agree, that we need to differentiate between Bitcoin currency as one thing, and Bitcoin network (technology+people running it) as another thing. Many people jumble these two things together and then can't come up with logical conclusions.
I have found out somewhat dubious (at first sight) quote in one older Bussiness Insider article:
"[...]fiat currencies have tremendous intrinsic value because governments say they do. That's why they're called fiat currencies. They have value by government fiat."
According to the dictionary, intrinsic means "belonging to the essential nature of a thing", so initially I though that there is a contradiction in that sentence - intrinsic means something "innate", and not that someone external (government) declared that it has the value. Because, fiat is just that, a declaration.
But thinking about it more, the sentence is actually correct: the government declared how that fiat currency will work, and maintains the rules and the technology surrounding it, so it can be successfully used as a medium of exchange and a store of value. So, the intrinsic value of state money, like USD for example, is not that it can be exchanged for other thing, the intrinsic value is indeed the fiat itself, and its other characteristics are just a consequence of this government backing. The fiat is an innate characteristics of the fiat currency.
Now, my main understanding is this: fiat currency is to government what bitcoin currency is to the bitcoin community. Government gives intrinsic value to currency by issuing fiat, and the bitcoin community (mostly the main developers) gives intrinsic value to bitcoin currency by issuing the source code of the bitcoin network. To simplify it a bit, this is the corresponding relationship:
fiat money - bitcoin
fiat, government laws - bitcoin source code
government officials, bankers - bitcoin programmers, miners
Now, if I am reading this correctly, since both fiat money and bitcoin can be used as a medium of exchange and a store of value, it's now more clear to me, that the bitcoin network is basically a direct competition to the government in the area of finance, in exactly the same way as for example email is a competition to a postal service. If both options will be freely available in the future (fiat and crypto-currencies), everyone will have to decide whom one believes more, government or bitcoin network, or how much trust one gives to each one.
To sum it up, intrinsic value of the bitcoin currency lies in the bitcoin technology, the same way as the intrinsic value of dollar lies in the government fiat. Or if we take the more strict definition of the word "intrinsic", neither dollar nor cryptocurrency has any. But there isn't any fundamental, "intrinsic" difference between them.
Now of course I don't say I am correct, it's just my current understanding, but at least let's agree, that we need to differentiate between Bitcoin currency as one thing, and Bitcoin network (technology+people running it) as another thing. Many people jumble these two things together and then can't come up with logical conclusions.
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