Topic: Medium of Exchange vs Store of Value - and effect on BTC worth (Read 4825 times)

And as long as you can exchange your fiat dollars for goods denominated in dollars, they are backed up by the whole US economy and part of the world's...

Which is why a BASKET of commodities has always been the "gold" standard in measuring and determining constant "value". 

Great post.

And how on earth are you going to quantify and measure the usefulness of some property inherent to anything if it may not go beyond simple binary yes or no (whether it is useful or not), let alone quantifying it into "value per unit of BTC"? Are you confusing price and subjective value here?

Subjective valuation reflects usefulness (utility) of some property in achieving an individual's personal ends, whether it helps him to reach these ends or not. If there weren't subjective valuation of security of bitcoin, it would necessarily be equal to saying that security is not a useful property of bitcoin, which is definitely not the case. So, what you say here substantially boils down to whether you admit that security of bitcoin is useful or not...

If we follow your logic, then taxes and backing are yet more different things. If security gives value to bitcoin through positive feedback making it more useful than without it, then taxes add value to legal tender in the opposite way, i.e. through negative feedback. Legal tender gets value by taxes because you will be forfeited for not having it through prosecution due to an alleged tax evasion...

It is absurd really that you deny security in backing bitcoin and at the same time easily accept that taxes are backing legal tender

Yes all value is subjective including that of gold, even the many industrial uses that we now have for gold ultimately fulfill desires that are subjective (like having a cell-phone).  Heck even FOOD can be considered to have subjective value, we might all desire to be Anorexic Yogi ascetic tomorrow and the value of food would plummet though probably not to zero unless everyone were really planning to starve to death.

But security and backing are still two different things.  Security is a guarantee of ownership, backing is a guarantee of value.  In the case of a commodity backed currency the guarantee rests upon the value of another commodity, it won't ever be less valuable then a set quantity of said commodity, but obviously the underlying commodity could still collapse.  Also states can enforce legal-tender laws and accept only their currency in payment of taxes, this is a very strong backing if the state is strong but it is still dependent on something that can ultimately fail just like a commodity.  Perfect backing is an impossibility, as is perfect security, but it's wrong to confuse of substitute them.

Saying that people have some personal subjective valuation of the security in BTC is a meaningless statement, it can not be quantified into value per unit of BTC.  Security is best expressed in a degree of confidence, the percentage probability that I will successfully retain ownership in the face of the random theft/loss chance, over a period of time.  I am equally secure regardless of how many BTC I own so why is a larger quantity worth more then a smaller quantity?  Lets suppose my confidence level is 99% per year, how do I turn that number ALONE into a valuation?  I would need to multiply it by a value derived from backing and take into account the risks that are inherent in any backing.  The only thing BTC enthusiasts can point to to back the UNIT of BTC having value is the ability to sell them to the greater fool in the future, aka they are not backed.

Are you Ben Bernanke or something?

You keep theorizing about inflationary fiat "backed" by governments. I'm from Greece. Do you want to know who's backing our euro (and its motherf... banks along with it)? The pension that I will not get. The youngsters that have no jobs. It is OUR backs backing the fucking euro!!!

NO MORE!!!

Why does it have to decline in the long run? Your point B makes it look like too many people turning to stores of value is a bad thing for the economy (ie the currency being used for active exchange). So if it doesn't decline in the long run and people have no need to turn to a store of value (because it stays so stable if it has full investment) then we don't worry about people sitting on it - they have no incentive to do that.

I will eventually spend part of a deflationary money. Why not? The remaining amount will just increase in value. I just need to make sure that the amount I spend is less than the increase in value of my remaining money.

Grrrr. If I read this stupid idea one more time I will cry. The incentive is that in the long run we are all dead and you can't take it with you.

All currency including Bitcoin is a confidence game.

If you are confident that it has value then it has value...its as simple as that.

Ok, let's start again. A currency in the gold standard is backed up by gold, right? Gold has some value, but this value is subjective in nature as well as for all other goods. This means that it is not determined by some property of gold (or amount of labor required to produce it, for that matter), but is determined by the importance an individual places on it for the achievement of his aims. Without this subjective valuation shared by the majority of people gold would be worth next to nothing. Now, if you agree that security of Bitcoin has value in the eyes of the individual as it does, you inevitably come with logical necessity to the conclusion that security IS backing up Bitcoin. Actually, anything inherent to a store of value that has subjective value will be backing it up, and the more people share this attitude, the more strength the store of value gets

It's a pity really that you went on a path of obfuscating and confusing matters here...

I've said that an asset needs BOTH security and backing to be a good store-of-value, and BTC has security (of a sort) but no Backing.  I'm arguing that no amount of security can compensate for the lack of backing, the relationship is Multiplicative not Additive, a Million x Zero = Zero, you seem to be arguing that if something is just Secure enough that Backing is unnecessary.  If we reverse the relationship and hypothesize an asset that's backing is perfect but is impossible to secure from theft, no one would call that asset a good store-of-value.

Impaler was absolutely wrong about security of Bitcoin adding nothing to its strength as a store of value for rather evident reasons which I have shown (it works the same way as taxes and legalization of money do), but this doesn't make your argument more valid. What you say here is a consequence of the factors that back up Bitcoin, but this is not what gives it strength or backs it up by itself. In fact, I have already explained this in one of my previous posts in this thread...

You keep saying that. It's just not how reality works. Bitcoin is backed by consensus among every bitcoin holder that it is worth investing fiat in. By the will of the people. The strength of the network and the lack of centralization is what allows us to enforce this will upon those who would take it down. In contrast, fiat is backed by states that confiscate peoples fiat at will.

Practical application trumps abstract theory every time.

It all hinges on how you define good store of value.

If you just look at the textbook definition of store of value: "Any form of commodity, asset, or money that has value and can be stored and retrieved over time, and be predictably useful when retrieved" -  then currencies are good stores of value, so long as there is a system in place (legal, political economic) that enshrines property rights.

But if you define a good store of value as a commodity, asset or money that, in addition to the above, is expected to retain its purchasing power in the long run - then fiat currencies are not good stores of value.

His logic is a bit perverted here, but still is pretty clear and correct though its premises may be wrong. As I got it, backing up of a store-of-value is not important in itself, it is the ultimate result it produces that actually matters, i.e "the expectation that the public perception of its value will persist". If we can get there without anything that would help retain purchasing power and the public perception does actually persist, then, yes, he is correct

Whether it is possible in reality or not is another question...

What you say here can formally be reduced to a set of qualities that contribute to the strength of a store-of-value making it either stronger or weaker (for the absence of some of these qualities). Apparently, the importance of each of these factors would be different in various conditions, i.e. their contribution to the overall strength of the store-of-value may vary. You are probably right on dollar vs Bitcoin comparison, but you would be on a shaky ground if you just tried to compare, say, counterfeit protection against legal status of a currency without taking into account the actual support they provide to this store-of-value. For example, Zimbabwean dollars had a legal tender status, but did this help them much? Would they be any better than Bitcoin which lacks such status?

I never said for a moment that ONLY currency has store-of-value, I've simply been contrasting cryptographic Fiat with National Fiat.

All the things you mention are REAL assets, NOT forms of FIAT, they are not what anyone in this thread has been talking about untill now.  I even offhandedly said earlier that pegging a unit of Fiat currency to a precious metal was one (archaic) form of backing so I would obviously consider the darn metal itself to be a store-of-value.  I'm arguing that FIAT currency needs backing for it to be a store-of-value, as without that you simply do not have any stable basis for a value and thus a poor store-of-value.