Topic: Regression theorem & Bitcoin revisited - page 2. (Read 5406 times)

I asked first but anyway.
I define it as the value you assign to something when you can only trade it for nothing.
It is the value something is assigned to when not having its price modulated by trade.

It's a bit off topic, and I agree with the on topic points in your reply, but I just wanted to clarify what I meant:
With the blockchain you can agree use a future block as the random source with a published method of determining the "winner" or whatever you are using it for.  When the block comes along, the operator can pay out the winner and everybody can verify that they did the right thing.

This is an intrinsic value of the blockchain that does not exist in any other form (other than altchains), but I will concede that it the value of Bitcoin, not a bitcoin.

Bitcoin, the network adds lots of value not only to bitcoin the currency, but for other uses as well.

I second that. The book is a writeup of Austrian economy, but also discusses mainstream economy and refutes some of it elegantly.

Intrinsic value: What the money stuff is useful for to you directly (say gold?)

This is Direct Use: what gold is useful for direct use/consumption? What need or want is satisfied by one once of gold?
But there is no intrinsic value, because the first ounce of gold will satisfy a more important need than the second ounce of gold, and so on. So the ounces of gold have not the same value for direct use. So they have not an intrinsic value.

No, gold have an expected purchasing power the day after it is acquired to be used as money because it had an exchange power the day before when it was bartered with some other stuff for direct use.

E.G.
Gold was exchanged the day before for apples. Who acquired the apples wanted to use the apple (eat them) and who acquired the gold wanted to make a ring for himself.

I suggest people to read Rothbard, "Man, Economy and State with Power and Market". It is available in PDF for free online at the Mises.org.
The first chapters deal with this stuff. It is not difficult to understand.

How do you define it?

Intrinsic value: What the money stuff is useful for to you directly
Exchange value: The added value the money stuff has because it can be exchanged for useful things.

Everbody knows the value of a unit of money. Even if you don't know the offer price of all things at a certain time, you have an idea. If you go into a shop and look at the price of something interesting to you, you have some idea of what a good price is. Hence you have an idea of the value of money.

What the regression theorem tries to explain how this value came into being. Why can you buy something at all with a hundred dollar note, even if the seller can not do anything with the piece of paper itself? The first answer is yesterdays prices. But then what was the basis for yesterdays value? For every answer there will be a new question - what about the day before that? The answer, from the regression theorem, is that it is yesterdays value every day, until you go back to the day when there was no extra exchange value, only intrinsic value.

The dollar bill has this connection to previous days value all the way back. Bitcoin has not this connection, because there was in the beginning no link to the dollar. The vision of bitcoin as a money system does not count, because there was no way to connect the value of one bitcoin to an amount of dollars. This is the problem under discussion. Now it is evident, but there was a time where it was not possible to say what the value was.

Nice comments.

Randomly select: You can find randomness in bitcoins, but all of it comes eventually from the randomness generator in your computer, so it would be even easier to just grab an octet from /dev/urandom. The blockchain is novel, and the invention itself is valuable and other useful systems could be built on the same idea. Still, it hardly is intrinsic value to a bitcoin.

The Casascius coins is a special think not like any other coin. It is a real bitcoin because the key of an unspent output is hidden in it. You can toss it, but that intrinsic value is added as a metal casing for the real coin, and you have to pay extra to get that. I am still unsure how it relates to the regression theorem. Anyway, Casascius coins came after regular bitcoins in time.

By now i'm just going to blatantly ask you (to prevent us from debating different definitions of the word):
How do you define the word intrinsic in the context of valuing?

Wrong.

That wow character doesn't exist by itself. It only exists when "alive" within the wow game with all it's properties.

Same goes for bitcoins, there's no such thing as just bitcoins. Bitcoins only exist within the whole package, the blockchain, the peer to peer network, the mining, ect.. the whole shabang.

You don't have to explain that to me, i know enough mmo junkies. 
But the intrinsic value of a mmo character would be what you value it without using it in the mmo.
So, say blizzard kills wow and you have this character there that you realy love.
Its intrinsic value it how much it is worth to you without the wow environment.
So if wow ends, how much is the character then worth to the players.

It's not semantics as the word intrinsic has a certain meaning.
Using 'semantics' as an excuse for not defining it properly is bad practice and will lead to nonsense.

More semantics.

You should meet a hardcore MMORPG player and see how really they think some "stored energy" in the form of their fictional character that they play in a game is to them. If still don't know, we're in the digital age now..

Yes, but it is a feature of the system operating.
Bitcoins, by themselfs are stored energy that has no other use than to be bitcoin.
What you describe is economic value (the value it gets from being used in an economy).
Intrinsic value is what it is worth without the rest of the economy giving it value.

What you actually are saying is that after being a currency for 503 days it gained economic value. It was used as a currency.
A dollar bills intrinsic value is not that it can be used to buy stuff.
It's intrinsic value is that you can hang it on the wall to admire it or burn it for some heat, or some other such thing.
It is what you value about the thing when you disregad it's economical position.

So the 'I like it for its math' is actually some intrinsic value of the bitcoin system (like all forms of aesthetics) because it values bitcoin for something other than being used as currency.
Unfortunately that part is pure information so it is not specific to any combination of bits sitting on your computer. It would even be hard to appreciate that aspect of it so the best way to do it is propably to read some technical information.
And so it is just this technical information that is being valued, not bitcoin itself.

And this is what the Regression Theorem require: the knowledge of the past allow to project a future expectation.
Before they were exchange for fun, to try if the transaction worked correctly or not, etc.
But not for a good or a service.
There was proof the network worked for a long time and the expectation it would be up for a long time. So who acquired bitcoin could use/give them to someone else in the future.

This is the part the barter have for gold. If it was exchanged before for a direct exchange it could be used after for an indirect exchange.

If you can't see intrinsic value in bitcoin after reading the whitepaper, you didn't understand it.

Semantics.

The network functioned for 503 days before somebody bought a pizza with bitcoins, so the bitcoins were quite shiny by then and promised to continue to be shiny for the foreseeable future.

I know exactly what you mean!!

Yes, but for people interested in cryptography, it's a scintillating blob!

I can get you some attempts at proofing Fermats last theorem for cheap...
Eh? Eh?