Topic: Scarcity doesn't always mean value - page 2. (Read 1366 times)

This is a Marxian labor theory of value at its best which had been proven inconsistent even before Marx made it known. In essence, its premises come down to claiming that value of a thing is determined by the amount of labor put into making it (as well as the cost of resources which is also ultimately just a cost of labor at a lower level). But even if this theory were true, it would still be not applicable here as there is no single cost of mining. Ironically, the lack of this cost shows how meaningless such "value" would be even if there were one.

By the way, I agree with your definition of utility as a capacity to satisfy a necessity, and in other contexts I would definitely use something like that myself. But how many people would actually understand that definition?

You are right but i do agree with you to some point. Sometimes scarcity does mean value. Usually limited number of asset or any goods increases the value of the goods or asset.

I don't dispute that. Maybe I should have written "aggregate price" instead of "value" when considering market cap as a measure.

But my point ("value" and thus also "price" being strongly influenced by "ecosystem value"/"ecosystem usage")  would still apply if you calculate "value" with your method (drawing a line from low to low). It is even better, to avoid to over-consider "bubbles".

I have read this theory several times, but I still dispute it. I consider mining costs, if existing, a very minor factor when calculation the value proposition. Why would miners not panic sell if the price of the coins they get falls below their "production costs"? I consider this scenario very likely.

A better factor is "attack cost", because it determines the security level of the coin and thus, its utility for usage, above all for actors who want to invest or move bigger quantities using it. Attack costs are about 3-5% from market cap (considering long-term averages), probably both for PoW and PoS coins.

Great analysis there tee-rex!

Truly, scarcity alone could not define value alone. In fact abundance at times defy the value of scarcity because of demand.

And yes, i also believe that utility is one of the best indicator of value. Though at times, popularity also sets value but utility can never be undermined.

That is why i always say that for bitcoin to retain value and grow it even more, utilize it, use it. Let bitcoin be an integral part of our daily purchases if possible. Let bitcoin be a system of payment within us and allow it to develop more utility to help increase its value.

But even if air has a price in the form of hidden costs or just direct price for a certain volume of it, I don't see how it undermines my example or takes anything from it. My point was to show that scarcity and utility are tied in with the price of an asset (like bitcoin) or resource (like air), that the price of it closely follows the relationship between the two. Obviously, if fresh and clean air becomes a scarce resource as in polluted cities of China, it will have a price tag attached to it (though I don't really know if it is actually so).

I remember reading a story about some bar in Japan where they had been selling "clean air" (likely with an elevated level of oxygen, though). And just yesterday I heard a story, or rather an anecdote, about some Italian soccer club selling bottled air dubbed as "Spirit of the bleachers", "Essence of victory", and even "Locker-room's aroma" (or something to that tune). Was it Fiorentina?


You may want to read my reply to that post.

So therefore, these two should be consider in classifying a coin and bitcoin have it all.

Bitcoin as utility
1. perceive as great asset
2. currency ( eventually )

Scarcity
1. rare with 21 million supply

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However, this contradict the above statement.


This should be a lot of talk and proofs so I think we shall stick with the supply and demand which is a basic determinant of value.

1. i dont say its price is LOW in comparison to the ATH. i see the price is LOW because it is floating only a thin film of bubble price (speculative foam) above value.

2. saying something is low is ok.. but saying it has CRASHED, which as we both agree is the wrong mindset of those that think the ATH is the norm.

3. i dont see a 25% built in speculative film of bubbles above value.
i seen a 200%-400% film of speculative bubbles above value last year.
i seen only a few % in this last couple months of speculative bubbles above value

4. last november value of ~$5.8k vs this year has changed. you just need to do the math of mining costs.
2017's ASIC batches were .. well ill save you the math. about $1.3k (simple math exahash *277)
november had the utility (point 1 of value indicator on first page) ramping up value due to the whole "segwitx1 locked segwit2x dead" that occured in november. this is where i pushed innovation into a gap away from the top 4 points. because once innovated it then becomes old news. so its more speculative than long term built in value of utility

even now segwit utility is locked but not many are actually using it. so not many actually would call segwit valued just yet.
(check the mining pools that strongly promoted and advocated for segwit like slush and BTCC who are not using bc1q addresses for their rewards)
(funnier sidenote i was begging bobby lee since december to use bc1q reward addresses to prove his confidence in segwit.. as of today still no(first chuckle).. yet bitmain. the opposition in many peoples eyes are using it(gave me another chuckle))

you can also chart in 2018 cost of mining using summers asic batch cost per btc (summers asic batch cost/btc simple math of exa *135)
its also worth noting that some pools this last month have been testing their 7mn next gen rigs (7nm next gen batch cost/btc simple math of exa *65)

yes, but the deficit in bitcoin is one of the most important reasons why the price of it is constantly growing

You are right! The value of bitcoin depends on many factors other scarcity of the currency

yes indeed it is. very well and detailed by the author

Did you have a bad night or what? If you noticed, I mentioned a little word that goes unnoticed some times... "or"  Ok, still I get your point and I will try to remember your teachings in the future.

Price/Value same thing for me, because it is indicative of what something is worth, so I use the term for both. I would find a coin online and I would like the way it looks and I will buy it, no matter what hype surround it.

Having utility is as important as being scarce. Citing myself on that part:


In this way, the answer to your remark should be straightforward and simple. While copper and aluminum have without doubt greater utility than gold, they are not as scarce as the latter is. In fact, this is a good example when one asset (copper) has greater utility than another (gold) but because of it being less scarce (more abundant), its market price turns out to be lower than the price of its counterpart. And unlike gold, which is truly unique, copper can be substituted by other materials.

If copper becomes more rare and it doesn't get substituted fully or partially with something else (the same aluminum), its price will rise. In real life, this is what happens with any commodity whenever there is a shortage.

wrong. price and value are 2 different things.
and dont use market caps.. just concentrate on price of individual coin. and then below that find the value by looking at the bottom line LOW of a period

value is stable and something that is mostly never dropped in PRICE below VALUE. (no one is stupid to sell for less)

..
anyways
check the minting/mining cost of coins. you will see where the variance of PRICE vs VALUE (roughly) when comparing 2 alts of similar utility/function.

PoS coins cost literally nothing to create new coins as rewards... so PoS coins will always be lower than PoW coins of similar utility/function.
EG if there was litecoin PoW and litecoin PoS.. the PoS would be less in value even if there was equal utility

when i look at the PRICES of coins. i do not look at the ATH. i look at the LOW
i draw a line from point to point of a periodic ATL and i treat that as the VALUE line, made up predominently by the top 4 catgories in my first reply of this topic. the volatile price above that line is the speculation/hype

and right now the PRICE is right near VALUE meaning a great time to buy. because with costs of mining/difficulty going up value will go up. meaning the price will go up even with little hype happening. .. and then during times of speculation, the price will spike up further and be way above value.

take november 2017-february 2018 VALUE was steady above $5k but the PRICE was volatile all the way up to near $20k

I agree with OP that utility is a major factor contributing to the "value proposal" of Bitcoin.

The example with the post stamp collectors, for example, shows that in this case "utility" does not mean that it's "useful to do other things", which would be the most common definition. Instead, it could be defined as "capacity to satisfy a necessity".

Typical necessities satisfied by cryptocurrencies are e.g. to use it for global transactions/remittances, buy/sell goods and services, speculation, or long-term storage.

We can now have the case of two cryptocurrencies which may have a similar utility. For example, Bitcoin and Litecoin both can be used for all these use cases.

LTC may be accepted by some less exchanges and merchants, but in major crypto countries you can buy lots of stuff with it. The small difference in "utility" here doesn't explain the large difference in "market cap" (market cap is pretty flawed but is currently our most popular measure to calculate the "value" of a cryptocurrency).

So I would not use "utility" to measure Bitcoin's "value", e.g. numbering use cases.

Instead, I would use the aggregate value of the ecosystem using Bitcoin.

This includes an estimation of the number of people, groups and organizations who are using Bitcoin to "satisfy a necessity" they have, and the amount of money and goods they move to do these things. So it's related to utility, but it's not the same thing.

Yes they have a lot of views and from what side they see it.

value of stamps is not sky high. you admitted it yourself they have no value.... however the PRICE is high

value and price are 2 separate things.
th price is high because people speculate, get emotional. but a price is not a set thing . prices can go down.

value is something that is more stable and is usually below price because speculation pushes up the price above value..
when speculation drops and the price drops too low. even below value. then the price is deemed as "undervalued"

also please stop over using the term commodities. atleast learn what these words are truly defined as first,
again for the multiple time. a commodity is a raw material used to create other products.
oil=plastics/fuels
wheat=flour/bread/cereals
gold=jewellery/electronics.

i know you feel bitcoin is digital gold. but that does not make bitcoins utility the same as gold. bitcoins values are only of golds values in relation to gold ALSO sitting in the ASSET category.

gold comodity market = to be used by industry
gold asset market = to be used to hold value by its owner, held and secured for investment/future sell

Technically speaking clean air has a price, clean air emissions policies in north america for vehicles are costing user lots of money, and were shown to improve air quality.  Apparently in some larger cities in China air is so bad they have clean air stations, where you pay to breath fresh air.  While other wear filtered masks, which also need to be purchased.  Yes I know it was just an example, but even an example off top of our head to demonstrate something with zero scarcity, like air, is still not truly scarcity free, and has lots of hidden costs.

don't confused the pumped up price of an altcoin with real price/value of them. there is a big difference when it comes to a manipulated altcoin. for instance yesterday there was an altcoin called AurumCoin that got pumped 6000% and reached 0.25BTC and was placed among the top 5 shitcoins in coinmarketcap.com
similarly in case of Waves and Ethereum, they are both pumped but ETH had a much stronger pumping team and a lot of advertisement so their pump lasted longer than other coins like AurumCoin otherwise it would have gone down just as fast.

Rightly said, there are alot of coins with low circulating volume and yet they are still far less in value than those coins with even more quantities. Waves and Etherem have similar circulating volume, same with Ethereum classic, but they price vary widely. So it is the dead and uses case that drives price, not just scarcity

Agreed. I am finding it hard to swallow that people keep referring to current levels as being low, while the only reason they consider current levels to be low is that they think $20,000 is the standard in an odd way.

Even right now the price consists of at least 25% of speculation that's baked in, and for that exact reason I wouldn't be surprised to see the market come real close to the $5000 mark this or next year.

There hasn't been much of a fundamental difference justifying the price right now to be much higher than last year's 'fair' price of $5000. Both the demand and the use aspect of Bitcoin have taken a longer term break.

Scarcity in this case can't change much. Maybe there is just too much floating coin supply.