Topic: the real price of 1btc - page 2. (Read 2641 times)

I think I should clarify that I actually believe that power consumption plays a negligible role if any in the price of bitcoin.  But, as a miner, the more cheaply I can get my base resources (in this case power), the higher my profit margins, at any price point.

The extent to which the cost of electricity power plays a role in the price point of a bitcoin depends on how that electricity is obtained and how much of it needs to be used to generate a given amount of processing power.  I can't wait til the Radeon 7000 series comes out, and maybe someday really soon I can afford FPGAs.  Solar panels are in my future and if I can a windmill going in my backyard, I will do it.

Cost of power, price of bitcoin, and difficulty are all interrlated. If the cost of power greatly increases and the price of bitcoin remains the same, the difficulty will adjust over time to compensate (e.g. fewer people will mine and thus difficulty will drop). Generally speaking, difficulty reacts to changes in the other two, though there's probably a minimum difficulty where certain people will always mine because they believe in Bitcoin. As for the price of Bitcoin, it's pretty much based on the perception people have of it's value. If people think it's worth $5, that's where the price will settle; if they think it's worth $20 or $2, we'll see price adjust to those as well. Of course, perceptions change, sometimes rapidly, which is why we end up with rapid fluctuations in the price of Bitcoin.

No, sorry. This is totally false.

The only value a bitcoin "stores" is the purchasing power it retains, which purely a function of supply and demand. The cost of electricity has little to nothing to do with how much a Bitcoin should cost. To illustrate, imagine if suddenly tomorrow everyone's electricity costs 100x more. Does that mean a Bitcoin must sell for $500 (given current price of $5)?  No.

Supply and demand is all that matters.

why should the electricity cost represent a 'minimum value' ?

The large part of the mtgox price is represented by a whopping risk-premium that Bitcoin might be more valuable in the future.  To this extent the market-clearing price is rather similar to a call option with a very low strike price, long maturity and very high volatility.

The actual mtgox volume is tiny compared to the underlying free-float, which makes the gox price something of a lottery.  

We hope is it valuable.  Beyond that we have to trust in the market mechanism to help us find our way.  And, the market mechanism can be a real bitch.  Even when we are right.  

I'm working on an infographic and thought people here might be able to help me speculate about the current actual value of bitcoin and not just the future market price of bitcoin.

Currently, bitcoin stores some sort of value.
The most obvious store is the electricity from the miners, which is roughly a function of bitcoin difficulty, and of course the price of electricity where you live (and the efficiency of your hardware etc).

This aspect of the value of bitcoin reflects the bare minimum value. Bitcoins should be worth at least the cost of electricity miners put into their creation.

I'm also trying to work out the social and commercial value which is roughly a function of:
how many services are being offered
how valuable those services are to the people who use them
how many people use those services (with bitcoin)

So for example, selling pizza - the market is large, but the number of people offering and using that service (with bitcoin) is small, so it doesn't really add much value to bitcoin. If the number of people offering this service increased and the number of people using it also increased, bitcoin would gain additional value.

I'm thinking as there's increases in point-of-sale infrastructure, international money transfer options, stores of wealth (ie replacement for gold) etc bitcoin value will also increase, and as such it's just as sensible to speculate about these things as it is to speculate about market trends.

Currently these non-mining factors all contribute a tiny  amount to the value of bitcoin, I'd say less even than the electricity cost of mining. As these aspects grow, their value will far outweigh the energy cost of maintaining the network.

So, any ideas of what the current ACTUAL value of 1btc is? Or how to calculate it? Or what will be the big value-adders that are on the horizon?

Any ideas on how to approach creating this infographic are welcome. I have my own ideas of course but I would like it to be an actually useful piece of information rather than just some curiosity that means little.

My guess is currently around the 10 USD mark, but not really based on anything solid yet, I still have to do some data research.