

Everyone Who Believes In Bitcoin Should Try To Answer This Question - svenkatesh
http://www.businessinsider.com/everyone-who-believes-in-bitcoin-should-try-to-answer-this-question-2013-12

======
fauigerzigerk
Good questions, but I think the answer for gold is pretty weak as well:

 _> Underpinning the value of gold is that if all else fails you can use it to
make pretty things._

That's true, but where would the price of gold be if there was only jewelry
demand left in the market? I think gold as a store of value depends on
psychology, not on jewelry. But it is a kind of psychology that is impossible
to replicate for anything newly invented.

------
cheald
This was discussed at length in the "Bitcoin is Evil" thread yesterday, but
the general idea is that Bitcoin can still be used to make "pretty things"
even if you aren't using it as a medium of exchange. Namecoin is one
particularly interesting example - fully decentralized DNS. The ability to
conduct authenticated P2P transactions of _any_ nature, not just financial, is
what makes Bitcoin and its ilk interesting, IMO.

~~~
simbolit
nonono. namecoin is not bitcoin. you are explaining why proof-of-work-schemes
are useful. that is not the question.

the article (quoting Krugman) says that there are good reasons why bitcoin
might be a wonderful medium of exchange, but there is no good reason why it is
a good store of value.

~~~
sjs1234
That specific premise is false. An alternate use case does not provide a
-meaningful- floor for any store of value. Tulips still have an alternate use
case.

I'd claim Krugman is arguing against cryptocurrency in general rather than
Bitcoin specifically.

The affordances provided cryptocurrency are new. It's a fair bet that will
provide value.

How many factors currently contributing to the value of the US dollar were in
place within the first decade of its existence?

I'd also claim the libertarian hopes for cryptocurrency are overblown, though
they are definitely contributing to its current level interest.

------
malandrew
IIRC, Paper money used in the colonies had the exact same problem as Bitcoin,
but many different forms of them worked prior to the establishment of the
United States and the US Mint. Not everything pre-United States was traded in
gold, furs and wigwam. They were a fiat currency that could not be used to pay
taxes.

What Krugman fails to consider time and time again is the notion of "fitness
for use". For international transfers, bitcoin has greater fitness for use
than any international currency or other medium of exchange out there. What's
missing is fitness for use for day to day transactions, usability, security
for the average person and volatility. The former three are being worked on by
many people and being solved little by little, and those three are
contributing to reduce volatility relative to it's moving average price
relative to other currencies.

------
mooneater
Just its existing network effect.

A new blockchain, alt-coin, or ripple-type system can and do pop up all the
time, but bitcoin has a significant network.

If someone invested in building out a new digital payment network they could
overtake bitcoin. But its not getting easier every day as bitcoin adoption
grows.

------
Kinnard
I am the answer. I place a floor on the value of bitcoin. So do all other
believers. To be clear, for all those out there confused, bitcoin is not just
money, it is not just a way to make money, it is a movement to change the
meaning of money. Only upon grasping that will the perplexed begin to
understand.

~~~
nlp
Faith is fickle.

The problem with your statement is that there may be a new digital currency
that displaces Bitcoin ... namecoin, anycoin, litecoin, dogecoin. Maybe not
one of those, but a 2.0 of some sort that attracts the miners.

If a NEW Bitcoin equivalent takes the spotlight and Bitcoin miners retrofit
their rigs to mine for the new network, then someone that had put all of their
money into Bitcoin could lose it all.

Nothing guarantees the continued use of Bitcoin. It is a decentralized fiat
currency.

~~~
malandrew
Nothing guarantees that a new currency will displace Bitcoin rather than
complement it. A second or third or fourth crypto-currency with broad adoption
like Bitcoin would help Bitcoin more than hurt it since they would suggest
that crypto-currencies are here to stay forever.

It's entirely conceivable that in the future there are half a dozen or more
crypto-currencies out there that provide different qualities that make them
more or less fit for use by different groups of people.

------
simbolit
_Placing a floor on the value of bitcoins is… what, exactly?_

Nothing but the trust of those involved. Plain and simple.

~~~
malandrew
And the investment already poured into it. A lot of people now have a vested
financial interest in making it succeed. There are enough of those people to
make it self-sustaining while the kinks are worked out.

