

Bitcoin's Value is Decentralization - c3o
http://paulbohm.com/bitcoin-decentralization/

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jerf
The question isn't "Is BitCoin's value non-zero?" As a general critic, I
freely say up front, yes, it's interesting and has some non-zero value. I
won't even say I'm "admitting" it, because it was never my contention
otherwise. But merely establishing that there is some aspect with a non-zero
value isn't interesting. The question is, do the positives outweigh the
negatives, and if so, do they outweigh them enough to fulfill the stated
goals?

You can make anything look great by considering only the positives, you can
make anything look terrible by only considering the negatives. The question at
hand is about the balance, not whether BitCoin has any positives at all.

~~~
vladd
I think you're confusing the Bitcoins' value with the value provided by the
open source code implementation which has been open sourced.

The code can be forked and used to power another coin system, let's call it
Webcoin, which will have the same properties. The cryptographic, decentralized
and uniqueness properties are therefore a value of the code.

The value of Bitcoin is related to this specific implementation, i.e. the
marketing that caused people to put their money in this specific fork of the
code and permitted early adopters to cash in.

At some point in the future, a country might choose to use the code to power
its own currency system and to back it with the economic activity performed
within (which is taxed via taxation). That would give intrinsic value to the
coins; today Bitcoins is just marketing implemented on top of a well-written
open source decentralized code-base.

~~~
jerf
"I think you're confusing the Bitcoins' value with the value provided by the
open source code implementation which has been open sourced."

No... no, I don't think so. You seem to be using "value" as a synonym for
"property", which is not at all how I meant it. I meant it as, errr, value.
Both the code and the BitCoin network have positive entries on their value
balance sheets, but I don't know that their total is positive, or that it will
be positive enough to work.

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_delirium
This doesn't really follow:

> Bitcoins have intrinsic value if they enable desirable interactions that are
> not possible without them.

Yes, any fiat currency has the 'intrinsic' value of enabling some kinds of
interactions that are not possible without them. For example, hard-to-
counterfeit pieces of paper have an intrinsic value. The problem is that such
things are often substitutable: the real value of most paper currencies comes,
circularly, from the fact that we've decided to settle on _this_ set of hard-
to-counterfeit pieces of paper, not a different one. That's why it's fiat
currency, because its value as currency fundamentally derives from the fact
that people have agreed to use it as currency.

The same applies for Bitcoin; the general idea could be a good one, but
Bitcoin is not the only possible implementation. If we settle on this
implementation over others (perhaps because it was first), it is for reasons
closer to fiat money than for reasons advocated by "hard money" proponents
that they have value.

~~~
RockyMcNuts
can't help wondering how much of gold's value is derived from the fact that,
circularly, people think it has value.

or for that matter, any human activity's.

~~~
ignifero
You implying that there are things that have intrinsic,
non-(social|market)-determined monetary value?

~~~
Goladus
I don't think he meant monetary value, he just meant value.

The gold in the plating on my headphone jack has intrinsic value to me,
measured nebulously in its quality and reliability. It has value to me, but it
has no value to the market. My demand for gold-plated headphone jacks is
currently zero and my headphones will never be a part of market supply.
Supply/demand cancel out, so the market ignores me, and I ignore the market.
But the value is still there.

Intrinsic value can indirectly affect the market by increasing demand.
Obviously, at some point in the past, I had demand for a gold-plated headphone
jack, and the market supplied it at a specific rate of exchange.

The question is, how does the value of intrinsic properties of gold, such as
its ability to conduct electricity, compare to the value derived entirely from
social factors, like its history as a medium of exchange and its current
status as a trading commodity?

Social value is not intrinsic value, but it's still real value. The fact that
everyone agrees something has value means I can trade it. We're getting
extremely close to monetary value but not quite there yet. In theory, the
socially-determined value of a currency could be measured in the same abstract
life-enhancement unit as real intrinsically-determined value, and this unit
still doesn't have to be money.

Monetary value isn't necessary until you actually participate in the market.
And so I guess there is a couple of questions:

(a) If you could come up with a unit to measure all value, how does the
intrinsic value of gold compare to the social value of gold?

(b) How does the intrinsic value of gold's effect on its market value compare
to the social value of gold's effect on market value.

~~~
ignifero
Sorry, I don't subscribe to the intrinsic value theory.

~~~
Goladus
If the context is strictly investment, intrinsic value (aka "wealth") is not
an especially useful concept. If your context is marketing, it might be more
useful, though questions like the one asked of gold, and similar in the
context of bitcoin, are mostly an intellectual curiosity. And either way,
there is yet no known way to measure intrinsic value.

For example if you want to compare the value of a solar-powered calculator in
2011 to the value of a viking longship in 1011, market value doesn't work
because the markets are simply not compatible. But there is still value there,
both relative to people of the time and in an absolute sense.

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sbov
Their method of decentralization seems pretty costly though, and that cost
will not abate over time, since the costliness is what makes it work. If
widely adopted, I don't look forward to the day when a large percentage of all
computing resources in the world is spent meaninglessly churning bits in the
name of a decentralized system.

~~~
DavidSJ
_Their method of decentralization seems pretty costly though, and that cost
will not abate over time, since the costliness is what makes it work. If
widely adopted, I don't look forward to the day when a large percentage of all
computing resources in the world is spent meaninglessly churning bits in the
name of a decentralized system._

Every market has friction and costs associated with its security. This is
fundamentally no different than a bank hiring a security guard. If someone
comes up with a solution to this problem which lacks this cost, it would of
course be preferable, but no one has yet done so.

~~~
RockyMcNuts
So... if I want to settle a $40b transaction, like a big merger, in <24h with
bitcoins, assuming the level of fragmentation you could expect if bitcoins
became ubiquitous in everyday transactions, what kind of server farm are we
talking about?

~~~
DavidSJ
It could take years before the block chain is long enough to dissuade a
double-spend attempt for a transaction that large, where you have a single
party single-handedly accounting for a significant fraction of spending on the
network. So for a single $40b transaction, perhaps bitcoin is infeasible (or
at least must be combined with traditional mechanisms like reputation, courts,
etc.), but for a million independent $40k transactions, they can all be
confirmed in a matter of hours for only a few hundred thousand dollars worth
of computation, total.

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Steko
Given recent events I take it we're no longer emphasizing stability and
security as features of bitcoin. I jest, clearly _decentralization_ is the new
killer feature. Money quote:

"Bitcoin makes it feasible to pay for internet relays that anonymize or
reroute traffic - that is, it makes it easier to remove central control and
fight censorship"

And who doesn't want to fight censorship amirite? Surely there are no negative
repercussions to letting people reroute traffic anonymously.

~~~
bdhe
_Given recent events I take it we're no longer emphasizing stability and
security as features of bitcoin._

I understand where such a snarky statement comes from, but let's take a step
back. Bitcoin has generate such enormous debate because it is not clear to
anyone---security researchers, economists, or otherwise---what Bitcoin
entails. It has some desirable properties, some undesirable properties, and
has, imho, made people think a lot about the concept of fiat currency and how
to go about extending the advantages paper currency has to the "digital
domain" (and I use that phrase loosely).

I think it is great that lot of people are looking at Bitcoin in many
different angles and since this is the first of its kind, I am sure people and
society (including governments) will learn from pitfalls (security, economics
or otherwise) to build a better system tomorrow. So let's not attack people
who are trying to explore what Bitcoin gives us and what it doesn't.

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dublinclontarf
Distributed DNS is something that's being tried with namecoinds, not really
taking off I think.

~~~
enki
author here: the cool part is that it's theoretically possible now. i have no
idea whether it'll take off.

what do you think, are there gonna be sufficient incentives in the future to
decentralize certain services?

~~~
_Lemon_
> what do you think, are there gonna be sufficient incentives in the future to
> decentralize certain services?

You bring a very good point, one that I hadn't considered at all.

Although I'm not sure, I think the "work from at least 50% of honest nodes" is
an issue. The more demand you have to create work for decentralised services,
the more you split and weaken said services.

For example, if x is a major player with 33% of workin one decentralised
system, they are more likely to have > 50% in smaller systems. So they would
have power in smaller systems being able to usurp them at will.

One way around this would be to have a lot of players in each system, such
that it would only be realistic to have a few % at a time (each). However,
this again would most likely be undermined by any state actors who would
ultimately be able to produce much more than anyone could if they wanted.

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drivebyacct2
Wasn't this obvious? Wasn't this what everyone was saying when others were
discussing the size of the economy and the size of transactions it could
handle and threats from the government...

It's the first time people can actually truly freely trade without fear of
monitoring or tracking. Of course that's its value.

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mattmanser
Huh? What was the author smoking when he wrote this as I want some!

