
Bitcoin's value is decentralization - ujeezy
http://paulbohm.com/articles/bitcoins-value-is-decentralization/
======
Codhisattva
There is no such thing as "intrinsic value". All value is perception and
subjective. Complicated arguments may enhance perceived value in others but
keep in mind the subjective nature.

Once confidence collapses, "intrinsic value" flees out the door.

~~~
robertskmiles
This is true. The easiest way to make this clear to someone is to ask them to
define 'value', and note that they can't do so without either a) talking in
terms of people and their subjective beliefs or b) relying on words that are
just synonyms for 'value'.

~~~
erikpukinskis
You can avoid talking about people's subjective beliefs about good or
services, and instead talk about their subjective beliefs about their lives.
You can then measure the curve of subjective satisfaction with their lives and
value can be defined as "the impact of a good or service on the satisfaction
curve of a recipient's life".

Tying value to the subjective experience of the outcomes is qualitatively
different than tying value to subjective beliefs about the goods or services.

For example, someone might buy a million dollar McMansion because they
subjectively believe it's valuable to them, and then discover that they're
miserable in it because it's horribly designed, poorly constructed, and
expensive to maintain. That's fundamentally different from someone who buys a
house that is cheap to heat and cool, makes their everyday tasks easier, and
causes the release of pleasure chemicals in a sustainable and helpful way.

The latter has intrinsic value in a way the former doesn't.

Edit: You can also define value as the ability for a good to increase your
overall wealth. So, some goods have a cost, and do nothing to my net worth
(lottery ticket). But some, if you look at the longer term, have a cost, but
also add to my net worth (buying a soy milk maker). If you put a dollar value
on your experiences, this can cover everything.

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Tycho
The next period of history could be defined as the post nation-state era, and
of all the supranational technologies and institutions that will make this so,
bitcoin could be the most important.

I'm talking about the ability of governments to restrict the activity of
citizens and also to fund themselves from said activity.

~~~
htmltablesrules
There will always be nation-states. Always. Put ten strangers on an island and
they will organically form a hierarchy and political alliances will happen.
There will never be a government-less world as long as we're human.

~~~
jcbrand
There's a big difference between a government-less world and one without
nation-states. Also, for the majority of human existence nation states didnt
exist.

~~~
eru
Yes. Just imagine a world dominated by city-states.

------
guylhem
This is an excellent article explaining very well the Byzantine general's
problem and how bitcoin provides a solution.

However, even if I agree with the answer, I don't agree with its "jump to the
conclusion".

Here is my take on that:

Whether one's believes in decentralization or in centralization, another of
bitcoin core assets is that it is not deflationary for prices.

All currencies have price deflation built it, for some macroeconomic reasons
about motivating agents that I don't fully understand yet. It could be a good
thing for economic growth, or it may not be. Let's leave that issue aside.

The important thing is that Bitcoin doesn't. Being convertible with other
currencies means its value can only rise (following the definition of
deflation!)

So the only question is whether the rise in relative value - bitcoin inflation
- will be faster than the fall of the goods prices' in the other currencies.

And that's where the decentralization part plays its role and the article
gives the right answer : if you believe in decentralization and in parties
acting in their own best interests, it will be faster.

If you believe in centralization and people acting for the others best
interest, it won't be faster.

Bitcoin is a fun experiment on human behaviour :-)

In the end, bitcoin value will still rise - if only because it provides a way
to escape from the deflationary currencies. The only question is how fast.

There _are_ negative interest government bonds being sold right now - IIRC,
Germany and France do that.

Why one would make sure to take a fall when a conversion in bit coin means
that the value can be preserved?

The question of whether it is a good thing for economic growth remains. It
doesn't seems to be.

I don't have bitcoin wealth. I wish I did because it seems like a very good
placement at the moment.

~~~
rprasad
I don't think you understand how currencies or economics work.

Currencies are by nature _inflationary_ in a growing economy. This is a good
thing, because inflation encourages spending and/or investment. Deflation is
fatal to an economy: because the value of the currency will grow with non-use,
deflation inhibits spending and investment.

Bitcoin's fatal flaw is that it is deflationary. At any given monent, you're
better off not spending your bitcoins, because that same quantity of bitcoins
will be worth more in the future.

Bitcoins other fatal flaw is that roughly half of all bitcoins mined thus far
are held in the hands of the inventor of bitcoins and his closet buddies. They
haven't been spending their bitcoins--but they're encouraging others to spend
bitcoins as they are mined. This is close to (but not quite) the definition of
a Ponzi scheme.

~~~
snitko
Inflation is not the only reason why I want to spend/invest money now rather
than save them. In fact, it's not even a good reason, because it forces me to
spend money.

Deflation doesn't discourage spending by itself. The price of holding to the
money is the lost opportunity of investing those money into something else.
I'd say, generally saving money is a good thing rather than bad because it
allows me to only invest them when I consider the opportunity good enough.
Presently, inflation punishes me if I save money. So, if we talk about
particular individuals saving money, inflation is not a good thing for them.
It might be good for specific groups of people who receive the money I spend,
but then one might say it is good for them at my expense. Which brings us to
the idea that inflation is simply a tax.

~~~
kybernetikos
> it's not even a good reason, because it forces me to spend money.

It doesn't _force_ you to spend money, it does however attach a cost to you
hoarding your currency. This makes sense, because you're harming the system as
a whole by hoarding. If you were allowed to hoard currency without paying some
sort of price that would be an externality.

~~~
snitko
No, I'm awaiting a good opportunity to invest. If in my judgement there's
currently nothing good on the market that I can invest into, why should I be
paying the price? I don't quite understand. If you want my money, make
something I want to buy/invest into. Inflation forces me to spend money on
things I otherwise would not buy. Thus, it promotes goods and services that
are not quite as good.

Also, I don't understand why do you consider hoarding a bad thing? If you
agree that I honestly earned the money, than you should also agree that I am
free to do with them whatever the hell I want. Currencies controlled by
governments tax me with inflation, bitcoin doesn't (or at least, it's
predictable, open and not controlled by one organization).

Upd: attaching additional costs (because there are other costs that are
inherent to hoarding, like lost opportunity costs) is, in my view, forcing. It
makes me it more likely that I spend the money. Let's not debate semantics.

~~~
sigkill
This is a very interesting discussion. I now take away that hoarding money is
like paying for storage costs, i.e paying someone so that you can keep your
money.

------
aprescott
Maybe I'm mistaken, but I think the specific value of 12 in this example is an
error from using an original description at [http://www.mail-
archive.com/cryptography@metzdowd.com/msg099...](http://www.mail-
archive.com/cryptography@metzdowd.com/msg09997.html) — the original
description uses the value of 2 hours ( _12_ * 10 minutes), whereas Paul's
does not.

~~~
enki
author here: i've written 12x10 minutes, and the original description writes
12x10 minutes. is there something i've missed?

it takes 10 minutes to find a solution, but only after 12 solutions have been
found (the chain has been extended 12 times total), can the authenticity of
the first of those 12 be guaranteed.

~~~
aprescott
The original description uses the value 12 because of the prior value of 2
hours, whereas you seem to just have N generals and no such hourly time from
which to derive 12, plus this:

 _The existence of the 12-block chain is proof that a majority of them has
participated in its creation._

Why is the existence of 12 verifications proof that a majority of N have
participated?

~~~
enki
because an attacker controlling less than 50% of the computational resources
can be lucky and find the first solution before anyone else.

he can even be lucky twice or thrice. but to be lucky 12 times against
everyone else with less than 50% of the resources, is statistically
improbable.

2 hours is the result of those two values (12 being statistically relevant,
and 10 minutes a chosen parameter of problem difficulty), not an input
variable.

------
negamax
Even from the comments and my own understanding is Bitcoin acts more like an
asset. It be very tough to run an economic cycle using it. Imagine someone
ordering a truckload of clothing and promising salaries to the workers but by
the time it's ready, value of Bitcoin would go up, hence that person will
receive less Bitcoins unless specified. The buyer i.e. holder of Bitcoin will
always try to delay payment, so they will have to pay less amount.

~~~
enki
the dollar and euro are also assets in that way. you're usually just not aware
of its fluctuations (against each other, against other currencies, and against
commodities)

look at any of the US dollar indexes, which examine the exchange rate of the
dollar against other currencies to shake the belief that the dollar is stable:
[https://www.google.com/finance?chdnp=1&chdd=1&chds=1...](https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1349549800008&chddm=98923&chls=IntervalBasedLine&q=NYSEARCA:UUP&ntsp=0&ei=135wUOCtEOKuiAKYggE)

~~~
negamax
Not quite. My point is Bitcoin is more like gold rather than any fiat
currency. Gold can still be inflationary by finding new mining rigs and
asteroid mining in the future but Bitcoin has a upper limit. So it will always
be an asset against all fiat currencies. Which will hinder trade as the way I
have listed above.

------
mistercow
The problem with this article is that in the very second sentence, the author
switches from discussing bitcoins themselves to discussing the bitcoin
monetary system as a whole. _Of course_ the whole system has intrinsic value,
but that is a separate issue from whether or not the currency itself has
intrinsic value. In fact, it is generally _necessary_ for a non-commodity
currency not to have significant intrinsic value.

~~~
enki
How is bitcoin a non-commodity currency? If bitcoins have value because they
allow you to do things you couldn't otherwise do (my point), it's a commodity.

why is it desirable for a currency to be a non-commodity currency?

~~~
gizmo686
Bitcoins do not have value anymore then a paper dollar has value. People are
willing to accept it as payment knowing that others will also accept it as
payment. You can (and I have) set up your own bitcoin system and get as many
as you want. The only difference with that one and the main network is that
the main network is bigger, and has a genesis block that people recognize as
identifying it as the main bitcoin network.

If everyone changed their programs to recognize my genesis block as the
correct one, then all of the main bitcoins will be worthless.

~~~
kybernetikos
> Bitcoins do not have value anymore then a paper dollar has value.

Actually slightly less, since paper dollars always have at least their joule
value.

~~~
gizmo686
Is their any way to use that without commiting a federal crime?

~~~
mistercow
Well, if you don't make the bill unfit to be reissued (or don't intend to),
you're in the clear in the US. The law with coins is more lenient; as long as
you aren't defacing them fraudulently, it's not illegal.

------
shalmanese
It's not clear from the page but this article was originally written in May
2011.

~~~
enki
thanks! date added to template!

------
gwern
My take: <http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better>

------
rumcajz
Nice. Imagine that domain names were mined for rather than assigned by random
registration authorities.

------
zby
Sure bitcoin is an interesting solution - but there is a problem with cost of
all that busy work.

~~~
enki
author here: there's a cost with storing gold in the ground and securing it,
and there's a cost with printing counterfeit-resistant paper and finding and
jailing counterfeiters (and a cost with not doing so - unbounded inflation)

an interesting question then is: are the above costs greater than the cost of
operating bitcoin? it might seem so at first, but don't be so sure and run the
numbers on the back of an envelope.

also walk around downtown in SF and NYC and look at the amount of skyscrapers
that are nothing but banks, scratch your head, and ask yourself what value
they're actually adding.

~~~
_red
>also walk around downtown in SF and NYC and look at the amount of skyscrapers
that are nothing but banks, scratch your head, and ask yourself what value
they're actually adding.

True. But I suppose one would need to define "what is a bank". From a pure
"money warehouse" definition they don't deserve to be that big, however from a
lending / investment perspective there is more value there.

I think in the end, a decentralized lending scheme (Mike Hearn has spoken and
written on this subject) integrated to bitcoin as the possibility to radically
change the social order.

It will very hard to fund wars without a printing press.

~~~
enki
bitcoin's problem is that the financial sector is massively regulated - you're
going to jail if you attempt to compete.

creating a website where you can store $10, send it to me, and then let me
withdraw it, is a 5 year felony in california. that's even when the site is
complying with all anti-money-laundering and know-your-customer regulation
that could be argued for because of terrorism. it's purely a licensing issue.

bitcoin's influence probably won't significantly grow until people find legal
workarounds/ways to comply (of which there are plenty, but likely implementing
them takes someone committed at least a year), or something happens that makes
enforcement of the law unlikely.

i personally know of a sizable number of bitcoin startups with
working/finished software and a great marketing strategy, that gave up in the
face of financial regulation and threatened jail time.

~~~
BladeMcCool
could they not just run their services off Tor and thumb their nose at the
financial authorities like certain other sites and services do, seemingly with
impunity?

~~~
enki
only if you're ok with never buying any physical goods with bitcoin. the weak
point is the exchange between bitcoins and classical currencies or physical
goods.

~~~
gizmo686
Running through TOR doesn't actually affect this. After the first node, the
only data on who is giving money to who is the bitcoin public keys. The only
way to attach those keys to a person is to have access to a node that is 1
degree removed, in which case you have the IP adress from TCP, or look through
the. block chain to see who else the bitcoin ID you are looking into traded
with. The first aproach is not common, and TOR will not help on the second.

When you are a business fearing regulation, this is all irrelevent, because
you need to make public what customers get in return for sending you bitcoins,
as well as your public key, so customers know who to pay.

It would be interesting to see a truly anonamaus bitcoin system. You would
need invalidate a coin for which you do know a secret, and create a new coin
for which someone else knows a secret, in such a way that when the other
person proves they know the secret no one can figure out that the coin they
know about is the one you gave them. Giving all of the things already
possible, this seems like it is easy in theory. Doing it in a computationally
efficient way is a different story.

------
Greynum
This was on hacker news last year

