Currency is a collective delusion. It's valuable if everyone believes it is, which is why precious metals trade higher than their usefulness in industry.
I don't think Bitcoin's delusion will last more than another decade. We'll probably find a way to design a delusion that distributes value "fairly" rather than to a class of nerd overlords. But until then, it's a fun story to watch.
Right, that's exactly my point. Bitcoin's only value is in the transactions it can make. If there are no transactions, there's no way for it to be a store of value, contra the GP.
Fiat currencies aren't technically any different, but you can use them to pay taxes and their value is insisted on by armies, which does count for something.
> Bitcoin's only value is in the transactions it can make.
Bitcoin's value is that it's
* Fungible
* Divisible
* Verifiable
(All qualities that gold has, but Bitcoin does them a lot better)
as well as being
* Stupidly easy to store and transport
* Extremely difficult/impossible to confiscate
* Not subject to devaluation due to an as-of-yet undiscovered deposit
> If there are no transactions,
There are, as of now, on the order of five transactions per second. How many times per second do you think people are trading gold?
> Fiat currencies aren't technically any different
Well, there's at least one difference; fiat currencies can be easily devalued by inflation. Gold can't be inflated by fiat, but it could be inflated by the discovery of a large deposit (or asteroid mining). Bitcoin can't be inflated at all, period.
> but you can use them to pay taxes
If you have an asset, you can sell the asses to pay taxes or court-ordered payments. The small friction involved in converting the asset to fiat money is factored into the price of the asset. (Incidentally, one of the benefits of Bitcoin is that it's less beholden to taxation than traditional clearing house/bank-held assets).
> and their value is insisted on by armies
I've seen this meme a few times, and I honestly don't understand how anyone can say or write this out and not think to themselves "Wait, this doesn't make any sense at all.". I'm pretty people started saying this as a joke.
What is this even supposed to mean? If I attempt to sell something for USD above a certain price, is the army going to kick down my door and threaten me until I place a higher value on the dollar?
> Gold can't be inflated by fiat, but it could be inflated by the discovery of a large deposit (or asteroid mining). Bitcoin can't be inflated at all, period.
Is this really true though? Couldn't a leap forward in quantum computing make mining BTC considerably "easier" and thus inflate and devalue the supply of BTC on the market?
Not as far as we know. Even with grover's algorithm, all hash algorithms in Bitcoin should still (probably) be secure. Even if there were a huge leap in processing power, the mining difficulty would increase automatically. Even if someone had infinite processing power, all they could do is mine the rest of the coins more quickly; there is still a hard cap on the total future number of coins.
Quantum computing has implications for the transmission of coins but has no implications for mining. There is no evidence that QC is going to make it easier to invert hash functions.
I thought so too, but SHA-256 should apparently be susceptible to Grover's algorithm, which would make mining O(sqrt(N)) instead of O(N).
Of course, a practical quantum computer would also likely break public key cryptography, so you could just take other people's coins instead of doing all that tedious hashing.
You can quantify how much the value of gold is through actual physical use value and how much is through mere speculation. So yes, 'using it in jewellery and circuits' is a perfectly fine explanation.
It's not a binary choice. Things don't have to be pure speculation or pure 'real' value.
People have been desiring gold for longer than documented history. It's beautiful to look at. It has inherent value, which is evident in the fact of it's desirable beauty and long history.
Even in worst case scenario that it's comparable in value to dull, metallic gray Rhenium for its industrial applications: $42 an ounce is better than BTC's worst case $0. You'll always be able to exchange gold for bread.
> People have been desiring gold for longer than documented history.
Yes, it's been around longer than Bitcoin. Not really sure what you're trying to indicate there.
> It's beautiful to look at.
Which is responsible for a very small fraction of its value. Most gold is not used in jewelry.
> It has inherent value
There is no such thing as "inherent value". Humans assign value to things. Most of the reasons that humans assign a high value to gold (fungibility, divisibility, unforgeability) also apply to Bitcoin, only more so.
I find a lot of engineers approach this topic so objectively. "Beautiful to look at? Pfffah! That doesn't compute, therefore it's incorrect."
Here's some additional benefits of gold:
* gold requires minimal knowledge to protect. To steal it you have to physically break into their home. They may be armed and they may kill you in the process. (My father can't protect his computer to save his life, but Lord save the poor soul who breaks into his home!)
* it's historically been very easy to trade gold for food.
* gold is worn on the body to show status and to look good. (Of course a software engineer is above such lofty extravagances which simply don't make sense)
* gold has industrial applications.
* you can look at gold and hold it in your hand. It's quite shiny and surprisingly shiny.
None of these things apply to BTC. Gold has inherent value because people inherently want it. Isn't 10,000 years of people digging it out of the ground evidence of that?
Either you didn't comprehend what I said, or you're intentionally being obtuse; I love the aesthetics of gold as much as anyone, but that simply does not account for the price of gold from an economic perspective. The vast majority of gold is sitting around in vaults, not being looked at by its owners.
> gold requires minimal knowledge to protect.
That's true, but you also can't protect it very well. Governments have a bad tendency to take people's gold away at certain times (even the US has done it before), and good luck protecting against that. It's not exactly hard for standard-issue thieves to get away with either. Bitcoin may take slightly more effort to protect, but you get a lot more for your effort.
> it's historically been very easy to trade gold for food.
You're just re-stating the fact that it has value.
> gold is worn on the body to show status and to look good.
Yes, this is one use of gold, as I already mentioned, and as I also already mentioned, this only accounts for a small fraction of gold's value.
> gold has industrial applications.
While true, this again is a very small market compared to the use of gold as a value store.
> you can look at gold and hold it in your hand.
That's true, and convenient, but hardly a necessary feature of a store of value. I can't hold in my hand the money in my bank account or my copper holdings. I still value them.
> It's quite shiny and surprisingly shiny.
OK, I think you have a repetition problem.
> None of these things apply to BTC.
And none of them are particularly relevant.
> Gold has inherent value because people inherently want it.
People don't "inherently" want it any more than they inherently want rubidium. It's just a metal; and yet, due to a confluence of circumstances and the network effect, it's subjectively very valuable for pretty much everyone.
> 10,000 years of people digging it out of the ground
You're repeating the fact that gold has been around for a long time.
