Smiling Dave,
instead of lamenting about people not acknowledging the great truth you purport to represent, how about you start presenting coherently formulated arguments, as opposed to random fractions and anecdotes?
I’d say his post to me was coherently formulated.
Indeed, that’s one of the reasons why aircraft designs and operating systems are not money.
Who’s telling anyone whether they should or shouldn’t value something? I am only explaining why I don’t buy/value bitcoin and why I predict that no one else will in the future. I wasn’t into beanie babies either. Feel free to value whatever you wish and I will do the same.
I thought we were discussing the value aspect. Unique immaterial goods can be valuable even if they are members of an infinitely large set. Your argument does not address scarcity. Bitcoin is money because it is highly liquid, durable (for a digital good), fungible, divisible, verifiable, and scarce.
sorry, I didnt mean to put words in your mouth, that seems to be the tone of the anti-bitcoin bandwagon.
Pete,
Thou hast committed the offense of cherry picking. My chart of bitcoin goes from day 1 of its existence right down to today. Let’s see what gold looks like from that perspective, not some time interval you searched for that would make gold look bad.
I say it wasn’t, because it is full of holes and riddled with vagueness. In his post to you, he neglected to address the price of fiat money. Of course we all know that Mises’ Regression Theorem does explain the emergence of price of fiat money too, but Smiling Dave’s post was formulated in a way that precludes fiat money from having a price. He also neglects other goods that are of no use to Robinson Crusoe, because their use requires either social interaction, or infrastructure which he does not have (for example, a telephone). Other examples include positional goods and non-money pure network goods (e.g. language).
He can’t formulate with sufficient precision, he just waddles from one error to another.
z1235: the reason why network goods such as, say, operating systems or money do not randomly displace each other is the network effect, which dampens the flow of users between the groups. Of course there are other oddities such as multihoming that can skew the results, I’m just pointing out that this plays a significant role in the process.
In what manner does Smiling Dave neglect fiat money? I see SD as explaining that there needs to have been some sort of original value that people had about the object in question. To understand fiat money, we must understand the origin of money. The problem with bitcoin is that people are trying to say it has qualities that make it a better medium of exchange than anything else.
But so what? That is not the question. The question is why should the people of any given community/society care? Dave has pointed out fads. There are always going to be some group of people that value something more than the rest of society. But the problem with bitcoin is that the rest of society won’t value it as money.
You disagree with his assessment. Only time will tell, but I’m with Dave on this one.
People can use bitcoin as a…medium of exchange…This…establishes a starting point for monetary value. This is all in complete agreement with Mises’ regression theorem…
You aren’t paying attention. Basically you are saying that it has intrinsic value, as money. Check out my latest blog post about how amusing that is, and why.
I am glad, for your sake, that you don’t waste your precious money on bitcoins. Glad we agree on something.
Other people value it as a medium of exchange, other people use it as money, its money…trying to say that what they use as money isnt money because its not money to you makes you the idiot.
You aren’t paying attention. Does the phrase “generally accepted” ring any bells?
Smiling Dave,
I only repeated the “cherry picking” you started to invalidate your point. I do not claim that “gold is like Bitcoin”, rather I am showing that you’re inventing arbitrary assumptions to fit your pseudo-arguments. Just like you can make arbitrary assumptions that lead to your conclusion, I can make arbitrary assumptions that lead to an entirely different conclusion.
Furthermore, your chart is not from day 1 as you allege, since on day 1 of Bitcoin there was not only no Mt. Gox, but also no price for Bitcoin. The price of Bitcoin, based on my research, only formed when Bitcoin was already about 10 months old, and it took further 9 months for Mt. Gox to appear.
Last but not least, you as usually avoid addressing any of the arguments that I make.
Yes, they are valuable until another (better) immaterial good drawn from said infinite set replaces them and makes them worthless (paper winged aircraft designs, Windows 3.1, etc.). Our inability to predict the qualities of bitcoin-97 is one of the reasons why bitcoin is not money today and probably never will be. If we could predict that in the near future alchemists would devise precious metals with qualities similar to (or better than) gold, the attractiveness of gold as money would be significantly diminished, too.
Yes, it does. Crypto-patterns are not scarce. Gold atoms (still) are.
you are equivocating on the definition of “money”.
wow, youre annoying. What is so clumsy about those names? They are certainly more descriptive than “intrinsic value” which isnt really intrinsic lol
the industrial value of bitcoin is as a pseudonymous digital instant balance transfer mechanism between crusoe and friday. It has features like peer verification or whatever that bitheads find fascinating. Enough bitheads start using it to transfer meaningful balances and it becomes money. See, no equivocation, just focusing on the facts. Bitcoin is now money, because it is a primary medium of exchange in some markets. Freedom of association, see? Those bitcoinheads dont have to thnk about you, and neither do we when we make socioeconomic judgments of commodities like pork bellies or bitcoins.
youre deliberately ignoring the bitcoin market. Freedom of association, gold is money but can you use it at publix? Not without an intermediary. You dont have to like ice cream to realize that theres a market for ice cream. You dont have to rent in order to recognize that people rent housing. You dont have to be long on bitcoin to realize that, in some markets, bitcoin is money, by definition, in practice, and in accordance with the regression theorem. Thise guys in nh could still use bitcoins to settle accounts amongst themselves, even if the internet market disappeared. More than likely, its random bitheads who would keep trading bitcoins if it disppeared in nh.
gotlucky: Smiling Dave says that money must have “use value” before it has “exchange value”. He did not say anything about the emergence of prices, which is the actual point Mises was trying to make. Fiat money does not have use value, but it can piggyback on the prior prices of commodity money (and Smiling Dave omitted this). So that’s two gaps already. Now I’m not claiming he does not know it, but that he cannot formulate it even though he knows it.
Furthermore, there is a graver error in Smiling Dave’s argument: money (or media of exchange) do not need use value to be money. Not according to Mises, not according to Rothbard. Once they are media of exchange, the network effect eliminates the necessity of other sources for the price. The “hardest” interpretation (with the use-value twist) of the the regression theorem says is that media of exchange need to have a use value before they are media of exchange. But Bitcoin already is a medium of exchange (and a highly liquid one at that). So whatever the regression theorem has to say about Bitcoin, it’s already too late. But Smling Dave somehow absurdly twists the causality around.
Whether any given community/society cares about Bitcoin is irrelevant. Similarly as it was irrelevant whether people cared about the internet before it was mainstream. Either the infrastructure based on Bitcoin matures and it overcomes the network effect of fiat, or it does not mature and will linger around in its infancy or even collapse. But as I attempted to explain, Bitcoin has shown that the super low transaction cost monetary systems that were hypothesised can empirically exist. There is no putting the genie back in the bottle. Unless the whole civilisation collapses by then, one of those hypothesised systems will push out the current one, just like the internet has pushed out less advanced systems (e.g. letters, fax, books, tv), because they cannot compete with the internet on transaction costs.
then people upgrade. They use the new money, I expect this to happen several times before diehards begin to accept purely digital cryptocurrency. Still money. I never said its good money.
not tracking here. Seems to me, that people use whats available until something better comes along. I imagine a transition from one cryptocurrency to another would be a market event, just like any other. Some people make money, some lose money. Doesnt mean its somehow not money.
not really, people would hoard gold until the z1235ium became available, then buy it up as soon as they could, and people would still use gold for transactions as z1235ium gained a market presence. People still ride bicycles right? Copper isnt as good of a money as gold or silver, yet somehow you can find it in bullion form. Bitcoin is a monetary service, perhaps a new class of money, but still money. Only because of all the crazy bitcoinheads in nh and on the dark internet. But its a fact, thats a market and bitcoins are commonly accepted there.
functional cryptocurrency units are scarce, and functional cryptocurrency types that are commonly accepted in certain markets are also scarce. Those are finite sets.
My grandfather always said, “Figures never lie, but liars figure.” Meaning that you can interpret an amazing amount of things from some set of data.
Bitcoins are demonstrably better than every other medium of exchange currently on the market. Transaction costs are far lower, storage requirements are far lower, they’re much faster to transfer, they’re anonymous, they’re immune to inflation or deterioration, and, best of all, there’s no centralised authority.
I understand that many of you think Bitcoin is destined for failure because it has no industrial use. What I want to know is; Why? I thought we fought to have a gold standard because it would prevent inflation, not out of some irrational fear of any competing currency. Bitcoins are immune to inflation.
If Bitcoins are the better currency, they don’t need any other use.
Throw me a bone here*.*
An axe would have value if it was only used to cut wood.
A blender would be useful if it was only used to blend.
Shoes would be useful if they were only used to protect feet.
But a cryptocurrency can’t be useful if only used as currency? Why? Why?
You’ll probably say, “I’m not saying it’s not useful, just that it will inevitably lose all value.”
Why, though? I haven’t heard any clear explanation.
It’s roughly equivalent to saying that all butter knives will inevitably lose value because we have swiss army knives. “Sure swiss army knives suck at buttering bread, but at least if their value for buttering bread falls to zero we can still open our wine bottles.”
Butter knives [Bitcoins] are better than swiss army knives [gold] at buttering bread [Being a medium of exchange], it doesn’t matter that swiss army knives [gold] can be used for other purposes, butter knives [bitcoins] should still replace swiss army knives [gold] as a way to butter bread [medium of exchange]. What part of this are you not getting?
Peter Surda,
It seems the problem here is that you think so long as something is an indirect medium of exchange, then it is money. I was under the impression that money had to be a commonly accepted indirect medium of exchange.
Because if bitcoins arent useful in and of themselves, then they are a token that is ultimately redeemable for nothing. Just like being the last speaker of a dead language makes you an anthropological curiousity. True money is valuable in and of itself, because it carries no counterparty risk.
They are useful in and of themselves. They are a decentralised authenticating unit of account. That’s useful, extremely useful. Bitcoins have gained value because of this utility, not because it’s a fad or for the luls.
Having a backup use for a medium of exchange is nice, but why do you think it’s needed to be “true money”. This hasn’t at all been proven.
You’re saying that bitcoins would have to have some other use in order to ever become money, but how is that any different than arguing that a butter knife can’t compete with a swiss army knife because a swiss army knife has alot of other things it can do?
The butter knife beats the swiss army knife hands down when it comes to buttering bread. You can keep the swiss army knife for its other functions.
Because true money has no real counterparty risk, otherwise its a credit transaction. Both a butter knife and a swiss army knife have an intersection of inclined planes used to cleave material. This is a prerequisite for knifeness, just like an industrial use is necessary for money, because true money has to have zero counterparty risk.
I agree.