Notice this is a backwards looking theory. There is something being used as money and we’re attempting to explain the praxeologic means by which it became so. It does not determine what is money, only attempts to explain how what is money became so. It is not a rubric for determining what is money.
The original use of bitcoin was mining them as an investment. This is what got the demand for them going, speculators with processing power.
A person speculates when he thinks the demand for something is, or will be, higher than the current price indicates. He assumes this imbalance will right itself in time, and so buys it, with intent to sell when market forces of supply and demand finally give the object the higher price.
You see where we are going with this. Saying a thing has value because it is underpriced is putting the cart before the horse. We are now discussing how the price of a bitcoin determined in the first place. And your answer is by people thinking its price is too low. But the question is how did those people themselves determine what the price should be?
Here’s another objection to your explanation. You think that a person can make money by taking something that has no use whatsoever, gambling that the price he pays for it now will rise, and then sell at the new price. Yes, he can sometimes do that, if he can convince fools to buy his useless object. But of course those buyers are just fools. A useless object will, by the inexorable market forces of supply and demand, drop to zero in the long run. In other words, you have admitted that bitcoin is doomed.
You’re not reading. I didn’t claim Mises confused anything, nor that anyone confused A with B (exchange value with non-exchange value). What I did say:
The second paragraph wasn’t addressed specifically to you. In your case, you seem to accept that any value - even sentimental - can count as “industrial/consumption value” in the theorem. No problem there.
Your core objection then seems to be that the number of people that value bitcoins for non-exchange purposes, their relevance in society, and the difference for them between having 1 BTC and 2 BTC are negligible. These are of course judgments, rather than anything that follows from the regression theorem itself.
Now, the following quote by Mises:
How many people make a market? How many people must agree on the price for it to be “objective”? If Grandma Koto down the street accepts 1 bitcoin for five loaves of bread, are individuals really not in any position at all to estimate the value of the money? These are fuzzy premises…and yet you go on to call this chain of reasoning “Impeccable logic. Apodictically certain.”
This is why I can’t take the regression theorem objection seriously. Apodictic certainty based on fuzzy premises is nothing but false rigor. And it shows when you have to make anciliary claims. If you really have apodictic certainty, you don’t need to make additional supporting claims about nerds, retards, used tissues, tiny minorities, or other things that would appear to some to make bitcoin adoption improbable, to render it with negligible market value, etc. These just serve to belie the claimed rigor, showing that it rests finally on subjective judgments. Negligible and improbable are not concepts that mix well with apodictic certainty. You’ve got to choose one or the other!
Personally the regression theorem argument is dead to me. Barring some new angle on it, I see no reason to address it further as it doesn’t seem to be misleading very many people anymore. The only thing left to discuss is whether the tens of thousands (hundreds of thousands?) of people who value bitcoin is not enough to network up to mass adoption.
Still unaddressed: Network effects, Grandma Koto, the fact that bitcoin is in right now the universal* medium of exchange on Silk Road (it has $2 million turnover per month in bitcoins), and the fact that anyone who owns 100,000 bitcoins is in a very good position in life.
*See how context-specific this word is? Again I ask, how can we privelege the statement, “Ithaca Hours (or whatever) are commonly accepted in the Ithaca community” over “Bitcoins are commonly accepted in the Bitcoin community”? What really does universal mean? “Universal” always references a community, and that community can of course be geographically small - this isn’t controversial. Why is it OK for that community to be numerically small if it is geographically small, but not OK for it to be numerically small if it is geographically large? Let’s at least get some consistency on this. If all 35,000 Lichtensteiners used Lichtenstein dollars and that makes those dollars a money, why does 35,000 bitcoiners worldwide using bitcoins not make bitcoins a money? This implicit bias toward geographically formed communities smacks of outdated, pre-Internet thinking. Many aspects of commerce are easier when people you can exchange with are nearby, but certainly not all of them.
red herring. Youre utterly unable to deny the fact that “people value bitcoins because they are useful” so you resort to simile.
the original german is properly translated as “valueless in itself” which certainly does not apply to bitcoin. Youre done here.
you dont need to believe me. Such a thIng is apodictically certain. Refer to the regression theorem. Or do you now somehow believe that money can start out as money without ever having been non-money? And the regression theorem must be empirically verified?
all of them. All of the people who are relevant, anyway.
right there, with the people who were using it, the only people who matter for this question.
Do you mean to ask me how much money they were paying for bitcoins before bitcoin was money to them?
you probably never heard of it because you dont get out much.
what part of apodictically certain are you confused over?
you dont understand what bitcoin is. That “arrangement” is cryptographic in nature, as is the message. Since the message is public and encrypted, and the author is publicly pseudonymous, this system is a peer-to-peer decentralized cryptographic communications network. Once you understand this, you might begin to see why bitcoin has industrial value. Hopefully the public shame of having been so wrong for so long wont cause you to do something drastic like implode your account.
The answer, of course, is that it depends on how many people find the thing useful. If very few people have a use for it, then the demand will be lame and the market price will be zero.
For starters, the parts I bolded are fuzzy and/or judgments. Beyond that, the blog post just doesn’t seem to address much of any of the recent points made, at least those I made. But again, I don’t find the comments via the regression theorem necessary to address further at this point.
If your problem is with the laws of supply and demand not being quantitative and are in your opinion fuzzy and judgemental, I can live with that, just like every economist on the face of the Earth, Austrian or not, has no problem with it.
Here is the impressive title, complete with Olde English:
Bitcoin and the Numbers Game, Part 2, in Which we Shew Two Different Ways that Bitcoin has Never, Not even Once, been used as a Medium of Exchange.
The summary:
We talk about the history of currencies similar to bitcoin, which were all flops eventually, but in some cases lasted almost 20 years before dying.
We also explain why bitcoin has never been used as a medium of exchange, not even once, despite the existence of mtgox and all the other bitcoin hangouts.
since you deliberately refuse to educate yourself on bitcoin, you must try to bolster your argument with irrelevancies. Oh the shame! Please end this pathetic charade, Dave, and forevermore refrain from commenting on bitcoin.
I will take an educated guess and say that those events are extremely rare. I will go so far as to say they never happen. I think that everyone who sold something and accepted bitcoin in payment then went right ahead and redeemed them for dollars.
[/quote]
Addendum, just to make my point perfectly clear to all.
Now I think about it, I am positive that nobody ever got up in the morning and said, “I have some apples to sell, and i want to trade them for oranges, and and beer, and diapers for my little tyke. What’s the most convenient way to do that? I know, I will look around for someone who will give bitcoins for my apples. Then I will look around for someone who will trade in my new bitcoins in exchange for apples, someone else who will give me beer, and a third person who will give me diapers.”
I can say with utmost confidence that such a thing never happened. But people say that every single day with dollars. That’s why dollars satisfy the definition of medium of exchange, and bitcoins do not.
This is why I think the theory itself is deficient. And again, the theory nowhere says that something with exchange value can’t be money. It only provides a rationale for how something with exchange value got that way. However, if it found something with exchange value and no commodity value, that would be something that shows the theory itself to be insufficient and thus require a new, broader theory, or some exception taking.
I’ve said from the beginning that you’re worshipping authority on this topic without looks at the facts staring you in the face, and it’s completely ridiculous. You simply don’t see the forest for the tree.
Not at all, that is the very job of any speculator. Can’t believe you’re still trying to weasel out of the obvious.
Doesn’t really matter. We know they historically did value bitcoin assuming the price would go up, based on what’s known about bitcoin. Just like any speculator on any object of speculation.
Whether it has a use is immaterial and also subjective in terms of investments. One man’s reasonable investment looks like folly to another. That’s why speculation pays off–he whom perceives the future best makes money. All that’s needed to speculate is a reasonable or even a scant suspicion that something may rise in price at some future point. Importantly here, the thing -does not- require any commodity or industrial use. People often speculate on art, for instance. I’ve read about a group of traders who loved speculating on odd things. One guy bought 30,000 tins of expired sardines. And, realizing what he’d done, he asked the group if he could eat them. Someone replied, ‘they ain’t for eaten, they’re trading sardines.’
Or if just more people speculate like him, thus raising demand and the price with it.
You’ve devolved to attacking these speculators? Umm, you do realize a lot of them made serious money speculating on bitcoin, right? Like, moooooneeeeeh. This isn’t a rational argument. Your reasoning is falling apart in the face of the speculation claim of its origin.
Unless it gains exchange value. Which it now has, as a direct consequence of the speculators pumping value into the currency on a speculation basis.
That’s been the genius of the currency thus far, to tie together speculators (miners) and the exchange aspect–even to the point that the proocessing the miner does is conflated with the exchange aspect.
Yes, I think we have a good answer now as to bitcoin’s original use and the way it gained value to become a medium of exchange. And I think it destroys your reasoning handily.
Now… one second here. If someone sold, say, yen and bought dollars… that would make bitcoin a medium of exchange by your own rationale.
And we know that’s happening every day. So, why are you limiting a medium of exchange to mere goods like apples and oranges?
Seriously? Your whole argument comes down to this easily destroyed rationale? Man, you are way too committed to a bad premise. What exactly do you have against bitcoin? This has to go beyond mere reason, did you lose a fortune on them or something?
People are selling yen and buying bitcoin, then buying dollars with the bitcoins? Why would they do that?
To send money overseas, why else. Come on. Any number of reasons beyond that come immediately to mind. Businesses might want to repatriate profits or do business in the local currency, etc., etc.
***I don’t know what ‘email’ you’re referring to. I have not emailed you or anyone.
Great point using cryptography as the first non-monetary use of bitcoin. Bitcoin adopted cryptograhpy in order to function. This service was in place and “universally” valued before bitcoin could be developed and this service allows it to function as money. This is where I think the value of bitcoin lies, it’s fast and private. It seems we can use the regression theorem to trace bitcoins origin back to this service.
Its true! Bitcoin is a cryptographic datum with properties that are perfect for anonymous clandestine communications, completely disregarding a monetary aspect. The monetary aspect improves the industrial properties by hiding the communications functions amongst so much commercial noise. And since we KNOW (per Mises) that something CAN NOT become money without some sort of industrial use beforehand, we are forced to conclude that this is it, the industrial use is a robust clandestine pseudonymous digital communications network. Bitcoins are divisible to eight decimals so I doubt this function will cease due to bitcoin appreciation. Does anyone know how to send and receive bitcoins via sms? Then all you need is a set of one-time pads and wallets for you and your friend.