I spent most of yesterday writing my research paper and got tired, so I did some reading about bitcoin last night. And I still don't understand how or where they derive any intrinsic value. To be sure, they have extrinsic value because people have agreed to use them as currency, and they appear to be as secure (if not more so) as any other electronic means of payment.

The only argument that sort of made sense to me was that someone has to invest the time, computer power, and electricity to "mine" them, just as someone has to drill a well for oil, or dig/pan for gold. But that doesn't make much sense to me either, as both gold and oil have obvious non-monetary utility that gives them intrinsic value, even if they're just sitting out waiting to be found.

What utility--if any--does bitcoin have besides being a form of currency? Or is there something else that gives it inherent value?

Because there are only 21 million Bitcoins allowed to exist.

The more people that want some of the 21 million Bitcoins the higher the price will go.

Beanie Baby price inflation. Restrict the quantity and pump the desire.

Because you can buy a kilo of Peruvian marching powder without having to go to the ATM

you sound like a reader of Kinky Friedman books

"Online drug markets are part of the �dark web�: sites only accessible through browsers such as Tor, which route communications via several computers and layers of encryption, making them almost impossible for law enforcement to track. Buyers and sellers make contact using e-mail providers such as Sigaint, a secure dark-web service, and encryption software such as Pretty Good Privacy (PGP). They settle up in bitcoin, a digital currency that can be exchanged for the old-fashioned sort and that offers near-anonymity during a deal.

Almost all sales are via �cryptomarkets�: dark websites that act as shop-fronts. These provide an escrow service, holding payments until customers agree to the bitcoin being released. Feedback systems like those on legitimate sites such as Amazon and eBay allow buyers to rate their purchases and to leave comments, helping other customers to choose a trustworthy supplier. The administrators take a 5-10% cut of each sale and set broad policy (for example, whether to allow the sale of guns). They pay moderators in bitcoin to run customer forums and handle complaints."

https://www.economist.com/news/internati...-forced-compete

I'd surmise the answer can be said in a single word, "belief."

Like many, if not all "internet/Ecommerce" like facewaste/fb, people believe that there is value and therefore invest.

Facewaste has probably since bought physical buildings, property, etc., but for the most part, other companies see it as a place that millions of people visit, therefore they buy "ad space."

Because of that, facewaste grew in value since 2008 when it was simply a high school yearbook online. Incredible!

...and to think the the idea was stolen, making that weasel a billionaire in his 20s.

Bitcoin, I don't know much about it, but what a friend told me is that bitcoin is "digital money backed by gold in a vault in the Middle East."

Is that accurate? If you buy into bitcoin, you are buying "value" online, but you don't actually "have" the product, you just have numbers in cyberspace that say you own "value." ???

Addendum: My assessment about "belief" is that Ecommerce is based on a belief system of value that grows before the company starts to build real assests. Once the company does, there is still "imaginary wealth" based on cyber numbers/belief that the company/person has real wealth.

Addendum: This isn't my theory. I thought it out myself, but I wasn't the first by any means. There's actually a line about it in the movie "Why Him?"

...------

You hit the nail on the head about the extrinsic value. It's like any other currency, a made-up form of payment that is valuable only because as a general rule, people agree on what it is worth. The same goes for bitcoin. The "safety" advantage to bitcoin is that it is legal, safe and accepted in a handful of countries. I recently read "Rich Dad, Poor Dad" by Robert Kiyosaki who said it perfectly. His "rich dad" told him that any currency that isn't backed by gold or silver is only an idea and you shouldn't save your money because it is only worth something as long as two people agree on its value. Most currencies anymore have only confidence-backed value and bitcoin is no different. The second advantage Bitcoin has is unlike the USD, it cannot be printed until it is worthless, there is a set amount of bitcoin that will exist ever, no questions asked. As long as more people continue accepting bitcoin this will, in theory, drive the price up, it's supply and demand, a set supply and rising demand results in higher price. If merchants, banks or whoever else decides to stop taking bitcoin it should go down in value, in theory. When asking yourself why bitcoin has value ask yourself why the USD has value? Answer one of the questions and you have answered both. Currencies aren't supposed to have intrinsic values, thats why we no longer have silver and gold coins in circulation.

I believe that these crypto currencies are going to become more popular due to the companies that accept them will not have to pay the % that each transaction from a VISA, AMEX, MC... ect charges.

Neither you nor your friend seem to have much understanding of the things you speak of

I believe some day there will be news leaked of some hanky panky going on and it will be renamend bitemecoin.

Why did people pay $250 or more for a beanie Baby ?

the belief that it will be worth more in the future.

My belief is that bitcoins will go the way of the beanie baby.


MO

If it were backed by ANY hard assets--gold, land, oil, etc--I'd understand it better. But the one thing I can say with confidence about Bitcoin is that it is NOT backed by anything of value, but is rather entirely in the realm of cyberspace.

The arguments some of you have made about limited quantity do make some sense, and I've seen them in more 'scholarly' articles.

I guess I'm just old fashioned. If I can't touch it, I have difficulty believing that's its really money.

Because people invest into pyramid schemes every day

The US dollar isn't backed by anything either. It used to be backed by gold until the gold standard act was removed.

https://en.wikipedia.org/wiki/History_of_the_United_States_dollar

Now it's value is basically because we say it has value.