A Bitcoin is a contract. just like a dollar
Comment on Anon gives up on Bitcoin in 2010
DankOfAmerica@reddthat.com 20 hours ago
I don’t understand how bitcoin has value. I know the dollar has no intrinsic value either; we just all agree it does. But the difference between the dollar and bitcoin is that if you decide to stop trading using the dollar, you become a terrorist and get a free hellfire delivery. If you stop trading using the bitcoin, no one cares. How did this whole bitcoin to value begin? How does a brand new currency start without the backing of a state? Why does it keep having value? It’s interesting af.
nutsack@lemmy.world 1 hour ago
Dragon@lemmy.ml 2 hours ago
It has value because it can be exchanged for dollars. It originally could be exchanged for dollars because people believed in it the same as a God. It is a simulacrum of dollars that became hyperreal.
KillingTimeItself@lemmy.dbzer0.com 11 hours ago
bitcoin has value because people perceive it to have value.
Basically, it went from like 10 people using it, where it was functionally worthless, to like 10 million people using it, where it’s value per bitcoin increased by one million fold.
net money in = net money out, the early investors are just reaping the rewards of other people investing their money into it (and then losing it)
merc@sh.itjust.works 10 hours ago
bitcoin has value because people perceive it to have value.
Bitcoin has value because they think other people perceive it to have value. Same with dollars, euros, pesos, etc. It’s not like art where the value is in the eye of the beholder. It’s something where you have to be confident that other people will perceive it to have value too, so when you want to exchange it, there will be other people who will accept it.
Dollars, euros, pesos, etc. have value because they’re accepted in thousands of stores, and because you need them to pay your taxes. Even if you, personally, don’t think you’ll need to hold onto any pesos to pay your own taxes, you know that there are likely to be millions of other people who will need them for their taxes.
With bitcoin, there are essentially no places you can use it to pay taxes, except maybe El Salvador (I don’t know if they’re still doing that). You can’t use it to pay in many stores. Just about the only thing that keeps creating demand for bitcoin is that there aren’t many other ways to pay off ransomware demands. Unlike traditional currencies, Bitcoin really relies on the belief that someone else will continue to believe that Bitcoin is still valuable.
Will the bubble eventually burst? I think so. I just think it could stagger on for a few more decades before the belief it has value eventually collapses.
SpongyAneurism@lemmy.frozeninferno.xyz 3 hours ago
Will the bubble eventually burst? I think so. I just think it could stagger on for a few more decades before the belief it has value eventually collapses.
I don’t think the lost belief in its value is going to collapse on its own. It is already accepted to have value by enough people, to sustain that belief. (A bit like a religion, if you think about it)
The downfall of bitcoin will lie in it’s technological design. The whole premise of the underlying blockchain technology relies heavily on Moore’s Law to keep working indefinitely. The complexity of the cryptographic calculations that have to be solved for each BTC transaction increases with each transaction, so it relies on exponential growth of computing power, or rather energy efficency of computing (which is a bit differen than Moore’s Law), to remain useful. The more widely adopted the bitcoin becomes and the more it is traded, the greater the challenge to keep it operational. That is a very impractical limitation for it to be useful as an everyday currency. If, at some point, the time and or cost-efficiency of the crypto-calculations cannot keep up with the number of BTC transactions anymore, the operational cost (or inconvenience) will limit its use. And at that point, I think, the speculation bubble will collapse eventually.
Now when that is going to happen, I cannot possibly know. I’d invest in leverage products against it, if I did.
Maybe progress in chip manufacturing will still continue to exceed my expectations. Maybe a breakthrough in quantum computing will enable the BTC to become a universally accepted currency or maybe it will break its underlying cryptography and kill it dead.Whatvever it may be, but my prediction is, that if the bitcoin is to collapse, it will probably have a reason rooted in technology.
DavidDoesLemmy@aussie.zone 3 hours ago
That’s not how the complexity of the mining works. It doesn’t increase with every block. It scales depending on how many miners there are (essentially). So if many people stopped mining, the complexity required would decrease.
merc@sh.itjust.works 3 hours ago
I don’t think the belief in its value is going to collapse on its own. It is already accepted to have value by enough people, to sustain that belief.
These things change. People once believed that diamonds were a valuable rock and essential for proposing marriage, but now people are starting to think that’s BS. There was massive social pressure, plus expensive propaganda from deBeers trying to keep people buying diamonds. But, people woke up.
So much of crypto’s promise is that there will always be another sucker who will buy your bitcoin for more than you paid for it. But, if actual real currencies that people pay taxes with can collapse, crypto could collapse a whole lot faster than that.
reksas@sopuli.xyz 2 hours ago
once you get the ball rolling it will keep rolling. That is what all those other coins are trying to do, though they settle for pump and dump too.
Shteou@lemmy.world 18 hours ago
After years of lurking and staying quiet on the subject, I’ll finally bite because it’s a valid question and the typical responses are usually poor quality. There will be simplifications, omissions, and errors, but hopefully you’ll find it useful nonetheless.
I’ll speak specifically to bitcoin, and ignore other crypto currencies where things get increasingly complex.
As you suggest, it has no intrinsic value just as the dollar doesn’t, in the sense it’s not backed by some physical asset.
Where does the value come from then? Value can be derived from your ability to transact with a currency. There can also be speculation around future value. Both are certainly true of Bitcoin, but it’s an evolving ecosystem. In the early days it was a novel idea and a very small number of people transacted with it and derived value that way. Since there’s a finite number of BTC value is driven up as more people want to hold it (regardless of whether that’s for transaction or speculation). During the silk road period (and to this day), the thought of a decentralised (and somewhat anonymous, let’s disregard the complexity and just say that people thought it was) currency would be great for buying and selling illegal goods and services. These transactions increased the value. Since then, there’s been a lot more mainstream interest in BTC, largely driving speculation but also transactability. Again, value increases under these conditions.
A lot of criticism of BTC is that it’s pure speculation and there’s little to no transactability. My thoughts on this is the majority of commenters are simply those that derive no benefit from transacting in a cryptocurrency. The USD, Euros, GBP are all amazingly transactable currencies, so why reach for crypto? The fact is, there are a lot of real world transactions happening with BTC and crypto in general. Several South American countries find themselves with a currency which is an incredibly poor store of value and BTC insulates it’s citizens from this. The remittances market is a huge cluster fuck of middlemen and fees, bitcoin is often a better deal.
All this is still changing though. Substantial amounts of crypto transactions are now facilitated by financial entities with improving KYC by firms like Chainalysis. Regulation is forming rapidly, recognising BTC like many other currencies or assets, ensuring that the majority is exchanged and transacted at regulated entities. Still volumes go up. There are more and more companies who will transact directly in crypto.
So I ask the question, if the trajectory of bitcoin is that more and more people are not just holding it, but using it… Why wouldn’t it be more valuable, why wouldn’t you have expectations of it like any young currency?
Re your point about trading in dollars. There’s plenty of states, entities and people who don’t use the dollar and they get on just fine. At a national level the US has a vested interest in ensuring a country does trade in dollars, or conversely making sure they can’t.
Now the USD is backed by the USA and that’s powerful, so how did BTC get started? It’s mostly the protocol. Miners find coins and get paid tx fees in exchange for securing the network against a sybil attack. We transact with BTC, or store it. Institutions are formed or pivot to support the ecosystem, the more people using it there more value there is in supporting it.
BTC is 16 years old now and it keeps having value because it’s valuable! Perhaps the greatest question is does the value outstrip the speculation? I won’t try to answer that, but we’ve seen a lot of crypto bubbles burst because of this… yet a few remain?
I’ll stop here because I could keep expanding and refining, but I have a dinner to go to. Hope this helped in your understanding!
DankOfAmerica@reddthat.com 14 hours ago
Thank you very much! That all makes sense to me. I think I have a basic understanding of why bitcoin can be an effective currency, but I’m still unsure about the very beginnings though. I don’t understand how it took hold. Was it just a small group of friends that were pretend-trading with each other? Even if it was great for illegal trades, how did it start? There had to have been at least 3 entities: 1) buyer, 2) seller, & 3) somewhere for seller to spend gains.
I hadn’t thought of the impact that being decentralized would have. If people like somewhere where inflation is going wild, bitcoin is a better option. Now, I want to see a graph of the value of bitcoin vs. the US dollar especially during and after COVID.
we’ve seen a lot of crypto bubbles burst because of this… yet a few remain?
Considering that even government-backed currencies have lost their value, I am willing to bet that there are powerful people supporting bitcoin. Otherwise, people would just be bouncing around cryptocurrencies like a casino.
JayDee@lemmy.world 13 hours ago
The bottom line is that all crypto is fiat with gimmicks at the end of the day. The only value it has is the perceived value. While with the USD you have a government body proclaiming it’s value, along with a vast network of businesses willing to honor its value with goods and services, with crypto you have a patchwork of individuals - mostly crypto hoarders - proclaiming it’s value, with very few legitimate businesses actually accepting the currency.
If you have the spoons, you should watch this full breakdown. It covers both crypto and NFTs in-depth.
DavidDoesLemmy@aussie.zone 2 hours ago
Does the US government really make the value of the US dollar? When inflation was out of control in Mexican America, the US government had a lot of trouble stopping it.
earphone843@sh.itjust.works 14 hours ago
It’s been a while since I looked, but it used to be that bitcoin value pretty closely follows the stock market.
DavidDoesLemmy@aussie.zone 2 hours ago
They’re somewhat correlated, but I think this is more related to times when people have money to invest.
index@sh.itjust.works 3 hours ago
I don’t understand how bitcoin has value.
Study how they work. You are on lemmy a dencentralized and open source platform.
LibreHans@lemmy.world 19 hours ago
I don’t understand how bitcoin has value
The first major use case were donations to wikileaks, because the existing financial system shut them out. Recently, the Americans shut Russia out of the financial system and stole their money. Escaping financial repression is valuable (even if you don’t agree that people should be able to escape).
DankOfAmerica@reddthat.com 14 hours ago
oh shittttt. this is getting interesting. i got obsessed with the Russia bs when Ukraine was first invaded, but I slowly lost interest because all things psychopath just get me too upset. but it’s back to the rabbit hole! ✌
SoftestSapphic@lemmy.world 12 hours ago
It has value because people are dumb and want a magic way to escape having to contribute to a society that doesn’t reward them for it
Aggravationstation@feddit.uk 5 hours ago
They also want an anonymous way to buy drugs
lime@feddit.nu 19 hours ago
drugs. the answer is drugs.
admin@sh.itjust.works 19 hours ago
Thats Monero my sweet summer child.
lime@feddit.nu 14 hours ago
not at the start it wasn’t
bountygiver@lemmy.ml 13 hours ago
BTC also still can remain untracable as long as you only deal any tradings of it with people who don’t keep other logs that tie to your identity. (Cash trades when buying BTC, and products sellers don’t link any deliveries with your BTC transaction)
rbesfe@lemmy.ca 19 hours ago
More specifically it’s international crime organizations using it as an alternative to moving cash across borders
DankOfAmerica@reddthat.com 19 hours ago
ohhhHHHHhhhhh! The criminal organizations are the ones propping that up. Use bitcoin or get cartelled?
LodeMike@lemmy.today 13 hours ago
The difference is that the US government can just print money whereas the supply of BTC is limited.
31337@sh.itjust.works 1 hour ago
In the early days, the Bitcoin community was very ideological (and I guess a lot of it still is). Libertarian, Mises Institute, Ayn Rand, abolish the Fed types. People actively willed-it into having value (e.g. setting up a pizza delivery for 10,000 BTC). It’s specifically designed to be “digital gold,” where the amount that can be mined decays logarithmically over time, so supply is effectively constrained (very much so now), and the more people that want to buy it, the more it’s worth, because that means you need to find people willing to sell it at a particular price. If you were to think of it as a currency, it would be a disinflationary currency, or effectively deflationary (because coins get “lost”). This gave and gives people that hold Bitcoin financial incentive to proselytize Bitcoin so their holdings are worth more. Overall, it’s a pretty stupid idea, IMO, and the crypto space is full of mostly scammers and grifters now. A deflationary currency is a really bad idea under capitalism, since it encourages people to just hoard the currency instead of loaning it out, investing in new businesses, etc. Gold is also a horrible currency, which is why no country uses it as such, or even backs its own currency with gold anymore.