[CydeWeys]

So what? I feel like these objections about "intrinsic value" are missing the point. There are lots of things out there that have little to no intrinsic value (like currency) that are nevertheless very useful. You are acting like there is some inviolable law of the world where things without intrinsic value will inevitably become worthless, but there isn't. There's lots of things with fundamentally no intrinsic value that have nevertheless commanded a very high market price for many centuries now.

I'm not saying Bitcoin is necessarily on that path, but there's also no reason it couldn't be, and whether it is or isn't isn't related to any intrinsic value it might or might not have. And lots of things that do have intrinsic value, like grain, are terrible investments because they're easy to make more of and because they don't store indefinitely. "Intrinsic value" is just an orthogonal concern.

[eloff]

You're right.

Fiat currency has no intrinsic value itself, but it can be exchanged for things that do. As long as people treat it like it has value, then it does have value.

The same can be sort of be said for crytocurrency. But it's a lot less liquid, mostly the only thing you can do with it is trade it for other cryptocurrencies or sell it. It's on much shakier ground that people will continue to view it as having value.

My advice, for what it's worth, until people find a practical application for it, stay away from it.

[ilammy]

> Fiat currency has no intrinsic value itself

Fiat currency emitted by governments has intrinsic value: you can pay taxes to the emitting government with it. That's its ultimate value.

In the same vein, some cryptocurrencies have value: you pay with Ether for distributed computations performed by Ethereum network, you way with Bitcoin for your data being permanently recorded on the Bitcoin chain.

[CydeWeys]

"Intrinsic value" is a phrase that has a specific meaning in economics, and you are not using it according to that definition. The current ability to pay taxes with a currency is not intrinsic value by the standard definition of the term. That currency could drop to worthless tomorrow and would be worth nothing. Go ask holders of Weimar Republic marks how much intrinsic value their currency ended up having. None! The value was hyper-inflated out of existence and the country that accepted it as tax payment no longer even exists! But if that currency had been made out of actual gold, then it would've had intrinsic value, and it would still be valuable today.

Guess what ... your dollars today are not made out of gold. They have no intrinsic value.

[CydeWeys]

Yes, that's one approach. It's a very conservative approach though, to stay far away from new technologies until they're firmly established. There's a lot of money to be made by getting into things when they're still on the bleeding edge though, and the entire startup community exists to take advantage of that fact.

The real question is, is it still early days for Bitcoin, in which case it would make sense to get into it now (albeit still risky)? Or are the early days over and all those gains have already been realized? You'd need a crystal ball to know for sure.

[jariel]

The USD is backed by the US governments ability to pay it's debts, which is a legit financial instrument of value. It's not a 'fiat' currency in the sense being described here.

[CydeWeys]

What? The US dollar absolutely is fiat currency, and anyone saying otherwise is simply using a non-standard alternative definition of "fiat currency" than what everyone else is using. Every economist ever will tell you that of course currency issued by a central bank that isn't backed by precious metals is a fiat currency, and that USD along with all the other major currencies count too.

[eloff]

The USD is a fiat currency that is worth what people (the market) values it at. The ability of the US government to pay it's debts is but one (very important) factor in that distributed calculation. It is not solely determined by that. If it were the value would rise or fall solely on the debt-to-GDP ratio - which is probably only loosely correlated - up to a point where default becomes probable and then it matters an awful lot more, like with Argentina.

[jariel]

"There are lots of things out there that have little to no intrinsic value (like currency)"

??? Most currencies are backed by something. USD's are backed by TBills, Euros are backed by some kind of asset.

"There's lots of things with fundamentally no intrinsic value " like what?

Gold and Diamonds people wear as jewelry, and they have other uses.

Platinum, were it plentiful, means we might have all shifted to fuel cells 2 decades ago.

Gold probably has an inflated price due to it's historical value as 'money' - but outside of that, there's basically nothing that people put significant amounts of money in without some kind of intrinsic value.

[CydeWeys]

> ??? Most currencies are backed by something. USD's are backed by TBills, Euros are backed by some kind of asset.

Oh yeah? And what assets are these exactly? It sounds to me like you're just describing things without intrinsic value that are "backed" by other things without intrinsic value. There is no economist that would tell you that government currencies or bonds have "intrinsic value"; they're just paper. Their value can go entirely to zero (and this has happened many times in the past).

> "There's lots of things with fundamentally no intrinsic value " like what?

Anything collectible has no inherent value. Think baseball cards, art, whatever. They're worth money only because they're rare and people are willing to pay big for them. But the actual intrinsic value of the materials in a rare painting worth hundreds of millions of dollars might be a few bucks at best.

And yes, precious metals do have intrinsic value as defined by economists. Currency doesn't.

[jariel]

"There is no economist that would tell you that government currencies or bonds have "intrinsic value"; they're just paper."

Ok then, I'll trade you any Government Bonds you might have (aka 'paper') for let's say, $100? I mean, worth more than paper, right?

Why do people have such difficulty grasping the abstraction of credit? And that it has value?

The entire system is based on credit - which is more intangible that 'bushels of wheat' or 'shiny rocks' but frankly it's not that hard to grasp.

The bonds are not 'paper' they are a 'promise to provide some value' - and most people take TBills at at least face value because the US Gov tends to honour the contract.

A currency based on a shiny rock has only one, small possible advantage, in that there is essentially a fixed supply of said rocks, and that it cannot be debased, however, this is in most ways not an advantage i.e. it precludes the possibility of any monetary policy.

Ergo we have systems of credit, currency based on that, and a whole bunch of rules around it.

"But the actual intrinsic value of the materials in a rare painting worth hundreds of millions of dollars might be a few bucks at best."

No, when things are configured in a certain way, they have value more than the constituent parts. A 'Tractor' is worth more than the 'Metal' it is made from. 'Art' is something that people like to look at beyond it's constituent bits of paper and dyes.

Yes, it's abstract, but it's not hard to grasp.

[CydeWeys]

You seem to be have a very fundamental misunderstanding here that "no intrinsic value" is the same thing as "worthless". You are misusing very basic economics terms. Currencies that aren't literally made out of precious metals are the textbook example used in economics texts to introduce the idea of things that lack intrinsic value.

[jariel]

You seem to a total and fundamental misunderstanding of what value is, and therefore, a misunderstanding of the entire field of economics.

[CydeWeys]

Please provide reputable economics sources saying that USD has intrinsic value.

[reportgunner]

Lets say you are stuck in a foreign country, you have no money and you are hungry. You meet a person who barely speaks your language:

a. you whip out a golden coin (intrinsic value) and they will give you food.

b. you whip out a Government Bond (no intrinsic value) and they will look at you like you are stupid because they have no idea what a Government Bond is