[toozap]

I think you might be missing the point. Bitcoin right now operates more like gold. You can't pay off your house, buy a car, pay your taxes or go out to eat with gold. However, there is a healthy market for exchanging gold for currency. You wouldn't call gold funny money. I think it would be more appropriate to compare bitcoin to gold right now. I have no idea how healthy the market is for exchanging bitcoin for other currency, though.

[XorNot]

Gold is a physical good with actual useful value. It is hugely overvalued right now, and anyone telling you to "buy gold" usually holds gold and benefits a lot from that.

Those cable "invest in gold" deals are exactly this but worse - they sell you gold more expensive then the commercial market that can never be redeemed for that price.

But it has a real cost of production that represents its relative industrial worth.

Bitcoin is valueless though. Created Bitcoins do not have any industrial value - you can't use them for anything else, even though they have a cost to create. There's no reason, if they lose value, for anyone to buy them from you - whereas with gold if you sit on it long enough, it will become valuable when someone needs gold for some type of industry at minimum.

[jmj4]

Fiat currency is valueless and can only be used because people trust the government issuing it. If Bitcoin can gain the trust of enough people, it can easily become more 'valuable' then many currencies in existence at the moment.

[XorNot]

Fiat currency is backed by the legal obligations of the country that issues it that it is a suitable means to extinguish debts.

Bitcoin is not. No one is obliged to accept Bitcoin as a currency for settling debts anywhere in the world, it has to be converted to something else. Similarly to gold - you don't have to accept gold as payment for debt, but you do have to accept USD.

This is where the problem lies: BTC acts like a commodity, not a fiat currency - and people are treating it like one buying into it. The problem is it has no value as a commodity other then being Bitcoin.

[toozap]

It does have value. It's long lasting, pseudonymous, secure, and it costs less to make transfers between two parties. These are qualities that are hard to find in a physical commodity. What gives value to an individual bitcoin is the Bitcoin network. There is real value there.