[dragonwriter]

> Bitcoin has an approximate "intrinsic value", which in economic terms is a bit above the cost of mining.

The current cost of mining is a rough replacement cost of bitcoin (and thus, in a sane market, ought to be a ceiling on its market value, since if the exchange cost is higher than that, you are better of mining then buying), but since mining isn't inherently reversible its not an intrinsic value.

[dllthomas]

"and thus, in a sane market, ought to be a ceiling on its market value, since if the exchange cost is higher than that, you are better of mining then buying"

Modulo time preferences...

But yes, bitcoin's intrinsic value is that it is the only method to pay transaction fees to have work done on your behalf by the bitcoin network. I don't know how to price that, though.

[AnneOminous]

Quote: "...but since mining isn't inherently reversible its not an intrinsic value."

It IS "value", because the resources used for mining have measurable value, and can be traded for things other than Bitcoins.

It may be an indirect measure of value, but it's still a measure of value.

[dragonwriter]

> It IS "value", because the resources used for mining have measurable value, and can be traded for things other than Bitcoins.

It is value, but its not value of bitcoins. It is the value that would need to be sacrificied to replace the bitcoins by mining, but its not value that can be recovered from the bitcoins, so its not intrinsic value that supports the market value of bitcoin.

Intrinsic value, as the term is used for currency, is value that you can recover from a currency without trading it -- e.g., the use-value of gold for ornamentation or industrial uses is intrinsic value.

[AnneOminous]

But you CAN trade Bitcoins for things, not just currency.

You can trade Bitcoins directly for more hardware to mine Bitcoins. So it IS a reversible transaction, and Bitcoins are DIRECTLY (not indirectly) valued at approximately the cost of mining and distribution.

Don't confuse "indirect value" with "indirect measurement of value". They are different things.

[dragonwriter]

> But you CAN trade Bitcoins for things, not just currency.

The value for which you can trade a currency is its extrinsic value. Insofar as "intrinsic value" is meaningful, it refers to the value you can derive from a thing without exchanging it with someone else.

> You can trade Bitcoins directly for more hardware to mine Bitcoins.

Yes, you can buy things with Bitcoins. That's the definition of a currency's extrinsic value.

> So it IS a reversible transaction

No, if mining was reversible, you could recover the resources expending in mining bitcoins without trading the bitcoin to someone else in the market, the way you can make industrial or ornamental use of gold in your possession without trading that gold to someone else for industrial tools or ornamentation.

> and Bitcoins are DIRECTLY (not indirectly) valued at approximately the cost of mining and distribution.

"Direct value" isn't a well-defined phrase, and isn't the one that was under discussion. Intrinsic value of currency is better defined, and is what was being discussed, and bitcoin doesn't have any of that traceable to its mining cost.

[TylerE]

If it's indirect that's not intrinsic. That's what intrinsic means the opposite of.

[AnneOminous]

No, it isn't. "Intrinsic" means "belonging to a thing by its very nature."

The "value" here isn't "indirect". Only the method of measurement.

This is economics, not quantum physics. The method of measurement (as long as it is rational and consistent) does not change the value being measured.

[21echoes]

carbon emissions from a coal plant do not have the "intrinsic value" of the coal that produced them. bitcoins from a miner's computer do not have the "intrinsic value" of the electricity and silicon that produced them.

[AnneOminous]

The exhaust from your Chevy also doesn't have the "intrinsic worth" of the oil that it ultimately came from, either. Nor does the electricity from my solar cells have the "intrinsic worth" of the silicon they were made of.

So what? That is about the farthest thing from a valid analogy I've seen in a long time.

[dragonwriter]

> The exhaust from your Chevy also doesn't have the "intrinsic worth" of the oil that it ultimately came from, either.

The difference between it and Bitcoin here is that no one is claiming that automotive exhaust has intrinsic worth due to the resources expended to produce it.

[AnneOminous]

No, you're still not getting it.

The VALUE is not indirect (i.e., extrinsic). The METHOD OF MEASUREMENT is indirect. Those are two different things. One does not imply the other.

If I measure the "worth" of your automobile in units of "old Chrysler convertibles", that doesn't mean your automobile has any more or less economic value than if I measure it in helium balloons. The method of measurement (if it's done properly) does not affect the actual value.

In the case of Bitcoin, it CAN be traded directly for goods, not dollars. There is nothing REAL distinguishing it from any other commodity, such as rice. The value is roughly equivalent to the cost of production + distribution.

I take that back. There IS one difference, but (at this time) it is minor: that is the ultimately limited supply, but that isn't even remotely close enough yet to affect a RATIONAL market.

An EXTRINSIC value, on the other hand, and to use Wikipedia's example, is like the "value" of a song played on a guitar. It has its own subjective and economic values, but that is completely separate from the cost of manufacturing the guitar. This is NOT even remotely the same situation as Bitcoin.