> As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.
That's a tautology, isn't it? People found the German Papiermark useful for criminal and non-criminal activity, which meant that it was worth something. Until it wasn't.
An old billionaire who has been around long enough to see fly-by-night scams come and go, Charlie Munger, called Bitcoins "rat poison". The only problem with that is the commodity of rat poison has some actual value.
In the past 20 years we have seen various things with inflated values. Homes with sub-prime mortgages in 2007, stocks like Webvan and Pets.com in 1999. Bitcoin, which is trading for $775 now, and was worth $1020 last week, is one with those things, as well as with Dutch tulip bulbs and the like.
Comparing a Bitcoin to any other commodity, I have to ask, what use value does it have? It has none. Gold is useful because it can fill teeth, conduct electricity etc., I can also easily use it to trade as a currency as it is durable, portable, divisible and uniform. Bitcoin is traded, but has no underlying usefulness like other commodities.
Sometimes people fish around for a comparison to something with worth and are hard up for one until in desperation they point to the only thing they can - the dollar. True, the piece of paper dollar never had intrinsic value. Until August 1971, it was convertible to gold. The US did and does store thousands of tons of gold at Fort Knox and in other places. In 1971, it temporarily (with exceptions for some people) stopped that convertibility. So the dollar now is doubly abstracted, it was an abstraction of the gold, then with the window closed it became an abstraction of that abstraction. The US pays a lot to guard those tons of gold that still implicitly (instead of explicitly) backs its currency. Bitcoin does not have tons of gold implicitly backing it. It is inherently worthless.
But the value of Bitcoin is that it is durable, portable, divisible and uniform - and basically in limited and predictable supply (unlike the Weimar Reichsmark or the Hungarian pengo.) That's what makes it useful. Why does a currency need to have other "functions"? Its usability as currency is its underlying usefulness.
Lots of perfectly reasonable and useful modern 'paper' currencies are not backed by any commodity nor have been since their most recent introduction. Money is useful as money, that's generally good enough.
Most reasonable paper currencies are backed by the fact that millions of people need to pay their taxes in that currency. That's generally what gives fiat money value.
I wouldn't quite agree that tax requisition is "the thing" that gives a paper currency value, though of course it is one. (I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.) But my main point is that it's not commodity backing that matters, and that currencies don't need to have "intrinsic value" in some other use than as currencies.
In any case, I find it kind of amusing how much incensed criticism Bitcoin gets simply for being a currency that exists. It's like, imagine people wrote thousands of angry, scathing articles and comments all over the internet about the Azerbaijani manat or something.
> I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.
I don't think vkou was claiming that you yourself need to pay taxes in the currency yourself. Just that the fact that there's workers out there in another country who needs to pay their taxes in their local currency and will therefore need to charge for their work in that currency or trade for it. Either option will lead to some predictable demand that you can depend on whether you pay taxes in the country in question or not.
All cryptocurrencies are durable, portable, divisible, and uniform. Nearly all of them will be worthless, and many that were already created and possess those four characteristics are already worthless. Bitcoin may escape that fate (I own a a fair amount, so I hope so), but it won't be because of those four traits.
Sure, most cryptocurrencies will probably fail over the long run. But the comment I was responding to was asserting that Bitcoin would fail because it lacks "underlying usefulness" or "commodity backing". I disagreed with that concept of money - but I didn't say that possessing the aforementioned properties of money would ensure that Bitcoin, or any currency, would not fail.
That's a tautology, isn't it? People found the German Papiermark useful for criminal and non-criminal activity, which meant that it was worth something. Until it wasn't.
An old billionaire who has been around long enough to see fly-by-night scams come and go, Charlie Munger, called Bitcoins "rat poison". The only problem with that is the commodity of rat poison has some actual value.
In the past 20 years we have seen various things with inflated values. Homes with sub-prime mortgages in 2007, stocks like Webvan and Pets.com in 1999. Bitcoin, which is trading for $775 now, and was worth $1020 last week, is one with those things, as well as with Dutch tulip bulbs and the like.
Comparing a Bitcoin to any other commodity, I have to ask, what use value does it have? It has none. Gold is useful because it can fill teeth, conduct electricity etc., I can also easily use it to trade as a currency as it is durable, portable, divisible and uniform. Bitcoin is traded, but has no underlying usefulness like other commodities.
Sometimes people fish around for a comparison to something with worth and are hard up for one until in desperation they point to the only thing they can - the dollar. True, the piece of paper dollar never had intrinsic value. Until August 1971, it was convertible to gold. The US did and does store thousands of tons of gold at Fort Knox and in other places. In 1971, it temporarily (with exceptions for some people) stopped that convertibility. So the dollar now is doubly abstracted, it was an abstraction of the gold, then with the window closed it became an abstraction of that abstraction. The US pays a lot to guard those tons of gold that still implicitly (instead of explicitly) backs its currency. Bitcoin does not have tons of gold implicitly backing it. It is inherently worthless.