Bitcoin (BTC) as Money

I also don’t know of a decisive argument that BTC doesn’t have real value, so maybe that’s somewhere to go?

Or maybe we could discuss some of these:

I think it’s sorta self-evident that, long-term, the only way BTC avoids → 0 is for it to always be used by some part of civilization as money. (it can do other basic stuff like timestamping but lots of other things are better for that)

Its only value is its objective exchange value, so if it’s not useful for that (e.g. civ collapses; all semiconductors get fried, etc), then the value goes to zero (since it’s not functional in any way). How does it start back up again without crypto-mania-hype?

(Btw, it occurs to me that the specific topic isn’t as important as figuring out what we agree and disagree on)

Also, I’m sorta curious you said this bc I see it as agreeing w the idea USG can do perma harm to BTC.

This isn’t self-evident at all to me.

This is also not obvious to me.

We agree that gold has value. Supposedly the value of gold ultimately comes from its value as a commodity. But why does gold have value as a commodity?

The reason we value gold as a commodity seems like it has to do with these standards that are arbitrary. That is, gold has value as a commodity because it looks pretty*, but why does it look pretty? I have no explanation: It’s conceivable that gold would not be pretty at all to an alien civilization, and so to them it would have no* value as a commodity.

Maybe the real reason gold looks “pretty” to us is more because we feel good when looking at gold or something, and maybe the reason for that is because gold is rare and expensive in first place.

But if the standard making us value gold (as a commodity) is really this arbitrary, why can’t it be modified arbitrarily it to encompass BTC as well? BTC is also rare and expensive, and people probably feel good when they look at how much BTC they have in their wallet or something.

*There are also some modern industrial uses of gold, but I don’t think that’s relevant. Gold has been highly valued for all of human history, and yet historically, the only use of gold as a commodity was the fact that it could be used to make stuff look pretty. Also, even today, the vast majority of consumption of gold is for cosmetic purposes.

Sorry I’ve been absent.

Because there is demand for consumption (what that demand is doesn’t matter that much). One core idea behind gold-as-sound-money (as I understand it) is that there will always be some demand for its consumption. I agree that industrial uses aren’t a significant factor in the price of gold (industrial use is minimal and sparing), but the fact that there are (at all) industrial uses (among others) is important.

WRT TMC[1], gold is considered the best candidate for sound money for reasons including: wide acceptance (note the network effect here), and wide understanding of soundness (including scarcity, persisting demand, etc). But it’s by not the only candidate.

Crucially, WRT the disparity between the current price (including the demand for gold as an exchange medium) and like an equilibrium-commodity-price, TMC doesn’t say that such a disparity is forbidden. Rather, it’s expected. One reason that gold is a good candidate for money is that the demand is somewhat ~inelastic (see wedding ring paragraph below), so a change in it’s objective exchange-value doesn’t affect the perception of it as a good medium of exchange (for the most part).

WRT aliens, it might be unlikely (or not) that there’s a good common fit for agreement on the best medium of exchange. But our and their mutual understanding of what is valuable to the other means that there is some benefit in the others’ preferred medium as an economic good – i.e., a thing one buys only for the purpose of future exchange. Similar to how, if you go to New Zealand, you’re going to buy some NZD. It’s not money back home, but it is money in a place where you want to do trade.

Looking pretty explains gold-colored plastic rings, but IDK if it explains gold rings (similar for necklaces, bracelets, earrings, etc). I think that’s b/c there’s an extra reason: a display of, or locking-up-of, wealth. Like a gold (or platinum, etc) wedding ring is a significant expense, and one common reason (mb) is to demonstrate significant investment. Like, wrt wedding rings, it’s literally entangling that value ($) with the fate of the relationship.

Good q. If we presume that – for the rest of time, some small group of ppl somewhere value BTC as other than an exchange good (like it makes them feel good), then the value should remain > 0. But, is that something ppl can/will bank on? Is there going to be such a hold-out group? I doubt it – past this generation of BTC maximalists (I think it’s fair to say the hypothetical group fit this term), if there’s a competitor to BTC that’s all-the-good-bits-and-more, why would any newcomers join the BTC camp? What do they have to gain?

So rly, I think it comes down to: Can BTC always remain competitive?, because if it can’t, then I don’t see it sticking around – outside this, ofc:

BTC can only have value if: it’s useful for exchange, or ppl subjectively value it.
(IMO this is consistent with TMC)

I don’t think ppl will always subjectively value it, tho, and I think there will be – just in the blockchain space – better alternatives developed.

(Note: I’m worried this post is a bit long; I’m okay with it this time b/c there’s some TMC explanation.)

  1. saying “as I understand it” every time will get tedious, so I’m going to treat it as implied. I’m not an expert on TMC. ↩︎

FYI, these are the bits I disagree with. The current discussion seems like it might get a bit busy right now, so I’m cautious to start discussing them atm. Good to record tho.

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One quick note:

Sure, gold would be valuable to aliens who trade with humans, even if it doesn’t look pretty to them. The alien civilization I’m imagining is not aware of the existence of humans, and doesn’t think gold is pretty, and doesn’t know about the industrial uses for gold. To them, gold would be no more valuable than dirt.

I should probably read TMC. There are some things you wrote in here

that I don’t really understand. I’m going to mostly ignore it for now because I want to keep the discussion focused (but let me know if any of it is important for what I say below).


I think that here ^^^, you’re saying almost the same thing as what I getting at with this sentence:

But yeah, there’s this weird feedback effect going on: much of the reason why gold has value as a commodity is because it’s already valuable. Let me call that type of value “2nd order commodity value” for lack of a better term.

Since BTC is rare and expensive, BTC already has value as a 2nd order commodity (e.g. allowing people to flaunt wealth, allowing people to look at their wallet and feel good about themselves).

Does what I’m saying make sense so far? Do you agree that BTC has some value as a “2nd order commodity”?

Copper’s Essential Role in Protecting Public Health says:

Then, a lethal dose of copper ions interferes with normal cell functions.

Gold and silver are in the same column of the periodic table as copper. I’m no chemist, but that typically means that have similarities for stuff like ions.

Also, even if gold and silver were just art supplies … those do have value. I vaguely know e.g. that dye trading was important enough in the ancient world to merit carrying dyes for trade on boats.

Yeah, it makes sense. IMO the way you use 2nd order commodity is convergent with the economic good idea. Tho I’d suggest saying “2nd order good” instead of “commodity” b/c BTC isn’t a commodity (tho I understand what you mean).

“2nd order commodity value” also sounds convergent with something like objective exchange-value (tho “2nd order commodity value” is more vague/looser).

In light of that, does the TMC/Mises stuff I wrote make more sense?

IDK if this is that safe – I brought it up and explained it for a reason.

The main point of the last paragraph is just to point out that if there’s like a “1st order value” for some good, and it has some “2nd order” type usage (like gold-as-money or btc-as-money), then we expect a difference between the 1st and 2nd order values (with the 2nd being higher) and also that the value in the real world (how much it costs to buy) is its 2nd order value.

Does that make sense?

In this case, we can say:

medium 1st order value (v_1) 2nd order value (v_2)
gold v_1 > 0 v_2 \ge v_1 > 0
BTC v_1 = 0 v_2 \ge v_1 = 0

do you agree with that? (note: v_2 \ge v_1 = 0 means v_2 \ge v_1 and also v_1 = 0 so v_2 \ge 0)

Yeah – there were like entire trade routes dedicated to it IIRC.

Here’s a relevant quote I found via a wiki cite:

“History of Indigo & Indigo Dyeing”. . Wild Colours and natural Dyes. Retrieved 30 December 2015. “Indigo was often referred to as Blue Gold as it was an ideal trading commodity; high value, compact and long lasting”

Huh, I just realized that wiki doesn’t have a permalink function – like on github I can hit ‘y’ to change the URL to a permalink. The problem with wiki is that linking to a citation is super fragile – if someone adds a cite before the one you link to (23rd of 32 in this case), then the anchor link will go to the wrong cite :confused:.

Okay – this seems significant. Maybe conversation-tree worthy.

WRT gold, there are general reasons (common among many people) to subjectively value it: it’s dense, it’s shiny, it’s elemental and nonreactive, it’s soft, etc. So it will always have some niche of utility.

BTC isn’t like that though: there’s no reason to think there will always be a niche. And the existence of bitcoin fans here (as a reason that there’ll always be some ppl who subjectively value it) doesn’t help. That’s circular – if all those fans went away at the same time (e.g., died) why would we expect bitcoin to maintain a nonzero value? (presuming it also wasn’t being used as money at the time)

But with gold, it has utility as material – and it always will.
Like you can’t make something out of other atoms that acts exactly like gold in all ways (i.e., there’s no chemical solution). There might be chemical solutions to compete with specific properties (e.g., good conductor + malleable), but we shouldn’t expect those to also have the other properties (shiny, inert, dense, etc).
So there’ll always be some niche where gold is useful – there’s a reason to expect it will maintain a nonzero value.

The latest South Park episode is also relevant.

Edit: The episode is Post Covid: The Return of Covid

You should edit your post to identify which episode you mean (using information like season number, episode number, link, title, or air date). No one reading this in the future will know which ep you mean.

Even reading it right now I didn’t know if the latest South Park episode that I saw is actually the latest one. So I looked it up and there’s an ep today (Dec 16) so still I don’t know which ep you mean. I think that had probably aired where you live – as of 5 hours ago when your post was written – but I don’t actually know. And even if it did air you might not have known that.

I think it’s worth considering what happened with communication like this. E.g. one cause could be taking your own context for granted. It may currently be really easy to tell which episode is the latest one in your context. But you may not have thought about the contexts of current or future readers. That’s a pretty common and important error. If you suspected that was the error, you could look at other posts you’ve written and see if you could find any other examples of it.

I will respond to your first post eventually. I think that the problem is that I haven’t given an adequate definition of “2nd order value” or whatever.

I’ve been listening to Human Action on audiobook (doing this is pretty awful; I don’t recommend), and one general point it makes is that we need to be careful to frame all our discussion of “value” in terms of subjective value. Things can only be of value to an individual. I definitely wasn’t doing this. Neither were you, in e.g. this sentence:


What is a BTC “fan”? I assume that by fans you mean people who value bitcoin? If so, then the “fans” include almost everyone (including you, since you’d be very happy if someone sent you 10000 BTC), so your hypothetical is much stranger than it first appears.

Are you imagining like, everyone dies except one person, then concluding that the one remaining person would not value BTC? That’s true, but such an argument would also basically apply to gold: if everyone but me disappeared, a pound of gold would probably be less valuable to me than e.g. a pound of rice.

I mean someone who subjectively values bitcoin outside it’s use as money. if someone offered to pay me in BTC, I’d consider it, but i wouldn’t necessarily keep it in BTC. I consider ‘fans’ those ppl who’d bias BTC particularly (above other crypto or other methods of holding value). I’m not a fan, in that I’d only hold it for pragmatic reasons. Does that make sense?

No. I don’t think either of these definitions are sufficiently precise, since e.g. I couldn’t use them to determine whether or not I am a btc fan.

I value BTC, but do I value it “outside of its use as money”? I have no idea what that would even mean, all I know is that 1 BTC is worth like $50,000 USD right now & so BTC is quite valuable to me.

Am I a person who would “bias BTC particularly (above other crypto or other methods of holding value)”? I have no idea what this means. Are you imagining some hypothetical scenario where 1 btc has the same value as 1 eth or 1 dogecoin or 1 of any other cryptocurrency, then defining a fan as someone who would prefer to have 1 BTC instead of 1 of another cryptocurrency in that scenario?

I think we might be getting away from the point. The reason I introduced the idea of fans was to say: the fact some some die-hard core audience exists now isn’t a reason think that BTC will maintain a nonzero value. The nature of that audience isn’t too important, just that it’s not a good argument that BTC will maintain value.

I think that part of the reason why I was probing into your definition of fans is that it’s not clear to me that BTC actually relies on anything like a “die-hard core audience” in order to maintain value.

right now, it doesn’t. There’s lots of other reasons that it has value, at the moment. But if that went away, and there was no die-hard audience, why would it ever recover?

IMO, we have an answer for gold, but not for BTC.

You’ve already made this argument, and it is not definitive, as I think I showed in this post.

We don’t know how cheap and easy transmutation will get.

Also, since you guys don’t seem to be making a tree, or doing anything else related to CF (including no post mortem on the communication point I raised), the discussion is a bit off-topic.