Oddbean

Don't let him get away with the "intrinsitc value" nonsense. Austrians are supposed to know that value is subjective & ordinal. Non-monetary use was only needed to bootstrap gold's network effect, after that non-monetary uses can really only hurt the stock to flow & get in the way of the function of money.

The computers have value, yes. But how much of that power does a certain unit of Bitcoin buy me? If the answer depends on the conversion rate between fiat and Bitcoin, that power cannot be the source of the value of Bitcoin (because it would provide the valuation at an arbitrary and fluctuating rate)

Time & adoption is needed. A conversion rate is required atm, but once there is wide adoption people will start pricing in satoshis. I’d be willing to bet the value won’t fluctuate nearly as much either I’m sure folks knew the amount of gold to buy a loaf of bread back in the day, but I wouldn’t even have a good guess what that amount was/would be

The point is that any fluctuation at all means the Bitcoin doesn't represent a specific unit of computing power. If the dollar is just a name for a certain weight of silver (as it was in 1780) then any fluctuation at all makes the label "dollar" meaningless. This may seem strange, but let's use a different unit: the gram. If I promise to pay you 10 grams of gold 2 years in a row, and I give you 2 different masses of gold, then either I've cheated you or "gram" is just a measure of whim (or both, especially if it's my whim). So if "Bitcoin" is a monetary unit that represents 10 petaflops of compute, and then next year it represents 8 petaflops, it's not really a unit at all. Similarly, a "dollar" that represents 10 grams one year and 8 grams the next isn't actually a unit.

Subjective value doesn't mean it's just made up, it means it relates to the subject. So if I have one gallon of water, I will put it to the most highly-valued use available to me (probably drinking it so I don't die) If I get a second gallon, I will put it to the second-most-highly-valued use (which might be different than your second most highly valued use) So the value of the water is subjective (it depends on who is getting it, how much water they already have, and what uses that person can imagine to which to put the water) But it's also objective in that if you knew all the uses of water available to me and how I rank them in terms of the satisfaction of my needs, you could predict how I will use the water, and there is an objectively correct usage of a given volume of water (conditional on knowing the unknowable) Bitcoin has no physical form and therefore no subjective or objective use. The first unit of Bitcoin I get doesn't allow me to do anything whatsoever, nor does the second, nor does any further amount. It's true that I can sign the chain to create new UTXOs for the next person, but that person also has no use for Bitcoin. The whole thing looks reasonable only in comparison to centralized fiat currency, in which the same drawbacks apply plus a privileged group is allowed to monkey with the system. A thought experiment: Suppose Satoshi had promised to pay 1 Bitcoin for each Bitcoin mined, and the ledger tracks how much Bitcoin he owes you for maintaining his records, rather than being the "money" itself. Then suppose Satoshi disappeared and it became apparent he would never pay. Presumably the value of these promises would go to zero when it becomes obvious they would not be fulfilled. But, how is that any different from the current system?

“Bitcoin has no physical form and therefore no subjective or objective use.” I don’t understand how you draw the conclusion that because #Bitcoin is not material, it doesn’t have a subjective and objective use. First, I would challenge the premise that Bitcoin has no physical parts. Bitcoin couldn’t exist without the infrastructure hosting its ledger. Maybe the physical components guaranteeing the existence of Bitcoin are distributed but Bitcoin isn’t fully immaterial. Second, even assuming that Bitcoin doesn’t match the definition of “being material”, it doesn’t mean that it doesn’t have a utility. By this reasoning you could make the case that software because it’s not physical has no utility which is obviously false.

Save, trade, create multisig contracts... If people can see the value potential (even before the network effect exists) then you can bootstrap a market valuation. That is literally what bitcoin has already proved. But all value is a function of knowledge & therefore subjective. If no one knows what a thing can be used for then it is basically worthless.

Also, I would add that I don’t think that #Bitcoin fix all the World’s problem like some maxis like to claim but it’s certainly different from the current monetary system because of the predictability and trustworthiness it offers in comparison to the current system. To be changed, Bitcoin needs to reach a social consensus which isn’t easy to be captured even though we can’t exclude this scenario to happen in the future if the Bitcoin mining industry continues to be consolidated in fewer hands. But so far it’s still better than the current system which is controlled by an ultra elite composed of a few individuals.

Money is half of every trade. Money literally touches everything. Bitcoin is the most scarce form of money to ever exist. All through history, people who chose to cling to less scarce forms of money when a newer more scarce form emerged got wiped out. Bitcoin is basically a black hole for economic value, everyone doesn't have to accept it for it to win, so long as it doesn't break or get corrupted it will win. It would probably win even if it got corrupted at this point because it is far less corrupt than the fiat system(s). Monetary debasement is the root of the rising cost of living, the root of most of the poverty that remains in the world, the root of the wars that are being fought, the corruption of healthcare & nutrition, the fact that many things aren't made to last, & none of the world's major govts can exist in anything like their current forms without monetary debasement. #Bitcoin fixes far more than most people have the capacity to see. That's why we say "Fix the money, fix the world." All the people I know who have spent thousands of hours studying the subject agree, it's generally only those who haven't who don't.

There's a huge selection bias there. If I take 10 hours to study Bitcoin and conclude that it is impressive from a cryptographic point of view but economically illiterate, why would I then spend thousands of further hours studying it?

Well we've reached N of 1, at least I have a graduate degree in economics & (more importantly) have spent thousands of hours studying (mostly Austrian) economics since then I am of the opinion that Bitcoin is economically illiterate and it will be to the great shame of Austrian economists to have ever supported it I regard Bitcoin as a better form of fiat - a "nothing" but with better rules than the dominant "nothing" Also, do you imagine that Peter Schiff hasn't spent thousands of hours studying money?

I was referring to his opposition to "fix the money, fix the world." Given that Peter is infinitely critical of central banking & has made selling gold the center of his life I would wager that (despite not believing that bitcoin fixes the money) he does basically believe that fixing the money will fix many of the major problems in society.

The way I understand it is that subjective value is a function of knowing what the thing can do. I have to know how to make use of crude oil or it might have a negative value to me, like it did for everyone for thousands of years. Knowing how to use bitcoin (in the most basic sense) is a prerequisite to valuing it as a tool for savings or as a formof money. The knowledge required to value anything is not guaranteed & it is not connected to the thing itself, so there is no intrinsic value.