# Lifestyles & Discussion > Bitcoin / Cryptocurrencies >  Bitcoin: Just Another Bogus Medium of Exchange

## FrankRep

*Bitcoin: Just Another Bogus Medium of Exchange*


David Kramer | LewRockwell.com
June 9, 2011

====

UPDATE: 

I've been getting a lot of reader response trying to "explain" to me the economic virtues of Bitcoin. Some responders have even mistakenly used Austrian economics to rationalize their views. I would suggest that before you write to me about the Austrian economics view of a medium of exchange, you should read the two books by one of the two giants of Austrian economics, Murray Rothbard, on what a medium of exchange is. Here is the pdf for Rothbard's What Has Government Done to Our Money and here is the pdf for Rothbard's The Case Against the Fed. For those of you who have not yet read any Austrian economics, please do not waste your time writing to me trying to explain the "scientific" breakthrough of the bogus Bitcoin computer program.

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## Andrew-Austin

Not a very informative blog post unfortunately. If he knows economics so well, he should have expounded more, instead of saying "go read these books". He seems to be getting all these emails but didn't put much effort in to addressing them. 




> And what's with the "fixed" amount of Bitcoins? Who determined the "proper" amount? A computer programmer? Only the free market can voluntarily determine how much of a real medium of exchange is needed in the marketplace over time.


So does the free market decide how much gold is on the planet as well? Nope. What determined the proper amount of gold available to use on the planet? Physics? So why can't we scoff at that too. The amount of gold out there is basically just a random number. 

It only seems relevant that bitcoins are scarce, and can be endlessly divided. 

Right now the free market does not decide how much gold exists. But eventually with nanotechnology it will be possible to create gold out of things that were previously not gold, thus it will be possible to inflate the supply of gold significantly (meaning wayyy faster than new gold can be discovered/mined). That won't be the case with bitcoin, because nanobots can't create something that isn't physical, they can't forge bitcoins. 





> I'm afraid that those people are losing sight of how a real medium of exchange arises in a free market. A medium of exchange arises from something that had a material use/value in the market prior to becoming a medium of exchange, i.e., it was also a good being  bartered for other goods and services. Over the centuries, gold and silver won out as the two most preferred mediums of exchange—with gold holding the number one position due to it being more scarce than silver.


By his own words he already called it a medium of exchange in the title. It is being used to buy things. It started out no where, but people subjectively valued bitcoins enough to pay for them. It does not matter the reason why they were subjectively valued, it is not an economists job to judge that. Bitcoin has some of the same qualities that make gold a good medium of exchange, plus a couple other benefits gold does not have. The only thing Bitcoin does not have, is that it was not previously used for anything on the market. I still don't see why this necessarily prevents bitcoin from becoming a good viable money. 





> UPDATE: I've been getting a lot of reader response trying to "explain" to me the economic virtues of Bitcoin. Some responders have even mistakenly used Austrian economics to rationalize their views. I would suggest that before you write to me about the Austrian economics view of a medium of exchange, you should read the two books by one of the two giants of Austrian economics, Murray Rothbard, on what a medium of exchange is. Here is the pdf for Rothbard's What Has Government Done to Our Money and here is the pdf for Rothbard's The Case Against the Fed. For those of you who have not yet read any Austrian economics, please do not waste your time writing to me trying to explain the "scientific" breakthrough of the bogus Bitcoin computer program.


If Rothbard was just writing on what historically money has been, that historically free market derived money has been things that had prior material use/value, then I don't see that as an argument that precludes bitcoin as a good medium of exchange. They didn't have computers back then, Rothbard didn't know something like bitcoin was possible, no one did. 

What about tribal/more primitive societies that used things like feathers and beads as a medium of exchange? What the $#@! is the use value of beads and feathers? They are just pretty I suppose, which is a petty prior value to base a currency on. But I am not arguing that beads and feathers can't be a money, my point is that the original reason for subjective valuation of a good (that is to become a money) does not matter. Couldn't you say in the beginning bitcoins were not technically a medium of exchange, and people subjectively valued them anyways and bought them. That value seeded its birth as a medium of exchange, now its value as a medium of exchange exists.

Mr. Kramer should have made some predictions, I would have been interested to hear them. Just does not seem as obvious as he is saying it is.

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## Vessol

The Russian's aren't behind Bitcoin?

I'm disappointed Frank.

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## IDefendThePlatform

Thanks for that analysis Andrew. Spot-on, IMO.

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## Warrior_of_Freedom

> The Russian's aren't behind Bitcoin?
> 
> I'm disappointed Frank.


Nah, they are still into hacking bank accounts.

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## muzzled dogg

frank man im with you i dont trust this $#@! one bit no pun intended

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## Seraphim

I don't trust it, but it's a niche market that is entirely voluntary. If people support it and use it as a means of exchange - do it if you want, don't if you don't.

Over the course of history humans have used everything from sticks to roses as currency - a lot of it tends to be local.

Bitcoin has global potential - it's functional, but it's inflation rate is  controlled by FAR more then just a handful of people.

Peer to peer, decentralized.

Bitcoin represents a for the people, by the people, market oriented solution to a lot of the BS we have to deal with.

Already the market is valuing it at 15 times the nominal price in USD. 

If Bitcoin (or any similar product) sees international success - the media punts will PUMP propaganda into the minds of masses of people. Oh yeah and peaceful good people would be put in cages by the State - to protect the power of the State/Sociopaths, of course. 

Bitcoin on a functional level is no different than your debit card, VISA, MASTERCARD.

On a fundemental level, it is very different. For and run by the full market that uses it - it's essentially an interest free digital currency. Controlled by the voluntary users of it.

Bitcoin has my overall stamp of approval. Rock on.

Me, I'll stick to precious metals and commodities...but Bitcoin is nothing to shake a stick at.




> frank man im with you i dont trust this $#@! one bit no pun intended

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## hugolp

This is just another (wrong) application of the Mises regression theorem. This is what you get when you get so caught up on theory that you miss reality.

The initial use of bitcoins was utility for entrepreneurs. The author can complain all he wants on how he does ot like it but its not his role as an economist to judge.

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## Dreamofunity

I don't think I've ever seen that much fail from an Austrian before.

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## Texan4Life

> I don't think I've ever seen that much fail from an Austrian before.


lmao!

I'm still trying to wrap my mind around bitcoin. I can see how some (or many) have doubts about it as it is not backed by an asset. But in the end even gold and silver are just a "thing" we all agree has value. It doesn't matter what that thing is as long as the market is allowed to function and set a value. It could be gold, donkey turds, or even a non tangible bitcoin.

It is an idea being put to the ultimate test and so far the true free market is liking it.

I still wonder about to possibly of fraud/manipulation... oh wait we get plenty of that in the "real" stuff too.

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## hugolp

> lmao!
> 
> I'm still trying to wrap my mind around bitcoin. I can see how some (or many) have doubts about it as it is not backed by an asset. But in the end even gold and silver are just a "thing" we all agree has value. It doesn't matter what that thing is as long as the market is allowed to function and set a value. It could be gold, donkey turds, or even a non tangible bitcoin.
> 
> It is an idea being put to the ultimate test and so far the true free market is liking it.
> 
> I still wonder about to possibly of fraud/manipulation... oh wait we get plenty of that in the "real" stuff too.


And one has to keep in mind that Bitcoin and gold and silver are not opposed but rather complementary. Bitcoin is way better for internet transactions than gold or silver (specially because its decentralized and pseudo-anonymous) and its cheaper to store. Gold and silver in the other hand is probably safer and has a lot more tradition. I use bitcoins (I have used them to buy computer hardware in the last 24hours) and still save in gold and silver. I would not put all my savings in bitcoins, gold or silver, but a combination of the three. If you feel you have too many bitcoins and would like to keep a part of your savings in gold and silver, just buy gold and sivler with bitcoins (there are already shops selling gold and silver for bitcoins), and keep using your bitcoins to buy what you need online.

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## TortoiseDream

http://www.youtube.com/watch?v=DoK8HXMSsNg

Some interesting points...

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## hugolp

> http://www.youtube.com/watch?v=DoK8HXMSsNg
> 
> Some interesting points...


He posted the video in the economics subforum and did not even bothered to reply: http://www.ronpaulforums.com/showthr...t-buy-Bitcoins Apparently he has said in the Mises Forum that he is too knowledgeable to mix with us...

By the way, someone made him a webpage: http://www.weusecarrots.com/

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## psi2941

> *Bitcoin: Just Another Bogus Medium of Exchange*
> 
> 
> David Kramer | LewRockwell.com
> June 9, 2011
> 
> ====
> 
> UPDATE: 
> ...


bravo!

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## hazek

> Thanks for that analysis Andrew. Spot-on, IMO.


+1, perfect rebuttals.

In the end it doesn't even matter what most of these righteous Austrian theorists think because it's going to be the free market that will decide the fate of Bitcoin. Right now the free market thinks they are valuable at $27 a pop and yes it's the FREE MARKET that thinks that because no one is forcing anyone to use Bitcoin. Where it'll go and what will happen no one knows, we just have to wait and see... just like with any new invention.

EDIT: btw I myself trust Austrian economics to guide me in life and I own gold and some Bitcoins.

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## hazek

> I'm still trying to wrap my mind around bitcoin. I can see how some (or many) have doubts about it as it is not backed by an asset.


It's a new invention. It's not fiat money nor is it a physical commodity obviously but it is an asset. You have to work and earn money, you have to have someone work and produce a computer, a good graphics card, electricity and an internet connection. Then you have to buy those 3 things with your money. And then you have to have your computer work and use the electricity and be connected through the internet connection to maybe create some Bitcoins and there's no way around it.

Bitcoins are the asset.

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## demolama

So if the gov't of the United States decides to shut down the internet... the currency stops growing right? I mean people can no longer mine and they can also no longer exchange with one another. correct?   How can people exchange bitcoin without the internet?  So while your assets might be protected because they are stored on your computer it doesn't do any good if it cant grow or be exchanged for goods.    

I'm not trying to fight about it... I don't have a pony in the race... I'm just curious how a currency whose sole existence is in cyberspace could work if the gov't shut down the internet

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## hazek

No no it's a valid question. My rebuttal though is: Can the US government shutdown the internet across the globe? If they can't there's no way they can stop Bitcoin.

Bitcoin assumes there will always be a few free nations..

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## hugolp

> So if the gov't of the United States decides to shut down the internet... the currency stops growing right? I mean people can no longer mine and they can also no longer exchange with one another. correct?   How can people exchange bitcoin without the internet?  So while your assets might be protected because they are stored on your computer it doesn't do any good if it cant grow or be exchanged for goods.    
> 
> I'm not trying to fight about it... I don't have a pony in the race... I'm just curious how a currency whose sole existence is in cyberspace could work if the gov't shut down the internet


I dont think the USA government is ever going to shut down the internet, but just in case http://guifi.net

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## low preference guy

> He posted the video in the economics subforum and did not even bothered to reply: http://www.ronpaulforums.com/showthr...t-buy-Bitcoins Apparently *he has said in the Mises Forum that he is too knowledgeable to mix with us...*


he is clueless by the way

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## Acala

> Not a very informative blog post unfortunately. If he knows economics so well, he should have expounded more, instead of saying "go read these books". He seems to be getting all these emails but didn't put much effort in to addressing them. 
> 
> 
> 
> So does the free market decide how much gold is on the planet as well? Nope. What determined the proper amount of gold available to use on the planet? Physics? So why can't we scoff at that too. The amount of gold out there is basically just a random number. 
> 
> It only seems relevant that bitcoins are scarce, and can be endlessly divided. 
> 
> Right now the free market does not decide how much gold exists. But eventually with nanotechnology it will be possible to create gold out of things that were previously not gold, thus it will be possible to inflate the supply of gold significantly (meaning wayyy faster than new gold can be discovered/mined). That won't be the case with bitcoin, because nanobots can't create something that isn't physical, they can't forge bitcoins. 
> ...


Nice rebuttal.

One question: how does nanotechnology change the nucleus of an atom, as would be necessary to make gold out of some other element?

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## hazek

> One question: how does nanotechnology change the nucleus of an atom, as would be necessary to make gold out of some other element?


I think he meant that more as a theoretical future problem with gold just like some say quantum computing is a future problem for Bitcoin.

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## Texan4Life

> It's a new invention. It's not fiat money nor is it a physical commodity obviously but it is an asset. You have to work and earn money, you have to have someone work and produce a computer, a good graphics card, electricity and an internet connection. Then you have to buy those 3 things with your money. And then you have to have your computer work and use the electricity and be connected through the internet connection to maybe create some Bitcoins and there's no way around it.
> 
> Bitcoins are the asset.


good point, I guess I meant a physical commodity instead of asset.

But like pointed out before the market will decide how good the bitcoin system is. I just find it exciting all around.
----

On another note, I have been solo mining for a few days now @ 145Mhash/s how long until I start seeing some coins (more like fractions of a coin) show up in the bitcoin app?

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## hazek

No.. If you are solo mining you can check right here how long statistically speaking will it take you to find one block and receive the current reward of 50BTC: http://www.alloscomp.com/bitcoin/old_calculator.php (almost two years and that still is only 95% to get only 1)

Of course you could get lucky and find 3 in a matter of days but those are really really reeeaaaalllyy slim odds 

So I suggest you pick a pool and join it and you can calculate how much you'll get per day in a pool here:
http://www.alloscomp.com/bitcoin/calculator.php

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## Texan4Life

> No.. If you are solo mining you can check right here how long statistically speaking will it take you to find one block and receive the current reward of 50BTC: http://www.alloscomp.com/bitcoin/old_calculator.php (almost two years and that still is only 95% to get only 1)
> 
> Of course you could get lucky and find 3 in a matter of days but those are really really reeeaaaalllyy slim odds 
> 
> So I suggest you pick a pool and join it and you can calculate how much you'll get per day in a pool here:
> http://www.alloscomp.com/bitcoin/calculator.php


*light bulb*

I see now its only giving out 50 btc so either I can mine for months (or years) and hope to get the chunk all at once. or be part of a pool the divids it up among the pool.

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## Andrew-Austin

> Nice rebuttal.
> 
> One question: how does nanotechnology change the nucleus of an atom, as would be necessary to make gold out of some other element





> I think he meant that more as a theoretical future problem with gold just like some say quantum computing is a future problem for Bitcoin.


Yes that is what I meant. But now that I think about it I might be wrong. I've heard/read that theoretically nanotechnology will be able to re-arrange matter. Matter meaning just molecules, not atoms. I forgot that Gold was an element and not a molecule. lol




> He posted the video in the economics subforum and did not even bothered to reply: http://www.ronpaulforums.com/showthr...t-buy-Bitcoins Apparently he has said in the Mises Forum that he is too knowledgeable to mix with us...
> 
> By the way, someone made him a webpage: http://www.weusecarrots.com/



Nielso is a smart dude, so no disrespect to him, it seems a lot of people are making this mistake not just him. 

But this is funny:

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## Vessol

I want to point out that Ron Paul does not support the gold standard, while it would be better than our current system, Ron Paul wishes to get rid of laws that make competing currencies illegal and enforce a monopoly of currency with the USD.

Note: A competing currency could be anything. Currency is just a means of trade or barter. Gold and silver have come to be recognized universally as a greatly desired facilitator; however, there are numerous other ways and means that one may trade. Bitcoin itself is a competing currency, it is a means to facilitate trade.

The only value in it is the value that it's users put upon it. The same can be said for gold and silver. There is no set or inherent value in anything, there is only value at which individuals place something at.

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## FrankRep

> I want to point out that Ron Paul does not support the gold standard, while it would be better than our current system, Ron Paul wishes to get rid of laws that make competing currencies illegal and enforce a monopoly of currency with the USD.


Easy to forget sometimes.

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## Napoleon's Shadow



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## psi2941

> 


i'm on the boat that bitcoin will not go main stream. but you can't eat gold and silver either.

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## FrankRep

> i'm on the boat that bitcoin will not go main stream. but you can't eat gold and silver either.


You can touch Gold and Silver. Can't touch a bitcoin.

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## hugolp

> You can touch Gold and Silver. Can't touch a bitcoin.


Why do you need to touch (or eat) your money for? You can not fly with gold, you need a plain for that, and so what?

And btw, technically you can not touch gold and silver neither because the atomic forces dont allow the atoms on your sking to touch the atoms of gold and silver... :-P

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## IDefendThePlatform

> This is just another (wrong) application of the Mises regression theorem. This is what you get when you get so caught up on theory that you miss reality.
> 
> The initial use of bitcoins was utility for entrepreneurs. The author can complain all he wants on how he does ot like it but its not his role as an economist to judge.


I'd add cheap, pseudonymous, person to-person money exchanges over the Internet as other "initial use" cases for bitcoin. 

Cryptocurrency has its limitations and drawbacks, but it sure seems like it's going to play an ever increasing role in the economy as time goes on, especially for the 5 billion people who don't have bank accounts.

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## muh_roads

Nice old bump...lol

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## FindLiberty

Does the JBS bookstore plan to start accepting Bitcoin sometime in the near future?

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## Madison320

> The only value in it is the value that it's users put upon it. The same can be said for gold and silver. There is no set or inherent value in anything, there is only value at which individuals place something at.



Seriously? This is where the Bitcoin crowd goes off the deep end. I'm all for competing currencies but don't try to tell me there's no such thing as intrinsic value. Gold and silver have intrinsic value, Bitcoin does not. Get over it.

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## PaulConventionWV

> Seriously? This is where the Bitcoin crowd goes off the deep end. I'm all for competing currencies but don't try to tell me there's no such thing as intrinsic value. Gold and silver have intrinsic value, Bitcoin does not. Get over it.


I don't think you quite understand what intrinsic value is.  It is certainly not as simple as your statement, "Gold and silver have intrinsic value, Bitcoin does not," would have us believe.  There is plenty of value to bitcoin.  Need I remind you that the tech realm started only recently?  This is just another major development that came along with things like the internet, and you can't tell me the internet doesn't have intrinsic value.  People value it because it's useful, not because it has a specific shape, color, or other characteristic of a physical object.  It's useful specifically because it's none of those things, and that's the advantage of bitcoin.  It doesn't carry  all of the limitations of using physical objects as currency that we've been dealing with since the dawn of time.  We've only just begun to understand how making money into something that you can't carry in your hand is advantageous because we've been used to dealing with physical objects as currency, literally, forever because it's all we've ever had.  But now that there's another option, it's going to take a little time to get used to and it will be suspect to many at first, but only once it explodes will people really see why it's so valuable.

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## Madison320

> I don't think you quite understand what intrinsic value is.  It is certainly not as simple as your statement, "Gold and silver have intrinsic value, Bitcoin does not," would have us believe.  There is plenty of value to bitcoin.  Need I remind you that the tech realm started only recently?  This is just another major development that came along with things like the internet, and you can't tell me the internet doesn't have intrinsic value.  People value it because it's useful, not because it has a specific shape, color, or other characteristic of a physical object.  It's useful specifically because it's none of those things, and that's the advantage of bitcoin.  It doesn't carry  all of the limitations of using physical objects as currency that we've been dealing with since the dawn of time.  We've only just begun to understand how making money into something that you can't carry in your hand is advantageous because we've been used to dealing with physical objects as currency, literally, forever because it's all we've ever had.  But now that there's another option, it's going to take a little time to get used to and it will be suspect to many at first, but only once it explodes will people really see why it's so valuable.


Bitcoin has value as a medium of exchange, so does paper. But it has no intrinsic value on its own.

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## dannno

> Bitcoin has value as a medium of exchange, so does paper. But it has no intrinsic value on its own.


You should have answered his post better considering your statement doesn't explain why you are simply disagreeing with their statement when their is actual thought in their statement. 

The cryptography is the intrinsic value. It actually has more value than gold in some instances, for example if I wanted to exchange it with somebody in another country it will happen much faster with bitcoin. Although the value disappears when the value (the internet and the ability to exchange the medium) disappear which is a downside, but gold has downsides as well. I can't immediately exchange gold with somebody on the other side of the globe and I have to send it through an intermediary like the post office which has greater ability to be controlled my government than bitcoin.

When you say bitcoin has no intrinsic value it makes one sound like a 90 year old with no imagination. If you're going to say it doesn't have intrinsic value, then explain why.

It's funny that the author in the OP tells people to read really old books that existed before the internet and cryptography to tell me about what value the internet and cryptography have with my payment system.

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## XTreat

> And one has to keep in mind that Bitcoin and gold and silver are not opposed but rather complementary. Bitcoin is way better for internet transactions than gold or silver (specially because its decentralized and pseudo-anonymous) and its cheaper to store. Gold and silver in the other hand is probably safer and has a lot more tradition. I use bitcoins (I have used them to buy computer hardware in the last 24hours) and still save in gold and silver. I would not put all my savings in bitcoins, gold or silver, but a combination of the three. If you feel you have too many bitcoins and would like to keep a part of your savings in gold and silver, just buy gold and sivler with bitcoins (there are already shops selling gold and silver for bitcoins), and keep using your bitcoins to buy what you need online.



Exactly, I exchange 1/3 of the coin I mine for physical without ever using dollars.

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## mczerone

> So if the gov't of the United States decides to shut down the internet... the currency stops growing right? I mean people can no longer mine and they can also no longer exchange with one another. correct?   How can people exchange bitcoin without the internet?  So while your assets might be protected because they are stored on your computer it doesn't do any good if it cant grow or be exchanged for goods.    
> 
> I'm not trying to fight about it... I don't have a pony in the race... I'm just curious how a currency whose sole existence is in cyberspace could work if the gov't shut down the internet


(1) 95% of US FRNs are simply digital now, shutting down the internet would ruin traditional banking as much as (if not more than) the Bitcoin network.

(2) Mesh-networks, short-wave networks, and simple "pirate" networks could keep the blockchain updated. The internet is just the way the nodes talking to each other; the govt may shut down major ISPs, but there will always be _some_ way for the nodes to connect - especially if there is financial incentive (transfer of Bitcoin) to do so.

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## mczerone

> Seriously? This is where the Bitcoin crowd goes off the deep end. I'm all for competing currencies but don't try to tell me there's no such thing as intrinsic value. Gold and silver have intrinsic value, Bitcoin does not. Get over it.


What is your definition of intrinsic value, and why can't I tell you that there's no such thing?

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## Madison320

> You should have answered his post better considering your statement doesn't explain why you are simply disagreeing with their statement when their is actual thought in their statement. 
> 
> The cryptography is the intrinsic value. It actually has more value than gold in some instances, for example if I wanted to exchange it with somebody in another country it will happen much faster with bitcoin. Although the value disappears when the value (the internet and the ability to exchange the medium) disappear which is a downside, but gold has downsides as well. I can't immediately exchange gold with somebody on the other side of the globe and I have to send it through an intermediary like the post office which has greater ability to be controlled my government than bitcoin.
> 
> When you say bitcoin has no intrinsic value it makes one sound like a 90 year old with no imagination. If you're going to say it doesn't have intrinsic value, then explain why.
> 
> It's funny that the author in the OP tells people to read really old books that existed before the internet and cryptography to tell me about what value the internet and cryptography have with my payment system.


Cryptography gives Bitcoin value as a medium of exchange. Just like paper dollars have threads that make it hard to counterfeit. Gold has intrinsic value ON ITS OWN not just as a medium of exchange. It's used as an industrial metal, jewelry, etc. The difference is crucial.

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## Madison320

> What is your definition of intrinsic value, and why can't I tell you that there's no such thing?


Ok if you're telling me there's no such thing as intrinsic value then I guess we have to agree to disagree.

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## dannno

> Cryptography gives Bitcoin value as a medium of exchange. Just like paper dollars have threads that make it hard to counterfeit. Gold has intrinsic value ON ITS OWN not just as a medium of exchange. It's used as an industrial metal, jewelry, etc. The difference is crucial.


Ok, but there are still all those pesky benefits that bitcoin has that silver and gold don't have, which could be more significant than intrinsic value, which is still mostly dependent on industry existing just like bitcoin is dependent on network technology existing. But bitcoin, along with some help from gold and silver, could potentially result in ending the current monetary monopoly paradigm the banks have where gold and silver might not be able to do it as effectively on their own.

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## dannno

> Ok if you're telling me there's no such thing as intrinsic value then I guess we have to agree to disagree.


I think their point is that if industry doesn't exist then you lose a lot of this intrinsic value you are referring to, plus if there is a huge excess of people and a huge shortage of food, people may not care very much about jewelry.

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## mczerone

> Ok if you're telling me there's no such thing as intrinsic value then I guess we have to agree to disagree.


You didn't answer my question on how you define intrinsic value, and I don't agree to disagree. 

Here's an attempt to best define intrinsic value:

W/o humans to value things, nothing has positive or negative value. They just "are". Things are only valuable, only have a purpose, when people are around to use them.

So humans (or other purposeful actors) are necessary for valuation. So now, what things are "valuable in themselves"? Those things that are directly necessary, without substitution, to human survival. So: breathable air, drinkable water, and food. But notice that "food" is a general catagory, and no _particular_ food is needed.

So "intrinsic" value is limited to breathable air and drinkable water. Everything else isn't NEEDED, and therefore doesn't have value in it's very form. Value in anything else depends on the subjective goals of the actor, and therefor is subjective value, as opposed to intrinsic.

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## mczerone

> Cryptography gives Bitcoin value as a medium of exchange. Just like paper dollars have threads that make it hard to counterfeit. Gold has intrinsic value ON ITS OWN not just as a medium of exchange. It's used as an industrial metal, jewelry, etc. The difference is crucial.


So it's not "intrinsic" value that precious metals have. It's "non-currency" value that you're concerned with. And Bitcoin has that, too: ownership tagging, anonymous wealth storage, cost-less geographical transportation, commodity speculation, etc.

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## jtap

Seems like according to Madison320's definition of intrinsic value, nothing that is digital has any intrinsic value. The 1's and 0's that represent money, books, pictures, computer software and music have no intrinsic value to him. I think I can understand that view. I also could see it the other way that 1's and 0's have no intrinsic value at random...but then certain patterns of 1's and 0's that are in fact placed in a way that they become money, books, pictures, software and music do have intrinsic value.

I think he should have to elaborate and provide specificity for his definition for others to really understand.

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## angelatc

> Seems like according to Madison320's definition of intrinsic value, nothing that is digital has any intrinsic value. The 1's and 0's that represent money, books, pictures, computer software and music have no intrinsic value to him. I think I can understand that view. I also could see it the other way that 1's and 0's have no intrinsic value at random...but then certain patterns of 1's and 0's that are in fact placed in a way that they become money, books, pictures, software and music do have intrinsic value.
> 
> I think he should have to elaborate and provide specificity for his definition for others to really understand.


For the record, I don't really care if people buy and sell with Bitcoin. In fact,  I would happily accept Bitcoin if there were an eBay-type place that accepted it.

But I think that I agree with Ron Paul in that my ideal alternative currency would be tied to something tangible.

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## PaulConventionWV

> For the record, I don't really care if people buy and sell with Bitcoin. In fact,  I would happily accept Bitcoin if there were an eBay-type place that accepted it.
> 
> But I think that I agree with Ron Paul in that my ideal alternative currency would be tied to something tangible.


Then it wouldn't be alternative, would it?  It would just be another physical object that can be suppressed and regulated by the government.  I think the strongest advantages of bitcoin are some of its perceived weaknesses.  We've never experienced a currency that isn't dependent on the whereabouts of some tangible physical object, but it might actually be a good thing not to have our money tied to some physical object.  Money is really an idea more than anything, and we've never been able to treat it as such because we've been limited by the things that were available to us at the time, and throughout history, that has meant objects used as money.  Perhaps that's not ideal.  We are just now finding out.

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## angelatc

> Then it wouldn't be alternative, would it?  It would just be another physical object that can be suppressed and regulated by the government.  I think the strongest advantages of bitcoin are some of its perceived weaknesses.  We've never experienced a currency that isn't dependent on the whereabouts of some tangible physical object, but it might actually be a good thing not to have our money tied to some physical object.  Money is really an idea more than anything, and we've never been able to treat it as such because we've been limited by the things that were available to us at the time, and throughout history, that has meant objects used as money.  Perhaps that's not idea.  We are just now finding out.


 I certainly like the notion of competing currencies in any event.  But your argument, that implies that as long as we all agree on a currency means it will have some value, is sort of the same notion we've mocked when discussing the American dollar.

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## PaulConventionWV

> I certainly like the notion of competing currencies in any event.  But your argument, that implies that as long as we all agree on a currency means it will have some value, is sort of the same notion we've mocked when discussing the American dollar.


Not really.  The difference is that the American dollar has no real value, or what value it might have is severely inflated.  The problem isn't that the dollar is perceived as having value.  The problem is that its value is inflated by government monopoly.

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## heavenlyboy34

> Seriously? This is where the Bitcoin crowd goes off the deep end. I'm all for competing currencies but don't try to tell me there's no such thing as intrinsic value. Gold and silver have intrinsic value, Bitcoin does not. Get over it.


Value is subjective-even Austrians agree with this.  There is no such thing as "instrinsic value".

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## Danke

Prepare for a major correction, I'm planning on buying some.

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## Madison320

> You didn't answer my question on how you define intrinsic value, and I don't agree to disagree. 
> 
> Here's an attempt to best define intrinsic value:
> 
> W/o humans to value things, nothing has positive or negative value. They just "are". Things are only valuable, only have a purpose, when people are around to use them.
> 
> So humans (or other purposeful actors) are necessary for valuation. So now, what things are "valuable in themselves"? Those things that are directly necessary, without substitution, to human survival. So: breathable air, drinkable water, and food. But notice that "food" is a general catagory, and no _particular_ food is needed.
> 
> So "intrinsic" value is limited to breathable air and drinkable water. Everything else isn't NEEDED, and therefore doesn't have value in it's very form. Value in anything else depends on the subjective goals of the actor, and therefor is subjective value, as opposed to intrinsic.


I'll take thousands of years of gold actually having value over you telling me that bitcoin has value.

Right now gold is about $1,300 dollars, bitcoin $416. That's about 3 to 1. How much you want to bet that ratio skyrockets over the next 10 years. Then you'll understand everything you need to know about intrinsic value.

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## Madison320

> So if the gov't of the United States decides to shut down the internet... the currency stops growing right? I mean people can no longer mine and they can also no longer exchange with one another. correct?   How can people exchange bitcoin without the internet?  So while your assets might be protected because they are stored on your computer it doesn't do any good if it cant grow or be exchanged for goods.    
> 
> I'm not trying to fight about it... I don't have a pony in the race... I'm just curious how a currency whose sole existence is in cyberspace could work if the gov't shut down the internet


Or what about a major power outage?

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## heavenlyboy34

> *I'll take thousands of years of gold actually having value* over you telling me that bitcoin has value.
> 
> Right now gold is about $1,300 dollars, bitcoin $416. That's about 3 to 1. How much you want to bet that ratio skyrockets over the next 10 years. Then you'll understand everything you need to know about intrinsic value.


More accurately, thousands of years of gold being considered valuable as a medium exchange/store of value.  There have been (rare) times and places in which gold was not considered valuable.

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## dannno

> I'll take thousands of years of gold actually having value over you telling me that bitcoin has value.
> 
> Right now gold is about $1,300 dollars, bitcoin $416. That's about 3 to 1. How much you want to bet that ratio skyrockets over the next 10 years. Then you'll understand everything you need to know about intrinsic value.


People who promote bitcoin generally promote gold and silver as well and would be fine with that - but you could be wrong and the ratio may go in the other direction if it becomes a widely used medium of exchange.

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## idiom

I don't see the point of bitcoins. I just use encrypted gold in all of my electronic transactions....

I suppose you could use bitcoins to buy stamps when you post gold to mail order catalogs....

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## PRB

bitcoins is the opposite of what libertarians stand for : a gold standard! on top of that, the fact silkroad operator was found and had his wallet emptied is enough to tell you it's no more secure than any other form of currency when a sloppy human error could land you robbed.

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## mad cow

I think that for now,Bitcoin is much too volatile to be a popular medium of exchange.The price has varied in the last year from $11.18 to $445.00.I am sure that the stats V. gold,silver,barrels of oil or pork bellies are near as bad.

Nobody is going to sign even a medium term contract based on payments in something that is changing thousands of percent in value in less than a year.

I have nothing against the idea of Bitcoin,I just don't see it becoming popular until it settles down.

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## mczerone

> bitcoins is the opposite of what libertarians stand for : a gold standard! on top of that, the fact silkroad operator was found and had his wallet emptied is enough to tell you it's no more secure than any other form of currency when a sloppy human error could land you robbed.


Wrong, wrong, wrong.

"Libertarians" stand for no force or fraud in life, including money. That precludes the use of the dollar, which is maintained through the monopoly of the State.

But also, no "libertarian" can seriously argue that people be FORCED onto the gold standard anymore than they could argue that they should be forced into the FED's rigged FRN system.

Competing currencies is the only consistent position.

Also, the alleged Dread Pirate Roberts's personal bitcoin wallet is intact - the feds can't get into it. They just have possession of the hardware it's stored on.

Lastly, it's no LESS secure than any other form of currency, and, if you take responsibility, it's way more secure than most anything. And it doesn't cost you thousands of dollars on a safe and hidden closets and ammo and bio-recognition locks, etc. that storing a bunch of gold would require to secure as tightly as you can easily secure Bitcoin.

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## muzzled dogg

bitcoin ride was nice but i'm getting off here.

see you again at $30

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## muh_roads

> bitcoin ride was nice but i'm getting off here.
> 
> see you again at $30


Congrats on your profit-take.

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## muh_roads

> I'll take thousands of years of gold actually having value over you telling me that bitcoin has value.
> 
> Right now gold is about $1,300 dollars, bitcoin $416. That's about 3 to 1. How much you want to bet that ratio skyrockets over the next 10 years. Then you'll understand everything you need to know about intrinsic value.


The world doesn't operate on intrinsic value.  Whether you like it or not, digital money is how our global market works.  Bitcoin has the benefit of limited supply, instant transfer (even around sanctions), and a fee of a few pennies.  Businesses that need to move a lot of money can save a great deal of their own capital using BTC and stop giving it away to the banksters.

The banking system becomes less needed as more people are empowered with a deflationary currency that they are taking part of.  Less and less people will desire loans.  Saving will be rewarded in the hands of the people where it belongs.  Like it used to be.

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## PaulConventionWV

> I'll take thousands of years of gold actually having value over you telling me that bitcoin has value.
> 
> Right now gold is about $1,300 dollars, bitcoin $416. That's about 3 to 1. How much you want to bet that ratio skyrockets over the next 10 years. Then you'll understand everything you need to know about intrinsic value.


We'll just see about that, then.

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## PaulConventionWV

> More accurately, thousands of years of gold being considered valuable as a medium exchange/store of value.  There have been (rare) times and places in which gold was not considered valuable.


I wish I could find those places.

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## PaulConventionWV

> I think that for now,Bitcoin is much too volatile to be a popular medium of exchange.The price has varied in the last year from $11.18 to $445.00.I am sure that the stats V. gold,silver,barrels of oil or pork bellies are near as bad.
> 
> Nobody is going to sign even a medium term contract based on payments in something that is changing thousands of percent in value in less than a year.
> 
> I have nothing against the idea of Bitcoin,I just don't see it becoming popular until it settles down.


It will settle down, that's the whole point.  There is ALWAYS a lot of volatility in a new market, but it doesn't last forever.

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## PaulConventionWV

> bitcoin ride was nice but i'm getting off here.
> 
> see you again at $30


I don't believe I will, actually.

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## LibertyEagle

I like the idea that, as of now, the government doesn't seem to have any control over it.

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## PRB

> I like the idea that, as of now, the government doesn't seem to have any control over it.


government has no control over MLM and Ponzi schemes either, other than criminalize it, and when they do, operators can cry foul like they did nothing wrong.

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## angelatc

> I like the idea that, as of now, the government doesn't seem to have any control over it.


Sure.  Not having a central bank is also a big appeal.

I think the title is wrong, in that it calls Bitcoin a bogus medium of exchange.  The fact that it might be over valued doesn't make it bogus, just over valued.

I'm going to get a lecture here, but the problems I see with it are:

 - It's too complicated to get involved with.  The average American consumer doesn't know how to and has little desire to create a secure wallet, maintain backups and do whatever else one has to do to spend the money.  Consider this - I know a lot more about it than the average American, and I'm practically clueless.

 - Its value seems to be primarily based on speculation.  I think this will end up being like the  Dutch tulip bubble. The only excitement it generates is when the value is measured in dollars. People aren't buying much with Bitcoin.  They're investing in them, and cashing out when they want to buy. 

- If I understand the system, there's only a limited number of them in circulation.  What happens over the course of a century, as some of them simply disappear from circulation?  Obviously that means the value goes up, but nobody wants to be the guy holding the last bitcoin either.

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## idiom

> bitcoins is the opposite of what libertarians stand for : a gold standard! on top of that, the fact silkroad operator was found and had his wallet emptied is enough to tell you it's no more secure than any other form of currency when a sloppy human error could land you robbed.


In the history of the world nobody has ever stolen gold? GOLD IS AMAZING!!!

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## PRB

> In the history of the world nobody has ever stolen gold? GOLD IS AMAZING!!!


other than pirates, but they're extinct now.

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## dannno

> I'm going to get a lecture here, but the problems I see with it are:
> 
>  - It's too complicated to get involved with.  The average American consumer doesn't know how to and has little desire to create a secure wallet, maintain backups and do whatever else one has to do to spend the money.  Consider this - I know a lot more about it than the average American, and I'm practically clueless.



It has gotten a lot easier than it was and people will continue to develop solutions to make it even easier still. 





> - If I understand the system, there's only a limited number of them in circulation.  What happens over the course of a century, as some of them simply disappear from circulation?  Obviously that means the value goes up, but nobody wants to be the guy holding the last bitcoin either.



As some disappear, you are correct that the value will increase for the others. But bitcoin can be split up into very small units so that shouldn't ever be an issue.

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## dannno

> other than pirates, but they're extinct now.


By pirates I assume you mean the government.

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## heavenlyboy34

> Then it wouldn't be alternative, would it?  It would just be another physical object that can be suppressed and regulated by the government.  I think the strongest advantages of bitcoin are some of its perceived weaknesses.  We've never experienced a currency that isn't dependent on the whereabouts of some tangible physical object, but it might actually be a good thing not to have our money tied to some physical object.  Money is really an idea more than anything, and we've never been able to treat it as such because we've been limited by the things that were available to us at the time, and throughout history, that has meant objects used as money.  Perhaps that's not ideal.  We are just now finding out.


Good post.   I would only nitpick that bitcoin is currency, not money.  Among the criteria for something to be "money" are durability, which bitcoin (as I understand it) lacks. /end ramble

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## PaulConventionWV

> Good post.   I would only nitpick that bitcoin is currency, not money.  Among the criteria for something to be "money" are durability, which bitcoin (as I understand it) lacks. /end ramble


And I would only nitpick that it's "is durability", not "are durability".  That said, I'm not sure how bitcoin lacks it.

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## Madison320

> Sure.  Not having a central bank is also a big appeal.
> 
> I think the title is wrong, in that it calls Bitcoin a bogus medium of exchange.  The fact that it might be over valued doesn't make it bogus, just over valued.
> 
> I'm going to get a lecture here, but the problems I see with it are:
> 
>  - It's too complicated to get involved with.  The average American consumer doesn't know how to and has little desire to create a secure wallet, maintain backups and do whatever else one has to do to spend the money.  Consider this - I know a lot more about it than the average American, and I'm practically clueless.
> 
>  - Its value seems to be primarily based on speculation.  I think this will end up being like the  Dutch tulip bubble. The only excitement it generates is when the value is measured in dollars. People aren't buying much with Bitcoin.  They're investing in them, and cashing out when they want to buy. 
> ...


Also how do you prove ownership of Bitcoins without also publicly exposing how many Bitcoins you have? Nobody knows how much gold I have but I can prove its mine. How does Bitcoin function in a major power outage or out of range of an internet connection?

But by far the worst argument in defense of Bitcoin is that intrinsic value is totally subjective therefore Bitcoin has just as much intrinsic value as gold. In fact it worries me that I have to even back up the fact that gold has intrinsic value on its own while bitcoin does not. 1+1=2. It's not debatable. If you want to convince me of the virtues of bitcoin don't start off with an obvious false statement. 

All that being said I'm totally in favor of competing currencies and I'm totally against government fiat money.

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## evilfunnystuff

> I think that for now,Bitcoin is much too volatile to be a popular medium of exchange.The price has varied in the last year from $11.18 to $445.00.I am sure that the stats V. gold,silver,barrels of oil or pork bellies are near as bad.
> 
> Nobody is going to sign even a medium term contract based on payments in something that is changing thousands of percent in value in less than a year.
> 
> I have nothing against the idea of Bitcoin,I just don't see it becoming popular until it settles down.


It wont always be this volatile, the only reason it is, is because so many see how big this is gonna be are rushing in. 

Until then there are options to deal with the volatility.

Then you can contract for a certain usd value worth of btc eg. $2,000 worth of Bitcoin to be payed at Bitstamp exchange rates upon project completion or simply hedge your BTC into gold silver, or USD until its time to spend.

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## evilfunnystuff

> ... In fact,  I would happily accept Bitcoin if there were an eBay-type place that accepted it.


I was going to try BitMit but they are apparently selling it.




> Bitmit is going to be sold. Please complete your orders and withdraw your funds asap!
> We are still taking serious offers!
> 
> 2013 November 6th
> Read more..
> 
> We are planning to let another company take over Bitmit. Meanwhile we deactivated the site to let you withdraw your funds & complete your orders. The chances are good that Bitmit will be continued.
> 
> « The end is the beginning of all things, suppressed and hidden, awaiting to be released through the rhythm of pain and pleasure. Bitcoin evolved from a sore baby to a powerful soldier who is surrounded by a wonderful community of freedom fighters! With your help Bitcoin will be able to defend itself in the fight against all financial systems that are based on debt. But for us it's time to move on. »
> ...

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## amonasro

Look up "proof of work" and you'll realize what backs Bitcoin. It's the digital, cryptographic equivalent of finding a piece of gold and taking it to a dealer to have it appraised. If you don't understand Bitcoin at a somewhat technical level you're never going to "get it" and shouldn't be arguing against it. Most arguments here and in the msm are very uninformed.

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## dannno

> I don't see the point of bitcoins. I just use encrypted gold in all of my electronic transactions....


Where's the gold?

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## heavenlyboy34

> And I would only nitpick that it's "is durability", not "are durability".  That said, I'm not sure how bitcoin lacks it.


Okay, 'scuse my typo.  How do digits have durability?    Last I checked, they can be wiped out by a keystroke.

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## PaulConventionWV

> Okay, 'scuse my typo.  How do digits have durability?    Last I checked, they can be wiped out by a keystroke.


You know anything about cryptography?  Because I know it's a lot different than hitting the 'delete' or 'backspace' button on your keyboard.

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## whippoorwill

Bitcoin has dubuis *intrinsic value*.

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