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Comment by phyller | Hacker News Reader

Good points about bitcoin, but really that holds true of everything. I don't understand why gold always gets a pass here, everyone assumes it has some magic intrinsic value. But the same rule applies. It's worth what other people are willing to give you for it. I'd wager that the value of a fresh loaf of bread has held its value more consistently than an ounce of gold over 10 years. The only advantages gold has over bitcoin is that gold has some useful chemical properties (which probably have little to do with its current price) and it has a lot longer history as being used as currency, which I think is the real reason we value gold today. It is valued because it is valued.

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IIRC correctly gold has been a popular currency because it has properties that allow it to fulfill the functions of a currency quite easily - it's uniform size and weight and overall geographic availability lend nicely to being a unit of account, while its natural scarcity lends itself to being a store of value, and its durability lends itself to both its unit of account and store of value functions.

It's also worth noting that the volatility of gold production has historically played against its function as a store of value, as fluctuations in its price have had impacts on the larger economy.

All of this is to say that the only reason gold has extrinsic value as money - why so many societies have seen it as money - is because it has natural properties that map reasonably well into the needed functions of a currency. It's not unique among natural currencies, rather just a first among equals.

I think this is exactly right, but it also shows why bitcoin is actually a very good candidate for a currency. It has every characteristic that makes gold a good currency, and additional ones as well. In the ways that gold is convenient, bitcoin is more convenient. As far as currencies go, I think that the less intrinsic value it has the better it fulfills its purpose. It is not meant to be hoarded but serve as lubrication for the exchange of goods and services. I could go on, but basically I think bitcoin could be seen as superior to gold as a currency, if its value was as globally accepted. But still, I think it is inferior to the dollar. For a truly stable economy we need to be able to control the value of our currency.

Of course you are right about Gold, it's valuable mostly because it is popular and we've agreed that it is valuable - for a while, aluminum was more valuable than gold, because it is shiny and was scarce. You could argue that aluminum is actually more "useful" than gold. Most things are either valuable because they are scarce (mainstream economics) or because a lot of labor went into it's production (labor theory of value/Marx). But things that are not money seem to need a "practical" use to be able to hold value.

Interesting fact about gold, for a while private gold possession was banned in the US. So even in that regard it is not a to Bitcoin...

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