Comment by rspeele | Hacker News Reader

Comment by rspeele | Hacker News Reader

Parent Full thread

For the record, I doubt the US will ban bitcoin. But let's imagine what would happen if it did. It wouldn't eliminate access to bitcoin but it would hurt its value quite badly.

The demand for heroin and cocaine is driven by intrinsic value: it gets you high. You can restrict supply but you can't stop people from wanting to get high. The demand will be there no matter what. The utility of the product is unchanged by laws or public perception.

Bitcoin doesn't have intrinsic value. It has value because people will buy it from you. I think BTC is a crappy technology, but I'm not ashamed to admit I'd buy one at $50,000/ea this instant, only because I know I can turn around and resell it for $57,000/ea. The only reason I want 1 BTC is that I know enough other people want 1 BTC badly enough, that I can sell it to them at a good price.

If exchanging my Bitcoin back into fiat or directly for goods becomes illegal, now I've got difficulty and risk involved in using it. I won't want Bitcoins as much. Its utility -- being useful for exchange -- can be directly impacted by the law.

A lot of the people who want to buy bitcoin today would not buy it if it were illegal to do so. I'm talking about casual retail speculators, Tesla, Microstrategy... all of your basic white collar investors who are looking to make a buck but don't want to get in trouble for it. If you delete all those people from the buying side of the order books, and put those who have already bought and want to get out on the selling side, what happens to the price?

I'm tired of this flippant statement that many crypto-detractors take as fact, that there's no intrinsic value in Bitcoin. When you create a product or service that other people want to use and pay you for, is there no intrinsic value there?

I don't know how else to say it. To me it is almost a tautology. In fact I would not even want a currency to have intrinsic value. I want my money to have value, but not intrinsic value. Maybe we have a mixup of definitions.

Let me see if I can explain my definition of intrinsic value.

Suppose a genie appeared before me and presented a gift to me, with one condition (enforced by genie magic): I can never sell this gift. The gift is a gorgeous, hand-engraved Krieghoff shotgun stocked in highly figured walnut. Now, this is a coveted object and one that would fetch a high price, if I were able to resell it. It's unfortunate that I can't! But I would still be thrilled to receive this gift. It's a very fine piece of craftsmanship and one that I can both appreciate for its beauty, and enjoy using on the skeet field. I want it just to have it and use it, not to sell it or put a number on it in measuring my assets.

You can imagine the same arrangement for many other things: a fancy car, a house, a stunning artwork, a barrel of booze, or even a pile of heroin and cocaine, if that's your preferred vice. Even with the stipulation that you absolutely cannot sell the item, you still want it.

Now, if the genie gave you a gift of Bitcoin, with this same magic arrangement that prevents you from selling it to somebody else (including trading it for anything), how excited would you be?

The point of a currency is to trade it. If you disallow that then you might as well ask about food that I'm not allowed to eat, art I can't look at, or a language I'm not allowed to speak.

> If you redefine "intrinsic value" to include "trade value", you have just made the word "intrinsic" meaningless. Is there any type of asset that does not have intrinsic value, using this new definition?

The value of cryptocurrency in the abstract over regular currency is that it's provably tied to a transaction which is a program, and that transactions cannot be reversed - any revocation mechanisms like escrow, timeouts, etc, need to be part of the contract and thus transparent. This has a ton of value if you want your software to be able to do things that involve real value, from topping-up your API limits on a website to trading Pounds against a falling Euro.

That can't be recreated by any centralized entity, such as the USA with dollars, or Ethereum and Eth, because of their ability to blacklist or roll back anything they don't approve of.

> The point of a currency is to trade it. If you disallow that then you might as well ask about food that I'm not allowed to eat, art I can't look at, or a language I'm not allowed to speak.

Yes! You get it. Currencies normally don't and shouldn't have intrinsic value. The gold coins of the distant past had some intrinsic value since they could be melted down and used for jewelry or corrosion resistant coatings etc, but all modern currencies have near-zero intrinsic value and there is nothing wrong with that.

I don't agree with your conclusion though, in that I don't think it's a meaningful statement.

All value is dependent on the use. Food is useful for sustenance, but less useful for shelter. Currency is worthless to eat, but useful to facilitate trade for shelter, etc. There's no objective intrinsic value to anything.

If the Genie was to offer two intangible things, useless in isolation, such as a cryptocurrency (not a unit of that currency, but the system itself) or a new human language, neither would interest me. Both only have network value. But if I was allowed to use them as intended I would feel happy to have either.

Do you agree that some things have value in isolation, in addition to their trade or network value?

If so, perhaps you can also agree that making that distinction might be useful, at least in certain situations.

In particular, the post that started this thread compared banning bitcoin to banning heroin. I believe heroin's value is driven almost entirely by its ability to get you high. The end users don't care if it's white, blue, red, or covered in Louis Vuitton logos as long as they are confident that it gets them high in that particularly lovely heroin way. When you ban it, you don't interfere at all with the fact that heroin gets you high. Heroin does that job as well as ever. By banning it, you make it harder to obtain, but you don't make having it any less desirable for the addict.

On the other hand, when you ban bitcoin, you do interfere with the thing that's useful about Bitcoin: trading it. Not only do you make it harder for somebody to obtain BTC, you make having BTC less desirable, because it's harder to redeem it for a product or another currency.

Maybe just speaking for myself here, but it wouldn't be as valuable to me if I couldn't go to a "legit" company like Coinbase to facilitate turning it into something I can use to buy a car or a house. I suspect a lot of people feel the same way so overall that lack of buying interest would be pretty strong downward pressure on the market price.

> Maybe just speaking for myself here, but it wouldn't be as valuable to me if I couldn't go to a "legit" company like Coinbase to facilitate turning it into something I can use to buy a car or a house.

Well, I've never used a centralized blockchain service. But then again, I've also transacted for foreign cash while in a bar. Obviously for you though, the value is based on those services. As it's a network effect, you not using it does hurt me a tiny bit multiplied by the number of people like you.

But it's not like it has to be the currency to be almost as useful. Euros aren't taken everywhere yet nobody trades them at a discount in those areas. As long as cryptocurrency works for what I want it to, I don't much care that it's a bit harder to use at the grocery store.

And of course, what's the consequence of the law? Do they shoot you, or do they just treat it as foreign cash or something and tax you at the least favorable rate? A totally ineffective ban could actually help. If you drove it underground enough that nobody declared it (or paid taxes on it) the increased value might help a burgeoning underground economy and help create money-laundering opportunities. And the ban has to be relevant to the use. If the USA banned bitcoin it might actually help other countries more than the diminished value of bitcoin hurt them and that disproportionate benefit could be the catalyst to make the system more useful overall.

Already the USA has effectively banned most cryptocurrency by limiting what Americans can invest in and who they can invest through, but because of the halo effect Americans can buy BTC and ride the general wave despite not participating in some of the other opportunities directly. The limited ban did almost nothing despite your logic being fairly sound.

Very excited! because by definition, it wouldn’t be bitcoin if it couldn’t be transferred. A genie cannot give you a bitcoin that cannot be transferred; as a bitcoin is only the ability to transfer. This censorship resistant value transfer channel has an intrinsic value — let’s say the genie anti-selling analogy applied to fiat gateways; no problem, I’ll swap my BTC for Starbucks gift cards and spend it all on the coffee that I am supposed to not be able to buy. Replace gift card with anything else you might want.

You know, if you want to just ignore the premise, you could also point out that genies aren't real, magic doesn't work, and heck, even for the physical objects there's no way I could be prevented from reselling my brand new shotgun or car or pile of drugs! But in doing so, you might miss the point of a thought experiment like this.

There is a difference between things that are desirable in and of themselves, and things that are desirable because of their trade value. The term "intrinsic value" is used to make that distinction. It doesn't mean things without intrinsic value are bad, or broken, or doomed to fail. It's not a strictly negative or positive distinction. But it is a useful distinction to be able to make.

If you redefine "intrinsic value" to include "trade value", you have just made the word "intrinsic" meaningless. Is there any type of asset that does not have intrinsic value, using this new definition?

Now, getting out of the realm of hypothetical genies and magic, you can make an argument that government regulation cannot realistically prevent trade in Bitcoin, so that trade value will be maintained. No intrinsic value is required. I'm not so sure that the trade value would hold up without the buying pressure from retail investors and businesses wishing to comply with US law, but reasonable people can disagree.

I love the hypothetical, but I will admit I tried to redirect it :-) thank you for your response.

I agree, one cannot consider “trade value” as a component of intrinsic — I think a better (partial) attribute of intrinsic to be its fungibility, which is more what I meant (ease of selling) instead of “trade value” as (sale price). Ease of selling can impact the sale price, which makes it an attribute of its trade value, not intrinsic, but I am making an argument that the very nature of the asset’s fungibility makes it a component of its intrinsic value. BTC is not perfectly fungible due to tx taint, but it is fungible enough over traditional stores of value that it makes it slightly better than traditional. This itself is independent of its sale price; “BTC had an intrinsic value the day it was born”, by merit of its coin provenance, audibility, integrity, censorship resistance and fungibility. That is worth something, even if nobody on earth wants to trade it for fiat.

Reply on news.ycombinator.com