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Comment by Yuioup | Hacker News Reader

I still don't understand how a nonexistent coin could be worth anything. No really. How does solving an algorithm translate into value?

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It doesn't.

'Value' comes from people's perception. The fact(s) that they can't (until the crypto is broken) be counterfeited or double spent (within reason/time limits), and that there are a limited amount ever, and that transfer is decentralised and unregulated, these things give them value to some people.

The actual hashing work done is useful to provide the above features. IMHO it is not useful in and of itself.

Note that I'm not really an advocate of bitcoins either, but I have taken a bit of time to try and understand them. The limited quantity and decentralisation are not positive features of a currency (again, IMHO)

Value, be it in gold or silver or USD or EUR or bitcoin or cars or art, is a perceived phenomenon. Something has value because others are willing to trade it for goods and services (or for other forms of value). Gold and silver are trusted stores of value because they have been used in that capacity for centuries (and for a very long time, USD were silver certificates so there was real metal backing the paper)

The underlying value of BTC, IMO, is the anonymity feature (the ability to conduct commerce without a clear centralized record identifying you by name). Once that is compromised, it's not clear what value BTC will have.

Anonymity is not really the selling feature of bitcoin - in fact it really only offers pseudo-anonymity.

The fact that no-one else can just "print" bitcoins, and that you can transfer funds at internet speed to anybody else anywhere in the world and that (after a short time), the transaction cannot be reversed are the main utilities.

Yes, I think it is possible, in the long run, to figure out who's behind a wallet, assuming that the Bitcoin use is frequent and convenient (meaning no-super-high-inconvenient-counter-measures are used, but a regular use of currency)

In that case, my concern is that I think it will be possible to determine ALL the transactions of that wallet. Making it even less anonymous than regular currencies.

I could be missing something, but if confirmed, that could be a problem for using Bitcoin as a regular currency

There are various laundering schemes, and there's nothing stopping you using new wallets constantly.

But yes, in effect, every transaction is traceable and public, AFAICT.

Yes, I understand that there are things that you can do. But, as those are in the way of convenience, we can assume that not everyone will take the extra effort to create constantly new wallets, etc.

So, in case someone can trace you to a wallet, that someone can know all your transactions (of course, only the transactions for that wallet), which is a huge potential privacy risk.

I still don't understand how a piece of rock could be worth anything. No really. How do some carbon atoms translate into value?

Value is a transient concept, many things we assume to be inherently valuable are simply based on the assumption everyone else will continue to value them as much (or more) as they do now.

Yes but there is nothing backing up the solving of the algorithm. The rock came from somewhere and can be put back to be picked up again. A bitcoin comes from nowhere and is a magnetic action away from being wiped into nothing.

Bitcoin is b<censored>t, a nonsense bubble waiting to burst. The emperor is wearing bitcoin.

Houses crumble, cars break down, money burns. Just as possible to be wiped into effectively nothing. Yet these things retain value.

I don't think that bitcoins are worth what people are willing to pay, but then I feel the same about diamonds.

A year or two ago a group in .ch (which is not China, BTW) organized a group buy of Debian logo'd swiss army knives. I got in on the deal and unfortunately ended up paying well over 50% the cost of the knife in various transfer fees. So my "$25 knife" or whatever it was ended up costing me about $50. First I needed to convert from dollars to euros, then an international xfer, then into something kinda like a cross between what americans would call paypal and a checking account I believe it was the iban system where I basically sent money to a number almost exactly like paypal would send money to an email addrs. Nobody would do stuff like this unless they were desperate or crazy or just didn't care so the financial cartels tacked on incredible fees at each step. Oh if only we could have made a transaction with BTC. It takes about 5 minutes to make a BTC transaction so the currency risk is pretty minimal compared to the 50%+ fees from traditional currency changers. Given those numbers, even during an active crash its safer/cheaper to use BTC than traditional forms of transfer.

Anyway the value of a bitcoin solely due to transfers is (how much money the world is transferring across borders with BTC today) / (how many BTC are available for that kind of transfer/trading today) with a correction factor for velocity of money today. So if a billion bucks a day flows outta $dying_country and there's ten thousand BTC in the trading pool being used to transfer the money, and the velocity of money is the btc change hands a thousand times a day, then the price delta due to Cyprus/whatever would therefore be "about" $100 per individual BTC on top of whatever existing value due to other transfers and such. These numbers are pretty well made up but this is generally where very long term price estimates end up. So assuming BTC someday approaches 1% of paypals volume, then given paypals well known transfer volume stats, and some realistic estimates of the BTC trading pool size, the price per BTC would be...

Much like EE work this valuation benefits from a hydrologic comparison. So given hoover dam, how much does a gallon of water weigh? Well if you know how many pounds of water fell over the dam per day, and you know how many gallons of water fell over the dam per day, and one day's worth of water takes exactly one day to fall over the dam, then a gallon of water would seem to weigh x pounds...

Wowsers.

Whereas I've sent money between accounts in all sorts of countries for next to nothing. I think whoever organised your group buy screwed up, badly. And by the sounds of it so did you.

LOL content free post. It does bring up the interesting question of what is the cheapest way to transfer money internationally. Obviously my example won't set any (good) records. Neither side were willing to use paypal so that's off the table (does paypal even do business in .ch?). Silver coins in a postage envelope maybe? A fat stack of Postal IRC (international reply coupons)? I think its going to be pretty hard to transfer money cheaper than "basically free" like BTC.

I'm just pointing out that your convoluted example of the knife (which I've heard somewhere before...) isn't necessarily a typical experience. There are a variety of ways to transfer money around for a variety of fee structures.

For instance I used a company called moneycorp last year to transfer a few tens of thousands of dollars between Australia and the UK. They had a low conversion fee, used market exchange rates and there was no fee at all between them and the banks involved at either end. Painless and cheap.

BTC may be basically free if BTC are wanted at both ends, otherwise there are conversion fees there too, as well as a variety of delays. And there are transaction fees (though these are small).

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