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Comment by t0 | Hacker News Reader

But what is the real value in these? TPB could start accepting tulip buds and we could set up exchanges for them and start gathering tulips at a much faster rate. Does that make them worth anything?

If you've participated in the btc-e chatbox for even a short period of time, you'd realize most investors are simply pumping and dumping. They aren't using the currencies for transactions. Bitcoin is hardly even used a currency.

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There's multiple reasons they have value. First off, they offer different block chains for additional security. Litecoin uses Scrypt as opposed to SHA-2 encryption, so it is harder for an attacker to hack both at once. If Bitcoin is brought down by an attack, Litecoin has a large chance of surviving.

Investors are not simply pumping and dumping. I agree some are, but there is likely true long term value in having multiple block chains.

edit: revised statement about security

The problem is not that, like tulips, there's no "intrinsic" value. The problem is that there's no way to keep alternative currencies from entering the marketplace. If there was a need for a cryptocurrency and there was some reasonably robust mechanism preventing alternatives from being adopted (which there's not, but it's certainly conceivable), then Bitcoin value could be about as stable as the US dollar.

But there are hundreds of currencies that are identical to the dollar, just named differently and backed by other countries.

The requirement of the government to pay taxes in dollars, and the fact that dollars are legal tender for settling civil debts prevents one country's currency from supplanting the other within the borders of the country, mostly.

"But what is the real value in these?"

Perhaps you should think about the real value of money.

http://blog.sossee.com/2013/04/29/bitcoin-explained-part-1/

Disclosure: my post.

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