Anon gives up on Bitcoin in 2010

In the early days, the Bitcoin community was very ideological (and I guess a lot of it still is). Libertarian, Mises Institute, Ayn Rand, abolish the Fed types. People actively willed-it into having value (e.g. setting up a pizza delivery for 10,000 BTC). It's specifically designed to be "digital gold," where the amount that can be mined decays logarithmically over time, so supply is effectively constrained (very much so now), and the more people that want to buy it, the more it's worth, because that means you need to find people willing to sell it at a particular price. If you were to think of it as a currency, it would be a disinflationary currency, or effectively deflationary (because coins get "lost"). This gave and gives people that hold Bitcoin financial incentive to proselytize Bitcoin so their holdings are worth more. Overall, it's a pretty stupid idea, IMO, and the crypto space is full of mostly scammers and grifters now. A deflationary currency is a really bad idea under capitalism, since it encourages people to just hoard the currency instead of loaning it out, investing in new businesses, etc. Gold is also a horrible currency, which is why no country uses it as such, or even backs its own currency with gold anymore.

A Bitcoin is a contract. just like a dollar. it represents the value of some amount of labor. fuck

It has value because it can be exchanged for dollars. It originally could be exchanged for dollars because people believed in it the same as a God. It is a simulacrum of dollars that became hyperreal.

bitcoin has value because people perceive it to have value.

Basically, it went from like 10 people using it, where it was functionally worthless, to like 10 million people using it, where it's value per bitcoin increased by one million fold.

net money in = net money out, the early investors are just reaping the rewards of other people investing their money into it (and then losing it)

once you get the ball rolling it will keep rolling. That is what all those other coins are trying to do, though they settle for pump and dump too.

After years of lurking and staying quiet on the subject, I'll finally bite because it's a valid question and the typical responses are usually poor quality. There will be simplifications, omissions, and errors, but hopefully you'll find it useful nonetheless.

I'll speak specifically to bitcoin, and ignore other crypto currencies where things get increasingly complex.

As you suggest, it has no intrinsic value just as the dollar doesn't, in the sense it's not backed by some physical asset.

Where does the value come from then? Value can be derived from your ability to transact with a currency. There can also be speculation around future value. Both are certainly true of Bitcoin, but it's an evolving ecosystem. In the early days it was a novel idea and a very small number of people transacted with it and derived value that way. Since there's a finite number of BTC value is driven up as more people want to hold it (regardless of whether that's for transaction or speculation). During the silk road period (and to this day), the thought of a decentralised (and somewhat anonymous, let's disregard the complexity and just say that people thought it was) currency would be great for buying and selling illegal goods and services. These transactions increased the value. Since then, there's been a lot more mainstream interest in BTC, largely driving speculation but also transactability. Again, value increases under these conditions.

A lot of criticism of BTC is that it's pure speculation and there's little to no transactability. My thoughts on this is the majority of commenters are simply those that derive no benefit from transacting in a cryptocurrency. The USD, Euros, GBP are all amazingly transactable currencies, so why reach for crypto? The fact is, there are a lot of real world transactions happening with BTC and crypto in general. Several South American countries find themselves with a currency which is an incredibly poor store of value and BTC insulates it's citizens from this. The remittances market is a huge cluster fuck of middlemen and fees, bitcoin is often a better deal.

All this is still changing though. Substantial amounts of crypto transactions are now facilitated by financial entities with improving KYC by firms like Chainalysis. Regulation is forming rapidly, recognising BTC like many other currencies or assets, ensuring that the majority is exchanged and transacted at regulated entities. Still volumes go up. There are more and more companies who will transact directly in crypto.

So I ask the question, if the trajectory of bitcoin is that more and more people are not just holding it, but using it... Why wouldn't it be more valuable, why wouldn't you have expectations of it like any young currency?

Re your point about trading in dollars. There's plenty of states, entities and people who don't use the dollar and they get on just fine. At a national level the US has a vested interest in ensuring a country does trade in dollars, or conversely making sure they can't.

Now the USD is backed by the USA and that's powerful, so how did BTC get started? It's mostly the protocol. Miners find coins and get paid tx fees in exchange for securing the network against a sybil attack. We transact with BTC, or store it. Institutions are formed or pivot to support the ecosystem, the more people using it there more value there is in supporting it.

BTC is 16 years old now and it keeps having value because it's valuable! Perhaps the greatest question is does the value outstrip the speculation? I won't try to answer that, but we've seen a lot of crypto bubbles burst because of this... yet a few remain?

I'll stop here because I could keep expanding and refining, but I have a dinner to go to. Hope this helped in your understanding!

I don’t understand how bitcoin has value

The first major use case were donations to wikileaks, because the existing financial system shut them out. Recently, the Americans shut Russia out of the financial system and stole their money. Escaping financial repression is valuable (even if you don't agree that people should be able to escape).

It has value because people are dumb and want a magic way to escape having to contribute to a society that doesn't reward them for it

I don’t understand how bitcoin has value.

Study how they work. You are on lemmy a dencentralized and open source platform.

The difference is that the US government can just print money whereas the supply of BTC is limited.

drugs. the answer is drugs.

Realistically there wasn't that much to lose if you mined instead of invested. NFTs is a different story.

How many Bitcoin millionaires do you know? Do you think there's a selection bias there and only the douchbags make a big song and dance about it.

The cope. Nobody could have predicted this! Except all the people who predicted it. But that was just luck!

You are comparing lemmy with threads. The average bitcoin millionare probably knows the difference.

Bitcoin is now literally digital gold, it has absolutely no value other than scarcity and you betting on people thinking it will be more valuable in the future, it's a money store, where you hopefully don't lose money, or don't accidentally click on a link that loses you all of your money, but most of bitcoin was bought ip by wallstreet and they built etfs around it, so it's not as much of a risk as it used to be, I still wouldn't touch it

But if you lived on the street, would you be able to mine?

I bought some $300 DC Shoes and T shirts but I was like 15 years old lmao. It'd be like 20k last time I did the math.

I used it once when my rental's heating was not working well so I used my GPU as a space heater, recoup more than 10x cost of the hardware by mining over half a winter.

your electricity, my bitcoin.

Ya, I saw an article when Bitcoin was very new, like 10 cents each, and it said Bitcoin was stupid as a currency because there is a limited number of it and it will only increase in value which will cause people to horde it making it not valuable as a currency. They were kinda right tbf, it's not a good currency.

I decided not to mine it because it would have cost as much in electricity as it was worth and the only thing I could buy were drugs which I don't use.

The problem with statements like "If you invested in Bitcoin back in 2009 you'd be rich now" is that you'd have to be clairvoyant to actually know that back then. And if you're clairvoyant, the lottery offers a better return on investment than bitcoin.

I'm not sure which meaning of "drug" makes it worse

I used to mine them with cpu / GPU.

I bought a bottle of Jim beam for 25 BTC lol.