/biz/ - Business & Finance

Contrast that with the properties that make gold a unique metal with high and lasting demand for jewelry and other uses: those properties are physically attached to each bit of the metal, and thus are truly "intrinsic".

In fact, while bitcoins are created in a fixed amount only when the miners have expended a large amount of work, the creation of those bitcoins costs nothing. The reward per block is defined by two lines of code in a program. By changing those lines, the reward could be sixty or six million bitcoins per block, with no extra work being required from the miners. Contrast that with the cost of producing gold, that is defined by geology and not by some line in a program.

It is claimed that the code lines that define the block reward cannot be changed because that would be "against the miners' self interest", or would be "rejected by the community". But neither of these arguments stands up to a critical analysis, that considers the actual reaction of that community to more radical changes that have been imposed on the protocol -- such as BTC's intentional congestion, and Ethereum's breaking of the sacred "code is law" principle.

It follows that bitcoins have no more intrinsic value than coins of any other cryptocurrency, or than the shares of Madoff's ponzi fund. These too were only an entry in a ledger, and where worthless by themselves. Unlike stocks or dollars in a checking account, none of those ledger entries gave their holders legal property rights on anything else; their value being only the right, conceded by the operators, to play the game -- that particular game -- while it lasted.

cont.