Cryptocurrency

ExCyment

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Jan 8, 2013
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Bitcoin is a commodity for 2 reasons primarily:

1. Proof of work mechanism (objective value based on cost/labor to produce it)
2. Bitcoin can be accumulated as a store of value asset. There is no matching liability by its creator (like fiat or other financial instruments.)
It may be traded like a commodity but is not one as it has zero value other than perceived value. Commodities can be used by industry or consumed like pork bellies or gold.
 
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JustAnotherTimeline

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It may be traded like a commodity but is not one as it has zero value other than perceived value. Commodities can be used by industry or consumed like pork bellies or gold.

I have gone into this in detail in previous posts, but in short, Bitcoin offers a unique set of properties that make it different from every other asset in existence. You may not find value in said properties, but that doesn't mean there is objectively zero value. We are in an ever increasing digital age. Bitcoin is a digital commodity. Your definition is too narrow if you will only consider physical and consumable items as commodities.
 
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siklon

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Aug 11, 2010
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How can it be a commodity when it has no use except as a currency. It is not a commodity any than the dollar is a commodity. It is a currency with no backing, very similar to today's dollar, but isn't controlled. The difference is it isn't controlled by the central bank and in design no more will be created. We'll see.
Bitcoin is backed by digital energy. Miners require energy inputs to produce new coins. Companies like Vespene can take methane from landfills run it through a generator and can literally turn waste into an appreciating asset via a carbon negative process. That seems to be one very useful example to me...

And if time can be considered a commodity, then surely Bitcoin can be. Both the CFTC and Gary Gensler also seem to share this view.
 
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Land Grant

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Oct 30, 2006
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Bitcoin is backed by digital energy. Miners require energy inputs to produce new coins. Companies like Vespene can take methane from landfills run it through a generator and can literally turn waste into an appreciating asset via a carbon negative process. That seems to be one very useful example to me...

And if time can be considered a commodity, then surely Bitcoin can be. Both the CFTC and Gary Gensler also seem to share this view.
This is the most specious argument I've ever read on this site.
 

agrabes

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Oct 25, 2006
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Bitcoin is backed by digital energy. Miners require energy inputs to produce new coins. Companies like Vespene can take methane from landfills run it through a generator and can literally turn waste into an appreciating asset via a carbon negative process. That seems to be one very useful example to me...

And if time can be considered a commodity, then surely Bitcoin can be. Both the CFTC and Gary Gensler also seem to share this view.
I don't think it's quite right to say that Bitcoin is "backed" by digital energy. That would be like saying gold is "backed" by the cost of diesel fuel and backhoes. Bitcoin and gold are both backed by societal expectation that they should have value. It's more correct (imo) to say that Bitcoin is secured by the energy it takes to write to the blockchain and the proof of work protocol, but that's not what gives it its value.

If the value of one bitcoin was pegged to the value of the electricity and computer hardware it takes/took to mine that coin, mining would never be profitable because money in would be exactly equal to money out. If the value of gold or bitcoin were determined by the cost of mining, then miners would operate continuously regardless of any economic conditions because they would know that they would always be able to get back at least the value of the cost of their mining activities no matter how expensive they were. In reality, it doesn't work that way. The value of gold and bitcoin are set by market conditions. Miners use the price to determine if mining is feasible, market participants don't look at the cost of mining to determine their asking price.

Also - utilizing landfill gas to generate cryptocurrency could only be called carbon negative under limited circumstances. Only in the case where the landfill was simply venting the gas to the atmosphere and not flaring it or running a generator to sell to the grid/power their own facilities (both of these are the normal practices for landfills), then it would be carbon negative. Otherwise, it's either carbon neutral (converting from flaring to a generator that runs miners) or increasing carbon by add load to the power grid and requiring additional generation that wouldn't be used otherwise.

IMO - I think the best description is to say that Bitcoin trades like a commodity (rightfully so, imo) but is not truly a commodity. Part of the definition of a commodity is that it is a physical good. What sets it apart from stocks, bonds, and other investment assets is that owning commodities means you own physical, tangible items, rather than an on paper representation of partial ownership of an abstract idea like a corporation. Hold on to a soybean contract long enough and a truck will show up at your house full of soybeans - you don't have that with bitcoin - only a string of numbers in a secure distributed ledger.
 

besserheimerphat

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Apr 11, 2006
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I wasn't trying to make an argument against USD. I simply listed the properties I like about bitcoin. It was a challenge to anyone who thinks bitcoin is not unique. If there is an alternative asset, I am interested. The point is, those features are valuable to me, and some others it appears.

Again, it's just Austrian economics. In that theory, deflation is not the great fear many modern economists think it is. You don't have to agree with it, but there is a minority set of economists that teach this view. In Austrian economics, finite supply is a feature not a limitation. In Austrian economics prices can.....go down.

Bitcoin is a store of value that can be used for instantaneous peer to peer settlement. I don't know what the market will decide it's role is in the future. But it is capable of both. I fail to understand your issue here.
Prices go down today when tech is held constant. Today you can buy a 20" flat screen HD TV for like $200. That TV would have cost you $2000 10 years ago. The reason TVs aren't "cheaper" today is they're all 48"+ 4K HDR with 240Hz refresh. It's still "a TV" but it's a hell of a lot more TV than it used to be.
 

besserheimerphat

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Even in that extreme example, the currency has lost "only" 45% of it's purchasing power. Thar nowhere near Bitcoins 400% change in the other direction. And no one is going to hold the Lira up as an example of a good currency. Nobody will use it that doesn't have to.
The problem isn't the lira itself, it's the instability in the Turkish (Venezuelan, Argentinian, whatever) economy and government that backs it.
 
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JustAnotherTimeline

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I don't think it's quite right to say that Bitcoin is "backed" by digital energy. That would be like saying gold is "backed" by the cost of diesel fuel and backhoes. Bitcoin and gold are both backed by societal expectation that they should have value. It's more correct (imo) to say that Bitcoin is secured by the energy it takes to write to the blockchain and the proof of work protocol, but that's not what gives it its value.

If the value of one bitcoin was pegged to the value of the electricity and computer hardware it takes/took to mine that coin, mining would never be profitable because money in would be exactly equal to money out. If the value of gold or bitcoin were determined by the cost of mining, then miners would operate continuously regardless of any economic conditions because they would know that they would always be able to get back at least the value of the cost of their mining activities no matter how expensive they were. In reality, it doesn't work that way. The value of gold and bitcoin are set by market conditions. Miners use the price to determine if mining is feasible, market participants don't look at the cost of mining to determine their asking price.

Also - utilizing landfill gas to generate cryptocurrency could only be called carbon negative under limited circumstances. Only in the case where the landfill was simply venting the gas to the atmosphere and not flaring it or running a generator to sell to the grid/power their own facilities (both of these are the normal practices for landfills), then it would be carbon negative. Otherwise, it's either carbon neutral (converting from flaring to a generator that runs miners) or increasing carbon by add load to the power grid and requiring additional generation that wouldn't be used otherwise.

IMO - I think the best description is to say that Bitcoin trades like a commodity (rightfully so, imo) but is not truly a commodity. Part of the definition of a commodity is that it is a physical good. What sets it apart from stocks, bonds, and other investment assets is that owning commodities means you own physical, tangible items, rather than an on paper representation of partial ownership of an abstract idea like a corporation. Hold on to a soybean contract long enough and a truck will show up at your house full of soybeans - you don't have that with bitcoin - only a string of numbers in a secure distributed ledger.

Bitcoin doesn't meet the traditional definition of a commodity. However, we are now in the digital age. Some people would expand the definition to include digital commodities. Why are you unwilling to do so?
 
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besserheimerphat

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Apr 11, 2006
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I don't think it's quite right to say that Bitcoin is "backed" by digital energy. That would be like saying gold is "backed" by the cost of diesel fuel and backhoes. Bitcoin and gold are both backed by societal expectation that they should have value. It's more correct (imo) to say that Bitcoin is secured by the energy it takes to write to the blockchain and the proof of work protocol, but that's not what gives it its value.

If the value of one bitcoin was pegged to the value of the electricity and computer hardware it takes/took to mine that coin, mining would never be profitable because money in would be exactly equal to money out. If the value of gold or bitcoin were determined by the cost of mining, then miners would operate continuously regardless of any economic conditions because they would know that they would always be able to get back at least the value of the cost of their mining activities no matter how expensive they were. In reality, it doesn't work that way. The value of gold and bitcoin are set by market conditions. Miners use the price to determine if mining is feasible, market participants don't look at the cost of mining to determine their asking price.

Also - utilizing landfill gas to generate cryptocurrency could only be called carbon negative under limited circumstances. Only in the case where the landfill was simply venting the gas to the atmosphere and not flaring it or running a generator to sell to the grid/power their own facilities (both of these are the normal practices for landfills), then it would be carbon negative. Otherwise, it's either carbon neutral (converting from flaring to a generator that runs miners) or increasing carbon by add load to the power grid and requiring additional generation that wouldn't be used otherwise.

IMO - I think the best description is to say that Bitcoin trades like a commodity (rightfully so, imo) but is not truly a commodity. Part of the definition of a commodity is that it is a physical good. What sets it apart from stocks, bonds, and other investment assets is that owning commodities means you own physical, tangible items, rather than an on paper representation of partial ownership of an abstract idea like a corporation. Hold on to a soybean contract long enough and a truck will show up at your house full of soybeans - you don't have that with bitcoin - only a string of numbers in a secure distributed ledger.
Good post. IMO, the value of a commodity is that it can be transformed into something else that produces more value. Gold can become jewelry or electronics. Pork bellies and soy beans become food. Bitcoin doesn't do that; it will always and forever be just a bitcoin.
 
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JustAnotherTimeline

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The problem isn't the lira itself, it's the instability in the Turkish (Venezuelan, Argentinian, whatever) economy and government that backs it.

Do you really think it makes sense that people have to evaluate the stability of their government when they receive a paycheck? That idea is completely void of basic economics.
 
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besserheimerphat

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Do you really think it makes sense that people have to evaluate the stability of their government when they receive a paycheck? That idea is completely void of basic economics.
That's why we should allow a lot more immigration - let the people that want to work here move here and participate in and grow our economy. Leverage the power of the market to promote human rights and democracy. I moved to WA because the pay and longterm job prospects were better than in IA.
 

nocsious3

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Aug 23, 2013
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It's a ledger. Ledgers have been around and used to keep score in finance since at least the knights templar during the crusades. The validation protocol doesn't impart value nor the energy input. Whether it's proof of work, proof of stake, or federated byzantine agreement, it has nothing to do with token value. If a digital ledger with a settlement function ends up gaining worldwide adoption, it will be because the native token is pegged to a commodity or basket of commodities, not unlike how currencies were formally exchangeable for gold/silver. The token is just the score keeping device on the cryptographically secured ledger.

Bitcoin was first. It's no where near the most feature rich or speedy ledger now. The only thing its has is fanboys who have no idea what they're talking about pimpin it on social media.
 

nocsious3

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Aug 23, 2013
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Do you really think it makes sense that people have to evaluate the stability of their government when they receive a paycheck? That idea is completely void of basic economics.
Argentinian farmers are doing exactly that right now by refusing to sell their grain as the currency devalues. I bet they'd take real money aka gold though.
 

nocsious3

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Aug 23, 2013
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Iran using bitcoin to circumvent sanctions. Cool cool cool.

Although this is accurate it's probably the weakest argument against Bitcoin. Regular old currency is used in plenty of crime. Cash is used to avoid sanctions. Alternatives to swift are becoming more common to avoid the traditional correspondant banking channels. With most all of crypto, the ledger is public , immutable, and usually traceable.

The avenues to obscure funds or use of privacy protocols, is getting smaller. The Treasury just put the tornado cash mixing service on the ofac list for instance.
 
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siklon

Active Member
Aug 11, 2010
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How can it be a commodity when it has no use except as a currency. It is not a commodity any than the dollar is a commodity. It is a currency with no backing, very similar to today's dollar, but isn't controlled. The difference is it isn't controlled by the central bank and in design no more will be created. We'll see.

I don't think it's quite right to say that Bitcoin is "backed" by digital energy. That would be like saying gold is "backed" by the cost of diesel fuel and backhoes. Bitcoin and gold are both backed by societal expectation that they should have value. It's more correct (imo) to say that Bitcoin is secured by the energy it takes to write to the blockchain and the proof of work protocol, but that's not what gives it its value.

If the value of one bitcoin was pegged to the value of the electricity and computer hardware it takes/took to mine that coin, mining would never be profitable because money in would be exactly equal to money out. If the value of gold or bitcoin were determined by the cost of mining, then miners would operate continuously regardless of any economic conditions because they would know that they would always be able to get back at least the value of the cost of their mining activities no matter how expensive they were. In reality, it doesn't work that way. The value of gold and bitcoin are set by market conditions. Miners use the price to determine if mining is feasible, market participants don't look at the cost of mining to determine their asking price.

Also - utilizing landfill gas to generate cryptocurrency could only be called carbon negative under limited circumstances. Only in the case where the landfill was simply venting the gas to the atmosphere and not flaring it or running a generator to sell to the grid/power their own facilities (both of these are the normal practices for landfills), then it would be carbon negative. Otherwise, it's either carbon neutral (converting from flaring to a generator that runs miners) or increasing carbon by add load to the power grid and requiring additional generation that wouldn't be used otherwise.

IMO - I think the best description is to say that Bitcoin trades like a commodity (rightfully so, imo) but is not truly a commodity. Part of the definition of a commodity is that it is a physical good. What sets it apart from stocks, bonds, and other investment assets is that owning commodities means you own physical, tangible items, rather than an on paper representation of partial ownership of an abstract idea like a corporation. Hold on to a soybean contract long enough and a truck will show up at your house full of soybeans - you don't have that with bitcoin - only a string of numbers in a secure distributed ledger.
Good post. I guess “backed” isn’t the right term. It seems bitcoin has inherent monetary properties that are rather enabled by the entire ecosystem of resources, capital and labor that created it.

Precious metals (such as gold) didn’t need to be backed by anything because they maintained strong monetary properties: scarcity, durability, divisibility, portability, fungibility, and acceptability. The switch to paper money provided greater divisibility/portability but lost scarcity, thus needing to be “backed” by something.