Originally Posted by lacrossewacker
you guys are missing the point.
We don't dig for dollar bills.
Our currency is used as a place holder basically, it's value was derived from somewhere. That value was earned through working hours, selling a service, or selling a product.
Where does the value come from with bitcoins? My $30 dollars can represent quite a bit. It could from the hour of work I've done, from a good meal I prepared somebody, or a simply mowing somebody's yard.
Those $30 dollars weren't just magically found and given value. Even money you find in the street, it came from somewhere. From somebody that worked for it, or from somebody that sold something for it.
Digging for petroleum is worth money because the petroleum itself is valuable to our society. That value is represented by our currency. So a $100 dollar bill is probably worth like a penny in materials, but it's representative of the sweat and work that was put into earning that bill.
How does mining for bitcoins fit into this? What are you mining, how is is valuable, and how does it earn it? Saying its rare is crap. I can say each of my boogers is rare.....doesn't suddenly make it a $200 gem. Bitcoins aren't a raw material, they aren't a usable product or service, they aren't exotic diamonds, they're just some weird scheme that's been cooking up on the internet.
Without calling me an ignorant idiot for not understanding the entire picture, what am I missing?
From your comments, I take it that you're not sure whether to treat Bitcoins as either a commodity or a currency. I'm just going to go ahead and say that you should treat it as a currency, as it's completely useless on it's own, exactly
like paper money. The reason that you can trade your hour of work for $30 and then use it to buy X Item is because society has determined that your hour of work is worth that X Item. Since it's easier to give someone a bunch of dollars or a check than a bag of groceries or X hours of electricity, we as a society have agreed to use those pointless pieces of paper.
The only difference between the legitimacy of a dollar and of a bitcoin is that bitcoins are new. If the situation was reversed, with paper money being new and the world using something like BTC since forever, we would all be paid in BTC, would use it to pay our bill and buy our groceries, and wonder what kind of idiot would think that a slip of paper could be valuable or useful. But since BTC is the new currency, it isn't widely known, has a large amount of skepticism as to whether it'll actually work, and isn't universally accepted, meaning that there are situations exactly like this thread. Assuming that BTC continues to be used and gains acceptance, there will eventually be a point where it could be considered as legitimate and 'real' as a Dollar or Euro, and it would gain value and usage from that perception of legitimacy.
If it does gain that legitimacy, BTC is no longer 'magic computer money', it just simply becomes what we use to buy things.
Edit: TL;DR It's a chicken or the egg problem essentially. For BTC to become a 'legitimate currency', people have to use it. But for people to use it, it has to be a 'legitimate currency.' Until that happens, people will question why anyone would use it.Edited by Shimme - 7/31/13 at 11:33am