Understanding the value proposition; The Bitcoin payment network

Jim H
By Jim H on Tue, Dec 3, 2013 - 8:47pm

In my early writings on Bitcoin here at PP.com, I stressed the elegance of the Bitcoin network... I could see the way the deflationary nature of the currency would motivate the Bitcoin "miners" who run the network nodes to continue their endeavors in both creating new Bitcoins, as well as maintaining the Blockchain.. the Bitcoin DNA.. aka the Ledger.  I did not though see the broad usefulness of the ledger itself.  This then is one aspect of the, "aha" which some of us are going through now.  

Michael Krieger, in his excellent blog Libertyblitzkrieg.com, linked today to an open letter written by Bitcoin evangelist Erik Voorhees which, as Michael points out, "  is one of the most eloquent, incisive and thoughtful articles in support of Bitcoin I have ever read."

Read the whole post:  http://libertyblitzkrieg.com/2013/12/03/erik-voorhees-responds-to-peter-schiffs-bitcoin-criticism-in-an-open-letter-this-is-excellent/

The thing I want to point out from the letter specifically is this;  

 When you suggest that bitcoins have “zero intrinsic value,” you are only considering the currency unit itself and ignoring the payment network. While I prefer the term “utility” over “intrinsic value” (because all value is subjective to the valuer), I may indeed admit that bitcoins, as currency units all by themselves, have no fundamental utility and are completely uninteresting. But – and this absolutely critical – the payment network has vast utility.

In fact, this network is probably one of the most valuable and consequential technologies currently on the planet. Some of us realized this a few years ago. Others are realizing it now. Many more will realize it in the future. The Bitcoin network is, fundamentally, a ledger of title controlled by no man. Ponder that for a moment. The transmission of value and ownership has thus just been severed from the State, not by impotent voting, but by the technological achievement of man.

So, what are you getting for your $1150?  Well, given the divisibility, you are getting 10,000,000 separate units of access to this ledger, each one costing only one ten thousandth of a cent...  I ask that you ponder that for a while.         


mrees999's picture
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 435
A fool expresses opinion with no pleasure of understanding.

A fool takes no pleasure in understanding, but only in expressing his opinion.

Proverbs 18:2


I smile with a bit of a twinkle in my eye as I speak to some people, not unlike some of our fellow forum that long ago made up their minds about bitcoin before knowing much about it. We can see their agitation later when defending their position while the other side gleefully celebrate at each new pivot point in the new world. For those who chose not to walk that path, it becomes more about their own pride and ego than about the search for truth and knowledge.

Some have deemed bitcoin a scam or ponzi scheme years ago - based on the fact they heard it from somebody else. Of course there was no bother in learning about such nonsense they believed. In time, in order to appear to remain consistent with themselves they still refuse to listen to reason.  Some watching the enormous success of Bitcoin with grated teeth they secretly hope for failure so they may finally take their triumph and declare to the world "I told you so". How sad it must be to take delight in the misfortune of others. This is how we know ourselves to be on the wrong side of an issue. And we have all likely done so at some point in our lives.

For each double in price it goes, their anger builds as they know in their hearts that it could have been them too. They also had the opportunity to enjoy the riches had they not been stubborn. Some of us talk about the amazement of technical achievement and the brilliance in logic and knowing the economic principals that each of us act in our own economic selfish interest that the Bitcoin creators arranged beautifully to work in harmony. Others may feel slightly embarrassed that they don't get it. They begin to hope and pray for the bitcoin demise because they can then self-justify their own stubbornness. They take no pleasure in seeing their associates and friends begin to realize their dreams - it only increases their bitterness and jealousy they would never admit out loud.

It is to them I extend my welcoming hand and say come...learn.  Join us.  You may only need to take that first step and let down your guard for one moment to allow yourself the opportunity to see what all the fuss is about.  The best place is to browse to "blockchain.info" and create your own bitcoin wallet for free. If you reply back with your wallet ID, I will happily deposit some bitcoin currency into your wallet for nothing. Then you can play with the money. Divide it up - create other wallets and transfer the money between them.  Or just let it sit and check back on it in a few years. You might be amazed.

The first step in a thousand mile journey is the first step.  I'll help you with that part. :-)








bowskill's picture
Status: Bronze Member (Offline)
Joined: Mar 16 2012
Posts: 78
Compulsory reading

Great letter Jim. Thanks for sharing the link. Very interesting that Erik sees bitcoin as a competitor to fiat currency - not to gold.

Yes there are two separate arguments that get entangled in the bitcoin debate. One is on the value of the currency, the other on the value of the network or protocol.

Even the most devout evangelists readily admit that bitcoin the currency may go to near zero. We are all just speculators on bitcoin price. It could go to 0% or it could go to 5000%. Even Erik said you should not put in more money than you can afford to lose. He suggests 1% of your total investments. Jim has posted a similar comment.

But the bitcoin system itself is where the value lies. That is where the real discussion should be taking place. That letter by Erik Vorhees should be compulsory reading before passing judgement on bitcoin (the system - network, protocol, infrastructure and currency).

Thanks Jim for bringing the discussion back to the real value of bitcoin. It does take time and effort to even begin to understand what the bitcoin infrastructure is all about.

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