A lot of people bearish on Bitcoin's future claim that it cannot last and the fad will be extinguished because it isn't backed by something, like gold, or a government. I would like somebody to explain why gold is inherently valuable, or why government support is necessary. All I've really read on the subject is that "gold is inherently valuable because it's always had value, historically." Could someone elaborate?
Gold is inherently valuable because you can use it to do things like protect circuit contacts from corrosion, or protect astronauts from solar radiation.
Government-backed currency isn't inherently valuable, per se, but for residents of many countries it's useful stuff to have because you need it to pay your taxes, and there's often a statutory obligation to accept it as a form of payment for settling debts.
Neither of those uses necessarily accounts for 100% of the value of either gold or fiat currency. (Arguably, not even close.) But they do place a kind of floor under their values. For gold it's a fairly absolute floor - there'll always be uses for gold, so it'll always have at least some value. For a national currency that isn't necessarily the case, as the case of the Zimbabwean dollar famously illustrates. However, when the currency is backed by a nation with a strong, stable economy then in theory (and, so far, in practice) that provides sufficient protection against the worst extremes of volatility.
Bitcoin, by contrast, is working without a net. Naturally that isn't a problem if it doesn't need a net. But there's an argument to be made that every currency is primarily fueled by human psychology, and every Dumbo likes to have his feather to hold.
Interesting, thanks. That puts it in more perspective for me. Although, still, it seems the term "inherent" might be a poor adjective to use to describe the system.
People bearish on Bitcoin's future price are usually the same people who are pissed that they didn't buy any bitcoins.
But often, something happens - they realize how incredible the technology is. Then they buy it, and suddenly they're bullish because they want the price to go up.
The price of gold is probably going to be killed to a very low ($50-100/oz?) price because the only thing keeping its value so high is how convenient it is as a store of manipulation-free value. However, bitcoins are far, far more convenient. And they will be even less subject to manipulation.
The features you just described are equally applicable to different kinds of metals/alloys. Arguably, other metals have even more practical applications. Why shouldn't those be more valuable than gold? In addition, the practical applications of gold you've just listed are, I expect, not what gold is normally used for. Economies, hopefully, aren't defined by whether their currency can make space equipment or electronics (especially since those are modern developments that predate the value in gold). So while what you've just said is true, it still doesn't fully answer the question.
> In addition, the practical applications of gold you've just listed are, I expect, not what gold is normally used for.
Exactly. Several countries have kept a reserve of gold for centuries, but probably not out of a fear that they will suddenly need a bunch of ductile metal.
The current price of gold is far greater than the values of all those things. If gold price was based on intrinsic value alone it would be worth considerably less than it is now.
I'm not arguing that the current monetary value of gold is appropriate; I'm simply answering the parent's question as to why gold was "chosen" to be valuable: it has many practical uses.
1. It's shiny: it can be used for jewelry and thus display wealth and power to fellow citizens.
2. It doesn't corrode, which means it keeps it value over time. You can store it in a a chest or a basement. (And like many metals, you can melt it into whichever shape you want, which makes it easy to seize from your enemies or taxpayers or whatever...)
All the scientific and practical uses you cite are recent (last century).
Before that, warriors didn't make swords with gold (other than decorative motifs), and craftsmen didn't build ships with it either.
"Investing" in metals today isn't limited to gold, you can invest into silver, platinum and other metals which aren't that different from gold with regards to interesting properties.
That's not the point. The question was why government support is necessary. What if the courts refused to recognize that Bitcoin is an asset? What if the courts ruled that a Bitcoin debt could be settled by simply starting your own Bitcoin alternative and making a payment with that?
