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From what I understood, the economic intrinsic value of Bitcoin as a currency is based on the "CPU-work" required to produce them. That is what makes Bitcoin rare enough to qualify as a currency. Is that it?

Now the thing is CPU-work doesn't come free of social costs. Doesn't it have some incidence on things like: - market prices of fuels (we all end up paying our electricity higher as a consequence of bitcoin, i.e. we bare the burden) - climate change (future generations will have to pay more to survive in a less stable climate) - no legal-compliance checks (i.e. bitcoin activity like all business takes advantage of the security of the State but doesn't fulfill the function of checking legal compliance of transactions as the banking system does - or should I say: is legally required to do)

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Welcome to Bitcoin.SE! Some interesting points that you raise.

Bitcoin is more analogues to gold than more recent traditional banking.

Yes, since power is used in bitcoin mining there are some additional distribution costs certainly. The distribution infrastructure exists anyway and in most cases is not being used to capacity ex-bitcoin, however, the more additional power that a wire carries the more losses there are. If power is in limited supply because generation capacity is being reached then there are certainly additional generation costs, otherwise, the generation cost, in most commercial scale generation projects, is in most cases nothing or close to it.

I heard somewhere recently I think that the total power usage in bitcoin mining is equivalent to the full output of three large nuclear reactors. I wondered what effect that may have on climate myself at the time but rationalised that regardless of Bitcoin, practices in generation need to globally improve. In most countries people either pay for the full cost of their power or, pay the cost of generating it themselves.

It is true that the security of the state is to the advantage of all and is why people are free to engage in things like transacting with Bitcoin. As stated, Bitcoin is more analogues to gold than it is to the banking system. So, Bitcoin currently seems to be about as regulated as transacting in cash, but without the tyranny of distance, and without the value ties of fiat currency and, without centralisation. No central bank can decide to print 21 million more Bitcoin and halve the value of everybody's holdings, much like gold.

With exchanges and Bitcoin Debit Cards, Bitcoin is linked to the local banking system much like any other offshore currency.

In Australia, Bitcoin is legally just like cash. GST and other taxes are payable.

  • also like. Gold: no... there are the holders, yes, but there are many, many traders? If bitcoin is gold, what is bitcoin Cash? :-) Power: It's in the range of 1000MW power plant. And nuclear doesn't add to climate change (haha...)? So it must be carbon/gas/fuel. In the monopoly of power distribution (see ENRON/USA), the assumptions are completly false. And e.g. in Europe power decentralization get's more and more important. Imagine electrical cars everywhere. They "cost" more than some miners. – pebwindkraft Mar 4 '18 at 21:48
  • Gold is a commodity with its price marked against the US currency in every major economy worldwide. There are many buyers and sellers of gold, arguably it has a greater utility value than Bitcoin. Bitcoin Cash is mostly Bitcoin with more transaction ledger writing capacity every x minutes, lower fees and lower market value and, missing a few beneficial features. I pity the miners if they cannot be paid for their work. – Willtech Mar 5 '18 at 9:17
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Some very good questions, like! Though not really relevant for this technical forum. But I cannot resist :-)

the economic intrinsic value of Bitcoin as a currency is based on the "CPU-work" required to produce them.

Unless the word "economic intrinsic value" has a special meaning, I would like to reject this statement. The intrinsic value of bitcoin comes from the fact, that its use case exceeds the possibilities of traditional FIAT money or complexity of gold handling (including having gold, or holding a paper which says I have gold). With bitcoin, you have a growing value (with Dollar, you can buy less and less over the years), you can easily send values over the internet, without financial institutions. And also you can trade it, without going through the complexity of the traditional fiat system. And: it is a "world currency", something that the dollar always wanted to be, but never achieved... This all adds to the INTRINSIC value, and certainly a lot more. But I think you were up to this scarcity of bitcoins:

That is what makes Bitcoin rare enough to qualify as a currency. Is that it?

Somehow, yes and no. There are people who say in traditional economics, when a ressource is scare enough, it's value increases. I don't see the same for all the altcoins, so there must be something wrong with this statement. Seems like standard economics don't match. Economics are based on long term observations, and maybe crypto world is just too young.

  • market prices of fuels (we all end up paying our electricity higher as a consequence of bitcoin, i.e. we bare the burden)

hugh, this is a good one! If there are people saving energy, price goes down? When the market asks for energy, and is ready to pay a price for it, the energy will be offered. And if there is no demand, new "requirements" are (must be) created, so that the investment in energy plants will not go lost. I think the statement is a bit too hard, and at the same time I understand, that it is probably very difficult to proof.

  • climate change (future generations will have to pay more to survive in a less stable climate)

What about the miners using solar and wind power? Or those who use energy, which would otherwise be wasted. This statement is also a bit "off topic", because looking at what energy is spent for other activities, be it for fun or be it for a specific "society beneficial use" - who would judge if it is ok to mine crypto or not? Climate change is caused 99% by industrialized countries, which now try to hide behind "green", just to continue to pollute the environment. Proof? Look at the complexity of the Kyoto protocol. So no, bitcoin and climate change - that's a little bit too big to put into the same phrase.

  • no legal-compliance checks (i.e. bitcoin activity like all business takes advantage of the security of the State but doesn't fulfill the function of checking legal compliance of transactions as the banking system does - or should I say: is legally required to do)

this is probably the best, and the most difficult one. There are people who like to be watched and controlled by governments, and those who like their independency. Especially "proud" US Americans must love their country for being victim of the tax system :-) One can raise the question, who benefits from the compliance with the money system. You quickly come to see, that countries/governements hold their inhabitants as victims, to assure money doesn't leave the country. In a peaceful world with one currency this would not be required (utopia? No, hold on! Europe has created the Euro, and freedom is better than ever in the last 1000 years!). But as we are here, we have to live the rules. And pay taxes, where others decide, how they get spent. For sure only to protect us from falling into the hands of criminals, gangsters, terrorists - you name it :-) Because government believes, their inhabitants are stupid? (maybe yes, one may look up Immanuel Kant and his essay: "Enlightenment is man's emergence from his self-incurred immaturity"). What is interesting: those with a lot of money still have their tax oases (Delaware, Channel Islands, Caymans - or last recently Panama and its papers), whereas the vast majority of inhabitants have no access to these tax paradises. So there are the individuals which are required to vote the government, but the very rich people (and companies) who pay the electoral campaigns have access to avoid taxes. I like this tax theatre!

My personal view: bitcoin is a masterpeace of freedom. It belongs to noone (or everyone), and you cannot change it to your will.

As I said, I couldn't resist ;-) A lot of these discussions can be found in bitcointalk, which is probably the better forum for such a discussion, cause you can assume, that my statements are not the holy grale.

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