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Cryptocurrency disciplee sometimes say that cryptocurrencies have just as much inherent value and potential as storage of value as fist currencies. One argument specific to the Bitcoin is that its value is guaramteed by the limited number of Bitcoins. However, I am very skeptical about this and similar arguments because of the following reasoning:

Why does noone use the exact same technology of the Bitcoin and create Bitcoin 2? If they did, why would a Bitcoin2 be worth less than a Bitcoin? If it isn't, how can there be any worth in a Bitcoin, if there is the possibility that in five years there are a thousand different Bitcoin like system all guaranteeing the same anonymity, reliability, decentralized storage, and ease of use as the original Bitcoin? To me this is a significant difference to classical currencies which are linked to real governments and guaranteed by the fact that these governments work, pay and are paid with their respective currencies.

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Why does noone use the exact same technology of the Bitcoin and create Bitcoin 2?

They have, there are hundreds of copies of bitcoin known as "altcoins", one prime example is bcash.

If they did, why would a Bitcoin2 be worth less than a Bitcoin?

Because there is no demand for a bitcoin2. No one wants one because its not a real bitcoin. The only value bitcoin has is in the demand people have for it - how much someone is willing to pay for it.

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    So Bitcoins are a pure investment bubble then? It sounds as if Bitcoins are a better investment than Bitcoin2s in the same way that tulips used to be a better investment than roses, except that tulips and roses actually make people happy and thus will always have at least some value – Bananach Jun 21 '18 at 8:58
  • Cryptocurrency systems have utility, so I would not say they are 'pure investment bubble' (thought certainly the value of a bitcoin has a speculative aspect built into it). Since cryptocurrencies have utility, they will have some value, and the cryptocurrency system which has the most usage and demand (ie bitcoin) will have the highest value. – chytrik Jun 21 '18 at 9:12
  • It is wrong to suggest there is "no demand" for altcoins like ethereum and ripple. There may be less demand or even much less demand but there can be significant demand. @Bananach is probably right to infer that the overwhelming majority of bitcoin transactions are currently speculative rather than associated with the purchase of legitimate retail goods. – RedGrittyBrick Jun 21 '18 at 14:26
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Anyone can create their own cryptocurrency, this is a fundamental aspect of such systems: they are open and permission-less, so anyone can participate, whether that be using an already-existing cryptocurrency, or creating a new one of your own.

how can there be any worth in a Bitcoin, if there is the possibility that in five years there are a thousand different Bitcoin like system

As a thought experiment, consider this: instead of talking about cryptocurrency, lets talk about metal. Imagine a society where money comes only in the form of metal coins, and the majority of coins are made from a type of metal called 'coinium'. A lot of people use coinium coins to purchase their daily goods, so there is a great deal of economic activity conducted using the coins, giving them great value.

Now, eventually someone realizes that there is another metal, called 'altium', that can also be used to create coins, and it is extremely similar to coinium in many ways, except for the colour is different, so they are still obviously distinct. Just a couple people start to use altium to conduct their business, but the vast majority still use coinium.

What is the difference between coinium coins, and altium coins? They both accomplish the same goal, are equally as easy to make, but still are distinct since they are obviously different colours. This distinction allows people to differentiate between the two types of coins, and each has its own value.

Likewise, there are already hundreds, if not thousands of 'altcoins', many of which are copies of the bitcoin code base. But just because they are all cryptocurrencies, does not mean they are all absolutely equal. Each network is distinct and separate from the rest, so you cannot send a bitcoin to the litecoin network, or vice versa.

So we can see that there is a distinction between a bitcoin, a litecoin, or any other coin. Each one has it's own network, and price, whereas if every cryptocurrency was equal, than we would expect no difference in price between them. So in practice, we see that there is a discernible difference.

  • the difference in price despite equality in everything else perfectly matches my belief that cryptocurrencies are a pure speculative bubble. Also, your metal analogy ignores the very important fact that metals have inherent value because they can be turned into consumer goods (machines, electronics, jewellery) and thus have inherent value and because they are truly limited (no one cannot break this limitation by inventing a new metal, and certainly not a million new metals by means of a mouse click) – Bananach Jun 24 '18 at 16:20
  • Gold, much like cryptocurrency, has a large amount of ‘speculative’ value. The price of gold is driven more by this than by its usefulness as a jewelry material. But either way, bitcoin (cryptocurrency) has properties and functions that no other financial asset has, and I believe some of these functions and properties are important, and valuable. Yes, value is created & maintained through consensus of users agreeing that ‘bitcoin is more valuable than bitcoin2’, but I don’t believe this makes the value any less ‘real’. – chytrik Jun 24 '18 at 18:34

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