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#2494·Erik OrrjeOP, 2 days agoThanks for the criticism. New argument: Utility (besides usefulness as money) is not strictly necessary, although it may be nice to have. The value of a currency is set by supply and demand.
Supply: A limited supply (scarcity) may increase the value.
Demand: Demand is set determined by how well people percieve the currency's features as a store of value, medium of exchange and unit of account. Important factors include: Durability, Portability, Divisibility, Fungibility, and Stability. Gold has had most of these features (importantly scarcity, only 2% inflation from mining). However, it severely lacks in portability due to being a metal, compared to hard digital assets.
So the value of a currency is mostly determined by its perceived usefulness as money, not its utility for other things.
Durability, Portability, Divisibility, Fungibility, and Stability
These are all secondary values.
The durability of something is irrelevant if the thing itself is useless.
The portability of something is irrelevant if the thing itself is useless.
The divisibility of something is irrelevant if the thing itself is useless.
Etcetera, etcetera.
The only demand for something like this comes from either a mistaken understanding of what ‘value’ is/means (e.g. believing that the ‘durability’ of something otherwise useless makes it valuable), or from the Keynesian Beauty Contest linked above.
This dynamic makes cryptos wonderful as instruments of speculation, but they will never be money unless they are backed by some independently useful commodity (which IIRC some actually are), or are made legal tender by some government (which defeats the point).