Artificial Value

in LeoFinancelast year

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Value as a social construct.

The concept of value does not exist outside of society. Sure, you might "value" food on a deserted island. In fact you'll need that to survive so it's quite important. However the measurement at that point becomes binary. You either need the thing or you don't. You certainly don't need money when out in the wilderness trying to survive alone.

Even small tribes do not require money because everyone knows everyone and the reputations are built and known between all possible relationships. "I know where you live," vibes come to mind. Only given a larger scale do we need to start pricing things in terms of currency to simplify the connections between people who don't necessarily know or trust each other.

So to a certain extent all value is artificial.

It's just this idea within our minds that comes into consensus with complete strangers. But even then the concept of value itself has different layers. A consumable has "real" value because you can consume it. Food and water are necessities and can be categorized non-optional. A place to live has "real" value. Clothes, cars, fuel, electricity, and internet connections are all pretty much in the same boat. These are considered standard basic costs of life in most circumstances.

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But what about a video game?

Does a video game have "real" value? The digital world is where things start to get a bit confusing. We could easily make the argument that a video game does have real value. It's a product that people want just like any other optional product that people might want. Why would that be any different than buying a piece of art or a houseplant?

However I can definitively claim that every asset within the game is completely artificial. The Sword of a Thousand Truths has a completely artificial value because the code could easily be tweaked to mint an infinite amount of them at any time. There is no limit or penalty for changing code in this manner. Resources in a video game are very much artificial and would be infinite if we programmed them that way.

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Bitcorn

Bitcoin and all crypto are also an extension of this concept. Bitcoin's value is 100% artificial. I could fork Bitcoin right now and print an infinite amount of tokens. No one could stop me. Of course I'm never going to do that because what would be the point other than joke-telling? The entire practical purpose of Bitcoin is the artificial value aspect of it. It has no use-case without it.

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In fact the value of all money is derived in an artificial way. Money itself is a social construct whose only purpose is to provide unit-of-account and a medium-of-exchange for commerce. Some people would try to argue that cash had more 'real' value back in the day when it was hardbacked by precious metals, but this isn't really the case, as value derived from PMs is also quite artificial from a standpoint of currency.

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Gold and Silver are weird like that:

As they have both real and artificial value. If we forge a silver sword to slay vampires and werewolves that has real value, but if we use it directly as money it becomes quite artificial. Okay obviously that's a terrible example because I'm pretty sure vampires aren't real, but gold is still used in electronics and things like that. Using something for real-world products vs a medium-of-exchange or speculative asset makes a big difference.

Circling back to Bitcoin...

If we think of BTC as a ledger rather than money, collateral, or a speculative asset then we can also make the argument that it perhaps has more 'real' value than we originally thought. Does a world-wide truth-table that can't be messed with have 'real' value? Seems like it does.

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Artificial Scarcity

This is a much more common topic that gets discussed at length. Farmers might purposefully grow less food just so prices are higher. A corporation might corner the market and reduce the supply of an asset just to turn a profit. You might be shocked to learn that diamonds are not that valuable whatsoever. Most of the entire business revolves around marketing, brands, and convincing people they should spend 3 months salary on an engagement ring. It's actually pretty gross all around. Blood diamonds exist for a reason.

Hop in the time machine.

What if you brought a smartphone 1000 years into the past? Would it have immense value because the tech is lightyears ahead of anything the people back then could have ever dreamed of? Not really.

How are you going to charge it? How are you going to download an app? How are you going to use the GPS? People forget that the entire value proposition of these devices is that they exist within the greater network of society. Without society: they become completely worthless. I can't signal an Uber during the Victorian Era; that's not how it works.

Conclusion

Of course at the end of the day a lot of this is just pointless semantics and nitpicking trivialities. Value is value. It doesn't matter if it is artificial or not. This is very much irrelevant within a lot of contexts. If you could make a million dollars selling a real-world product or two-million dollars selling a digital product, you're probably going to sell the digital product. Nobody cares if it's 'real' or not. The concept of being real itself is debatable.

Still there is some value in making these categorical distinctions in order to understand the limitations of the world around us. We COULD print Bitcoin to infinity if we wanted to, but we can't print food or lithium batteries to infinity. We choose not to print Bitcoin to infinity on purpose, as this ironically creates abundance and value out of thin air. It's all very Zen. Everything is as it should be.

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Shoes are incredibly valuable. Could spend $1000 on a pair and feel great. Yet one doesn't really notice the true value until they discover some asshole stole their shoes, and now you're the only guy on the bus without any, on your way to the hospital so they can pull the broken glass out and put ointment on the burns because holy shit. Who knew asphalt could be so hot.

Life is a journey.

And it's been one hell of a trip.

I thought it was a highway

Are you going my way?

We are all on the same road, but different timelines, which frequently intersect causing branches when one of us has enough power to change the direction of the other persons life.

I don't remember these lyrics.

I've learned that back in the day when I was working as a postman. Good shoes are valuable. Health is more valuable than all the money in the world.

You know what money can't buy?

Calluses.

What the heck is that?

English not my native language...

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Do you even lift, bruv?

What do you think?

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I think you might have calluses.

Technically we have 19 million BTC in existence but who knows how much is actually being traded on exchanges. If they are using paper Bitcoin then the cap doesn't have that much value.

That's not a situation where exchanges can win.
The volatility of crypto is too high.
Eventually every single exchange that does it will go bankrupt.
Most do after a single bear market.

It also ignores up and coming DEX tech.
We already seen what happens when exchanges get run like fractional reserves.
There is very little wiggle room in crypto.
And that's because of the cap, and on-chain data.

Kinda makes me wonder about the "value" of ostensible marketing gurus who figured out how to persuade humans to stop pausing to reflect on what has actual value to them, vs. what purely has "ego value."

=^..^=

Beautiful!

This is a very interesting topic. Value does not only reside in the material and digital space. You are right in saying it is a social construct. Value can be relationships between family and friends. In my case the thing I value the most is my wife and our marriage. Memories and experiences are also valuable thats why i dont wait for adventures to happen and i create them.

Value is an interesting topic, sometimes seems value like beauty, is in the eye of the beholder.