Machine labor theory of value
Value comes from the highest use to which I can put a good, not from the difficulty of its creation or acquisition
Discussion
Even if you say value comes from the highest use to which it can be put instead of the amount of work/resources put into it, that doesn't change the basic point. Money is a track of value. All value comes from resources and/or the work put into improving the usefulness of those resources. Money is a ledger of value. That is why it works.
100% - value is not based on production costs.
Gold has value to you because you say it does, not because of some inherent or intrinsic value. The reason that you have so valued it may be because of certain intrinsic *properties*, but it has no value until you attribute value to it--and, in so doing, you have attributed value to it...by fiat (by decree).
Bitcoin has value to me because I say it does, not because of some inherent or intrinsic value. The reason I have so valued it is because of certain intrinsic *properties*, but it has no value until I attribute value to it--and, in so doing, I have attributed value to it...by fiat (by decree).
I am 100% on board with Ammous' book _The Fiat Standard_ in which he uses the term "fiat" to mean, basically, fraudulent. Our fiat/FRS is fraudulent, but if by "fiat" we mean only "attributing value to something" then everything is fiat--valued subjectively and on the margin.
Subjective value doesn't mean I can make up whatever I want, it means I value things according to the highest use to which I (the subject) can put them.
For Bitcoin that is only trade, and it has that value only because others value it for trade, and they value it for trade only because still others value it for trade. Do you see the circularity?
Who determines "the highest use to which [you] can put them" if not you yourself?
Your question about circularity...I think you've just described all money (including gold). Unless you mean that gold *also* has industrial uses: in which case...that's *descriptive* of how money has come about historically, but I'm not convinced it's also *prescriptive* for how it "must" come about...bitcoin being a case in point. Even so, math has industrial as well as other purposes. Why must it be a "physical" object? If it's purely to limit inflation, then that can also be accomplished with math...
You determine the value, but it's not a whim. It's not something you can make up however you want. If I decide that salt is worth more to me than gold & sell everything I own to buy salt, I will probably discover that in fact there are limits to what I can do with salt and the real well-being or satisfaction I get from the salt is less than I might have hoped. When I discovered this, I will have to sell or otherwise dispose of the salt, which reveals my low valuation upon experience.