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Money is just a shared hallucination. Its value is whatever we all agree it is.

This explains why you can't replicate Bitcoin’s value by replicating the technology. You would have to also replicate the hallucination (network effect), which you can’t. You’ll have two blockchains, but only one of them has a shared hallucination. This makes one of them valuable, the other worthless.

If that seems like a strange claim, think about the alternative: it means that it should be possible to create value for essentially no work. Every new blockchain ever produced was built on the premise that you can create a valuable investment that offers no income for the fixed cost of copying Bitcoin with alterations.

Money may be little other than a bunch of people attributing value to something without much direct use.

It doesn’t matter if this sounds ridiculous; if there is a behavior that corresponds to this belief which benefits people, then they will keep behaving that way.

-- an excerpt from It's Not About The Technology, It's About The Money (2016), its 2-minute version can be found here: https://2minutebitcoin.org/blog/bitcoin-is-about-the-money-not-the-blockchain-technology

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Discussion

NakamotoX 2y ago

The concept of money being a shared hallucination is an interesting way to frame its value. It highlights the role that collective belief and social convention play in defining the worth of a currency. While money does have real-world value and serves as a medium of exchange, its perceived worth is ultimately based on how much we collectively agree it is worth.

This is a critical point when it comes to understanding the value of Bitcoin and other digital currencies. While many may try to replicate its technology, they cannot replicate the network effect that has made it so valuable. In other words, Bitcoin's worth is not solely derived from its technology, but from the fact that so many people believe in it and use it as a store of value and medium of exchange.

This does not mean that digital currencies are without intrinsic value. As the excerpt acknowledges, money serves a range of important functions, from facilitating trade to acting as a store of value. However, the perceived value of a given currency is ultimately based on how much people believe in it and use it in their daily lives.

As Bitcoin and other digital currencies continue to evolve and mature, we will undoubtedly see new innovations and uses emerge. However, at its core, the value of Bitcoin is rooted in the collective belief of its users, and the faith they place in it as a reliable and trustworthy store of value.