See Menger in Principles of Economics, Chapter 4: http://mises.org/etexts/menger/four.asp

“But it is not easy to find an actual case in which an exchange operation can be performed without any economic sacrifices at all, even if they are confined only to the loss of time. Freight costs, loading charges, tolls, excise taxes, premiums for marine and other insurance, costs of correspondence, commissions and other sales costs, brokerage charges, weighages, packaging costs, storage charges, the entire cost of the commercial banking system, even the expenses of traders and all their employees, etc., are nothing but the various economic sacrifices which are required for the conduct of exchange operations and which absorb a portion of the economic gains resulting from the exploitation of existing exchange opportunities. Economic development tends to reduce these economic sacrifices, with the result that even between the most distant lands more and more economic exchanges become possible which previously could not have taken place.”

140 years ago, Menger understood what Bitcoin does.

What if people decided gold bricks didn’t have any value to them?

What if?

What we know is that Bitcoins have value right now, and that they will most likely continue to have value into the future because of the properties that they have which allow them to act as a money.

What if they stop accepting it?  Bitcoin is evidence of the incredible confusion that exist between fiduciary media and real money.

Gold only has low transaction costs if there are no money substitutes. On a free market, it can only win if the financial system collapses completely, there are no banks anymore and the fiat currencies are abandoned in hyperinflation, in large parts of the world simultaneously. If merely the central bank stops printing money and the legal tender laws are lifted, that does not give gold sufficient advantage. If this happens only in one country, the currencies from will be the ones with lowest transaction costs. Recently in countries where this happened, such as Iraq or Somalia, the local currency was not replaced with gold. It was only supplemented by other currencies, but still remains in use. In Zimbabwe, their hyperinflated currency, was replaced on markets by currencies from other countries, not with gold.

Bitcoin however can easily compete on transaction costs with the digital and paper forms of money.

The Austrian story of the origin of money (AKA Mises’ Regression Theorem) only works as an explanation of how money develops from barter, and how fiat money develops from commodity money. It doesn’t work well if it has to explain why money A is replaced by money B on a free market. The choice of money is driven by transaction costs, not by “backing” or “intrinsic value” or any such nonpraxeological terms. Money evolves from barter because it lowers transaction costs. Money substitutes evolve because they lower transaction costs. Similarly, Bitcoin evolved to a medium of exchange because it lowers transaction costs. Maybe it will evolve into money, maybe it won’t. But it does not look very rosy for gold. While it might remain to be used as a store of value, I am skeptical about it being able to compete as a medium of exchange.

I’ve written extensively on this topic, so you can find out why you are wrong by simply looking at the Bitcoin category of posts on this blog.

The fact that a single Bitcoin is worth five fiat dollars demonstrates that Bitcoins have value because the market says they have value. Therefore, any assertion that Bitcoins don’t have value is proven to be false on its face.