This was posted in another thread, but such a great explanation I thought I'd pass it along here too:

Bitcoin has value. Shit tons more than fiat boys and girls. Even more than Gold. Most people don't understand it and like everything else its all emotional.

Why is bitcoin more valuable than fiat?
Fiat is limitless and printed by governments willy-nilly.
It's printed on nearly worthless paper or fake coins (zinc vs copper pennies). There is no end to the supply and the only value it has is 100% perceptual dependent upon the common perception of the world markets, but it's true value is negative given the continual printing and exponential debt to actual money.

Bitcoin on the other hand is finite and actually quite scarce. This element of bitcoin is similar to Gold - however gold is also infinite in supply just simply harder to obtain through finding or yes manufacturing with science. Eventually gold will be mined on other interstellar objects such as the moon, mars, and asteroids. Bitcoin however will run out and never another made after 21 million are minted. You wont find new ones on the mars or moon. It is 100% finite given the integrated functional math. Thus it has inherent true scarcity, even more-so than gold and well its obvious that fiat is anything but scarce. Fiat is way too loose.

Now another thing that people just don't understand is the tremendous value in the hardware used to actually support the bitcoin network and the energy used to do so. There is millions if not billions of dollars being invested into the bitcoin network, applications, hardware and businesses that drive value into the digital currency. It costs the governments very little to just spit out new coins - while every newly minted bitcoin costs a lot of money just to create factoring in hardware and electricity costs. This cost also drives value into the coin.

The greatest value of all is that the coin represents FREEDOM to each and every individual on the planet. They are free to essentially be their own bank and to be their own stock broker free of the control imposed by those that run the world markets that are in collusion with world governments. Digital currencies are the safe haven for the average Joe, everyman. Of course the value will fluctuate - but over time it will simply continue to grow as the populace becomes more awakened to the fact that they no longer need to be under the wing of the bankers and that as more individuals own parts of the coin the higher the value vs fiat becomes. The returns are far greater than any other market - at least for the past 2 years straight and as scarcity increases so will this continued growth.

-AC 73533979