
Bitcoin Is a Terrible Currency, and Not for the Reason You May Think - f_o_m
https://medium.com/@Factory_of_Mirrors/bitcoin-is-a-terrible-currency-and-not-for-the-reason-you-may-think-80e08f13a3da
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notthemessiah
> Bitcoin is hyperdeflationary

Am I the only one where this was the reason I was thinking?

Interestingly, thinking honestly about bitcoin made me a Keynesian.

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nine_k
Bitcoin is only hyperdeflationary because it's being pumped, to my mind. It's
mostly used as an investment and speculation tool, _not_ as a currency, that
is, not for paying for goods and services.

It's not (yet) "digital gold", but rather "digital tulips" [1].

[1]:
[https://en.wikipedia.org/wiki/Tulip_mania](https://en.wikipedia.org/wiki/Tulip_mania)

~~~
sova
Tulips are a dumb analogy. There, I said it.

Tulips come from seeds and are ornamental, once they are dead they can no
longer be traded for value. There is no limit to the world-wide supply of
tulips, and there is no such thing as distributed international observation
and participation in tulips.

To further my antagonist response, the Smithsonian Mag recently did a report
explaining that Tulip Mania was also not really a Tulip Mania and that reports
were highly exaggerated; an author of a recent book on that time claims that
there really is no lesson to learn from Tulip Mania, as tempting as the
comparison may be.

[https://www.smithsonianmag.com/history/there-never-was-
real-...](https://www.smithsonianmag.com/history/there-never-was-real-tulip-
fever-180964915/?no-ist)

~~~
IshKebab
Once digital currencies are dead they can no longer be traded for value. There
is no limit to the world-wide supply of digital currencies.

~~~
nrhk
There are limits to specific protocols, like bitcoin.

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Glyptodon
The main reason I never got into Bitcoin is that I considered its deflationary
nature a disaster and crippling flaw (for a _currency_ ).

That said, it's become much less a currency and more a fiat commodity one
stashes like beanie babies so my original reasoning isn't particularly
applicable at this point.

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zyxzkz
Bitcoin has always been the game of finding the greater sucker... now more
than ever.

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Empact
I don't find this argument persuasive. If the currency is liquid, you can
simply spend the new currency rather than the old, while using the old
currency you would have otherwise spent to acquire the new currency. The
spending will have negligible impact on your investment outcomes, and you'll
be supporting the currency that you're investing in.

~~~
notthemessiah
That's a pretty big if. Also, currency is liquid nearly by definition, and
bitcoin in relation to other currencies has demonstrated many properties that
make it practically very illiquid (e.g. the uncertainty of day-to-day price
changes).

~~~
Empact
The argument is basically an example of Gresham's law, which is used to
explain why value-backed currency often loses out to fiat currency. IMO this
doesn't apply to cryptocurrency because Gresham's law was formulated in
contexts with lower liquidity and no electronic transmission.

[https://en.wikipedia.org/wiki/Gresham%27s_law](https://en.wikipedia.org/wiki/Gresham%27s_law)

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badloginagain
I may not buy a pizza with my bits, but I'd sure as hell buy a house, pay off
my student debt, or whatever my proverbial lambo is. I only have enough BTC
for really one big ticket purchase in my life, even if it increases in value
forever.

Actually, a deflationary currency is an interesting concept for Basic Income-
if everyone is given an amount of BTC at birth, so that it appreciates in
value by the time they're old enough to spend it, they have a nice nest egg to
build off of.

Of course, it only works if the currency circulates. I wonder if there's real
world examples of deflationary currencies. Has it ever been tried?

~~~
f_o_m
Yes I think of it as an investment vs. a currency. For example I may also sell
TSLA stock to buy a house but not to buy groceries if I think it still has
lots of room to run.

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sova
Solid Platinum is also not a very good currency. What is your point?

~~~
f_o_m
As far as I know no one is arguing that platinum is a future global currency,
or letting customers buy products with it. Both are increasingly true for
Bitcoin.

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sova
You're an idiot if you don't accept platinum as a form of payment

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Phenomenit
I don't think the deflationary nature of btc and other crypto that are a
finite in design is necessarily a bad thing.

The most common objection is that it leads to intertemporal decisions. Is that
really bad?

If you knew that your money increases in value over time you might only spend
it when it's really necessary instead of driving an ever expanding economy
that consumes a finite world.

Maybe a finite world needs a finite economy?

If my money reflect the wear and tear on our common ecology I might be more
restricted in its use.

~~~
f_o_m
A currency that discourages consumerism - interesting idea!

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azinman2
This volatility is exactly the reason it isn’t useful _for now_. In the past
countries have created currencies, and it’s never been the case that they
capitalize from 0 to _a lot_ in such a short time period. That’s why the USD
chart is meaningless as a comparison against the same timeline. Wait 20-50
years and then we’ll see.

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f_o_m
Yes I agree - perhaps in 20-50 years (and maybe earlier) but not anytime soon.

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srge
Flagged. This article brings nothing new or even interesting.

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prophesi
Not to mention the clickbaity title.

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vorotato
Bitcoin doesn't inflate enough, so there's no incentive to spend it.

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alexmat
I can't take it with me when I die, so I'll spend it at some point. Also, see
marginal utility of value:
[https://www.investopedia.com/terms/m/marginalutility.asp](https://www.investopedia.com/terms/m/marginalutility.asp)

~~~
vorotato
By the time you want to spend it it's possible there won't be enough liquidity
to actually facilitate your transaction.

