
Bitcoin's Golden Future - qu4ntumturk
https://www.bloomberg.com/gadfly/articles/2017-09-06/seventy-eight-billion-reasons-why-bitcoin-s-the-new-gold
======
delegate
Bitcoin and other crypto require a well functioning internet infrastructure,
otherwise it's just data on a hard-drive.

Disconnect a country from the Internet (or filter the traffic) and you're
forking the chain. Spend on both networks by buying other (unfiltered) crypto.
There are states (even large ISPs) that can do that.

Also, the first thing to go in case of global conflict is the global Internet.
Countries will try to damage opponent's internet links to gain strategic
advantage.

Crypto currencies will be useless in this case, losing all of their value.

There's always the concern of a bug in the protocol, a solution to the hash
function or plain old human stupidity that can crash the currency.

I guess my point is: be careful, this is still very much experimental, don't
invest everything you have in them.

~~~
gldalmaso
I think you have a valid point, but, ultimately aren't all or most trades
digital today?

Are countries exchanging actual loads of gold and/or cash around? If the
answer is no, then isn't it all just data on a hard-drive?

In that case damaging internet links will have the same effect all around,
though information can probably still go in/out in different ways with some
effort. Is there some aspect of crypto currency that makes it different
(honest question)?

~~~
simias
The difference IMO is that gold has intrinsic value by virtue of being rare
and shiny. I guess the idea is that even if civilization collapses and we
return to the stone age gold will still be valuable. Since the use of gold as
currency can be traced back at least to 600BCE[1] there's a good reason to
believe that.

Bitcoins however doesn't really have a intrinsic "rest" value. Anybody can
(and many do) spawn a new blockchain out of thin air. Ironically Bitcoin is
entirely about trust at the core. The trust that the other participants in the
bitcoin economy won't lose faith in the currency and dump it. That trust is
the only thing that gives the coin value.

[1]
[http://rg.ancients.info/lion/article.html](http://rg.ancients.info/lion/article.html)

~~~
acdha
Similarly, national currencies have a value because governments collect taxes
and pay for things using those currencies so there's a considerable inertial
force encouraging their usage.

That doesn't mean that failure is impossible but it smooths out a lot of minor
fluctuations whereas, as you pointed out, if a Bitcoin competitor took off
tomorrow there's no pressure not to adopt it instead other than the sunk costs
which a small percentage of the general population has.

~~~
ericb
I don't think it is that simple. Bitcoin has 3 main advantages that can't be
easily taken away from it that make things harder for competitors:

1 - Distribution (Metcalfe's law):

Metcalfe's law states that the value of a telecommunications network is
proportional to the square of the number of connected users of the system
(n2).

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

2- Schelling Point

Bitcoin is the natural Schelling point for those drawn to the advantages of
cryptographic money.

[https://en.wikipedia.org/wiki/Focal_point_(game_theory)](https://en.wikipedia.org/wiki/Focal_point_\(game_theory\))

3 - Most battle-tested codebase. No cryptocurrency has been successfully
operating for as long.

~~~
acdha
That's arguing that the past will be like the future when things are still
really early. Statistically almost nobody owns or uses Bitcoin, especially
when you subtract the Bitcoin proponents who do most of their transactions
using something like a credit card which actually uses local currency via Visa
or where Bitcoin is converted into real currency immediately by the recipient,
and who thus would have very little switching converting to something else.

Ask how long either #1 or 2 would hold true if, say, a couple of large banks,
Visa/Mastercard, Apple and/or Google, etc. launched a currency accessible to
their existing customer bases. I'd give that a couple of days before Bitcoin
would be a rounding error in the daily transaction volume.

The big long-term reason I expect that to happen is the deflation model baked
into Bitcoin: every player which didn't acquire a substantial holding years
ago has a huge incentive to find an alternative which doesn't mean they're
putting effort into making someone else rich. Right now there's very little
mainstream demand for Bitcoin but if that change it's hard to believe the
finance people wouldn't be obsessed with ways to capture that revenue going to
a third-party.

~~~
ericb
Coinbase has 10 million users, most of whom are there for bitcoin.

~~~
acdha
How many of them are active? How many hold non-trivial balances? Most
importantly, how many sales would legal merchants lose if those users jumped
ship or lost interest?

Again, my point is simply that there's little holding anyone who hasn't made a
huge investment specifically in Bitcoin. If you have $10 equivalent sitting in
an account and CitiCoin™ launches next week with attractive terms and
mainstream merchant acceptance, are you going to think twice about bailing?
Alternately, if law enforcement cracks down on the money laundering, etc. and
prices drop, how many people will lose interest if it won't make them rich?

A key point here: of the comparatively few merchants who accept BTC, how many
do their business primarily in Bitcoin and don't quickly convert to something
else? That's the only group with a significant commitment to continued use;
everyone else can switch on a whim.

That's the difference between a pure fiat currency like Bitcoin and something
backed by a national government. Bitcoin has no inherent value beyond
voluntary group consensus, which means that a panic, messy fork, or
disinterest has no natural floor on how far it can fall. In contrast, USD are
backed by one of the major world economies, hundreds of millions of people
need them to pay taxes, and billions of dollars are paid to government
employees, contracts, benefits, etc. Again, that's not immunity from problems
but it's a huge inertial weight moderating swings.

~~~
ericb
The backing and even the existence of the United States is also simply a
matter of group consensus. It is turtles all the way down, my friend. We're
just debating whose delusions are bigger and better.

~~~
acdha
Do you actually believe that false equivalence? It's like saying your two-
person startup is basically the same as IBM because they're both companies.

------
sbenitoj
"There are two main reasons to doubt bitcoin's viability as an
investment....Another is more philosophical: Digital currencies have no
fundamental value, so have no place in a portfolio."

There is no such thing as an objective theory of value. ALL value is
subjective (meaning each person values the same thing differently). The more
you learn about what money is, the more you realize that there are qualities
of money that make it valuable/appealing to be used AS money (e.g.
fungibility, low to no inflation, difficult to counterfeit, scarce, easy to
verify authenticity). This is why things like sand and hair make for poor
money, and this is why the free market essentially chose gold as money before
governments co-opted, confiscated, and controlled it. Gold would most likely
be the primary money today if people had been free to transact using gold as
money [0].

Governments stopped the use of gold as money because they can use fiat
currencies to fund the operation of the government (by increasing the supply
of fiat and buying their own debt with it), reducing the purchasing power of
their own currency and acting as a tax on savers. Bitcoin is a serious threat
to that because unlike gold, it is orders of magnitude more difficult for
governments to confiscate and control.

[0]
[https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_curr...](https://en.m.wikipedia.org/wiki/Liberty_dollar_\(private_currency\))

EDIT: Spelling

~~~
trgv
I agree with you that there's no such thing as objective value. But my feeling
is that there is still something important that differentiates "real"
currencies (fiat or not) from bitcoin/gold/etc. Namely, there is a government
backing the "real" currencies.

Dollars are "guaranteed" to have value because they are "legal tender," ie you
can pay your taxes and buy things with them. As long as the US government has
power, that will continue to be the case.

I can definitely see btc being a viable currency in situations where a
government's power is limited but, for stable countries, it seems more like a
commodity, and that's definitely (at least it seems to me) how people are
treating it.

~~~
sbenitoj
Have to pick a bone here: dollars do not have value because they are "legal
tender" \-- see Zimbabwe hyperinflation [0]. Zimbabweans stopped valuing their
national currency years before Zimbabwe recognized any other currencies as
legal tender.

Dollars (and all fiat for that matter) have value because once upon a time
paper money was tied to a specific weight of gold / silver stored in a bank
vault. Over the past 100-ish years that link was slowly eroded until the point
where there was no backing whatsoever. Inertia is the only thing keeping fiat
currencies going, and it's not going to last forever now that alternatives
(like cryptocurrency) exist and governments can't shut them down (like they
did with the Liberty Dollar [1]).

After a couple more financial crises in the West and bank bailouts I suspect
ALL governments will have limited power in this domain, people aren't going to
let their savings be inflated into oblivion for the rest of eternity.

[0]
[https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe](https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe)

[1]
[https://en.wikipedia.org/wiki/Liberty_dollar_(private_curren...](https://en.wikipedia.org/wiki/Liberty_dollar_\(private_currency\))

~~~
trgv
The point that I meant to get across was that dollars have value as long as
the government has power. You're right that it doesn't matter what the
government says. Rather what matters is whether or not the government can back
up what it says.

If you don't pay your taxes, you will be jailed. How do you pay your taxes?
Well that's up the government, and they went with dollars.

I don't agree with your explanation of why dollars have value. You seem to
have a bone to pick with every fiat currency, which I think is very silly.

~~~
sbenitoj
Not sure why I'm getting downvotes on this, but you're right that I have an
issue with every fiat currency, they're antithetical to a free society. No
fiat currencies would exist in a world without coercion, people would not
voluntarily use a currency which is debased every year by design.

------
thecopy
Transaction time and energy inefficiency makes Bitcoin's future not so golden,
imo.

~~~
rugffgbv
Not only it's slow, but transaction fees are ridiculously high. $4.3
currently.

I go to shop and pay $0.5 for 2kg of potatoes (or a bottle of beer), and pay
$4.3 fee, and wait 1 hour for confirmations?

~~~
ISL
If you make a consumer trade with Fidelity, the trading fee is $5.

For better or worse, Bitcoin has evolved into a financial-scale product, no
longer something one would use to buy $0.50 of potatoes.

(P.S. $0.50 for 2kg of potatoes or a bottle of beer? both of those are a great
deal)

~~~
rugffgbv
I think future cryptocurrency will need to be very scalable, zero fees and
instantaneous. At least capable of handling VISA traffic. Ideally something
good enough for microtransactions, sending $0.001.

So far I've heard about IOTA and Lightning Network.

In Europe bank transfers are free. I often send $1 or $2 to roommate bank
account for something from refrigerator. Also in shop I pay $2 with VISA card.

------
hxta98596
Bitcoin appears to be turning into a relatively standard commodity arbitrage
market (in the real world sense of arbitrage not the academic sense). The
article is right to compare to gold in this sense.

People seem to get caught up on the word "value" and then rush to defend
Bitcoin's use cases and unique technology as making it valuable. I don't think
it's a diss when people say Bitcoin has no fundamental value. A thing having
use cases or unique properties is not what "value" means in an exchange market
sense. "Fundamental value" is also known as "intrinsic value" and is based on
the BUILT IN return potential of an asset. So stocks and bonds have an
intrinsic value because they generate a return, based on dividends or
interests rates they pay.

A thing is only worth what someone will give you for it. So EVERY value needs
to be in terms of something else.

An ounce of Gold, 1 bitcoin, 1 US dollar, have NO intrinsic value because you
can hold them forever and they will never pay you a dividend or make a coupon
payment on their own. Gold has a few practical uses in jewelry and industry
but that's not why it's important. Bitcoin and the dollar have ZERO "value"
beyond being a place to store something else's value. Well back in the day a
dollar in the bank might earn you a small interest rate but hello 21st
century. Bitcoin doesn't even offer an interest rate. Gold is not a good long
term investment. But Gold is good to have in case of emergency. I imagine
bitcoin will be similar. Bitcoin and gold COST you money to own them. The
people who make money off gold are the miners and then forever after the banks
and security companies who store physical gold for you at great expense.
Bitcoin should be similar in this sense as Bitcoin can create a spread income
over the energy costs and the transaction fees it generates every 10 minutes.

My guess is since 90% of the bitcoins that will ever be mined will be mined
within the next 2-3 years. And there will be lost coins. So maybe 15 million
coins will be around long term and that number will slowly shrink. The fees
will start to be more important.

I don't think Bitcoin is a Ponzi scheme. Bitcoin has a ton of great uses and
tech features. And most importantly it has signaling properties. While Bitcoin
is unlikely to be the main digital currency people on a daily basis as the 1
MB limit does appear to cause issues. It would be very bad for all digital
currencies if bitcoin went away.

------
vocatus_gate
The big mystery to me is whether Bitcoin is the Myspace or Facebook of digital
currency. Only time will tell.

~~~
murph37
This is a large concern for me. If cryptocurrencies begin to attract more
users and widespread adoption, what is preventing a new coin that corrects
Bitcoin's inefficiencies from ultimately gaining more users and superseding
it? I would love to know your guy's thoughts.

~~~
1ba9115454
There are plenty of coins already that are technically better than Bitcoin.
It's just that Bitcoin has the network effect.

So perhaps one day a new coin will overtake Bitcoin, but my guess is that the
coin will need a very distinct advanatge to gain traction.

~~~
iainmerrick
_There are plenty of coins already that are technically better than Bitcoin._

Is there anything that fixes the wasteful mining process? To me that seems
like a serious flaw in Bitcoin.

~~~
kuprel
Iota uses a "tangle" instead of a block chain

~~~
iainmerrick
Sounds interesting!

But a quick search sent me to [https://iota.org](https://iota.org), and oh my
gosh, that website is impossible to use. Uninterruptable animations and
completely broken scrolling. Oh well.

EDIT to add: suddenly I'm reminded of "For the love of God, please tell me
what your company does" from the other day
([https://news.ycombinator.com/item?id=15170182](https://news.ycombinator.com/item?id=15170182)).
Probably the incomprehensible website means Iota is aimed at big businesses,
not individuals.

------
Double_a_92
Did you mean: "Tulip's Golden Future" ?

~~~
ghostbrainalpha
Are you talking about the new ICO 2.lip ?

It's got one of the most exciting whitepapers I've read. Also has a great
Board of Directors and some really great advisers behind it.

------
imaginenore
_" Digital currencies have no fundamental value"_

That argument never made any sense to me. What's the fundamental value of $1?

People assign value to all things based on how desirable they are (the
demand). There are rare exceptions, like when a government ties their national
currency to something like the dollar, but that immediately creates a black
market, where it trades for its real value, and because of that, the
government exchange only works one way (to buy or to sell). See Bolivar as a
current example.

~~~
rm_-rf_slash
The fundamental value of $1 is the full faith and credit of the United States
Government and the economy of America.

The fundamental value of cryptocurrencies is a shared agreement of value
amongst investors.

I imagine some snotty 14-year old would argue that there is no fundamental
distinction between the two but that's not being economically serious.

~~~
imaginenore
I'd argue more, according to your definitions, the "fundamental value" of the
dollar (which you conveniently didn't specify) relies on violence (as in, pay
up of guys with guns will put you in prison). Whereas the fundamental value of
Bitcoin is determined by the free market.

It's quite clear to me which one is a more moral system.

Again, based on your own definitions.

~~~
jules
The property rights to your belongings are also fundamentally reliant on the
government's promise to use violence to enforce those rights. Concluding that
it is therefore immoral is too simplistic. You have to take into account the
full consequences of not enforcing those rights, and then determine whether
society as a whole is better off or worse off.

