
The Guns of Bitcoin (2017) - rfreytag
https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f779309a718
======
monokh
The common mistake is to try to compare Bitcoin to a predefined experience of
money.

Bitcoin's value is multifaceted. From a very simplistic perspective, it can be
compared to gold. Things get more interesting when you value aspects such as
it being:

\- Fully digital

\- Verifiable by the common individual

\- Sent and received with no interference from third parties

\- Free from supply emission increases or control

Each of these is especially hard to come across in any other form of money.
Combining them is unprecedented.

~~~
wslh
> From a very simplistic perspective, it can be compared to gold.

It is indeed very simplistic to compare it to gold and this is sadly part of
the Bitcoin narrative. Gold has a recognition as an store of value based on
its network effects while Bitcoin network effect is pretty low in comparison.
We can imagine than if a Bitcoin2 is created with similar economic properties
and gain more traction it will automatically replace the Bitcoin1 as a store
of value. Obviously, this can happen to gold either but with much less
probability thinking on all the financial network gold is part of.

~~~
coralreef
_Gold has a recognition as an store of value based on its network effects
while Bitcoin network effect is pretty low in comparison._

Not sure I understand why you believe Bitcoin's network effects are lower than
golds. The more people willing to accept a unit of Bitcoin, the more useful
Bitcoin becomes.

Also, gold's store of value power is also attributed from its stock to flow
ratio (the difficulty of inflating gold supply). Bitcoin has an even better
stock to flow ratio, which is why its often compared to gold.

~~~
wslh
> Not sure I understand why you believe Bitcoin's network effects are lower
> than golds. The more people willing to accept a unit of Bitcoin, the more
> useful Bitcoin becomes.

Gold is more connected to the regulated financial world than Bitcoin. The
network effect is not only about user base but interrelation with other
systems. Not saying that Bitcoin could not have a bigger place but it is not
there yet.

~~~
coralreef
I see, you're saying gold is basically more established in the current
financial system.

It might just be semantics, but when you say gold has stronger network effects
than bitcoin, I'm imagining that an additional user provides X value to the
gold system, but an additional bitcoin user only adds X-1 value to bitcoin.
Which I believe isn't true, both networks probably follow the same marginal
utility curves.

~~~
wslh
Tether (USDT) has more volume than Bitcoin which could mean that the network
effect ironically turns to stable coins connected to fiat money taking
advantage of permissionless protocols and not caring about the native assets
like Bitcoin or Ethereum.

~~~
coralreef
Stable coins like Tether are mostly used by large exchanges for liquidity
purposes.

Retail users rarely use USDT to buy/sell goods or exchange with one another.
It is also not really permissionless because you need to register with the
administrators of USDT and wire a bank transfer if you ever want to convert
your USDT to USD. All fiat backed stablecoins have this inherent flaw of
having an intermediary party to "parent" transactions. An example of this is
Tether banlisting addresses of suspected stolen coins.

------
Bishop_
People using pine wood for flooring to spite the king for claiming it is
probably the most American thing I have ever heard of.

~~~
tossAfterUsing
Pine floors are terrible to maintain though.

'cut off your nose to spite the king'

~~~
gruez
>Pine floors are terrible to maintain though.

Why? Is it the sap?

~~~
LgWoodenBadger
Pine is a very soft wood. Some you can dent with a pencil.

Our dining table was like that when I was a kid. You could see all sorts of
writing in it from too much pencil pressure when doing homework.

------
seibelj
> _What makes dollars valuable is that the government wants them back._

Very common misconception. Dollars have value because there is demand for them
(governments, other governments, other people and institutions). Bitcoin also
has value because there is demand for it. As does your house, expensive art,
etc.

Why does anything have value? Because someone else will pay your for it. I can
say my pencil is worth $1 billion, but it doesn't really unless someone else
will execute the trade.

~~~
NetWorth16254
Actually you wrong. Dolar has value, because even if no one will want dollar,
government will buy it for dollar. It backed on government promise.

~~~
xerxesaa
Your argument sounds recursive. What does it mean to say the government will
buy a dollar for a dollar? A dollar is only useful if it can be exchanged for
things other than itself.

~~~
streb-lo
I mean avoiding prison for tax evasion sounds pretty useful to me.

------
natch
Wow, app wall, that’s a new one. “Download the app or create an account to
read.”

~~~
gt2
Seen it. Most recently was trying to view a reddit on mobile. Said download
the app or take a hike. Circumvented by doing 'request web view' option (in
mobile safari)

------
ed25519FUUU
The article makes a lot of good points. I think people put _way_ too much
stock into the government not being able to regulate digital currencies.
Besides the obvious technical advantages of a state power, they can simply
create policy that turns people into criminals if they intentionally answer
questions wrong on their tax returns.

------
atemerev
Well it is possible to pay some (municipal-level) taxes in Switzerland in
Bitcoin. That’s a start. As for the guns — how about, say, using Bitcoin in
lieu of dollars for petroleum and other import-export settlements? You can’t
sanction Bitcoin, you know.

------
SuoDuanDao
What are the guns of bitcoin? In answer I point to is its network. People who
are willing to take payment in bitcoin are different from the general
population. It's a club many desire to join.

------
conanbatt
> American dollars have value because the US Government taxes things, like
> land, and if you do not pay those taxes they will send you mean letters
> (trust me) before resorting to other means (trust Al Capone)

This is just plain wrong. Currencies have value themselves for their utility
as a means of exchange, not because of taxes. This idea that raising taxes
increases the value of a currency is bonkers.

~~~
hansvm
It's not "plain wrong." When minting a new currency you need a way to
bootstrap it into being an accepted medium of exchange, and taxes help serve
that purpose. They aren't the only method (and I'm not sure historically
whether that was the case for the USD), but it isn't baseless.

~~~
conanbatt
Currencies existed well before governments minted them. Plus the dollar was
once backed by gold: you can transition from a convertible system to a fiat
system, which has nothing to do with fiscal policy.

~~~
hansvm
This reads like an argument, but it doesn't seem to contradict anything I
said. Am I misinterpreting you?

> Currencies existed well before governments minted them.

Sure. Nevertheless, to accept a currency as a medium of exchange when it has
no value to you personally (bank notes, gold, etc) you need to have confidence
that you can exchange it to somebody else for something you do care about,
regardless of who mints it.

> Plus the dollar was once backed by gold: you can transition from a
> convertible system to a fiat system, which has nothing to do with fiscal
> policy.

Yep. As stated, "[taxes] aren't the only method" to bootstrap a currency, and
in practice transitioning from a gold backing to fiat seems to work smoothly
(somehow...it's not hard to imagine an alternate reality where the public
heard their dollars wouldn't be exchangeable for gold, the public lost faith
in the dollar, and the dollar tanked as a result).

~~~
conanbatt
As far as I know, there is no currency that existed because there were taxes
involved, and that's certainly not the experience of the major fiat
currencies.

In fact it might be otherwise: taxes are a deterrent to use currency, which is
why barter is so often used by people and small businesses to avoid the tax-
man today.

------
scottmsul
What's going to stop me from using bitcoin for everything, and then exchanging
some into dollars at the last second to pay my taxes?

~~~
solotronics
There are already initiatives to pay taxes directly in Bitcoin.
[https://bitcoinmagazine.com/articles/why-ohios-state-
treasur...](https://bitcoinmagazine.com/articles/why-ohios-state-treasurer-
backs-decision-accept-btc-tax-payments)

This isn't some fringe idea it is being developed by governments around the
US. I remember reading about some city in America that will take Bitcoin
directly for tax but I can't find the article.

~~~
tripletao
See my comment below--the tax-related demand for USD comes from the holding
period between incurring the tax liability and paying it, not from the payment
itself. Even if you get paid in BTC and pay your taxes in BTC, 1 mBTC earned
on Jan 1 with a 30% tax rate doesn't imply you owe 0.3 mBTC on April 15--USA
tax law expects you to convert from BTC to USD using the Jan 1 exchange rate
to calculate your tax liability, and then convert back using the April 15
exchange rate when you make the payment.

------
beervirus
Since when does Medium _require_ an account to read articles? Guess I'm not
gonna read this one.

~~~
Shared404
It's an interesting article and worth a read. Here's an outline link from
elsewhere in the thread.

[https://outline.com/VBSEgq](https://outline.com/VBSEgq)

------
coinward
full decentralization and seizure-resistance work as good guns against state
tyranny

~~~
rlucas
That is orthogonal to the point of the article.

The state can demand, using their guns, that you pay them in the coin of their
realm.

At that point, you need to come up with those coins, or face their guns.

You can have your BTC be decentralized and seizure-resistant at that point,
but that will not stop the Leviathan from jailing or killing you. The "guns"
of the article are the actual guns of the IRS.

~~~
coinward
Do the IRS really carry guns? The man-power needed and costs to enforce
collection of coins means this doesn't scale well for the state

~~~
inscionent
They have guns and a yearly budget of US$1.2 billion

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

~~~
WorldMaker
They are notorious for "always" catching their criminals, too. Local law
enforcement of many stripes in multiple states tried to catch Capone, but in
the end it was the Revenuers that caught Capone on tax evasion.

~~~
Sschellbach
For every Capone there are thousands of people you never heard of successfully
evading taxes

------
varbhat
[https://outline.com/VBSEgq](https://outline.com/VBSEgq)

Read without annoying app/account wall

------
Acrobatic_Road
I think the guns of bitcoin are it's decentralized design backed by the
lobbying of domestic forces (The EFF, ACLU, exchanges, etc)

------
paulpauper
yaaawn. this article is full of tired arguments. Bitcoin is a lot more like
gold than a competitor to the US dollar or substitute for cash.

------
rboyd
tired old arguments

------
louwrentius
I would like to see a total ban/block of any kind of cryptocurrency articles
on HN. I'm happy to include my own, if that's what it takes.

[https://louwrentius.com/cryptocurrencies-are-detrimental-
to-...](https://louwrentius.com/cryptocurrencies-are-detrimental-to-
society.html)

~~~
coinward
you want to censor discussion around a promising technology. why?

~~~
beachjpg
Bitcoin is not really liked on HN. I'm guessing most of the older HN guys
don't seem really interested in the tech or is terrified by the price action,
perhaps

~~~
Sschellbach
I'm on HN. I like Bitcoin. Surely, I am not alone

~~~
xur17
You are not. I will say, the general consensus seems to be negative, but I
wouldn't say it's disliked by all.

