What am I missing?
Hardcore tech people and those who don't (or can't) trust institutions with their Bitcoin will pay the transaction fees to get their money out of exchanges and into their own wallet. The average retail investor, however, doesn't want to be their own bank. They just want in on the price action, while letting the exchange manage their money. Does anyone really think the person buying crypto $100 at a time in their Robinhood account wants to pay $18 (current average transaction fee) every time they want to move that BTC into their wallet? Of course not, which is one reason why Robinhood doesn't even have an option to withdraw Bitcoin.
As with any frenzy, the misinformation being circulated by people who want everyone to buy Bitcoin is getting out of control. How many average people buy Bitcoin because they think Bitcoin is the only way to avoid losing purchasing power? Meanwhile, everyone else has been protecting against inflation by purchasing stocks, real estate, or virtually any other investment long before Bitcoin was even invented. (Yes, I'm aware of the 21 million maximum BTC cap). The current Bitcoin narratives are more like a religion than reality.
That said, Tesla's Bitcoin purchase does make a lot of sense. Elon Musk went on Twitter and called Bitcoin "BS" to drive the price down so they could buy at a discount. They then announced their Bitcoin purchase with fanfare that drove the price up, marking a quick return on their investment. They used Elon's influence to make a quick profit on the frenzy.
Tesla is a car manufacturer! It doesn't make any sense at all! At any company that made sense, a CEO would lose his job for gambling $1B of company money in a casino totally unrelated to the company's business interests.
IMHO rising energy price is totally not good for Tesla's and other electric car manufacturers. It increases TCO of electric vehicles and companies' cost of support for premium models with free charging access.
Energy-prices fluctuations are relatively irrelevant in the long run. Oil will run out, and renewables are the only hope to address energy needs without killing the planet. This message is well-understood by now, the transition has started, it’s just a matter of how fast (or slow) we get to the new normal.
What are you, Apple? That gives no charger for "environmental reasons" while packaging its wireless headphones in a crapload of unnecessary plastics.
If you are so energy consciousness then go bark at US military, those are the biggest polluters and energy hungry of the world.
Isn't a rebuttal different than a deflection?
Anyway half - 3/4ths of bitcoin mining is using clean energy that wasn't going to be used for anything else, or a sustainability solution for energy that was going to be used as pollution.
While the clean energy claim may be true, why do you claim it wouldn't have been used for anything else?
The answer to your question depends on which power source we are referring to. Where Bitcoin is a sustainability solution, it is reducing waste by products which were already being produced and now are not being produced because they are used for energy.
Bitcoin is a multi-billion industry whether you respect its existence or not, your arguments will simply have to get more nuanced to have a real conversation about what's happening.
Organizations that know better are intentionally omitting the source of energy, in their discussion about the amount of energy. Don't fall for it.
Or with electrolysis or storage you need to generate it and transport it to where it can be used, getting you back to square one because nobody is doing that because it is uneconomical. Whereas mining is not because it can be all done on site in remote locations and doesn't even need great internet. High latency, spotty internet is good enough for crypto mining.
We know what the ideals are: no pollution and infinite energy, or no pollution and less energy use. Thats not going to happen, and crypto wasn’t part of those 50 year old models, yet it is accomplishing a lot of those ideals and people choose not to respect its existence as it alters their worldview.
If miners could burn cyanide to mine, they would. They don't give a single shit about clean energy, just cheap energy
2/ Bitcoin is causing _more_ energy consumption. It's not curbing pollution, in any way. It's just grafting itself where the energy is cheap. Noone's building wind farms for bitcoin.
3/ If I cut off 36% (which is a low bound, other countries are not clean either) of your salary, go ahead and tell me it's okay because you still have the supermajority of it.
3/ I’m not sure what you are saying here? Is this supposed to be an analogy to something? What happens if you get rid of that energy use? The bitcoin network will adapt to a lower difficulty rate... not sure what you think you’re saying here.
That's not how bitcoin works. The price of bitcoin is the budget you can spend on mining a single coin. If the price is higher, you can afford to run more miners. If the cost of electricity goes down, you can afford to run more miners. If the efficiency goes up, you can afford to run more miners. Running more miners increases the mining difficulty and you are back where you started.
If Bitcoin is worth $50k people will destroy $50k of energy to acquire Bitcoin.
If Bitcoin price goes up, then the return on energy gets greater. Therefore, it's worth it to spend more energy mining. Then difficulty rises and takes this incentive away, reaching a new equilibrium with more energy spent.
We’re aware there are non-U.S. dollar currencies out there? And non-currency assets one can buy?
Crypto currencies are best compared to pink sheets prior to increased regulation, and no one in their right mind would tell you to buy pink sheets to hedge against economic downturn even if their favorite did show a 10000% increase in value.
can you expand on that?
"at any company that made sense" is true, to a point. But the point of tesla has been, for a not-insignificant number of people, not meant to make sense. It's faith based. It's cult based.
Elon Musk has strong parallels to Trump's appeal. It might not make sense. That's not the point.
and it is probably related to medieval kings and queens, religious prophets and why some monkeys are more equal than others.
According to SEC filings, Elon himself hasn't sold any recently, but he owns 20% of Tesla, worth about $10B today. Even if Tesla drops 10x, he would have $100M worth of shares. Not to mention all his other assets, shares in SpaceX etc. He has more money than he will ever need.
Tesla's market cap is $764.255B. 20% of that is $152.851B.
Sure, he also probably takes a salary for his role at the companies as well. Still, there's a reason he continues to work I'd assume? It might be he truly wants to get electric car on the road, or it could be he wants more money. In both cases you could ask: "Can Tesla survive his inevitable exit?"
So ignoring Elon's motivations here, as maybe he just has fun running Tesla, who knows, still the question is relevant to other investors into the Tesla stock, and for Tesla's employees.
Isn't that the strangest thing? If you watch videos of Elon he is no where near as charismatic as trump.
I think it mostly stems from his success with SpaceX and earning accolades for being, "The Guy who does Impossible things". His having a car manufacturing company with an impossible share price just make sense.
That's what you think.
Is that even legal? It sounds like pumping and dumping.
He's definitively manipulating the market in the sense of the colloquial meaning of the word.
If there are public signals that predict the performance of a stock then those who benefit the most are those who execute their trades as quickly as possible and since Elon knows what he is going to "announce" on his Twitter account he is going to benefit massively.
He has put the term "bitcoin" in his twitter bio.
Better thought of as a configuration value set by people with most of the mining power, which last time I checked was PRC
These splits have already happened multiple times (Bitcoin Gold, SV, ABC, Cash) and most claim to be "the real Bitcoin". They are all either dead or valued <1/100 of BTC.
Sounds like you’re saying Bitcoin only has value because the PRC allows it to?
The owners of Bitcoin would just fork and switch to a different algorithm, ruining the value of existing mining hardware.
Please learn how the Nakamoto Consensus works and how nodes protect the Bitcoin network while miners are slaves to the network. There's a rich history of this being tested by adversaries.
The practical problem is that users have to download the entire dataset. There are a lot of queries that cannot be done exclusively through an index and require downloading a substantial amount of data. Bitcoin (and any decentralized app) is exactly the same. It's just that they replaced the central server with a proof of work consensus mechanism that makes it truly decentralized.
It's not a practical user experience. Lightning is just a fancy federated paypal. The average user won't care once Paypal and Mastercard support Bitcoin. The inability to scale causes Bitcoin to give more power to established financial institutions. It's ironic. Bitcoin will just be relegated to a settlement layer.
Not ironic at all. Bitcoin is supposed to be a robust, decentralised, censorship resistant settlement layer. That's literally the point. It's the base protocol.
We don't, after all, expect users to care about TCP/IP whenever they post to TikTok.
But it's reasonable, based on current trends, to predict that the number of full nodes will continue to increase all over the world.
If they don't follow the rules as set by the users of the system, their blocks will be automatically ignored by the users software  (while users receive blocks from miners following their rules).
: there is one CONDITION to that, and that is that an economic majority of users either do run real bitcoin nodes (can also be light clients on smartphones that connect to own node at home or to external servers that do not belong to miners) or that the services they use do run real bitcoin nodes (and do not collude with miners).
It is about an economic majority of users, and not about a simple majority. There are higher chances that users with more value invested, will run their own nodes, and therefore will not be tricked by malicious miners, and therefore increase the value of the blockchain where the rules are followed (if the forked blockchain with infinite or increase supply were to have some traction by an economic minority, the economic majority could run a second node with these changed rules and sell their coins on that chain, that would make the chain the loosing chain, like what happened with "Bitcoin-cash").
Obviously everyone running their own node would be best, so that those nodes are not run by a small amount of entities who could decide to run software/nodes that do follow their own rules. That is *WHY* bitcoiners are sooo much against raising the blocksize limit, so that running a node is not too resource intensive, so that the number of people running their own nodes (knowingly or even better unknowingly) is as big as possible. Many do think that bitcoin is slow for technical reasons. That is not the case (and lightning could increase the throughput a lot if it achieves it's goal one day). Bitcoin wants to be "slow" to make it easy for as much users as possible to run a node (read: having a maximum amount of users (knowingly and unknowingly) run real nodes, instead of SPV-wallets that do NOT validates the rules and therefore can be tricked by miners!)
By running your own node, you mainly protect yourself, but a tiny bit also the rest of the users (long term aligned incentives, once running a node is computational irrelevant, or one node per family runing on the home router or similar).
That being said, miners, developers, exchanges, ... all can influence what happens, but the biggest power lies in users hands... if the economical majority run (archival or pruned) fully validating nodes.
miners are timestamping machines, which main function is to order (!) the transactions. That's it!
The is the whole point, everyone/every node verifies the rules, but the network has to agree on some ordering, as they could be many possibilities to order the transaction, and the network wouldn't know who to listen (everyone has his own opinion about the best ordering). So the "lucky miner" extends the blockchain effectively ordering the new transactions.
If the miner increases the supply or doesn't follow any other consensus rule, other nodes won't accept it. So the miner has not much power. He orders transactions
Title: Reddit Post Reporting Tesla's Bitcoin Purchase From a Month Ago Was a Hoax
Reportedly, the person claiming to be a Tesla insider with intel on the bitcoin purchase was actually some political science major college student tripping on acid. Crazy how so many people ate this story up.
> Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.
I'm curious is this the transaction per $100 or is $18 a flat fee regardless of transfer amount?
In general a Bitcoin transfaction fee is a market price to get your transaction included in a block. There is one block mined every 10 minutes and each block has enough capacity for a few thousand transactions. You put your transaction out on the network with a fee specified, and miners trying to create blocks can choose whether to include it in the block they attempt to mine. Naturally, miners trying to maximize profit will choose to include the transactions with the highest fees, occupying the least space in the block.
The size of the transaction (in bytes) is not related to the amount being transferred. It is tied to the number of inputs and outputs. Bitcoin doesn't directly track the "balance" of each address. Instead of a transaction saying "deduct 1000 satoshis from my account and give it to Charlie", it says, "take the 800 satoshis received from Alice in this old transaction, and the 500 satoshis received from Bob in that old transaction, and with that 1300 total give 1000 to Charlie and 300 back to me". 2 inputs and 2 outputs in that example, but you can imagine how both the # of inputs and the # of outputs can vary in practical usage. Therefore, a transaction that moves Bitcoins accumulated from many small transactions will be somewhat larger and have a more expensive fee than one that moves Bitcoins that were acquired all at once.
However, don't take this to mean that has an impact on the cost of withdrawing from an exchange: since the exchange doesn't make on-chain transactions for each buy/sell, it doesn't matter whether you bought your Bitcoins a little at a time or all at once for calculating your withdrawal fee. It'll pretty much be a flat fee.
One other thing - you cant even move BTC in or out of Robinhood. Robinhood for crypto is a complete scam right now.
It has a big warning saying to not use it with cash you aren't willing to lose.
This has tended to be true (that it’d go through within a few days), but right now it’s probably largely false.
Assume a small 226 byte transaction (one input and two outputs); at $50,000 per bitcoin, 50¢ is 1000 satoshi, which is about 4.4 satoshi per byte.
Per https://jochen-hoenicke.de/queue/#0,30d, transactions with fees under 5 satoshi per byte were last cleared on February 8 (~8 days ago), and before that last on January 28 (~11 days). (Before that, such transactions stalled for about 12 days in October/November; other than that, it looks like such transactions never stalled for even a week back to the January 2018 craze, to say nothing of 50¢ being more satoshi per byte back then anyway.)
And if your transaction expires after a week——
It turns out that people were right when they said that it would take a long while for it to be adopted.
The miners then choose the transactions they want to include in a way, as to maximize their gains. As a block can only hold a certain amount of transactions and the limit being set by the weight-units , miners will want to prioritize the transactions that offer them bigger fees per weight unit, or usually expressed as sats/vbyte (satoshis per virtual bytes).
So if you don't need a transaction to arrive in the next 1-2 hours, you can lower your fees, and the transaction might pass in the night (although BTC is international, congestion is less on US night time and especially week-ends) or if not, probably in the week-end. If it doesn't clear fast enough, or as fast as hoped, then RBF (replace-by-fee) or CPFP (child-pays-for-parent) might help (manually or an increase of the fee could be automated by the wallet every set amount of time).
TL;DR: there is a free market for transactions, but the price is not dictated by the market (and there is no real bidding system), instead you suggest a fee, and see if any miner around the world wants to include it in a block (and you can adjust if the outcome isn't achieved, which has similar results to a bidding system... but is more like natural supply/demand mechanism, as miner do not guarantee to include a transaction).
Helpful to see current unconfirmed transactions (and sats/vbyte):
[info: the legend is clickable, and makes it easier to view how many higher paying transactions there are]
If you buy an option for a barrel of oil, Robinhood doesn't even deliver it to you. Same for wheat and gold. What a scam!
In all seriousness, if you want to speculate on the price of Bitcoin, Robinhood may be better than using some of these more sketchy exchanges that offer decent amounts of leverage.
If you want to actually purchase Bitcoin, there's regulated exchanges where you can do so, though that'll probably land you on some FBI watch list.
Even if the government didn't have that, they might still be able to deanonymize you via your transactions. Pseudonymity is not anonymity. If a single merchant identifies you as the buyer in a transaction, the government might be able to figure out the rest of your transactions in that chain.
I definitely would not call that a scam. I have no reason to move my BTC.
Besides, if you really want to own a given amount of bitcoins that you have in your robinhood account, you just liquidate your position in RH and use those funds to purchase bitcoins directly.
If you're transferring smaller amounts, why are you using Bitcoin? Use Bitcoin Cash or Litecoin or one of these newfangled proof-of-stake currencies. Then it'll be a couple of cents flat.
Power to the people?
The story seems to rapidly shift between "BTC will save Venezuelans from an oppressive government" and "we never said it mattered if people could use BTC for transfers of non-huge amounts of money".
Of course people have trouble pricing Bitcoin, but the same is true for many other assets. If literally the only use for Bitcoin would be to speculate on all the cryptocurrencies, that would be enough to make it valuable.
A wire transfer is a realtime transfer between banks. The only time I've used it was while buying a house. I've never done a wire transfer under $20k.
I don't see an inherent problem with this. People who were too gullible to believe influencer crap and caused bitcoin's price to go down by panic selling are now gone from the market, and the believers stayed in and made money. That's a good thing, and weeds out gullible people from the system. This isn't the stock market where fundamentals matter.
So when the price goes down due to influencers, people are dumb for selling.
But when the price goes up due to the very same influencers, people are smart for buying?
> This isn't the stock market where fundamentals matter.
Amen to that.
The way I see it, Bitcoin is all about hype and modelling hype, so if you can correctly model a particular influencer's effect on a bunch of sheep, I think it's fine to reward that modelling prowess.
As for the sheep themselves, they might win or lose, it's a coin toss, but at the end of the day, they're just sheep.
That's a part of the crowd. Another part is in for speculation and sold on negative message then bought in the dip. We don't know the proportions. The first part could be close to 0.
Honestly what more do most people have? You could work your entire life but even all the earnings and scrimping and saving isn't even be a tiny fraction to what you would have if you had been the one to fulfil the order for the bitcoin pizza and just held.
Think a lot of people misunderstand just how hopeless the world is for most people.
GME and Doge are just the start, get used to hearing people are sinking their entire savings into far flung gambles multiple times a year from here on out. Especially in a post pandemic world where people are been completely downtrodden to their limit. Property is so exorbitant, pay is so low we're now entering a world where just gambling seems the smarter option than living within your means because anyone who has tried that can tell you it gets you nowhere. Pay just hasn't increased enough in line with property and your dollars are worth less and less every day.
When you tell them BTC is slow and expensive they tell you BTC will never replace dollars so it's not a real issue, when you tell them BTC is a ponzi scheme they tell you that it will replace dollars. Even in the pro BTC group nobody agrees what it is, what it should be and what it should become.
I see it less as desperation and more of 'whoa, i have more money now, i want to put it into things that go up in value!'. I haven't seen the data (so do correct me), but I would suspect that less sophisticated retail investing is on the rise over the last year, correlating with increased savings.
The narratives we craft define how we move in this world. This is a toxic way of thinking. It takes about $500/month throughout a working life to retire comfortably investing in just VTSAX.
People have certainly paid for a better standard of living, but they didn't get there with just wages.
Household debt service payments as a percent of disposable personal income are as low as they have ever been: https://fred.stlouisfed.org/series/TDSP
Personal savings rate has never been better: https://fred.stlouisfed.org/series/PSAVERT
Household debt to GDP saw a spike at the beginning of the pandemic, but still is much lower than we were coming out of the last recession: https://fred.stlouisfed.org/series/HDTGPDUSQ163N
Disposable income has never been higher: https://fred.stlouisfed.org/series/DSPI
It has become a total HN cliché that the top comment is a negative takedown of the tech or startup in question. From Dropbox, to Coinbase, to Ethereum, and now to Bitcoin at 50k.
Not refuting anything you're saying here. Just find it amusing to have seen this pattern play out so many times here on HN.
engineer working at morally dubious ad-retargeting analytics company: "this has no utility whatsoever ($30), I could do that with a database ($7,500)! I'm going to ignore this for entire decades! ($50,000)"
The reason it has value is because people have demand for it. People have demand for it for a variety of reasons. I think it's reasonable to presume that a non-trivial portion of that demand is driven by the features that make it a rather good black market currency. It's also obviously quite appealing to certain groups of privacy conscious individuals. I've heard it's somewhat popular for international remittances, which makes sense given the economic stability issues various places have around the world. On top of those fundamentals, demand is further inflated by speculators.
Your biggest criticism seems to be that it would be a bad national currency because you can't implement a bitcoin monetary policy. But none of the demand for bitcoin is driven by that factor, so the observation is simply irrelevant.
unless you want to explain how what happened with gme reflected a rational valuation of the company
For instance your comment about GME seems to involve an intentional misrepresentation of what occurred, for the purpose of supporting a judgemental comment. All of the decision making involved was perfectly rational. The decision to short the stock is a perfectly rational risk to take based on the short sellers analysis of the business fundamentals. The decision to squeeze the stock is also a perfectly rational risk to take based on the knowledge that the short sellers would eventually have to close their positions. Your statement that the price of GME should have (in a rational world) reflected the value of the business is simple a misrepresentation of how the system works. The price of GME represents the demand for GME, and for a set of perfectly rational reasons, that price was temporarily misaligned with the value of the underlying business. I get the feeling you're trying to make some criticism about how the mechanics of the system work, but to do so under the pretence of irrationality is simply wrong.
The question to ask is, do the fundamentals you mentioned justify the valuation?
Your mistake is to think that it should. The valuation is exclusively a result of the demand for the shares. Under typical circumstances that valuation will reflect "the market's" sentiment on the underlying business, in the context of the broader economy. But there are situations where the demand for shares can be temporarily influenced by factors other than the nature of the underlying business. The short sellers had contractually committed to having a certain level of demand in the future, and other market participants exploited this fact for their own benefit.
For that reason the price was temporarily misaligned with the underlying value. These temporary price fluctuations are a perfectly ordinary feature of any market, and can be caused by any number of different inefficiencies exerting a temporary influence on price before the market has time to correct itself. There's not much insight in commenting that a market is not perfectly efficient, because no market is. Events like this are remarkable because of their scale, but also because of how infrequently they occur. You could count all short squeezes of this scale on one hand. So what is the point of your comment? That massively inefficient pricing, while possible, almost never occurs?
How does a static rather than unconstrained supply make something a LESS good store of value?
Bitcoin-fanatic-USD-bears claim that Bitcoin is a good store of value because it has constrained supply. But they miss the demand side of the equation. Similarly, they claim that the USD is a bad source of value because it has "unlimited" supply. That also misses the demand side.
The demand for USD is robust because people need USD to pay taxes and to purchase most goods and services offered by US-based organizations. The demand for Bitcoin is based on... how many people Bitcoin-fanatics can get to buy and hodl Bitcoin.
(I don't count organizations that accept Bitcoin as payment because almost all of them exchange received Bitcoin into the local currency, negating the demand effects of the original Bitcoin purchase. In the US, that's usually USD.)
In economic terms, Bitcoin is inflating as an asset. Specifically, it's demand-pull inflation.
Bitcoin isn't even uniquely positioned to protect against inflation, other than the mistaken public belief on that topic. Inflation is an increase in the price of assets, so investors can (and do) escape inflation by investing their money.
Ironically, Bitcoin's limited supply disincentivizes holders from investing their money.
I don't think this is precise. Inflation of an asset means that the asset itself drops in value, relative to the value of other goods. For example: when prices rise, the USD itself would be inflating because would then take more USD to buy goods.
Bitcoin is rising in price compared to the USD. So it's not "inflating." If we treat Bitcoin as a currency, it's deflating because right now it takes fewer Bitcoin to buy goods than one year ago.
This is also why "asset inflation" is not precise. The asset itself is not inflating, it is actually deflating wrt. to other goods.
That assumes an asset can be used as a medium of exchange. In its current form, BTC is not a medium of exchange, it's a store of value.
In other words - the word inflation has to do with purchasing power. If the asset isn't used as a way to purchase then comparing the characteristic of inflation is basically pointless. It' be like saying "trees are inflating as an asset". No one makes purchases using trees so the concept is irrelevant.
But you're right that Bitcoin is mostly used as a speculative investment, and not to actually exchange goods. (That's not very convincing to crypto-people, though.)
It more accurately conveys the fact that 1) the assets are increasing in value, compared to a basket of goods or the USD; and 2) doesn’t imply that the asset is a currency.
I'm afraid this ship has sailed.
Demand-pull inflation in fact is exactly what is happening with Bitcoin and bitcoiners would agree. There's huge demand for bitcoin and an ever reduction of circulating supply. What that means is that it can maintain/increase purchasing power incredibly relative to other assets that have unconstrained and erratic supply (fiat).
Maybe you are trying to say that the USD is inflating (w/ demand-pull inflation) because USD is becoming less valuable, relative to Bitcoin.
But that theory is still problematic, since you can't measure inflation against just one asset. An asset might appreciate because of a shift in consumer demand -- the currency itself might not have "devalued." Instead, a better way to measure inflation is wrt. a basket of goods, like CPI. CPI has not changed much in the last year, which implies that the USD is not inflating much.
How about another two? Like equities and real estate. Still not inflation?
CPI is a scam - it now includes 80,000+ items muting the shit out of the dramatic price changes in the stuff you actually want and need.
Consumer prices are flat, but the money printer is making investing assets expensive. That's fun for last year's investors but not next year's.
You cite this a priori - but it's so much more complicated than this.
Demand is intimately connected with supply in many cases.
Soemtimes this can be because demand is latent. If production of food goes through the roof - and people were previously starving because the price of food was too high, then that latent demand will be released when supply improves and costs drop.
But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely. People will rush to unload that currency for other assets as they watch their wealth evaporate. It may hit some sort of baseline determined by the daily needs of payroll and tax payments - but other than those moments everyone will try to store there wealth anywhere but that currency.
What is actually happening empirically is that people are coming to see Bitcoin as a reliable store of value over medium to long timeframes. You can continue to believe in your theory a priori, believing that in the even longer term, the lack of goverment mandate in Bitcoin will see its value evaporate... You can even continue to do this when everyone is vested in Bitcoin except you. At which point, you can claim, with 100% theoretical consistency that everyone is a stupid lemming.
But ultimately, it will be the case that the Bitcoin folks had a better explanation of supply and demand than you - and their prediction of reality will be the measure of this.
> But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely.
This is terrible reasoning. It depends on why that supply is going through the roof. Maybe the supply is increasing because of higher demand? (Hint: increased demand for the USD is why the Fed is increasing the supply -- to keep the price stable.)
The phenomenon you're referring to is that, with all else equal, people will shift away from the USD if supply increases make the USD's value drop. But all else is not equal; demand for USD last year effected all-time high issuings of stocks and bonds.
Or, another way I could interpret this sentence is that you are claiming that the USD is not an ordinary good. Do you have some evidence to back that up?
> What is actually happening empirically is that people are coming to see Bitcoin as a reliable store of value over medium to long timeframes.
"Happening empirically." Have some numbers to back that up?
Oh yeah, good luck taking vacations in Europe this year.
Your original statement:
>The demand for USD is robust because people need USD to pay taxes and to purchase most goods
...remains an absurdly simplistic explanation of USD demand. I wasn't citing latent demand as a counter example to this explanation - just an illustration of easy to intuit scenario where demand responds dynamically to supply so that folks can see it happening in another context besides currency.
Clearly I was not referring to latent demand in my actual counter-example - which you even seem to acknowledge later...
> This is terrible reasoning. It depends on why that supply is going through the roof.
I don't disagree. And at least one scenario where USD demand has skyrocketed has been because of its safe haven reserve status... which again speaks to how simplistic your original claim about the robustness of USD demand actually is... and lo - suddenly we have another vector of possible future weakness of USD demand that Bitcoin folk can consider. A vector, mind you, that was completely elided by that simplistic explanation of demand that I contested.
Which is all I really want to achieve here... to remove this veil of simplicity - folks like you repeat ad nauseam these one line, simplistic claims about why Bitcoin demand must be illusory or idiotic... "Because you can't pay taxes with it! Hurrumph!".
But no - there is considerably more complexity and nuance to all this - as you yourself are admitting in your response. That all I wanted / needed to do to demonstrate the obfuscatory contribution to the discussion of your original comment.
Are you willing to provide a more sophisticated explanation for USD demand? The biggest thing missing from my explanation is demand as an investment, or foreign demand to hedge risk. Which right now isn't huge, given interest rates are at 0.
> just an illustration of easy to intuit scenario where demand responds dynamically to supply
Sorry, I was not correct that you were using this as an "counterexample." My intended point was that you seem to be presenting this as an unexpected phenomenon (like how others present "latent demand"), which signals that you don't understand basic econ. (And if one isn't familiar with basic econ, how are they supposed to understand monetary policy, which is based on a second/third year econ (macro)?)
A person who understands economics would usually write: a rise in supply (with all else equal) causes the price of an ordinary good to drop, which shifts the equilibrium to a point where usually there is more demand. "Supply is intimately linked with demand" misses the mark completely! Supply isn't at all "intimately" linked with demand; it's linked with price, which is linked with demand.
That distinction is critically important. It's the difference between central-bank money printing being inflationary (as you seem to suggest) vs. it being stabilizing (which is what is actually happening). And it affects behavior: people don't start buying food when when they see the news reporting an increase in supply. People start buying food when that supply increase causes the price to fall. If the price doesn't fall, people don't buy the food!
The same happens with USD. People don't swap the USD to another currency because they see the central bank creating money (apart from Bitcoin-fanatics). Normal people start migrating off the USD to other assets when they see its value fall (inflation), which isn't happening at all (as measured by the CPI)!
> "Because you can't pay taxes with it! Hurrumph!".
This is a strawman of my argument. Not only can you not pay taxes with Bitcoin, you also can't use it to buy any goods and services. In fact, the only thing it seems like you can do with Bitcoin is to tell others that how Bitcoin is the future, and if they are a disbeliever, that they will be left behind claiming "with 100% theoretical consistency that everyone is a stupid lemming."
I don't particularly feel the onus is on me to provide a full explanation. You are the one providing one in order to show Bitcoin demand is illusory or foolish. All I wanted to do was to point out enough of what yours was missing to show that Bitcoiners are at least not FOOLISH... that there is nuance enough here that if they are wrong, it's likely not because of some 101 mistake.
I did this by pointing out how an explanation of demand of currency must include an account of how supply itself can influence demand. The scenario I painted where supply grossly outstrips initial demand - thus further reducing demand - is possible; it can and has happened - Weimar, Zimbabwe etc... You responded by adding even MORE nuance by pointing out that added supply, rather than representing a hyperinflationary scenario - might itself just be a response to increased demand. And it might indeed! But are we in your scenario or are we heading further and further down the road of over supply? That's a HUGE empirical question... surely. And surely in determining whether or not I want to keep my wealth in USD vs something else, I need to know more about reality than just whether or not I can pay my tax in it, or purchase various things.
Thus I feel I have adequately demonstrated your explanation of currency demand as simplistic - without having to supply a fully rigorous account of my own.
The rest of your reply is worthy and deserving of response - but time is short! :)
Not who you're replying to, but I don't think you can have a reasonably complete explanation of USD demand without mentioning the petrodollar system/international dollar trade settlement. And how a number of countries are looking at ways to break out of that. Also, foreign dollar-denominated debt and debt service.
It matters, in the sense that the government could just adopt a foreign countries' currency and thus the value of that foreign currency would benefit from the power of the USA. The USD would lose its value as a result. I can run my own central bank and mint the hacker news dollar and the currency would still be worthless because of a lack of government adoption.
The US government has decided for itself to be dependent on the USD via taxation and thus it will do everything in its power to protect it. It's that simple. So, yes taxation has a huge second order effect that completely dwarfs the first order effect.
Compare that to oil dependent countries that get paid in dollars for their wealth. They tend to protect their USD based economy at the expense of everything else. Their local currency tax base tends to be pathetic in comparison to the oil money and thus they neglect it.
As for your "HND" hypothetical, it's very plausible that you could mint your own currency and control its value. You would not be able to control the total value of all HND in circulation. In aggregate HND would probably be a relatively worthless currency but so long as you are willing to constrain supply very tightly you will ultimately end up with a market for the few weirdos who are willing to part with $1 to obtain 1 HND. That may be a total of $1000 or less in the end, a laughable sum, but the unit price would still be controlled.
Whether wealth disappears or not is purely dependent on what the money is spent on. If there is a food shortage you can actually spend government money on producing more food and thus end up with more wealth than before. In this scenario each new unit of currency is backed by additional production capacity that guarantees that you can exchange the same amount of currency for food. Since the price of food is still the same but there is more food you actually do need to increase the supply of money to match the supply of food, otherwise the price of food would be going down and we would get deflation.
1. The premise is false. Bitcoin does not have the same demand as the USD.
2. The whole point of my original comment is that value is a result of demand. So your question is circular.
"If Bitcoin had equal demand to the USD, then it would be a better store of value" is as logical a statement as "if my grandmother had wheels, she would be a wagon, if you define a wagon as anything that has wheels."
I could ask the same question about cow dung, or any scarce good. If the demand for cow dung was as high as the USD, will it be a stable store of value? Yes.
The usual fallacy is when proponents claim that Bitcoin is the only asset able to escape inflation due to fiscal policy interventions. This couldn't be more false. The very definition of inflation is an increases in prices, or a decrease in buying power. However, investors have been buying assets and investments to avoid inflation long before Bitcoin was even invented.
Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses.
Bitcoin has value not because someone coded a 21 million coin limit in the code somewhere. Bitcoin has value because people want Bitcoin. Why do people want Bitcoin? Because the price goes up up. Why does the price go up? Because people want Bitcoin. As soon as something breaks that cycle, it doesn't matter what the maximum number of coins is. Without demand from the belief of future increases due to increasing demand, the price will go down. The purchasing power decreases.
Everyone likes to demonize fiscal intervention, but the reality is that counter-cyclical fiscal intervention tends to benefit the average person. Running inflation too hot is bad, but swinging to a full deflationary currency (Bitcoin) would also be bad for the economy.
This is true, but the bottom at which people value bitcoin continues to rise significantly over time. Yes there are crazy bull cycles and bear markets that make the price highly volatile, but even people who bought at the absolute worst time 3 years ago, at $20k, before the price tanked by 80%, are currently nearly at 150% profit.
The price continues to be volatile yet less and less risky and overall trending upwards.
Please stop telling nocoiners this arcane and forbidden knowledge! Instead, encourage them in their belief that Bitcoin is a scam, a collective delusion, a market mania, a bubble, based on nothing, wastes energy, will go to zero, and so forth.
When, in a decade, 1btc == usd1M, we'll all be grateful that such people stayed out of the market long enough to allow us to buy more bitcoin relatively cheaply.
What they can't see is that Bitcoin is now more likely inevitable than not.
What kind of long term are you talking about?
In a hundred years, there can be wars, reparations, and lots of damage to equity.
I think some distinction should be made on store of value (win for gold) vs asset appreciation (win for stocks), especially once you start talking about 100years.
This is just a technicality however. In practice you have to buy stocks according to the index yourself or invest into a fund that mirrors the index for you. The secret sauce in ETFs is that algorithms do the work of the fund manager and thus reduce costs.
Germany has weird taxes. There there is a 25% tax on stock market returns. But no tax on gold sales. Nor on Bitcoin sales. Although silver is taxed.
Because a healthy capitalist economy needs an incentive to invest. A steady, low, positive inflation rate is essential to encouraging those with capital to rent that capital out to those who need it for productive uses.
However, this doesn't say anything about Bitcoin, other than that it fails to be relevant as a currency. The reason why Bitcoin is a poor store of value is that owning Bitcoin doesn't guarantee that there will be an economy in the future that actually provides value equivalent to the value of your Bitcoin. If you invest into stocks or real estate you are making sure that there is a company or house out there that contributes to the economy.
There’s no such reserve value for Bitcoin. You can’t look at it or hold it or do anything with it other than as a currency.
I’ve seen widely varying stats estimating gold’s jewelry share but all of them are large.
Think: why are diamonds so expensive?
uh, no that's not true. I bet there's more bitcoin being used to buy drugs than gold being used in jewelry
I hold because i expect us to continue approaching the game-theoretic attractor. I've held for years and will keep holding. Every year, i see more and more people coming around to my perspective.
How many years can you watch the price keep going up before you'll eventually consider that you might be missing something?
> We know transactions are slow and expensive,
lightning network obviates this problem
> it’s often regulated such that it needs to be fully declared (removing the whole anti-gov part)
The government still can't print more bitcoin, which is the main appeal for me.
They also cant technically block anyone from recieving coins. They can make doing so a crime, but don't have the technical ability to, say, freeze funds.
> typically markets eventually correct when there’s no underlying true value proposition
Given that bitcoin is over 10 years old, shouldn't its longevity be taken as evidence that there is, indeed, a true value proposition?
> which can be executed “well”
Why is 'well' in quotes here?
Are you open to the hypothesis that money printing exacerbates might cause long term issues in society?
Make your money the way you want, but I wont participate in something I have no chance to control.
Sounds like you should avoid effectively any form of investing according to this principle.
I first heard someone mention this circa 2014. What happened? If anything fewer people try to use bitcoin for transactions since then.
And if the point is to hold and never sell why buy anything with bitcoin?
If the governments of the world made it a crime for miners to include transactions involving certain blacklisted addresses in their blocks that could be a big step towards a freeze.
And even this is a very low-probability scenario. The most likely outcome is that the US and a few European countries try to do this, China laughs and does nothing, and Bitcoin belongs to China pretty soon (if it doesn't already).
You're not missing anything, you said it yourself it's a store of value. Maybe markets eventually correct, but in the last 10 years Bitcoin has only gone up, so if you had planned to use it to store value for 10 years a decode ago, then it worked pretty well.
> It also pushes only towards deflation, so it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy
Well it's a store of value, not a tool for the gov to handle the economy.
It was $19k in Dec 2017 and $3k in Dec 2018.
That's what you're missing here, not everything needs to be on-chain to be valuable. Exchanges and businesses and services can aggregate.
If you never actually use the blockchain, then you don't really know if those BTC you 'bought' even exist.
The truth is, the current financial system is just a large number of databases trying to sync with one another, and one of cryptocurrencies' goal is to decrease this amount of databases.
And replace them with one of the biggest wastes of electricity?
What's the point of "getting rid of databases", when you end up needing them for something as fundamental as an BTC/USD exchange anyway?
you're aware that you're talking about legacy cryptocurrencies?
The point is that "use BTC as a hedge against inflation" is obviously not a thing since people are chasing 10x growth.
If you buy a car and treat it like an investment (don't drive it, store it properly, keep it maintained) it behaves like an investment. Depending on the car and the market, the value goes up substantially.
Here's an example of a 2000 Honda Civic selling for $50,000 USD : https://bringatrailer.com/listing/2000-honda-civic-27/
Bitcoiners like to emphasize Bitcoin's limited supply, but Bitcoin is hardly the only thing in life with a limited supply. There will never be any more 2000 Honda Civics, for example.
The purchase price of that car would have been $27,320.28 in today's dollars. Also, you still have to store it and do some minor maintenance even though it's not being used. The true cost of ownership for 21 years isn't really known. It's hard to know how much the real profit actually was. Either way, it's a gamble as an investment strategy.
Bitcoin has been pretty consistently up on any timeline over the last decade. I've been present every crash and my tolerance for keeping a small percentage of net worth in it increases each time.
You don't have to keep 100% of your cash in bitcoin. With the current pace of money printing I think not keeping something in it is basically negligence to your family.
It's not a tail risk. If you see prices increase exponentially over the span of months, you will have had plenty of time to react. Inflation is mostly a problem of the wage earners who don't have cash savings in the first place. Otherwise, if you have significant life savings all in cash, you're financially illiterate and cryptocurrency is the last thing you should put your money into.
> Bitcoin has been pretty consistently up on any timeline over the last decade.
Bitcoin also has been consistently down 50% from the previous high most of the time. It has pump-and-dump penny stock levels of volatility.
Bitcoin is fine as a speculative asset, as an inflation hedge it's just completely asinine. There is virtually no correlation between actual inflation and the value of Bitcoin. There may be some correlation to the level of panic about hyperinflation among the uninformed public. If you want to ride that wave, go for it.
With inflation rate 2% after 25 years you lose about 40% of your savings value.
The purchasing power I might lose from a mere $20 is of course irrelevant. If I put it into Bitcoin it might turn into $100 or $200 at an off-chance, but that has nothing to do with inflation. Bitcoin just isn't that correlated with cash. If I wanted to make a $20 bet that the dollar inflates dramatically, I would buy an option to buy gold at $5000.
That may be true, but the broader money supply hasn't really changed much:
It's also not really clear how it would. Banks aren't out there giving out loans like candy to everyone for anything. The little bit of helicopter money doesn't even cancel out the lack of spending due to COVID layoffs. You just can't have CPI inflation that way.
> I just loaded up on gold, platinum, silver, art, crypto, and real estate.
One of these is not like the others.
> Those will all fare better than cash or savings as hyperinflation grips the country.
You've probably listened too much to gold/silver salesmen who have been warning about the next crash and hyperinflation for many decades.
In reality, inflation is arguably bullish for all these heavily indebted companies in the stock market. A market crash can be hedged against too, just look at how Universa Investments performed in 2020. How did gold perform though? Unimpressive.
Did you zoom out? M2 money supply increased 25.6% in the past year. Might be easier to see at https://fred.stlouisfed.org/series/M2
The M2 has increased because interest rates are down (on purpose) and more money is being borrowed.
> We know transactions are slow and expensive
^ You're missing this.
* Cross-border transactions which would take days for Swift are instant
* Expensive: no not really. In the filled mempool days, yes prices shot up, but that was a few years ago. Fees are incredibly low now.
* Non-int transactions are still just about the same speed as a Visa cc/debit swipe. Again, when the mempool is going insane (hasn't happened in some time), yes TXs could take time vs. fees. However, nowadays it's just about as quick to reach a "basically verified" TX as it whatever risk mgmt balancing Visa is doing in the background. This time, instead of Visa's fraud department doing some checks, it's 1 or 2 blocks to very likely confirmed, 6 blocks to definite. Just different ways of skinning the same cat.
You're correct on this
> also lacks a lot of the controls that traditional banks have for good reasons,
But you're blending some arguments that are counterfactual if taken together as something cohesive. It's fast because it doesn't have these controls, for instance.
As you have made a totally new account you probably weren’t around for this.
Also, I don't know if all investment need to make sense based on economic fundamentals, bitcoin makes sense at a psychological level why it is a good investment for now, as more and more people slowly decide they need to dip their toes in it as well.
> We know transactions are slow and expensive, so it’s not a good replacement for ordinary commerce.
I don't think that this is obviously true. Digital transfer of the US Dollar is similarly slow and expensive (see: ACH, Wire, SWIFT). The response you'll hear the most frequently is that BTC (and digital currencies) should be compared to the US Dollar, not to Visa and Stripe and Venmo etc. Right now, if you want to send US dollars to somebody and you're unable to do it through PayPal/Venmo/Square/Visa/MasterCard, your best bet is to literally mail cash to the recipient. BTC solves that problem; you now have the option to send someone "cash" in a trust-less way, but that's probably not how the majority of people would use BTC.
The blockchain doesn't have to be used to settle every single transaction in real-time, just like you don't have to use ACH/Wire to send $5 to someone electronically for every transaction. Just like banks today send a batched ACH files of all money movement at the end of the day, they may do the same on the blockchain hourly/daily. The benefit of BTC over USD is that there is a way to "mail someone a briefcase of cash" without having to actually mail them; instead you can "mail" it to them on the blockchain and have it take a few hours rather than 3-5 business days. If you want to send US dollars faster, you can rely on centralized institutions that build financial products on top of the US Dollar, but the same can happen on top of other non-government-backed currencies. Just like you have a bank account where you can see in Dollars or Yen or Pounds what your bank balance is, one ought to be able to open an account and see what their balance is in BTC or ETH or Nano...or so the argument goes.
> It also lacks a lot of the controls that traditional banks have for good reasons, so fraud becomes harder to tackle, and things like refunds are just at the mercy of the other side of the transaction (making commerce even harder, as well as basic banking)
Again, you want to compare BTC/ETH to the actual currencies, rather than the institutions that engage with those currencies. All of what you said is true of any fiat currency: I can physically hand you a $20 bill, and that transaction can happen in a totally un-traceable way already. There’s a common saying that if cash were invented today, it would be illegal, since it’s hard for the government to track and they wouldn’t like it.
> So then it becomes a digital store of value, one that is only as valued as the market gives it, and typically markets eventually correct when there’s no underlying true value proposition (as we can see with $GME).
This is a good point, but I found a good "counter-point" in Matt Levine's latest Bloomberg Money blog post: https://www.bloomberg.com/opinion/articles/2021-02-16/goldma...
Here is the relevant bit:
"We have talked a lot recently about the Reddit-fueled rally in meme stocks like GameStop Corp. One thing I have said about this rally is that it reflected Reddit traders’ correct understanding of a simple market dynamic, which is that if they all bought the same stock at once then it would go up. So they did. Institutional Bitcoin adoption, as we have also discussed, has a somewhat similar dynamic: Each time a big institution says “we like Bitcoin now,” Bitcoin goes up, because widespread mainstream institutional adoption is clearly bullish for Bitcoin at this point. So if you are a big institution or corporation, you can make some free money by (1) buying Bitcoin, (2) announcing “we like Bitcoin now,” (3) watching Bitcoin go up, and (4) selling the Bitcoins you bought for a quick profit. (Or keep them as a bet that other institutions will do the same thing and you’ll make even more profits.)
This dynamic, separate from any particular institutional decision, is good for Bitcoin: If it’s in every big bank’s and corporation’s short-term financial interest to quietly buy some Bitcoins and then noisily make a show of adopting Bitcoin, then a lot of them will, which will have the effect of pushing up the price (both because of their buying and because of their announcements). Unlike meme stocks, there is no underlying business, no cash flows that do or don’t make the price make sense: The price of Bitcoin makes sense or not purely as a social fact; if there are “fundamentals,” they are things like “widespread mainstream adoption,” which you can provide. “The fundamentals of Bitcoin are strong, look, Morgan Stanley is buying some,” Morgan Stanley could plausibly say, after buying some Bitcoins. So it might as well do that.
With the meme stocks the natural thing was to worry about the endgame for that process; you can’t have a stock price that is divorced from fundamental value forever. With Bitcoin, you ... can? Like if the endgame for Bitcoin was “universal adoption by corporations and institutions as a digital store of value,” then that sounds like a good and permanent and somehow fundamental result?"
> so it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka printing money, which can be executed “well” (US) and really poorly (Zimbabwe)).
This is very debatable, and you've more or less illustrated the controversy by pointing to a "good" version and a "bad" version. The political question is whether the possibility of "bad" means that the concept of government-controlled inflationary assets is inherently bad. I won't pretend that there's an objective answer, but neither should you; the fact that it removes the tool you describe can both be described as a feature or a bug, depending on your political leaning.
And with ACH, wires, swift, the slowness is a feature not a bug. It's one of the ways fraud is combated, for example. I seriously doubt it's fundamentally a technical limitation of the technology used, but rather a choice.
But as you said people aren't doing this with BTC -- and if they're not, then this removes one of the use cases that would warrant it's value, so you're only arguing my point.
> The benefit of BTC over USD is that there is a way to "mail someone a briefcase of cash" without having to actually mail them
You also seem to forget about checks -- no one ever sends bricks of cash in USPS unless you're a drug dealer running a YOLO life. But you also ignore ACH/wires/credit cards and all the ways most money moves today. What is the fundamental issue there that Bitcoin solves?
> Again, you want to compare BTC/ETH to the actual currencies, rather than the institutions that engage with those currencies
You're right, however regulations exist that enforce institutions use USD. Those are largely good things.
> With Bitcoin, you ... can? Like if the endgame for Bitcoin was “universal adoption by corporations and institutions as a digital store of value,” then that sounds like a good and permanent and somehow fundamental result?"
But is/will that happen? These issues that I point to make it a less good option.
> I won't pretend that there's an objective answer, but neither should you; the fact that it removes the tool you describe can both be described as a feature or a bug, depending on your political leaning.
It's a tool that gets removed. Being global means there's no local way to adjust things to current circumstances. Just look at Greece in the EU -- because they went on the Euro, with a totally different economy than Western Europe, they got all of the deflation with a GDP that couldn't keep up, and as they piled on the debt they didn't have any levers to pull. Unifying global currency is a terrible idea when you have very uneven economic realities around the globe.
Regarding this point, Bitcoin solves the freedom to move capital. People in the U.S. under-appreciate this freedom. I'm from a country with strict capital control, very very difficult to move money outside the country, it's hard even to convert local currency to USD.
Bitcoin won't be a unifying currency. It behaves like a commodity, and commodities prices can swing wildly - remember negative crude oil prices last year?
I know the payments industry pretty well, and I can assure you that the limitations of ACH are NOT a choice in the least. It’s a system that was designed in the ‘60s that hasn’t changed simply due to institutional inertia.
> But as you said people aren't doing this with BTC -- and if they're not, then this removes one of the use cases that would warrant it's value, so you're only arguing my point.
They’re not doing it yet, but just this week we’ve got MasterCard, Visa, and Morgan Stanley announcing their plans to support cryptocurrencies, especially on the merchant-services side. Supporting this does not remove the existing value, it simply reinforces it. Just like the US dollar, you can either transact with people purely on trust-driven centralized services (and enjoy the convenience that such services allow) or you can “withdraw” some of that “cash” and “mail” it to people in a trustless way (albeit very slightly less conveniently).
> You also seem to forget about checks
Checks only partially solve the problem that I described. First of all, you can't take a check and chop it into pieces and use those pieces as tender; you have to cash the check eventually. In contrast, you can spend the Bitcoin you receive to anyone that willingly accepts it either in full or in part.
Second of all, while checks provide the functionality that "mailing cash via USPS" provides, it's equally cumbersome. If I want to donate $$ to a political dissident that's been canceled off of every platform, it would be quite annoying to find my checkbook, write the check, and then send it to that person. If I wanted this to be a recurring donation, it'd be even worse. That brings me to the next point...
> no one ever sends bricks of cash in USPS unless you're a drug dealer running a YOLO life. But you also ignore ACH/wires/credit cards and all the ways most money moves today. What is the fundamental issue there that Bitcoin solves?
The fundamental issue that this specific use case solves is that it allows one to transact with people even if the traditional rails disallow it. For example, if you want to donate money to your favorite porn star on PornHub or OnlyFans, it's impossible to do that via Visa/MasterCard/Amex/PayPal as these financial institutions have all blocked such services. Or perhaps a somewhat more topical use case: if you want to use and support services like Gab or Parler who are effectively persona non grata in the tech world, there is essentially no way to do this via the traditional payments rails. Crypto solves this problem in a way that's relatively more user friendly than mailing cash or checks.
If you lived your life on cryptocurrencies, you could transact day-to-day using your Visa branded card at your coffee shop (eventually settled on the blockchain), or you can “withdraw” some “cash” into a separate wallet and set up recurring donations on-chain. A few hours of automated asynchronicity is far less cumbersome than manually cutting, writing, and mailing checks every month.
> You're right, however regulations exist that enforce institutions use USD. Those are largely good things.
Correct, and in the worst case, it’s good that we have a fallback legal tender! But it’s also good that there are now more options in addition. With pegged stablecoins, it’s becoming easier to interoperate with USD.
> Being global means there's no local way to adjust things to current circumstances. Just look at Greece in the EU -- because they went on the Euro, with a totally different economy than Western Europe, they got all of the deflation with a GDP that couldn't keep up, and as they piled on the debt they didn't have any levers to pull. Unifying global currency is a terrible idea when you have very uneven economic realities around the globe.
I think that there are several assumptions baked into this argument that won't necessarily hold true. First of all, I don't think anyone believes that there will ever be one and only one global currency. Instead, the paradigm that's being challenged here is that, at a local level, you might no longer be forced to use one and only one currency. In the "new world" you might imagine a market of currencies with the option to use whichever you want to. If you think your government is being callous with its monetary policy, you can seek refuge in other currencies with little difficulty and even coexist with others that use different currencies. A lot of the new decentralized finance applications seem to be focusing on providing interoperability between multiple blockchains (Uniswap, Cosmos) as well as fiat currencies (via pegged stablecoins).
I think you're right that it remains to be seen if any of this will succeed or come to pass, but it's too early to say that it will fail. We're either in the mainframe era of cryptocurrencies, or we’re in the Concorde era of cryptocurrencies. Impossible to know which it is, at this moment.
With gold I trust the laws of physics and reality (not a human based system), with BTC I trust the consensus of the network participants and that the rules everyone follows will result in trustworthy outcomes, with a bank I trust that bank.
The big threat to BTC trust therefore IMO is if the network participants as a whole or enough of them aren't trustworthy. Marginal cost of mining a block favors cheap electricity countries (i.e. hydro China power) in the long term as the difficulty of the network changes to price out other competitors as they scale up. In that instance do you trust the person with the cheapest electricity to verify your transactions? Given my understanding of crypto that's probably the biggest threat to any long term investment in BTC. For PoS currencies I'm guessing your trusting the stakers by amount put down (i.e the rich people) to verify your transactions.
Of course, the counter-counter-point to that is that the Bitcoin network also has "intrinsic value", and it's that it enables trustless/permissionless transactions to people that might be engaging in illegal commerce or are trying to escape the currency of a regime with poor monetary policy (Venezuela, Bolivia, Nigeria, Zimbabwe, etc).
i call a bunch of people serving 1% of the population without question lemmings. to try and falsely frame a legitimate worldwide, grassroots counterculture movement as just a bunch of stupid lemmings betrays your prejudice and makes it hardly surprising that you don't see any value in the space.
i can't believe a bunch of "hackers" shit on the open source, decentralized internet of money. it's a currency created by real hackers for the internet. it is the first of an entirely new asset class that allows any person to be their own bank and has a hard cap on supply. Yes it's slow, but it's also extremely secure and resistant to change.
>it’s often regulated such that it needs to be fully declared (removing the whole anti-gov part)... so fraud becomes harder to tackle
which one is it? cash is the king of fraud and illegal activities anyway: fungible, anonymous, hard to trace. a public immutable database ought to make fraud much easier to weed out in the long run...
>no underlying true value proposition
it has outperformed every other asset in the world over the last decade, maybe you need to look a little closer to understand the value proposition. just because a bunch of bigots decide it has no value proposition doesn't make it true and obviously the market strongly disagrees with this sentiment.
>It also pushes only towards deflation
you mean poor people can have their money appreciate over time instead of having their meager savings robbed by an unseen, man-made market force? you mean people won't be so eager to waste their money on crap that causes pollution and ends up as landfill? i've never really understood the deflation argument, it's a textbook slippery slope.
> removes an important tool that governments have to handle the economy
if the government were truly democratic and benevolent this would be the case. unfortunately we live under a bunch of warmongering kleptocrats who need to be kept in check.
more like an important tool to bail out themselves and their cronies after they fuck up the economy so badly with their corrupt, short-sighted practices.
the people who seem to screech the loudest against cryptos seem to have a massive vested interest in maintaining the status quo. you really can't get how the economy might actually function better for most people if it wasn't serving as a welfare state for the elite?
meanwhile the btc supercomputer keeps producing blocks, just like it has since day one.
Think about it - if you had invested at any point in Bitcoin before today, you would have made money. But keep on resisting.
That's irrelevant to me. It's not all about "getting rich". It's not like everyone can become rich off of bitcoin. The only way you make money is taking it from someone else. At the end of the day, real work needs to be done in the world.
At least when the scam is selling shares of an imaginary gold mine, there is hypothetically somewhere for the profits to come from. With Bitcoin, there is only a $12B/year loss to electricity charges and no where for money to come into the system but absurd transaction fees.
You all do deserve to stay poor and be labeled as #nocoinists.
And give us one historic example of it being a good time to buy when the recent price chart looks like an exponential growth curve.
Bitcoin is used by people under authoritarian regimes around the world. IF nothing else, i'm happy to support people protesting in belarus.
They were all over in 2017 before the price dropped to 3k,I admit I was a bit of a savage when that happened.
In all seriousness with the scam you re running online, be careful and protect your family for when it goes back from 50k to 3k. A lot of people will have lost a lot of money :(
“Stability in value is presumed to be the decisive factor for acceptance. Hayek makes the assumption that competition will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors.”
Stability is not the observed behaviour in BTC.
No fork necessary. We can already use millisatoshis on L2.
If Bitcoins were the dominate and only currency, people would continue to buy food, clothing, luxury goods etc. b/c they need or really want those things and will be willing to trade bitcoins in exchange for those goods. Practically, Bitcoin is unlikely to be the dominate currency allowed in countries to participate in transactions without incurring significant taxes, so likely people will store wealth in Bitcoins(or other cryptocurrencies) and then convert to fiat currencies as they need to make their purchases.
In a pure BTC environment, the borrower is employed and being paid a salary in BTC. Loans would work just like in an inflationary environment, except now the overall deflation rate of BTC would be taken into account during loan origination.
Bitcoin is not a good asset to do loans in right now as it has high volatility, but as ownership of Bitcoin becomes more and more dispersed, then the volatility will reduce. Once the volatility of the asset is stabilized, then the depreciation rate could be factored into loans.
Fiat can, most of the time, grow or shrink the money supply as needed for the most stable economic outcome.
The idea that USD is becoming worthless due to recent monetary policy, however ill-advised, is greatly exaggerated.
The idea that Bitcoin is the only way to protect oneself against inflation is also greatly exaggerated. Investors have been buying assets and investments for a long time before Bitcoin was invented to avoid inflation. Bitcoin didn't magically change that.
That's a nonsensical statement. Use BTC to buy a car today, and then use it to buy the same value car in a year. BTC is, fundamentally, unstable at this point in time. Even when all BTC is mined and it is distributed across the globe to every human being and sentient AI and animal, it will likely continue to be highly unstable as a currency.
Compare to the, relatively, stable USD as a currency. Prices for goods and services in USD fluctuate, but typically only changing once a year or so. Your milk price doesn't, in USD, shoot up by 500% in a week.
Has anyone confirmed that Mastercard is even going to support Bitcoin? Previous articles suggested it was stablecoins only.
In no way is spending Bitcoin as easy as spending regular old cash.
Many dont understand Bitcoin was designed this way on purpose. L1 is for infrequent important transaction settlement. If it wasnt the chain would grow to a point where it could not be decentralized because the chain would be too big for hard drives and individuals to run nodes. It would naturally expand faster than memory advancement and centralize.
SWIFT and ACH don't seem to be it. Assuming a generous 3,000 transactions per block Bitcoin can do ~158M a year.
ACH does ~25B a year. It's harder to find numbers on SWIFT but it looks like at least 10 million per day, so ~3-4B a year.
Let's say I'm running a business. I have day-to-day transactions going through some higher layer network, but I expect some money "settled" in my account each month. That's 12 transactions a year. The US has around 30M businesses, so that's 360M settlement transactions a year. Already more than double what Bitcoin can do and we're not even talking about, say, having employees paid on the blockchain.
For the rest of us, the next layers sitting above the Bitcoin blockchain can either be a truly decentralized, trustless layer with on-chain settlement, like Lightning Network, which might incur too many on-chain transactions to be practical. Or it can be a centralized, trusted layer, like Mastercard -- in which case, what's the point of having Bitcoin underneath it?
It goes right back to gold. Sure, we can back currencies with gold, but it's too impractical to move around for individuals and businesses to transact in. So paper currencies developed. They were backed by gold for a while, then ceased to be, and not much fuss was made about it because it changed nothing for the average user.
"why should they use Bitcoin rather than a centralized scheme they all agree on?" because customers decide what they want to own and they dont seem to like the fed printing non-stop thing they keep doing.
LN will be for the rare nerds actually using the chain as payment and want cheap, instant, frequent transactions but on chain settlement periodically just as an institution would.
I think I need to break down how this works. Bitcoin L1 chain is a settlement layer where transactions are pooled per tx (its not 10 tx per second or whatever people think it is). Regardless, its L2 that processes small frequent transactions. That would be providers like Visa, Mastercard, Paypal, Circle, etc. They process the transactions and keep the account, only infrequently is it settled to the actual blockchain ledger. Then you get into the lighting network. Bitcoin can absolutely scale without issue.
nacs: because common sense
So, not Bitcoin. And maybe not any existent cryptocurrency.
The only statement Mastercard has made is that they will support "crypto" on their network in the future.
They have not mentioned which cryptocurrencies they will support at launch from what I've seen.