'Money' occupies a position of special privilege:

1) Your tax office requires your taxes to be paid with local currency

2) Because of this, you are obliged to routinely measure your economic activity relative to the yardstick of your local currency

Bitcoin doesn't have the same special place. My beefs with quantitative easing are:

1 - Whoever spends the money first is treated by the economic system as having done something useful for their money; when they have not.

2 - it distorts the yardstick we measure everything with. Eg, someone born in the 60s probably hasn't really adjusted their gut-feel for how much $1,000,000 is really worth these days. This just seems like confusing people for no reasons, and hence a bad idea.

Bitcoin ain't doing neither of these things. It is fine by me. Wealth creation even, if it doesn't bust spectacularly.

In case anyone's wondering: $1,000,000 in 1960 would be more than $8,000,000 today. (things feeling 8x "more expensive" to these old timers)

https://www.dollartimes.com/inflation/inflation.php?amount=1...

Quantitative Easing injects new money into the economy, devaluing money. But my bitcoin is only worth $10,000 USD if that's the amount you agree to pay me for it. And you will pay me using existing money. So there is no new money being injected and so it would seem there is no devaluation of old money.

But it feels like maybe you're right. I think existing money is essentially being devalued every time someone decides to spend their USD on bitcoin, demonstrating that a new thing that came out of (more-or-less) thin air now has value, and thus those who own it can 'claim' dollars, and thus there are less dollars for all the people who don't yet own bitcoin. Which means they are getting poorer.

My head hurts. Can someone smarter than I figure this out?

This is not QE. BTC is treated like a physical asset with a fixed quantity, if x reserves of y mineral were found that would not be QE. Discoveries that increase net global value are completely different from altering the amount of a circulating currency.

Like any other product or service, when you exchange your money for BTC all that has happened is someone decided to sell you BTC and you gave them money.

BTCs exchange rate is dependent on someone else offering money. If there's a market panic, the price quickly drops due to a race to beat other orders.

Your newly printed stack of $100 bills is also only worth $10000 if someone is willing to exchange it for goods and services worth that much. I don't see how newly mined $10000 worth of Bitcoin is injecting any less artificially created value into the economy.

Quantitative easing (QE) is when central bank does large scale longer maturity assets financial asset purchases in order to lower interest rates and increase the money supply. This is supposed to stimulate economy. QE exchanges short term asset (cash) for long term assets (bonds and other debt instruments).

QE works by increasing the money flow trough real economy (the part of the economy that is concerned with actually producing goods and services rather than the part that consists of financial services such as banks, stock markets).

Bitcoins is the opposite. It's speculative asset that moves money into financial realm.

Think of currencies as placeholders of value. When you work you create value and unless you want to trade that value directly for an asset that isn't a currency (think barter) you exchange the value for a currency. The currency acts as a placeholder for the value you created. One of currency's attributes is it's easy to divide into equal units. These units then become the "price" of your work. The currency makes it easy to compare units are prices of any other asset. So you can compare how much you want to charge for your work by comparing the units of currency across other stuff (e.g. cars, rent, food, etc.). Not all assets make good potential currency. Think of comparing televisions priced in houses. The Sony is 1/10000 of Alice’s house, the Visio is 1/100000 of Bill’s house, etc.

Currencies are just another asset with some additional properties. The most important additional property is that people are willing to exchange it for any other asset. The point at which an asset crosses over to the currency or medium of exchange is elusive.

The paradox is, a modern society needs currency in order to function (barter doesn’t work because of the double coincidence of wants), however, determining when to add/subtract currency (i.e. the money supply) from the world is imperfect. So the question is, how do you do this where all participants are treated the same?

The US dollar’s money supply is managed via lending. That is, currency is lent into existence. This methodology is extremely flexible through the use of inflation and generally depends upon prices going up, however, it’s not a panacea. If loans are not collateralized “fairly” then a bank's special ability to create loans in this closed system can harm everyone that holds dollars.

Currently, the Bitcoin money supply is managed through mining up to a finite number of Bitcoins. This is considered deflationary and has the potential downside of everyone holding Bitcoins and prices going down.

Bitcoin, imho, is not a currency because it isn’t used as a medium of exchange, yet or maybe never. However, it is a store of value (not saying it’s a good or bad store of value) with a limited supply. In time, we’ll learn whether that in and of itself is useful and therefore justifies the price or just a speculative bubble.

>then didn't some subset of techies print a lot more money than there is?

I think it's quite important that you watch this:

https://www.youtube.com/watch?v=4AC6RSau7r8

If you feel extremely angry afterwards, you're not alone.

> But if this would take off and get a strong foothold at the prices that we're seeing now (bitcoin almost 10K in dollars), then didn't some subset of techies print a lot more money than there is?

Over the course of history, people crated money out of many physical objects that had the "money" properties. Money is a tool to represent value of exchange. As long as we all agree on it's value.

In the fiat world, the value of money is artificially fixed by the central banks and backed by the military power of its governments. it has effectively an unlimited supply. Quantitative easing is one of the techniques used to quickly increase the supply as it fits the central banks. You, me and all fiat money users have no say in it.

Bitcoin, is a limited amount of money supply that will ever exist. It is backed by math and cryptography and an open source ecosystem. It was decided so by us the people and not central banks. We didn't ask for their permission the same way as they don't ask for ours when they decide to print more.

Many of us believers in Bitcoin do not agree with the way central banks handle the most important tool of our civilization (Money) and do not agree with the current mainstream economic theory. So we decided to exit that system and try our own.

> To me it seems there might be a chance that we're devaluing real currencies by quite a bit over the course of the next couple of years. Of course, the bigger chance is that this is a bubble and it will pop, but what if it isn't?

If fiat currencies get devalued, and they will if the Bitcoin experiment works, then it would just mean fiat money is a weaker money than bitcoin (see Gresham Law[1]). In that case, is it the fault of the inventors if they invented a better system ?

As of the "speculative" nature of bitcoin, yes it is. What drives speculation is greed. Bitcoin at the protocol level is just a communication system. If you couple greed and Metacalfe's Law[2], you obtain a very powerful incentive for the system to grow.

I think of this incentive as a the trojan horse to the current financial system. People will come through greed and stay once they discover and learn about this new system, since it's not likely the central banks will "objectively" assess the value of Bitcoin.

The biggest part of humanity does not benefit from our current central bank system, so it has to get disrupted and replaced with a better one.

Either this, or we're stuck with the current unhuman, exploiting system. As an optimist, I'm betting on the former.

[1] https://en.wikipedia.org/wiki/Gresham's_law [2] https://en.wikipedia.org/wiki/Metcalfe%27s_law

> replaced with a better one.

I'm curious how you define "better"? If you go by wealth equality, Bitcoin is worse than USD because Satoshi Nakamoto, the inventor of Bitcoin, owns more than 1/21 of all ever available Bitcoin. Several other early adopters claim to own a few hundred thousand Bitcoin.

Better as in better money[1], nothing else.

If you are talking about income inequality, it cannot be fixed with money as it is just a tool. If our economic system is based on hoarding capital, then you end up hoarding it. If the best and safest way to hoard is Bitcoin, they you will use it.

However, you cannot go further than hoarding or using it. What the central banks do is much worse, they print it out of nothing and it ends up in the hands a few individuals, with impunity. So on scale of bad to worse, I would argue bitcoin is the lesser evil since at least it would allow for true free markets to exist.

Regarding Satoshi and the early adopters, why do you care ? When using fiat money, do you care about the fact the US dollar got an unfair advantage when it forced the Bretton Woods system on all of us ? As a matter of fact, the US dollar has been the strongest currency and international settlement one exactly because of that unfair advantage.

And if you do care, the problem is not within the money but the economic system. It's an other topic for a bigger problem ...

[1] Bitcoin is not there yet, still a lot of progress to be done on the fungibility side of it.

*wary

Thanks :) (I'm Dutch, and didn't spell check, my apologies)