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).
> 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.