With built in and inevitable deflation. Bitcoin could never replace a national currency.
With transaction times in the tens of minutes and with a maximal global transaction rate of 5-10 per second. The Blockchain couldn't replace the banking system of single mid-sized town.
It's not money. It's at best "digital gold", but more realistically it's just a ponzi scheme.
That is the most grandiose goal a new monetary technology could possibly have. It doesn't need to replace a national currency to be useful/valuable to users.
FYI, Buddhist extremism has resulted in two (ongoing) genocides.
The fixed emission schedule of BTC means that there is no issuer that can capture increased demand in the good, but the holders of BTC get that benefit. So the only thing you need to bet on is if there will be more aggregate demand for the 21 million btc in the future than there is today.
With fiat currencies, when there is a crisis like COVID and the demand for money skyrockets, the fiat issuer can print out the money and do whatever it wants with that surplus demand.
If BTC makes it so the aggregate demand in currencies is split partially from fiat into BTC itself, then it will be a great transfer of wealth from governments into BTC owners.
There's your value.
And will quickly be banned by said country.
I also doubt on the feasibility of a global crackdown on miners in the entire world.
There are plenty of scenarios for Bitcoin to succeed and be useful without necessarily replacing national currencies.
«transaction times in the tens of minutes»
Wires take hours/days. Credit card transactions take 1-2 days before the seller's bank account is actually credited. Obviously speed isn't an issue for adoption given that people tolerate systems much slower than Bitcoin.
«maximal global transaction rate of 5-10 per second»
Bitcoin Lightning Network supports thousands/millions of transactions per seconds.
«Blockchain couldn't replace»
IMHO it shouldn't replace, but complement.
Wires take hours, rarely, if ever days, and in my experience the money is in the receiving account before I hang up from sending it.
Also people tolerate this system because there is nothing else available, and much of it is not a result of lack of desire but anti money laundering. Countries are already moving to digital currency tokens.
> Bitcoin could never replace a national currency.
You can't predict the future.
> With transaction times in the tens of minutes and with a maximal global transaction rate of 5-10 per second. The Blockchain couldn't replace the banking system of single mid-sized town.
With millions of transactions per second, the Lightning network could.
> It's not money.
It's money. Here's an explanation of money https://powreach.com/crypto
To HN moderators: make it possible to understand why someone downvoted. This is an example of what makes HN off-putting.
[0] https://krugman.blogs.nytimes.com/2010/08/02/why-is-deflatio...
No one's taking out a bitcoin mortgage to buy their house with.
The supply of Bitcoin has been inflated, on average, every 10 minutes for the past ~11 years.
How much USD will exist in 10 years?
How many BTC will it take to buy a Toyota Corolla in Feb 2022?
I think a better question would be, how many BTC will it take to buy a house in 2050? I think the three things that have experienced the most drastic inflation are: housing, healthcare and education. It would be interesting to measure Bitcoin's long term value next to those highly inflating costs. Say a house now costs 10 BTC/$500,000 and in 2050 10 BTC/$2,000,000.
Financial planning -> window, cause my base currency keeps moving around and won’t hold still long enough for me to even finish the equation.
When there's no more coins to mine, there's no reason for anyone to be running their bitcoin operations. It'll fall to governments? At that point, can't they introduce more Bitcoin?
Looking at https://ycharts.com/indicators/bitcoin_average_transaction_f... the average Bitcoin fee seems to be somewhere around $22 right now. Just think of the dialog occurring once miners have to make all their money from fees only:
"Yes sir, I would like to buy this chewing gum for my son. Yes I know it costs $0.50. Yes I know it will cost me the equivalent fee of $50 to buy it using Bitcoin. Now sell it to me already!".
Without the presence of transaction fees though, things would fall apart once the block reward ran out, as asked in the original question.
Event-based, surprise inflation is the only negative inflation, for the end user.
Nit: it would also require a hard, not a soft fork.
No, it would be a hard-fork and be rejected by all nodes that weren't explicitly updated to accept it.
Miners won't because it would devalue their coin.
New buyers might because they can "buy cheap"
Or not, you don't know. Maybe a friend of the board wants to have a controlling stake in the company and that's the reason.
If bitcoin could solve those problems, and the energy usage problem, I’d use it. As is, it’s solved the double-spend problem - admirable and impressive, but it’s not a substitute for a stable currency yet.
Second, you have natural scarcity: truffles are not commonly available. How much you want to eat them may put a ceiling on the price, but again there is also a floor below which no amount of energy would bring you more truffles.
As it turns out "sending money over the internet" is kind of an important utility for the modern world, and nothing does it as well as Bitcoin. This is why it's now a trillion dollar global economy.
That's great for you that you're in a position where you never need to send money over the internet, and you have people who you trust that can manage all your money for you without robbing you, but that's a privilege not everyone in this world has.
Please stop denigrating shit that you don't understand. Bring proud of ignorance is not a good look, and it really is embarrassing that a community that's supposed to be somewhat technologically sophisticated has bought in so hard to this ignorant-ass take.
I've been in it, found the entire system wanting, and got out. May get in again to enjoy gamble in speculative bubbles, but as a technology, it is still in the early and massively-sucking and increasingly-sucking days.
Like railroads in the 18th century, they utterly changed society, but most investors lost their shirts along the way.
Scalability, inconvenience, insecurity, and transaction fees all suck to varying degrees at varying times.
It used to be that transactions would take 5-10 minutes to confirm, and that seemed mildly inconvenient but acceptable due to low costs. Now, it varies wildly, e.g., between 61 and 426 minutes in the last week [1]. I just bought software last night and the transaction cleared in fewer seconds than I could notice, and that network handles orders of magnitude more transactions than does BTC.
Costs. BTC transaction costs used to be astonishingly trivial. Now, they fluctuate wildly depending on network congestion, and average well over $20/transaction. [2] This is nuts. A BTC transaction has to be over $750 to be better than break-even compared to a 3% credit card transaction fee. The days of buying a pizza with BTC are long gone, unless you want to pay more in fees than for the pizza. But it might make sense for buying a Tesla, if your fiat-exchange costs on the input side are not too high.
Inconvenience and insecurity. You can either keep your BTC with someone else, which means you don't control it ("Not your keys, not your coin", see also multiple exchange hacks and/or exit scams), or you must roll your own. This involves first, extensive research to avoid selecting a wallet that has either been deliberately designed to steal your bitcoin, or just has unknown vulnerabilities. Then, you need to have absolutely solid key management to avoid both having your BTC stolen bay targeted malware attacks, or losing it because you lost your key, crashed your drive, etc. I find this daunting with a solid tech background, getting individual users to successfully and conveniently do it is not going to happen.
Paul Graham made an excellent point about this yesterday [3]
In short, without MASSIVE improvements, BTC and many other cryptos are nothing more than gambling on vaporware.
And that is ignoring the deliberately engineered-in catastrophic energy consumption, which is literally more than the energy consumption of entire countries, when we need desperately to be cutting energy usage to minimize anthropometric global warning
Sure IFF [4] the system could be scaled to handle billions of transactions per day at a cost of pennies per transaction (compare with ACH network costs), and with a usable and secure UI/UX, sure it WOULD be fantastic.
But over a decade since those promises, all of the metrics: scalability, security, transaction time, costs, are tracking in the wrong direction.
I really wish someone could point me to some cruptocurrency that has these solved. I'd genuinely like to see it and would use and advocate for it.
But until then, I can only hope they enjoy their gambling.
[1] https://www.blockchain.com/charts/avg-confirmation-time
[2] https://ycharts.com/indicators/bitcoin_average_transaction_f...
[3] https://twitter.com/paulg/status/1364986808900202513
[4] If and Only If
Of course, paying with Bitcoin saves the seller about 3% of the final cost, and they need not worry about chargebacks, which saves them more money in the long run, so they offer a discount when crypto is used. It's a win-win for me and the seller.
But where are the benefits for the buyer? I have to go out of my way to buy BTC, when I’m paid in USD, and the value changes so quick that if I don’t want to hold BTC the buying the exact amount will be difficult, get to deal with fun taxes at the end of the year, and all of this because “fiat is bad” and to give up my rights to a chargeback. And then one day SHA256 will be broken, as all hashing functions eventually are, and then what?
It's possible the app I use is just bad at calculating fees, but I'm thinking yeah that guy got lucky.
Also ransomware can demand payment in Bitcoin without being traced.
FYI, everything you said can be done with cold hard cash.
The BTC transfer fee is something like $20 now, more than the cost of a pizza, and the transaction might take like an hour to clear? Maybe it's fine if you don't mind overpaying, aren't too hungry, or you enjoy cold pizza.
Segwit transfer is currently at $0.003, and a transaction with enough fee processes instantly. It takes 6 confirmations for a guarantee (but that will settle over the next hour). Pizza deliveries get paid in cash through many extensions that provide BTC2CASH purchase.
I can bet you buying a pizza in Spain with Spanish currency using a US card will charge you a foreign exchange fee.
That sounds like a personal choice. There are plenty of banks that don't charge fees for purchasing in foreign currencies. Monzo and Revolut both spring to mind here in the UK, and I believe both are now available in the US.
Bitcoin itself is not at all the best tool for this job, its value comes from the fact that it happened to be first. It's valuable for the same reason antiques are valuable.
Only through a centralized intermediary (e.g. PayPal), which may block the transfer, freeze funds, deny access, go bankrupt, etc. Bitcoin allows direct peer-to-peer money transfers (a bit like cash but digital).
> Why is Bitcoin special if that’s the reason for its value?
Personally, I feel that the censorship resistant and pseudonymous p2p money transfer is a nice feature but the killer feature is that it's a money that can't be manipulated by any one entity. Its rules are pretty much set in stone. Since it is politically neutral, it is well suited for becoming an internationally accepted store of value / currency.
Not quite. The miners collectively decide what rules to follow. A majority of them forming a cartel to collectively skip certifying certain transactions is completely in the realm of what’s allowed by the network.
I don't mind being nitpicked but what you wrote is more incorrect. Miners can't unilaterally decide what rules to follow even if a majority of the hash power formed a cartel. Non-mining nodes also validate the rules and would reject mined blocks that violate consensus rules. The worse that a majority cartel of miners could do is perform a double spend attack or bring the network to a halt but that's hardly surprising.
Crypto is often sold as 'anarchy with rules' but it's not really that. Nor is it oligarchy as is the case with fiat and central banks. Crypto is in fact democratic. I wonder whether that's why it's unpopular in certain circles.
PayPal charges a big percentage to send money to friends overseas. 3.9% + $0.3 in my experience, some countries may be higher, how is that lower than Bitcoin's fees?
A better system would be a voting system that doesn't split the vote, because then you could forgo the primaries altogether. Have A, B, and C all run against each other directly. This is impossible with today's first past the post system, because that would immediately hand the election to C.
The way one should have thought of it, with hindsight, is that there are going to be several groups of people:
- those who don't understand the problem and just guess a number between 1 and 100,
- those who only reason to one degree, and guess 33,
- those who only reason to two degrees (ah but if everyone else guesses 33 I should aim for two thirds of that!)
- those who reason to initiate degree and guess 0
The real competition is guessing the proportions of these groups.
But then you probably still have to account in your strategy for estimating the proportion of people who will reason to infinite degree and estimate 1, as well as the proportion who will reason to an infinite degree and misread the rules, and guess 0...
All in all, I had the idea that pure chaos cannot be used so there will always have weak superstitious held as reference points for a game to emerge. The one who can play it right (or have enough resources to endure errors) or not when it shouldn't will benefit from the others.
It seems strange that he has reduced it to one where there is no objective value at all. As an equity at the first level is still about how the company will perform in the future, no? And thus has an objective value.
At certain extremes, a stock price is clearly objective.
If the company is bankrupt and wiping all stock, that's objective. If the company does so well the shareholders demand an immense dividend or buyback, that's objective. Those are the fixed points where stock price is set to money in hand.
Are the swings in the market just irrational participants between those extremes?
We could imagine purely objective superintelligent AI dominating a market, investing only to those "true" values. Such AIs might determine p(bankruptcy) and p(payout), knowing those are the "true" outcomes of the prop bet, and set expected price as the ratio of those two probabilities.
But both those p()s are vanishingly small for most companies, and infinite precision will be impossible. Even if you were nearly omniscient about all current factors within a company, the slightest possible change in either probability could swing the ratio in dramatic ways.
(Add on to that the graveyard of companies that performed well, got fat, and failed to adapt... current performance is somewhat but not fully predictive of longevity.)
So basically, what if EMH is true, but stock pricing is a debate at an arbitrary level of precision, to make it close to meaningless in short time windows?
I'm not an expert so I'm sure professionals or academics would roll their eyes and offer something even more explanatory, but that's my best hunch at resolving this tension so far.
(The upshot of this theory is that it seems to validate strategies that help you zoom way out: low fees, broad diversified indexes, long time windows... those are the real value trades.)
This sounds like the idea of a Keynesian Beauty Contest (https://en.wikipedia.org/wiki/Keynesian_beauty_contest)
"It is not a case of choosing those [faces] that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees."