> we have a deflationary currency we trade for goods and services.

Such a vanishingly small percentage of cryptocurrency activity is actually used for trade (as opposed to speculation) that it is a novelty and newsworthy when it actually happens.

E.g. We all know about that guy who bought a pizza with BTC. And when Tesla decided to allow purchases via BTC (which they have since backtracked) it was a media sensation and market-moving. This is not normal.

Is this really true? I buy stuff with crypto all the time.

It's how I learned about crypto in the first place- back ~2015, I ordered legitimate, had-a-prescription medication for my father from overseas using bitcoin, as it was the only way I could get it, as the even-with-insurance price in the states was beyond our means. Wound up doing so for several years, and it was much easier than dealing with the 'normal' ways of payment. A lot of the things I order from overseas in general I pay for in crypto, simply because it's cheaper & easier than doing regular currency conversions. I'm talking about regular things, like specialty foods, or everyday items I can't find in the states. Nothing even close to grey market or sketchy. Just regular financial transactions, using crypto.

I'm sure by numbers my <$100-equivalent purchases are small potatoes, but how is that not also true for regular money? There are billions of dollars of capital sloshing around in the markets, but that doesn't make my personal-level spending not useful.

I don't know what jurisdiction you are in, but as far as I know, crypto is treated as a capital asset in the US, not a currency, so I'm unprepared to deal with the tax consequences of using it as a currency.

If I paid for things with it then every transaction would require calculating capital gains/losses. And it's far worse than conventional assets like stocks because at least the brokers track that stuff for you.

In the parents defence, the tax status of crypto has nothing to do with the technical capability of using Bitcoin for trade. I think we can all agree, that if both parties are willing, I can use bitcoin to buy things.

Sure. If both parties are willing, you can also use pokemon cards to buy things. The main point of the comment is that it's not convenient and common to use crypto to buy goods and services yet.

The current desktop UX (today) of using cryptocurrency to order takeaway food from the market leading delivery platform in Germany is actually MORE convenient than Visa in my experience.

Visa: get card from wallet, type in number, type in CSC code.

Cryptocurrency: pull out phone, scan QR code.

But do they give you a significant discount for crypto vs. a credit card?

In the US you can get a 2% rebate on what you spend with a credit card. In effect, you are credited back most of the merchant fees baked into transactions.

In which case cash or crypto requires a >2% discount to break even.

I'm from Argentina and all you need to remember is the CCV. And sometimes not even that

Yes, I agree that it’s not common or convenient. But I think it was just a counter point that you can use Bitcoin for regular purchases and people do. And I don’t think tax law is going to stop these people.

I completely agree that the instances of use as currency is vanishingly small.

Funny and true!

You can do whatever if you are willing to take the risk, but US federal tax returns are now specifically asking if you own any cryptocurrency, which seems like at least a mild threat they might come after you.

We can have the cake and eat it too: it's called stablecoin.

1. Park your ETH/WBTC/BAT (a whole bunch of other tokens) on a smart contract as collateral so that you can withdraw a token that is pegged to the USD, or just go to a regular exchange to buy the stablecoin.

2. Use this token to make transactions online.

Tax advantages: you are not selling your volatile crypto, so you don't have to declare any sales or profits. On the other hand, if the crypto you place loses so much in value to the point where the smart contract liquidates you, you don't need to return the stable token and you can get a tax write-off.

This isn't how tax laws work. Exchanging one cryptocurrency for another is a taxable event. You are committing tax fraud.

Nope. It’s called a collateralized loan, and is one of the fun tricks that show how absurd and illogical income taxation really is.

You seem certain that the IRS has never considered this possibility before.

This is exactly how tax laws (ridiculously) work, at least in the USA.

It uses the same “trick” billionaire CEOs use when they borrow against their shares to fund spending, instead of selling some shares and calling it “income”.

It's not an exchange. It's a loan with a collateral. It's only an "exchange" if you get liquidated, which means that you were forced to sell it at a loss.

Doesn't this assume you only get liquidated below your initial purchase price?

With something as volatile as cryptocurrency it's not exactly a crazy idea that you'd buy at say $30k, take a loan at $60k and get liquidated at $50k and get stuck with a big tax bill

Yes but in that case you did enjoy 20k of capital gains and so it makes sense* to pay tax on the 20k gain. There is no issue.

Depends on jurisdiction. In Poland the official government stance now is that only exchange into fiat is taxable. (which is absurd, but I won’t be the one to complain)

My impression is stablecoins are still taxed as property, even if they don't fluctuate as much. Going through the same hassle but not having as much fluctuation seems like solving 20% of the problem.

And if you peg your money to fiat, aren't you just ending up back where you started?

What you're describing sounds essentially like being my own brokerage back office to provide cash services to myself. That's nice for people who enjoy that sort of thing, I guess.

> And if you peg your money to fiat, aren't you just ending up back where you started?

Not if you are talking about the idea that only crypto allows you to transact without a middleman and without the risk of having your funds seized or your account canceled.

But if you are simply talking about crypto as an way to invest: I can tell where I can park USDC and DAI and get 2% returns per month - and have gotten that consistently for the last 8 months. Can you tell me any traditional bank that can offer this good of a deal?

You don't get 2% a month unless there's a significant risk of losing your money. That's just basic economics- high returns only come with high risk. In other words it's nothing like a bank and should not be compared to one.

That's under the presumption of efficient markets where there's perfect information across all market pariticipants which isn't the case currently with DeFi.

It's highly unlikely the people pushing crypto as a source of 2% monthly bank-like return have reliable information about these products and far more likely that the "risk/reward" rules of economics do in fact apply and that these accounts should be avoided due to the high risk.

The problem is compounded by the fact that people have every incentive to astro turf this technology to promote a get rich quick bubble. So the people claiming these accounts are safe may be lying. I would go so far as to say only a pyramid scheme can offer 2% monthly returns on a technology asset that produces nothing and has no inherent value.

It's amazing how much ignorance of the state of DeFi you managed to display on just two paragraphs, and yet you are so quick to determine that only a pyramid scheme can provide these kind of returns.

First: I am sure you understand the difference between saying something has returned 2%/month on a given period and saying that something can offer "2% monthly returns". At no point I claimed guaranteed performance, all I did say is that I did get these returns on a very low-risk protocol and only used stable tokens to do it.

Second: the reason that I managed to get this type of return is because I provide liquidity to pools that have a better utilization rate (compound pool on Curve) than others that have more "popular" tokens. Effectively this means that if more people join the pool, its profitability will actually go down.

Third: the "profit" (mostly) comes from selling the tokens minted from the protocol that you are using (e.g, I am using Curve, so they mint their own CRV token as a reward for liquidity providers ) and not "in kind". The amount that you receive "in kind" is much smaller (to the order of 0.05%) and corresponds to some "transaction fee", so it's not compounded. It is physically impossible for these protocols to create more tokens out of thin air and therefore pyramid schemes (strictu sensu) are impossible to happen on the blockchain.

Am I "promoting a get rich bubble"? Quite the opposite: if you ever find me on these DeFi subreddits, you will find me clearly recommending people against buying these governance tokens. People buying them are speculating without any clue of the fundamentals of the protocols or how a competitor can come and destroy any kind of claimed competitive advantage. I lost count of how many threads I got on /r/uniswap telling them that any sensible person would never buy UNI, yet the token went up more than 10x in price in 6 months. For them, I am the conservative one because I am selling these tokens as early as possible, but I am more than happy to take their money.

Is this going to last for a long time? Quite unlikely, but my strategy is as low-risk as it can possibly be in the space, it keeps me liquid (I can withdraw my funds anytime), and has virtually no downside. Even if the profitability went down to 2%/year, it would be a better deal then leaving the money in a savings account.

To sum up: I'm all for healthy skepticism and informed criticism, but your comment provides neither.

You wrote "I can tell where I can park USDC and DAI and get 2% returns per month - and have gotten that consistently for the last 8 months. Can you tell me any traditional bank that can offer this good of a deal? "

If it was not your intention to imply your crypto scheme was as safe as a bank account or a traditional bank product like a CD, you did a bad job of communication what you were trying to say.

If you communicate (however unintentionally it might have been, I'll grant you the benefit of the doubt) like a sucker roped into ponzi scheme, it's only rational to assume you are one.

I didn't care about the details of your speculative business, I cared about the giant red flag you raised when you compared what you were doing to a bank offering.

Read the first part of the what I wrote and read what I was responding to: OP was asking why use stable tokens if they don't have any chance of appreciating in value, and my response was to show that you can put your capital to work in crypto even if you stick only with stable currencies.

In no point I am saying that what I am doing is "just as safe as a bank". And when @kobasa pointed out that it is indeed possible to have above-average returns given the information asymmetry, you doubled-down on your assumption and implication that I either (1) don't know what I am talking about or (2) am somehow being dishonest.

Frankly, you are being quite offensive and reading only whatever confirms your worldview. This is not the way to keep a conversation.

> Can you tell me any traditional bank that can offer this good of a deal?

Well banks offer lower rates of interest, but they're FDIC insured, they have nice (ish) apps, they have regulations to protect consumers, etc.

I can tell you PLENTY of places i've parked my money (for the last 8 months) that have gotten much more than 2% return - but they don't have FDIC insurance (just like crypto).

Everybody will tell you what you are doing is stupid without knowing the details...I had an idea which may also be stupid, but again, seems to be working recently and seems like simulated super high interest (but not not not investing advice). Thinking about crypto as "digital gold" gave me the idea.

What if you deposit your cash in a regular brokerage account and every week sell an equal amount (that is, one contract for every 100 shares you can afford to buy) of at-the-money puts on GLD? This is literally digital gold.

If the probability of gold going to zero (or GLD) is essentially nothing, and inflation is inevitably going to pick up, then this feels plausibly "risk free". The worst that can happen is you are assigned some shares, which you can sell or sell calls on. In any case, people are apparently willing to pay a surprising amount for short term volatility on it.

Even better, you can buy the cheapest longest dated out-of-the-money put to lay off some risk at minimal cost.

You may be able to do this on Robinhood, I haven't tried.

Just an idea...of course analyzing how this could hide large risks would be interesting.

Am I missing something? If GLD drops and your initial put was ATM and the buyer exercises, then you lose.

That can happen occasionally. But the idea is that you limit the amount so as to only lose as much as if you owned shares of it in the first place, and therefore any losses are sustainable, temporary, and not frequent. Given the conviction it has to go up in the medium term.

Can you really imagine selling insurance against gold cratering in the near term being disastrous, barring leverage which can always ruin you?

I think it's probably important, for managing risk, to have the self control to only hold as many short contracts as you have cash for assignment, and also not to get greedy when the price moves in your favor, but wait until the end of the week to swap them for a different strike.

The downside scenario is gold dropping 50%, or 100%, which just seems implausible, maybe more implausible than in living memory.

I don't care how many months of 2% (or 10%) interest I get if it's followed by a 100% loss. You're getting that high interest rate because you're taking on a great deal of risk. 8 months of a bull market hardly proves otherwise.

Of course there is risk, but they are not as great of a deal as you think it is. I am talking about transactions that deal with stable coins only, one of them is backed by a credible institution (Circle) and I am talking about a smart contract (Curve) that is being used already for over an year and is holding billions of dollars already.

Smart contracts are somewhat Lindy: the longer they are in place, the more of an indication they are secure. I wouldn't recommend putting your money on any new contract, but Curve is around for long enough that I don't believe that it will get hacked in the next years. Sure, it is not as "secure" as a FDIC-insured savings account, but it is not degen-type of investment either.

Which is why you use coinbase and they tell you the cost basis and then you use cointracker to import it into turbotax. It's just some extra overhead when filing taxes.

You're absolutely right that the current US tax laws are a real problem for crypto-as-a-currency. I do expect better law to prevail over time.

Have you heard of PayPal? Because i buy things internationally and pay with PayPal all the time. If I don't receive the order, I can contest and cancel the charge (sometimes). And there's no transaction fee that I'm aware of.

Do you buy $5 items internationally? Because the bulk of my international orders are low value items. If I have to spend more on a transaction fee than the item costs, I'm not gonna buy the item. Oh, lightning you say? You really think I should trust that more than pay pal?

Have you heard of all the people arbitrarily blocked/banned/censored by PayPal? Just for one, I had my Paypal account permanently closed because I (many years prior to the block) registered it when I was still under—age. Separately, I am resident in a new country where for arbitrary reasons I don’t have all the necessary validation to open a Transferwise account registered here.

Relying on a small handful of centralized private service providers for critical infrastructure is a bad idea. My situation is not unique or strange. I could most likely illegally submit false information or register new accounts, with the risk of having payments frozen or even held at any point. Some online vendors only use PayPal, which has lifetime banned me as a person, so by extension I can not purchase from these vendors.

I do trust Lightning more than any of these. I actually regularly use for payments for stuff like you mentioned. Last time a $11 purchase yesterday, which even including amortized channel opening cost was most certainly less fees than PayPal would have been.

——

You’re happy with PayPal now, because it works fine for you, but the increasing power they have over individuals and the economy is real, concerning and dangerous.

I'll agree with you that the monopolies (or too big to fail whatever) in finance and technology should be broken up. And I hope everyone who is into crypto banks their fiat at a local credit union.

But I think for most people using lightning means getting an account with a wallet provider. Couldn't they suspend your account for violating ToS? I guess some people could setup their own channel but I don't think that's what most people do.

Proof of Stake just means the biggest entities will have control. That doesn't sound stable to me but good luck.

> Couldn't they suspend your account for violating ToS? I guess some people could setup their own channel but I don't think that's what most people do.

I someone can, someone else will for you.... that's the thing. I can't make a Paypal alternative for myself, so I can't do it for anything, but if I can build an alternative on the lightning network... well... someone else can do it and take care of people that can't.

The buy guys only care about the big numbers... but open the door to the smaller guys, and you'll see, they'll take care of the smaller numbers too.

https://www.paypal.com/us/webapps/mpp/paypal-fees https://www.fool.com/the-ascent/research/average-credit-card...

There are significant international transaction fees. There are also merchant fees involved for sellers. Much like the ubiquitous credit card fees, you may not see it line-itemized on your bill, but the costs are absolutely part of the price you see at checkout.

Literally everything I buy with crypto, the crypto network fees are less than what I would have paid otherwise.

What about how much money it cost to get whatever currency you had into a cryptocurrency? That may be vanishingly small for people that had BTC cheap and now have a bunch that cost some low initial amount to get into the system, but most people would necessarily have to convert whatever currency they normally have to a crypto currency first and then spend it. A true comparison would compare a few things, including same currency transactions using paypal, differing currency transactions using paypal, cost to use crypto to buy assuming you have none to start with, and cost to use crypto assuming you already have it as crypto at essentially zero cost. And for all those, probably run the number for buying something at $5, $10, $50, $100 and $1000.

Or don't do all that and intuit from it that the likely result is that in some cases crypto wins (when the purchase is large, when the crypto was acquired at closet to zero cost), and in others it doesn't (when the cost is small, or possibly even moderate and when you have to convert to crypto first).

I guess my point is that with PayPal, as a buyer, the transaction fees are seamlessly included in the price.

With crypto, it depends. Which coin? Which wallet? Which seller or marketplace? I'm curious if you care to share more about your transactions, that cost less using crypto. Now, if you're saying that you bought at $100 and it's at $1000, and you "paid less" that way, that's just this stage of the ponzi scheme's doing, not an inherent feature of the network that lowers costs.

Oh, for sure, there's plenty of work to still be done on the crypto side of things.

Regarding which coins I use, it's mostly Bitcoin Cash or Doge. No funny accounting or anything. The network transaction fees are readily available:

https://bitinfocharts.com/comparison/dogecoin-transactionfee...

https://bitinfocharts.com/comparison/bitcoin%20cash-transact...

You sound new to the paypal ban me for no reason game. We all play we just never know when we lose.

Like... Why? Why pay $10-25 in transaction fees for a $100 purchase? Unless it's illegal, it's far easier and cheaper to do currency conversion with a credit card.

I'm not using bitcoin. I mostly use bitcoin cash and doge, where fees are in the 50 cent - dollar or two range.

No offense, but you and the few dozens (exaggerating here for emphasis) of others around the world who use crypto as a currency regularly just don’t even matter in the context of the world’s financial systems.

No offense taken. I know I am currently in the (significant) minority.

But it's been six years, now, since using crypto has been a genuine net benefit for me, and this is completely outside of any kind of monetary speculation. That's not nothing. Is it a useful comparison, one guy that works in tech vs. the world's financial systems?

If using crypto helps me, it can help other people, too. That's enough for a real start, all on its own.

Cool so just ban it without worrying about who it hurts because you’ve literally explicitly declared that they don’t matter.

Well, yes, if banning something considered harmful for the vast majority hurts a few, at some point it's worth considering. The line differs for everyone to be sure. For crypto"currency" in particular I'm not sure an outright ban is merited. It sure does seem more useful for criminal organizations and trading casinos to part unsophisticated "investors" (idealists?) from their cash than for actual people to use to conduct business, though.

What proportion of bitcoin use do you think is legitimate purchases versus crime? I suspect it's a long way on the wrong side of Blackstone's ratio.

Specifically for bitcoin- my hunch is one of the main drivers of its valuation is Chinese-owned capital trying to find its way outside of mainland China, as the ability of the average middle-class or wealthier Chinese person to have assets outside of state oversight is highly constrained.

I do think that coins with more reasonable transaction fees are actually used as normal, boring currency a lot more than crypto-naysayers think.

I also think the rampant speculation going on over coins like Doge is nuts, but it's worthwhile keeping in mind that if you're just using crypto as an exchange of value, with the purchase of the coin and its use at the same time, it doesn't really matter what the spot price is.

> my hunch is one of the main drivers of its valuation is Chinese-owned capital trying to find its way outside of mainland China, as the ability of the average middle-class or wealthier Chinese person to have assets outside of state oversight is highly constrained.

Where by constrained you mean it's a crime, right? Obviously you can argue that in this specific instance making it easier for criminals to evade law enforcement is a morally good thing, but cryptocurrency does the same thing for any profitable crime in any country, which is why I see it as such a negative thing overall.

>Where by constrained you mean it's a crime, right?

Not in the way you mean it, no. Otherwise industrial-scale bitcoin miners, situated near power plants, wouldn't be able to operate in the open at all, yet they do. Without making any moral judgement one way or the other, China works differently than is generally understood by the West.

//

I don't want to downplay criminal use of crypto- its use in cryptolocker-type malware is a real problem, for example.

I do think it is important to recognise that criminals already use existing monetary systems quite well, and that fully-public blockchains have an audit trail that investigators could only dream of compared to plain cash.

> Not in the way you mean it, no. Otherwise industrial-scale bitcoin miners, situated near power plants, wouldn't be able to operate in the open at all, yet they do. Without making any moral judgement one way or the other, China works differently than is generally understood by the West.

Well, the western understanding is that it's a corrupt country where the powerful and well-connected can openly flout the law for some time - until they misread a shift in power dynamics and it becomes convenient to prosecute them. I'm sure that's not the only paradigm through which these things can be understood, but it doesn't seem inaccurate either.

> I do think it is important to recognise that criminals already use existing monetary systems quite well, and that fully-public blockchains have an audit trail that investigators could only dream of compared to plain cash.

Well it's not like cash is particularly clean - if someone wants to pay or be paid in cash only, I would see that as a sign that things were probably not entirely on the level. Presumably criminals continue to use cash in parallel only use cryptocurrencies where they gain an advantage from doing so - but there are plenty of cases where cryptocurrency does offer big advantages for crime (and all of the reasons people give for using cryptocurrency - sending money internationally, avoiding reporting requirements - seem like crime-friendly things). Even the traceability you mention seems to be seen as more of a bug than a feature by crypto advocates.

This notion that bitcoin is great for crimes has been thoroughly debunked in a variety of studies over the last few years. There's more crime committed using the US dollar (on a percentage basis even) than using bitcoin and the Bitcoin network's transparent nature coupled with the advance in on-chain analytics makes this easy to explain.

Citation? That sounds thoroughly implausible - consider how much flack HSBC gets for having dared to transfer money between the US and Mexico, something that bitcoin allows and encourages people to do all the time with no approval steps at all.

HSBC got flack just for transferring money between US and Mexico? I'm willing to bet there's more to it than that... so I think it fair that you should also provide a citation.

The clients they transferred it for turned out to be murderous drug cartels. But as far as I can see HSBC actually followed all the rules at the time; much has been made of the fact that they lowered the level of controls applied to those transfers for commercial reasons, but the law required them to judge the appropriate level within a particular range, and the level they applied afterwards was still within the legal range for Mexico. Yet whenever they come up on HN you'll hear people talking like they were killing people.

(They reached a settlement where they paid money and made an apology statement rather than going to court, as would most entities in their position).

That interpretation directly contradicts Mexican authorities:

> the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores – CNBV) which, across more than 20 volumes and some 10,000 pages, established how HSBC Mexico’s top management committed serious mistakes, such as:

> - Deliberately failing to report suspicious transactions.

> - Permitting the exponential growth of bulk dollar shipments on armored trucks bound for the US.

> - Deliberately delaying the issuance of client reports with unusual and suspicious transactions.

> - Maintaining business relationships, until the last possible moment, with people, businesses and currency exchange houses used by drug traffickers to acquire aircraft.

HSBC may not have been killing people themselves, but they unquestionably facilitated and profited from it. I'm a little surprised that someone would downplay their involvement given its scope TBH.

https://insightcrime.org/news/analysis/hsbc-dirty-money-whit...

That's exactly the kind of take I'm talking about. All you've written is phrased to make it sound as negative as possible, but very little sounds like actual illegality. Permitting exponential growth and maintaining business relationships: what business wouldn't want to do that? Deliberately not reporting or delaying reports: sounds bad, but actually these reports are judgement calls, there can be legitimate differences of opinion. The violations of internal policy in your link sound like the same sort of thing: they're written to sound as though closing more suspicious accounts is always good and less is always bad, but actually suspicion is not proof, there can be genuine disagreement, and there's an equal and opposite story about people's accounts being closed for no good reason. 10,000 pages sounds like a lot, but it's to hide the lack of a smoking gun; all there is is a bunch of judgement calls that with the full benefit of hindsight we say were unreasonable because they lead to bad outcomes.

And compare this to Bitcoin where there is no judgement call, no KYC at all, anyone can move money anywhere. I suppose it's harder to gather 10,000 pages about how poor the judgement calls were in hindsight when no-one's making those judgements, but I would hope that HN of all places would look past the sound and fury and pay attention to the actual outcomes.

Don't all online payment systems use cryptography?

Are you being intentionally daft?

Or do you genuinely fail to realise thay there is a difference between you and small number of other people relative to the global population using cryptocurrency as money as compared to everyone on the planet doing so?

Ideas start from somewhere, and take time to spread.

And most of them never get anywhere meaningful.

They certainly don't when they have have otherwise intelligent people using strong emotive language telling them that they're not important.

There's facing statistical facts, and then there's just being flat-out negative.

The statistical facts warrant a strongly negative outlook.

I guess I don't totally know how to respond to that; I have no idea what everyone is using it for. That's rather hard to know just looking at the blockchain, or even reading message boards like this. I have no problem spending it; pretty easy to convert it to gift cards that can be spent anywhere (they give you a kick back even), there's some places that do take it directly (not restaurants, or car repair, but like electronics stuff on the internet). And of course you can just sell it for fiat on an exchange then turn around and dump the fiat for stuff (in this case, fiat is kind of the weak asset since no one really wants to hold cash for long). Plus, it can buy some stuff you can't get with fiat (e.g. overseas purchases not tied into USD, or all the dark web stuff people talk about). It feels pretty darn liquid; I've never had a problem turning BTC into stuff. And it is way more so than gold, land, even stocks and bonds; none of which can turn into stuff in under an hour much less without audit/paper-trail/control. Only fiat is more liquid, except no one wants to hold fiat; just turn it into something else actually worth having. The real problem is getting BTC. Lots of roadblocks in acquiring it and generally the people who have it would rather pay you in fiat and keep their BTC.

What’s the point of a currency where you have to convert it to another currency to spend it?

(I’ve got an idea, and I think the answer is speculation….)

Converting BTC to Fiat and then spending Fiat isn’t the same as buying things with Bitcoin. It’s buying things in Fiat with extra steps.

I convert my bank deposits to cash before spending it. It's not like there's cash in a vault with my name on it, I ask to withdraw cash and my checking account is debited. Doesn't seem so different than an exchange.

It’s entirely different, because you are transacting in the same currency without an exchange mechanism required.

This is important in days like today, where a coffee would cost more in BTC this evening than it would have this morning - how do I know how many BTC I have spent without referring to the current market price in USD and calculating it?

If the extra step means my money doesn't lose value as government print cash like there's no tomorrow, then that step is quite valuable to me

BTC seems to be about 10 times more volatile than the dollar on a daily basis. Like, last friday, the dollar was down about 0.4% and BTC was up or down 4-5% intraday.

This seems to me kind of like the argument that the government is "just" another gang of armed bandits.

There is a huge amount of value in predictable taxation rather than random robbery. Partly because of the variance, and partly because government has more of a long term interest in the viability of the citizenry, even if it weren't especially democratic per se.

And similarly, there's a huge value in a currency that gradually loses value over time rather than being up or down 5% in a day and 30% in a few weeks.

The whole point of currency is that it's not a long term investment asset, but a tool for trade, isn't it? So why would long run inflation be relevant?

> BTC seems to be about 10 times more volatile than the dollar on a daily basis.

They're not talking about volatility; they're talking about the average trend over time.

I know. My point was this is the wrong focus, because of what currency is by nature.

Short term volatility is a big disadvantage, while gradual loss in value doesn't matter for something that's not a long term investment.

I owe way more money than I have in cash, as does almost everyone, and my loans being in nominal currency, inflation only helps.

Yea, but I don't have a problem with volatility. I have a problem with inflation. So, as a customer of this product, you can tell me I should want a lack of volatility. But what I really want is a lack of inflation. And indeed, your note implies that you too are fleeing cash. But I don't want to park all my money in bonds (also being printed like crazy) and houses (also being printed like crazy) or even companies (also being printed like crazy). I'd like to just park it in the IOU-form I earned it in without having it's value stolen or being forced to invest in something being printed like crazy with all sorts of complexity of risks (e.g. debt filled companies, real estate I have to rent or something). Just to have my money not lose value and for me to be able to spend it without someone being able to stop me. And it does that. I'll take the volatility.

My experience of BTC is when people say “I don’t want inflation” what they really mean is “I want my money to go up in value”.

Which ultimately just ends up in people wanting speculation.

A bit of a generalisation, but I know plenty of people who hold Bitcoin and they all are buying it because it might be worth more in the future, and none are buying it to transact in Bitcoin and use it as a currency.

Fiat is a currency that's continuously going down in value. There can be no dispute about that; it's the stated goal of nearly every central bank.

So, I don't want that. It's that simple. If you could transfer USD anywhere without audit and the US fed had it increasing in value, I wouldn't need bitcoin.

But they can't do that. They literally cannot afford to in the sense that the government they're attached to does deficit spending and the bond market isn't enough. They have to print. Not only must they print, but the spending that causes them to do it is heavily military. They're buying the tanks and planes they used to start wars for as long as any of us have been alive (Korea, Vietnam, Iraq, Afghanistan, etc.) Thus, every dollar I keep in my pocket is a continuous loan to their war machine; it loses value and that value goes to buying bombs.

I'm not participating any more. I'm taking my barbies and going home. Before BTC, there was no where to run to. Now there is. No more fiat. Long live deflationary, un-censor-able, distributed crypto currencies.

Can't speak for anyone else, but when I say "I don't want inflation" what I really mean is "I want my money to not go down in value".

> My point was this is the wrong focus, because of what currency is by nature.

Ah, fair enough. That said:

> I owe way more money than I have in cash, as does almost everyone, and my loans being in nominal currency, inflation only helps.

This only works if you have a effective means of prohibiting (any) interest on those loans (ie anti-usury laws that actually have teeth). Otherwise the lender just bakes inflation into the interest.

I don't know if you are American, but it's common here to have 30 year fixed rate mortgages. I gather that's rare most other places. So I'm supposing a typical scenario where a person borrowed or refinanced recently to lock in very low inflation expectations.

That said, there are variable rate loans, but last year some lenders were actually offering such loans at a noticeable discount to prime (albeit with a floor that is above prime for now).

> 30 year fixed rate mortgages.

That helps a little, but relies on lenders underestimating future inflation. If they can predict X% inflation, they can price that into the initial fixed rate. So it's useful for making damages due to usury less variable - which is helpful for the same reasons insurance is helpful - but it doesn't usefully reduce them.

>If they can predict X% inflation, they can price that into the initial fixed rate

Yes, hypothetically, but they aren't, yet.

Agree

How is that different to investing in any other asset and then selling when you need to spend fiat currency, though?

It only loses value when Elon shitpost on Twitter, right?

...you do realize that most of the world's money supply exists in the form of derivatives, right? A single-digit percentage is actual cash. You're committing a strawman. They didn't say anything about how the proportionality of crypto's use breaks down - they simply stated that it has achieved the basic use it set out to. And they're 100% correct - I use crypto to buy things quite regularly (email, VPN, etc), and will continue to. Really, the only thing preventing me from doing so more often is hard-headed people refusing to support it, because it's "mostly speculative."

Here's an infographic: https://www.visualcapitalist.com/all-of-the-worlds-money-and...

You wrote: "most of the world's money supply exists in the form of derivatives". I also looked at the infographic. So silly. Clearly, they are just summing the notional of outstanding derivatives contracts. Summing PV (present value) would be more useful. If I buy (open long) 100 WTC Oil futures contracts, then sell (open short) 100 WTC Oil futures contracts, my delta risk is zero. However, the total notional will be 200 WTC Oil futures contracts.

This article might help to explain more: https://www.investopedia.com/ask/answers/052715/how-big-deri...

The notational value of derivatives is the whole point of derivatives. They wouldn't be traded at all if they were priced solely by the value of their underlying asset.

I disagree. For the largest derivatives markets -- a: interest rate swaps, b: FX swaps, and c: credit default swaps, they formed (and grew) because market participants wanted to express a particular view, but could not easily find enough of the required "cash product" -- a:gov't bonds, b:spot FX (or simultaneous, dual currency, short-term LIBOR lending), c:corporate bonds. For (a) and more so (c), it is difficult to short, even for large/institutional clients. Synthetic equivalents (interest rate swaps are _effectively_ synthetic gov't bonds) 1:can be created upon demand, specific to a client's needs, and 2:can be trivially shorted.

When a client is buying or selling a derivative, they don't care about the notional -- they care about the delta (or gamma/other greek). You just turn the dial for notional to achieve the target delta/gamma.

Your second sentence does not make sense with respect to single name equity options. (I pick a simple product as a counterpoint.) I doubt anyone is losing sleep in 2021 over 'rho' (interest rate sensitivity) in their options trading book for any floating currency with short term rates below 1%. Thus, everything about the underlying price (including expected future divs and its historical volatility) drives the prices of single name equity options. (If you are referring to delta one derivatives, that is a whole different discussion. And yes, they trade -- equity swaps, because you can get implied leverage through financing.)

Someone is going to make a chart comparing crypto to the already-ridiculous crypto derivatives market, and you’ll realize your point is totally irrelevant.

Companies don’t transact in Bitcoin because nobody wants to hold it. Except for companies getting a valuation boost from retail investors.

No, my point isn't irrelevant, and you thinking it is means you almost certainly missed it. Most of the world's value is speculative in nature (derivatives, credit, real estate, you name it), so I couldn't care less about the crypto derivatives market, or the "normal" derivatives either. Neither are preventing me from using crypto as a store of value. At the end of the day, people speculating the value of crypto does nothing to detract from its core function as a decentralized ledger. I know this to be fact, because I have and continue to use it as money, and no amount of smug pseudo-intellectual retorts can change that. The briefest of cursory internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's, a company that has existed since the 1700s. But they must be fools who don't know what they're doing, right?

You wrote: <<internet searches will disprove your idea that companies don't want to hold crypto - there's been massive buy in from very significant companies. Eg Sotheby's>>

I looked into this claim, and I disagree. Google search for <<sotheby's cryptocurrency>>. The first two results for me were:

https://www.sothebys.com/en/articles/cryptocurrency-payment-...

https://www.sothebys.com/en/buy-sell/cryptocurrency-faq

They are allowing partial cryptocurrency payment for a single Banksy painting.

From the FAQ:

<< Which part of the transaction is payable in cryptocurrency?

Sotheby's will accept cryptocurrency for the hammer price of the lot. The buyer’s premium and overhead premium, as well as any taxes, must be paid in USD. >>

Sotheby's is simply facilitating the transaction as an auction house. They have zero exposure to cryptocurrency. I assume the cryptocurrency will be transferred to the seller after the auction is paid-in-full. The buyer must pay all non-hammer-price costs in USD to Sotheby's. (As I understand, these fees can be significant.)

Like some other posts mentioned, the seller could agree to receive seashells instead of cryptocurrency. All said, this seems like a very good publicity stunt by Sotheby's.

> Such a vanishingly small percentage of cryptocurrency activity is actually used for trade

In reality, an overwhelmingly large percentage of tangible trade is fasciliated by one specific cryptocurrency for one particular umbrella of goods and services that may have something to do with onions.

What percentage of dollars are used for trade, as opposed to investment? Does it matter?

You can use bitcoin as a saving mechanism, which is the primary purpose of money, as long as you can trust that it is tradeable to something else. There are hundreds of millions of people who use bitcoin in this way.

For using it as everyday currency, there are debit cards that automatically convert your bitcoin to local currency at the time of payment. There are probably millions of people who use these debit cards. Bitcoin itself isn't suitable for everyday payments yet.

> And when Tesla decided to allow purchases via BTC

The main reason I don't buy things with cryptocurrency is that it would trigger a liquidation event and short term capital gains taxing.

Due to that, for US residents and citizens, it's not functional as a currency in its current form. I'm vehemently against taxing of cryptocurrency or treating it as a security by the IRS, but that's the way it is now.

> Such a vanishingly small percentage of cryptocurrency activity is actually used for trade (as opposed to speculation) that it is a novelty and newsworthy when it actually happens.

First, that last part is definitely not true. People do accept Bitcoin and buy things with it, and it’s not newsworthy at all unless it’s a meme-driven electric car company boss doing it. But secondly, why do these percentages actually matter? At what point does my valid use of something become dismissible because another use case which you don’t like gets popular? Do we dismiss people who actually like playing the Pokémon card game because lots of people collect the cards purely for speculation now?

It was a media sensation because it was Tesla doing it, not because of what was being done.

Tesla and Musk are attention-sponges and it's a large part of how they're still operating.

Yeah, I use crypto for purchases quite frequently. From hotel rooms to supplements.

Transaction fees were north of $50 a couple of weeks ago. Who's buying a pizza with that overhead? Genuinely asking, because I've a bridge to sell

Before the edit window closes... 5 workarounds and counting. Are they interoperable, or is all this a thick layer of bullshit that users need to wade through to spend their "currency"? I see the plurality of "solutions" here indicative of a problem. Yes, you can fix anything with duct tape, but then it gets sticky

You can use Lightning (a Bitcoin technology) to send BTC which is extremely cheap in comparison. Talking fractions of a cent.

How do you use the Lightning network?

Check out strike app, it is a managed lightning wallet denominated in USD that allows venmo/cashapp style pay to user transactions; and payments on the lightning network. All funded from a bank account.

Use muun or phoenix wallets, they're very usable.

Isn't that only for Bitcoin Cash?

Nope you can directly use Bitcoin Cash with subcent transaction fees without any other layers. A place near me sells Kava for BCH (supposedly, I have not been to a bar in a loooonnnnggg time).

You can use Ethereum Layer 2 tech like Loopring, zkSync, and eventually Optimism which Coinbase supports in the Coinbase Wallet. They haven't even added support for Lightning

Nobody in the real world is using any of this.

...yet, all these are fairly new. Give it another 2-5 years for implementations and integrations.

Also, it’s already used in defi, if you count that as “real world”. Reminds me of when anything on the internet wasnt “real”.

Sorry but I've been following the last decade of the crypto world. In a decade I have not seen a single "defi" product sticking around because there just doesn't seem to be real demand for these products.

Considering how many spaces in new startups developed massive traction in that span of time (social networks, other forms of digital payments and banking, online marketplaces) the fact that there are no star products in such a span of time gives me little consideration.

Wait what? DeFi pretty much started booming from last summer.. it hasn't existed for a decade. Do you not know Uniswap? It's existed since around 2017. Sushiswap? even Pancakeswap?

There's $80 billion locked in DeFi right now. https://defipulse.com/

Uniswap has more transaction fees than the Bitcoin network https://cryptofees.info/history/2021-05-16

Institutions are even starting to get in https://twitter.com/stanikulechov/status/1394390461968633859

I call bs. There is not $80 billion USD locked in defi -- the world has not taken $80 billion USD, bought crypto with it, and put the crypto into defi code. Like, where are the receipts?

What has happened is defi tokens have appreciated through speculation. Sites like defi pulse erroneously represent the wealth locked into defi contracts as token_price * tokens_locked, which is trivial to manipulate for shallow-market tokens. Like, I can spin up a token with 1 billion units, buy one token for $1, and put the remaining tokens into a defi contract. Voila -- defi pulse reports $81 billion locked.

EDIT: downvotes aren't receipts, and downvoting doesn't change the accounting discrepancy.

An 80 billion market cap in Ponzi scheme products with no star companies that testify the usage of said products sounds like a scam.

Aave, Compound are both not Ponzi schemes and allow you to lock things like USDC and ETH (also not Ponzi schemes) for others to borrow, and earn interest. It's automated lending, I don't understand how people are not excited about this.

No demand for DeFi? Are you serious? Total value in DeFi has gone from sub $1b to over $70b in the last year.

>Give it another 2-5 years for implementations and integrations.

This is what I heard when Lightning went live.

Lightning usability is horrible and requires 2 parties to be online at the same time, whereas with Ethereum scaling solutions, you can use your regular metamask wallet to deposit, and you're on L2.

And very likely just like Lighting we'll hear similar excuses as to why it doesn't work.

The early adopters will be the ones who reap the rewards.

Via the Polygon commit chain, these issues are fixed. Polygon's adoption is through the roof, saving Ethereum's butt. Hence the massive price climb.

Does Polygon stay relevant after Ethereum's PoS?

Yes. Ethereum's scaling with PoS is still fairly slow, and as the biggest network, I'm bullish on the continuing need for 2nd level solutions.

> we have a deflationary currency we trade for goods and services.

You do not, not really. Merchant adoption is microscopic. Even prominent Bitcoin fans admit it's terrible as a payment system. E.g., Fred Wilson of Union Square Ventures: https://avc.com/2017/08/store-of-value-vs-payment-system/

Or look at Overstock, one of the few large retailers that accepts it. Something like 0.1% of their business is done using it, which explains why most other merchants don't bother. Even there, they price everything in dollars, so if the Bitcoin price shifts between you purchasing something and you returning it, you'll get the dollar equivalent, not the Bitcoin you gave them: https://www.nytimes.com/2021/02/03/style/what-can-you-actual...

This is especially obvious when you contrast it with something like M-Pesa, an e-cash system that launched around the same time. It's hugely popular in the countries it operates in. (Along the way, it did a lot for banking the unbanked, one of the mirage-like goals that Bitcoin is always approaching but never arrives at.) The transaction volume is orders of magnitude higher than Bitcoin. https://en.wikipedia.org/wiki/M-Pesa

Sure, it technically works; you can probably still buy a pizza somewhere. But "technically works" is a shaky standard even for something that just launched. It's no standard at all for something that launched the same time as Android or Uber.

And why would you want a deflationary currency? If you see it as an investment, then of course. But for the general economy it is better when people spend their money sooner rather than later, and capital gets invested where it does something useful.

Ah, the old Keynesian argument...

Um yes? And reality consistently confirms Keynsian/demand-side modeling.

Keynsian demand-driven economy is the root of all evil, i.e. market bubbles that pop eventually. Everyone except market speculators would be much better of with supply-driven economy and small deflation.

For one it would provide incentive to save money and spend it wisely, instead of mindlessly buying all that unnecessary crap.

> Everyone except market speculators

And debtors. The very notion of taking out a loan for something becomes nigh impossible with a deflationary currency, particularly one as deflationary as Bitcoin. Seeing as how the lower and middle class tend to take out loans for all sorts of reasons (since if they had the sort of cash lying around to buy homes and cars and appliances and such outright, they probably would be neither lower nor middle class), the direct harm such a currency would have is readily apparent.

While I'm skeptical of homeownership and car ownership in particular for other reasons, absolutely a healthy capitalist economy needs easy access to credit for potentially socially useful activities.

Strange reading of Keynes. I never read him advocate for rampant wasteful consumerism. In fact many of his arguments about government intervention (investment) are derived by his observation that consumption is prone to drying up.

I also don't see how Keynes and speculative frenzies are connected, considering they existed long before his Treatise or General Theory.

Keynes advocated for rate cuts as a remedy for crises. His reasoning being that cheap credit will stimulate demand for consumer goods. It's almost the textbook definition of "wasteful consumerism".

Indeed, and bubbles are in assets not goods to consumption, and stimulus is supposed to boost consumption in the first order, so the comparison seems even more far fetched.

> ... his observation that consumption is prone to drying up.

Now that wording has a certain ring to it (in my ears).

"Consumption prone to drying up"? As if consumption alone were of any value. As if consumption were the foundation of all well being. As if it were something that needs to be tended to like some garden with flower beds.

Sounds more like ideology to me instead of reasoning.

Keynesian isn't a value judgement on whether various sorts of consumption are good. It's firstly a description of how capitalist economies actually work, and secondarily a toolkit of policy based on that description. The focus on demand is primary because how it affects the economy writ large.

In fact, Keynes himself famously thought that would be working 15 hours a week by now instead of...well...wherever all the work is going, some of which I suppose is propping up the consumption you don't approve of.

It's a pity then that supply side economy doesn't work.

Ah another free market neoliberalist. You do know that government intervention during Keynesian’s time was incredibly helpful for the macro economy - providing jobs and investment into long running avenues. Neoliberalism purports that the private sector will invest diligently but really we’re seeing companies use shortermism as a technique to just make profit.

And Keynes has empirically done very well, thank you.

Well, now that it exists, what would you as an individual rather keep your cash in compared to inflationary fiat held in an account with negative interest rate?

Genuine investments in companies, real estate, and other hard assets which actually produce cash flow rather than BTC whose value depends on the madness of crowds and the tweets of eccentric billionaires.

Investment portfolios exist. They also reduce the cost of loans, thus making it easier for companies to grow and speeding up innovation. In comparison, the only thing "investing" in cryptocurrency does, is encourage larger economies of scale for cryptocurrency (which, side note, has built in mechanisms to actively prevent it from becoming more efficient).

I don't know a single person who holds their money in 'cash'. They invest it in the market, real-estate, business development, etc.

I am one who holds cash. Not all, but not an insignificant portion either. I have a mixture of assets. Why not invest that cash? None of the investment opportunities that I see fit my risk profile. Example: I'm holding my stocks now, but I do not plan to buy more.

The average middle class (and below) person in any highly developed country has a mixture of assets, dominated by their house and cash savings in a bank. Most don't directly own financial assets -- stocks, bonds, etc. However, they are invested in a pension (national or private) that will certainly invest in financial assets.

> we have a deflationary currency

I've never understood why this is an explicit goal of any currency. Money is a way of keeping score of economic value produced. The economy is expected to create more value over time. That means you need more points, aka money, to represent that value.

I hate it when the government sneaks around back and lowers my score all the time. It'd be nice to retire someday before I'm dead.

It's not the government doing that, though, it's the economy. The government just provides the points for keeping score.

If the economy grows by x% this year and all your money is in cash, then your relative share in the economy has declined. So of course the value of your cash has now reduced. The government was only indirectly involved insofar as it issued the currency that the value was measured in.

If you want your money to stop losing value, stop the economy from creating more value.

This is nonsensical. There was practically no inflation in the United States during the 19th century[0], the major exception in that period being the Civil War, a period of when the government needed to generate more revenue by printing more money. Following the war, deflation brought prices lower so that price levels at the end of the century were roughly equal to those at the start of it (and it should go without saying that there was certainly economic growth between 1800 and 1900).

With economic growth, you would expect the economy to produce more items, thereby being able to buy the same things for cheaper. E.g., if we get better at producing electronics, you would expect their price to decline - and that's precisely what we've seen in the past couple of decades.

It is true that a period of economic growth could induce inflation in the short run if the growth resulted in an expansion of credit, which increases the money supply even if M1 is stable. But there's only so far you can stretch the money multiplier. And on the other hand, monetarists believe that increasing the money supply could resolve a recession, but for one, an increasing money supply clearly isn't required for economic growth (the 19th century in the US is emblematic of this, but in particular there were decades of deflation within that century with economic growth), and for another, increasing the money supply in the monetarist framework is brought about by a central bank, not caused by the growing economy.

[0]: Figure 1 of https://www.stlouisfed.org/publications/regional-economist/s...

> if we get better at producing electronics, you would expect their price to decline

I would also expect the value of the electronics industry, and its profits, to rise. Where's the additional money to denote that value coming from?

> There was practically no inflation in the United States during the 19th century

I can't speak to inflation in the 19th century. I'm not an economist and expert like the writer of that article. But as a percentage of household income, basic necessities (food, clothing, transportation, entertainment, energy) have undoubtedly become cheaper since the 19th century, despite inflation. Goods and services that don't follow normal supply-demand logic (education) or have excessive regulation controlling supply (healthcare, real estate) are the exception to this.

> the major exception in that period being the Civil War, a period of when the government needed to generate more revenue by printing more money

Money printing is the proximate cause, but not the root cause. The war increased demand, leading to increased prices i.e. inflation. The government printed more money to pay for the war, but it could alternatively have taken on more debt (and maybe it did, I'm not an economist or a historian).

> I would also expect the value of the electronics industry, and its profits, to rise. Where's the additional money to denote that value coming from?

Value does not come from money. Real value comes from the goods and services actually produced. As for whether profits increase, that depends. An increase in productivity in an industry might not necessarily entail an increase in profits for those in that industry. That's the basis for cartels, restriction production in order to boost profits.

> Goods and services that don't follow normal supply-demand logic (education) or have excessive regulation controlling supply (healthcare, real estate) are the exception to this.

This is not necessarily the case, i.e., services can decline in price as well as output increases. If, for example, the money supply were fixed but there were now twice as many workers, there is half the amount of money to go around for each person (but this is not really a problem because money is only useful as far as it is used to purchase goods and services, and in this scenario there are now twice as many goods and services to go around, so it balances out). So if the money supply were completely fixed, you would expect the price of everything to decline over time. However, historically, before the Federal Reserve, prices were relatively stable over periods as long as a hundred years. This is probably because the money supply was not actually fixed - it was backed by gold, and the more the economy grew, the more gold could be mined.

> The government printed more money to pay for the war, but it could alternatively have taken on more debt

Well, this is precisely how the Federal Reserve system works (at least in theory). It doesn't simply hand the government a blank check (although these days it might as well). It lends money to the government to spend. Actually, the process is slightly more convoluted. The government borrows money by selling bonds, and then bondholders sell those bonds to the Fed.

Regardless, the end result is the same, an influx of created money entering the economy. Other forms of lending plays a central part in money creation, through what's called the money multiplier, and the Fed has traditionally targeted inflation by lowering interest rates, making it cheaper to borrow money, encouraging more borrowing, and thereby increasing the money multiplier. So in any event, the cause of inflation is an expansion of the money supply. The money printer by itself is responsible for only M0, but other actions by the government can grow or shrink the larger money supply (M2).

> Value does not come from money

I didn't say that. I said money measures value. Without money, value is purely subjective.

> Real value comes from the goods and services actually produced

Agreed. And making more money over time is a means of measuring "real value" creation. It's a crude approximation (patent trolls and telemarketers are strictly negative value IMO, and they still make money) but it's the best we have right now.

> An increase in productivity in an industry might not necessarily entail an increase in profits for those in that industry.

True. It can also spark price wars and a race to the bottom, which is great for consumers. However companies are required to make a profit in order to continue to survive. Otherwise they run out of money eventually. This is the current reality of balance sheets and return on capital and quarterly results. Wanting currencies to be deflationary under this reality is like wishing that time runs forward for everyone else while you keep getting younger.

> the money supply was not actually fixed - it was backed by gold

Why does anyone give a shit about gold? Why does it have any value? This whole thing is circular reasoning. "Gold standard currencies are good because they're deflationary. Deflationary currencies are good because they're backed by gold".

> the cause of inflation is an expansion of the money supply

When speaking of inflation, I feel like it's necessary to differentiate between nominal inflation (the number on your grocery receipt goes up) and real inflation (percentage of your income/assets spent at the grocery store goes up). Btw, I'm not an economist so I have no idea if these are real terms. But as a consumer, these are the only things that actually matter to me. I wouldn't care to live in the 19th century, when the price of wheat only increased by 10 cents/bushel decade-over-decade, if I couldn't afford enough food to feed my family.

Moreover, given how different everything in the 19th century was (open immigration, tons free land to settle, tons of newly discovered resources, less competition for everything, less well-developed capital markets, less global trade), I'm skeptical about how useful it is to compare prices of consumer goods back then to now.

Sure the money printer makes all the numbers go up in a scary way. But does it make people poorer in real terms? The answer to that IMO is, "it depends". If the money supply exceeds actual value produced in the economy, it does. If not, it doesn't.

Your negative reaction to my comment about the gold standard is misplaced. I only mentioned it to explain the historical characteristics of the money supply, namely the stability of prices during the 19th century. I'm no goldbug and do not particularly care that money has to be backed by anything.

> And making more money over time is a means of measuring "real value" creation.

This is only because that's a characteristic of how the modern money supply works. Money itself does not create value; if tomorrow the money printer turned off and from now until the end of time everyone worked with a fixed quantity of dollars, that would not stop value from being created.

> However companies are required to make a profit in order to continue to survive. Otherwise they run out of money eventually.

They could break even. Anyway, there is economic profit and normal profit. The latter refers to profit on the balance books, while economic profit accounts for the opportunity cost involved. In the pure competition model, the economic profit is driven to zero, yet companies making no economic profit will still survive. If a company can year over year make enough money to pay for its expenses and the expenses of its employees and operators, it will survive. It could make less money one year than the year before, but if its expenses declined as well, it can continue (note that this again doesn't entail less value produced, as more real products could be produced for a lower price). There's nothing fundamental about a deflationary currency that would prevent a company from making enough money to meet its costs.

> I wouldn't care to live in the 19th century, when the price of wheat only increased by 10 cents/bushel decade-over-decade, if I couldn't afford enough food to feed my family.

> Moreover, given how different everything in the 19th century was (open immigration, tons free land to settle, tons of newly discovered resources, less competition for everything, less well-developed capital markets, less global trade), I'm skeptical about how useful it is to compare prices of consumer goods back then to now.

I only spoke of the 19th century only to point out that economic growth is not the cause of inflation, as you had asserted above (with a possible exception in the short run as I mentioned above). It is caused by an expansion of the money supply.

Whether inflation or deflation are good or bad are separate arguments. I think both can lead to problems. Deflation encourages people to hoard money, as a productive investment that isn't productive enough could lose money; without deflation, even if you don't beat the opportunity cost you could have made, at least you're better off than if you had just kept your money as cash. Inflation, on the other hand, encourages risky and speculative investment. It is no coincidence that cryptocurrencies have exploded in price in the cheap money, low interest rate environment we currently have. Anyone who saves money in a bank is essentially losing money. So a good deal of money has been created, and it goes towards chasing any type of asset that is appreciating in value - stocks, land, and cryptocurrency. The S&P 500 has doubled in value in the last five years, but the economy did not even nominally grow by 20%. It is a recipe for a bubble, or worse if the Federal Reserve decides to try and keep that bubble from popping by any means necessary.

Why is illegal transactions a goal? You can hate on governments all you want, but that is the only way currently known where we can have a reasonable say into the laws made and uphold — and order is not a bad thing in my opinion. Why circumvent that, instead of voting someone in who will create reasonable laws to protect us all?

Why do you expect the government's laws to be forever reasonable, or reasonable for everyone all the time? Can you be guaranteed a vote if you've already been made a criminal? I'm skeptical of BTC as a currency, but divorcing the state from the capacity to control who can transact seems like a fantastic check on government power in a world where surveillance is becoming increasingly perfect. Think of Bitcoin in this context as digital cash, in relation to a a potentially centralized digital currency.

I mean, what’s your plan at that point? Move to the wild with a gun and hunt something for food? We can’t separate ourselves from society, and many countries have a way to reform and defend the direction their government is heading. That’s what we should strive to do.

If I'm frozen out of access to my native currency? Absolutely.

We can't separate ourselves from society, nor should we want to. But we should also ensure checks are in place so that society's capacity to control the individual is not absolute, so as to mitigate the negative side-effects that can spring from its convulsions.

Perfect and immediate enforcement of every law prevents many undesireable activities, but it removes what I consider to be necessary alack from the system. It should be enough that the ledger is transparent, and the law can be retroactively enforced when law enforcement is made aware of the violation.

I cant vote in the US. In argentina, however, the government seized my bank accounts and made it illegal to trade foreign currencies.

This assumes your vote matters. Governments around the world are consumed by regulatory capture and corruption.

True, but at the point of a dictatorship, all is lost, unless you leave the country - and that’s why democracy should be protected at all cost. I don’t see how circumventing the whole thing help the regular people, considering the potential increase due to easier availability in illegal activity like human trafficking, child porn, weapons trade, etc. We have laws against them for very good reasons.

> True, but at the point of a dictatorship, all is lost, unless you leave the country

Today's democracy is just a dictatorship in sheep's clothing, and I'm not convinced democratic governments were ever anything but.

> illegal activity like human trafficking, child porn, weapons trade, etc.

Boogiemen... Not that these things don't happen, but that they happen rarely, and the government doesn't even do a good job of stopping these things.

Worst of all good people believe the government stops these things and don't work to protect themselves and their community from them because of this belief.

Jews who fled Nazi Germany would like a word with you.

Nazi Germany was known for having a prototypical democracy, right?...

As we've seen with events in the last year, things can change pretty quickly.

Government has always been the principal enabler of every war, genocide, and mass abuse of human rights through history. Divorcing them from control of money is a massive human rights advancement, and most people recognize this.

Disagree. Power was and is the enabler of said things. And currently, democracy with proper separation of powers is the best we have to manage said power.

The government is just another name for whoever has a monopoly of said power (and violence).

"or asked for ID"

That ship sailed long ago in the US if you use any exchange. Not using an ID is much, much harder now. And is kind of besides the point with a public ledger.

He was talking about paying w/bitcoin. You don't need KYC for that.

It's not a currency. It doesn't even pass macro encon 101 definitional smell test of currency

The level of delusion when it comes to cryptocurrencies - is unreal.

As a market practitioner of many decades, I must say I have never witness this level of froth and delusion before.

I'm studying it with great interest (and a touch of disdain about my fellow humans unbounded rationality/irrational exuberance about cryptos)

It's because once people put their money into a cryptocurrency they have a stake in not seeing it fail. The more they have in the cryptocurrency, the more they need it to retain value.

If your life savings were at risk of becoming worthless, you would also be defending cryptocurrencies as rabidly as these people.

"As a market practitioner of many decades" -- I like that phrase.

In the first phase, it was purely retail speculation. However, we are now entering into a new phase. ETFs are being issued. This makes it easier for institutional money to buy. Also scary. I'm not concerned about "fast money" (hedge funds), but rather "slow money" like pension funds.

Final phase: I notice that investment banks are slowly beginning to open cryptocurrency trading desks. They may trade directly, but mostly they are interested in derivatives. That is my biggest fear. How is that any different than CDS on MBS/ABS/CDO? (Credit default swap on sub-prime mortgage bonds) In short: The underlying was junk loans. Derivs on crypto feels like the same wolf, but in a different skin!

Seems like cryptocurrency mania is substantially more insane then tulip mania.

Ah yes the typical HN commenter who sees hundreds of millions of people doing something and assumes that he knows better.

All crypto posts poke the hornets nest of angry engineers here at HN because (I think) crypto is now 90% a finance/economic/social phenomenon. There is little new to say from a technical perspective but people who are super smart in one field think it should generalize to a vaguely adjacent one. I’ve spent quite a lot of time on this stuff and the potential of Defi is massive compared to 99% of trad fintech startups but its impossible to even keep up with.