It all depends where you look. In some niches, BTC is used a lot. In some niches it isn't used by anyone (hi HN!) But it's a big world out there, and if you look outside your bubble it's not hard to find people using it.
Re: the last paragraph, BTC did indeed crumple under load for a long time around ~2016, and transaction fees were very high as a result. But lightning network has appeared since then and fees are back down to reasonable levels, well under $1. Those were serious growing pains, but we made it through just fine.
[1]: https://news.ycombinator.com/item?id=31914284
[2]: https://www.wsj.com/articles/how-crypto-is-helping-ukraine-r...
Ukraine's banking system is both online and functional:
https://kyivindependent.com/hot-topic/ukraines-banking-mirac...
Regarding donations to Ukraine, the total value of donations to Ukraine has been around $900M so far [1], of which only $7M has been in crypto (according to your WSJ article), so less than 1%.
1. https://fortune.com/2022/04/15/how-much-donated-ukraine-war/...
Vitalik alone donated $5M. https://fortune.com/2022/04/08/vitalik-buterin-ukraine-donat...
This page says $60M has been donated to one specific organization https://donate.thedigital.gov.ua/
Here's another one that says they've collected $9M https://unchain.fund/
I'm sure there are others.
Those are basic for doing business. People share them with everybody they deal with.
I already have to trust my power company, most of my credit cards, my ISP, my gas company, and my landlord with my bank info, all of which are probably less secure and trustworthy than Pornhub...
Contrast that with explicitly authorizing PornHub to withdraw from your account at their discretion, as is the case when you're giving them your account/routing number on a web form. That info then gets stored in some database.
And no, I don't give utility companies or landlords or what have you such authorization, either. I mail them a check (thereby not giving them cause to store the account info long-term and not giving them consent to auto-withdraw), or I use a credit or debit card (which I can dispute or change far more easily than I can a bank account). If they accepted cryptocurrencies, then I'd pick that over either of those options.
we know that you know, and that we know, but the comment was saying that most people don't.
That bar is so low I couldn't even trip over it.
I could use that data to extort at least 10% of those people easily (religious people, celebrities, politicians, etc). This is disregarding the price that I'd get for just leaking the other 90%.
Now imagine the fallout of somebody downloading the same info for a local brewery, a big tech company like Atlassian, a household brand like Staples, or even great big Amazon.
The floor is different from what people will sell it to you for right now.
AMZN may have a floor of $ASSETS / #SHARES (or something, I just made that up), but that doesn't mean anyone will sell it to you for that right now.
I’ll sell an American-style options contract to someone who thinks BTC is going anywhere near there at Black-Scholes -75. And I’ll have no trouble financing it.
You want the other side?
If you want to take a big position, talk to someone like Wintermute who has a big OTC desk, or if you want a better deal, find a friend of a friend. Someone you know knows a whale.
You can buy puts at the $25k strike dated June 2023 for $4300-4800.
[1] https://app.ledgerx.com/btc There was a link that doesn't require login but I forgot it.
As well as it needs to be when you’re up against Yi He, that chick gives Bill Gates nightmares: she’s a fucking force of nature.
Are your court shoes laced?
EOY 2022 $15k strike: $1700-2000
EOY 2022 $10k strike: $700-950
June 2023 $25k strike: $7400-7900
They have full openly auditable reserves and all their code is open source and visible on their respective smartchains. Wanting an institution to provide a sub-par solution for this is a cop-out. Put up or shut-up.
You’re talking 12k-15k, which is a much more interesting options chain.
Maybe you already knew that, but if not you’re a natural.
I don't understand what Black-Scholes means, but if you're willing to take 10 to 1 odds in my favour I'll draw up a smart contract: we both deposit USDC and receive tokens for our position which can be resold if desired; if bitcoin hits $1000 or less according to the Chainlink BTC_USD oracle at any point between now and 10 years from now, I get 10 USDC for every one of mine wagered
You think BTC is going to drop like 20x in a sane options duration?
I think a lot of people would sell you that.
In some niches, BTC is used a lot.
The value if BTC is primarily driven by day-trader hype, IMHO.
The minute you offload any of that to other systems, you're essentially creating dark pools and money laundering opportunities because of differential oversight.
It's particularly funny, because I remember Justin Sun trying to scam people like this years before cryptocurrency had really taken off. Back then, though, everyone who had skin in the game actually cared about the health of the community, and the guy lost millions of dollars trying some really insane hostile takeover tactics. Nowadays though, nobody cares. The hucksters of this world make their money hand over fist now.
You could look at L2s as a sort of credit card system, and from a systems and technology POV there’s nothing inherently “scammy” about it. For web3 applications of any meaningful large scale, L2 solutions are necessary.
For better or worse, the L2 developer platforms that I assume you’re referring to are essentially low-code solutions to abstract away the actual systems software engineering aspect of web3 development. Are the low-code SaaS companies overvalued or “scammy”? I’m not suggesting they are or are not.
Well-staffed tech companies building web3 applications often build their own implicit L2 solutions because it’s just how you connect things in a distributed system with modern L1 blockchain constraints.
I actually agree with that about Bitcoin.
Web3 is generally done on EVM or cosmos chains, some of which are L2s (and some of which are loosely considered L2s). But most of them are still separate chains, so not L2s in the sense that the Lightning network is an L2. If you're looking at EVM chains, then L2s are certainly required to handle significant throughput, but the "lack of transparency" mentioned by GP isn't an issue with them.
Translation: we will rebuild existing financial institutions with a bunch of move-fast break-things poorly-regulated "difi" companies which will both intentionally and through ignorance recapitulate every flaw of the existing financial industry.
Purpose: as in the Celsius case, to intentionally exploit regulatory response time so as to extract money through opaque extra-legal and unethical exploits, intended to allow ourselves and chosen insiders to run off it, leaving deluded last-fools holding the bag.
There is literally no benefit to anyone except the VC backing the scam, who are using chaff and FOMO to farm rubes.
It doesn’t matter if it’s crypto or gold, there will always be people manipulating financial systems, but that doesn’t mean any system is inherently good or bad.
https://en.m.wikipedia.org/wiki/Financial_crisis_of_33
https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007%E2%...
Sure. The banks do the exact same thing, which is what makes them so goddamn profitable to run. The problem is that the entire cryptocurrency space now has to choose between two destinies:
a. Default on the trustless model in order to continue scaling, passing the actual verification process to private validators who may or may not be scamming you.
b. Let every token lose it's value, allow the system to suffocate and continue pushing for airtight security until the bitter end.
Now, neither of those are attractive choices. I'll tell you what, though: I'd rather have a $20 bill than $20,000 of Monopoly money.
All currencies we use are smoke and mirrors. The difference is that that $20 bill is backed by well armed US Marines and an crypto currency is not
I can't say for sure without actually seeing the tech, but if a company promises to scale cryptocurrency transactions then they're probably doing it on an L2 chain. The problems with this are obvious: trusting a single party to handle all of your transactions and not abuse that insider info is crazy. These people are going to use their power over the chain to eke out every cent they can, otherwise it doesn't make financial sense to operate in the first place. It looks attractive from a VC standpoint, but that's because it's a deliberate honeypot.
Which is interesting for many applications but kind of kills BTC as something that could be an everyday currency.
I'm already uncomfortable with the amount of data my bank has about me. No matter what scheme has been used to obfuscate it, I'm not comfortable with that data being held by anyone with a hard drive and internet connection.
I don't get why this is a useful argument; BTC and/or Crypto is definitely going to evolve. The question is how.
DeFi may need to evolve, and it may need to do something other than blockchain - but something pre-product/market fit shouldn’t have a multi trillion dollar market cap.
> This is true for all blockchain-based currencies, and it's fundamental to the technology. There is no "fix". It's not just a case of poorly written code or limited infrastructure, it's the core premise of the idea that's rotten.
You are very confident for someone who seemingly hasn't researched much about optimistic and zero knowledge rollups. These systems inherit the security of Ethereum while providing exponentially greater transaction throughout which means scale improves and these networks cannot steal your money or do anything nefarious.
Even setting aside the fact that you're wrong in practice (i.e. there are already far more efficient cryptocurrencies in existence today) it's just very weird that the sort of person who goes to a site like this will confidently say something that's roughly equivalent to "We've reached the maximum speed of CPUs, they cannot get faster than this."
To anyone who spent a few hours, days, weeks looking into crypto a few years ago and thinks you have any idea what's been going on in research in the field since then you're sorely mistaken.
Except who vets the smart contracts? How does the customer execute the transaction in a fool proof way?
In real life, the things we "Contracts" are not the the execution of the transaction itself, they are the written statement that attempts to describe the intent of the parties and most importantly -- what you do if things go wrong.
Despite what I've said above, I will definitely go full Luddite and say we are not remotely close to a world in which the lawyers are not needed.
"Building a house" is not a contract. It's an act.
They're NOT CONTRACTS. They're automated transaction robots.
I gave up telling people not to call cryptocurrency "crypto" — I would suggest suggesting a better term, or expect to be disappointed/it to continue.
Now, as a lawyer, I could just sit back and wait for the f**ups to happen and get paid cleaning them up -- and I might -- but also, I like the idea of warning people as well.
The breaking of the gold standard has allowed the US government to extend its monetary base significantly, which is a price future generations (read: our generations) will be footing the bill for.
I'm a bitcoin maximalist, but I don't mind if all existing banks were to build a second layer that scales vastly, so long as I'm allowed to settle my bitcoin in their ecosystem with bitcoin on chain.
This is why second layer solutions are being built, which offer the option of settling on-chain at the user's request. Second layer systems allow you to transact within that system without needing to publish each transaction. Block space is valuable, and your 1c purchase probably isn't worth putting on everyone's hard disk for all eternity.
Bitcoin is actively managed to prevent bloat to keep it decentralized. A layered system allows you to scale massively, much like the OSI model used by the internet.
https://watcher.guru/news/morgan-stanley-says-bitcoin-lightn...
That is not true. The US isn't forcing anyone to use the dollar, e.g.: https://www.wsj.com/articles/saudi-arabia-considers-acceptin...
Saudi Arabia only get to price in Yuan, because the US can't afford to invade China. The unipolar world is fraying at the seams, and one wonders what will happen to the dollar when the US government can no longer lean on the petrodollar to enforce it's world reserve status.
Check Lyn Alden's piece on the history of the US Dollar as world reserve asset [0] for a vastly superior exposition of facts regarding this matter.
Bitcoin is a 0 calorie apple, today you can exchange it for 1 banana, people who hold it think tomorrow they'll be able to get 2 bananas for it.
At the end of the day we are biological entities, value is what survival and reproduction benefits we think something can provide, and if enough people are paying that price then its value is that price in dollars.
This matters. Even gold, at least I can wear it and display my wealth. You can’t even display your crypto wealth like that. It is entirely lacking in any “real” value.
Idea: luxury tshirt made out of a $5 white tee with a wallet QR code slapped on the front showing off the balance of the shirt. Or a ring. Crypto fine jewelry.
I understand cash has this same issue. Assets do not - they provide an actual value to the physical world - which is what my point was in the above statement. A crypto t shirt can still provide value as a t shirt, regardless of the value of the coins it holds. I’ll admit it’s a reach, but just to illustrate the point.
What gives money its value? Well it depends on the money. Fraud, violence, trust, in the case of Bitcoin: cryptography and game theory.
> Breathable air and drinkable water have the greatest real value of anything, but their marginal values are zero and near zero respectively for a number of reasons
Case in point. Sure, abundant now. But when they are not, which we know is actually happening, that “0 marginal value” will quickly become “whatever we can afford so we can survive”.
The original QE decision by the fed was taken during a meeting that has meeting notes that can be downloaded. I highly advise you to do so if you are under the illusion that the decision was made by highly competent experts basing their decisions on hard data and well-made, objective models.
I'd feel much safer displaying large sums of wealth online by posting a wallet than by wearing luxury goods in public.
I wonder if there's an argument to be made that nothing is of any real value unless there's also some risk of losing it.
e.g. you drop your apple in a gutter, or someone takes it from you, or it turns out to have a nice fat worm inside it
If you're looking for a commodity to have trade or exchange value, then it must be tradeable or exchangeable. That's the notion of "inalienable" as used in the US Declaration of Independence: rights which cannot be alienated (separated) from the individual posessing them. Life, liberty, happiness being the three used in that document.
This doesn't mean undeniable, and there might be some value which can be extracted through threats of denial: "your money or your life".
And there are aspects of value which can be exchanged though the good itself doesn't move: title, copyright, and patent rights might be three such of these. If I transer you land title, the land itself doesn't move, but the claim to usefruct from it does.
A hypothetically nontransferable, non-appropriable technical asset is still subject to claims if a superior right or denial of access to that asset may still be claimed.
And in general, a currency which is used to facilitate trade should in general be portable, readily recognisable, divisible, durable, and homogeneous, all attributes William Stanley Jevons proposed in 1875:
https://archive.org/details/moneyexchange00jevorich/page/30/...
(He also claimed money required intrinsic value, which appears to be an error. Rather, intrinsic value exchanges for trust within the financial system.)
That said, an interesting suggestion.
Life, for example, is extremely valuable. Everyone loses it, but there’s no getting it back. If you lose the apple, you can probably get another relatively easily, unless we’re talking a post-apocalypse situation…
It's the web3 version - in web 2 I'd be instagramming my knockoff Rolex I bought in Tijuana
Would you show off real SOL tokens of that qty?
Would you say there is value in having the capability to transact with someone else? There is some value there, no matter how many alternatives and how little that value is. That value scales exponentially with the number of potential transactional partners because each additional partner gives all other partners a new potential transactional partner.
So at scale, even if the value of having the option to trade is minuscule, it balloons into real value when every single person on earth is a potential trade partner. That is the inherent value of a cryptocurrency network.
Likewise, that's the same market for any currency proposal -- including all the coins currently trading at 0 USD.
Money's job is not to have inherent use-value, as then people would use it up. Its value is relational, it tracks the economic exchanges with actual inherent value. But not perfectly, since you can eg., have hyperinflation, etc. So money has a life of its own above the economic transactions, but this is unsustainable, hence inflation which is "money falling back to earth".
There is no earth for crypto to fall to, ie., no place of actual economic productivity.
Facebook isn't valuable because anyone on Earth could use it. It is valuable because people do use it and its value has the network effects.
Coins trading at 0 USD have no users, thus their value is 0.
Money must have inherent value (at least the capability of being traded) for it to be money.
I don’t have a horse in the race, just trying to understand.
The key to a cryptocurrency store can be memorized in your head. That means I can have 2mil in my head, with no other way to access it. I take it wherever I go, and can access it when there is internet. I can also send it to whoever I want, no limit.
This is literally a 1st. How high people value that, is not up to me alone. But you cannot deny that it has some value. And as long as it has some value, the above works. It basically bootstrapped itself. Claiming it has a value of 0 is very short sighted.
Also, nobody quits MasterCard et al because it relies on the internet...the transactions are cached, and the few problems when things come back online are dealt with as a standard "doing business" item — everywhere from insurance agencies to corner stores.
Companies like McDonalds operate on credit via privately owned payment rails because ACH and cash are way too slow. Even when it takes cash that cash is not physically shipped to a bank vault at McDonalds HQ but instead local restaurants make cash drops to other private companies, banks, that then take possession of the cash and use their own private network to credit a remote account.
Even tax payment portals allow use of the payment rails of private companies because paper USD is too impractical.
Still, the fixed supply of federal reserve issued USD is what all these magic third party payment rails create an abstracion layer for.
No one Bitcoin advocate that knows how it works is saying Bitcoin will be used -directly- for daily commerce. Even in El Salvador venmo-like apps have emerged that batch Bitcoin transactions and use credit, much like Visa does to abstract slow ACH or cash.
These proprietary credit systems defeat a lot of the point of Bitcoin though, so open off-chain credit systems like Lightning exist. My local Coffee shop accepts Lightning which in short allows us to just continually cancel and re-issue signed Bitcoin transactions off-chain we never publish until one of us needs to settle which in some cases could be years, and that is fine.
Unlike Visa, the benefits of credit solutions like Lightning are available to all replacing KYC and credit checks with cryptography.
Also going back to your point about taxes, several states have serious efforts to get Bitcoin permitted for tax payment: https://www.deseret.com/2022/2/8/22918061/wyoming-arizona-bi...
There's something else El Salvador has too. Two really fast ACH networks. The fastest one can do inter-bank transactions in seconds during banking hours. And a second slower one that takes about 15 minutes but covers more banks and is available every day of the year. Payments cards are slower though, they usually take between 2 to 5 days to clear.
I see a lot of clearly incorrect information being displayed here about l2 such as Lightning Network, and at odds with reality. I'm not addressing the posts but it seems lately HN comments have nearly become a pile-on of misinformation bike-shedding about Bitcoin and in the face of reality, these folks want to spread outright lies and falsities. You may not own Bitcoin and you may not like it, but it's going far when hundreds of comments are so boldly misleading. For folks who are into science and technology, and some who are hackers, the ethos doesn't check out spreading misinformation about energy usage, centralization, and fairness of the system. When I was growing up, hacking was all about freedom to explore, libertarian bent, and/or anarchy.
The cypherpunk movement from which Bitcoin sprang was very libertarian or even one could say classical liberal. This article attempts numerous times to, for some reason, compare libertarianism to communism which is quite absurd. Libertarianism is for as little system of government as necessary, for staunch individual liberty and property rights, and hands-off free market economies. Clearly, communism is for state controlled property and no individual rights, one-world state, and no individual rights at all. Communism seeks to replace free-market economies with everyone equal and no individual rights. It's absurd on it's face to even compare libertarianism to communism when they're at opposite poles. At any rate, I would hope people don't take all these fear-mongering anti-crypto articles just at face value and do some research into what crap they're reading.
If you don't pay your taxes, you don't get to participate in the local economy for very long. Men with guns will eventually come to your home and take your stuff and/or take your freedom.
You can't even do direct barter without cash without incurring a tax obligation in the US, https://www.irs.gov/taxtopics/tc420, so even if you live your life like this, you still need to find a way to get actual dollars to pay your taxes. This is what creates the basic and permanent demand for dollars.
The simple truth is that every government is at its core the biggest, baddest gang in the land. The old royalty were literally mob bosses, and often presented themselves as gaudily and arrogantly as the street gang bosses in the modern age. They have the monopoly on violence in their realm and then printed a bunch of tokens that they demand as tribute for the promise of letting you live your life in peace. Because they control the issuance of these tokens, they effectively control the flow of the economy and can more easily manipulate people. They can't arrest everyone, so there's still a fine balancing act required to keep the masses generally consenting of the arrangement, with just the right show of force to reinforce the system.
But other things beyond currency are still money, like gold and bitcoin, because money is just something scarce that you hoard in the hope that in the future, you can trade it for at least as much goods and services as you originally traded for the money, if not more. Anything scarce can be monetized when the currency becomes less scarce, which is part of what is driving up housing as people hoard it as a better store of value than currency. And importantly, making the thing you store this ethereal "money" in even more scarce relative other things increases the value of your own, which is part of the driving force behind NIMBYs who block new housing developments.
Yes, this is the part where the government (state or federal) delivers value, such as education, healthcare, natsec, and generally facilitates the ability to do business via the court system. I think it’s disingenuous to make the argument you’re making without acknowledging the value that government provides.
Were.
I don't know if you subscribe to the political analysis of Adam Curtis but in the past two decades governments have been passing their power to private banks, corporations, QANGOs and "non majoritarian" think-tanks like it's a hot potato. The new breed of politicians are not statesmen but revolving-door temporary managers who would sell-off and outsource the whole country for personal convenience.
Other than a monopoly on violent power (which is vanishing fast in the USA as private cops and prisons take over) it's hard to locate the power of government sometimes. Even the military is dissolving into a loose collection of defence contractors. In the UK our intellgence services were more or less sold to Amazon.
The OP article seems dead set against anarcho-libertarianism but it is by no means pro-government, or explicitly pro-democracy. With regard to money and economics, from my moderately pro-government/state stance I see the great mistake governments are making is giving up on cash.
Physical currency is an absolutely vital component of a stable economy. Its very lack of instantaneous fluidity (it relative inconvenience) means it acts like a capacitor to stabilise markets if you can manage circulation and interest. Moreover, governments have a strict monopoly on that, and physical currencies can take on many new guises with modern cash technology. Abandoning that would be suicide.
If governments get into a battle to take the ground of purely digital currencies against crypto, they will lose. They are making this mistake in an attempt to gain legibility (surveillance). Ultimately they will have to choose between surveillance and economic control. And since the value of surveillance is massively over-rated I am optimistic we'll pull out of the Orwellian misadventure in time.
Anyone genuinely interested in defending against the "ideology of crypto" (as this article posits) should be investing in new cash technologies (some of which I have mentioned in earlier comments here). They should be promoting a plurality of diverse cash equivalents (many of which can be implemented using cryptographic technology - not necessarily block-chain).
Based on this statement, the currency need not be physical. It sounds like all that’s really necessary is to moderate the money supply (something that is already done in a federal reserve banking system).
What am I missing? Is there some other aspect of physical currency that makes it advantageous?
Governments are made of individual actors, in the US these are often buying cryptocurrency. Their friends have invested in and built cryptocurrency companies. They hold investments in cryptocurrency companies.
Cryptocurrency IS the capacitor you're talking about, the policy of the US is showing this more weekly.
This idea is at odds with the concept of the modern nation state. You can't have running state institutions and an army that, in theory, should provide some level of security of the state borders. Having many groups of people, each exchanging peanuts, beans or stones would lead to a decreased level of trust and no concept of national unity.
Good.
Even if it’s just an economist weirdo I’d be curious to see what the argument is there
https://www.irs.gov/businesses/small-businesses-self-employe...
The notion of property rights is only relevant with a central authority who is able to enforce it. Which could be a nation state, tribal chief or a lord. In the jungle you only own whatever you are able to defend. Even your own life.
The same was true for salt, and many more local kinds of money that existed.
It's also the same trust you need for fiat money. This, and trust that your government won't create a huge lot of it in an instant (slow rates of money creation are fine). Turns out that governments have a lot of leverage to enforce the first, more relevant kind of trust, so the total trust required decreases.
The idea of cryptocoins was to remove the trust on nobody creating a lot of money very fast. But in doing so, they also lost the leverage to enforce that people will accept it.
The innovation of bitcoin is precisely making this statement no longer true. The "property" might only be digital data, rather than physical things, so you can argue that it is no longer true in only a limited context, but it is not longer absolutely true.
Maintaining BTC itself requires physical inputs and physical property rights. You need fiat to buy energy. Your house with mining rigs needs enforcement of property rights.
> You need fiat to buy energy.
This is a circular argument and not true. You can buy energy today with gold or bitcoin.
For 'fiat currency', it's the fact that the state has a monopoly on violence and has decreed both [A] that they will accept the fiat currency for fulfillment of tax obligations, and [B] that they will not enforce a claim of debt if you have offered to pay it in fiat currency and the debtee didn't accept your offer.
For gold it's the fact that gold is considered intrinsically pretty by some, and has industrial uses.
The same can be said for iron, wood, or even air - but those are far less rare. Wood has value just as gold does - it's just that folks tend not to trade trailers full of wood as a fungible because it is unwieldy.
Stocks have intrinsic value too: It's a tiny voting share, and gives the right to enjoy a share of dividends.
Bitcoin has __nothing__. Whatsoever. It's real easy to look at the ridiculous price of stocks in companies that make it incredibly difficult to use your vote and which never pay out any dividends, or the sheer unfathomable levels of business done in terms of USD or EUR and how it seems to dwarf the intrinsic, and conclude that the intrinsic is just not important...
But is that a jump you can make?
As you said:
> I accept 100 euro bills for my labour because I believe I'll continue to be able to trade them for food and shelter.
You sure? Maybe it's 1% 'because I have absolute guarantees I can pay my taxes with this, and I have a guarantee that I can trade them for food and shelter because if I pay my bills with dollars and the recipient no longer wants them, they have no legal recourse to force me to make good in any other way'. Presumably you have certain outstanding debts that work like this (if not just simply your tax bill, which is inevitable, then your power bill, your rent or mortgage, etc), so that euro bill __already has value__ the moment you receive it. You can take your mental bookkeeping of 'oh yeah the month is halfway through so I absolutely do, unambiguously, owe my bank half a month's mortgage at the very least', and immediately reduce that amount by €100,-, given that you are holding a €100,- bill in your hands and the state has decreed that they will tell the bank to get fucked if they decide they no longer want to accept your euro for paying off that mortgage.
As for Bitcoin, the original Bitcoin paper talks about replacing trust with code, and I just don't buy it. Sure, you can trust that Bitcoin aren't spent more than once and all that, the maths take care of that. But it fails to consider all the institutions that integrate the Bitcoin world with the rest of social/economical reality, and all that arises there like price volatility, transactions taking forever, exchanges getting hacked, and that Bitcoin-as-a-casino, excuse me, object of speculation, has a far bigger impact on its day-to-day than for e.g. the Euro. The paper doesn't consider that reality at all, but those things mean that 1000EUR worth of Bitcoin is a lot less useful than a stack of fifties.
There arent really many counterexamples and arguably the counterexamples have extenuating circumstances (e.g. dinar under saddams occupation).
—
What are some of the counterexamples?
No one facing a hyperinflationary death spiral says "oh well, at least the government will take taxes in this crap" they desperately cast around for a stable place to put wealth.
One: gold is the og currency, it doesn't have to prove its value because it already did. Two: it is also being actively used for transactions, look no further than jewelry. If you have gold, you will find someone who is willing to exchange it for something else with material value in any city on the planet. This is not the case for crypto.
No? You don't think the following statement is as true as the one you made?
"If you have Bitcoin, you will find someone who is willing to exchange it for something else with material value in any city on the planet"
My experience would tell me otherwise, but maybe I'm a outlier.
Bitcoin wins.
See, we can do this all day. There are points of comparison and points of departure.
1: Cryptocurrencies can still operate over distributed mesh networks or sneaker-nets in a semi-doomsday scenario.
2: With gold, it is difficult to verify its authenticity vs some impostor alloy without the necessary tech/knowledge.
Edit: the bottom line is that in a doomsday scenario, people have little use for bitcoins or shiny yellow rocks.
However, gold has a fundamentally stronger argument for its value. Gold is useful: it has unique physical and chemical properties.
Gold is drastically more difficult to transact in than bitcoin or any cryptocurrency. Not only is it extremely difficult to create exact change to pay in gold (shaving of milligrams per dollar?) but there is zero infrastructure or education on how to verify that the gold is real. Even modern nation state banks have been fooled by tungsten cored bars of gold.
There are plenty of well established crypto apps that make receipt, verification, and conversion into your preferred cryptocurrencies or fiat currencies instant and effortless.
My parents bought my childhood home with physical gold bars (around ~3.5kg gold, in bar of 37.5g each)
It's also intrinsically valuable for jewelry and industrial purposes. It's irreplaceable in electronics, for example.
Cryptocurrency that can't be sold to someone else has absolutely no value. In fact, it has negative value because of transaction fees, something that plain cash doesn't have. I can send someone $100k with a $0 transaction fee.
First silver, then gold, then platinum, now palladium and rhodium have ridiculous values associated with them.
She proposes three ways, including valuing cryptocurrency as we do precious metals.
https://www.americaslibrary.gov/jb/gilded/jb_gilded_monument...
I actually agree with you. :)
But I don't think you can say the same about bitcoin. Bitcoin's fundamental utility is low, even compared to other cryptocurrencies.
Gold has useful unique properties over other metals. Bitcoin does not even have useful unique properties over other cryptocurrencies.
https://mappingignorance.org/2017/02/09/electronegative-gold...
Makes me wonder if there are a ton of unexplored properties and usecases for rare metals that we just haven't discovered yet.
No current cryptocurrency that is even remotely decentralized, offers good throughput / scalability / tps.
Bitcoin has Lightning and it's in my opinion fundamentally flawed in its UX. It hasn't picked up much adoption after many years for what it's worth.
Ethereum has many L2 solutions in development but they are many years away from being finished (actually scalable, safe, decentralized)
I don't know much about other cryptocurrencies but from what I've seen they all are either very centralized or not scalable either (see the Blockchain Trillema)
But also the premise of your argument (taxes and oil) is weak. The value of these transactions pales in comparison with the rest of the transactions. So government enforcement has little to do with the value of USD. It has value, because people believe it, they trust it will be accepted and / or easily converted to the currency of their choice.
D'you think it might have something to do with the state willing to violently require you accept its currency?
Back in medieval and later times, when states were much weaker than they are today, especially economically, and especially small states, people chose which currencies they trusted, and often ignored the coins their local state was minting in favor of other, more trust-worthy coins minted in other places. Those places had no direct power over the people using their currency, and these people were not paying any taxes to them - they were simply choosing a currency they knew was likely to keep its values over the years.
This does happen occasionally in the modern day, with USD-based economies outside the USA, typically in countries with runaway hyper-inflation in their local currency.
Trust is the key.
Higher velocity of money would lead to zero value? That's not commonly what basic economy dictates.
This being 2022, let's try to keep our concepts clear as to not rehash the debate from ten years ago. BTC is a currency, a blockchain, a programmable transaction language, a piece of software, and a protocol. It is good to suggest which one of these we imagine in use, and how that use is done.
Otherwise we risk saying that imagine if the physical $100 bill was used for all McDonald's transactions, clearly that wouldn't work, they are too hard to subdivide and even if they weren't there simply aren't enough of them, and therefore it is unusable as a currency.
Clearly McDonald's couldn't operate each and every economical transaction by settling them publicly on the BTC block chain, that much is obvious. But just as clearly there's nothing stopping Visa from denominating transactions in BTC, or utilizing that type of transactions internally, or utilizing the public Lightning network, or whatever it is McDonald's use in El Salvador. That much we probably agree on so let's leave that discussion in the past decade.
I think you missed his actual point, which to be fair wasn't explicitly stated and I don't think is widely known. The bitcoin network can not handle large transaction volumes, like at all- its absurdly low. Somewhere around 10/second is where I understood it to stand, and I recall reading a paper that talked about changes that could theoretically get that to 40/s. A quick googling on the state of the art of this has it reporting 7/second: https://www.google.com/search?q=max+transactions+per+second+...
I know this because this came up around 2016ish during one of the booms, and while I was previously crypto-curious and even a bit enthusiastic about the possibilities, once I saw that, I immediately lost all interest and got out. Other coins like Bitcoin Cash tried to address this, but the numbers were still absurdly low for what was supposed to be a completely decentralized currency to replace all others. Which is actually why Coinbase, FTX and the like rose so quickly and became so important- they enable transfers off chain.
Even if Bitcoin was primarily transferred between custodians between clients, it would still be better than USD (assuming a stable market cap) and give clients far more options while also forcing banks to disclose reserves.
Then you moved the goal post. If Bitcoin is pointless because it has no use case, you would have started with that point and not been drawn into critiquing an aspect reliant on the assumption it is useful.
There is a small amount of industrial demand, but this is far too tiny to justify gold's gigantic market capitalization. Valued on industrial demand alone gold would maybe worth $100/oz, yet today it trades at $1700/oz. And it has held a lofty valuation more than half a century after all major economies abandoned any gold standard behind their fiat currencies.
The only possible explanation for gold's continued valuation is that it's quite possible for assets to exist as money-like stores of value without necessarily needing to possess a functioning role as a medium of exchange or unit of account. Moreover what we can see is that store of value assets are highly path-dependent. Rhodium has similar properties to gold, yet gold is far more widely used as a store of value. The sole explanation for this is because of gold's historical narrative.
Gold is conceptually very similar to bitcoin, except gold can't be forked or copied. Which is why in the long term, I prefer gold.
This is what gives Bitcoin much of its value as well.
> Gold is conceptually very similar to bitcoin, except gold can't be forked or copied
This touches on another thing that makes Bitcoin valuable - consensus. Enough people agree to use it that it becomes the defacto standard.
Bitcoin (and Ether to a lesser extent) are the “rough consensus and running code” of decentralized algorithmic money
The two points are related. It was much easier to synthesize Bitcoin when fewer people were using it, and it’s market value was less.
This auto-scaling of difficulty with interest/value was added as a security mechanism but actually plays a key monetary role as well.
The vast majority of gold investors are not physically storing it on their own property. Most invest through funds, derivatives, ETFs, etc. If civilization collapses to the point the Internet can no longer support a peer-to-peer network moving 1 MB every 10 minutes, then it's almost certainly the case that you won't be able to sell your GLD stock at NASDAQ.
The point being that while some gold investment demand may be as an armageddon hedge, the behavior of most investors is not consistent with that being the central driving factor. Ergo gold has utility as a store of value for macro conditions that fall short of civilization and the Internet collapses.
Not really. You just need some way for nodes to communicate. That could happen over the Internet, or it could happen over mail, or it could happen over a team of ravens carrying transaction data on little scrolls (hell, given corvid intelligence, they might even be able to execute smart contracts in transit).
Practically, you are talking nonsense and it's patently impossible. You cannot run any crypto currency with a system of letters even if you're transporting them with the full infrastrcture of the modern world with it's airmail and diesel vans.
Try and do it with letters delivered on foot. It is actually impossible.
The existence of IP over Avian Carrier demonstrates otherwise. It's slow and it's lossy, but it's good enough for a blockchain.
The reason people believe gold will retain meaningful value in a situation where nothing else does is thousands of years of history where it did work out like that. It's debatable (to say the least) whether Bitcoin with its mere twelve years of history and inherent dependency on easily disrupted digital networks could have the same properties.
That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.
The thing about money is that it is a technology. But unlike other technologies, such as an electric toothbrush, for instance, it has an additional quirk: without belief, it doesn't work. Regardless of whether or not I believe in electricity, an electric tooth brush turns on and off; if the participants in an economy don't have faith in the economy, the economy falters. Money's value lies in this belief, whether it is the belief that I can buy groceries or pay taxes. It is a faith that is a function of utility: there is the interdependence of the gods' delivering and my belief that they will; should the gods not deliver sufficiently, my faith wavers; likewise, if enough of the faith of the masses wavers, the gods fail to deliver.
Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent.
Scenario: we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin.
Very nice point, you're not wrong. That being said:
>we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin.
Because it has properties that qualify it as a method of exchange (portability, provable chemical composition [...]) -- the same reasons it worked the first time. Mr Bean-Haggler, what else do you suggest we use for exchange? Mud? :-)
Gold is transitorily convenient provided you exercise military force over a domain - that is you can force gold to be accepted for debts within your dominion. Nothing about it makes it intrinsically valuable otherwise - and more importantly you having gold doesn't grant you wealth because you didn't economically contribute to the system to start with.
Turning up with all the gold you want would get it rejected or siezed because it wasn't an approved coinage.
The reason I use the post-apocalyptic scenario is exactly because of this rupture of social relations. It is not the ghost of the previous civilization trying to reconstitute itself. It is a place in a wilderness onto which people might stumble. (Admittedly, this might not be communicated well and too informed by my early secondary consumption of old western movies.)
Without this broader social context, the concept of trade becomes purely localized. My needs are not serviced by an explicit diffuse network which is conceptualized as an aspect not just of society but constitutive of reality. Operating on a faith, we take the conceptualization as reality and can accept, in our lives now, intermediary exchange: I firmly believe that by accepting an electronic transfer to my bank, I will be able to buy sweet and salty food that is engineered to appeal to my dietary obsessions as bequeathed by a combination of evolution and social conditioning.
In the midst of such a thought experiment, however, I am not guaranteed to encounter another haggard individual in this hypothesized godforsaken world for a very long time. Neither am I guaranteed that any individual I meet will have such social relations as to value such an intermediary, either.
Intermediary exchange is only viable once the pool of social relations grows beyond a certain bounds.
The function of my acceptance of any system is the fulfillment of my needs, to some degree. In such a scenario, the only way those needs can be serviced is an equivalence of exchange. In this case, food is required for immediate survival, the tools of procuring such, and shelter, etc. Intermediaries, in such a scenario, provide no guarantee to provide such. So such must be acquired directly. I can eat beans. To take the gold assumes, incorrectly, I can obtain another can or equivalent. That incorrect assumption is a holdover from the fundamental and all-pervasive faith we are at present steeped in and that must be maintained for our reality to function.
I unironically suggest having a box or two as a hedge, no associated weapon needed.
A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes.
In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
>If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?
What do you think this means? Because gold is only worth what you can trade it for - the exchange rate.
It has no "inherent value" - you don't eat gold.
How is that different from using the gold? i.e. has the same limitations.
There are rational reasons for the gold standard having been dropped.
In this scenario, labor power has been replaced by GPU power, which can be measured in terms of electricity. Everything from ordering a meal at a restaurant to building a house to designing a new computer system can be measured this way, and the price of everything is tightly coupled to the price of electricity and the price of compute.
Under these conditions, it might make sense that programs/robots would incorporate smart contracts or participate in some sort of generalized proof-of-work system to finance themselves. Running a program would require currency as input to cover the computational cost of actually running the program, even if the program is open source.
That's where I see this going. Traditional currency is great for incentivizing human labor, but the problem is it's not designed to be programmable.
Physically impossible: yes - you've suggested using a currency made by the infinitely wasteful PoW system to finance the power used to compute something useful. You might as well try to fly by pulling on the arms of your chair.
Witness Moscow commuters not being able to enter their metro as Apple Pay cuts them off.
Witness the AML surveillance regime shutting out entire countries:
https://www.coindesk.com/policy/2020/10/23/money-reimagined-...
Per your example, ok Apple Pay got cut off. Is the transit system going to support crypto? Will they be able to run their business and make that transition with regulators? It’s a drastic measure that cuts one off from the structures that they physically exist in, and unless those structures are overall crypto-supportive, they would just be putting themselves further between a rock and hard place (which as we’ve seen by the lack of serious business adoption, companies and orgs are not really willing to take that risk in any meaningful way)
Edit: I agree with your use of the term “regime” and am not arguing against the sentiment of your point. Just that I don’t think crypto actually has the backbone to solve it, there’s not enough physical-world tie in yet for it to have the leverage it needs to truly overcome the global financial regimes that are neck-deep in fiat and physical assets that actually impact everyday peoples’ lives.
That's the big question. But assuming for a moment that crypto can act as a substitute for traditional centralized payment systems, then it has significant advantages in some contexts over those systems.
Except that, fundamentally, distributed permission-less systems can't come close to the computational efficiency of centralized systems. So this is like "assuming perpetual motion machines existed, we could build a post-scarcity society" levels of assumption.
With zk-proofs, the redundancy of a blockchain can be significantly reduced without comprimising security. What redundancy remains provides the high process integrity that critical applications like financial transactions require.
It’s been around for a bit already, why is it not more widely adopted compared to BTC/ETH, any thoughts?
https://polynya.medium.com/rollups-data-availability-layers-...
zcash initially used zk-proofs only for privacy. It is only now looking to utilize it for scalability.
The same old behaviour should be applied to machines, it doesn't matter how much resource a machine takes to do the job, what is important is the output. The pay should not be X*Watts, but X agreed in advance for training that specific neural network, this type of market incentives evolution, where the machines that can do the same job with lower resources have the lower hand
In the past nearly everyone was a serf and they provided their goods/services to their lieges in exchange for basic needs like having someplace to live.
In the present it's pretty much the same thing, except with us serfs being paid wages (which we then end up spending most of as rent and taxes) and serving multiple lieges.
Not quite - if someone, anyone, wants something that someone else has, they're prepared to buy it. That's the price. You might say tulips are valueless, but that wasn't the case when people wanted them - https://en.wikipedia.org/wiki/Tulip_mania
I'm sure everyone has said "I wouldn't pay X for Y", but someone has paid X for Y. X is the price.
As much as many on HN like to hate on crypto, people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people.
There are many reasons to want something, but broadly you can argue that you either want something because you believe owning the thing will make your life better in some way (food, housing, transportation, ...); or you can want something because you think someone else will pay more for it later down the line, in which case the value of the thing is entirely speculative to you.
Some things are not entirely one or the other. People wanted tulips because they are pretty. Eventually they became a status symbol, demand grew faster than supply, and quickly people started buying tulips not because they wanted them, but because someone else might pay more later. So tulips became a speculative bubble, which eventually collapsed.
People don't want to sell it, they have to, in order to pay the electricity bills for the mining (in their countries normal currency, for that matter).
There is no inherent value - you can only sell if the exchanges find someone who is willing to buy.
The value to the seller is the Dollar/Euro they get at the exchange. The value for the buyer is speculation on the price, which someone else then has to pay at the exchange in normal currency. There is exactly zero value in crypto itself.
I choose not to. But other people do.
> Money has value because of the value of the economic transactions in which its conducted.
As the OP said, little pieces of paper have essentially no intrinsic value. But use it for transactions, and it has suddenly has a value forced on it. We've all seen zombie apocalypse films with cash blowing around in the street and the survivors ignoring it for good reason, no one _values_ it.
Bitcoin is the same, it's a bit of paper in the sense that it's just some numbers on disc somewhere with no _intrinsic_ value, yet as soon as it's a medium of exchange, _which it is_, it has value. There are transactions made in bitcoin.
No direct analogy intended but it's an important historical fact. A lot of money was made on the South Seas as well.
In my opinion, there will need to be a great clearing out for cryptocurrencies and blockchain technologies to mature, and things will need to get very boring. The "clearing out" means $0 BTC, DOGE, ETH, LTC, etc. The "boring" part means things staying stable. Otherwise, it doesn't look like there is enough room for other cryptocurrencies (like SOL as an NFT/smart contract platform) to succeed in the market, and scams will be the only viable business models because they are fast.
Suppose I want to buy something online using crypto. I buy up $X worth and transfer it to the vendor. They transfer whatever it was that they bought, but they immediately redeem the bitcoin for $X, give or take a small amount from market moves.
There’s no net demand for crypto here, and the increase in crypto price from my purchase will roughly be offset by their sale.
I think the only way to explain crypto prices is through buyers hoping that they’ll be used as a store of value. I don’t agree with that, but that’s a different story.
Further, I've heard people emphasise crypto as being useful for things such as smart contracts and dApps. Even with a Lower transaction value, one could still theoretically do some higher value transactions with crypto.
I am not endorsing this argument, but I have heard of it.
Well obviously, on the superficial level there's plain old greed.
But on a more existential level, bitcoiners are acknowledging that proof of work will lose to proof of lead, in any kind of direct confrontation.
So backing its security with math isn't enough, coiners want it backed with armed force. like fiat.
Why would Bitcoin collapse if it was used at "any" scale? Low max transactions per second? It is used by some people (even if not many) to pay for real things as well as wages! Are you saying an "economic" transaction has to be a commodity or taxes?
I think any specific currency is valuable because people believe it is so. No single characteristic defines value.
You're mixing up things. I can draw a one-off picture, that doesn't make the drawing valuable (sadly. If you want to buy my paintings, hmu). The value needs to be attributed by a shared denominator, which for the example of Mona Lisa is cultural prestige. Crypto has zero inherent cultural prestige, it's only value lies in social attribution. Wallets on hard drives are meaningless unless we decide that they aren't. The mona lisa isn't worth what it is if we decide otherwise, but it does have inherent value. Crypto does not. For crypto to have value, someone else needs to pay Dollar/Euro/whatever at an exchange. That's the value of crypto - the exchange rate.
This is true for every economic good, including paintings. Whether the value is "inherent" or not is irrelevant, you need a transaction or the value is just theory. Culture could also forget about the significance of the Mona Lisa, it has happened before, see for example https://en.wikipedia.org/wiki/Archimedes_Palimpsest, a mathematical text that our culture considers having very high value, but was overwritten into a prayer book by a culture that considered the work less valuable than the material it was written on.
If an artist signs an NFT or Colored Coin with a keypair that is associated with their public identity, shouldn't that be analogous to an autograph? If a physical, signed artistic work has more value than an unsigned work, does that mean that if you take the physical artistic work out of the equation you're left with the value of the signature? It's a funny question I guess. Like imagine people collecting PGP autographs.
Maybe art has some intrinsic value, but I think a large part of the "value" of an art piece is associated with the cultural relevance of the piece. It would follow that if you can associate a transaction output with some cultural relevance in the same sense that traditional artwork does, then it could have value, albeit not much.
This assumes that an original painting and a perfect replica of it have equal value. That might be the case if you don't know which is the original, but in the case of the Mona Lisa - and in the case of the NFT - you almost certainly can figure that out.
You need to pay attention to the actual economic transactions taking place. Looking at a graph of pure speculative value and calling it an economy is, more or less, a scam.
You'll see that when it all disappears.. moreso than the cashflow of, eg., an actual business.
I think many cryptocurrencies are useless and driven purely by marketing and speculation and most tokens are unregulated securities. Bitcoin is someone's attempt at inventing an "ideal" currency and it is being bootstrapped into value and existence. How else could it work? Maybe it will fail, maybe not.
> Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight.
You never explained why and I am honestly interested in your reasoning here. Are you implying BTC can't scale? It seems like two contradicting thoughts - if it is used, then it becomes less valuable.
That's such a silly argument. There are thousands of paintings around the world with the same level of scarcity as the Mona Lisa, but have far less value.
Scarcity drives up prices on items that already have some perceived value. It doesn't create any value itself.
I believe your last two sentences hit the nail on the head (albeit being oxymoronic). Things have value because people are willing to pay for them. That's it. If companies can be traded below book value, Tesla can be worth more than the next five automakers combined and NFTs can cost six digits there seems to be no intrinsic value.
With Bitcoin’s hash rate at an all time high, it’s more secure than ever - can we say it’s the most secure system in the world?
Of course the tradeoff for BTC is like insane consumption of power (currently Argentina size).
With BTC, I don’t think the use case will ever be to handle small sums of money. Transaction speed and fees don’t make sense for it.
Money has value because of the value of the economic transactions in which its conducted.
Government-backed currencies are forced to have value in the sense they force people to use it for their taxes. The US, additionally, forces the world to use it for oil trades.
Value is in those economic transactions. A currency is just a "liquifying" of that value, to make it easier to spread around. So that 1hr of my time/output can be more easily traded for 1hr of another persons. We are still just trading output.
For BTC (or any coin) to have any value, it needs actual economic transactions to be conducted in it. If there arent any, its value is smoke-and-mirrors; its not real. If you can't trade the market cap of bitcoin for actual economic output, it isnt actual economic value.
Imagine doing that right now. Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight.