Isn't this counter-argument equally applicable to silver or gold?

Well, the problem is you can easily trade gold for cash because it is socially acceptable to do so. If Bitcoin became outlawed, it would be very hard to exchange Bitcoin for cash, since it has no extrinsic value outside of being a financial asset (as compared to, for example, barrels of crude oil). That being said, I doubt Bitcoin will be outlawed in the West, and generally agree that it will be around for the long term.

> That being said, I doubt Bitcoin will be outlawed in the West, and generally agree that it will be around for the long term.

Well, not entirely without precedent, since private ownership of gold was outlawed nationwide in the US during the Great Depression. It wasn't fully legalized until 1974.

https://en.m.wikipedia.org/wiki/Executive_Order_6102

This is an entirely new fact for me. It’s surprising to me that I’d never heard of this. Thanks for sharing!

Wait till you hear that the first chairman of the SEC was a notorious market manipulator who was hired by his friend FDR to prevent anyone else from doing the things that made him rich. He also happened to be JFK's dad.

https://en.wikipedia.org/wiki/Joseph_P._Kennedy_Sr.#Wall_Str...

That's why history repeats. Most people have no idea what happened a 100 years ago.

Yes.

Nobody can tell you what a gold oz. worth of wheat is without resorting to exchange rates of gold to actual currencies.

I'll give you 1kg of wheat for an ounce of gold right now.

I'll see your 1kg and raise to 100kg.

Congrats boys! We just created a market using gold as the unit of account!

Gold has intrinsic value as a commodity though. It's scarce, has industrial uses, and has aesthetic value to a lot of people. Bitcoin doesn't have that. Bitcoin has value entirely because people think it has value. As an inflation hedge it fuckin sucks because it follows the market. When the fed increased rates, bitcoin crashed. As a store of value, it's too volatile to really work well for that and small mistakes can leave you with nothing. As a currency, the transactions per second is way way too low to be useful.

> Gold has intrinsic value as a commodity though. It's scarce, has industrial uses, and has aesthetic value to a lot of people.

Yet this value is a small fraction of gold's trading price. How do you explain the current price of gold?

Gold, like stocks and real estate, trades at some multiple of book (with metals this ratio is generally between 0 and 1, with stocks it's generally greater than 1). In fact, looking at the P/B ratio is often one of the first things someone does when evaluating an investment. That ratio for bitcoin is infinite which is why it's not an "investment" in the usual sense of the word.

why is BTC ratio infinite, but not gold?

Gold has industrial uses; the gold traces on a PCB add $X value to it which is a floor for the value of the gold itself

That ratio is a somewhat arbitrary thing. Who says it's a good measure?

For gold, perhaps 20% of its value is its actual use and 80% is for the scarcity. For bitcoin it's 0% for actual use and 100% of the price is its scarcity.

When you look at it like this, the difference between gold and bitcoin is not nearly as dramatic.

We almost had that with oil, but then they killed the guy trying to make it happen.

Unrelated to the killing, tying you medium of exchange to a physical commodity was ill-suited to a time where the global productivity growth was double-digits for 50 years. Limiting the growth of your exchange medium to the rate at which a commodity can be extracted is almost as bad as going full command economy.

I'm not sure what point you think you're making here, because this is in fact entirely correct for gold and why gold isn't some magic "better money" alternative.

This is a very valid point. However, the gold:<random currency> markets have been extremely liquid and somewhat transparent for the past thousand years. In the dark ages there was no way for someone to move the *global* gold:wheat chart by 50% just by executing shadowy trades at a single marketplace. Of course this is because medieval markets lacked a great deal of information synchronization, but it was also because medieval markets were actually decentralized.

You do need to separate medium of exchange from store of value. Real estate is useless as a currency while being the primary store of value for most people. Most of your objections also apply to real estate: can't know how much wheat a house is worth, houses are notoriously illiquid, price discovery is difficult and quite opaque, the sector is rife with misrepresentations. I wouldn't go so far as to say fraud, but where does "real estate agent" sit on those polls of "most trusted professions"? Houses aren't even fungible!

And if anyone thinks BTC/ETH transactions are slow and expensive (me!), around here the gas fee on real estate transactions is ~5% with a 6-month processing time...

I guess the difference is that you can live in a house. For the majority of people that's the real value.

Real estate market is also heavily (heavily) regulated, to the point that buying and selling houses require so much paperwork that it's not really convenient for scammers.

It's also quite stable, loans are secured by mortgages on the properties, I'm not sure anyone would accept bitcoins for the same purpose.

You sort of tipped around the main difference: Real estate is illiquid and intransparent sure, but it is a non-fungible productive asset, you can get people to pay you rents because they need precisely your building. There are no comparable income streams for bitcoin (outside of Ponzi "yield farming") so it is illiquid without any of the benefits of traditional illiquid assets.

rent is due after you bought the property.

which entails a lot of the aforementioned paperwork and checks and law abidings.

if bitcoin could provide the exact same level of security, it could be used as an asset, granted it failed as a currency.

the problem is it was designed precisely to not adhere to the standards everyone expects from "old-school" transactions, hence its main purpose is speculation, and it's barely good at that right now.

You can live in a real estate investment or grow food on it or run a business in it. Bitcoin is a bunch of 1s and 0s that is same as a blank canvas hung in museum and is priced at $20M. It is essentially useless, but people believe it’s worth something, so it keeps holding value. Until one day, it doesn’t.

I'm not a bitcoin maximalist, but you have to acknowledge that in this day and age that your definition pretty much applies to USD as well. People believe it's worth something. And so it is.

USD holds value because the government says it does. The government holds authority because they have a monopoly on violence. Or, if your less pessimistic, it's because people believe in the government.

Exactly

To paraphrase a quote attributed to Stalin - how many divisions does Satoshi have?

But then you have to explain why gift cards are worth something. The answer is, because someone will give you something for them.

Meanwhile there are a large number of entities that have already entered into long-term contracts denominated in cryptocurrencies and any of them would pay you something for it when they need to satisfy their obligations.

That doesn't mean the value never changes, but that's also true of government-issued currencies. That's what inflation is.

> But then you have to explain why gift cards are worth something

gift cards are vouchers

You pay $30 to the store so that someone else can spend the $30 in that store.

It's a certificate, not a currency, not a store of value.

It’s “buying power”

  gift card
  noun [ C ]
  uk /ˈɡɪft ˌkɑːd/ us /ˈɡɪft ˌkɑːrd/

  a card that can be exchanged in a shop or on a website for goods or services of the value that is printed on it

it's literally the same thing as cash, a check or a voucher.

it is also entirely dependent on the same external factors of cash, vouchers and checks: inflation, exchange rates, etc.

because it's simply a certification that you can spend that amount of money, in that currency, in that shop and that's it.

Also: a Patek Philippe is buying power as well

everything that can be exhchanged for something else can be defined as "buying power"

but an American Express or a gallon of water in the desert are buying power too.

the definition is too broad to be useful.

I’d counter that buying power is the only metric that matters. All these abstractions of buying power may distract and distance you from this most important metric - often to the benefit of companies and nation states.

> I’d counter that buying power is the only metric that matters

I'd counter that protection of buying power over long periods is what really matters.

My CD collection had an enormous buying power in the 90s, now it's almost worthless.

I reckon one cannot rely on buying power of CD or DVD or VHS.

> often to the benefit of companies and nation states.

In this regards people, companies and nation states interests are usually aligned, i.e a stable currency that provides protection against wild fluctuations and retains its buying power and its usefulness.

Unless you are an enemy of the people, I don't see why someone should not like it.

Good points. Consider all the different investment instruments out there. Abstractions on top of abstractions on top of abstractions of buying power. Yes, a stable currency is desirable. But volatile abstractions are also beneficial to powerful entities.

its a loan to the card issuer

an interest free loan, that's why it has "gift" in the name.

It works the same way as lending the money directly to a person, gift cards are simply more convenient to handle and are safer than cash, but other than that it's just a gift in the form of cash, no matter how many intermediaries are between the sender and the receiver, the input and the output will always match exactly.

If, for example, I give my friend Alex $20 to buy something for his little daughter but Alex uses it to bet on a football match and loses it, Alex has to take some money from his pocket and then buy the gift with his own money. Which is not different than saying he spent his money on the bet and bought the gift with the money I gave him.

If otherwise Alex wins, he will still buy the gift, but he will also have increased the initial sum by an x% which he can keep (or maybe try his luck again)

Buying a gift card is the same process, the company holding the money at one point has to give back something of the same exact value, it doesn't matter what they do with the money in between, what matters to the sender and the receiver is that the amount printed on the card is fully available at the check out (which is just lik getting the amount in cash and then paying with that)

Do gift cards go up & down 50% in a year and have large transaction costs?

Some of them do. Suppose the issuing company gets into some trouble and people fear they won't be able to make good, but then later they take care of it.

For that matter some government-issued currencies do that too.

when you say up and down you are referring to buying power. And yes, the buying power of a $20 grocery store gift card has gone way down the last few years. Consider how much milk and eggs you could buy in 2018 compared to today.

Gift cards are tethered to the dollar, with a discount, because they are essentialy unsecured loans to the gift card issuer.

I also would point out that very few if any people would point to gift cards as a durable store of value and new world currency.

Totally agree. I only meant to illustrate that all abstractions of buying power fluctuate in their ability to secure basic needs - food, water, shelter, supplies.

And the "tethered to the dollar" part is important. They are basically liquidity/risk discounted dollars, as are many of these examples of "buying power".

No one is tethering their Rolex price to BTC. No one is tethering their home purchase budget to BTC.

Why? It's all tethered to your income, in dollars, and your savings presumably mostly in dollars as well.

Even "jug of water in the desert" is tethered more to dollars than BTC because what are you more likely to have in your pocket, and why?

Dollars are tethered to the government taxing us in dollars, so we get paid in dollars, and our government has nukes & aircraft carriers and such. Everything then gets tethered to it because thats what we get paid & save in.

BTC is tethered to nothing, and there is no natural value you can back into such that you can justify any price level of it.

Other than its usefulness as "untraceable" (what people think, but not what is true.. it is more like "unblockable") cash, and for money laundering/drugs.. it is a trading instrument for punters.

> No one is tethering their home purchase budget to BTC.

Whether you tether the purchase of a home to bitcoin or the US dollar is more a state of mind, tribalism, etc. Both the US dollar and bitcoin have no intrinsic value. They both derive value from a human belief system - I believe they have value and that others believe the same. They are both just networks in that sense.

> Even "jug of water in the desert" is tethered more to dollars than BTC because what are you more likely to have in your pocket, and why?

This is silly. But to add to the silliness - you could have bitcoin in your brain. Just memorize your words.

> Dollars are tethered to the government taxing us in dollars, so we get paid in dollars, and our government has nukes & aircraft carriers and such

Now THIS is truly different. The US dollar has violence on its side. I concede that bitcoin is a peaceful currency - at least thus far. Hopefully it stays that way.

> Other than its usefulness as "untraceable" (what people think, but not what is true.. it is more like "unblockable") cash, and for money laundering/drugs.. it is a trading instrument for punters.

This is political bias and parroting talking points of anti-bitcoiners. While your other points are thoughtful, this is not. Why not just call bitcoin a butthead?

> USD holds value because the government says it does.

so how do you explain dollarization of failed economies? Such as lebanon, or venezuela etc?

Surely, you're not saying that the US gov't somehow is exerting violence on another country to make the dollarization happen.

The people in Lebanon and Venezuela trust that the US government will continue to exist and that they will either meet with people who want to do business with it, or will meet people who assume they will meet people who will, etc. So they have value.

So if people trust that Bitcoin will continue to exist and they will meet people who want to do business with it etc...

except bitcoin is one of the worst choices for that purpose

even the Iranian Rial is more reliable

can't edit anymore, the point is Iranian Rial is accepted by 90 million people in Iran, all the Iranian businesses and the Iranian government, there are much less bitcoin users, technically there are a lot more accounts, but that doesn't mean real people or real businesses.

Not surprisingly Iran and Russia are teaming up to create a new stablecoin and not adopting BTC, because using BTC right now is literally the best way to get caught (for example infringing sanctions).

The people that can afford to trust and use bitcoins for exchanges are the people who do not have to fear the surveillance of State actors/secret services/national agencies(NSA,FBI,Europol,China's central bank,...)/etc and that would be much better off using another FIAT currency (USD, EUR, etc.)

That's the only thing that gives Bitcoin value. So, in a crisis it can become false for some people, then spread to the people they know, etc.

With dollars, all Americans need them. So do international companies that transact with Americans. If you think the US government will hold, then that belief will be true, it's only a question of the number of steps.

> in a crisis it can become false for some people

it depends on what the crisis is, and whether this same crisis also makes people believe that the US gov't will not hold.

In general yes, but with the difference that the dollar (or other "real" currencies) are encoded in law to have a value with the whole state backing it.

US Dollar has value largely because the United States government is legally obligated to accept it to settle debts.

Also, any debt in the US can be paid with dollars. They even printed "for all debts, public and private" on the bills.

Yes that is one small dimension of why the dollar is valuable. But a far bigger part is the fact that using dollars enters you into the US financial (and by extension legal) systems which has been far more stable, reliable and predictable than other systems over the last century. For a point of reference consider Switzerland, whose currency is a minor reserve currency and whose banking and legal systems are globally appreciated, despite the fact that they have no power projection and a tiny population in comparison to their financial markets. The Swiss central bank has even deviated from their usual stable policy since 2008 and yet still they see inflows.

I have to agree, fiat currency seems very similar to bitcoin. Its a manmade currency essentially that is backed by nothing.

Bitcoin appears to be the next phase of that manmade currency.

Also the US government threatens (and occasionally delivers) military and financial harm on entities that refuse to use USD for certain transactions.

Yes, this is the key dimension of the "currency" front. But bitcoin "advocates" (a term I'll use for diplomatic purposes) say that within a context that implies that is somehow a low bar to clear or just a consquence of the monopoly of force or somehow morally questionable. But becoming something people trust (or at least have some amount of confidence in multiple dimensions in) is one of the most difficult things for any new asset class or medium of exchange.

Some of the main ways currencies and commodities get there are value stability (sticking within a certain band with <100% annual swings), wide acceptance and utility. After 10 years of many techno-smart people trying to engineer cryptos to become that we are nowhere near any of these promises being fulfilled.

Now do the US dollar!

I don’t think any of this is accurate. My house is a store of value but not easily traded for goods and services, but can be sold for local currency to facilitate that exchange. There are many crypto exchanges with conversion to many currencies, including fiat currencies, but also between other crypto currencies. This is how price discovery is accomplished. If it were illiquid as you claim then there would be a ton of arbitrage opportunity in the inefficiencies and mispricings of crypto currencies. However in recent times prices are fairly rational across exchanges and conversion to fiat. The fraud claims you have seen overblown, FTX not withstanding. But I’d note that all financial markets are rife with fraud, hence the regulation.

I don’t think regulation is a bad thing in crypto exchanges specifically. I think any rational crypto exchange would welcome it. Despite claims to the contrary compliant exchanges in many markets not aligned to big players start up all the time. That’s great, and I think a lot of crypto exchange operators have been hoping for a clear regulatory regime from regulators in the US. The current “you better comply with unwritten regulations or we sue you” regime is absurd.