There seems to be two concepts that are getting conflated. One concept is that BTC is a good investment. Historically that is undeniable.

The other concept is that it is a good medium of exchange. I think that is not so true because 1) its neither cheap nor easy to buy a lot of things with it 2) a thing that goes up in value is not a good medium of exchange because people don't want to spend it, they want to hoard it.

If you accept that BTC is a reasonable investment, but not a great medium of exchange then what is happening makes sense.

I am not saying that a decentralized token couldn't be a good medium of exchange -- honestly I don't know. But so far BTC is not that.

> One concept is that BTC is a good investment. Historically that is undeniable.

I'll deny it.

Bitcoin has seen large gains, that is undeniable. However, that is not the same thing as being a good investment.

> a thing that goes up in value is not a good medium of exchange because people don't want to spend it, they want to hoard it.

So... traditional money is good because it forces poor people to spend it? Rich people have no problem converting cash into assets that go up in value and holding onto them converting back at need. It's only poor people that have to hold comparatively high percentage of their assets in something that loses value.

Yes it is good to have currency that is distinct from an investment asset. It allows you to do currency things with one, and investment things with the other.

Yes, exactly. It forces the poor (and the rich) to spend it.

When you take out a mortgage on a house its partly because someone took cash they received and deposited it in the bank. If they kept the cash the bank would not have reserves to loan.

You don't even need to do anything to deposit money in the bank anymore. Most people automatically receive their salary in the form of direct bank deposits. And if the value of your money grows, why would you want to do anything with it? You would just let it sit there in the bank.

Let me add a third concept which, to me, is a much more useful feature (as I wrote in a sister thread): a store of value for people whose governments like to control the money flow, dilute savings in the single available local fiat currency and confiscate savings calling it a money reform. Which, sadly, is a large part of the world.

Value oscillating against some golden reference by a factor of 4? Many will likely take that if it means avoiding their own government shenanigans. I saw a currency reform which turned savings to zero. My parents lived through two such devaluations. As did my grandparents. Buying dollars or another hard currency, if found, meant prison. In this setup a permissionless, anonymous store of value, warts and all, is very valuable.

Beautifully explained. This applies to just about every single country in the world. There are no countries in the modern world that operate on the gold standard, which means they all print just about as much money as they want and deflate the savings of their citizens.

You're also conflating two distinct concepts: "Bitcoin the currency" and "Bitcoin the payment network."

The currency itself can be used independently of its base-layer network, which is intentionally slow and costly (functioning primarily as a settlement layer). This separation is enabled by off-chain or layer 2 systems, such as the Lightning Network or custodial platforms. These solutions retain Bitcoin's monetary benefits - like a predictable money supply, off/on ramping through the base layer - while enabling fast, cheap transactions. The tradeoff is that you must trust an intermediary, but this mirrors the same compromise inherent to digital USD payment systems (Venmo, credit cards, PayPal, etc.).

In fact, USD lacks a true "base layer" altogether. The closest equivalent would be the Federal Reserve Bank’s ledger, but accounts there are restricted to large financial institutions, not individuals.

That’s a lot of words for “it cannot be used in everyday financial transactions”.

It's not convenient to use "Bitcoin the payment network" for everyday financial transactions, just as it's not convenient to use the "USD the payment network" (e.g. the Federal Reserve ledger) for everyday financial transactions (in fact, it's impossible).

However, “Bitcoin the currency” and “USD the currency” work perfectly for daily use if you route them through trusted intermediaries (Strike, Cash App, PayPal, etc.). These third parties abstract away the base layer and offer fast, cheap, and reversible transactions.

But Bitcoin qua payment network is/was a major part of the Bitcoin value proposition—what a Bitcoin _is_ is an entry in a distributed ledger.

Whereas USD is ultimately bearer tokens. Yes, those tokens can be optimized away as entries on a balance sheet when held by a large entity. But USD is a token system, not a payment network. Bitcoin is the opposite.

> But Bitcoin qua payment network is/was a major part of the Bitcoin value proposition—what a Bitcoin _is_ is an entry in a distributed ledger.

I know that's what hardcore Bitcoiners have historically pushed for, but I personally disagree. To me, the most interesting thing about Bitcoin is its predictable and unmanipulatable money supply. The payment network is nice though because it can let you easily and permissionlessly take your Bitcoin wherever you want. Fees are actually not that exorbitant, certainly cheaper than SWIFT transfers. The current average transaction fee is around 1 USD and the first confirmation, which is sufficient for a majority of transactions, takes 10 minutes on average.

> Whereas USD is ultimately bearer tokens. Yes, those tokens can be optimized away as entries on a balance sheet when held by a large entity. But USD is a token system, not a payment network. Bitcoin is the opposite.

USD cash is (paper bills and coins), not digital USD. Bitcoin is a digital bearer token system. As a side note, it wouldn't be very hard to replicate a cash system for Bitcoin, if there was an entity responsible for emitting and redeeming cash for digital Bitcoin (a bit like the US Mint but for Bitcoin).

What do you mean, I use bitcoin and the lightning network all the time for small payments.

I wish there was usdc over lightning

if there is, it’s poorly advertised

does seem like a huge swing and a miss for lightning to only have unstable value units of account going over it

the market clearly wants something else, and has that, on other networks at large volumes

thanks! yes I mean to check on bitcoin after major network upgrades like Taproot. okay that article was last updated 10 months, how is that panning out with standardized protocols and wallet integration and issuance?

I’m curious where the communities about this are, or are nowadays

I personally have no need for "stable" assets, so I don't know more than that they exist.

Same here. I'd rather hold and use an asset that unstably increases in value greatly over time, than one which continuously goes down in value to 0 (all fiat currencies go to zero eventually)

That's a good point. The payment layer can be different then the ones I have and encountered, and it could evolve. Going forward I will keep that in mind because I think in the back of my head I just assume BTC is a pain to use and that may not always be the case.

Makes me wonder why the BTC original design tilted toward deflationary, since allegedly, 'satoshi' was trying to create currency, not speculation. Was it a two phase idea ? Attract people for 80 years as investment then when it's stable, use them as stupid coins ?

Deflation is the natural state of the economy because progress makes everything cheaper. We only have an inflationary system because central banks print money. Putting a central bank into code and micro-managing the money supply was not possible, so bitcoin is more like a commodity, like gold for example. Gold has worked just fine as a money for thousands of years.

A lot of people on libertarian right genuinely believe that deflationary money is desirable. BTC is often referred to as "digital gold" for a reason.

can you explain their reasoning ? just curious (i'm a newb)

Sure: if I buy today, I’ll be richer tomorrow.

Ergo, the exact reason it’s a horrible currency for the system.

It’s really just the infamous libertarian inability to consider the needs of the system as separate but still important and sometimes in tension with the desires of the individual.

It’s just a particularly goofy one because a deflationary currency very obviously cannot support an economy.

You're right, It is a horrible currency for the system. How would we prop up the military industrial complex and wars with foreign third world countries if we could no longer print money out of thin air? Just dreadful to think about.

Lol

The US economy grew rapidly in the 19th century through long periods of deflation, particularly 1870-1896.

We need to be clear about the features of money we are talking about (and there are many):

For money to work as a convenient way for people or companies to settle transactions, long-term inflation or deflation does not matter. If A wants cement and has mangoes, B wants pants and has mangoes and C wants mangoes and can do tooth fillings they just need something universally accepted to convert what they have into. And, a bit later, buy what they want. Most money satisfy this, but usually people want more features.

For money to also be a store of value it should maintain its purchasing power. This allows an individual to, say, pay for an education of a child when the child grows up: I can save in today's money and be fairly confident that when the time comes to pay it will cover the (future) cost. This feature is what people tend to refer to as "digital gold" as gold generally maintains its purchasing power over very long times.

For money to enable governments to stimulate society in different ways, money should be deflationary. Easy long term store of value makes people less responsive to short-term government stimuli. Without deflationary money a government cannot print extra money when it overspends or if not enough players want to lend to that government.

The last two tend to cause eternal strife between individualists (who want small government that does not do things people did not explicitly ask for) and progressivists (who want to push the society along the path they see as the best one).

There are more features of money (highly recommend reading "Broken Money" by Lyn Alden)

>Now the businesses are free to accept it or not instead of being required to accept it. That's all.

Right, so it's no longer legal tender.

Legal tender does not have to be a mandatory means of exchange.

That is actually the defining characteristic of legal tender: “money that is legally valid for the payment of debts and that must be accepted for that purpose when offered”

https://www.merriam-webster.com/dictionary/legal%20tender

Thanks, you're right and I was totally wrong. I'd delete my comment if I could

Its status in El Salvador was actually a bit more than _just_ legal tender; merchants were _required_ to accept it.

For instance, the euro is legal tender in the eurozone. I can pay a tax bill or a bank loan with 10cent coins, and technically they have to accept that (though note that some countries do have special rules around whether small change is legal tender). However, a merchant is not required to take my wheelbarrow full of 10cent coins in exchange for goods and services; no debt exists before the purchase.

El Salvador was forcing the merchant to take the wheelbarrow.

"El Salvador abandons tulips as legal tender"

Day to day there won't be much change, as bitcoin acceptance wasn't really enforced.

Looks like a fair take to me. They are not forcing people to accept it anymore because it didn’t work. It was never supposed to work.

Bitcoin tried for 15-20 years to find a use case but now it’s just an asset class like gold and nothing else, it will never be more than that.

The trouble is, it needs to be more than that if it is to survive. Since inception, mining has mostly been subsidized by new bitcoin, which is capped by design (and about 95% distributed).

Satoshi’s paper assumed that transaction costs would make up for the exponentially declining subsidy, but that hasn’t really happened since it never lived up to his “digital cash” vision.

I'm so curious what will happen as mining approaches the asymptote. When the mining rewards become more and more rare and if people aren't incentivizing the network with a lot of transactions, will transaction times just get slower and slower until it becomes a stranded asset?

Probably. Deflationary money is ridiculous. Gold was ridiculous, too, but at least you could sorta mine more of it. But the global economy only works the way it does because of the flexibility of fiat currency. And somehow, solving finite sudokus for drugs while using asymptotically more electricity wasn't the great success we were promised.

Transaction times are independent of mining power. One block every ~10 minutes.

But as the block rewards diminish from halving it will approach 0, so that will leave the only incentive for "miners" to secure the network to be transaction fees. At that point transaction fees will have to be extemely high to justify all that hash power right? So I can imagine it could get to the point where transaction fees exceed the value held in some wallets and you get stranded assets.

Alternatively, if transaction fees stay low, there might be very little incentive to secure the network with hash power and you could end up with fewer and fewer miners controlling the network and a 51% attack becomes quite feasible.

I'm really curious how this will play out over the next 100 years.

Ethereum solves both of these issues. It is an entire platform designed for the development of distributed applications and will probably win over BTC in the long-long-term.

No. Ethereum is a solution searching for a problem. Have you seen any widely used successful application developed using Ethereum?

There are tens of billions of dollars locked up in DeFi ecosystems with hundreds of millions of dollars worth of assets exchanging hands daily, but you would probably just say that it doesn't count for some inane reason.

Tokenized stocks are coming this year.

> The trouble is, it needs to be more than that if it is to survive.

But why is it necessary for it to survive? Like, I think even cryptocurrency true believers would acknowledge that there are better cryptocurrencies out there if you want a currency; bitcoin seems at this point of largely symbolic value.

I’m not talking about losing mindshare, I mean in the literal sense that transaction volume is necessary for Bitcoin to avoid an attack on the network. The incentive system that secures it is designed to increasingly rely on transaction fees increasing over time to make up for the diminishing pool of unmined Bitcoin that currently subsidize network security.

That largely hasn’t happened; transaction fees have dropped as it became a store of value and moved less frequently (and increasingly moved off-chain in tradfi rails).

Yeah, but what I mean is, if bitcoin went away tomorrow, why would anyone care? Advocates of cryptocurrency as currency, I think, have largely already gone beyond bitcoin in any case at this point, and the speculators could just move on to the next speculative asset.

Why does it need to be more than a store of value? If every single country In the world is off the gold standard and inflates their citizen's savings away at a whim, why does Bitcoin need to be more than a way to keep your savings safe, especially if it's the best way to do so with the least amount of government meddling.

Running the Bitcoin network securely is expensive. Currently, about 95% of the cost is covered by issuance of new Bitcoin, but the amount of remaining Bitcoin decays exponentially (currently it’s down to the last 5%).

The incentive design of Bitcoin assumed that it would be used as cash, so that transaction fees could take over as the main source of revenue for the miners that secure the network. As a “store of value”, it doesn’t generate enough transaction fees to secure the network.

> asset class like gold and nothing else, it will never be more than that

Lol, gold that can be teleported around the globe for fractions of a cent, yeah.. it sucks that bitcoin will never be more than that.

For 100000/1 fraction of a cent?

The transaction fee is currently $1.64 and frequently spikes to tens of dollars. (Yes, sometimes LN can reduce that.) You can buy gold via something like $GLD for free.

It's funny how people keep pretending like there's only on chain bitcoin or that lightning is broken in 2025.

Why do they need an IMF loan? (that's typically a sign of the economy not doing great)

They've needed IMF loans for decades, this is unrelated to Bitcoin: https://www.imf.org/external/np/fin/tad/extarr2.aspx?memberK...

Not every country has the esteemed ability to print the world's own reserve currency.

Why does the IMF care what denomination they use domestically?

They care about the economic stability of a country they make loans to. Their loans often come with conditions about how the government can run fiscal or trade policy.

I don't know if that is good or bad but I have heard smart economists argue both sides.

Sounds reasonable. Which countries got better after the IMF got involved?

There's a lot of information about the IMF online.

It's reasonable when you think about it from a risk assessment point of view.

The IMF wants to feel that El Salvador (a) will likely be able repay the debt, (b) in a currency that is unlikely to devalue too much. For that reason, the debt would probably be in USD or some other prominent world currency (letting the debt be in El Salvador's local currency would risk them printing money to devalue it, threatening (b)).

So the IMF would probably make the debt in USD. In theory, bitcoin can be exchanged for USD, so in theory, El Salvador could exchange some of their bitcoin into USD to pay the IMF back. But what if bitcoin's value drops precipitously? Or if it becomes illiquid?

It seems the IMF thinks bitcoin is hype, so it expects its value to drop to near zero eventually. That would make it very difficult for a country that has large bitcoin reserves (instead of large reserves of a more stable currency) to repay the loan.

Because using digital global warming edgelord tulips as money sort of implies you're not actually taking anything seriously.