3 ms·

You can't know. For those who are saying it is obviously a bubble: If bitcoin "succeeds" and becomes widely used as money, then its value will grow a lot more,

You can't know. For those who are saying it is obviously a bubble: If bitcoin "succeeds" and becomes widely used as money, then its value will grow a lot more, since there can only ever be 21 million bitcoins. It is inherently deflationary. One bitcoin is worth, roughly (and circularly) speaking, the total valuation of bitcoin divided by the number of coins. Another way of looking at it: imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC. I know it is not really that simple, and dollars have some special properties compared to bitcoin: you have to pay your US taxes in USD, for example. Also, it is easy to talk about "valuation" (in e.g. USD, EUR) if you view bitcoin as a commodity - but if it becomes a dominant currency it is not so simple. You can still reason about exchange rates, and my point is, the asymptotic exchange rate USD:BTC (assuming no dollar inflation) is not of the order of 10000:1, but much higher, maybe 1000000:1.

rmah 9y ago
Bitcoin cannot become "widely used money". It is technically impossible. It is transaction rate limited to 6 txn/sec. Worldwide. Even band-aids such as increasing the block size won't help enough. I'm not saying bitcoin prices will crash anytime soon. Simply that the dream of bitcoin replacing fiat currencies in daily commerce is just that: a dream.
- ericb 9y ago
  It was once impossible to stream movies over the internet because modem technology was limited to 1200 bits per second. Even band-aids like doubling capacity wouldn't help enough. Technically. Impossible.
  - take4 9y ago
    Streaming movies was impossible over dial-up, and still is. But you can if you have different internet connections like DSL, Cable, Fiber, etc. For the original bitcoin that is currently being priced at $13,000 it is indeed technically impossible to exceed 6 transactions per second. Sure you could make a new crypto protocol, but it's not "bitcoin".
    - ericb 9y ago
      The protocol (proof of work based system using wallets and addresses) doesn't define the implementation and the implementation defines limits. The protocol especially does not define the implementation of other layers built alongside it, so this is a straw man. If your argument is "any improvement to the current system" "isn't bitcoin" then that's a no true scotsman sort of argument and I don't think it holds much water.
- captainmuon 9y ago
  What will likely happen is that bitcoin will only be used to transfer large sums between exchanges. Day-to-day payments will be handled off-chain. Another option is to use lighter alt-coins in parallel to bitcoin, again using bitcoin for long-term storage or larger transactions. You are right that the current bitcoin as-is is not suited for many small everyday transactions, as envisioned by many. The transaction rate and fees are just too high. This is actually - besides governmental bans - the one thing I think could take bitcoin or cryptocurrency in general down.
saalweachter 9y ago
So the US money supply is about $3.5 trillion. If you had 21 million BTC worth the same, your exchange rate would be about $170,000 / BTC. Now I'll admit that I never expected BTC to break 5 figures, but even if your argument is "BTC should be worth as much as USD", 7 figures is still absurd.
- captainmuon 9y ago
  Why would that be absurd? "Bitcoin" is an arbitrary unit, you can rescale it. For example, 1 satoshi = a hundred millionth BTC. In your example, the rate would be 1 kilosatoshi = $1.70. A nice and imaginable rate if it was a regular currency. The thing is: you can either call current (and possibly future) bitcoin absurdly overvalued (with its real value close to zero), or the early-stage bitcoin absurdly undervalued (with its real value close to the "asymptotic" value). I personally prefer the latter, or better: acknowledge that the "value" is determined by the market, and the "real" value is dynamic in time. The only question is: is the current exchange rate rational, or a craze? I believe, assuming nothing catastrophic happens (bitcoin outlawed, or it is abandoned because the network cannot handle the number of transactions anymore), the current rate is rational (close to the instantaneous "real" value), and will continue to rise (and approach the asymptotic "real" value) in future. Full disclosure: I am not 100% convinced (and thus stupidly sold quite some BTC before the current hike), but I'm betting some coffee money that BTC - if it is staying with us - will go "to the moon".
  - saalweachter 9y ago
    "imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC." The US money supply (M1) is $3.5 trillion. The maximum Bitcoin supply is 21 million BTC. $3.5 trillion / 21 million BTC = $166,000 / BTC. 1 BTC being worth seven figures USD would mean that the "Bitcoin money supply" was 10x the "USD money supply".
deleted 9y ago
[deleted]
dsacco 9y ago
> You can't know. For those who are saying it is obviously a bubble: If bitcoin "succeeds" and becomes widely used as money, then its value will grow a lot more, since there can only ever be 21 million bitcoins. It is inherently deflationary. One bitcoin is worth, roughly (and circularly) speaking, the total valuation of bitcoin divided by the number of coins. Another way of looking at it: imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC. This doesn't make sense. More precisely, your argument for why its value could grow more doesn't make sense. You're comparing incongruent units when you should be comparing per-unit value. 1 BTC is not an indivisible unit, it's just the most widely used unit. Similarly, we have $100 bills, $50 bills, etc despite $1 being the most widely used. We could also use pennies or nickels if the value of a single dollar far outstripped its ordinary utility for commerce. The feedback loop you're suggesting would not occur because as the value of Bitcoin grew, each atomic slice of a Bitcoin would simply increase in utility as the new benchmark unit. With 100M satoshi per 1 Bitcoin, we're not in any danger of Bitcoin's valuation increasing just because there is a limited supply.
djellybeans 9y ago
One of the biggest questions people have is how loans and debt can be handled in bitcoin. Since it's deflationary by nature, how will loans be easily recovered from the borrowers when it becomes harder to pay back the amount of BTC as the cost of BTC goes up?

rmah 9y ago

Bitcoin cannot become "widely used money". It is technically impossible. It is transaction rate limited to 6 txn/sec. Worldwide. Even band-aids such as increasing the block size won't help enough. I'm not saying bitcoin prices will crash anytime soon. Simply that the dream of bitcoin replacing fiat currencies in daily commerce is just that: a dream.

ericb 9y ago
It was once impossible to stream movies over the internet because modem technology was limited to 1200 bits per second. Even band-aids like doubling capacity wouldn't help enough. Technically. Impossible.
- take4 9y ago
  Streaming movies was impossible over dial-up, and still is. But you can if you have different internet connections like DSL, Cable, Fiber, etc. For the original bitcoin that is currently being priced at $13,000 it is indeed technically impossible to exceed 6 transactions per second. Sure you could make a new crypto protocol, but it's not "bitcoin".
  - ericb 9y ago
    The protocol (proof of work based system using wallets and addresses) doesn't define the implementation and the implementation defines limits. The protocol especially does not define the implementation of other layers built alongside it, so this is a straw man. If your argument is "any improvement to the current system" "isn't bitcoin" then that's a no true scotsman sort of argument and I don't think it holds much water.
captainmuon 9y ago
What will likely happen is that bitcoin will only be used to transfer large sums between exchanges. Day-to-day payments will be handled off-chain. Another option is to use lighter alt-coins in parallel to bitcoin, again using bitcoin for long-term storage or larger transactions. You are right that the current bitcoin as-is is not suited for many small everyday transactions, as envisioned by many. The transaction rate and fees are just too high. This is actually - besides governmental bans - the one thing I think could take bitcoin or cryptocurrency in general down.

saalweachter 9y ago

So the US money supply is about $3.5 trillion. If you had 21 million BTC worth the same, your exchange rate would be about $170,000 / BTC. Now I'll admit that I never expected BTC to break 5 figures, but even if your argument is "BTC should be worth as much as USD", 7 figures is still absurd.

captainmuon 9y ago
Why would that be absurd? "Bitcoin" is an arbitrary unit, you can rescale it. For example, 1 satoshi = a hundred millionth BTC. In your example, the rate would be 1 kilosatoshi = $1.70. A nice and imaginable rate if it was a regular currency. The thing is: you can either call current (and possibly future) bitcoin absurdly overvalued (with its real value close to zero), or the early-stage bitcoin absurdly undervalued (with its real value close to the "asymptotic" value). I personally prefer the latter, or better: acknowledge that the "value" is determined by the market, and the "real" value is dynamic in time. The only question is: is the current exchange rate rational, or a craze? I believe, assuming nothing catastrophic happens (bitcoin outlawed, or it is abandoned because the network cannot handle the number of transactions anymore), the current rate is rational (close to the instantaneous "real" value), and will continue to rise (and approach the asymptotic "real" value) in future. Full disclosure: I am not 100% convinced (and thus stupidly sold quite some BTC before the current hike), but I'm betting some coffee money that BTC - if it is staying with us - will go "to the moon".
- saalweachter 9y ago
  "imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC." The US money supply (M1) is $3.5 trillion. The maximum Bitcoin supply is 21 million BTC. $3.5 trillion / 21 million BTC = $166,000 / BTC. 1 BTC being worth seven figures USD would mean that the "Bitcoin money supply" was 10x the "USD money supply".

deleted 9y ago

[deleted]

dsacco 9y ago

> You can't know. For those who are saying it is obviously a bubble: If bitcoin "succeeds" and becomes widely used as money, then its value will grow a lot more, since there can only ever be 21 million bitcoins. It is inherently deflationary. One bitcoin is worth, roughly (and circularly) speaking, the total valuation of bitcoin divided by the number of coins. Another way of looking at it: imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC. This doesn't make sense. More precisely, your argument for why its value could grow more doesn't make sense. You're comparing incongruent units when you should be comparing per-unit value. 1 BTC is not an indivisible unit, it's just the most widely used unit. Similarly, we have $100 bills, $50 bills, etc despite $1 being the most widely used. We could also use pennies or nickels if the value of a single dollar far outstripped its ordinary utility for commerce. The feedback loop you're suggesting would not occur because as the value of Bitcoin grew, each atomic slice of a Bitcoin would simply increase in utility as the new benchmark unit. With 100M satoshi per 1 Bitcoin, we're not in any danger of Bitcoin's valuation increasing just because there is a limited supply.

djellybeans 9y ago

One of the biggest questions people have is how loans and debt can be handled in bitcoin. Since it's deflationary by nature, how will loans be easily recovered from the borrowers when it becomes harder to pay back the amount of BTC as the cost of BTC goes up?