5 ms·

> Bitcoin is hyperdeflationary Am I the only one where this was the reason I was thinking? Interestingly, thinking honestly about bitcoin made me a Keynesian.

nine_k 9y ago
Bitcoin is only hyperdeflationary because it's being pumped, to my mind. It's mostly used as an investment and speculation tool, not as a currency, that is, not for paying for goods and services. It's not (yet) "digital gold", but rather "digital tulips" [1]. [1]: https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania
- anonymous5133 9y ago
  Agree. BTC is now a speculative tool similar to gold. If you want something that is more like a currency then bitcoin cash is better. The fees are like one penny. Also I don't think the deflationary is an issue because of how fast crypto can change hands. For example, I go to buy a t-shirt for $10 and I pay the merchant $10 equivalent in bitcoin cash. The transaction confirms in 10 minutes or less and the merchant can send the crypto to an exchange to immediately convert it to fiat or any other crypto of their choice. Also most likely in the future, merchants will use some sort of centralized payment processor so when the buyer pays and the transaction confirms the seller immediately gets fiat cash instead of crypto, assuming they want fiat of course. So the whole idea that crypto doesn't work as a currency is mostly a moot point IMO. Most people are thinking about that issue from a macroeconomic perspective as in if one crypto was used as the official currency. The days of that is coming to an end IMO. The future is going to be multiple cryptocurrencies competing with traditional fiats. The payment processors of the future will be able to process hundreds of different medium of exchanges through their point of sale system. A merchant has nothing to lose by accepting 100 different medium of exchanges if the other medium of exchanges are simply be converted to whatever the merchant's ideal store of value is. Then it simply comes down to individual merchants and consumers deciding what medium of exchange to use and that is good for everyone. More freedoms is better. I think we can all agree on that.
  - chriswarbo 9y ago
    > For example, I go to buy a t-shirt for $10 and I pay the merchant $10 equivalent in bitcoin cash. This is why I don't think of bitcoin as a currency: I've never seen it used to denominate prices. As far as I can tell, not even Silk Road had prices set in bitcoin. Paying "$10 equivalent in bitcoin cash" (or bitcoin, or litecoin, or whatever) is using those cryptocurrencies as a payment gateway; the currency in those transactions is $.
    - DarronWyke 9y ago
      >Paying "$10 equivalent in bitcoin cash" (or bitcoin, or litecoin, or whatever) is using those cryptocurrencies as a payment gateway; the currency in those transactions is $. Precisely. We're entering some real fiat currency inception here. Bitcoin is worth whatever people value it at, similar to most forms of currency (backed by the faith of the issuing government). Now we're going to faith upon faith.
- sova 9y ago
  Tulips are a dumb analogy. There, I said it. Tulips come from seeds and are ornamental, once they are dead they can no longer be traded for value. There is no limit to the world-wide supply of tulips, and there is no such thing as distributed international observation and participation in tulips. To further my antagonist response, the Smithsonian Mag recently did a report explaining that Tulip Mania was also not really a Tulip Mania and that reports were highly exaggerated; an author of a recent book on that time claims that there really is no lesson to learn from Tulip Mania, as tempting as the comparison may be. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/?no-ist https://www.smithsonianmag.com/history/there-never-was-real-...
  - IshKebab 9y ago
    Once digital currencies are dead they can no longer be traded for value. There is no limit to the world-wide supply of digital currencies.
    - nrhk 9y ago
      There are limits to specific protocols, like bitcoin.
  - nine_k 9y ago
    Agreed! Tulips are an imperfect analogy. The only analogous part is the rally, which is not due to the intrinsic value of the item (gold is ornamental, a paper can pay coupons or dividends, etc), but due to the bandwagon effect.
- frgtpsswrdlame 9y ago
  Sure but bitcoin's weakness to pumping is what makes it a bad currency. Is that weakness going to a feature of all cryptocurrencies? I'd say any currency which is deflationary and has anonymous transactions will be vulnerable to pump and dumps.
- Glyptodon 9y ago
  Even if it weren't being pumped the finite limit on total 'coins' would be a disaster for any real currency in any situation with an expectation of meaningful future economic growth.
  - bigtunacan 9y ago
    If it weren’t being pumped I don’t see this being a real issue. With fiat money has some smallest division possible (aka the penny). When there is more money needed the banks print more money and so everyone’s money becomes worth less so we see inflation. With a limited digital currency like BTC you would expect to see deflation and so over time transactions would require a smaller fraction of a coin as payment.
sova 9y ago
Could you elaborate on what you mean by Keynesian in 2017?
- alexmat 9y ago
  ideological beliefs about the nature of money (liberals not interested in non-state currencies, and Austrians believing that currencies must have intrinsic value) https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-...
  - szemet 9y ago
    'must have intrinsic value' AFAIK one of the main underpinning of the Austrian school is: https://en.wikipedia.org/wiki/Subjective_theory_of_value https://en.wikipedia.org/wiki/Subjective_theory_of_value
    - alexmat 9y ago
      You're correct, Austrian school is based on subjective value theory, this is gwern's phrasing not mine. I was in a rush and didn't cite properly, here is the link: http://www.gwern.net/Bitcoin-is-Worse-is-Better http://www.gwern.net/Bitcoin-is-Worse-is-Better Although to be fair a lot of non-scholarly "Austrians" cite the intrinsic value of gold as what makes it superior to Bitcoin. So he's right in the parlance of common rhetoric. I also think he is right in that liberals tend to favor keynesianism because it makes it easier for the government to grow.
  - sova 9y ago
    I'm still not sure what you meant by Keynesian, but that is a nice link to a very thorough discussion about bitcoin from 2011. Supply, Demand, What is Money, and What is Valuable are all unresolved questions even in 2017. The need for money fundamentally stems from needing a way to trade dissimilar goods (like hens for milk). Nations making money is a whole separate issue that has delayed the progress of mankind for millenia
  - notthemessiah 9y ago
f_o_m 9y ago
I don't think you're the only one but may be in the minority.

nine_k 9y ago

Bitcoin is only hyperdeflationary because it's being pumped, to my mind. It's mostly used as an investment and speculation tool, not as a currency, that is, not for paying for goods and services. It's not (yet) "digital gold", but rather "digital tulips" [1]. [1]: https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania

anonymous5133 9y ago
Agree. BTC is now a speculative tool similar to gold. If you want something that is more like a currency then bitcoin cash is better. The fees are like one penny. Also I don't think the deflationary is an issue because of how fast crypto can change hands. For example, I go to buy a t-shirt for $10 and I pay the merchant $10 equivalent in bitcoin cash. The transaction confirms in 10 minutes or less and the merchant can send the crypto to an exchange to immediately convert it to fiat or any other crypto of their choice. Also most likely in the future, merchants will use some sort of centralized payment processor so when the buyer pays and the transaction confirms the seller immediately gets fiat cash instead of crypto, assuming they want fiat of course. So the whole idea that crypto doesn't work as a currency is mostly a moot point IMO. Most people are thinking about that issue from a macroeconomic perspective as in if one crypto was used as the official currency. The days of that is coming to an end IMO. The future is going to be multiple cryptocurrencies competing with traditional fiats. The payment processors of the future will be able to process hundreds of different medium of exchanges through their point of sale system. A merchant has nothing to lose by accepting 100 different medium of exchanges if the other medium of exchanges are simply be converted to whatever the merchant's ideal store of value is. Then it simply comes down to individual merchants and consumers deciding what medium of exchange to use and that is good for everyone. More freedoms is better. I think we can all agree on that.
- chriswarbo 9y ago
  > For example, I go to buy a t-shirt for $10 and I pay the merchant $10 equivalent in bitcoin cash. This is why I don't think of bitcoin as a currency: I've never seen it used to denominate prices. As far as I can tell, not even Silk Road had prices set in bitcoin. Paying "$10 equivalent in bitcoin cash" (or bitcoin, or litecoin, or whatever) is using those cryptocurrencies as a payment gateway; the currency in those transactions is $.
  - DarronWyke 9y ago
    >Paying "$10 equivalent in bitcoin cash" (or bitcoin, or litecoin, or whatever) is using those cryptocurrencies as a payment gateway; the currency in those transactions is $. Precisely. We're entering some real fiat currency inception here. Bitcoin is worth whatever people value it at, similar to most forms of currency (backed by the faith of the issuing government). Now we're going to faith upon faith.
sova 9y ago
Tulips are a dumb analogy. There, I said it. Tulips come from seeds and are ornamental, once they are dead they can no longer be traded for value. There is no limit to the world-wide supply of tulips, and there is no such thing as distributed international observation and participation in tulips. To further my antagonist response, the Smithsonian Mag recently did a report explaining that Tulip Mania was also not really a Tulip Mania and that reports were highly exaggerated; an author of a recent book on that time claims that there really is no lesson to learn from Tulip Mania, as tempting as the comparison may be. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/?no-ist https://www.smithsonianmag.com/history/there-never-was-real-...
- IshKebab 9y ago
  Once digital currencies are dead they can no longer be traded for value. There is no limit to the world-wide supply of digital currencies.
  - nrhk 9y ago
    There are limits to specific protocols, like bitcoin.
- nine_k 9y ago
  Agreed! Tulips are an imperfect analogy. The only analogous part is the rally, which is not due to the intrinsic value of the item (gold is ornamental, a paper can pay coupons or dividends, etc), but due to the bandwagon effect.
frgtpsswrdlame 9y ago
Sure but bitcoin's weakness to pumping is what makes it a bad currency. Is that weakness going to a feature of all cryptocurrencies? I'd say any currency which is deflationary and has anonymous transactions will be vulnerable to pump and dumps.
Glyptodon 9y ago
Even if it weren't being pumped the finite limit on total 'coins' would be a disaster for any real currency in any situation with an expectation of meaningful future economic growth.
- bigtunacan 9y ago
  If it weren’t being pumped I don’t see this being a real issue. With fiat money has some smallest division possible (aka the penny). When there is more money needed the banks print more money and so everyone’s money becomes worth less so we see inflation. With a limited digital currency like BTC you would expect to see deflation and so over time transactions would require a smaller fraction of a coin as payment.

sova 9y ago

Could you elaborate on what you mean by Keynesian in 2017?

alexmat 9y ago
ideological beliefs about the nature of money (liberals not interested in non-state currencies, and Austrians believing that currencies must have intrinsic value) https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-...
- szemet 9y ago
  'must have intrinsic value' AFAIK one of the main underpinning of the Austrian school is: https://en.wikipedia.org/wiki/Subjective_theory_of_value https://en.wikipedia.org/wiki/Subjective_theory_of_value
  - alexmat 9y ago
    You're correct, Austrian school is based on subjective value theory, this is gwern's phrasing not mine. I was in a rush and didn't cite properly, here is the link: http://www.gwern.net/Bitcoin-is-Worse-is-Better http://www.gwern.net/Bitcoin-is-Worse-is-Better Although to be fair a lot of non-scholarly "Austrians" cite the intrinsic value of gold as what makes it superior to Bitcoin. So he's right in the parlance of common rhetoric. I also think he is right in that liberals tend to favor keynesianism because it makes it easier for the government to grow.
- sova 9y ago
  I'm still not sure what you meant by Keynesian, but that is a nice link to a very thorough discussion about bitcoin from 2011. Supply, Demand, What is Money, and What is Valuable are all unresolved questions even in 2017. The need for money fundamentally stems from needing a way to trade dissimilar goods (like hens for milk). Nations making money is a whole separate issue that has delayed the progress of mankind for millenia
- notthemessiah 9y ago

f_o_m 9y ago

I don't think you're the only one but may be in the minority.