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The money doesn't go up with traditional goods, but the total value in the system does. This is easier to understand if you think about a specific traditional
by vec 9y ago
The money doesn't go up with traditional goods, but the total value in the system does.
This is easier to understand if you think about a specific traditional commodity, say timber futures. A timber future is created by some arborist who has some trees to sell, and will hopefully be ultimately purchased (after probably passing through a few investors' hands) by someone who has need of trees, like a sawmill operator.
But here's the magic bit: the same tree is worth more to the sawmill operator than it is to the arborist. Because she owns a sawmill, she can make finished boards from the tree which she can then sell at a profit. The arborist, who lacks a sawmill, can't take advantage of that opportunity. So there is some range of prices for a tree where the arborist and the sawmill operator will both think, correctly, that they benefited from the deal. By moving the same tree from someone who can't make further use of it to someone who can, the total value has gone up. And as long as the price of the future remains in that magic range, any number of middlemen can skim some off in between and everyone still wins.
Bitcoin doesn't work like that. There's nothing one can do with a bitcoin other than sell it, so there's no two parties who will mutually benefit from an exchange at any price. If two people disagree about the value they, personally, can extract from a fixed amount of BTC they can't both be right. They may disagree about their predictions or their risk appetite. But there's no sale of Bitcoins that both parties can look back on with perfect hindsight and agree that they both benefited.
- davidgerard 9y agoyep. I literally explain this in the article, and I also link the relevant Wikipedia page: https://en.wikipedia.org/wiki/Circular_flow_of_income https://en.wikipedia.org/wiki/Circular_flow_of_income But it's difficult to get a man to understand something when his HODLing depends upon his not understanding it.
- dragonwriter 9y ago> If two people disagree about the value they, personally, can extract from a fixed amount of BTC they can't both be right. This is a absolutely not true if either party has outside opportunities (including the “opportunity” to avoid a unique personal disutility) not available to the other party; sure, all you can do with a Bitcoin is exchange it for other goods/services, but the goods/services A can exchange it for may not be the same that B can exchange it for. And even if they are, the utilities each party attaches to those things may not be the same.