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The common mistake is to try to compare Bitcoin to a predefined experience of money. Bitcoin's value is multifaceted. From a very simplistic perspective, it ca

by monokh 6y ago

The common mistake is to try to compare Bitcoin to a predefined experience of money. Bitcoin's value is multifaceted. From a very simplistic perspective, it can be compared to gold. Things get more interesting when you value aspects such as it being: - Fully digital - Verifiable by the common individual - Sent and received with no interference from third parties - Free from supply emission increases or control Each of these is especially hard to come across in any other form of money. Combining them is unprecedented.

1996 6y ago
Also, add the open source part meaning everyone can audit how it works and fork it if needed, and the network effects preventing said forks. Being protected from double spend or 51% attacks by having everybody in the world cooperate, because it is in their own selfish interest to do so, is indeed unprecedented. The current price seems extremely undervalued. I believe it is due to factoring-in the legal risks for when government realize a currency they can't control (block people they don't like, see eurodollars) or inflate at will (regardless of the reason, good or bad, it's about control) is a threat that must be legislated away.
munk-a 6y ago
Gold is a very good comparison (especially since it is inherently pretty worthless much like bitcoins) but I think the core currency quality it has is the limit of supply. One of the more amusing qualities of the fallout world to me was always the usage of bottle caps as a currency. Oh sure we have a pretty much infinite supply now but in a post-war setting it's a relatively common material (we don't use rhodium for currency because it's rare in absolute terms and also very hard to come by) that isn't going to increase in volume - that said more recent games have under cut that with the sheer commonality of nuka cola, and it also seems like a rather easy currency to forge per the volume it takes to transact an exchange. The other points you mentioned are what's really interesting to me, the verifiable property is one that physical currency has struggled with for a long term and the ledger aspect has no equivalence in physical currency exchange[1] - it's really neat! 1. Except, of course, for my most favorite currency ever the Rai stones https://en.wikipedia.org/wiki/Rai_stones https://en.wikipedia.org/wiki/Rai_stones which are essentially a built-in fiat currency that no one ever actually counts or carries but instead the ownership was/is tracked entirely by oral history which is amazing.
- seibelj 6y ago
  The fixed supply is the most interesting aspect. There could be an extremely huge gold deposit, or someone could figure out how to extract it from the ocean efficiently, or an asteroid / planet made of gold discovered and mined. But there will never be more bitcoin. More bitcoin would just fork the chain, and it wouldn't be bitcoin anymore.
  - WorldMaker 6y ago
    Forks are so easy in practice though that it seems magic/wishful thinking to assume there's anything particularly special about one branch's artificial scarcity. It seems axiomatic that in using a tree-based structure branches should be the natural and expected state and pretending the other branches don't exist is a fascinating strategy that I just have a rough time thinking holds over the long term, especially when trying to maintain something like artificial scarcity.
    - keymone 6y ago
      Fork of bitcoin is not bitcoin. Only 21 million bitcoin will ever exist and that’s a self-fulfilling prophecy. Whether that 21 million bitcoin branch will remain the dominant in terms of use and hashpower is under question, but there will only ever be 21 million bitcoin.
      - WorldMaker 6y ago
        My exact point is that this is a fun "semantic" game. From a technical standpoint, the entire merkle tree is bitcoin, because that is the root data structure, however you want to "brand" individual forks/branches they are always going to be inter-related. The fact that forks already exist today seems to clearly undermine the idea that there are "only ever 21 million bitcoin" because even just taking "Bitcoin Gold" and "Bitcoin Cash" into account alone represent an "additional" 42 million possible bitcoin. (That's before you take in the dozens of other bitcoin forks, and the larger picture of how generally non-scarce cryptocoins are in the general forest beyond the bitcoin tree.) It doesn't really matter which fork is "dominant", the artificial scarcity seems extremely artificial in a most brittle way and not that scarce from a respectable technical viewpoint. You can certainly try to build a definition of "dominant" based on mining "hashpower", but that's a social/economic/political/geopolitical minefield much more than it is a technical factor inherent to bitcoin's underlying data structure, because the underlying data structure is forks ("dominance" is a lucky/expedient edge case).
wslh 6y ago
> From a very simplistic perspective, it can be compared to gold. It is indeed very simplistic to compare it to gold and this is sadly part of the Bitcoin narrative. Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. We can imagine than if a Bitcoin2 is created with similar economic properties and gain more traction it will automatically replace the Bitcoin1 as a store of value. Obviously, this can happen to gold either but with much less probability thinking on all the financial network gold is part of.
- badloginagain 6y ago
  Just gonna quickly fork this gold and call it silver
- monokh 6y ago
  What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". Some even with overwhelming support from powerful actors. If they fail like they have during Bitcoin's infancy, later on they have no chance.
  - wslh 6y ago
    > What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". I am saying we don't have yet that Bitcoin2 yet and the sum of people and organizations using cryptocurrencies is pretty low comparing to their potential of a Bitcoin2 occurring with more user base.
- coralreef 6y ago
  Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes. Also, gold's store of value power is also attributed from its stock to flow ratio (the difficulty of inflating gold supply). Bitcoin has an even better stock to flow ratio, which is why its often compared to gold.
zaphar 6y ago
Those are value adds for a currency. But the article here is speaking about the core value of a currency. Essentially for an asset to be useful it's value must be backed by something and it must be possible to both defend and deploy that asset in a reasonable way. Bitcoin has not yet made the case that is practically useful for anything other than a volatile store of value.
- sushshshsh 6y ago
  I would say that it has made the case for it based on how many people have used it to exchange value internationally, trustlessly, at a very low cost. Additionally, Bitcoin network is backed by its ability to detect and refuse counterfeit coins. You can do most of the above with Visa or Venmo as well, however you run the risk of tax reporting, transaction reversal, fraud, negligence, changing fees... When Visa works, it works well. But when it fails, it fails in quite bad ways that Bitcoin does not.

by monokh 6y ago

1996 6y ago

Also, add the open source part meaning everyone can audit how it works and fork it if needed, and the network effects preventing said forks. Being protected from double spend or 51% attacks by having everybody in the world cooperate, because it is in their own selfish interest to do so, is indeed unprecedented. The current price seems extremely undervalued. I believe it is due to factoring-in the legal risks for when government realize a currency they can't control (block people they don't like, see eurodollars) or inflate at will (regardless of the reason, good or bad, it's about control) is a threat that must be legislated away.

munk-a 6y ago

Gold is a very good comparison (especially since it is inherently pretty worthless much like bitcoins) but I think the core currency quality it has is the limit of supply. One of the more amusing qualities of the fallout world to me was always the usage of bottle caps as a currency. Oh sure we have a pretty much infinite supply now but in a post-war setting it's a relatively common material (we don't use rhodium for currency because it's rare in absolute terms and also very hard to come by) that isn't going to increase in volume - that said more recent games have under cut that with the sheer commonality of nuka cola, and it also seems like a rather easy currency to forge per the volume it takes to transact an exchange. The other points you mentioned are what's really interesting to me, the verifiable property is one that physical currency has struggled with for a long term and the ledger aspect has no equivalence in physical currency exchange[1] - it's really neat! 1. Except, of course, for my most favorite currency ever the Rai stones https://en.wikipedia.org/wiki/Rai_stones https://en.wikipedia.org/wiki/Rai_stones which are essentially a built-in fiat currency that no one ever actually counts or carries but instead the ownership was/is tracked entirely by oral history which is amazing.

seibelj 6y ago
The fixed supply is the most interesting aspect. There could be an extremely huge gold deposit, or someone could figure out how to extract it from the ocean efficiently, or an asteroid / planet made of gold discovered and mined. But there will never be more bitcoin. More bitcoin would just fork the chain, and it wouldn't be bitcoin anymore.
- WorldMaker 6y ago
  Forks are so easy in practice though that it seems magic/wishful thinking to assume there's anything particularly special about one branch's artificial scarcity. It seems axiomatic that in using a tree-based structure branches should be the natural and expected state and pretending the other branches don't exist is a fascinating strategy that I just have a rough time thinking holds over the long term, especially when trying to maintain something like artificial scarcity.
  - keymone 6y ago
    Fork of bitcoin is not bitcoin. Only 21 million bitcoin will ever exist and that’s a self-fulfilling prophecy. Whether that 21 million bitcoin branch will remain the dominant in terms of use and hashpower is under question, but there will only ever be 21 million bitcoin.
    - WorldMaker 6y ago
      My exact point is that this is a fun "semantic" game. From a technical standpoint, the entire merkle tree is bitcoin, because that is the root data structure, however you want to "brand" individual forks/branches they are always going to be inter-related. The fact that forks already exist today seems to clearly undermine the idea that there are "only ever 21 million bitcoin" because even just taking "Bitcoin Gold" and "Bitcoin Cash" into account alone represent an "additional" 42 million possible bitcoin. (That's before you take in the dozens of other bitcoin forks, and the larger picture of how generally non-scarce cryptocoins are in the general forest beyond the bitcoin tree.) It doesn't really matter which fork is "dominant", the artificial scarcity seems extremely artificial in a most brittle way and not that scarce from a respectable technical viewpoint. You can certainly try to build a definition of "dominant" based on mining "hashpower", but that's a social/economic/political/geopolitical minefield much more than it is a technical factor inherent to bitcoin's underlying data structure, because the underlying data structure is forks ("dominance" is a lucky/expedient edge case).

wslh 6y ago

> From a very simplistic perspective, it can be compared to gold. It is indeed very simplistic to compare it to gold and this is sadly part of the Bitcoin narrative. Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. We can imagine than if a Bitcoin2 is created with similar economic properties and gain more traction it will automatically replace the Bitcoin1 as a store of value. Obviously, this can happen to gold either but with much less probability thinking on all the financial network gold is part of.

badloginagain 6y ago
Just gonna quickly fork this gold and call it silver
monokh 6y ago
What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". Some even with overwhelming support from powerful actors. If they fail like they have during Bitcoin's infancy, later on they have no chance.
- wslh 6y ago
  > What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". I am saying we don't have yet that Bitcoin2 yet and the sum of people and organizations using cryptocurrencies is pretty low comparing to their potential of a Bitcoin2 occurring with more user base.
coralreef 6y ago
Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes. Also, gold's store of value power is also attributed from its stock to flow ratio (the difficulty of inflating gold supply). Bitcoin has an even better stock to flow ratio, which is why its often compared to gold.

zaphar 6y ago

Those are value adds for a currency. But the article here is speaking about the core value of a currency. Essentially for an asset to be useful it's value must be backed by something and it must be possible to both defend and deploy that asset in a reasonable way. Bitcoin has not yet made the case that is practically useful for anything other than a volatile store of value.

sushshshsh 6y ago
I would say that it has made the case for it based on how many people have used it to exchange value internationally, trustlessly, at a very low cost. Additionally, Bitcoin network is backed by its ability to detect and refuse counterfeit coins. You can do most of the above with Visa or Venmo as well, however you run the risk of tax reporting, transaction reversal, fraud, negligence, changing fees... When Visa works, it works well. But when it fails, it fails in quite bad ways that Bitcoin does not.