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I still dont understand why bitcoin should hold any value over the next 10, 20 years. In that time I still earn dollars and items cost dollars and I borrow doll

I still dont understand why bitcoin should hold any value over the next 10, 20 years. In that time I still earn dollars and items cost dollars and I borrow dollar mortgage to buy a dollar house. I can see how some central bank backed electronic currency could be used for my transactions. Why would BTC be involved? Why would anyone choose to use it? I can't see it makes any sense.

anm89 6y ago
No one is forcing anyone to buy bitcoin. So just don't buy any if it seems like a bad idea to you.
doggosphere 6y ago
Your dollars lose value every year because the government creates money out of thin air (aka inflation). Some assets like gold or Bitcoin are much harder to create, and so there is no indefinite, limitless increase in supply. This allows them to function better as stores of value than dollars. See hyperinflation to better understand why some people fear government spending deficits and the spiral of money creation that follows: https://www.investopedia.com/terms/h/hyperinflation.asp https://www.investopedia.com/terms/h/hyperinflation.asp
- x87678r 6y ago
  I understand money, inflation and finance very well. I understand that BTC has limited supply. In 10 years why would anyone want BTC though? Why would I want to buy it when I could buy BTC2 or whatever else? Its like yes there is a limited supply, but there is unlimited supply of cryptocurrencies, why is BTC more valuable than the others?
  - karanbhangui 6y ago
    Was initially my argument against bitcoin also. The flaw in this reasoning imo is the power law distribution of attention. Bitcoin and Ethereum get the vast majority of the attention (and hence trade volume). Everything else pales in comparison.
  - anythingdude321 6y ago
    because it was first and has proven itself to be both immutable and highly secure. this leads to network effects. and money is the ultimate network effect. people want money because they know others want money and will therefore accept it in exchange for other things.
  - doggosphere 6y ago
    The existence of a cryptocurrency does not give it value. Its network gives it value (users, wallets, hardware, aka usage and adoption). Ex: Facebook is the most valuable social network on the internet. Forking FB's source code and starting my own social network does not mean anyone will use it. FB is valuable because it works, and because users are there.
  - SuoDuanDao 6y ago
    No one would use a Model T as a car, but if you had one in mint condition a collector would pay a lot for it.
  - jimmysong 6y ago
    Because Bitcoin is credibly scarce. In 10 years, Bitcoin will have 20+ years of history behind it. Your BTC2 will be much younger, probably have had a creator, a foundation that directs where it goes, possibly changed the proof-of-work and supply schedule a few times and possibly picked winners and loser on their ecosystem. In other words, your other currency won't be that different than normal fiat money. Most people don't really get that Bitcoin is unique in this regard. Literally every other coin has less credibility and more intervention and a shorter history. That's why BTC will be more valuable.
  - mindcandy 6y ago
    You could spin up your own Bitcoin fork in an afternoon. The difference between Bitcoin and x87678rCoin is confidence. No one knows or cares about x87678rCoin. x87678rCoin has no track record or evidence that it will be maintained and supported by any ecosystem in the long run. Until x87678rCoin proves itself, it is contributing nothing to the supply of cryptocurrencies. Zero.
- audunw 6y ago
  > Your dollars lose value every year because the government creates money out of thin air (aka inflation). I'm pretty sure it's not the government that creates most of the money. It's mostly the banks right? When you borrow money, they don't need to go to the government to create the money for that loan in your account. And this is a mostly a good thing. I know a lot of people think it's not, but what it really does is democratise borrowing. Your ability to borrow money is mostly only limited to your own ability to make regular payments. A slight inflation also incentivises people to borrow and invest, so it's often good for economic growth. Maybe it won't be so good in the future when the population and economy starts to shrink consistently. But I'm not convinced that cryptocurrencies is the answer there either.
  - doggosphere 6y ago
    The central bank / federal reserve controls monetary policy. Explaining the path of money creation to consumer is beyond my scope, but basically it always starts with the feds. The power to create money is indeed useful at times. However, there are problems with it that eventually arise over time. Cryptocurrencies/blockchains simply provide infrastructure outside the control of the government or any single entity. The applications we decide to use with it is ultimately up to us.
anythingdude321 6y ago
software people in stable states have had a hard time understanding why bitcoin could be valuable. consider that the dollar may not be desirable for such transactions in the future if its basis is unstable (not uncommon in many countries around the world). when you consider the instability of the US government of late, we must agree that there is a non-zero probability of confidence in the dollar diminishing significantly. multiply this probability times what you think the price of bitcoin would be in such a world. that's why people want bitcoin.
SuoDuanDao 6y ago
My theory as someone long Bitcoin? Nostalgia. Why were cars some of the best investments one could have made in the 1960s? Because people today associate these cars with intense memories of their youth. Making and losing your first fortune trading Bitcoins should have a similar effect on the retirees of 2050.
- doggosphere 6y ago
  Nostalgia works on things you can see, smell, touch; they have form. Bitcoin seems too abstract to be collectable in that sense
audunw 6y ago
> I borrow dollar mortgage to buy a dollar house. Yeah, this is currently my main reason for thinking the existing cryptocurrencies will not compete with normal currencies. You can't do fractional reserve banking. I know a lot of people think that's a good thing, but I'm not so sure. I like to consider borrowing with a fractional reserve banking system as borrowing from your future self. Mostly, the only barrier to getting a loan is your own ability to make regular payments. With a cryptocurrency, it feels like you're gonna have to find some old rich dude willing to lend you some money (possibly through a bank, but still..). I have a suspicion that this will lead to many people not being able to buy their own home anymore.. if you have a lot of money, why put it in savings in a bank to be lent out to others to buy homes? Why not buy property and rent it out instead? You'll probably have a higher ROI. In my view BTC is basically acting like a distributed pyramid scheme. A lot of the money going into it is people "investing" in the currency, and these people will try their best to recruit more people to invest even more money into the scheme so that the first guys can increase the value of the BTCs, and possibly sell out for a profit later. The only difference from an actual pyramid scheme is you don't get money directly from the people you recruit. BTC kind of shuffles the contributions. But once you're bought into BTC you still have very high incentives to hype it up as much as possible, regardless of the actual value of cryptocurrency to society. I think cryptocurrencies and blockchains in general is incredibly cool. I played around with mining Bitcoin very early on, and I do like the concept. But like many others I've yet to see a single usecase where there's no better alternative to using a blockchain, as long as you have a functioning legal system. If you're doing crime, or living in a failed/corrupt state, or doing something like international bank transfers ... sure. But those cases should hopefully be niche.
- bubersson 6y ago
  Specifically for the mortgages I don't think that will be much different with bitcoin. The whole fractional bitcoin reserve category is already booming and they do the same things as banks do in terms of rehypothecating the collateral, e.g. https://blockfi.com https://blockfi.com does that.
mindcandy 6y ago
If you are living in the US, not homeless, getting paid US dollars via direct deposit, paying for your lattes with a Mastercard, then there's not much need for Bitcoin for you beyond 1) a speculative bet on it taking off globally. 2) a speculative hedge against the US dollar greatly losing value in the next decade. But, if you are living in the confines of an backwards/broken/oppressive financial system, runnaway inflation, oppressive restrictions/sanctions, outright kleptocracy then Bitcoin is your sanctuary. It's complicated, risky, slow and tremendously better than what billions of people are dealing with from their local governments/banking systems.
- latchkey 6y ago
  ^this. Right now, Bitcoin is ~$1000 more expensive in Vietnam. Demand is higher. https://bitcoinvn.io/ https://bitcoinvn.io/ 376,246,110 / 23150 = $16,252
cactus2093 6y ago
Why does Gold have value? Everyone just agrees that it does, and once that has been true for a while you can trust that it will continue to be true tomorrow and beyond. Bitcoin seems to be entering that domain, at least in my opinion. Like gold it can't be inflated on a whim, and it's a good reserve store of value that can be stored and sent anywhere in the world much more easily than gold. There's definitely a vocal subsection of the crypto community that wants to spend BTC or some other cryptocurrency for everything they buy down to a cup of coffee, and FWIW I agree with what you're saying and I also don't understand that line of thinking. It solves no problem for me, buying a cup of coffee in a developed country. But like gold, BTC doesn't need to be used for that purpose to be useful. And then of course, it's also an alternative store of value for people in other places who can't trust their own government's currency. But I think even this (very real, very useful) use case is dwarfed by its use as a store of value in rich countries which is the largest factor in driving its valuation, since the majority of the world's wealth is held in rich countries.
intotheabyss 6y ago
I have a different take on this. In the next 10-20 years, I could earn DAI (dollars backed by ether), and buy items with DAI or ETH, and borrow mortgages on DeFi in ETH or DAI once I have a digital identity issued on Ethereum with collateral / trust built in. I also see no reason for Bitcoin.
- doggosphere 6y ago
  Eth has a different supply limit. I love Ethereum but think that Bitcoin solves something different.
  - whoisninja 6y ago
    Ethereum has some respect because atleast it is not an outright scam. But consider following : - Rollback done during DAO hack - Policy of minimum issuance but they're changing the issuance to more tighter issuance "going fwd" - They are changing the main consensus algo from proof of work to proof of stake if you understand and try to work on it you will understand how centrally planned it is becoming and how clunky their nodes are to run and their entire execution is chaos. it is hard to put serious money on something like that but sure you can bet on it ...
    - doggosphere 6y ago
      The Ethereum network has much larger and complex technical aspirations than the Bitcoin network. I'm okay that its only lead by a few people, that they did a rollback, etc. We are in the earliest days of decentralized infrastructure; laying the foundations for something that can physically last forever is more important following stringent, irreversible protocols. Ethereum as of today has many limitations, but has a chance to literally be THE future of decentralized computing. It's worth trading whatever we have now for a chance at that future.
      - whoisninja 6y ago
        those aspirations are futile if there's compromise on decentralization... + most projects on Ethereum are not decentralized if you think how they're raising funds from the VCs => they've jurisdictions anyways...but good luck to them i hope it works out
hydroreadsstuff 6y ago
On the flipside: What else are you going to hold? How much are you allocating to cash, bonds, equity, real estate, gold, bitcoin(, collectibles, art, pokemon trading cards), etc? They all come with their own sets of risk. Think of it as another asset class, with different characteristics / (albeit changing) correlation. We are at historically low interest rates. Equities are at historic P/E multiples in the U.S. and globally. Real Estate is getting more and more expensive compared to generated cashflow. Inflation/Deflation possibilities. Naturally, people are looking at other opportunities or hedges. Allocating portion according to your own situation and believe can make sense. There also exists an argument on Gold vs BTC: - Gold is hard to transport - Same bar appears on multiple balance sheets - Paper gold ETFs - Price manipulation by central banks and hedge funds - Hardness / How much gold is added yearly - Ability to improve in use through software Could be a very good collateral, compared to bonds which lose value through inflation. It's really a personal decision. If you think your money should be elsewhere, then put it elsewhere.

anm89 6y ago

No one is forcing anyone to buy bitcoin. So just don't buy any if it seems like a bad idea to you.

doggosphere 6y ago

Your dollars lose value every year because the government creates money out of thin air (aka inflation). Some assets like gold or Bitcoin are much harder to create, and so there is no indefinite, limitless increase in supply. This allows them to function better as stores of value than dollars. See hyperinflation to better understand why some people fear government spending deficits and the spiral of money creation that follows: https://www.investopedia.com/terms/h/hyperinflation.asp https://www.investopedia.com/terms/h/hyperinflation.asp

x87678r 6y ago
I understand money, inflation and finance very well. I understand that BTC has limited supply. In 10 years why would anyone want BTC though? Why would I want to buy it when I could buy BTC2 or whatever else? Its like yes there is a limited supply, but there is unlimited supply of cryptocurrencies, why is BTC more valuable than the others?
- karanbhangui 6y ago
  Was initially my argument against bitcoin also. The flaw in this reasoning imo is the power law distribution of attention. Bitcoin and Ethereum get the vast majority of the attention (and hence trade volume). Everything else pales in comparison.
- anythingdude321 6y ago
  because it was first and has proven itself to be both immutable and highly secure. this leads to network effects. and money is the ultimate network effect. people want money because they know others want money and will therefore accept it in exchange for other things.
- doggosphere 6y ago
  The existence of a cryptocurrency does not give it value. Its network gives it value (users, wallets, hardware, aka usage and adoption). Ex: Facebook is the most valuable social network on the internet. Forking FB's source code and starting my own social network does not mean anyone will use it. FB is valuable because it works, and because users are there.
- SuoDuanDao 6y ago
  No one would use a Model T as a car, but if you had one in mint condition a collector would pay a lot for it.
- jimmysong 6y ago
  Because Bitcoin is credibly scarce. In 10 years, Bitcoin will have 20+ years of history behind it. Your BTC2 will be much younger, probably have had a creator, a foundation that directs where it goes, possibly changed the proof-of-work and supply schedule a few times and possibly picked winners and loser on their ecosystem. In other words, your other currency won't be that different than normal fiat money. Most people don't really get that Bitcoin is unique in this regard. Literally every other coin has less credibility and more intervention and a shorter history. That's why BTC will be more valuable.
- mindcandy 6y ago
  You could spin up your own Bitcoin fork in an afternoon. The difference between Bitcoin and x87678rCoin is confidence. No one knows or cares about x87678rCoin. x87678rCoin has no track record or evidence that it will be maintained and supported by any ecosystem in the long run. Until x87678rCoin proves itself, it is contributing nothing to the supply of cryptocurrencies. Zero.
audunw 6y ago
> Your dollars lose value every year because the government creates money out of thin air (aka inflation). I'm pretty sure it's not the government that creates most of the money. It's mostly the banks right? When you borrow money, they don't need to go to the government to create the money for that loan in your account. And this is a mostly a good thing. I know a lot of people think it's not, but what it really does is democratise borrowing. Your ability to borrow money is mostly only limited to your own ability to make regular payments. A slight inflation also incentivises people to borrow and invest, so it's often good for economic growth. Maybe it won't be so good in the future when the population and economy starts to shrink consistently. But I'm not convinced that cryptocurrencies is the answer there either.
- doggosphere 6y ago
  The central bank / federal reserve controls monetary policy. Explaining the path of money creation to consumer is beyond my scope, but basically it always starts with the feds. The power to create money is indeed useful at times. However, there are problems with it that eventually arise over time. Cryptocurrencies/blockchains simply provide infrastructure outside the control of the government or any single entity. The applications we decide to use with it is ultimately up to us.

anythingdude321 6y ago

software people in stable states have had a hard time understanding why bitcoin could be valuable. consider that the dollar may not be desirable for such transactions in the future if its basis is unstable (not uncommon in many countries around the world). when you consider the instability of the US government of late, we must agree that there is a non-zero probability of confidence in the dollar diminishing significantly. multiply this probability times what you think the price of bitcoin would be in such a world. that's why people want bitcoin.

SuoDuanDao 6y ago

My theory as someone long Bitcoin? Nostalgia. Why were cars some of the best investments one could have made in the 1960s? Because people today associate these cars with intense memories of their youth. Making and losing your first fortune trading Bitcoins should have a similar effect on the retirees of 2050.

doggosphere 6y ago
Nostalgia works on things you can see, smell, touch; they have form. Bitcoin seems too abstract to be collectable in that sense

audunw 6y ago

> I borrow dollar mortgage to buy a dollar house. Yeah, this is currently my main reason for thinking the existing cryptocurrencies will not compete with normal currencies. You can't do fractional reserve banking. I know a lot of people think that's a good thing, but I'm not so sure. I like to consider borrowing with a fractional reserve banking system as borrowing from your future self. Mostly, the only barrier to getting a loan is your own ability to make regular payments. With a cryptocurrency, it feels like you're gonna have to find some old rich dude willing to lend you some money (possibly through a bank, but still..). I have a suspicion that this will lead to many people not being able to buy their own home anymore.. if you have a lot of money, why put it in savings in a bank to be lent out to others to buy homes? Why not buy property and rent it out instead? You'll probably have a higher ROI. In my view BTC is basically acting like a distributed pyramid scheme. A lot of the money going into it is people "investing" in the currency, and these people will try their best to recruit more people to invest even more money into the scheme so that the first guys can increase the value of the BTCs, and possibly sell out for a profit later. The only difference from an actual pyramid scheme is you don't get money directly from the people you recruit. BTC kind of shuffles the contributions. But once you're bought into BTC you still have very high incentives to hype it up as much as possible, regardless of the actual value of cryptocurrency to society. I think cryptocurrencies and blockchains in general is incredibly cool. I played around with mining Bitcoin very early on, and I do like the concept. But like many others I've yet to see a single usecase where there's no better alternative to using a blockchain, as long as you have a functioning legal system. If you're doing crime, or living in a failed/corrupt state, or doing something like international bank transfers ... sure. But those cases should hopefully be niche.

bubersson 6y ago
Specifically for the mortgages I don't think that will be much different with bitcoin. The whole fractional bitcoin reserve category is already booming and they do the same things as banks do in terms of rehypothecating the collateral, e.g. https://blockfi.com https://blockfi.com does that.

mindcandy 6y ago

If you are living in the US, not homeless, getting paid US dollars via direct deposit, paying for your lattes with a Mastercard, then there's not much need for Bitcoin for you beyond 1) a speculative bet on it taking off globally. 2) a speculative hedge against the US dollar greatly losing value in the next decade. But, if you are living in the confines of an backwards/broken/oppressive financial system, runnaway inflation, oppressive restrictions/sanctions, outright kleptocracy then Bitcoin is your sanctuary. It's complicated, risky, slow and tremendously better than what billions of people are dealing with from their local governments/banking systems.

latchkey 6y ago
^this. Right now, Bitcoin is ~$1000 more expensive in Vietnam. Demand is higher. https://bitcoinvn.io/ https://bitcoinvn.io/ 376,246,110 / 23150 = $16,252

cactus2093 6y ago

Why does Gold have value? Everyone just agrees that it does, and once that has been true for a while you can trust that it will continue to be true tomorrow and beyond. Bitcoin seems to be entering that domain, at least in my opinion. Like gold it can't be inflated on a whim, and it's a good reserve store of value that can be stored and sent anywhere in the world much more easily than gold. There's definitely a vocal subsection of the crypto community that wants to spend BTC or some other cryptocurrency for everything they buy down to a cup of coffee, and FWIW I agree with what you're saying and I also don't understand that line of thinking. It solves no problem for me, buying a cup of coffee in a developed country. But like gold, BTC doesn't need to be used for that purpose to be useful. And then of course, it's also an alternative store of value for people in other places who can't trust their own government's currency. But I think even this (very real, very useful) use case is dwarfed by its use as a store of value in rich countries which is the largest factor in driving its valuation, since the majority of the world's wealth is held in rich countries.

intotheabyss 6y ago

I have a different take on this. In the next 10-20 years, I could earn DAI (dollars backed by ether), and buy items with DAI or ETH, and borrow mortgages on DeFi in ETH or DAI once I have a digital identity issued on Ethereum with collateral / trust built in. I also see no reason for Bitcoin.

doggosphere 6y ago
Eth has a different supply limit. I love Ethereum but think that Bitcoin solves something different.
- whoisninja 6y ago
  Ethereum has some respect because atleast it is not an outright scam. But consider following : - Rollback done during DAO hack - Policy of minimum issuance but they're changing the issuance to more tighter issuance "going fwd" - They are changing the main consensus algo from proof of work to proof of stake if you understand and try to work on it you will understand how centrally planned it is becoming and how clunky their nodes are to run and their entire execution is chaos. it is hard to put serious money on something like that but sure you can bet on it ...
  - doggosphere 6y ago
    The Ethereum network has much larger and complex technical aspirations than the Bitcoin network. I'm okay that its only lead by a few people, that they did a rollback, etc. We are in the earliest days of decentralized infrastructure; laying the foundations for something that can physically last forever is more important following stringent, irreversible protocols. Ethereum as of today has many limitations, but has a chance to literally be THE future of decentralized computing. It's worth trading whatever we have now for a chance at that future.
    - whoisninja 6y ago
      those aspirations are futile if there's compromise on decentralization... + most projects on Ethereum are not decentralized if you think how they're raising funds from the VCs => they've jurisdictions anyways...but good luck to them i hope it works out

hydroreadsstuff 6y ago

On the flipside: What else are you going to hold? How much are you allocating to cash, bonds, equity, real estate, gold, bitcoin(, collectibles, art, pokemon trading cards), etc? They all come with their own sets of risk. Think of it as another asset class, with different characteristics / (albeit changing) correlation. We are at historically low interest rates. Equities are at historic P/E multiples in the U.S. and globally. Real Estate is getting more and more expensive compared to generated cashflow. Inflation/Deflation possibilities. Naturally, people are looking at other opportunities or hedges. Allocating portion according to your own situation and believe can make sense. There also exists an argument on Gold vs BTC: - Gold is hard to transport - Same bar appears on multiple balance sheets - Paper gold ETFs - Price manipulation by central banks and hedge funds - Hardness / How much gold is added yearly - Ability to improve in use through software Could be a very good collateral, compared to bonds which lose value through inflation. It's really a personal decision. If you think your money should be elsewhere, then put it elsewhere.