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I don't understand why people keep trying to compare Bitcoin to traditional fiat money when it is an entirely new asset class that we have never seen. It is sor

I don't understand why people keep trying to compare Bitcoin to traditional fiat money when it is an entirely new asset class that we have never seen. It is sorta like money (or can easily be converted to "real" money), an asset, store of value, protocol, and secure network all at once. Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole.

ahpearce 6y ago
But in the markets, it is not about the technical definition of Bitcoin, it is about how the average market participant interprets what Bitcoin is... Being technically novel does not protect Bitcoin from being treated like currency, and it doesn't alleviate the negative impact of people's (erroneous) conceptualization of it.
stetrain 6y ago
At the end of the day it is being traded and speculated on like any normal asset though. The people buying bitcoin as an investment don't need to care about the asset or secure network, in fact bitcoin's technical details have actually created negatives when exchanges/vaults/services break and assets are lost. To most buyers it's just like buying and selling stocks, currency, gold, oil futures, whatever.
- hanniabu 6y ago
  If a tanker sinks, that means nothing about the value of oil. Similarly, when there's an exchange hack, that means nothing about the value or security of bitcoin. It just means they had poor security standards.
- washedup 6y ago
  I agree that most buyers are investing as a speculation; all investing is speculation. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
  - stetrain 6y ago
    But are any of those new properties at all related to its value or why it is being traded? At the end of the chain of speculation, eventually oil gets sold to a customer who wants to burn it and real estate gets sold to someone who wants to live there. If they didn't, those markets would collapse (and housing has done just that in the past). I do agree that bitcoin (well, blockchain in general) has useful properties for certain types of transactions or record keeping. But I think the points of the article stand. If a currency isn't useful to buy things, or is subject to wild value swings due to speculation, then it isn't a great currency. If an asset doesn't have any real value to any customers, then it's not a great asset. Bitcoin combines both of those into, a mediocre currency and a speculative asset?
- pontifier 6y ago
  Exactly! The biggest arguments I have around Bitcoin are 1: Even if you can treat it like an asset, it's an unproductive one. 2: It's too easy to have some sort of problem and lose it. At the end of the day, I see the long term value of BTC going to zero. I feel lucky to have had some at one point, just to have that experience. One day, I saw that Bitcoin sitting in my wallet, and realised I didn't really care anymore. It didn't solve any problems I was having, and I couldn't do anything with it other than look at the balance or send it somewhere. I'd rather have my future wealth come from value I create, than some asset I happen to hold.
  - cinntaile 6y ago
    Regarding your last sentence. Trading your time for money will take a long time to build wealth. Wealth is usually created by holding assets.
    - mlady 6y ago
      "I'd rather have my future wealth come from value I create" He doesn't say anything about trading time for money. If he creates value that scales, he can divorce his time from the money he makes.
      - cinntaile 6y ago
        I'm having trouble coming up with an example. Can you give an example of value that scales but that isn't an asset he holds?
        pontifier 6y ago
        I prefer assets that I create, or have an active role in such as patents, and businesses, and code.
        deleted 6y ago
        [deleted]
  - Siira 6y ago
eli 6y ago
It's a thing investors buy and sell but that also has other uses? So it's an asset.
- washedup 6y ago
  Anything that a person finds useful (or, more strictly, that a person can trade) can be an asset. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
  - eli 6y ago
    My point is that the new properties don't matter for this discussion.
SpicyLemonZest 6y ago
Institutional investors have to (and personal investors should) have some concrete understanding of what an asset is and why it's valuable before investing in it. If there's a better understanding than "just a currency", sure, that's worth discussing. But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements?
- mateuszf 6y ago
  > But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements? Two words: digital gold
- washedup 6y ago
  Markets determine which price is reasonable. It's a collective decision about how much something is worth. Is it reasonable to say bitcoin should be worth less than $10K, $1000, $100 etc...? No, because the price today is not that.
  - SpicyLemonZest 6y ago
    You're misunderstanding something here. It's reasonable and very common to say that the true value of a financial asset is different than its market price; anyone who makes an investment in something is expressing the thesis that the current market price is lower than it will be in the future.
    - washedup 6y ago
      No, I don't misunderstand, I agree with you. Just saying that a market price is the best guess for whatever the "true" price is / should be. Because cyrpto markets are easily accessible across the world to everyone, it will be closer to the "true" value than other markets that are less accessible.
logifail 6y ago
> It is sorta like money (or can easily be converted to "real" money), an asset, store of value, protocol, and secure network all at once Apart from "protocol" and "secure network" ... this sounds almost how one might have described owning a tulip bulb in the year 1636 :)
- ForHackernews 6y ago
  Are you kidding? Tulip bulbs make an outstanding protocol: they are self-propagating and they come in 10+ different colors, making them more information-dense than a conventional binary protocol.
mbesto 6y ago
There are two aspects of "money" - store of value and medium of exchange. > Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole. Which is funny because that's exactly what you did. You only compared it to store of value ("asset class") and ignored the "medium of exchange" part...which is the characteristic people are using for the comparison to fiat currency. You can accept that BTC has a store of value and still be critical that its use for a medium of exchange is limited.
- washedup 6y ago
  The author is saying it's lack of ability to be medium of exchange is reason for it's failure and their decision to short it, I am saying that you need to consider all facets of the technology. It might fail as currency today, but that doesn't mean it won't in the future or that it has other useful properties today
  - mbesto 6y ago
    > I am saying that you need to consider all facets of the technology. And to your point the author did assess it as a medium of exchange and deemed it a failure. > but that doesn't mean it won't in the future or that it has other useful properties today Just as you think it has a future, the author thinks it doesn't - hence the short position. But saying that the author didn't consider all aspects is disingenuous - they literally did, they just don't agree with you. Also, you talked about other uses like "protocol and secure network". Aren't these just features of the technology that powers BTC (e.g. blockchain)?
    - washedup 6y ago
      Good point, a lot of the value prop is simply blockchain, which there are many "crypto" versions. Bitcoin's real value prop today is the network effect (growing in users/wallets/network hash etc).
      - mbesto 6y ago
TheChetan 6y ago
https://www.cs.utexas.edu/users/EWD/transcriptions/EWD10xx/EWD1036.html https://www.cs.utexas.edu/users/EWD/transcriptions/EWD10xx/E... Dijkstra does a commendable job in explaining how people map new ideas to old ones and never really end up looking at things in a new way.
powerapple 6y ago
1) you believe someone else will buy it with higher price; 2) its scarcity; 3) the value is not fixed on anything other than buyers. It is the same as paintings and other arts. It can be used for money laundry as well investiment.
powerapple 6y ago
1) you believe someone else will buy it with higher price; 2) its scarcity; 3) the value is not fixed on anything other than buyers. It is the same as paintings and other arts. It can be used for money laundry as well as investment.
saltminer 6y ago
Bitcoin should not be viewed as a currency (for the reasons outlined in the article), but the libertarian-types who were claiming it was going to replace fiat currency early on continue to peddle that about Bitcoin and other cryptocurrencies today. And the idea that BTC = money ("coin" is in the name and "currency" is in "cryptocurrency") has stuck in many people's minds, so this stuff is unfortunately necessary since the general public's understanding of Bitcoin is "obscure digital money that goes from cheap to expensive and back real quick". And the media, being generally too lazy to do critical investigative work into obscure tech stuff, have actually reported on BTC as if it is a real currency in the past. Futures, stocks, etc never had the public image of a potential future currency, which is why you don't see blog posts about how "High-yield debt will Replace Fiat in a few years" or other such nonsense. The same cannot be said for Bitcoin.

ahpearce 6y ago

But in the markets, it is not about the technical definition of Bitcoin, it is about how the average market participant interprets what Bitcoin is... Being technically novel does not protect Bitcoin from being treated like currency, and it doesn't alleviate the negative impact of people's (erroneous) conceptualization of it.

stetrain 6y ago

At the end of the day it is being traded and speculated on like any normal asset though. The people buying bitcoin as an investment don't need to care about the asset or secure network, in fact bitcoin's technical details have actually created negatives when exchanges/vaults/services break and assets are lost. To most buyers it's just like buying and selling stocks, currency, gold, oil futures, whatever.

hanniabu 6y ago
If a tanker sinks, that means nothing about the value of oil. Similarly, when there's an exchange hack, that means nothing about the value or security of bitcoin. It just means they had poor security standards.
washedup 6y ago
I agree that most buyers are investing as a speculation; all investing is speculation. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
- stetrain 6y ago
  But are any of those new properties at all related to its value or why it is being traded? At the end of the chain of speculation, eventually oil gets sold to a customer who wants to burn it and real estate gets sold to someone who wants to live there. If they didn't, those markets would collapse (and housing has done just that in the past). I do agree that bitcoin (well, blockchain in general) has useful properties for certain types of transactions or record keeping. But I think the points of the article stand. If a currency isn't useful to buy things, or is subject to wild value swings due to speculation, then it isn't a great currency. If an asset doesn't have any real value to any customers, then it's not a great asset. Bitcoin combines both of those into, a mediocre currency and a speculative asset?
pontifier 6y ago
Exactly! The biggest arguments I have around Bitcoin are 1: Even if you can treat it like an asset, it's an unproductive one. 2: It's too easy to have some sort of problem and lose it. At the end of the day, I see the long term value of BTC going to zero. I feel lucky to have had some at one point, just to have that experience. One day, I saw that Bitcoin sitting in my wallet, and realised I didn't really care anymore. It didn't solve any problems I was having, and I couldn't do anything with it other than look at the balance or send it somewhere. I'd rather have my future wealth come from value I create, than some asset I happen to hold.
- cinntaile 6y ago
  Regarding your last sentence. Trading your time for money will take a long time to build wealth. Wealth is usually created by holding assets.
  - mlady 6y ago
    "I'd rather have my future wealth come from value I create" He doesn't say anything about trading time for money. If he creates value that scales, he can divorce his time from the money he makes.
    - cinntaile 6y ago
      I'm having trouble coming up with an example. Can you give an example of value that scales but that isn't an asset he holds?
      - pontifier 6y ago
        I prefer assets that I create, or have an active role in such as patents, and businesses, and code.
      - deleted 6y ago
        [deleted]
- Siira 6y ago

eli 6y ago

It's a thing investors buy and sell but that also has other uses? So it's an asset.

washedup 6y ago
Anything that a person finds useful (or, more strictly, that a person can trade) can be an asset. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
- eli 6y ago
  My point is that the new properties don't matter for this discussion.

SpicyLemonZest 6y ago

Institutional investors have to (and personal investors should) have some concrete understanding of what an asset is and why it's valuable before investing in it. If there's a better understanding than "just a currency", sure, that's worth discussing. But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements?

mateuszf 6y ago
> But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements? Two words: digital gold
washedup 6y ago
Markets determine which price is reasonable. It's a collective decision about how much something is worth. Is it reasonable to say bitcoin should be worth less than $10K, $1000, $100 etc...? No, because the price today is not that.
- SpicyLemonZest 6y ago
  You're misunderstanding something here. It's reasonable and very common to say that the true value of a financial asset is different than its market price; anyone who makes an investment in something is expressing the thesis that the current market price is lower than it will be in the future.
  - washedup 6y ago
    No, I don't misunderstand, I agree with you. Just saying that a market price is the best guess for whatever the "true" price is / should be. Because cyrpto markets are easily accessible across the world to everyone, it will be closer to the "true" value than other markets that are less accessible.

logifail 6y ago

> It is sorta like money (or can easily be converted to "real" money), an asset, store of value, protocol, and secure network all at once Apart from "protocol" and "secure network" ... this sounds almost how one might have described owning a tulip bulb in the year 1636 :)

ForHackernews 6y ago
Are you kidding? Tulip bulbs make an outstanding protocol: they are self-propagating and they come in 10+ different colors, making them more information-dense than a conventional binary protocol.

mbesto 6y ago

There are two aspects of "money" - store of value and medium of exchange. > Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole. Which is funny because that's exactly what you did. You only compared it to store of value ("asset class") and ignored the "medium of exchange" part...which is the characteristic people are using for the comparison to fiat currency. You can accept that BTC has a store of value and still be critical that its use for a medium of exchange is limited.

washedup 6y ago
The author is saying it's lack of ability to be medium of exchange is reason for it's failure and their decision to short it, I am saying that you need to consider all facets of the technology. It might fail as currency today, but that doesn't mean it won't in the future or that it has other useful properties today
- mbesto 6y ago
  > I am saying that you need to consider all facets of the technology. And to your point the author did assess it as a medium of exchange and deemed it a failure. > but that doesn't mean it won't in the future or that it has other useful properties today Just as you think it has a future, the author thinks it doesn't - hence the short position. But saying that the author didn't consider all aspects is disingenuous - they literally did, they just don't agree with you. Also, you talked about other uses like "protocol and secure network". Aren't these just features of the technology that powers BTC (e.g. blockchain)?
  - washedup 6y ago
    Good point, a lot of the value prop is simply blockchain, which there are many "crypto" versions. Bitcoin's real value prop today is the network effect (growing in users/wallets/network hash etc).
    - mbesto 6y ago

TheChetan 6y ago

https://www.cs.utexas.edu/users/EWD/transcriptions/EWD10xx/EWD1036.html https://www.cs.utexas.edu/users/EWD/transcriptions/EWD10xx/E... Dijkstra does a commendable job in explaining how people map new ideas to old ones and never really end up looking at things in a new way.

powerapple 6y ago

1) you believe someone else will buy it with higher price; 2) its scarcity; 3) the value is not fixed on anything other than buyers. It is the same as paintings and other arts. It can be used for money laundry as well investiment.

powerapple 6y ago

saltminer 6y ago

Bitcoin should not be viewed as a currency (for the reasons outlined in the article), but the libertarian-types who were claiming it was going to replace fiat currency early on continue to peddle that about Bitcoin and other cryptocurrencies today. And the idea that BTC = money ("coin" is in the name and "currency" is in "cryptocurrency") has stuck in many people's minds, so this stuff is unfortunately necessary since the general public's understanding of Bitcoin is "obscure digital money that goes from cheap to expensive and back real quick". And the media, being generally too lazy to do critical investigative work into obscure tech stuff, have actually reported on BTC as if it is a real currency in the past. Futures, stocks, etc never had the public image of a potential future currency, which is why you don't see blog posts about how "High-yield debt will Replace Fiat in a few years" or other such nonsense. The same cannot be said for Bitcoin.