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I'll try, even though I'm also still wrapping my head around it. > It's a bad currency because it is slow to exchange and costs lots of money to exchange - I c

by bhupy 6y ago

I'll try, even though I'm also still wrapping my head around it. > It's a bad currency because it is slow to exchange and costs lots of money to exchange - I can't use it to buy my coffee in the morning. I'd say that there are 2 ways to address this: 1. Bitcoin is less analogous to cash or credit cards, and more analogous to the US dollar. Today, when you buy a cup of coffee with a credit card, your issuing processor updates a database entry reflecting that you owe the coffeeshop $X. At the end of the day, the issuing processor submits a batch file to a network of automated clearing houses to reflect this movement of money. This process is extremely asynchronous, and can take up to weeks to complete. Processing a Bitcoin transaction on the blockchain is analogous to that very slow, very asynchronous process. 2. Bitcoin is about as "bad" a currency as gold is. It's fairly impractical to pay for a cup of coffee with gold, unless you are able to carry a pile of it that's cut into small enough pieces that you can reasonably transact for cheap items like coffee. A crypto bull would tell you that if your use case is to buy a cup of coffee, you're better off using a credit card through a trusted network, where the currency that's being transacted is BTC or ETH instead of USD, JPY, EUR, GBP, etc. The reason why you would have a trusted bank account storing BTC or ETH instead of USD etc is because it lets you opt-out of being at the behest of a central bank that might co-opt a monetary policy you don't agree with — or worse, can render your currency useless if they do the wrong thing. It also lets you digitally transact with people in a trust-less way if you really need to. That is to say: you don't use Bitcoin to buy a cup of coffee, you use it to pay for porn on PornHub or OnlyFans because those companies have blocked by the major payment networks. Right now the only way to pay for stuff like that is by withdrawing cash and mailing briefcases of it. > It's a bad non-speculative asset, because it can't produce anything to deliver returns. It produces one, and only one thing, and that's trustless transactions. As long as there is a market need for this, it has some use, even if it's a niche use-case. > And if the answer to the question 'what can i do with a bitcoin?' is 'Wait until it is valuable, and then you can turn it into a currency you can actually spend' then it's not actually fulfilling what it set out to achieve. I think this is a good criticism, but is one that a bull might argue will hold less true over time. In the bull's perfect world, there exists enough tooling and frameworks to allow someone to live their entire life off of Bitcoin while still interoperating with the tradition financial systems seamlessly.

Closi 6y ago
> This process is extremely asynchronous, and can take up to weeks to complete. Processing a Bitcoin transaction on the blockchain is analogous to that very slow, very asynchronous process. The difference is that you have a level of guarantees that it is going to clear - at least in the UK, the second I make a payment I get a notification and the debit is posted onto my account in real time. If someone sends me money I receive it within seconds at no fee. With Bitcoin you don't have that guarantee until it has cleared which can take hours and cost over $2. > It produces one, and only one thing, and that's trustless transactions. As long as there is a market need for this, it has some use, even if it's a niche use-case. Your bitcoin doesn't produce that - your bitcoin sits there not doing anything. The transactions are verified by actual assets (servers). > I think this is a good criticism, but is one that a bull might argue will hold less true over time. In the bull's perfect world, there exists enough tooling and frameworks to allow someone to live their entire life off of Bitcoin while still interoperating with the tradition financial systems seamlessly. Even the bulls seem to admit that the transaction fees of BTC are too high and the validation time too slow - this is why they seem to push towards alt coins. I can see that someone might be able to live their entire life off bitcoin, but I still wonder why. I mean I live in the UK and people can hold all their money in Yen and pay via MasterCard if they want which will automatically do the currency conversion, but people don't do it because it would be insane. I don't see why BTC is any different.
- bhupy 6y ago
  > The difference is that you have a level of guarantees that it is going to clear - at least in the UK, the second I make a payment I get a notification and the debit is posted onto my account in real time. If someone sends me money I receive it within seconds at no fee. With Bitcoin you don't have that guarantee until it has cleared which can take hours and cost over $2. While this might be true in the UK, it's untrue in the US. In fact, in the US the ACH protocol is such that you never get a failure (a "return") within the 1 business day, you only receive successes. You may receive a "return" any time over the period of the following month. Most payment processing systems empirically work out a rough time limit before deciding that an ACH transaction was successful after all. This diagram captures the intended use case for the blockchain. You'll notice that it's the lowest level, at the Settlement layer -> https://twitter.com/stlouisfed/status/1358883628600721411/photo/1 https://twitter.com/stlouisfed/status/1358883628600721411/ph... > Your bitcoin doesn't produce that - your bitcoin sits there not doing anything. The transactions are verified by actual assets (servers). The same way that your specific gold isn't used to manufacture microchips or make jewelry, it's just sitting as gold bars in vaults managed by bullion trusts. The reason why gold has intrinsic value is that there is some use for your specific gold bar in theory, but not in practice. And yet, gold is still a viable store of value with intrinsic value. The same holds true for Bitcoin and its peers. > Even the bulls seem to admit that the transaction fees of BTC are too high and the validation time too slow - this is why they seem to push towards alt coins. Sure, I'm speaking of cryptocurrencies in general. Bitcoin, specifically, may not be the implementation that wins out. Transaction fees of altcoins like ETH and LTC are much lower, for example. They are also set per transaction rather than being a function of the actual amount size, so as long as the raw blockchain is merely used as a settlement layer, most institutions would submit large batches of transactions of high dollar amounts and pay a flat transaction fee per batch...not too dissimilar from ACH. > I can see that someone might be able to live their entire life off bitcoin, but I still wonder why. I mean I live in the UK and people can hold all their money in Yen and pay via MasterCard if they want which will automatically do the currency conversion, but people don't do it because it would be insane. I don't see why BTC is any different. Because foreign exchange fees. These don't necessarily exist with cryptocurrencies in the same way that they necessarily exist for actual fiat currencies.

by bhupy 6y ago

Closi 6y ago

> This process is extremely asynchronous, and can take up to weeks to complete. Processing a Bitcoin transaction on the blockchain is analogous to that very slow, very asynchronous process. The difference is that you have a level of guarantees that it is going to clear - at least in the UK, the second I make a payment I get a notification and the debit is posted onto my account in real time. If someone sends me money I receive it within seconds at no fee. With Bitcoin you don't have that guarantee until it has cleared which can take hours and cost over $2. > It produces one, and only one thing, and that's trustless transactions. As long as there is a market need for this, it has some use, even if it's a niche use-case. Your bitcoin doesn't produce that - your bitcoin sits there not doing anything. The transactions are verified by actual assets (servers). > I think this is a good criticism, but is one that a bull might argue will hold less true over time. In the bull's perfect world, there exists enough tooling and frameworks to allow someone to live their entire life off of Bitcoin while still interoperating with the tradition financial systems seamlessly. Even the bulls seem to admit that the transaction fees of BTC are too high and the validation time too slow - this is why they seem to push towards alt coins. I can see that someone might be able to live their entire life off bitcoin, but I still wonder why. I mean I live in the UK and people can hold all their money in Yen and pay via MasterCard if they want which will automatically do the currency conversion, but people don't do it because it would be insane. I don't see why BTC is any different.

bhupy 6y ago
> The difference is that you have a level of guarantees that it is going to clear - at least in the UK, the second I make a payment I get a notification and the debit is posted onto my account in real time. If someone sends me money I receive it within seconds at no fee. With Bitcoin you don't have that guarantee until it has cleared which can take hours and cost over $2. While this might be true in the UK, it's untrue in the US. In fact, in the US the ACH protocol is such that you never get a failure (a "return") within the 1 business day, you only receive successes. You may receive a "return" any time over the period of the following month. Most payment processing systems empirically work out a rough time limit before deciding that an ACH transaction was successful after all. This diagram captures the intended use case for the blockchain. You'll notice that it's the lowest level, at the Settlement layer -> https://twitter.com/stlouisfed/status/1358883628600721411/photo/1 https://twitter.com/stlouisfed/status/1358883628600721411/ph... > Your bitcoin doesn't produce that - your bitcoin sits there not doing anything. The transactions are verified by actual assets (servers). The same way that your specific gold isn't used to manufacture microchips or make jewelry, it's just sitting as gold bars in vaults managed by bullion trusts. The reason why gold has intrinsic value is that there is some use for your specific gold bar in theory, but not in practice. And yet, gold is still a viable store of value with intrinsic value. The same holds true for Bitcoin and its peers. > Even the bulls seem to admit that the transaction fees of BTC are too high and the validation time too slow - this is why they seem to push towards alt coins. Sure, I'm speaking of cryptocurrencies in general. Bitcoin, specifically, may not be the implementation that wins out. Transaction fees of altcoins like ETH and LTC are much lower, for example. They are also set per transaction rather than being a function of the actual amount size, so as long as the raw blockchain is merely used as a settlement layer, most institutions would submit large batches of transactions of high dollar amounts and pay a flat transaction fee per batch...not too dissimilar from ACH. > I can see that someone might be able to live their entire life off bitcoin, but I still wonder why. I mean I live in the UK and people can hold all their money in Yen and pay via MasterCard if they want which will automatically do the currency conversion, but people don't do it because it would be insane. I don't see why BTC is any different. Because foreign exchange fees. These don't necessarily exist with cryptocurrencies in the same way that they necessarily exist for actual fiat currencies.