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One of the properties of gold that roughly held true for centuries was a stable value. When gold threatened to become too scarce for a growing economy the incen

by krrrh 6y ago

One of the properties of gold that roughly held true for centuries was a stable value. When gold threatened to become too scarce for a growing economy the incentive to mine, explore, and develop new mining technology increased. Goldbugs often point out that an ounce of gold has always been close to the price of a nice suit (admittedly a fuzzy measure, and it’s sometimes a really nice suit, and sometimes just a really nice jacket). Bitcoin has gone from pennies, to around $100 for a year, to around $1000 for a year or two, to between $20000 and $3000 for a few years, and now to $50-60k. I guess you could argue that this is just going to take a few decades to stabilize, but that’s a pretty big bet, and a pretty weird way to design the next monetary framework. There was a pretty interesting Clubhouse discussion on the weekend where Eric Weinstein praised the genius of Bitcoin but bemoaned the stupidity of its design (“a QWERTY problem”), and Lex Fridman tried to charitably compare Bitcoin to JavaScript as a flawed tech that had great distribution and has been making the best of it since then. They were both rudely dismissed by a group of Bitcoin maximalists as “not getting it”. The question I’ve asked since the start is, if this is a functional idea, why is the dumb beta version still the dominant implementation? There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success, while proposed uses for Bitcoin and the blockchain have been quietly discarded. Bitcoin’s valuation is more of a symptom of post-2008 monetary conditions than a long-term challenge to them.

freeone3000 6y ago
Because it's the one that's caught on. There's no actual need for inherent utility of it that can't be papered over by running everything through one of a few big exchanges. Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin. (I'm drawing a comparison to gold here, but this is also true for other commodities, and for that matter, stocks.)
- danShumway 6y ago
  > Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin. That's an important point, because it prompts the question: what is the problem that Bitcoin is solving if the preferable outcome is that it does exactly the same things that gold and centralized banks already do? The more that I hear people justify slow transaction times, high fees, and a general lack of platform evolution, the more it sounds to me like the only problem that Bitcoin is solving in the real world is that gold is already stable, and speculators need a new thing to jump on. The arguments people are making today about why slow transactions are irrelevant are not the same arguments that people were making when Bitcoin was new. It's revisionist history. And when people are talking about centralization as the end goal... this is also part of why I'm skeptical about claims that proof of stake is going to solve anything on the environmental front, or that microtransactions are ever actually going to get better. The overwhelming perspective I'm seeing here is that nobody involved in speculating on Bitcoin cares about the technological side at all, and I don't see what incentive there is for anyone to make mining easier, cheaper, more democratic, or more environmentally friendly. The whole point seems to be that people want to get in early and then erect as high barriers of entry as possible. What makes people think that anyone speculating on Bitcoin is going to care about proof of stake? At the point where bitcoin becomes a nationally backed currency that is just a backbone for other smaller systems and is (for most people) completely independent from their regular everyday transactions -- there's no advantage to creating that world, that is the world we already have. The only difference is that a few people on Reddit haven't gotten rich off of the world we have. The fact that the majority of the market is still standardized on Bitcoin despite a plurality of clearly better coins drives home to me that the discussion about Bitcoin has nothing to do with practical merits of the system, and everything to do with a bunch of people trying to extract as much money as possible before tragedy of the commons sets in. We can make centralized banks without bitcoin. If that's the end goal, then we should absolutely get rid of the blockchain because blockchain is not necessary for a centralized bank exchange with a small number of government-level actors. I'm surrounded by people who tell me that Bitcoin is a giant innovation, but who are then openly hostile to any kind of improvement to the platform and who are continually dismissing valid criticisms of its technology and governance model as irrelevant because those criticisms don't directly impact Bitcoin's value as a purely speculative currency. What you're describing when you propose a single, centralized exchange is, "we want to make banks a second time the same way, except less efficiently with fundamentally outdated technology, because we want some of the pie this time." Which, great, but as a non-speculator, why on earth should I support that or care about it?
hfsp 6y ago
>There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success This is a feature, not a bug. It is very difficult to change the protocol. We have a 100% certain monetary policy. I agree with you that perception of what btc is and isn't changes with time. If you have a proposal, you are free to create and propose a BIP, or fork off. Good luck.
- deleted 6y ago
  [deleted]
Robotbeat 6y ago
Well, it’s no major mystery WHY you get religiosity and post how rationalizations. Those with Bitcoin, especially those with a LOT of their net worth tied up in Bitcoin, will work the hardest to protect that investment. Of course, rich people have always done that (post hoc justifications for their wealth), but when that wealth is not codified and protected by anything other than speculative value, it just increases the volume of that effect even more. The lack of technical fundamental superiority of Bitcoin vs other approaches (and no need to mention alternatives, y’all know them) increases the fervor of defense of Bitcoin as that’s basically the only thing keeping it up. Anyway, as long as Bitcoin has perceived social value, it may still have niche uses like allowing you to get money out of Venezuela. And maybe slightly cheaper than wiring large amounts of money. So actually you’re left with just: 1) pure social perceived value and 2) small use case when you have utter failure of the formal financial system. The first case is a self-licking ice cream cone, but... Unfortunately, #2 could end up being a self-licking ice cream cone, too, because now you have a bunch of people kind of invested in the formal system failing. I’m not really worried about it as the number of Bitcoin true believers is low vs the total population (and there have often been such people with a stake in system failure), but it is something to keep in mind. But not everyone just acts mechanically in response to financial incentives, as there are some cryptocurrency advocates who see the need to shore up the formal system and advocate for that.
samatman 6y ago
This is where it's good that the article did such a solid job of explaining the difference between a token and a ledger. Any ledger which represents value in a purely abstract sense has to start at zero value— and any ledger which represents ownership of some concrete asset has to be kept aligned with reality, which makes it a nonstarter for a trustless, distributed system. As an aside, the value of "one Bitcoin" is a bit of a distraction: market cap is the relevant measure, as long as we're using an existing currency as the unit of account, and the only market cap at which a distributed ledger could be relatively stable is many trillions of dollars. So, for a trustless and decentralized ledger to become the next monetary framework through voluntary action, it has to start cheap, and persist for long enough to become expensive. There's simply no other way of doing it. As for why Bitcoin, and not some other cybercoin: well, jury is out, isn't it? But money exhibits very strong network effects, and Bitcoin's first-mover advantage is considerable. A global marketplace doesn't have any reliable way to communicate other than price signals, and either BTC forms a Schelling point as the new baseline store of value, or it doesn't. It hasn't yet, but it remains the most credible candidate. If you were a small central bank, nervous about the effect of 2020 USD and EUR printing on the buying power of your foreign exchange reserves, and you wanted to buy a little chunk of some distributed ledger "just in case", which one would you pick? Probably the first one you heard of, and the one with the largest market cap: Bitcoin and BTC, respectively.
byset 6y ago
I hear this idea a lot, that Bitcoin is obviously flawed design that would be done differently if we could do it over again, so either it's the myspace of crypto and something better will supersede it, or it's the QWERTY keyboard (or maybe MS Windows 3.0) of crypto — locked in as a standard due to network effect but it's a sad thing because it's basically a garbage design that we're all stuck with now. But it's always kind of vague what is fundamentally different about this imaginary, perfected version of bitcoin. Is it the block size, i.e. Bitcoin Cash is really the ideal bitcoin? Seems highly debatable, but anyhow, the block size is a debate about tradeoffs between centralization and throughput rather than an obviously embarrassing decision. Or is it more about the issuance schedule and supply cap? Generally, if the current bitcoin is an embarrassing beta version that we're stuck with due to network effect, what does the better bitcoin look like? Does it exist already? That seems like a more interesting conversation than a meta-discussion about why we're stuck with this "dumb beta version" or why bitcoin maximalists are so mean.
svachalek 6y ago
There are various "stablecoins" that show you can have some of the benefits of crypto without wild price fluctuations. There is another interesting project called SORA that features a digital central bank managed via sortition (basically like juries, but more complicated). https://medium.com/sora-xor/sora-the-new-economic-order-3ec3f0327e5a https://medium.com/sora-xor/sora-the-new-economic-order-3ec3...

by krrrh 6y ago

freeone3000 6y ago

Because it's the one that's caught on. There's no actual need for inherent utility of it that can't be papered over by running everything through one of a few big exchanges. Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin. (I'm drawing a comparison to gold here, but this is also true for other commodities, and for that matter, stocks.)

danShumway 6y ago
> Or, preferably, ONE big exchange, where all settlements can take place off-chain and the blockchain sits in a big vault and everyone just trusts you can redeem your account balance for Bitcoin if you ever want it, but you won't want it, because the balance is more valuable than the actual Bitcoin. That's an important point, because it prompts the question: what is the problem that Bitcoin is solving if the preferable outcome is that it does exactly the same things that gold and centralized banks already do? The more that I hear people justify slow transaction times, high fees, and a general lack of platform evolution, the more it sounds to me like the only problem that Bitcoin is solving in the real world is that gold is already stable, and speculators need a new thing to jump on. The arguments people are making today about why slow transactions are irrelevant are not the same arguments that people were making when Bitcoin was new. It's revisionist history. And when people are talking about centralization as the end goal... this is also part of why I'm skeptical about claims that proof of stake is going to solve anything on the environmental front, or that microtransactions are ever actually going to get better. The overwhelming perspective I'm seeing here is that nobody involved in speculating on Bitcoin cares about the technological side at all, and I don't see what incentive there is for anyone to make mining easier, cheaper, more democratic, or more environmentally friendly. The whole point seems to be that people want to get in early and then erect as high barriers of entry as possible. What makes people think that anyone speculating on Bitcoin is going to care about proof of stake? At the point where bitcoin becomes a nationally backed currency that is just a backbone for other smaller systems and is (for most people) completely independent from their regular everyday transactions -- there's no advantage to creating that world, that is the world we already have. The only difference is that a few people on Reddit haven't gotten rich off of the world we have. The fact that the majority of the market is still standardized on Bitcoin despite a plurality of clearly better coins drives home to me that the discussion about Bitcoin has nothing to do with practical merits of the system, and everything to do with a bunch of people trying to extract as much money as possible before tragedy of the commons sets in. We can make centralized banks without bitcoin. If that's the end goal, then we should absolutely get rid of the blockchain because blockchain is not necessary for a centralized bank exchange with a small number of government-level actors. I'm surrounded by people who tell me that Bitcoin is a giant innovation, but who are then openly hostile to any kind of improvement to the platform and who are continually dismissing valid criticisms of its technology and governance model as irrelevant because those criticisms don't directly impact Bitcoin's value as a purely speculative currency. What you're describing when you propose a single, centralized exchange is, "we want to make banks a second time the same way, except less efficiently with fundamentally outdated technology, because we want some of the pie this time." Which, great, but as a non-speculator, why on earth should I support that or care about it?

hfsp 6y ago

>There’s a bizarre religiousity and post hoc rationalizations for some of the weirdest decisions in its design, and mistaking speculative mania and nominal price for success This is a feature, not a bug. It is very difficult to change the protocol. We have a 100% certain monetary policy. I agree with you that perception of what btc is and isn't changes with time. If you have a proposal, you are free to create and propose a BIP, or fork off. Good luck.

deleted 6y ago
[deleted]

Robotbeat 6y ago

Well, it’s no major mystery WHY you get religiosity and post how rationalizations. Those with Bitcoin, especially those with a LOT of their net worth tied up in Bitcoin, will work the hardest to protect that investment. Of course, rich people have always done that (post hoc justifications for their wealth), but when that wealth is not codified and protected by anything other than speculative value, it just increases the volume of that effect even more. The lack of technical fundamental superiority of Bitcoin vs other approaches (and no need to mention alternatives, y’all know them) increases the fervor of defense of Bitcoin as that’s basically the only thing keeping it up. Anyway, as long as Bitcoin has perceived social value, it may still have niche uses like allowing you to get money out of Venezuela. And maybe slightly cheaper than wiring large amounts of money. So actually you’re left with just: 1) pure social perceived value and 2) small use case when you have utter failure of the formal financial system. The first case is a self-licking ice cream cone, but... Unfortunately, #2 could end up being a self-licking ice cream cone, too, because now you have a bunch of people kind of invested in the formal system failing. I’m not really worried about it as the number of Bitcoin true believers is low vs the total population (and there have often been such people with a stake in system failure), but it is something to keep in mind. But not everyone just acts mechanically in response to financial incentives, as there are some cryptocurrency advocates who see the need to shore up the formal system and advocate for that.

samatman 6y ago

This is where it's good that the article did such a solid job of explaining the difference between a token and a ledger. Any ledger which represents value in a purely abstract sense has to start at zero value— and any ledger which represents ownership of some concrete asset has to be kept aligned with reality, which makes it a nonstarter for a trustless, distributed system. As an aside, the value of "one Bitcoin" is a bit of a distraction: market cap is the relevant measure, as long as we're using an existing currency as the unit of account, and the only market cap at which a distributed ledger could be relatively stable is many trillions of dollars. So, for a trustless and decentralized ledger to become the next monetary framework through voluntary action, it has to start cheap, and persist for long enough to become expensive. There's simply no other way of doing it. As for why Bitcoin, and not some other cybercoin: well, jury is out, isn't it? But money exhibits very strong network effects, and Bitcoin's first-mover advantage is considerable. A global marketplace doesn't have any reliable way to communicate other than price signals, and either BTC forms a Schelling point as the new baseline store of value, or it doesn't. It hasn't yet, but it remains the most credible candidate. If you were a small central bank, nervous about the effect of 2020 USD and EUR printing on the buying power of your foreign exchange reserves, and you wanted to buy a little chunk of some distributed ledger "just in case", which one would you pick? Probably the first one you heard of, and the one with the largest market cap: Bitcoin and BTC, respectively.

byset 6y ago

I hear this idea a lot, that Bitcoin is obviously flawed design that would be done differently if we could do it over again, so either it's the myspace of crypto and something better will supersede it, or it's the QWERTY keyboard (or maybe MS Windows 3.0) of crypto — locked in as a standard due to network effect but it's a sad thing because it's basically a garbage design that we're all stuck with now. But it's always kind of vague what is fundamentally different about this imaginary, perfected version of bitcoin. Is it the block size, i.e. Bitcoin Cash is really the ideal bitcoin? Seems highly debatable, but anyhow, the block size is a debate about tradeoffs between centralization and throughput rather than an obviously embarrassing decision. Or is it more about the issuance schedule and supply cap? Generally, if the current bitcoin is an embarrassing beta version that we're stuck with due to network effect, what does the better bitcoin look like? Does it exist already? That seems like a more interesting conversation than a meta-discussion about why we're stuck with this "dumb beta version" or why bitcoin maximalists are so mean.

svachalek 6y ago

There are various "stablecoins" that show you can have some of the benefits of crypto without wild price fluctuations. There is another interesting project called SORA that features a digital central bank managed via sortition (basically like juries, but more complicated). https://medium.com/sora-xor/sora-the-new-economic-order-3ec3f0327e5a https://medium.com/sora-xor/sora-the-new-economic-order-3ec3...