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The funny thing is that Bitcoin will basically only have value as a collectible as long as substantial numbers of people believe this essay’s argument is false.

by graeme 6y ago

The funny thing is that Bitcoin will basically only have value as a collectible as long as substantial numbers of people believe this essay’s argument is false. People want to collect bitcoin at current valuations because they are convinced it will become a currency/store of value of the future and hence rise in value. If everyone suddenly switched to believing “Oh bitcoin doesn’t do anything but it is a fun collectible which also has mining costs to track ownership” its value would plummet.

danjac 6y ago
> The funny thing is that Bitcoin will basically only have value as a collectible as long as substantial numbers of people believe this essay’s argument is false. Is this the "greater fool" argument against Bitcoin?
paxys 6y ago
Bitcoin can be a collectible and a store of value without ever becoming a currency. Gold, art, baseball cards etc. all fall into that category.
- graeme 6y ago
  Those all have some kind of use value, and a story attached. Gold makes beautiful jewelry, collector’s cards remind people of childhood and baseball flory, art is lovely to look at and a way to flaunt wealth or feel a connection through the ages. You can look at all three and feel a fuzzy glow of happiness as you ponder the attached narrative. My point was that, if the author’s argument is true, bitcoin will only have value as a pure collectible if people maintain some wider narrative that opposes the argument in the essay. No one would collect a sterile piece of cardboard devoid of any story, just as no one would collect “Digital token #385839, definitively devoid of use”. I’m not saying Bitcoin needs to become a useful currency to maintain a value. I’m saying it needs to have people believe it will, or to believe some other narrative about it which makes them consider it as more than a collectible.
  - zbraniecki 6y ago
    That feels like a rationalization of an emotional argument. Gold's current value is not related to its function as a material for jewelry, but from a myth that it is a store of value. If people would stop believing the myth, the cost of gold would plummet and stabilize around the value it provides as a material for jewelry. Similarly, "art is lovely" is a really stretched argument. If you want, you could print your transaction block hash and consider it pretty as a math-art concept. So yes, bitcoin needs people to believe in its value to remain valuable, much like everything else that is not a raw utility - nations, religions, money, corporations, gold, baseball cards, and so on. Heck, even Ferraris would become much cheaper if people only valued them for their function. They cost a lot primarily because we value them highly due to myths and scarcity.
    - chii 6y ago
      > If people would stop believing the myth imagine if tomorrow, we suddenly find ourselves mining gold from asteroids, and that gold suddenly became super-abundant. Would the price of gold drop to match just the material usage value (e.g., for jewellery and electronics)?
      - omegant 6y ago
        It has happened before, aluminum is a good example.
      - ZephyrBlu 6y ago
        I would say yes.
      - paxys 6y ago
        Yes. In the same way Bitcoin will be worthless if quantum computing or some yet undiscovered technology makes calculating hashes effortless.
        wolfretcrap 6y ago
        But by then bitcoin would have started using quantum hashes.
Triv888 6y ago
You are missing a lot on what bitcoin actually is and what it could be (because it can change)... which is hopefully why it will keep an edge on other cryptos.
- jazzyjackson 6y ago
  Holders of gold seek no innovation in the material science of gold. Would like to hear more of your theory, in my view Bitcoin is a fossil whose community is intent on keeping it a fossil. All energy towards improving the network are focused on Layer 2. Transactions per second will not be increased, max supply will not be increased... the various forks of bitcoin speak to this. Why do you believe Bitcoin can keep an edge?
dnautics 6y ago
> If everyone suddenly switched to believing “Oh bitcoin doesn’t do anything but it is a fun collectible which also has mining costs to track ownership” its value would plummet. That's generally true for all currencies. If everyone suddenly switched to believing "X-sovereign-currency" doesn't do anything but legitimizes that sovereign and has military and human rights costs to maintain the illusion of that legitimacy, its value would plummet. Currencies are not real, their value is in our collective heads, or at the tip of the gun, or because you can pay taxes in it or get sent to jail. Yes, in general they're nice because it makes transactions less of a pain, but that isn't specifically true for any one currency.
- handmodel 6y ago
  > their value is in your head, or at the tip of the gun, or because you can pay taxes in it or get sent to jail. These all seem very real. And not something that will disappear (or even drop) if media attention or nerd interest moves elsewhere.
  - dnautics 6y ago
    it's not like currencies haven't died before due to international boycott. And even internally there is a breaking point at which a sovereign that loses the confidence of its people is helpless.
  - paxys 6y ago
    A lot of "real" currencies – backed by governments with guns – have disappeared in the past, simply because people stopped believing in them.
  - rawtxapp 6y ago
    We had other global reserve currencies before USD and they have all lost their reserve status, it can and will happen to USD too, as other countries become more powerful.
  - matheusmoreira 6y ago
    Every currency ever created eventually disappeared. Nothing particularly special about them. The only reason people even bothered using them at all was due to government mandate: businesses are required to accept the local currency and taxes can only be paid using it. Cryptocurrencies exist in a digital and decentralized world. They will outlast governments.
fny 6y ago
Here's a question: how many people do you know that buy crypto intend to spend it? You know, use it like currency? Or are they all just HODLing in the hopes that some other buyer will come along who believes it will become a medium of exchange? In my view, it's not a currency until people stop speculating and start using it like a currency. So yes, it's a collectible with ridiculously high transaction costs that make it difficult for me to use as a currency.
- ALittleLight 6y ago
  Just recently I was looking into making bets on polymarket - a prediction market that uses Ethereum and advertises zero fees. I happened to have a bit of eth from a while back but I was dismayed to find out that the transfer fee, seemingly to move any amount of eth into polymarket, was something like a flat 50 dollar equivalent. I just wanted to bet with a few hundred dollars, and having to spend 50 of that just to get started felt unfun.
  - fny 6y ago
    I actually think gets fixed with ETH2. I'm actually a bigger believer in DeFi than BTC.
- spookthesunset 6y ago
  The problem with Bitcoin is it is a horrible currency. It’s slow and it doesn’t scale beyond a few transactions a second. I’ve been following Bitcoin for more than seven years and absolutely nothing about it has fundamentally changed. It has always been a “currency” majority owned by dodgy shadowy characters. It’s always been slow. It’s always been unscalable (by design!). It has always been a get rich quick pyramid scheme. It doesn’t matter what its USD value is. It’s a scam. Always was, always will be.
  - rawtxapp 6y ago
    I feel like beating a dead horse, but there's tons of L2 technologies at this point, lightning payment channels or rollups on eth, etc. The blockchain itself is like a settlement layer. Our current financial system is also layered similarly btw. When you buy something with your credit card, it doesn't settle right away.
fossuser 6y ago
I’ve basically come to believe the argument described in the following is true: https://www.matthuang.com/bitcoin_for_the_open_minded_skeptic https://www.matthuang.com/bitcoin_for_the_open_minded_skepti... Bitcoin isn’t a cash competitor, it’s a gold competitor - and it’s a pretty good one. Part of something like gold is the shared social belief in it as a store of value. Bitcoin has this and there’s enough time and infrastructure behind it at this point that I’d bet it’s likely to keep it. That plus its scarcity guarantee and disconnect from the federal monetary policy of any one country or bank makes me bullish on its future in the long term. I’m also bullish on ethereum, but for different reasons.
- mrpopo 6y ago
  > Part of something like gold is the shared social belief in it as a store of value. Gold has inherent uses as a precious metal. Bitcoin mining only computes SHA256 hashes for no actual purposes.
  - paxys 6y ago
    Gold's market value has nothing to do with the fact that it is also has some uses as an actual metal. The vast majority of it will always be kept in a vault.
  - fossuser 6y ago
    It’s worth reading what I linked. Gold’s inherent utility as a metal is largely irrelevant.
matheusmoreira 6y ago
Bitcoin's only value is the fact it's the most popular and well-known cryptocurrency. It came first and a lot of people are aware of it. Technologically it's already been surpassed by everything that came after. Monero in particular is essentially bitcoin with all the problems fixed. I wish it'd just lose it's value already so that liquidity will flow into all the much better coins out there. Not likely to happen though...
- ZephyrBlu 6y ago
  You say that like it's not important. The fact Bitcoin has become so ubiquitous is an achievement in itself. A large aspect of currency/store of value/whatever is social/network effects.
  - matheusmoreira 6y ago
    I understand its importance. Everyone knows bitcoin and this is a valuable property of the currency. I'm just frustrated the market doesn't value good technology more. There are far better coins out there that deserve more attention. We're all still talking about bitcoin when the market should've moved on ages ago.
tessierashpool 6y ago
> People want to collect bitcoin at current valuations because they are convinced it will become a currency/store of value of the future and hence rise in value That’s just objectively false, though. Yes, a small group of people collect Bitcoin because they believe it will become a currency and therefore rise in value. But most people who collect Bitcoin think it will rise in value because they see it rising in value. Occam’s razor, dude.

by graeme 6y ago

danjac 6y ago

> The funny thing is that Bitcoin will basically only have value as a collectible as long as substantial numbers of people believe this essay’s argument is false. Is this the "greater fool" argument against Bitcoin?

paxys 6y ago

Bitcoin can be a collectible and a store of value without ever becoming a currency. Gold, art, baseball cards etc. all fall into that category.

graeme 6y ago
Those all have some kind of use value, and a story attached. Gold makes beautiful jewelry, collector’s cards remind people of childhood and baseball flory, art is lovely to look at and a way to flaunt wealth or feel a connection through the ages. You can look at all three and feel a fuzzy glow of happiness as you ponder the attached narrative. My point was that, if the author’s argument is true, bitcoin will only have value as a pure collectible if people maintain some wider narrative that opposes the argument in the essay. No one would collect a sterile piece of cardboard devoid of any story, just as no one would collect “Digital token #385839, definitively devoid of use”. I’m not saying Bitcoin needs to become a useful currency to maintain a value. I’m saying it needs to have people believe it will, or to believe some other narrative about it which makes them consider it as more than a collectible.
- zbraniecki 6y ago
  That feels like a rationalization of an emotional argument. Gold's current value is not related to its function as a material for jewelry, but from a myth that it is a store of value. If people would stop believing the myth, the cost of gold would plummet and stabilize around the value it provides as a material for jewelry. Similarly, "art is lovely" is a really stretched argument. If you want, you could print your transaction block hash and consider it pretty as a math-art concept. So yes, bitcoin needs people to believe in its value to remain valuable, much like everything else that is not a raw utility - nations, religions, money, corporations, gold, baseball cards, and so on. Heck, even Ferraris would become much cheaper if people only valued them for their function. They cost a lot primarily because we value them highly due to myths and scarcity.
  - chii 6y ago
    > If people would stop believing the myth imagine if tomorrow, we suddenly find ourselves mining gold from asteroids, and that gold suddenly became super-abundant. Would the price of gold drop to match just the material usage value (e.g., for jewellery and electronics)?
    - omegant 6y ago
      It has happened before, aluminum is a good example.
    - ZephyrBlu 6y ago
      I would say yes.
    - paxys 6y ago
      Yes. In the same way Bitcoin will be worthless if quantum computing or some yet undiscovered technology makes calculating hashes effortless.
      - wolfretcrap 6y ago
        But by then bitcoin would have started using quantum hashes.

Triv888 6y ago

You are missing a lot on what bitcoin actually is and what it could be (because it can change)... which is hopefully why it will keep an edge on other cryptos.

jazzyjackson 6y ago
Holders of gold seek no innovation in the material science of gold. Would like to hear more of your theory, in my view Bitcoin is a fossil whose community is intent on keeping it a fossil. All energy towards improving the network are focused on Layer 2. Transactions per second will not be increased, max supply will not be increased... the various forks of bitcoin speak to this. Why do you believe Bitcoin can keep an edge?

dnautics 6y ago

> If everyone suddenly switched to believing “Oh bitcoin doesn’t do anything but it is a fun collectible which also has mining costs to track ownership” its value would plummet. That's generally true for all currencies. If everyone suddenly switched to believing "X-sovereign-currency" doesn't do anything but legitimizes that sovereign and has military and human rights costs to maintain the illusion of that legitimacy, its value would plummet. Currencies are not real, their value is in our collective heads, or at the tip of the gun, or because you can pay taxes in it or get sent to jail. Yes, in general they're nice because it makes transactions less of a pain, but that isn't specifically true for any one currency.

handmodel 6y ago
> their value is in your head, or at the tip of the gun, or because you can pay taxes in it or get sent to jail. These all seem very real. And not something that will disappear (or even drop) if media attention or nerd interest moves elsewhere.
- dnautics 6y ago
  it's not like currencies haven't died before due to international boycott. And even internally there is a breaking point at which a sovereign that loses the confidence of its people is helpless.
- paxys 6y ago
  A lot of "real" currencies – backed by governments with guns – have disappeared in the past, simply because people stopped believing in them.
- rawtxapp 6y ago
  We had other global reserve currencies before USD and they have all lost their reserve status, it can and will happen to USD too, as other countries become more powerful.
- matheusmoreira 6y ago
  Every currency ever created eventually disappeared. Nothing particularly special about them. The only reason people even bothered using them at all was due to government mandate: businesses are required to accept the local currency and taxes can only be paid using it. Cryptocurrencies exist in a digital and decentralized world. They will outlast governments.

fny 6y ago

Here's a question: how many people do you know that buy crypto intend to spend it? You know, use it like currency? Or are they all just HODLing in the hopes that some other buyer will come along who believes it will become a medium of exchange? In my view, it's not a currency until people stop speculating and start using it like a currency. So yes, it's a collectible with ridiculously high transaction costs that make it difficult for me to use as a currency.

ALittleLight 6y ago
Just recently I was looking into making bets on polymarket - a prediction market that uses Ethereum and advertises zero fees. I happened to have a bit of eth from a while back but I was dismayed to find out that the transfer fee, seemingly to move any amount of eth into polymarket, was something like a flat 50 dollar equivalent. I just wanted to bet with a few hundred dollars, and having to spend 50 of that just to get started felt unfun.
- fny 6y ago
  I actually think gets fixed with ETH2. I'm actually a bigger believer in DeFi than BTC.
spookthesunset 6y ago
The problem with Bitcoin is it is a horrible currency. It’s slow and it doesn’t scale beyond a few transactions a second. I’ve been following Bitcoin for more than seven years and absolutely nothing about it has fundamentally changed. It has always been a “currency” majority owned by dodgy shadowy characters. It’s always been slow. It’s always been unscalable (by design!). It has always been a get rich quick pyramid scheme. It doesn’t matter what its USD value is. It’s a scam. Always was, always will be.
- rawtxapp 6y ago
  I feel like beating a dead horse, but there's tons of L2 technologies at this point, lightning payment channels or rollups on eth, etc. The blockchain itself is like a settlement layer. Our current financial system is also layered similarly btw. When you buy something with your credit card, it doesn't settle right away.

fossuser 6y ago

I’ve basically come to believe the argument described in the following is true: https://www.matthuang.com/bitcoin_for_the_open_minded_skeptic https://www.matthuang.com/bitcoin_for_the_open_minded_skepti... Bitcoin isn’t a cash competitor, it’s a gold competitor - and it’s a pretty good one. Part of something like gold is the shared social belief in it as a store of value. Bitcoin has this and there’s enough time and infrastructure behind it at this point that I’d bet it’s likely to keep it. That plus its scarcity guarantee and disconnect from the federal monetary policy of any one country or bank makes me bullish on its future in the long term. I’m also bullish on ethereum, but for different reasons.

mrpopo 6y ago
> Part of something like gold is the shared social belief in it as a store of value. Gold has inherent uses as a precious metal. Bitcoin mining only computes SHA256 hashes for no actual purposes.
- paxys 6y ago
  Gold's market value has nothing to do with the fact that it is also has some uses as an actual metal. The vast majority of it will always be kept in a vault.
- fossuser 6y ago
  It’s worth reading what I linked. Gold’s inherent utility as a metal is largely irrelevant.

matheusmoreira 6y ago

Bitcoin's only value is the fact it's the most popular and well-known cryptocurrency. It came first and a lot of people are aware of it. Technologically it's already been surpassed by everything that came after. Monero in particular is essentially bitcoin with all the problems fixed. I wish it'd just lose it's value already so that liquidity will flow into all the much better coins out there. Not likely to happen though...

ZephyrBlu 6y ago
You say that like it's not important. The fact Bitcoin has become so ubiquitous is an achievement in itself. A large aspect of currency/store of value/whatever is social/network effects.
- matheusmoreira 6y ago
  I understand its importance. Everyone knows bitcoin and this is a valuable property of the currency. I'm just frustrated the market doesn't value good technology more. There are far better coins out there that deserve more attention. We're all still talking about bitcoin when the market should've moved on ages ago.

tessierashpool 6y ago

> People want to collect bitcoin at current valuations because they are convinced it will become a currency/store of value of the future and hence rise in value That’s just objectively false, though. Yes, a small group of people collect Bitcoin because they believe it will become a currency and therefore rise in value. But most people who collect Bitcoin think it will rise in value because they see it rising in value. Occam’s razor, dude.