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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 tha

by 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.
  - Spivak 6y ago
    But then the issue is that the settlement layer becomes an arbitrary implementation detail. The second layer is the thing that really matters. The settlement can happen in dollars or some stock in a portfolio of assets like what Libra wanted to do. Is Bitcoin the best thing to use as an settlement layer?
    - rawtxapp 6y ago
      The 2nd layer always maps to the settlement layer as in you're still transacting in Bitcoin, you just don't broadcast the signed transactions to the whole network because you expect to continue your transactions. You can use eth or any of the thousands of other crypto-currencies, Bitcoin benefits from being the most secure and also having the largest network effects due to being the earliest. When it comes to money, security is the most important thing and Bitcoin offers the most secure settlement layer.
    - swensel 6y ago
      If a credit card is the example of a layer 2, with dollars being the base layer, would you say that dollars don't matter then, and the only thing that matters is the layer 2?
      - Spivak 6y ago
        You have it backwards. With credit/bank cards the second layer is dollars that we're transact in. If financial institutions decided to settle amongst themselves with commodity stocks, government bonds or FedCoins would you even notice? It just happens that in the US dollars also make a good settlement layer.
        swensel 6y ago
        Good point. Would I notice? Yes, most likely. Would people who don't pay attention notice? No, probably not. I was giving an example that Bitcoin and layer 2 solutions are related, similar to how dollars and credit cards are related. My point was if the layer 2 networks have value, it doesn't mean Bitcoin doesn't have any value. Even in the cases you raise, dollars still probably will have some value. I don't see the dollar collapsing any time soon. Is Bitcoin the best settlement layer? I'm not sure yet. IMO, Bitcoin / cryptocurrency in general does have some value since it is enabling new technologies, like layer 2 solutions, to be developed, when they otherwise would not have been. I think new technology is valuable.
- la_fayette 6y ago
  Bitcoin is an amazing invention. For me personally it is the best store of value ever, I just need to remember my private key and travel the world and cash out in every country. The fees are totally acceptable, you can use lower fees and wait a bit longer for the transaction to get into a block. Bitcoin is definitely not a scam!
rawtxapp 6y ago
Personally, I'll start spending it when it's value stabilizes and that won't happen until it either "wins" as in becomes the global reserve currency or "loses" as in becomes worthless. If it were to freeze at it's current price, it would only be able to power a very small economy of 1T$, that's nothing considering it's borderless and digital.
- rapsey 6y ago
  So you will never spend it. What gives currencies relative stability is central banks. It will never become a global reserve currency for the same reason gold is no longer a basis for money. It is better to inflate your way out of problems (print money to bail out key institutions) than to deflate your way out of them (great depression). Better is defined as causing less harm to individuals.
  - rawtxapp 6y ago
    I'm not sure that it's "better", we now have crazy high asset prices, the bubble is bigger than ever, all while the average worker's compensation has stayed relatively stable.
  - dnautics 6y ago
    > Better is defined as causing less harm to individuals Inflation sucks for more people than deflation. It causes social strife, environmental destruction through overconsumption, a widening gap between the rich and the poor, more expensive healthcare for lower classes, stress and the need to live on the corporate treadmill, a general inability to identify worthwhile investments versus ponzi schemes because TINA, pushing more people into partial servitude to the economic system by encouraging borrowing. It's great for the rich, though. Lowered interest rates things like financial games, leveraged trading, and corporate agglomeration become favored. And the devaluing currency pushes average joes to participate in the wall street casino, which is good for CEOs. It's not the deflation of the great depression that was causing starvation. Remember that during the part of the great depression where people were starving (nobody was starving at the onset), the government was doing things like buying food and burying it on the premise that this would create demand and stimulate prices.
dyslexit 6y ago
It has value as a currency on dark markets and possibly for companies paying hackers off to disable ransomware. I can't really think of why people would use it instead of fiat for something like a Tesla though.
- pfisch 6y ago
  Because the long term holders could try to dodge the irs.
- herbst 6y ago
  Fees? People whine about high Bitcoin fees, but with your Tesla example what are those $15 Bitcoin fees against a 3% fee from a credit card provider? Moving money in higher amounts can get expensive as fuck.
matheusmoreira 6y ago
I would pay and get paid using monero. It's everything bitcoin was supposed to be.
- Spivak 6y ago
  I mean we would probably pay and get paid in any currency that was stable enough in the world market and accepted by the people we want to buy from.
- paxys 6y ago
  > I would pay and get paid using monero If you agreed to work for a company for X monero a month, and the value of monero (relative to USD or your local currency) dropped by 90% a few months later, would you continue to work at the originally agreed upon rate? And on the opposite end, if a coffee shop sold lattes for Y monero, would you be okay with continuing to pay Y if monero shot up by 1000%?
  - matheusmoreira 6y ago
    No, I'd raise the XMR price for my services. We still need fiat in order to pay for everyday things.
  - arthurcolle 6y ago
    just do it relative to some low vol underlier
  - herbst 6y ago
    Just because you get paid in crypto does not mean you do not hold the money in FIAT. Whatever people think about USDT or other stable coins, its easy to move your crypto worth into USD and back. What you could do against the fact that the USD is heavily losing on value is a different topic tho. On the same note: You are likely getting paid in $. Your currency lost about 4% in value against the CHF in the last months. Is this something you worry about? I guess not.
pfisch 6y ago
Now apply that logic to gold.
- dagmx 6y ago
  Gold is a usable, consumable product. Unlike Bitcoin, the value of gold in a given market has a tangible backing that isn't purely speculative.
  - beambot 6y ago
    It appears less than 8% of gold's annual production is for industrial use [1]. If you remove the "store of value" demand from its price, then the residual value is peanuts. [1] https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/ https://www.statista.com/statistics/299609/gold-demand-by-in... It's like saying, "Bitcoin has residual value because you could always sell the GPU mining equipment"
    - dagmx 6y ago
      Are we just glossing over the 48% listed for jewelry which is a huge market? I'm not sure your analogy of GPU mining hardware makes sense to me. You can have Bitcoin without having GPUs. Just like you can have gold without having a mining operation. So if Bitcoin crashes to some hypothetical value tied to consumability, you're left with nothing. Whereas gold is still something you could sell for industrial and fashion use. I don't think there's a good analogy between cryptocurrency and gold because they're not very similar at all unless people only narrow the scope to long term holdings and ignore risk/speculation.
      - pfisch 6y ago
        The jewelry use is 99% tied to gold's perceived valuation and is used as a way to display opulence and wealth. It is just an extension of gold being a store of value.
beambot 6y ago
Most people I know keep less than 3 months of their net worth in currency. The vast majority of their net worth is placed in real estate (largely, their primary residence), stocks, or ETFs. You can make a case about net-present value of future dividends, but the S&P dividend yield is 1.4% -- i.e. less than inflation. So quite literally, every asset they have as a store of wealth is "just HODLing in the hopes that some other buyer will come along who believes it will become (worth more)". In this light, how is Bitcoin any different? Note that currency has two functions: store of value (Bitcoin) and medium of exchange (Ethereum? Ripple? Carbon credits? Other?). That we can split these functions should not be surprising. Plus, our modern money system is a fairly new invention and it's clearly being disrupted. Hell, even the idea of an electronic ledger to track stock ownership was only really developed in the 1980s by Cede and the DTC -- and it still takes 2 days to fully settle.
- gajotron 6y ago
  In terms of numbers, your logic is slightly off because of the distortions of tax law, which means in fact, the bulk of the S&P's distributions in any given year are often buybacks. It makes the net yield of the S&P500 closer to 5% over the last decade: https://www.yardeni.com/pub/buybackdiv.pdf https://www.yardeni.com/pub/buybackdiv.pdf People rationally buy 5% perpetual yields to cream the asset, not HODLing in the hopes some other buyer will come. Absolutely I would make a case about the net present value of future distributions - the clearing IRR is currently around 4%, having been around 5% last year. Similarly real estate pays rent or owners equivalent rent (the value the owner derives from living in it rather than paying market rents). Here, the market seems to clear around 2-3% net of maintenance, having previously cleared around 6% when interest rates were higher. Bonds pay interest, albeit at this time the clearing yield level is very very low. What is the clearing yield of bitcoin? Undefined, because it has no expected future intrinsic cashflow payable to the owner. Bitcoin hodlers have only one possible way to collect a future cashflow, sale to another person for either fiat or goods/services.
- n4r9 6y ago
  I guess one difference is that real estate and stocks are more functional. With real estate you're providing a service for yourself or someone else. With stocks you're giving a company to continue business.
herbst 6y ago
Spending Bitcoin & Crypto is incredible easy in Switzerland. Our main Amazon alternative as well as the biggest food delivery network both accept crypto. You can even pay your taxes in some places. I know only few people who own crypto as pure speculation. Most are using too (at least from time to time)
- bb88 6y ago
  Given the price of bitcoin skyrocketing, why would anyone spend it on anything. If you have 1BTC, and you think it's going to go up 100x still, then why would you ever spend it?
  - herbst 6y ago
    If USD is only decreasing in value compared to CHF why would you not keep everything in CHF? Because you need money to live from and you likely need USD to spend. I only partially care if it goes /2 or x100. Its still money
    - bb88 6y ago
      What if it goes to /100? /1000?
      - herbst 6y ago
        A little far fetched IMO, but meh. That could happen with any investment and bad luck.
UncleMeat 6y ago
I know exactly one population of people who buy crypto with the intent of spending it: people who got in on the ground floor and made it so rich that now it is largely a game. I know a few people who made $50m before they were 30. The act of spending money is now fun for them, almost independent of the outcome. Incredibly high donations to twitch streamers, denominated in BTC, tickle their fancy. Every other person I know who owns BTC is either trying to speculate by owning a lot of it or believes that putting 5% of their investment portfolio is good for diversification. In the same way that I don't spend VTI at the store, these people don't spend BTC at the store.

by fny 6y ago

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.
- Spivak 6y ago
  But then the issue is that the settlement layer becomes an arbitrary implementation detail. The second layer is the thing that really matters. The settlement can happen in dollars or some stock in a portfolio of assets like what Libra wanted to do. Is Bitcoin the best thing to use as an settlement layer?
  - rawtxapp 6y ago
    The 2nd layer always maps to the settlement layer as in you're still transacting in Bitcoin, you just don't broadcast the signed transactions to the whole network because you expect to continue your transactions. You can use eth or any of the thousands of other crypto-currencies, Bitcoin benefits from being the most secure and also having the largest network effects due to being the earliest. When it comes to money, security is the most important thing and Bitcoin offers the most secure settlement layer.
  - swensel 6y ago
    If a credit card is the example of a layer 2, with dollars being the base layer, would you say that dollars don't matter then, and the only thing that matters is the layer 2?
    - Spivak 6y ago
      You have it backwards. With credit/bank cards the second layer is dollars that we're transact in. If financial institutions decided to settle amongst themselves with commodity stocks, government bonds or FedCoins would you even notice? It just happens that in the US dollars also make a good settlement layer.
      - swensel 6y ago
        Good point. Would I notice? Yes, most likely. Would people who don't pay attention notice? No, probably not. I was giving an example that Bitcoin and layer 2 solutions are related, similar to how dollars and credit cards are related. My point was if the layer 2 networks have value, it doesn't mean Bitcoin doesn't have any value. Even in the cases you raise, dollars still probably will have some value. I don't see the dollar collapsing any time soon. Is Bitcoin the best settlement layer? I'm not sure yet. IMO, Bitcoin / cryptocurrency in general does have some value since it is enabling new technologies, like layer 2 solutions, to be developed, when they otherwise would not have been. I think new technology is valuable.
la_fayette 6y ago
Bitcoin is an amazing invention. For me personally it is the best store of value ever, I just need to remember my private key and travel the world and cash out in every country. The fees are totally acceptable, you can use lower fees and wait a bit longer for the transaction to get into a block. Bitcoin is definitely not a scam!

rawtxapp 6y ago

Personally, I'll start spending it when it's value stabilizes and that won't happen until it either "wins" as in becomes the global reserve currency or "loses" as in becomes worthless. If it were to freeze at it's current price, it would only be able to power a very small economy of 1T$, that's nothing considering it's borderless and digital.

rapsey 6y ago
So you will never spend it. What gives currencies relative stability is central banks. It will never become a global reserve currency for the same reason gold is no longer a basis for money. It is better to inflate your way out of problems (print money to bail out key institutions) than to deflate your way out of them (great depression). Better is defined as causing less harm to individuals.
- rawtxapp 6y ago
  I'm not sure that it's "better", we now have crazy high asset prices, the bubble is bigger than ever, all while the average worker's compensation has stayed relatively stable.
- dnautics 6y ago
  > Better is defined as causing less harm to individuals Inflation sucks for more people than deflation. It causes social strife, environmental destruction through overconsumption, a widening gap between the rich and the poor, more expensive healthcare for lower classes, stress and the need to live on the corporate treadmill, a general inability to identify worthwhile investments versus ponzi schemes because TINA, pushing more people into partial servitude to the economic system by encouraging borrowing. It's great for the rich, though. Lowered interest rates things like financial games, leveraged trading, and corporate agglomeration become favored. And the devaluing currency pushes average joes to participate in the wall street casino, which is good for CEOs. It's not the deflation of the great depression that was causing starvation. Remember that during the part of the great depression where people were starving (nobody was starving at the onset), the government was doing things like buying food and burying it on the premise that this would create demand and stimulate prices.

dyslexit 6y ago

It has value as a currency on dark markets and possibly for companies paying hackers off to disable ransomware. I can't really think of why people would use it instead of fiat for something like a Tesla though.

pfisch 6y ago
Because the long term holders could try to dodge the irs.
herbst 6y ago
Fees? People whine about high Bitcoin fees, but with your Tesla example what are those $15 Bitcoin fees against a 3% fee from a credit card provider? Moving money in higher amounts can get expensive as fuck.

matheusmoreira 6y ago

I would pay and get paid using monero. It's everything bitcoin was supposed to be.

Spivak 6y ago
I mean we would probably pay and get paid in any currency that was stable enough in the world market and accepted by the people we want to buy from.
paxys 6y ago
> I would pay and get paid using monero If you agreed to work for a company for X monero a month, and the value of monero (relative to USD or your local currency) dropped by 90% a few months later, would you continue to work at the originally agreed upon rate? And on the opposite end, if a coffee shop sold lattes for Y monero, would you be okay with continuing to pay Y if monero shot up by 1000%?
- matheusmoreira 6y ago
  No, I'd raise the XMR price for my services. We still need fiat in order to pay for everyday things.
- arthurcolle 6y ago
  just do it relative to some low vol underlier
- herbst 6y ago
  Just because you get paid in crypto does not mean you do not hold the money in FIAT. Whatever people think about USDT or other stable coins, its easy to move your crypto worth into USD and back. What you could do against the fact that the USD is heavily losing on value is a different topic tho. On the same note: You are likely getting paid in $. Your currency lost about 4% in value against the CHF in the last months. Is this something you worry about? I guess not.

pfisch 6y ago

Now apply that logic to gold.

dagmx 6y ago
Gold is a usable, consumable product. Unlike Bitcoin, the value of gold in a given market has a tangible backing that isn't purely speculative.
- beambot 6y ago
  It appears less than 8% of gold's annual production is for industrial use [1]. If you remove the "store of value" demand from its price, then the residual value is peanuts. [1] https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/ https://www.statista.com/statistics/299609/gold-demand-by-in... It's like saying, "Bitcoin has residual value because you could always sell the GPU mining equipment"
  - dagmx 6y ago
    Are we just glossing over the 48% listed for jewelry which is a huge market? I'm not sure your analogy of GPU mining hardware makes sense to me. You can have Bitcoin without having GPUs. Just like you can have gold without having a mining operation. So if Bitcoin crashes to some hypothetical value tied to consumability, you're left with nothing. Whereas gold is still something you could sell for industrial and fashion use. I don't think there's a good analogy between cryptocurrency and gold because they're not very similar at all unless people only narrow the scope to long term holdings and ignore risk/speculation.
    - pfisch 6y ago
      The jewelry use is 99% tied to gold's perceived valuation and is used as a way to display opulence and wealth. It is just an extension of gold being a store of value.

beambot 6y ago

Most people I know keep less than 3 months of their net worth in currency. The vast majority of their net worth is placed in real estate (largely, their primary residence), stocks, or ETFs. You can make a case about net-present value of future dividends, but the S&P dividend yield is 1.4% -- i.e. less than inflation. So quite literally, every asset they have as a store of wealth is "just HODLing in the hopes that some other buyer will come along who believes it will become (worth more)". In this light, how is Bitcoin any different? Note that currency has two functions: store of value (Bitcoin) and medium of exchange (Ethereum? Ripple? Carbon credits? Other?). That we can split these functions should not be surprising. Plus, our modern money system is a fairly new invention and it's clearly being disrupted. Hell, even the idea of an electronic ledger to track stock ownership was only really developed in the 1980s by Cede and the DTC -- and it still takes 2 days to fully settle.

gajotron 6y ago
In terms of numbers, your logic is slightly off because of the distortions of tax law, which means in fact, the bulk of the S&P's distributions in any given year are often buybacks. It makes the net yield of the S&P500 closer to 5% over the last decade: https://www.yardeni.com/pub/buybackdiv.pdf https://www.yardeni.com/pub/buybackdiv.pdf People rationally buy 5% perpetual yields to cream the asset, not HODLing in the hopes some other buyer will come. Absolutely I would make a case about the net present value of future distributions - the clearing IRR is currently around 4%, having been around 5% last year. Similarly real estate pays rent or owners equivalent rent (the value the owner derives from living in it rather than paying market rents). Here, the market seems to clear around 2-3% net of maintenance, having previously cleared around 6% when interest rates were higher. Bonds pay interest, albeit at this time the clearing yield level is very very low. What is the clearing yield of bitcoin? Undefined, because it has no expected future intrinsic cashflow payable to the owner. Bitcoin hodlers have only one possible way to collect a future cashflow, sale to another person for either fiat or goods/services.
n4r9 6y ago
I guess one difference is that real estate and stocks are more functional. With real estate you're providing a service for yourself or someone else. With stocks you're giving a company to continue business.

herbst 6y ago

Spending Bitcoin & Crypto is incredible easy in Switzerland. Our main Amazon alternative as well as the biggest food delivery network both accept crypto. You can even pay your taxes in some places. I know only few people who own crypto as pure speculation. Most are using too (at least from time to time)

bb88 6y ago
Given the price of bitcoin skyrocketing, why would anyone spend it on anything. If you have 1BTC, and you think it's going to go up 100x still, then why would you ever spend it?
- herbst 6y ago
  If USD is only decreasing in value compared to CHF why would you not keep everything in CHF? Because you need money to live from and you likely need USD to spend. I only partially care if it goes /2 or x100. Its still money
  - bb88 6y ago
    What if it goes to /100? /1000?
    - herbst 6y ago
      A little far fetched IMO, but meh. That could happen with any investment and bad luck.

UncleMeat 6y ago

I know exactly one population of people who buy crypto with the intent of spending it: people who got in on the ground floor and made it so rich that now it is largely a game. I know a few people who made $50m before they were 30. The act of spending money is now fun for them, almost independent of the outcome. Incredibly high donations to twitch streamers, denominated in BTC, tickle their fancy. Every other person I know who owns BTC is either trying to speculate by owning a lot of it or believes that putting 5% of their investment portfolio is good for diversification. In the same way that I don't spend VTI at the store, these people don't spend BTC at the store.