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I think its place isn't as a currency. I written this comment before, but I’ve basically come to believe the argument described in the following is true: https

I think its place isn't as a currency. I written this comment before, but 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.

shostack 5y ago
How does shared social belief in it as a store of value differentiate it from fiat currency?
- hurlaway25 5y ago
  Fiat can be arbitrarily devalued to finance whatever schemes the government decides is worth financing. In other words, fiat doesn’t really encourage saving.
- for_shostack 5y ago
  Because of its scarcity. It costs 0$ (or so nearly as to not matter) to create 1$. This is not true for stores of value like gold and BTC
- fossuser 5y ago
  That part is something they have in common. The differentiation is about monetary policy, BTC's policy is in code via incentives and PoW. It's decentralized and not controlled by a government. The currency is scarce and the maximum amount is predetermined. It's deflationary. I'm not an 'inflation is bad' person. I'm not a hardcore anti-government crypto-anarchist. I think government monetary policy has a place and the QE policy after 2008 clearly worked based on the rapid recovery and loan repayment. I think when you have growth you need more currency to support that growth and newly created wealth. Some inflation in monetary policy is desirable and creates incentives you want (investment) vs. hoarding cash. I am not an economics expert and people are often way too confident in this kind of stuff when they shouldn't be. The reason BTC is more like gold than like fiat currency is because of the things in that article, but a quick summary: - It's hard to actually trade with for goods (nobody is bringing little gold flakes into the 7/11 for a chocolate bar). - It's scarce and takes a lot of energy to 'mine'. The supply of gold on earth is limited by nature. The supply of BTC is limited by code and math. - People use it as a place to store value beyond its inherent value. Gold is shiny and has some utility as a metal, but its market value is mostly entirely unrelated to that. - In some ways BTC is better than gold as a value store. It's easier to store and easier to transport.
jszymborski 5y ago
I do like the idea of stablecoins collaterised by cryptocurrency like the Dai as a currency. But without the private-but-auditable properties that something like Zcash has, it's a pretty dystopic future where everything from your morning bagel purchase to a visit to your preferred pharmacy are public knowledge. I like ethereum a lot as well[0], but the complexity of the system which has led to hacks in the past[1] has me a bit wary. [0] I've a very tiny bit of skin in the game, and the tech is very cool [1] https://finance.yahoo.com/news/55m-hack-almost-brought-ethereum-124152546.html https://finance.yahoo.com/news/55m-hack-almost-brought-ether...
- fossuser 5y ago
  Yeah - I think holding value in BTC and then converting to other stuff to do different things is likely a common use case. You can move BTC to Zcash and then have shielded transactions. The worst kind of outcome is what the CCP is building - a digital on chain currency to completely surveil their population's every financial transaction. There are some interesting things a government run digital currency can do though - expiring money stimulus (money that must be spent in a short time or somehow otherwise constrained). The ability to very quickly give money to people securely. Though obviously even with some of these interesting things, the CCP's currency is very bad for the privacy and freedom of their people - China is basically already in that dystopia.
foogazi 5y ago
> That plus its scarcity guarantee How does Bitcoin scarcity compare with the availability of other crypto products ? Are these analogous? Gold > Silver > Bronze Bitcoin > Ethereum > Doge (Edit: formatting) Is it all about mindshare at this point? What prevents another crypto product from sprouting up?
- fossuser 5y ago
  > How does Bitcoin scarcity compare with the availability of other crypto products ? I think this question doesn't totally make sense, but I get what you're getting at. BTC because of PoW and mostly first mover advantage (more mining network capacity, therefore more secure) has more shared value. A lot of the other crypto products are relatively insecure proof of stake with problematic on chain governance. The scarcity is not that there are lots of crypto products, but that there will only be a maximum number of BTC mined ever. The existence of Venezuela dollars doesn't really impact the value of USD - they're different currencies with different reasons for their value. Many others 'coins' are ERC-20 tokens on ETH and while they support their applications/create shared incentives they don't have nearly the same network size as BTC (or shared sense of value) so they're less robust. Those tokens are less like a currency and more like company stock (where the 'company' is the on chain application). There are some others on their own block chains that have interesting properties (ZCash), but the risk there is adoption. Lots of commodities are traded, but gold has a shared store of value property above its inherent value for social reasons. I'd argue BTC has that for similar social reasons. Ethereum is different because of its programmable smart contracts, it has a lot more potential as a protocol that applications can be built on top of (and we're seeing a lot of cool stuff here, DeFi - Uniswap, Compound, see: https://medium.com/dragonfly-research/what-explains-the-rise-of-amms-7d008af1c399 https://medium.com/dragonfly-research/what-explains-the-rise...). As a result I think its token has value and its more exciting than BTC, but it's a different kind of thing - BTC is simpler. Doge is a joke - just straight speculative gambling, you might luckily make money (and it's fun to gamble), but there's no scarcity built in. It definitely has the meme aspect going for it though.
  - tromp 5y ago
    > there's no scarcity built in There is. Unlike fiat, Doge is disinflationary, with the yearly supply inflation rate steadily going down towards 0. It's folly to equate scarcity with fixed supply [1]. [1] https://john-tromp.medium.com/a-case-for-using-soft-total-supply-1169a188d153 https://john-tromp.medium.com/a-case-for-using-soft-total-su...
MarkMc 5y ago
> Bitcoin isn’t a cash competitor, it’s a gold competitor - and it’s a pretty good one. I wonder whether people will switch to Bitcoin en-mass when Asteroid mining becomes viable.

shostack 5y ago

How does shared social belief in it as a store of value differentiate it from fiat currency?

hurlaway25 5y ago
Fiat can be arbitrarily devalued to finance whatever schemes the government decides is worth financing. In other words, fiat doesn’t really encourage saving.
for_shostack 5y ago
Because of its scarcity. It costs 0$ (or so nearly as to not matter) to create 1$. This is not true for stores of value like gold and BTC
fossuser 5y ago
That part is something they have in common. The differentiation is about monetary policy, BTC's policy is in code via incentives and PoW. It's decentralized and not controlled by a government. The currency is scarce and the maximum amount is predetermined. It's deflationary. I'm not an 'inflation is bad' person. I'm not a hardcore anti-government crypto-anarchist. I think government monetary policy has a place and the QE policy after 2008 clearly worked based on the rapid recovery and loan repayment. I think when you have growth you need more currency to support that growth and newly created wealth. Some inflation in monetary policy is desirable and creates incentives you want (investment) vs. hoarding cash. I am not an economics expert and people are often way too confident in this kind of stuff when they shouldn't be. The reason BTC is more like gold than like fiat currency is because of the things in that article, but a quick summary: - It's hard to actually trade with for goods (nobody is bringing little gold flakes into the 7/11 for a chocolate bar). - It's scarce and takes a lot of energy to 'mine'. The supply of gold on earth is limited by nature. The supply of BTC is limited by code and math. - People use it as a place to store value beyond its inherent value. Gold is shiny and has some utility as a metal, but its market value is mostly entirely unrelated to that. - In some ways BTC is better than gold as a value store. It's easier to store and easier to transport.

jszymborski 5y ago

I do like the idea of stablecoins collaterised by cryptocurrency like the Dai as a currency. But without the private-but-auditable properties that something like Zcash has, it's a pretty dystopic future where everything from your morning bagel purchase to a visit to your preferred pharmacy are public knowledge. I like ethereum a lot as well[0], but the complexity of the system which has led to hacks in the past[1] has me a bit wary. [0] I've a very tiny bit of skin in the game, and the tech is very cool [1] https://finance.yahoo.com/news/55m-hack-almost-brought-ethereum-124152546.html https://finance.yahoo.com/news/55m-hack-almost-brought-ether...

fossuser 5y ago
Yeah - I think holding value in BTC and then converting to other stuff to do different things is likely a common use case. You can move BTC to Zcash and then have shielded transactions. The worst kind of outcome is what the CCP is building - a digital on chain currency to completely surveil their population's every financial transaction. There are some interesting things a government run digital currency can do though - expiring money stimulus (money that must be spent in a short time or somehow otherwise constrained). The ability to very quickly give money to people securely. Though obviously even with some of these interesting things, the CCP's currency is very bad for the privacy and freedom of their people - China is basically already in that dystopia.

foogazi 5y ago

> That plus its scarcity guarantee How does Bitcoin scarcity compare with the availability of other crypto products ? Are these analogous? Gold > Silver > Bronze Bitcoin > Ethereum > Doge (Edit: formatting) Is it all about mindshare at this point? What prevents another crypto product from sprouting up?

fossuser 5y ago
> How does Bitcoin scarcity compare with the availability of other crypto products ? I think this question doesn't totally make sense, but I get what you're getting at. BTC because of PoW and mostly first mover advantage (more mining network capacity, therefore more secure) has more shared value. A lot of the other crypto products are relatively insecure proof of stake with problematic on chain governance. The scarcity is not that there are lots of crypto products, but that there will only be a maximum number of BTC mined ever. The existence of Venezuela dollars doesn't really impact the value of USD - they're different currencies with different reasons for their value. Many others 'coins' are ERC-20 tokens on ETH and while they support their applications/create shared incentives they don't have nearly the same network size as BTC (or shared sense of value) so they're less robust. Those tokens are less like a currency and more like company stock (where the 'company' is the on chain application). There are some others on their own block chains that have interesting properties (ZCash), but the risk there is adoption. Lots of commodities are traded, but gold has a shared store of value property above its inherent value for social reasons. I'd argue BTC has that for similar social reasons. Ethereum is different because of its programmable smart contracts, it has a lot more potential as a protocol that applications can be built on top of (and we're seeing a lot of cool stuff here, DeFi - Uniswap, Compound, see: https://medium.com/dragonfly-research/what-explains-the-rise-of-amms-7d008af1c399 https://medium.com/dragonfly-research/what-explains-the-rise...). As a result I think its token has value and its more exciting than BTC, but it's a different kind of thing - BTC is simpler. Doge is a joke - just straight speculative gambling, you might luckily make money (and it's fun to gamble), but there's no scarcity built in. It definitely has the meme aspect going for it though.
- tromp 5y ago
  > there's no scarcity built in There is. Unlike fiat, Doge is disinflationary, with the yearly supply inflation rate steadily going down towards 0. It's folly to equate scarcity with fixed supply [1]. [1] https://john-tromp.medium.com/a-case-for-using-soft-total-supply-1169a188d153 https://john-tromp.medium.com/a-case-for-using-soft-total-su...

MarkMc 5y ago

> Bitcoin isn’t a cash competitor, it’s a gold competitor - and it’s a pretty good one. I wonder whether people will switch to Bitcoin en-mass when Asteroid mining becomes viable.