5 ms·

I asked this recently but the topic died before I got many answers. Basically, I’m not a cryptocurrency denier. I just don’t understand it. Do people want crypt

I asked this recently but the topic died before I got many answers. Basically, I’m not a cryptocurrency denier. I just don’t understand it. Do people want cryptocurrency because they want to spend it on stuff? Or do they want cryptocurrency because they want to sell it for other currencies? In other words, at what point will a cryptocurrency stand on its own as something that’s worth a pair of shoes? Instead of being something that people invest in to eventually sell for dollars with which they they buy shoes? Again- I know I just don’t understand. My original question: 1 point by theshadowknows 4 days ago | parent [–] | on: The Last Days of Satoshi: What Happened When Bitco... Bitcoin and other crypto/alt currencies are so interesting to me. Partly because I do not understand them: If I mow your lawn and you pay me in the locally accepted fiat then I can use that fiat to buy hotdogs and fuel for my lawn mower because the gas station itself will accept that fiat. The gas station will accept that fiat because its vendors, creditors, and employees also accept it. And the chain goes on. If however I mow your lawn and you pay me in bitcoin I'll need to find a gas station that accepts it. Many likely exist. But, how many of their vendors, creditors, and employees also accept it? Some, no doubt, but I'd wager not all would. So, even though these currencies no doubt represent massive potential they're still somewhat limited in terms of adoption. Obviously this is becoming less true over time which I think is a good thing - competition isn't something fiat currencies tend to have to deal with, but they sure could use it. My real misunderstanding is 'why' people accept these currencies in the first place. In other words - people accept a United States dollar because it is worth one United States dollar. However, it seems that most people accept bitcoin (or bitcoin fragments) not because they are worth some percentage of bitcoin but exactly because they are worth some amount of United States dollars. Is that true? Is the primary reason that bitcoin has become more popular that an investor can spend 10,000 fiat on it - wait a year - and then extract 15,000 fiat from it?

matkoniecz 5y ago
> Is the primary reason that bitcoin has become more popular that an investor can spend 10,000 fiat on it - wait a year - and then extract 15,000 fiat from it? It seems to be true.
joecool1029 5y ago
> Do people want cryptocurrency because they want to spend it on stuff? Some of us did. Last month marks 10 years since I was introduced to the community and registered on the bitcoin-otc. We bought and sold all sorts of random crap (food items, laptops, gadgets, one regular even paid people bitcoin to have them buy him lunch. A brief time existed where some of the more idealists expected bitcoin to replace Paypal. That obviously didn't happen. Starting with Satoshidice gambling the network performance started to crap up and fees began to climb. Eventually it became worthless for any sort of fast/cheap transacting and everything centralized onto a few exchanges. Every asshole in the world has proposed ways to improve this issue, but with all the money sunk into bitcoin and a lot of arguments we aren't in a better situation today. Now every naive person from 20-some year olds to 70-year olds are hitting me up and asking what I think of NFT's and the shitcoin of the week because they saw some heads on Bloomberg gushing over it and I'm just tired of it all.
- briefcomment 5y ago
  What about BCH? It seems like a reasonable solution still in the running
  - wmf 5y ago
    BCH solved one of BTC's fatal flaws (transaction rate) but all the other fatal flaws like volatility, irrevocable transactions, being your own bank, etc. are still there.
    - briefcomment 5y ago
      Hm, but if we solved for those issues, we would probably just have USD. I thought the appeal of a fixed supply, non-double spend asset was to be able to keep up with previously exclusive asset inflation .
      - wmf 5y ago
        That depends whether you want Austrian digital cash or Keynesian digital cash.
beambot 5y ago
Here's an alternative mental model... Let's talk about Filecoin (related to Chia) for file storage. Assume for the moment that all 2 billion tokens are in circulation. At any given time, there is a market of people looking to store files and people willing to store those files for a fee. You're transacting (roughly) in Gb-years at today's level of technology -- i.e. willingness to store 1Gb of data for 1 year. Regular market forces apply. You could also pre-purchase credits for later use... either to get higher priority for your data when you want to use your tokens, or as an investment in said ability. And the prices you'll pay will automatically flex based on improvements in technology since the global supply of tokens is fixed. You could then reasonably think of Filecoin as a futures contract on generic file storage capacity. Ethereum is a futures contract on computational horsepower. Bitcoin is something else(?) - perhaps a futures contract on a general long-term abstract form of value storage. In short: Some of these tokens act as futures contracts for decentralized compute capabilities. The most-common current use case happens to be heavily related to finance (DeFi); applications for censorless content networks are also in development; and the applications are really quite general purpose. Anything today that requires a ledger is a reasonable problem to tackle too, where eliminating centralization could be beneficial. E.g. ENS instead of ICANN for domain names, tokenized stock certificates instead of relying on opaque organizations owned by major banks (e.g. the DTC and problems around naked shorting).
- wmf 5y ago
  These velocity of money models can't account for even a small fraction of cryptocurrency valuations. For example, if your model says Filecoin is worth $10 but it's currently trading for $160... clearly the buyers are not pre-purchasing storage.
  - beambot 5y ago
    https://file.app https://file.app will give you a reasonable approximation of the current value of Filecoin in Gb-years. From what I can tell, it still compares very favorably to various AWS offerings even at today's price. You could make a reasoned case that recent price run-up was more related to discovery than fundamentals... But regardless, my stated supposition assumed we reached steady state on token issuance (i.e. many years into the future). New paradigms are likely to exhibit a lot of volatility during their onset, but timing matters less than giant rising tides. Time will tell.
wmf 5y ago
It's more like the promise that you could spend $10,000, wait five years, then retire. Bitcoin's historical >10,000x returns have triggered massive amounts of envy, greed, and FOMO.
rocqua 5y ago
Outside the options you mentioned, people buy crypto because the tech is cool, and the idea of a trustless decentralized system apeals to them. The end goal isn't really clear. Perhaps the main thesis is like VC investing. Cool stuff now might become useful and valuable later.
bruiseralmighty 5y ago
I bought some address space (like for a web server) in ETH the other day. I think the Ethereum contracts system is quite nice and logical to put on the block chain. Changing stock trading protocols to go on a block chain with full public transparency would be a useful application. No need for PoW, you can just have the Fed mint new blocks out. This would prevent a lot of the shenanigans and gatekeeping that occur in capital markets. It would greatly improve price discovery. On a less directly applicable level, I feel that the only realistic strategy for governments in the long term will be to become more competitive with the crypto-ecosystem (currencies, contracts, encryption, etc.). The hope being that by allowing individuals to freely choose their own legal and financial rule-sets the systems that will remain relevant will become better. Having more freedom of choice for which government you'd like to be a part of is ultimately a good thing. Whether that will actually shake out is anyone's guess, but I believe something along those lines is the fundamental hope of this area of technology.
john_minsk 5y ago
The way I understand bitcoin is the following: 1. Main advantage of it is that it can't be stopped. 2. Since it can't be stopped - it allows to evade any regulation from the government or the bank. If it replaces banking system - you can move around the globe with your capital and spend it the way you like. This is not the case at the moment 3. Bitcoin could become a currency if it was fast enough and fees were low enough. Which was quickly discovered to be not true since the complexity increased, transactions slowed down and no one agreed to upgrade block size since this is additional costs to mining. 4. Since bitcoin now is slow and expensive industry found another way to use it - store long term value without risk of government to inflate currency and steal your money. point#2 is still valid. Recent surge in prices is caused by this reasoning in my mind. 5. Since everyone earned enormous amount of money in past months people will keep hodling expecting the growth to continue, but it will slow down. Once it slows down - people will start selling to get their profits and there will be huge correction. 6. In the very long run bitcoin can go through multiple cycles of such growth and decline and either will become more predictable (community will come up with some rules on how bitcoin fees and speeds are regulated etc.) or will stay this a bit more dangerous but a but more free way to transfer value geographically and also over time. It probably could be more dangerous to world governments if point #3 realized
- Tepix 5y ago
  If more countries outlaw exchanging bitcoin with fiat commercially (for example because of its detrimental effect on the environment), bitcoin's value will decrease.
unnamedhorse 5y ago
Disclaimer: I'm a Bitcoiner, which seems to be an unpopular stance here. I'll do my best to explain some of my motivation and answer to your questions. Q1: Why would people accept these currencies in the first place? I want to hold Bitcoin because of its monetary policy. It has a fixed, capped supply of 21 million BTC, whereas fiat can be printed at will. This property is what fuels the current hype, and the fact that central banks around the world are inflating money supply as we speak certainly helps the narrative. So for bitcoiners, money saved in fiat is likely to lose buying power over time, but in Bitcoin we see, on average, a steady increase. Since I see Bitcoin as a superior form of money, I would certainly prefer getting paid in Bitcoin than in fiat. Q2: Why do people that accept Bitcoin still denominate prices in USD? Bitcoin is far from being an established currency, and it is still very volatile (though far less than a few years ago). Most of the population are not bitcoiners. The US are denominated in USD. So, until Bitcoin is both more stable and more popular, it is the most convenient to do what we're used to and denominate things in USD. Q3: Is speculation the primary reason for Bitcoin's rise in popularity? We're in the middle of a bull run right now, so probably? But if you zoom out and look at the price evolution over 5 years it looks different, and there is a steady growth. Q4: Do people just want to increase their USD? ("spend 10,000 [...] and then extract 15,000 fiat") Some do for sure, but I don't see much appeal in exchanging hard money into money with arbitrary monetary policies. Bitcoin tripling in value does not change the initial motivation I had to buy it, so why sell? Of course, if I want to buy something with btc then that amounts to selling some. But my motivation to be in Bitcoin is to protect my time, the most limited resource I have in my life, from inflation, and that does not change with price.

matkoniecz 5y ago

> Is the primary reason that bitcoin has become more popular that an investor can spend 10,000 fiat on it - wait a year - and then extract 15,000 fiat from it? It seems to be true.

joecool1029 5y ago

> Do people want cryptocurrency because they want to spend it on stuff? Some of us did. Last month marks 10 years since I was introduced to the community and registered on the bitcoin-otc. We bought and sold all sorts of random crap (food items, laptops, gadgets, one regular even paid people bitcoin to have them buy him lunch. A brief time existed where some of the more idealists expected bitcoin to replace Paypal. That obviously didn't happen. Starting with Satoshidice gambling the network performance started to crap up and fees began to climb. Eventually it became worthless for any sort of fast/cheap transacting and everything centralized onto a few exchanges. Every asshole in the world has proposed ways to improve this issue, but with all the money sunk into bitcoin and a lot of arguments we aren't in a better situation today. Now every naive person from 20-some year olds to 70-year olds are hitting me up and asking what I think of NFT's and the shitcoin of the week because they saw some heads on Bloomberg gushing over it and I'm just tired of it all.

briefcomment 5y ago
What about BCH? It seems like a reasonable solution still in the running
- wmf 5y ago
  BCH solved one of BTC's fatal flaws (transaction rate) but all the other fatal flaws like volatility, irrevocable transactions, being your own bank, etc. are still there.
  - briefcomment 5y ago
    Hm, but if we solved for those issues, we would probably just have USD. I thought the appeal of a fixed supply, non-double spend asset was to be able to keep up with previously exclusive asset inflation .
    - wmf 5y ago
      That depends whether you want Austrian digital cash or Keynesian digital cash.

beambot 5y ago

Here's an alternative mental model... Let's talk about Filecoin (related to Chia) for file storage. Assume for the moment that all 2 billion tokens are in circulation. At any given time, there is a market of people looking to store files and people willing to store those files for a fee. You're transacting (roughly) in Gb-years at today's level of technology -- i.e. willingness to store 1Gb of data for 1 year. Regular market forces apply. You could also pre-purchase credits for later use... either to get higher priority for your data when you want to use your tokens, or as an investment in said ability. And the prices you'll pay will automatically flex based on improvements in technology since the global supply of tokens is fixed. You could then reasonably think of Filecoin as a futures contract on generic file storage capacity. Ethereum is a futures contract on computational horsepower. Bitcoin is something else(?) - perhaps a futures contract on a general long-term abstract form of value storage. In short: Some of these tokens act as futures contracts for decentralized compute capabilities. The most-common current use case happens to be heavily related to finance (DeFi); applications for censorless content networks are also in development; and the applications are really quite general purpose. Anything today that requires a ledger is a reasonable problem to tackle too, where eliminating centralization could be beneficial. E.g. ENS instead of ICANN for domain names, tokenized stock certificates instead of relying on opaque organizations owned by major banks (e.g. the DTC and problems around naked shorting).

wmf 5y ago
These velocity of money models can't account for even a small fraction of cryptocurrency valuations. For example, if your model says Filecoin is worth $10 but it's currently trading for $160... clearly the buyers are not pre-purchasing storage.
- beambot 5y ago
  https://file.app https://file.app will give you a reasonable approximation of the current value of Filecoin in Gb-years. From what I can tell, it still compares very favorably to various AWS offerings even at today's price. You could make a reasoned case that recent price run-up was more related to discovery than fundamentals... But regardless, my stated supposition assumed we reached steady state on token issuance (i.e. many years into the future). New paradigms are likely to exhibit a lot of volatility during their onset, but timing matters less than giant rising tides. Time will tell.

wmf 5y ago

It's more like the promise that you could spend $10,000, wait five years, then retire. Bitcoin's historical >10,000x returns have triggered massive amounts of envy, greed, and FOMO.

rocqua 5y ago

Outside the options you mentioned, people buy crypto because the tech is cool, and the idea of a trustless decentralized system apeals to them. The end goal isn't really clear. Perhaps the main thesis is like VC investing. Cool stuff now might become useful and valuable later.

bruiseralmighty 5y ago

I bought some address space (like for a web server) in ETH the other day. I think the Ethereum contracts system is quite nice and logical to put on the block chain. Changing stock trading protocols to go on a block chain with full public transparency would be a useful application. No need for PoW, you can just have the Fed mint new blocks out. This would prevent a lot of the shenanigans and gatekeeping that occur in capital markets. It would greatly improve price discovery. On a less directly applicable level, I feel that the only realistic strategy for governments in the long term will be to become more competitive with the crypto-ecosystem (currencies, contracts, encryption, etc.). The hope being that by allowing individuals to freely choose their own legal and financial rule-sets the systems that will remain relevant will become better. Having more freedom of choice for which government you'd like to be a part of is ultimately a good thing. Whether that will actually shake out is anyone's guess, but I believe something along those lines is the fundamental hope of this area of technology.

john_minsk 5y ago

The way I understand bitcoin is the following: 1. Main advantage of it is that it can't be stopped. 2. Since it can't be stopped - it allows to evade any regulation from the government or the bank. If it replaces banking system - you can move around the globe with your capital and spend it the way you like. This is not the case at the moment 3. Bitcoin could become a currency if it was fast enough and fees were low enough. Which was quickly discovered to be not true since the complexity increased, transactions slowed down and no one agreed to upgrade block size since this is additional costs to mining. 4. Since bitcoin now is slow and expensive industry found another way to use it - store long term value without risk of government to inflate currency and steal your money. point#2 is still valid. Recent surge in prices is caused by this reasoning in my mind. 5. Since everyone earned enormous amount of money in past months people will keep hodling expecting the growth to continue, but it will slow down. Once it slows down - people will start selling to get their profits and there will be huge correction. 6. In the very long run bitcoin can go through multiple cycles of such growth and decline and either will become more predictable (community will come up with some rules on how bitcoin fees and speeds are regulated etc.) or will stay this a bit more dangerous but a but more free way to transfer value geographically and also over time. It probably could be more dangerous to world governments if point #3 realized

Tepix 5y ago
If more countries outlaw exchanging bitcoin with fiat commercially (for example because of its detrimental effect on the environment), bitcoin's value will decrease.

unnamedhorse 5y ago

Disclaimer: I'm a Bitcoiner, which seems to be an unpopular stance here. I'll do my best to explain some of my motivation and answer to your questions. Q1: Why would people accept these currencies in the first place? I want to hold Bitcoin because of its monetary policy. It has a fixed, capped supply of 21 million BTC, whereas fiat can be printed at will. This property is what fuels the current hype, and the fact that central banks around the world are inflating money supply as we speak certainly helps the narrative. So for bitcoiners, money saved in fiat is likely to lose buying power over time, but in Bitcoin we see, on average, a steady increase. Since I see Bitcoin as a superior form of money, I would certainly prefer getting paid in Bitcoin than in fiat. Q2: Why do people that accept Bitcoin still denominate prices in USD? Bitcoin is far from being an established currency, and it is still very volatile (though far less than a few years ago). Most of the population are not bitcoiners. The US are denominated in USD. So, until Bitcoin is both more stable and more popular, it is the most convenient to do what we're used to and denominate things in USD. Q3: Is speculation the primary reason for Bitcoin's rise in popularity? We're in the middle of a bull run right now, so probably? But if you zoom out and look at the price evolution over 5 years it looks different, and there is a steady growth. Q4: Do people just want to increase their USD? ("spend 10,000 [...] and then extract 15,000 fiat") Some do for sure, but I don't see much appeal in exchanging hard money into money with arbitrary monetary policies. Bitcoin tripling in value does not change the initial motivation I had to buy it, so why sell? Of course, if I want to buy something with btc then that amounts to selling some. But my motivation to be in Bitcoin is to protect my time, the most limited resource I have in my life, from inflation, and that does not change with price.