5 ms·

Contrary to the mainstream narrative on Bitcoin, it's not purposefully designed to bypass regulation, depending on which type of regulation we're talking about.

by fleddr 5y ago

Contrary to the mainstream narrative on Bitcoin, it's not purposefully designed to bypass regulation, depending on which type of regulation we're talking about. Bitcoin's power lies in its controlled supply that is absolute and guaranteed. As such, you can argue that Bitcoin is regulated in its monetary policy (by verifiable software), whilst the traditional system isn't. The entire reason Bitcoin now has a trillion dollar market cap is the unstable traditional system where savings have a negative return. This is the step forward, not backwards. At least to those believing in Bitcoin. You gain protection against central debasement and you gain a brand new ability: Bitcoin is unconfiscatable. You're right that crypto custody is harder than a traditional bank account, although it doesn't have to be. People can chose between die-hard self custody (cold wallet), hot wallets, and soon there will be more fool-proof mainstream options, I believe Twitter is working on one.

yokem55 5y ago
> Bitcoin's power lies in its controlled supply that is absolute and guaranteed. Bitcoin's supply limit is only as guaranteed as the community consensus around what the supply limit should be. Now that consensus is unlikely to change, but there is no magic or law of physics that makes it so. It's just (a strong) community consensus.
- fleddr 5y ago
  Technically, you're right, but the word "just" strongly undersells the strength of this consensus compared to fiat currencies, which has none at all.
lottin 5y ago
The supply of bitcoins can be inflated in the same way that the supply of dollars is inflated, namely by fractional reserve banking. In fact the amount of dollars created by the federal reserve is a small proportion of the total dollars in circulation. The other thing is that the quantity of money, which is one of the key variables influencing the price level, does not remain constant even if the supply of money does, because of trade imbalances. For example, any trade deficit is necessarily offset by an outflow of money, thus reducing the quantity of money in the economy. Therefore if you think that the adoption of bitcoin as currency would prevent your cash balances from losing value in any way, shape or form you're completely wrong.
- fleddr 5y ago
  There is no such thing as fractional reserve banking in Bitcoin. Say you have a wallet with a balance of 10 BTC and decide to act as if you're a bank. The first lender comes, requesting a loan of 30 BTC. You don't have 30 BTC, and it basically already stops there. You can't transfer the 20 extra BTC to the lender, since that BTC does not exist. You can't make up your own BTC as it's all on-chain. You can make up however much fiat money you want. You can own 10 BTC and loan out the USD equivalent of 30 BTC in USD, but that's traditional fractional reserve banking, which has nothing to do with Bitcoin.
  - PeterisP 5y ago
    If a significant amount of consumers would not hold their BTC on-chain but at some institution (which, if BTC would become very popular, would very likely be the case for most users - these mainstream users are very different from the groups which use BTC now) then they would effectively be holding IOUs-denominated-in-BTC issued by that institution, and the supply of those would be likely be much larger than real on-chain BTC, just as in the fractional reserve banking scenario. I.e. I strongly believe that any widespread mass adoption of BTC would actually result in a mass adoption of BTC-flavored-fiat and a relatively smaller use of actual on-chain BTC; simply because of the preferences of the mass consumer market which aren't really aligned with the advantages of keeping stuff directly on-chain.
    - fleddr 5y ago
      Right now, a lot of Bitcoin is held at exchanges, which you can consider an IOU. However, it's still real Bitcoin reflected on-chain. As a user, you basically bought your Bitcoin from the supply of real Bitcoin the exchange holds in aggregated wallets. Should the exchange run short in supply, they buy real Bitcoin from other parties. It's all on-chain. Exchange wallets are well known and actively tracked. Theoretically, an institution could let you buy Bitcoin that doesn't exist or which they don't own. This strategy would fall apart in mere weeks. Say there's a new bull run and people are mass buying Bitcoin, for about 50 billion USD per week. You, the exchange, don't actually have this Bitcoin, yet in your books you pretend that you do. The customer is none the wiser. Your revenue is 50 billion USD. Bitcoin doubles in USD value and customers are now mass selling and/or withdrawing their Bitcoin (which you made up). So now you have to either payout 100 billion USD or actively buy real BTC at its high price, which just doubled. Unless you have an additional 50 billion USD at hand, your exchange collapses and goes bankrupt. Can an exchange sell slightly more BTC than they own? Technically, yes. Can they do many multiples of actual supply? No.
imtringued 5y ago
>The entire reason Bitcoin now has a trillion dollar market cap is the unstable traditional system where savings have a negative return. One would think that people would simply invest their money instead of holding onto it. If anything, negative yields on savings are just a case study of why trickle down economics is a myth. The rich consider holding onto money more profitable than investing it.

by fleddr 5y ago

yokem55 5y ago

> Bitcoin's power lies in its controlled supply that is absolute and guaranteed. Bitcoin's supply limit is only as guaranteed as the community consensus around what the supply limit should be. Now that consensus is unlikely to change, but there is no magic or law of physics that makes it so. It's just (a strong) community consensus.

fleddr 5y ago
Technically, you're right, but the word "just" strongly undersells the strength of this consensus compared to fiat currencies, which has none at all.

lottin 5y ago

The supply of bitcoins can be inflated in the same way that the supply of dollars is inflated, namely by fractional reserve banking. In fact the amount of dollars created by the federal reserve is a small proportion of the total dollars in circulation. The other thing is that the quantity of money, which is one of the key variables influencing the price level, does not remain constant even if the supply of money does, because of trade imbalances. For example, any trade deficit is necessarily offset by an outflow of money, thus reducing the quantity of money in the economy. Therefore if you think that the adoption of bitcoin as currency would prevent your cash balances from losing value in any way, shape or form you're completely wrong.

fleddr 5y ago
There is no such thing as fractional reserve banking in Bitcoin. Say you have a wallet with a balance of 10 BTC and decide to act as if you're a bank. The first lender comes, requesting a loan of 30 BTC. You don't have 30 BTC, and it basically already stops there. You can't transfer the 20 extra BTC to the lender, since that BTC does not exist. You can't make up your own BTC as it's all on-chain. You can make up however much fiat money you want. You can own 10 BTC and loan out the USD equivalent of 30 BTC in USD, but that's traditional fractional reserve banking, which has nothing to do with Bitcoin.
- PeterisP 5y ago
  If a significant amount of consumers would not hold their BTC on-chain but at some institution (which, if BTC would become very popular, would very likely be the case for most users - these mainstream users are very different from the groups which use BTC now) then they would effectively be holding IOUs-denominated-in-BTC issued by that institution, and the supply of those would be likely be much larger than real on-chain BTC, just as in the fractional reserve banking scenario. I.e. I strongly believe that any widespread mass adoption of BTC would actually result in a mass adoption of BTC-flavored-fiat and a relatively smaller use of actual on-chain BTC; simply because of the preferences of the mass consumer market which aren't really aligned with the advantages of keeping stuff directly on-chain.
  - fleddr 5y ago
    Right now, a lot of Bitcoin is held at exchanges, which you can consider an IOU. However, it's still real Bitcoin reflected on-chain. As a user, you basically bought your Bitcoin from the supply of real Bitcoin the exchange holds in aggregated wallets. Should the exchange run short in supply, they buy real Bitcoin from other parties. It's all on-chain. Exchange wallets are well known and actively tracked. Theoretically, an institution could let you buy Bitcoin that doesn't exist or which they don't own. This strategy would fall apart in mere weeks. Say there's a new bull run and people are mass buying Bitcoin, for about 50 billion USD per week. You, the exchange, don't actually have this Bitcoin, yet in your books you pretend that you do. The customer is none the wiser. Your revenue is 50 billion USD. Bitcoin doubles in USD value and customers are now mass selling and/or withdrawing their Bitcoin (which you made up). So now you have to either payout 100 billion USD or actively buy real BTC at its high price, which just doubled. Unless you have an additional 50 billion USD at hand, your exchange collapses and goes bankrupt. Can an exchange sell slightly more BTC than they own? Technically, yes. Can they do many multiples of actual supply? No.

imtringued 5y ago

>The entire reason Bitcoin now has a trillion dollar market cap is the unstable traditional system where savings have a negative return. One would think that people would simply invest their money instead of holding onto it. If anything, negative yields on savings are just a case study of why trickle down economics is a myth. The rich consider holding onto money more profitable than investing it.