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But what's easy to value is public pensions. Do the existing reserves and projected inflows match the liabilities? Of course not, they are underwater by trillio

But what's easy to value is public pensions. Do the existing reserves and projected inflows match the liabilities? Of course not, they are underwater by trillions of dollars. How will fifty very different state governments and the federal government distribute these losses? Impossible to say, because different factions are already lining up different schemes with vastly different outcomes. In contrast, we already know exactly how bitcoin works presently and how it works in the future. It's right there in the cpp file. It doesn't matter who the Senator from California is, it doesn't matter who is the chairman of the Fed is. So bitcoin competes with other currencies by being a system with transparent and predictable behavior. Meanwhile the current dollar system - which is valuable precisely because the government always meets its obligations - is being valued by pretty much just ignoring all its underfunded obligations in the hope that some unknown solution will be arranged when it becomes a crisis. To tie these findings back to the concept of financial "valuation", I think the author elides the role that predictability plays in it. And specifically overestimates the predictability of status quo at a time length of five to thirty years.

hnarn 5y ago
I don’t mean to sound tongue in cheek, but claiming that “predictability” is one of the major benefits of crypto currencies seems like a very rose-tinted way of describing how they behave in real life.
- stillsut 5y ago
  Agreed. Crypto is risky and volatile, and can go to zero and that makes it difficult for the average person to treat it as a savings vehicle. The distinction in predictability between the two system is kind of subtle: In bitcoin, the internal system mechanics are highly predictable. But there's no external "Open Market Committee" (e.g FOMC) that will change the market price to hit the targets mandated by its stakeholders. In dollars, the internal system is becoming more unpredictable, while there are numerous external systems (e.g. bailouts, QEx, etc) which are very predictable: they will act to make sure the economic tradeoffs shield the voters of the system from experiencing pain to the next election cycle. Neither seems ideal in its present form.
  - NicoJuicy 5y ago
    But Bitcoin isn't transparent either, because none of the companies infuencing Bitcoin are.
    - stillsut 5y ago
      On January 1, 2028 how much bitcoin is there? You can predict the supply to within +/- 0.00001%, regardless of the companies who influence bitcoin. On January 1, 2028 how much M2 money supply is there? 10% more? 10% less? 100% more? 1,000% more? It completely depends on who is influencing it.
      - NicoJuicy 5y ago
        How much money will tether print to buy Bitcoin tomorrow?
throwaway6734 5y ago
>So bitcoin competes with other currencies by being a system with transparent and predictable behavior There's no reason to believe that the crypto ecosystem is 100% secure. Any security vulnerability could destroy the value of the entire market. Not to mention that the crypto ecosystem is unable to use force.
- stillsut 5y ago
  This is a good point - that we trade political risk for technical risk, e.g. will sha256 be broken, will quantum computing break ECC, or will a well funded actor launch a 51% attack or empty block attack on the network. These are the big known-unknowns. In these cases, ideally a hard fork would be able to maneuver the network out of the way of the technical vulnerability in time. Less ideally, there's just the fact that crypto protocols are now so diversified in terms of hashing algos, PoW algos, and alternative consensus mechanisms (e.g PoS, zk's, etc), active chains, and governance models, that successfully knocking out the majority of them, nevermind all of them, would be almost impossible. But this is obviously less than ideal in that now you have an even more complex situation: where you are constantly hedging your savings in multiple tokens, and how do you value one versus the other? Simply in its blue-horizon cryptographic development threat model? popularity? ease of use? >the crypto ecosystem is unable to use force. I'd argue the crypto ecosystem has been building "soft power" with web3. To the extant one would argue "it's a scam" is directly proportional to the success of its "propaganda" agencies.
  - headmelted 5y ago
    > These are the big known-unknowns. It's the big unknown-unknowns that are the problem. Is there a relatively simple implementation bug that hasn't yet been discovered in the biggest projects? They're all less than 12 years old at this point, it's entirely probable that they include 0-day vulnerabilities that are undiscovered. That's enough to destroy the whole thing. One single 0-day, exploited slowly over the course of a week. It's not like the transactions can be reversed, so all of that value would have been reassigned to the exploiter. No government is insuring balances in any of these projects - so a single shock will (rightly) shake all of these holders back out again.

hnarn 5y ago

I don’t mean to sound tongue in cheek, but claiming that “predictability” is one of the major benefits of crypto currencies seems like a very rose-tinted way of describing how they behave in real life.

stillsut 5y ago
Agreed. Crypto is risky and volatile, and can go to zero and that makes it difficult for the average person to treat it as a savings vehicle. The distinction in predictability between the two system is kind of subtle: In bitcoin, the internal system mechanics are highly predictable. But there's no external "Open Market Committee" (e.g FOMC) that will change the market price to hit the targets mandated by its stakeholders. In dollars, the internal system is becoming more unpredictable, while there are numerous external systems (e.g. bailouts, QEx, etc) which are very predictable: they will act to make sure the economic tradeoffs shield the voters of the system from experiencing pain to the next election cycle. Neither seems ideal in its present form.
- NicoJuicy 5y ago
  But Bitcoin isn't transparent either, because none of the companies infuencing Bitcoin are.
  - stillsut 5y ago
    On January 1, 2028 how much bitcoin is there? You can predict the supply to within +/- 0.00001%, regardless of the companies who influence bitcoin. On January 1, 2028 how much M2 money supply is there? 10% more? 10% less? 100% more? 1,000% more? It completely depends on who is influencing it.
    - NicoJuicy 5y ago
      How much money will tether print to buy Bitcoin tomorrow?

throwaway6734 5y ago

>So bitcoin competes with other currencies by being a system with transparent and predictable behavior There's no reason to believe that the crypto ecosystem is 100% secure. Any security vulnerability could destroy the value of the entire market. Not to mention that the crypto ecosystem is unable to use force.

stillsut 5y ago
This is a good point - that we trade political risk for technical risk, e.g. will sha256 be broken, will quantum computing break ECC, or will a well funded actor launch a 51% attack or empty block attack on the network. These are the big known-unknowns. In these cases, ideally a hard fork would be able to maneuver the network out of the way of the technical vulnerability in time. Less ideally, there's just the fact that crypto protocols are now so diversified in terms of hashing algos, PoW algos, and alternative consensus mechanisms (e.g PoS, zk's, etc), active chains, and governance models, that successfully knocking out the majority of them, nevermind all of them, would be almost impossible. But this is obviously less than ideal in that now you have an even more complex situation: where you are constantly hedging your savings in multiple tokens, and how do you value one versus the other? Simply in its blue-horizon cryptographic development threat model? popularity? ease of use? >the crypto ecosystem is unable to use force. I'd argue the crypto ecosystem has been building "soft power" with web3. To the extant one would argue "it's a scam" is directly proportional to the success of its "propaganda" agencies.
- headmelted 5y ago
  > These are the big known-unknowns. It's the big unknown-unknowns that are the problem. Is there a relatively simple implementation bug that hasn't yet been discovered in the biggest projects? They're all less than 12 years old at this point, it's entirely probable that they include 0-day vulnerabilities that are undiscovered. That's enough to destroy the whole thing. One single 0-day, exploited slowly over the course of a week. It's not like the transactions can be reversed, so all of that value would have been reassigned to the exploiter. No government is insuring balances in any of these projects - so a single shock will (rightly) shake all of these holders back out again.