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> What do you think will break the network effects of Bitcoin? Which network effects are you referring to exactly? What does BTC have that the RMB or USD don't

by hiq 5y ago

> What do you think will break the network effects of Bitcoin? Which network effects are you referring to exactly? What does BTC have that the RMB or USD don't have? Or do you mean that having no counter party risk is a network effect in itself? I'm not sure I follow. Why would country A supplying country B with something it really wants accept a contract denominated in a currency other than the one of their choosing? Why would they choose a volatile currency they don't even control? I feel that the network effects are playing in favor of the dominant currencies. By definition, network effects only exist once there's an actual network, and it seems we agree that BTC doesn't have one comparable to e.g. USD yet. > It only makes sense to me that volatility will decrease with time. So you think it will start decreasing this year? 1. as I pointed out, numbers still don't show a decrease 2. lack of regulation means it's prone to market manipulation, with some parties playing simultaneous roles to an extent which would be forbidden in a regulated market. These manipulations tend to increase volatility (you don't make much money if the price remains the price, but you can make a lot if you have an idea of where you'll send the prices) In turn, that means that: > As the institutions and sovereign wealth funds start to pile into crypto, they're going to want to choose the most secure and stable good in the space to hold for the long term is not necessarily true. Elon Musk can send BTC either way with a simple tweet. Why would big players buy and hold when they can benefit from the volatility they themselves generate and make a quick buck instead? 3. BTC hasn't gone through a crisis yet. As you wrote, it seems to be correlated with tech (risky) stocks, with higher swings, either way. I'd be surprised if that changes during a crisis.

rufusroflpunch 5y ago
> Which network effects are you referring to exactly? The network effects of people owning and becoming more comfortable with it. This drives the value, which drives companies to build on it, which further drives value, etc. This will either: A) Level off at some point. B) Reverse and go to zero. C) Continue growing forever. Because there's no counter party risk, there's no company that can go out of business and take it out. There's no revenue projections that Bitcoin can miss. No founder to attack. No foundation to sanction. In order to reverse Bitcoin's progress, someone would need to somehow do something to break the network. It must be something really dramatic, like breaking SHA256, governments unanimously banning it, or creating some new monetary technology which is overwhelmingly superior to Bitcoin. I agree BTC is not USD yet. My view is that USD is eroding, however, and Bitcoin is growing, and I see nothing on the horizon that can reverse this. Many other currencies are eroding faster, though, and most will collapse into the USD in the meantime. > So you think it will start decreasing this year? I would be comfortable saying this year. Major nations are adopting formal regulatory frameworks for cryptocurrencies, including the United States. Fidelity just announced that they will start letting customers buy Bitcoin with their 401k. I would expect other asset managers will be following suit, shortly. I know pension funds (big bit money) are looking at buying in. We will be seeing a major sea change in Bitcoin this year and next year. By the way, I would expect Bitcoin to remain relatively volatile for quite a while, even if overall volatility decreases. Deleveraging the crypto markets will help a lot, but there's still much growth left to be done. > 3. BTC hasn't gone through a crisis yet. I think the network has gone through several crises. Do you mean internal crises, or major economic crises? If you mean the second thing, I would agree. We're about to see what Bitcoin is really made of in the next couple of years, since we're probably going to see huge global deleveraging event and a lot of economic/currency collapses.
- hiq 5y ago
  > The network effects of people owning and becoming more comfortable with it. People already own fiat currencies, and are mostly comfortable with them, more than they will ever be with cryptocurrencies where losing a private key can mean losing your funds irremediably. And even then, at best you'd get the same network effect as the fiat currency, no more than that. So how would this effect lead to the cryptocurrency prevailing over fiat currencies? I guess I still don't understand your reasoning about Bitcoin's inevitable fate as a dominant currency, or even as a mainstream one. There's nothing stopping Bitcoin as a blockchain, but there's not much pushing for it either in terms of use. I still don't know anyone who actually uses cryptocurrencies as currencies rather than as speculative assets. Currencies are used because states want people and other countries (in the case of international currencies such as the USD) to use them, and they have the power to enforce this through various means. The same can't be said about BTC. There could be some advantages for countries adopting it as a legal tender that we're not seeing, but I somehow doubt it'll become apparent in CAR of all countries, and it doesn't seem to be going so well in El Salvador either.
  - rufusroflpunch 5y ago
    I think your time horizon is just too short. Fiat currencies weaken and die because of counter party risk. Governments can't help but abuse their powers and eventually kill their currency. Bitcoin has an entirely new and unique value proposition: A monetary network with no counter party risk without the need to physically transport a good (like gold). The implications of this are mind bending. We're seeing something we've never seen before: the bootstrapping of an entirely new monetary system from the ground up with an asset and network that didn't previously exist. The path is laid out: 1) Store of value: We're still working our way through this phase. There is still a lot of monetary value left to gobble up. 2) Medium of exchange: People will horde this asset until other monies become so weak in comparison that merchants will prefer/demand payment in this one. 3) Unit of account: People become so used to transacting in a money they start to think in terms of that money. At this point, volatility gets measured in terms of this asset, not the other way around. Some goods are stores of value but will never reach the second stage, because they're not good monetary assets. Real estate, for example, or stocks. Not divisible, fungible, neutral, etc. Bitcoin has all of the ingredients, we just need to wait for the stew to cook. There are only a few things that can stop it, and none of them seem particularly likely to me. edit: I don't want to be dismissive. Private key management and things like that are certainly challenges, but it's just a matter of time, experimentation and UX improvements. It's not existential.

by hiq 5y ago

rufusroflpunch 5y ago

> Which network effects are you referring to exactly? The network effects of people owning and becoming more comfortable with it. This drives the value, which drives companies to build on it, which further drives value, etc. This will either: A) Level off at some point. B) Reverse and go to zero. C) Continue growing forever. Because there's no counter party risk, there's no company that can go out of business and take it out. There's no revenue projections that Bitcoin can miss. No founder to attack. No foundation to sanction. In order to reverse Bitcoin's progress, someone would need to somehow do something to break the network. It must be something really dramatic, like breaking SHA256, governments unanimously banning it, or creating some new monetary technology which is overwhelmingly superior to Bitcoin. I agree BTC is not USD yet. My view is that USD is eroding, however, and Bitcoin is growing, and I see nothing on the horizon that can reverse this. Many other currencies are eroding faster, though, and most will collapse into the USD in the meantime. > So you think it will start decreasing this year? I would be comfortable saying this year. Major nations are adopting formal regulatory frameworks for cryptocurrencies, including the United States. Fidelity just announced that they will start letting customers buy Bitcoin with their 401k. I would expect other asset managers will be following suit, shortly. I know pension funds (big bit money) are looking at buying in. We will be seeing a major sea change in Bitcoin this year and next year. By the way, I would expect Bitcoin to remain relatively volatile for quite a while, even if overall volatility decreases. Deleveraging the crypto markets will help a lot, but there's still much growth left to be done. > 3. BTC hasn't gone through a crisis yet. I think the network has gone through several crises. Do you mean internal crises, or major economic crises? If you mean the second thing, I would agree. We're about to see what Bitcoin is really made of in the next couple of years, since we're probably going to see huge global deleveraging event and a lot of economic/currency collapses.

hiq 5y ago
> The network effects of people owning and becoming more comfortable with it. People already own fiat currencies, and are mostly comfortable with them, more than they will ever be with cryptocurrencies where losing a private key can mean losing your funds irremediably. And even then, at best you'd get the same network effect as the fiat currency, no more than that. So how would this effect lead to the cryptocurrency prevailing over fiat currencies? I guess I still don't understand your reasoning about Bitcoin's inevitable fate as a dominant currency, or even as a mainstream one. There's nothing stopping Bitcoin as a blockchain, but there's not much pushing for it either in terms of use. I still don't know anyone who actually uses cryptocurrencies as currencies rather than as speculative assets. Currencies are used because states want people and other countries (in the case of international currencies such as the USD) to use them, and they have the power to enforce this through various means. The same can't be said about BTC. There could be some advantages for countries adopting it as a legal tender that we're not seeing, but I somehow doubt it'll become apparent in CAR of all countries, and it doesn't seem to be going so well in El Salvador either.
- rufusroflpunch 5y ago
  I think your time horizon is just too short. Fiat currencies weaken and die because of counter party risk. Governments can't help but abuse their powers and eventually kill their currency. Bitcoin has an entirely new and unique value proposition: A monetary network with no counter party risk without the need to physically transport a good (like gold). The implications of this are mind bending. We're seeing something we've never seen before: the bootstrapping of an entirely new monetary system from the ground up with an asset and network that didn't previously exist. The path is laid out: 1) Store of value: We're still working our way through this phase. There is still a lot of monetary value left to gobble up. 2) Medium of exchange: People will horde this asset until other monies become so weak in comparison that merchants will prefer/demand payment in this one. 3) Unit of account: People become so used to transacting in a money they start to think in terms of that money. At this point, volatility gets measured in terms of this asset, not the other way around. Some goods are stores of value but will never reach the second stage, because they're not good monetary assets. Real estate, for example, or stocks. Not divisible, fungible, neutral, etc. Bitcoin has all of the ingredients, we just need to wait for the stew to cook. There are only a few things that can stop it, and none of them seem particularly likely to me. edit: I don't want to be dismissive. Private key management and things like that are certainly challenges, but it's just a matter of time, experimentation and UX improvements. It's not existential.