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I never understood the argument why crypto was a good store of value. Sure, it’s an ingenious new transactional system, making global payments mostly frictionle

I never understood the argument why crypto was a good store of value. Sure, it’s an ingenious new transactional system, making global payments mostly frictionless, etc, but that’s true whether the value of 1 Bitcoin is $1 or $50,000. If everyone’s just converting back to fiat anyway, only keeping enough BTC transiently to settle transactions, why hold it long term?

brazzy 4y ago
Greed.
sfblah 4y ago
That’s not totally true. The value of a Bitcoin does relate to how much effort miners put in. So, $1 might be low enough to allow some sort of attack on the network.
- vel0city 4y ago
  > The value of a Bitcoin does relate to how much effort miners put in. It looks like you have the causal relationship there backwards. A bitcoin currently has value, so there's a lot of effort miners put in to get the block rewards + fees. But the amount of effort a miner puts in doesn't make the price go up, the price can move independently to hashrate.
nickff 4y ago
If the transient use of a cryptocurrency is increasing, the demand for it will be, and the price will follow. If the price is increasing fast enough, it could be worth holding. The same is true of any money or asset used for payments/settling debts (like gold or silver).
- richardwhiuk 4y ago
  Only if people hold it for the transaction for a significant length of time. If people want to get out ASAP, then the faster that transactions happen, the less demand for bitcoin there will be.
- Barrin92 4y ago
  this doesn't work super well because if a currency appreciates in value due to usage and you start to hold it, that means there's less of an incentive to spend it in the first place. That's one of the reasons why we're not trading in gold coins any more, it's almost exclusively turned into an appreciating store of value. Deflationary currency is undesirable as a means of exchange because you don't want to use it, and that is also one of the reasons why central banks target low inflation rates.
meetups323 4y ago
This is why IMO blockchains should be designed to be inflationary. On one hand it just makes sense that as more compute is added transactions should be able to process faster and tokens should be minted more rapidly, such that by "mining" you are producing real value (allowing the chain to process more transactions per second and more people to acquire tokens), on the other very few people use crypto for anything besides speculation so such a coin would never be widely adopted.
- wonnage 4y ago
  I think this is why the fiat system is inflationary (low level inflation is seen as healthy). Assuming that productive projects exist, you never want lack of capital to be the reason that they're not done. The free market is never going to perfectly allocate capital, therefore there should be some extra money in the system to allow for errors. The errors would cause inflation (money supply increased, but productive output did not), but this is better than being overly cautious. Incidentally this is why austerity in debt-laden countries is kind of a terrible idea. You're taking a broken economy and removing what little slack remains in the system. And if the economy was broken due to corruption or incompetent government, you're kind of just betting on regime change at this point, which (apart from the human toll) won't be great economically either.
mgfist 4y ago
Well it's actually a pretty bad transactional currency because it costs so much to transfer btc. So it's kinda the opposite, where people mostly hold it instead of transacting. The argument for a store of value is that of gold but easier to store and transfer, better security etc.. Whether it's a good one is for you to judge.
- mrb 4y ago
  "costs so much to transfer btc" That's not true. The typical credit card processing fee ranges from about 1.3% to 3.5%. Average international remittance fees are about 7%. For comparison the average Bitcoin fee is about $1 right now, so 1% on a $100 transaction. So Bitcoin compares favorably to its competitors.
  - mdorazio 4y ago
    1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. I like some parts of crypto, but transaction fees on most coins right now are not one of those parts.
    - louloulou 4y ago
      > 1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. As far as I understand ACH doesn't work globally > 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. Or use lightning and pay a fraction of a cent transaction fee
      - FireBeyond 4y ago
        Ahh, Lightning. The network that is simultaneously "here and available and usable, right now" when convenient, and "still a few years away", when that argument is convenient.
lbotos 4y ago
> If everyone’s just converting back to fiat anyway, only keeping enough BTC transiently to settle transactions, why hold it long term? People aren't doing this now though. They are buying bitcoin and holding (hodl) or they are trading that bitcoin for other crypto. I think most people aren't using it as a currency, more so speculation
Terry_Roll 4y ago
> I never understood the argument why crypto was a good store of value. Its digital gold thats it, its no more a store of value than antique's, rare cars, fine arts etc etc and unsurprisingly those markets can also see the bottom drop out of them for decades. Ultimately its people en masse who decide what something is worth, but big players can manipulate those markets with resources, laws, taxation, media sentiment and its easy to spook people when they value something, so dont get attached to anything if you dont want to be manipulated. The other thing to note is, it only takes a few hundred million £ on the Asian market to get the GBP to drop against the USD in time for European markets. So there are very few entities who can cause the crypto market to fall like this. Think about that.
- ttfkam 4y ago
  Gold can be used for corrosion-resistant electrical contacts, infrared reflectors for space telescopes, decoration in gaudy penthouses, and more even if everyone decided it was useless as a currency. An antique desk that loses all value in the open market can still be used as a desk or at least firewood. A rare car can still be used to transport yourself, as a prop in a movie, or scrap for other projects. A "worthless" painting can still inspire, liven up a room, or gifted as a gag. Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency.
  - Terry_Roll 4y ago
    > Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency. Its a decentralised currency, its not backed up by a country and their nuclear arsenal rammed down people's throats as we will possibly be seeing with Ukraine. Notes/currency only has value where the threat of violence extends to prevent any counterfeiting attempts, so just like you see matches or cigarettes used as currency in a prison, it still has value. Its value went up when the Greeks had their financial crisis because the Greek banks stopped money leaving the country and this is the important thing, crypto is the thing that helps people move money out of a country fast across borders in a crisis. If you tried to move gold in or out of Switzerland you'll get stopped at the border, they are hot on that sort of stuff but it also shows their level of intelligence in world affairs. Crypto if done properly has a level of privacy affordable to anyone, not just the super rich but also a level of transparency to maintain its integrity from counterfeiting by criminals or the central bank.
jjtheblunt 4y ago
> mostly frictionless isn't the prohibitive electric bill to reconcile the distributed ledger the ultimate showstopping friction?

brazzy 4y ago

Greed.

sfblah 4y ago

That’s not totally true. The value of a Bitcoin does relate to how much effort miners put in. So, $1 might be low enough to allow some sort of attack on the network.

vel0city 4y ago
> The value of a Bitcoin does relate to how much effort miners put in. It looks like you have the causal relationship there backwards. A bitcoin currently has value, so there's a lot of effort miners put in to get the block rewards + fees. But the amount of effort a miner puts in doesn't make the price go up, the price can move independently to hashrate.

nickff 4y ago

If the transient use of a cryptocurrency is increasing, the demand for it will be, and the price will follow. If the price is increasing fast enough, it could be worth holding. The same is true of any money or asset used for payments/settling debts (like gold or silver).

richardwhiuk 4y ago
Only if people hold it for the transaction for a significant length of time. If people want to get out ASAP, then the faster that transactions happen, the less demand for bitcoin there will be.
Barrin92 4y ago
this doesn't work super well because if a currency appreciates in value due to usage and you start to hold it, that means there's less of an incentive to spend it in the first place. That's one of the reasons why we're not trading in gold coins any more, it's almost exclusively turned into an appreciating store of value. Deflationary currency is undesirable as a means of exchange because you don't want to use it, and that is also one of the reasons why central banks target low inflation rates.

meetups323 4y ago

This is why IMO blockchains should be designed to be inflationary. On one hand it just makes sense that as more compute is added transactions should be able to process faster and tokens should be minted more rapidly, such that by "mining" you are producing real value (allowing the chain to process more transactions per second and more people to acquire tokens), on the other very few people use crypto for anything besides speculation so such a coin would never be widely adopted.

wonnage 4y ago
I think this is why the fiat system is inflationary (low level inflation is seen as healthy). Assuming that productive projects exist, you never want lack of capital to be the reason that they're not done. The free market is never going to perfectly allocate capital, therefore there should be some extra money in the system to allow for errors. The errors would cause inflation (money supply increased, but productive output did not), but this is better than being overly cautious. Incidentally this is why austerity in debt-laden countries is kind of a terrible idea. You're taking a broken economy and removing what little slack remains in the system. And if the economy was broken due to corruption or incompetent government, you're kind of just betting on regime change at this point, which (apart from the human toll) won't be great economically either.

mgfist 4y ago

Well it's actually a pretty bad transactional currency because it costs so much to transfer btc. So it's kinda the opposite, where people mostly hold it instead of transacting. The argument for a store of value is that of gold but easier to store and transfer, better security etc.. Whether it's a good one is for you to judge.

mrb 4y ago
"costs so much to transfer btc" That's not true. The typical credit card processing fee ranges from about 1.3% to 3.5%. Average international remittance fees are about 7%. For comparison the average Bitcoin fee is about $1 right now, so 1% on a $100 transaction. So Bitcoin compares favorably to its competitors.
- mdorazio 4y ago
  1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. I like some parts of crypto, but transaction fees on most coins right now are not one of those parts.
  - louloulou 4y ago
    > 1) why are you comparing to credit cards? The average ACH transfer costs zero dollars. As far as I understand ACH doesn't work globally > 2) why did you pick $100 as your basis? If I try to buy a $5 sandwich in Bitcoin and have to pay 20% transaction fee that is not a good platform for transactions. Or use lightning and pay a fraction of a cent transaction fee
    - FireBeyond 4y ago
      Ahh, Lightning. The network that is simultaneously "here and available and usable, right now" when convenient, and "still a few years away", when that argument is convenient.

lbotos 4y ago

> If everyone’s just converting back to fiat anyway, only keeping enough BTC transiently to settle transactions, why hold it long term? People aren't doing this now though. They are buying bitcoin and holding (hodl) or they are trading that bitcoin for other crypto. I think most people aren't using it as a currency, more so speculation

Terry_Roll 4y ago

> I never understood the argument why crypto was a good store of value. Its digital gold thats it, its no more a store of value than antique's, rare cars, fine arts etc etc and unsurprisingly those markets can also see the bottom drop out of them for decades. Ultimately its people en masse who decide what something is worth, but big players can manipulate those markets with resources, laws, taxation, media sentiment and its easy to spook people when they value something, so dont get attached to anything if you dont want to be manipulated. The other thing to note is, it only takes a few hundred million £ on the Asian market to get the GBP to drop against the USD in time for European markets. So there are very few entities who can cause the crypto market to fall like this. Think about that.

ttfkam 4y ago
Gold can be used for corrosion-resistant electrical contacts, infrared reflectors for space telescopes, decoration in gaudy penthouses, and more even if everyone decided it was useless as a currency. An antique desk that loses all value in the open market can still be used as a desk or at least firewood. A rare car can still be used to transport yourself, as a prop in a movie, or scrap for other projects. A "worthless" painting can still inspire, liven up a room, or gifted as a gag. Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency.
- Terry_Roll 4y ago
  > Crypto that loses its value has no other underlying utility over and above the output of /dev/random. That's a MASSIVE difference and more clearly demarcates BTC as a money laundering/Ponzi scheme rather than "digital gold" or a viable currency. Its a decentralised currency, its not backed up by a country and their nuclear arsenal rammed down people's throats as we will possibly be seeing with Ukraine. Notes/currency only has value where the threat of violence extends to prevent any counterfeiting attempts, so just like you see matches or cigarettes used as currency in a prison, it still has value. Its value went up when the Greeks had their financial crisis because the Greek banks stopped money leaving the country and this is the important thing, crypto is the thing that helps people move money out of a country fast across borders in a crisis. If you tried to move gold in or out of Switzerland you'll get stopped at the border, they are hot on that sort of stuff but it also shows their level of intelligence in world affairs. Crypto if done properly has a level of privacy affordable to anyone, not just the super rich but also a level of transparency to maintain its integrity from counterfeiting by criminals or the central bank.

jjtheblunt 4y ago

> mostly frictionless isn't the prohibitive electric bill to reconcile the distributed ledger the ultimate showstopping friction?