22 ms·

There needs to be some basic economics here.. Money has value because of the value of the economic transactions in which its conducted. Government-backed curr

There needs to be some basic economics here.. Money has value because of the value of the economic transactions in which its conducted. Government-backed currencies are forced to have value in the sense they force people to use it for their taxes. The US, additionally, forces the world to use it for oil trades. Value is in those economic transactions. A currency is just a "liquifying" of that value, to make it easier to spread around. So that 1hr of my time/output can be more easily traded for 1hr of another persons. We are still just trading output. For BTC (or any coin) to have any value, it needs actual economic transactions to be conducted in it. If there arent any, its value is smoke-and-mirrors; its not real. If you can't trade the market cap of bitcoin for actual economic output, it isnt actual economic value. Imagine doing that right now. Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight.

jrm4 4y ago
Weird argument, you're presuming that it has no value today because it doesn't work YET. But, that's like the whole point of e.g. IPO's. People sometimes put money in something in the belief that it, or something related to it, will work later.
- luma 4y ago
  So when, exactly, is "later"? Bitcoin is nearing it's 14th birthday which seems like plenty of time to make it "work".
  - jrm4 4y ago
    The argument I've been making is that Bitcoin is the equivalent of the Model T; the prototype thing that essentially "proves" the technology can, and even will work, but it won't be the actual thing. It will likely be a different cryptocurrency.
- tsimionescu 4y ago
  Bitcoin can't scale to real numbers of transactions (say, enough to handle the daily needs of a small town) fundamentally by design. Investing in Bitcoin with the expectation that it will ever scale to Visa levels of tps is like investing in an early-stage cold fusion start-up.
faeriechangling 4y ago
One of the biggest arguments I've seen for bitcoin is the theory that it's a store of value, and it can be valuable in the same sense less liquid financial instruments are useful. Not as a currency to buy bread and beer, but something to put your savings into. Further, I've heard people emphasise crypto as being useful for things such as smart contracts and dApps. Even with a Lower transaction value, one could still theoretically do some higher value transactions with crypto. I am not endorsing this argument, but I have heard of it.
forum_ghost 4y ago
Why then Turkey lira isn't very valuable? Turkey demands the lira for taxes too.
j0hnyl 4y ago
Uh... BTC transactions are happening all the time?
junofan 4y ago
I really don’t buy the old taxes-make-the-money-work chestnut. Far too many counterexamples.
- pydry 4y ago
  Taxes are only a chunk of what makes fiat money work but theyre probably the largest chunk. There arent really many counterexamples and arguably the counterexamples have extenuating circumstances (e.g. dinar under saddams occupation).
- bluetomcat 4y ago
  Paying taxes in a given currency means that the government forces the use of that currency nation-wide. Without a central tax authority requiring that currency, groups of people could start exchanging, say, peanuts for the mutual exchange of goods and services. Since you can't pay your taxes in peanuts, you would want to hold national currency instead of peanuts.
  - yakak 4y ago
    I would want to exchange peanuts and consequently owe no taxes. That is why the US has very complicated rules to discourage bartering and gives every sign it would complicate and eventually outlaw quid-pro-quo family/friend arrangements for things like child and elder care if large and powerful groups of people weren't still extended family oriented.
    - elil17 4y ago
      Genuinely curious here: has anyone actually proposed making family helping with childcare illegal (or perhaps taxed?) Even if it’s just an economist weirdo I’d be curious to see what the argument is there
      - yakak 4y ago
        The exceptions in the rules here for example are almost certainly directly constructed by Congress or anger from Congress and not particularly consistent with how the IRS expands laws by expanding existing theories if left alone: https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-tax https://www.irs.gov/businesses/small-businesses-self-employe...
solotronics 4y ago
Gold having value over a long period of time is a counter argument. Nobody is transacting in gold yet it is valuable.
- bitxbitxbitcoin 4y ago
  If anything this is an argument for Bitcoin also having “value” without being used by the average Joe for day to day transactions like buying a coffee.
- zach_garwood 4y ago
  Gold has utility. You can't make circuits out of Bitcoins.
  - nightski 4y ago
    But most Gold is not used for circuits. Not only that, gold can be mined on demand and has an ever increasing supply (gold does not really disappear).
    - cowtools 4y ago
      Sure, but a not-insignificant amount of gold is still used for industrial applications. Even if gold wasn't used as money or in jewlery, I imagine it would still be quite expensive: at least half of it's current price. The same could be said of other precious metals. But I don't think you can say the same about bitcoin. Bitcoin's fundamental utility is low, even compared to other cryptocurrencies. Gold has useful unique properties over other metals. Bitcoin does not even have useful unique properties over other cryptocurrencies.
      - daniel-cussen 4y ago
        It would definitely be worth half its price as a reserve currency for purely industrial reasons, if not a bit more. Like if it became impossible to balance payments with it, well like if it became irradiated long-term like in Goldfinger, but there was still some clean gold left and it was just for industry. People would totally invent new uses for it at half the price. They just don't even consider it because it's expensive.
nathias 4y ago
ah yes, the "basic economics" that you just make up as you go ...
- cowtools 4y ago
  Rebut the parent comment
hackernudes 4y ago
So scarcity pays no role in value? Is the Mona Lisa not valuable? If money is printed it doesn't lose value? Why would Bitcoin collapse if it was used at "any" scale? Low max transactions per second? It is used by some people (even if not many) to pay for real things as well as wages! Are you saying an "economic" transaction has to be a commodity or taxes? I think any specific currency is valuable because people believe it is so. No single characteristic defines value.
- theplumber 4y ago
  I think Bitcoin will have as much value as the hypercard protocol has now. It's not really as valuable as Mona Lisa but you could say it has some value.
- mjburgess 4y ago
  Every crypto coin trading at 0USD is likewise scarce. You need to pay attention to the actual economic transactions taking place. Looking at a graph of pure speculative value and calling it an economy is, more or less, a scam. You'll see that when it all disappears.. moreso than the cashflow of, eg., an actual business.
  - hackernudes 4y ago
    It is true that not all scarce things are valuable. But isn't scarcity is a good quality for a currency? Fiat currencies fail because of money printing. I think many cryptocurrencies are useless and driven purely by marketing and speculation and most tokens are unregulated securities. Bitcoin is someone's attempt at inventing an "ideal" currency and it is being bootstrapped into value and existence. How else could it work? Maybe it will fail, maybe not. > Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight. You never explained why and I am honestly interested in your reasoning here. Are you implying BTC can't scale? It seems like two contradicting thoughts - if it is used, then it becomes less valuable.
- nixpulvis 4y ago
  Another issue of HN debates values.
ntoskrnl 4y ago
Who says BTC isn't used for payments? Many porn sites ONLY allow you to pay with crypto, including PornHub[1], and they're keeping the lights on somehow. It's being used by the Ukrainian military to pay their suppliers while the banking system is offline[2]. It's being used for remittances. I had to pay my rent with it once. Also VPNs, etc. There's far more global economic activity conducted in BTC than in gold. It all depends where you look. In some niches, BTC is used a lot. In some niches it isn't used by anyone (hi HN!) But it's a big world out there, and if you look outside your bubble it's not hard to find people using it. Re: the last paragraph, BTC did indeed crumple under load for a long time around ~2016, and transaction fees were very high as a result. But lightning network has appeared since then and fees are back down to reasonable levels, well under $1. Those were serious growing pains, but we made it through just fine. [1]: https://news.ycombinator.com/item?id=31914284 https://news.ycombinator.com/item?id=31914284 [2]: https://www.wsj.com/articles/how-crypto-is-helping-ukraine-russia-currency-donations-transfer-infrastructure-11648065166 https://www.wsj.com/articles/how-crypto-is-helping-ukraine-r...
- gricardo99 4y ago
  In some niches, BTC is used a lot. I think that’s GPs point: the economic transition volume is just so low that it doesn’t have much value (relative to government currency). The value if BTC is primarily driven by day-trader hype, IMHO.
- mjburgess 4y ago
  You're right that BTC has a floor because there's some economy behind it. I'd say in the 100USD-1000USD/coin range.
  - benreesman 4y ago
    I’ll sell you that contract up to what I can finance it at.
    - dmoy 4y ago
      You completely ignored what GP said. The floor is different from what people will sell it to you for right now. AMZN may have a floor of $ASSETS / #SHARES (or something, I just made that up), but that doesn't mean anyone will sell it to you for that right now.
R0b0t1 4y ago
A more compelling theory suggest that money has value because it is coercively used to extract value from a society via taxes. People desire it because the government's monopoly on force requires them to pay taxes in it.
waynecochran 4y ago
I don't follow the last statement. If a cryptocurrency was used for decentralized buying and selling, folks were not using it for speculation, and thus it became a stable currency would it not flourish?
- pclmulqdq 4y ago
  This is why Monero is doing really well right now as a currency, but it has become a bit of a dirty word among crypto bros. For many people in cryptocurrency, the price action is the point. People are tired of saving and seeing inflation eat their savings. They want to get rich, and they believe that no investment lets them do it. That's why the Gamestop fiasco became such a phenomenon, and I think that is why Bitcoin is so volatile and why it is what it is. In my opinion, there will need to be a great clearing out for cryptocurrencies and blockchain technologies to mature, and things will need to get very boring. The "clearing out" means $0 BTC, DOGE, ETH, LTC, etc. The "boring" part means things staying stable. Otherwise, it doesn't look like there is enough room for other cryptocurrencies (like SOL as an NFT/smart contract platform) to succeed in the market, and scams will be the only viable business models because they are fast.
- lottin 4y ago
  The demand for a currency fluctuates according to various factors, therefore if the supply remains fixed its price will not be stable.
  - diogenes1 4y ago
    which is fine, since you can back another cpi/whatever automated chainlink index adjusted asset with it. Sure the efficiency will not be as good as fiat but it's robust
    - lottin 4y ago
      I thought we were talking about price stability.
  - waynecochran 4y ago
welshwelsh 4y ago
Imagine a future where the vast majority of work is automated. Most of this is computationally expensive work, such as training large neural networks, and the average program takes a substantial amount of resources to run, comparable to paying a human worker. In this scenario, labor power has been replaced by GPU power, which can be measured in terms of electricity. Everything from ordering a meal at a restaurant to building a house to designing a new computer system can be measured this way, and the price of everything is tightly coupled to the price of electricity and the price of compute. Under these conditions, it might make sense that programs/robots would incorporate smart contracts or participate in some sort of generalized proof-of-work system to finance themselves. Running a program would require currency as input to cover the computational cost of actually running the program, even if the program is open source. That's where I see this going. Traditional currency is great for incentivizing human labor, but the problem is it's not designed to be programmable.
- maury91 4y ago
  People being paid by the hour is just a result of simplifying work, in the very past everyone was a merchant and they sold their goods/services. The same old behaviour should be applied to machines, it doesn't matter how much resource a machine takes to do the job, what is important is the output. The pay should not be X*Watts, but X agreed in advance for training that specific neural network, this type of market incentives evolution, where the machines that can do the same job with lower resources have the lower hand
  - yellowapple 4y ago
    > in the very past everyone was a merchant and they sold their goods/services In the past nearly everyone was a serf and they provided their goods/services to their lieges in exchange for basic needs like having someplace to live. In the present it's pretty much the same thing, except with us serfs being paid wages (which we then end up spending most of as rent and taxes) and serving multiple lieges.
    - bandrami 4y ago
dcolkitt 4y ago
The continued existence of gold as a store of value (and to a lesser extent silver) contradicts this model. Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. There is a small amount of industrial demand, but this is far too tiny to justify gold's gigantic market capitalization. Valued on industrial demand alone gold would maybe worth $100/oz, yet today it trades at $1700/oz. And it has held a lofty valuation more than half a century after all major economies abandoned any gold standard behind their fiat currencies. The only possible explanation for gold's continued valuation is that it's quite possible for assets to exist as money-like stores of value without necessarily needing to possess a functioning role as a medium of exchange or unit of account. Moreover what we can see is that store of value assets are highly path-dependent. Rhodium has similar properties to gold, yet gold is far more widely used as a store of value. The sole explanation for this is because of gold's historical narrative.
- hans1729 4y ago
  >Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.
  - gumby 4y ago
    > economies can crash. Gold can not… A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes. In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
    - hans1729 4y ago
      The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. That was my point, sorry if that wasn't coming across. >If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all? This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?
carapace 4y ago
Giordano Bruno said that whatever has the most value and the least cost of storage becomes money.
bufferoverflow 4y ago
Your comment sort of works against BTC, because it was intentionally crippled. But there are many other coins that will do just fine for day to day transactions. But also the premise of your argument (taxes and oil) is weak. The value of these transactions pales in comparison with the rest of the transactions. So government enforcement has little to do with the value of USD. It has value, because people believe it, they trust it will be accepted and / or easily converted to the currency of their choice.
- mjburgess 4y ago
  Why do they trust that? D'you think it might have something to do with the state willing to violently require you accept its currency?
  - bufferoverflow 4y ago
    Cryptocurrencies don't do that, and they are still worth more than zero. Trust is the key.
  - tsimionescu 4y ago
    State authority is only truly relevant for collapsing currencies - for a functioning economy and currency, trust and availability are far more important. Back in medieval and later times, when states were much weaker than they are today, especially economically, and especially small states, people chose which currencies they trusted, and often ignored the coins their local state was minting in favor of other, more trust-worthy coins minted in other places. Those places had no direct power over the people using their currency, and these people were not paying any taxes to them - they were simply choosing a currency they knew was likely to keep its values over the years. This does happen occasionally in the modern day, with USD-based economies outside the USA, typically in countries with runaway hyper-inflation in their local currency.
chaosbolt 4y ago
Well an apple has value because it's food, but if today people are willing to pay 1 banana for it and tomorrow they're willing to pay 2 bananas for it, the apple still has the same value it did yesterday because the calories in it haven't changed, but you can actually obtain twice the calories you could've obtained yesterday by taking the banana (2 bananas today), so its value today has doubled. Bitcoin is a 0 calorie apple, today you can exchange it for 1 banana, people who hold it think tomorrow they'll be able to get 2 bananas for it. At the end of the day we are biological entities, value is what survival and reproduction benefits we think something can provide, and if enough people are paying that price then its value is that price in dollars.
- throwaway413 4y ago
  This is well said, I’m gonna borrow that - “crypto is like a 0 calorie apple.” This matters. Even gold, at least I can wear it and display my wealth. You can’t even display your crypto wealth like that. It is entirely lacking in any “real” value. Idea: luxury tshirt made out of a $5 white tee with a wallet QR code slapped on the front showing off the balance of the shirt. Or a ring. Crypto fine jewelry.
  - tuesdayrain 4y ago
    >Even gold, at least I can wear it and display my wealth. You can’t even display your crypto wealth like that I'd feel much safer displaying large sums of wealth online by posting a wallet than by wearing luxury goods in public.
    - jesushax 4y ago
      Totally agree. For example, I have 10,000 SOL (Solana tokens) that I regularly screenshot and show off. It's all on devnet, though, so it's free and worthless. It's the web3 version - in web 2 I'd be instagramming my knockoff Rolex I bought in Tijuana
      - aaaaaaaaata 4y ago
DrBazza 4y ago
> For BTC (or any coin) to have any value, it needs actual economic transactions to be conducted in it. If there aren't any, its value is smoke-and-mirrors; its not real. Not quite - if someone, anyone, wants something that someone else has, they're prepared to buy it. That's the price. You might say tulips are valueless, but that wasn't the case when people wanted them - https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania I'm sure everyone has said "I wouldn't pay X for Y", but someone has paid X for Y. X is the price. As much as many on HN like to hate on crypto, people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people.
- hans1729 4y ago
  >people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people. People don't want to sell it, they have to, in order to pay the electricity bills for the mining (in their countries normal currency, for that matter). There is no inherent value - you can only sell if the exchanges find someone who is willing to buy. The value to the seller is the Dollar/Euro they get at the exchange. The value for the buyer is speculation on the price, which someone else then has to pay at the exchange in normal currency. There is exactly zero value in crypto itself.
  - DrBazza 4y ago
    Not at all - I can buy a bitcoin now, and then sell it, having not mined it. I choose not to. But other people do. > Money has value because of the value of the economic transactions in which its conducted. As the OP said, little pieces of paper have essentially no intrinsic value. But use it for transactions, and it has suddenly has a value forced on it. We've all seen zombie apocalypse films with cash blowing around in the street and the survivors ignoring it for good reason, no one _values_ it. Bitcoin is the same, it's a bit of paper in the sense that it's just some numbers on disc somewhere with no _intrinsic_ value, yet as soon as it's a medium of exchange, _which it is_, it has value. There are transactions made in bitcoin.
- ookdatnog 4y ago
tuesdayrain 4y ago
Your mistake is valuing cryptocurrency purely as a currency. In reality BTC and other cryptos have combined properties of currencies, commodities, securities, as well as unique elements that can't be found elsewhere. Crypto is its own asset class and trying to value it using old models of other assets is bound to fail.
globalreset 4y ago
- melony 4y ago
  You are describing fractional reserve banking. Banking licenses have their authority ultimately derived from the state's monopoly on violence.
  - MrMan 4y ago
    Yes thats life
  - globalreset 4y ago
babypuncher 4y ago
Just using BTC to replace all of McDonald's daily debit/credit card transactions would completely destroy the system. I don't know why people think they are refuting your argument by pointing out low-volume examples like porn sites.
- olalonde 4y ago
  You're comparing apples to oranges. Debit/credit card transactions are done through centralized systems. Bitcoin transactions can also be done at scale on those same centralized systems (aka "off-chain transactions").
  - LtWorf 4y ago
    Then you are back to having a bank… Then what's the point?
    - once_inc 4y ago
      You have the option to settle down to a decentralized system. Imagine the US still on a gold standard. If you lose trust in USD because of changes in the government (election of obviously corrupt or incompetent officials), you can settle out of the US Dollar to gold, which is apolitical and allows you to be self-sovereign. The breaking of the gold standard has allowed the US government to extend its monetary base significantly, which is a price future generations (read: our generations) will be footing the bill for. I'm a bitcoin maximalist, but I don't mind if all existing banks were to build a second layer that scales vastly, so long as I'm allowed to settle my bitcoin in their ecosystem with bitcoin on chain.
      - silentsea90 4y ago
        THIS. I feel like I keep smashing my head against a wall explaining the same thing to everybody. This isn't quantum mechanics. Why is this so hard to understand for others :(
    - olalonde 4y ago
soVeryTired 4y ago
It’s not obvious to me that transactions are the key here. Suppose I want to buy something online using crypto. I buy up $X worth and transfer it to the vendor. They transfer whatever it was that they bought, but they immediately redeem the bitcoin for $X, give or take a small amount from market moves. There’s no net demand for crypto here, and the increase in crypto price from my purchase will roughly be offset by their sale. I think the only way to explain crypto prices is through buyers hoping that they’ll be used as a store of value. I don’t agree with that, but that’s a different story.
cypress66 4y ago
As much as I enjoy (and actually use) crypto, you touch a very important point. No current cryptocurrency that is even remotely decentralized, offers good throughput / scalability / tps. Bitcoin has Lightning and it's in my opinion fundamentally flawed in its UX. It hasn't picked up much adoption after many years for what it's worth. Ethereum has many L2 solutions in development but they are many years away from being finished (actually scalable, safe, decentralized) I don't know much about other cryptocurrencies but from what I've seen they all are either very centralized or not scalable either (see the Blockchain Trillema)
- koonsolo 4y ago
  Nano uses what they call a "block lattice" which is based on DAG's. Seems to work both in theory and practice: 0 fees, sub-second transactions and can handle thousands of tps.
mathattack 4y ago
I will play the devils advocate here. What if it’s value is more like a store of value (gold) rather than a currency. We can’t pay all of our bills in gold, but it’s a store of value you can buy in and out of. I don’t have a horse in the race, just trying to understand.
- anbende 4y ago
  Right, except that gold has inherent value. Historically we thought it was pretty and made jewelry out of it. It’s important for a variety of technology products. It’s a value store because it is consistently valuable first. Bitcoin skips that step.
  - koonsolo 4y ago
    Gold has pretty big downsides as a store of value. It's heavy, hard to transport, ... . The key to a cryptocurrency store can be memorized in your head. That means I can have 2mil in my head, with no other way to access it. I take it wherever I go, and can access it when there is internet. I can also send it to whoever I want, no limit. This is literally a 1st. How high people value that, is not up to me alone. But you cannot deny that it has some value. And as long as it has some value, the above works. It basically bootstrapped itself. Claiming it has a value of 0 is very short sighted.
  - aaaaaaaaata 4y ago
    Gold is nearly worthless as an investment vehicle for a generation or two that will never own a single property.
  - mattwilsonn888 4y ago
    Gold pays for that step. No one sensible would prefer the gold UX compared to Bitcoin. It beats it in every way other than 'shiny!'
    - LtWorf 4y ago
      Gold works when the internet is down :)
tablespoon 4y ago
> The US, additionally, forces the world to use it for oil trades. That is not true. The US isn't forcing anyone to use the dollar, e.g.: https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541 https://www.wsj.com/articles/saudi-arabia-considers-acceptin...
- LtWorf 4y ago
  The last countries that considered it seriously were bombed and invaded…
  - aaaaaaaaata 4y ago
    "We came, we saw, he died."
- once_inc 4y ago
  They have strong-armed their petrodollar system since 1971, and have invaded a number of oil-producing countries that toyed with the idea to price oil in value other currencies. Saudi Arabia only get to price in Yuan, because the US can't afford to invade China. The unipolar world is fraying at the seams, and one wonders what will happen to the dollar when the US government can no longer lean on the petrodollar to enforce it's world reserve status. Check Lyn Alden's piece on the history of the US Dollar as world reserve asset [0] for a vastly superior exposition of facts regarding this matter. [0]: https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
- bioemerl 4y ago
  With sanctions against Russia the US is actually doing the opposite. Forcing them not to use the USD.
  - mattwilsonn888 4y ago
    "Force." The real question is, why do they want to use the Dollar so bad?
douglaswlance 4y ago
Cryptocurrencies have inherent value. Would you say there is value in having the capability to transact with someone else? There is some value there, no matter how many alternatives and how little that value is. That value scales exponentially with the number of potential transactional partners because each additional partner gives all other partners a new potential transactional partner. So at scale, even if the value of having the option to trade is minuscule, it balloons into real value when every single person on earth is a potential trade partner. That is the inherent value of a cryptocurrency network.
- mjburgess 4y ago
  Well that's the total addressable market: all possible users of any currency. Likewise, that's the same market for any currency proposal -- including all the coins currently trading at 0 USD. Money's job is not to have inherent use-value, as then people would use it up. Its value is relational, it tracks the economic exchanges with actual inherent value. But not perfectly, since you can eg., have hyperinflation, etc. So money has a life of its own above the economic transactions, but this is unsustainable, hence inflation which is "money falling back to earth". There is no earth for crypto to fall to, ie., no place of actual economic productivity.
  - douglaswlance 4y ago
    It's not all possible users. It's all actual users. Facebook isn't valuable because anyone on Earth could use it. It is valuable because people do use it and its value has the network effects. Coins trading at 0 USD have no users, thus their value is 0. Money must have inherent value (at least the capability of being traded) for it to be money.
ChainOfFools 4y ago
there is so much soft-corruption pressure and old fashioned lobbying from Bitcoin kingpins to insinuate BTC into various nations' fiat pools. Why is this, when making bitcoin into fiat undermines the entire point of bitcoin. Well obviously, on the superficial level there's plain old greed. But on a more existential level, bitcoiners are acknowledging that proof of work will lose to proof of lead, in any kind of direct confrontation. So backing its security with math isn't enough, coiners want it backed with armed force. like fiat.
- mattwilsonn888 4y ago
  You're all over the place, and "making Bitcoin into fiat" can have many meanings. I doubt it means to you what it means to most.
antoniuschan99 4y ago
Isn’t the value in money both in security (eg. Dollar backed by Superpower) and economic transaction? With Bitcoin’s hash rate at an all time high, it’s more secure than ever - can we say it’s the most secure system in the world? Of course the tradeoff for BTC is like insane consumption of power (currently Argentina size). With BTC, I don’t think the use case will ever be to handle small sums of money. Transaction speed and fees don’t make sense for it.
- pavel_lishin 4y ago
  What sort of security are you referring to?
  - deleted 4y ago
    [deleted]
  - kreetx 4y ago
    Expensive to fork I presume.
mattwilsonn888 4y ago
Bitcoin doesn't need to be money, especially not on layer 1, to have value. USD doesn't get its value as a currency from slow and expensive wire transfers, and it gets very little value at all from being a store of value. Even if Bitcoin was primarily transferred between custodians between clients, it would still be better than USD (assuming a stable market cap) and give clients far more options while also forcing banks to disclose reserves.
- thelamest 4y ago
  Transfers can be dirt cheap with normal money (e.g.: Single Euro Payment Area), and your banking system can be transparent enough (the US one already is), if your regulating body cares about it. The average individual neither can change it, nor cares. If many people can’t help themselves but get fleeced, as happened recently on a large scale in the crypto space, at best you can struggle to recreate regulatory agencies in some kludgey crypto form. Most egregiously, all this is still worse than pointless, because the true differential value-add in crypto comes from enabling value flows for undesirable activities like crime, and it’s only possible thanks to horrible incentive system that rewards wasting energy.
  - mattwilsonn888 4y ago
    You have admitted that I was correct in refuting you: all desired qualities of the current system can exist on Bitcoin no problem. Then you moved the goal post. If Bitcoin is pointless because it has no use case, you would have started with that point and not been drawn into critiquing an aspect reliant on the assumption it is useful.
xorcist 4y ago
> Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight. Higher velocity of money would lead to zero value? That's not commonly what basic economy dictates. This being 2022, let's try to keep our concepts clear as to not rehash the debate from ten years ago. BTC is a currency, a blockchain, a programmable transaction language, a piece of software, and a protocol. It is good to suggest which one of these we imagine in use, and how that use is done. Otherwise we risk saying that imagine if the physical $100 bill was used for all McDonald's transactions, clearly that wouldn't work, they are too hard to subdivide and even if they weren't there simply aren't enough of them, and therefore it is unusable as a currency. Clearly McDonald's couldn't operate each and every economical transaction by settling them publicly on the BTC block chain, that much is obvious. But just as clearly there's nothing stopping Visa from denominating transactions in BTC, or utilizing that type of transactions internally, or utilizing the public Lightning network, or whatever it is McDonald's use in El Salvador. That much we probably agree on so let's leave that discussion in the past decade.
- lrvick 4y ago
  I appreciate that we both replied with the same points at almost the same time.
- kevstev 4y ago
  > Higher velocity of money would lead to zero value? That's not commonly what basic economy dictates. I think you missed his actual point, which to be fair wasn't explicitly stated and I don't think is widely known. The bitcoin network can not handle large transaction volumes, like at all- its absurdly low. Somewhere around 10/second is where I understood it to stand, and I recall reading a paper that talked about changes that could theoretically get that to 40/s. A quick googling on the state of the art of this has it reporting 7/second: https://www.google.com/search?q=max+transactions+per+second+bitcoin&oq=max+transactions+per+second+bitcoin https://www.google.com/search?q=max+transactions+per+second+... I know this because this came up around 2016ish during one of the booms, and while I was previously crypto-curious and even a bit enthusiastic about the possibilities, once I saw that, I immediately lost all interest and got out. Other coins like Bitcoin Cash tried to address this, but the numbers were still absurdly low for what was supposed to be a completely decentralized currency to replace all others. Which is actually why Coinbase, FTX and the like rose so quickly and became so important- they enable transfers off chain.
lrvick 4y ago
Big companies are not using actual printed paper money directly. Cash, like Bitcoin, is great for peer to peer transactions, but too slow and impractical for the population to all use end to end for all daily transactions. Companies like McDonalds operate on credit via privately owned payment rails because ACH and cash are way too slow. Even when it takes cash that cash is not physically shipped to a bank vault at McDonalds HQ but instead local restaurants make cash drops to other private companies, banks, that then take possession of the cash and use their own private network to credit a remote account. Even tax payment portals allow use of the payment rails of private companies because paper USD is too impractical. Still, the fixed supply of federal reserve issued USD is what all these magic third party payment rails create an abstracion layer for. No one Bitcoin advocate that knows how it works is saying Bitcoin will be used -directly- for daily commerce. Even in El Salvador venmo-like apps have emerged that batch Bitcoin transactions and use credit, much like Visa does to abstract slow ACH or cash. These proprietary credit systems defeat a lot of the point of Bitcoin though, so open off-chain credit systems like Lightning exist. My local Coffee shop accepts Lightning which in short allows us to just continually cancel and re-issue signed Bitcoin transactions off-chain we never publish until one of us needs to settle which in some cases could be years, and that is fine. Unlike Visa, the benefits of credit solutions like Lightning are available to all replacing KYC and credit checks with cryptography. Also going back to your point about taxes, several states have serious efforts to get Bitcoin permitted for tax payment: https://www.deseret.com/2022/2/8/22918061/wyoming-arizona-bitcoin-cryptocurrency-taxes-state-legislatures-congress-constitutional-hurdles https://www.deseret.com/2022/2/8/22918061/wyoming-arizona-bi...
- BTCOG 4y ago
  Exactly! If Walmart/McD's wish to successfully use Bitcoin, they will easily batch millions of transactions from numerous locations into just a handful of on chain network transactions. The point is finality in Bitcoin for those who wish to hold hard money at the end of it rather than a credit system or fiat currency. I see a lot of clearly incorrect information being displayed here about l2 such as Lightning Network, and at odds with reality. I'm not addressing the posts but it seems lately HN comments have nearly become a pile-on of misinformation bike-shedding about Bitcoin and in the face of reality, these folks want to spread outright lies and falsities. You may not own Bitcoin and you may not like it, but it's going far when hundreds of comments are so boldly misleading. For folks who are into science and technology, and some who are hackers, the ethos doesn't check out spreading misinformation about energy usage, centralization, and fairness of the system. When I was growing up, hacking was all about freedom to explore, libertarian bent, and/or anarchy. The cypherpunk movement from which Bitcoin sprang was very libertarian or even one could say classical liberal. This article attempts numerous times to, for some reason, compare libertarianism to communism which is quite absurd. Libertarianism is for as little system of government as necessary, for staunch individual liberty and property rights, and hands-off free market economies. Clearly, communism is for state controlled property and no individual rights, one-world state, and no individual rights at all. Communism seeks to replace free-market economies with everyone equal and no individual rights. It's absurd on it's face to even compare libertarianism to communism when they're at opposite poles. At any rate, I would hope people don't take all these fear-mongering anti-crypto articles just at face value and do some research into what crap they're reading.

jrm4 4y ago

Weird argument, you're presuming that it has no value today because it doesn't work YET. But, that's like the whole point of e.g. IPO's. People sometimes put money in something in the belief that it, or something related to it, will work later.

luma 4y ago
So when, exactly, is "later"? Bitcoin is nearing it's 14th birthday which seems like plenty of time to make it "work".
- jrm4 4y ago
  The argument I've been making is that Bitcoin is the equivalent of the Model T; the prototype thing that essentially "proves" the technology can, and even will work, but it won't be the actual thing. It will likely be a different cryptocurrency.
tsimionescu 4y ago
Bitcoin can't scale to real numbers of transactions (say, enough to handle the daily needs of a small town) fundamentally by design. Investing in Bitcoin with the expectation that it will ever scale to Visa levels of tps is like investing in an early-stage cold fusion start-up.

faeriechangling 4y ago

One of the biggest arguments I've seen for bitcoin is the theory that it's a store of value, and it can be valuable in the same sense less liquid financial instruments are useful. Not as a currency to buy bread and beer, but something to put your savings into. Further, I've heard people emphasise crypto as being useful for things such as smart contracts and dApps. Even with a Lower transaction value, one could still theoretically do some higher value transactions with crypto. I am not endorsing this argument, but I have heard of it.

forum_ghost 4y ago

Why then Turkey lira isn't very valuable? Turkey demands the lira for taxes too.

j0hnyl 4y ago

Uh... BTC transactions are happening all the time?

junofan 4y ago

I really don’t buy the old taxes-make-the-money-work chestnut. Far too many counterexamples.

pydry 4y ago
Taxes are only a chunk of what makes fiat money work but theyre probably the largest chunk. There arent really many counterexamples and arguably the counterexamples have extenuating circumstances (e.g. dinar under saddams occupation).
bluetomcat 4y ago
Paying taxes in a given currency means that the government forces the use of that currency nation-wide. Without a central tax authority requiring that currency, groups of people could start exchanging, say, peanuts for the mutual exchange of goods and services. Since you can't pay your taxes in peanuts, you would want to hold national currency instead of peanuts.
- yakak 4y ago
  I would want to exchange peanuts and consequently owe no taxes. That is why the US has very complicated rules to discourage bartering and gives every sign it would complicate and eventually outlaw quid-pro-quo family/friend arrangements for things like child and elder care if large and powerful groups of people weren't still extended family oriented.
  - elil17 4y ago
    Genuinely curious here: has anyone actually proposed making family helping with childcare illegal (or perhaps taxed?) Even if it’s just an economist weirdo I’d be curious to see what the argument is there
    - yakak 4y ago
      The exceptions in the rules here for example are almost certainly directly constructed by Congress or anger from Congress and not particularly consistent with how the IRS expands laws by expanding existing theories if left alone: https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-tax https://www.irs.gov/businesses/small-businesses-self-employe...

solotronics 4y ago

Gold having value over a long period of time is a counter argument. Nobody is transacting in gold yet it is valuable.

bitxbitxbitcoin 4y ago
If anything this is an argument for Bitcoin also having “value” without being used by the average Joe for day to day transactions like buying a coffee.
zach_garwood 4y ago
Gold has utility. You can't make circuits out of Bitcoins.
- nightski 4y ago
  But most Gold is not used for circuits. Not only that, gold can be mined on demand and has an ever increasing supply (gold does not really disappear).
  - cowtools 4y ago
    Sure, but a not-insignificant amount of gold is still used for industrial applications. Even if gold wasn't used as money or in jewlery, I imagine it would still be quite expensive: at least half of it's current price. The same could be said of other precious metals. But I don't think you can say the same about bitcoin. Bitcoin's fundamental utility is low, even compared to other cryptocurrencies. Gold has useful unique properties over other metals. Bitcoin does not even have useful unique properties over other cryptocurrencies.
    - daniel-cussen 4y ago
      It would definitely be worth half its price as a reserve currency for purely industrial reasons, if not a bit more. Like if it became impossible to balance payments with it, well like if it became irradiated long-term like in Goldfinger, but there was still some clean gold left and it was just for industry. People would totally invent new uses for it at half the price. They just don't even consider it because it's expensive.

nathias 4y ago

ah yes, the "basic economics" that you just make up as you go ...

cowtools 4y ago
Rebut the parent comment

hackernudes 4y ago

So scarcity pays no role in value? Is the Mona Lisa not valuable? If money is printed it doesn't lose value? Why would Bitcoin collapse if it was used at "any" scale? Low max transactions per second? It is used by some people (even if not many) to pay for real things as well as wages! Are you saying an "economic" transaction has to be a commodity or taxes? I think any specific currency is valuable because people believe it is so. No single characteristic defines value.

theplumber 4y ago
I think Bitcoin will have as much value as the hypercard protocol has now. It's not really as valuable as Mona Lisa but you could say it has some value.
mjburgess 4y ago
Every crypto coin trading at 0USD is likewise scarce. You need to pay attention to the actual economic transactions taking place. Looking at a graph of pure speculative value and calling it an economy is, more or less, a scam. You'll see that when it all disappears.. moreso than the cashflow of, eg., an actual business.
- hackernudes 4y ago
  It is true that not all scarce things are valuable. But isn't scarcity is a good quality for a currency? Fiat currencies fail because of money printing. I think many cryptocurrencies are useless and driven purely by marketing and speculation and most tokens are unregulated securities. Bitcoin is someone's attempt at inventing an "ideal" currency and it is being bootstrapped into value and existence. How else could it work? Maybe it will fail, maybe not. > Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight. You never explained why and I am honestly interested in your reasoning here. Are you implying BTC can't scale? It seems like two contradicting thoughts - if it is used, then it becomes less valuable.
nixpulvis 4y ago
Another issue of HN debates values.

ntoskrnl 4y ago

Who says BTC isn't used for payments? Many porn sites ONLY allow you to pay with crypto, including PornHub[1], and they're keeping the lights on somehow. It's being used by the Ukrainian military to pay their suppliers while the banking system is offline[2]. It's being used for remittances. I had to pay my rent with it once. Also VPNs, etc. There's far more global economic activity conducted in BTC than in gold. It all depends where you look. In some niches, BTC is used a lot. In some niches it isn't used by anyone (hi HN!) But it's a big world out there, and if you look outside your bubble it's not hard to find people using it. Re: the last paragraph, BTC did indeed crumple under load for a long time around ~2016, and transaction fees were very high as a result. But lightning network has appeared since then and fees are back down to reasonable levels, well under $1. Those were serious growing pains, but we made it through just fine. [1]: https://news.ycombinator.com/item?id=31914284 https://news.ycombinator.com/item?id=31914284 [2]: https://www.wsj.com/articles/how-crypto-is-helping-ukraine-russia-currency-donations-transfer-infrastructure-11648065166 https://www.wsj.com/articles/how-crypto-is-helping-ukraine-r...

gricardo99 4y ago
In some niches, BTC is used a lot. I think that’s GPs point: the economic transition volume is just so low that it doesn’t have much value (relative to government currency). The value if BTC is primarily driven by day-trader hype, IMHO.
mjburgess 4y ago
You're right that BTC has a floor because there's some economy behind it. I'd say in the 100USD-1000USD/coin range.
- benreesman 4y ago
  I’ll sell you that contract up to what I can finance it at.
  - dmoy 4y ago
    You completely ignored what GP said. The floor is different from what people will sell it to you for right now. AMZN may have a floor of $ASSETS / #SHARES (or something, I just made that up), but that doesn't mean anyone will sell it to you for that right now.

R0b0t1 4y ago

A more compelling theory suggest that money has value because it is coercively used to extract value from a society via taxes. People desire it because the government's monopoly on force requires them to pay taxes in it.

waynecochran 4y ago

I don't follow the last statement. If a cryptocurrency was used for decentralized buying and selling, folks were not using it for speculation, and thus it became a stable currency would it not flourish?

pclmulqdq 4y ago
This is why Monero is doing really well right now as a currency, but it has become a bit of a dirty word among crypto bros. For many people in cryptocurrency, the price action is the point. People are tired of saving and seeing inflation eat their savings. They want to get rich, and they believe that no investment lets them do it. That's why the Gamestop fiasco became such a phenomenon, and I think that is why Bitcoin is so volatile and why it is what it is. In my opinion, there will need to be a great clearing out for cryptocurrencies and blockchain technologies to mature, and things will need to get very boring. The "clearing out" means $0 BTC, DOGE, ETH, LTC, etc. The "boring" part means things staying stable. Otherwise, it doesn't look like there is enough room for other cryptocurrencies (like SOL as an NFT/smart contract platform) to succeed in the market, and scams will be the only viable business models because they are fast.
lottin 4y ago
The demand for a currency fluctuates according to various factors, therefore if the supply remains fixed its price will not be stable.
- diogenes1 4y ago
  which is fine, since you can back another cpi/whatever automated chainlink index adjusted asset with it. Sure the efficiency will not be as good as fiat but it's robust
  - lottin 4y ago
    I thought we were talking about price stability.
- waynecochran 4y ago

welshwelsh 4y ago

Imagine a future where the vast majority of work is automated. Most of this is computationally expensive work, such as training large neural networks, and the average program takes a substantial amount of resources to run, comparable to paying a human worker. In this scenario, labor power has been replaced by GPU power, which can be measured in terms of electricity. Everything from ordering a meal at a restaurant to building a house to designing a new computer system can be measured this way, and the price of everything is tightly coupled to the price of electricity and the price of compute. Under these conditions, it might make sense that programs/robots would incorporate smart contracts or participate in some sort of generalized proof-of-work system to finance themselves. Running a program would require currency as input to cover the computational cost of actually running the program, even if the program is open source. That's where I see this going. Traditional currency is great for incentivizing human labor, but the problem is it's not designed to be programmable.

maury91 4y ago
People being paid by the hour is just a result of simplifying work, in the very past everyone was a merchant and they sold their goods/services. The same old behaviour should be applied to machines, it doesn't matter how much resource a machine takes to do the job, what is important is the output. The pay should not be X*Watts, but X agreed in advance for training that specific neural network, this type of market incentives evolution, where the machines that can do the same job with lower resources have the lower hand
- yellowapple 4y ago
  > in the very past everyone was a merchant and they sold their goods/services In the past nearly everyone was a serf and they provided their goods/services to their lieges in exchange for basic needs like having someplace to live. In the present it's pretty much the same thing, except with us serfs being paid wages (which we then end up spending most of as rent and taxes) and serving multiple lieges.
  - bandrami 4y ago

dcolkitt 4y ago

The continued existence of gold as a store of value (and to a lesser extent silver) contradicts this model. Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. There is a small amount of industrial demand, but this is far too tiny to justify gold's gigantic market capitalization. Valued on industrial demand alone gold would maybe worth $100/oz, yet today it trades at $1700/oz. And it has held a lofty valuation more than half a century after all major economies abandoned any gold standard behind their fiat currencies. The only possible explanation for gold's continued valuation is that it's quite possible for assets to exist as money-like stores of value without necessarily needing to possess a functioning role as a medium of exchange or unit of account. Moreover what we can see is that store of value assets are highly path-dependent. Rhodium has similar properties to gold, yet gold is far more widely used as a store of value. The sole explanation for this is because of gold's historical narrative.

hans1729 4y ago
>Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.
- gumby 4y ago
  > economies can crash. Gold can not… A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes. In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
  - hans1729 4y ago
    The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. That was my point, sorry if that wasn't coming across. >If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all? This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?

carapace 4y ago

Giordano Bruno said that whatever has the most value and the least cost of storage becomes money.

bufferoverflow 4y ago

Your comment sort of works against BTC, because it was intentionally crippled. But there are many other coins that will do just fine for day to day transactions. But also the premise of your argument (taxes and oil) is weak. The value of these transactions pales in comparison with the rest of the transactions. So government enforcement has little to do with the value of USD. It has value, because people believe it, they trust it will be accepted and / or easily converted to the currency of their choice.

mjburgess 4y ago
Why do they trust that? D'you think it might have something to do with the state willing to violently require you accept its currency?
- bufferoverflow 4y ago
  Cryptocurrencies don't do that, and they are still worth more than zero. Trust is the key.
- tsimionescu 4y ago
  State authority is only truly relevant for collapsing currencies - for a functioning economy and currency, trust and availability are far more important. Back in medieval and later times, when states were much weaker than they are today, especially economically, and especially small states, people chose which currencies they trusted, and often ignored the coins their local state was minting in favor of other, more trust-worthy coins minted in other places. Those places had no direct power over the people using their currency, and these people were not paying any taxes to them - they were simply choosing a currency they knew was likely to keep its values over the years. This does happen occasionally in the modern day, with USD-based economies outside the USA, typically in countries with runaway hyper-inflation in their local currency.

chaosbolt 4y ago

Well an apple has value because it's food, but if today people are willing to pay 1 banana for it and tomorrow they're willing to pay 2 bananas for it, the apple still has the same value it did yesterday because the calories in it haven't changed, but you can actually obtain twice the calories you could've obtained yesterday by taking the banana (2 bananas today), so its value today has doubled. Bitcoin is a 0 calorie apple, today you can exchange it for 1 banana, people who hold it think tomorrow they'll be able to get 2 bananas for it. At the end of the day we are biological entities, value is what survival and reproduction benefits we think something can provide, and if enough people are paying that price then its value is that price in dollars.

throwaway413 4y ago
This is well said, I’m gonna borrow that - “crypto is like a 0 calorie apple.” This matters. Even gold, at least I can wear it and display my wealth. You can’t even display your crypto wealth like that. It is entirely lacking in any “real” value. Idea: luxury tshirt made out of a $5 white tee with a wallet QR code slapped on the front showing off the balance of the shirt. Or a ring. Crypto fine jewelry.
- tuesdayrain 4y ago
  >Even gold, at least I can wear it and display my wealth. You can’t even display your crypto wealth like that I'd feel much safer displaying large sums of wealth online by posting a wallet than by wearing luxury goods in public.
  - jesushax 4y ago
    Totally agree. For example, I have 10,000 SOL (Solana tokens) that I regularly screenshot and show off. It's all on devnet, though, so it's free and worthless. It's the web3 version - in web 2 I'd be instagramming my knockoff Rolex I bought in Tijuana
    - aaaaaaaaata 4y ago

DrBazza 4y ago

> For BTC (or any coin) to have any value, it needs actual economic transactions to be conducted in it. If there aren't any, its value is smoke-and-mirrors; its not real. Not quite - if someone, anyone, wants something that someone else has, they're prepared to buy it. That's the price. You might say tulips are valueless, but that wasn't the case when people wanted them - https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania I'm sure everyone has said "I wouldn't pay X for Y", but someone has paid X for Y. X is the price. As much as many on HN like to hate on crypto, people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people.

hans1729 4y ago
>people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people. People don't want to sell it, they have to, in order to pay the electricity bills for the mining (in their countries normal currency, for that matter). There is no inherent value - you can only sell if the exchanges find someone who is willing to buy. The value to the seller is the Dollar/Euro they get at the exchange. The value for the buyer is speculation on the price, which someone else then has to pay at the exchange in normal currency. There is exactly zero value in crypto itself.
- DrBazza 4y ago
  Not at all - I can buy a bitcoin now, and then sell it, having not mined it. I choose not to. But other people do. > Money has value because of the value of the economic transactions in which its conducted. As the OP said, little pieces of paper have essentially no intrinsic value. But use it for transactions, and it has suddenly has a value forced on it. We've all seen zombie apocalypse films with cash blowing around in the street and the survivors ignoring it for good reason, no one _values_ it. Bitcoin is the same, it's a bit of paper in the sense that it's just some numbers on disc somewhere with no _intrinsic_ value, yet as soon as it's a medium of exchange, _which it is_, it has value. There are transactions made in bitcoin.
ookdatnog 4y ago

tuesdayrain 4y ago

Your mistake is valuing cryptocurrency purely as a currency. In reality BTC and other cryptos have combined properties of currencies, commodities, securities, as well as unique elements that can't be found elsewhere. Crypto is its own asset class and trying to value it using old models of other assets is bound to fail.

globalreset 4y ago

melony 4y ago
You are describing fractional reserve banking. Banking licenses have their authority ultimately derived from the state's monopoly on violence.
- MrMan 4y ago
  Yes thats life
- globalreset 4y ago

babypuncher 4y ago

Just using BTC to replace all of McDonald's daily debit/credit card transactions would completely destroy the system. I don't know why people think they are refuting your argument by pointing out low-volume examples like porn sites.

olalonde 4y ago
You're comparing apples to oranges. Debit/credit card transactions are done through centralized systems. Bitcoin transactions can also be done at scale on those same centralized systems (aka "off-chain transactions").
- LtWorf 4y ago
  Then you are back to having a bank… Then what's the point?
  - once_inc 4y ago
    You have the option to settle down to a decentralized system. Imagine the US still on a gold standard. If you lose trust in USD because of changes in the government (election of obviously corrupt or incompetent officials), you can settle out of the US Dollar to gold, which is apolitical and allows you to be self-sovereign. The breaking of the gold standard has allowed the US government to extend its monetary base significantly, which is a price future generations (read: our generations) will be footing the bill for. I'm a bitcoin maximalist, but I don't mind if all existing banks were to build a second layer that scales vastly, so long as I'm allowed to settle my bitcoin in their ecosystem with bitcoin on chain.
    - silentsea90 4y ago
      THIS. I feel like I keep smashing my head against a wall explaining the same thing to everybody. This isn't quantum mechanics. Why is this so hard to understand for others :(
  - olalonde 4y ago

soVeryTired 4y ago

It’s not obvious to me that transactions are the key here. Suppose I want to buy something online using crypto. I buy up $X worth and transfer it to the vendor. They transfer whatever it was that they bought, but they immediately redeem the bitcoin for $X, give or take a small amount from market moves. There’s no net demand for crypto here, and the increase in crypto price from my purchase will roughly be offset by their sale. I think the only way to explain crypto prices is through buyers hoping that they’ll be used as a store of value. I don’t agree with that, but that’s a different story.

cypress66 4y ago

As much as I enjoy (and actually use) crypto, you touch a very important point. No current cryptocurrency that is even remotely decentralized, offers good throughput / scalability / tps. Bitcoin has Lightning and it's in my opinion fundamentally flawed in its UX. It hasn't picked up much adoption after many years for what it's worth. Ethereum has many L2 solutions in development but they are many years away from being finished (actually scalable, safe, decentralized) I don't know much about other cryptocurrencies but from what I've seen they all are either very centralized or not scalable either (see the Blockchain Trillema)

koonsolo 4y ago
Nano uses what they call a "block lattice" which is based on DAG's. Seems to work both in theory and practice: 0 fees, sub-second transactions and can handle thousands of tps.

mathattack 4y ago

I will play the devils advocate here. What if it’s value is more like a store of value (gold) rather than a currency. We can’t pay all of our bills in gold, but it’s a store of value you can buy in and out of. I don’t have a horse in the race, just trying to understand.

anbende 4y ago
Right, except that gold has inherent value. Historically we thought it was pretty and made jewelry out of it. It’s important for a variety of technology products. It’s a value store because it is consistently valuable first. Bitcoin skips that step.
- koonsolo 4y ago
  Gold has pretty big downsides as a store of value. It's heavy, hard to transport, ... . The key to a cryptocurrency store can be memorized in your head. That means I can have 2mil in my head, with no other way to access it. I take it wherever I go, and can access it when there is internet. I can also send it to whoever I want, no limit. This is literally a 1st. How high people value that, is not up to me alone. But you cannot deny that it has some value. And as long as it has some value, the above works. It basically bootstrapped itself. Claiming it has a value of 0 is very short sighted.
- aaaaaaaaata 4y ago
  Gold is nearly worthless as an investment vehicle for a generation or two that will never own a single property.
- mattwilsonn888 4y ago
  Gold pays for that step. No one sensible would prefer the gold UX compared to Bitcoin. It beats it in every way other than 'shiny!'
  - LtWorf 4y ago
    Gold works when the internet is down :)

tablespoon 4y ago

> The US, additionally, forces the world to use it for oil trades. That is not true. The US isn't forcing anyone to use the dollar, e.g.: https://www.wsj.com/articles/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541 https://www.wsj.com/articles/saudi-arabia-considers-acceptin...

LtWorf 4y ago
The last countries that considered it seriously were bombed and invaded…
- aaaaaaaaata 4y ago
  "We came, we saw, he died."
once_inc 4y ago
They have strong-armed their petrodollar system since 1971, and have invaded a number of oil-producing countries that toyed with the idea to price oil in value other currencies. Saudi Arabia only get to price in Yuan, because the US can't afford to invade China. The unipolar world is fraying at the seams, and one wonders what will happen to the dollar when the US government can no longer lean on the petrodollar to enforce it's world reserve status. Check Lyn Alden's piece on the history of the US Dollar as world reserve asset [0] for a vastly superior exposition of facts regarding this matter. [0]: https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
bioemerl 4y ago
With sanctions against Russia the US is actually doing the opposite. Forcing them not to use the USD.
- mattwilsonn888 4y ago
  "Force." The real question is, why do they want to use the Dollar so bad?

douglaswlance 4y ago

Cryptocurrencies have inherent value. Would you say there is value in having the capability to transact with someone else? There is some value there, no matter how many alternatives and how little that value is. That value scales exponentially with the number of potential transactional partners because each additional partner gives all other partners a new potential transactional partner. So at scale, even if the value of having the option to trade is minuscule, it balloons into real value when every single person on earth is a potential trade partner. That is the inherent value of a cryptocurrency network.

mjburgess 4y ago
Well that's the total addressable market: all possible users of any currency. Likewise, that's the same market for any currency proposal -- including all the coins currently trading at 0 USD. Money's job is not to have inherent use-value, as then people would use it up. Its value is relational, it tracks the economic exchanges with actual inherent value. But not perfectly, since you can eg., have hyperinflation, etc. So money has a life of its own above the economic transactions, but this is unsustainable, hence inflation which is "money falling back to earth". There is no earth for crypto to fall to, ie., no place of actual economic productivity.
- douglaswlance 4y ago
  It's not all possible users. It's all actual users. Facebook isn't valuable because anyone on Earth could use it. It is valuable because people do use it and its value has the network effects. Coins trading at 0 USD have no users, thus their value is 0. Money must have inherent value (at least the capability of being traded) for it to be money.

ChainOfFools 4y ago

there is so much soft-corruption pressure and old fashioned lobbying from Bitcoin kingpins to insinuate BTC into various nations' fiat pools. Why is this, when making bitcoin into fiat undermines the entire point of bitcoin. Well obviously, on the superficial level there's plain old greed. But on a more existential level, bitcoiners are acknowledging that proof of work will lose to proof of lead, in any kind of direct confrontation. So backing its security with math isn't enough, coiners want it backed with armed force. like fiat.

mattwilsonn888 4y ago
You're all over the place, and "making Bitcoin into fiat" can have many meanings. I doubt it means to you what it means to most.

antoniuschan99 4y ago

Isn’t the value in money both in security (eg. Dollar backed by Superpower) and economic transaction? With Bitcoin’s hash rate at an all time high, it’s more secure than ever - can we say it’s the most secure system in the world? Of course the tradeoff for BTC is like insane consumption of power (currently Argentina size). With BTC, I don’t think the use case will ever be to handle small sums of money. Transaction speed and fees don’t make sense for it.

pavel_lishin 4y ago
What sort of security are you referring to?
- deleted 4y ago
  [deleted]
- kreetx 4y ago
  Expensive to fork I presume.

mattwilsonn888 4y ago

Bitcoin doesn't need to be money, especially not on layer 1, to have value. USD doesn't get its value as a currency from slow and expensive wire transfers, and it gets very little value at all from being a store of value. Even if Bitcoin was primarily transferred between custodians between clients, it would still be better than USD (assuming a stable market cap) and give clients far more options while also forcing banks to disclose reserves.

thelamest 4y ago
Transfers can be dirt cheap with normal money (e.g.: Single Euro Payment Area), and your banking system can be transparent enough (the US one already is), if your regulating body cares about it. The average individual neither can change it, nor cares. If many people can’t help themselves but get fleeced, as happened recently on a large scale in the crypto space, at best you can struggle to recreate regulatory agencies in some kludgey crypto form. Most egregiously, all this is still worse than pointless, because the true differential value-add in crypto comes from enabling value flows for undesirable activities like crime, and it’s only possible thanks to horrible incentive system that rewards wasting energy.
- mattwilsonn888 4y ago
  You have admitted that I was correct in refuting you: all desired qualities of the current system can exist on Bitcoin no problem. Then you moved the goal post. If Bitcoin is pointless because it has no use case, you would have started with that point and not been drawn into critiquing an aspect reliant on the assumption it is useful.

xorcist 4y ago

> Imagine BTC was actually used for any scale of economic transactions. It would collapse overnight. Higher velocity of money would lead to zero value? That's not commonly what basic economy dictates. This being 2022, let's try to keep our concepts clear as to not rehash the debate from ten years ago. BTC is a currency, a blockchain, a programmable transaction language, a piece of software, and a protocol. It is good to suggest which one of these we imagine in use, and how that use is done. Otherwise we risk saying that imagine if the physical $100 bill was used for all McDonald's transactions, clearly that wouldn't work, they are too hard to subdivide and even if they weren't there simply aren't enough of them, and therefore it is unusable as a currency. Clearly McDonald's couldn't operate each and every economical transaction by settling them publicly on the BTC block chain, that much is obvious. But just as clearly there's nothing stopping Visa from denominating transactions in BTC, or utilizing that type of transactions internally, or utilizing the public Lightning network, or whatever it is McDonald's use in El Salvador. That much we probably agree on so let's leave that discussion in the past decade.

lrvick 4y ago
I appreciate that we both replied with the same points at almost the same time.
kevstev 4y ago
> Higher velocity of money would lead to zero value? That's not commonly what basic economy dictates. I think you missed his actual point, which to be fair wasn't explicitly stated and I don't think is widely known. The bitcoin network can not handle large transaction volumes, like at all- its absurdly low. Somewhere around 10/second is where I understood it to stand, and I recall reading a paper that talked about changes that could theoretically get that to 40/s. A quick googling on the state of the art of this has it reporting 7/second: https://www.google.com/search?q=max+transactions+per+second+bitcoin&oq=max+transactions+per+second+bitcoin https://www.google.com/search?q=max+transactions+per+second+... I know this because this came up around 2016ish during one of the booms, and while I was previously crypto-curious and even a bit enthusiastic about the possibilities, once I saw that, I immediately lost all interest and got out. Other coins like Bitcoin Cash tried to address this, but the numbers were still absurdly low for what was supposed to be a completely decentralized currency to replace all others. Which is actually why Coinbase, FTX and the like rose so quickly and became so important- they enable transfers off chain.

lrvick 4y ago

Big companies are not using actual printed paper money directly. Cash, like Bitcoin, is great for peer to peer transactions, but too slow and impractical for the population to all use end to end for all daily transactions. Companies like McDonalds operate on credit via privately owned payment rails because ACH and cash are way too slow. Even when it takes cash that cash is not physically shipped to a bank vault at McDonalds HQ but instead local restaurants make cash drops to other private companies, banks, that then take possession of the cash and use their own private network to credit a remote account. Even tax payment portals allow use of the payment rails of private companies because paper USD is too impractical. Still, the fixed supply of federal reserve issued USD is what all these magic third party payment rails create an abstracion layer for. No one Bitcoin advocate that knows how it works is saying Bitcoin will be used -directly- for daily commerce. Even in El Salvador venmo-like apps have emerged that batch Bitcoin transactions and use credit, much like Visa does to abstract slow ACH or cash. These proprietary credit systems defeat a lot of the point of Bitcoin though, so open off-chain credit systems like Lightning exist. My local Coffee shop accepts Lightning which in short allows us to just continually cancel and re-issue signed Bitcoin transactions off-chain we never publish until one of us needs to settle which in some cases could be years, and that is fine. Unlike Visa, the benefits of credit solutions like Lightning are available to all replacing KYC and credit checks with cryptography. Also going back to your point about taxes, several states have serious efforts to get Bitcoin permitted for tax payment: https://www.deseret.com/2022/2/8/22918061/wyoming-arizona-bitcoin-cryptocurrency-taxes-state-legislatures-congress-constitutional-hurdles https://www.deseret.com/2022/2/8/22918061/wyoming-arizona-bi...

BTCOG 4y ago
Exactly! If Walmart/McD's wish to successfully use Bitcoin, they will easily batch millions of transactions from numerous locations into just a handful of on chain network transactions. The point is finality in Bitcoin for those who wish to hold hard money at the end of it rather than a credit system or fiat currency. I see a lot of clearly incorrect information being displayed here about l2 such as Lightning Network, and at odds with reality. I'm not addressing the posts but it seems lately HN comments have nearly become a pile-on of misinformation bike-shedding about Bitcoin and in the face of reality, these folks want to spread outright lies and falsities. You may not own Bitcoin and you may not like it, but it's going far when hundreds of comments are so boldly misleading. For folks who are into science and technology, and some who are hackers, the ethos doesn't check out spreading misinformation about energy usage, centralization, and fairness of the system. When I was growing up, hacking was all about freedom to explore, libertarian bent, and/or anarchy. The cypherpunk movement from which Bitcoin sprang was very libertarian or even one could say classical liberal. This article attempts numerous times to, for some reason, compare libertarianism to communism which is quite absurd. Libertarianism is for as little system of government as necessary, for staunch individual liberty and property rights, and hands-off free market economies. Clearly, communism is for state controlled property and no individual rights, one-world state, and no individual rights at all. Communism seeks to replace free-market economies with everyone equal and no individual rights. It's absurd on it's face to even compare libertarianism to communism when they're at opposite poles. At any rate, I would hope people don't take all these fear-mongering anti-crypto articles just at face value and do some research into what crap they're reading.