7 ms·

> If the network is valued at $568B, but costs $7.125B/year or more to secure, that’s a pretty big leak for something that is supposed to preserve value. > Now

> If the network is valued at $568B, but costs $7.125B/year or more to secure, that’s a pretty big leak for something that is supposed to preserve value. > Now some of you are already thinking, hey 7.125/568 is only 1.25% per year. But that’s not exactly how market cap works. This 1.25% system leak doesn’t necessarily translate to a 1.25% price decrease per year. Far from “not exactly how market cap works”, this is more or less “not even close to how market cap works”. Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation. A “store of value” has always been an ill considered term - but this is not the argument against it. What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature.

cowtools 4y ago
>Far from “not exactly how market cap works”, this is more or less “not even close to how market cap works”. >Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation. A “store of value” has always been an ill considered term - but this is not the argument against it. Who cares? The general point here still stands: bitcoin's valuation will have to double every halfening (in terms of some indicator like USD) in order for the cost of security (total block reward) to stay constant in (terms of some indicator like USD). >What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature. Any cryptocurrency can do this, and many do not have bitcoin's crippled market cap or development structure. The question is this: "Why bitcoin?". Bitcoin's sole advantage over other cryptocurrencies is its name brand.
- rabuse 4y ago
  No, it doesn't. Bitcoin's difficulty automatically scales based on how fast the previous blocks were "solved". With that, if miners start dropping off, then the protocol will adjust for the falloff in "hashrate".
  - adgjlsfhk1 4y ago
    the problem is that Bitcoin mining has to be sufficiently popular for the network to be secure. if the amount of miming ever drops too low, it becomes attackable.
    - Animats 4y ago
      Which has happened to many of the lesser altcoins. Look for a boom in that, with all those underutilized GPU miners.
    - sph 4y ago
      How would the amount of mining drop too low? There are only two cases: - Miners fall off the face of the Earth. Bitcoin is still valuable so others rush to their place because there is money to be made. - Bitcoin stops having any meaningful value due to other factors, so there is no reason to mine. There is no option that Bitcoin is valuable and everybody stops mining thus opening the network to attack.
      - cowtools 4y ago
        >- Miners fall off the face of the Earth. Bitcoin is still valuable so others rush to their place because there is money to be made. Your logic does not follow. What I am saying is this: You cannot continue to halve the mining rewards while maintaining network security. At some point you reach a point where the cost/benefit of attacking bitcoin (whether that be a deliberate 51% attack or a selfish mining scheme) outweighs the cost/benefit of mining faithfully. There may be some irrational agents who continue to mine at a loss, but they will be outnumbered by rational agents with more capital.
        sph 4y ago
        Your argument assumes that the Bitcoin price stops rising after halving, which does not make any economical sense. And even when all Bitcoin has been mined, transaction fees will prop miners up (though it hasn't happened yet so it's valid to be doubtful this'll happen in practice) And also depends what you mean by securing. All clients, miners and not, are capable of checking transaction and discarding "insecure" and invalid chains. I don't need a miner to tell me if your transaction is valid or not.
- wyager 4y ago
  You seem to be missing the existence of transaction fees.
VictorPath 4y ago
> Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation Econ 201 time: value is concrete, the definition of value is subjective. I can say that the value of two exchanged objects are concrete - that they have the same embedded value.
- rabuse 4y ago
  What is the point of this statement exactly?
- skybrian 4y ago
  That's a simplifying assumption used to make the accounting practical. But knowing that someone bought something on Amazon doesn't tell you how much the buyer would have paid or how low the seller would have been willing to go. (There are gains from trade and who gets them depends on negotiations and the competitive situation.) Also, one or even both of them may have made a mistake. People return things they purchased all the time, and they may regret purchases they don't return. We are fortunate that for many kinds of goods, we usually don't have to pay the full value of what we buy, due to competition.
- gweinberg 4y ago
  No,that's econ negative 1. People don't exchange things because they are of equal value, they exchange things because each feels himself better off after the trade.
  - imtringued 4y ago
    That means money makes us lazy because it is superior over goods and we feel worse off when we give up liquidity.
    - pas 4y ago
      and that's certainly happening. money now is better than money later (time value of money, net present value discounting), during economic downturns people don't start buying the dip like there's no tomorrow, even though it's very likely that they would make bank in 5-10 years. (because people are risk averse) similarly we are bad at managing spread out risks (climate change, road traffic incidents)
lottin 4y ago
If bitcoin was good at being internet dollars, people would use bitcoin in the same way that they use dollars. They don't.
- birracerveza 4y ago
  Last time I checked, people can and do pay for things using Bitcoin and crypto. Just because YOU don't doesn't mean it doesn't happen.
  - Bakary 4y ago
    People sometimes treat established fiat currencies as a speculative or at least arbitrage-based asset, but they are a tiny minority compared to those who use it as well, currencies. With crypto the proportions are reversed. Those who use it as a currency are a tiny minority compared to those who speculate on it.
    - birracerveza 4y ago
      lottin commented that people don't use crypto as a currency, which is flat out wrong. Nothing you said changes that fact. Just because the majority uses it as a speculative asset doesn't mean it's not being actively used as a currency.
      - Bakary 4y ago
        I don't want to misrepresent their argument, and I don't want to go into a gotcha contest, but that's not what I got from the GP's comment. They said that bitcoin wasn't used the way dollars are used, which is different from saying that they are never used as currency. Currently, dollars are used as a currency first and an asset a distant second. Bitcoins and other crypto are used as an asset first and as currency a distant second. That might change, especially with Ethereum, but for now I agree with the GP that things are not looking rosy when it comes to functioning as an online dollar.
    - jboy55 4y ago
hnbad 4y ago
> What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature. Funny. My bank account does that too and transactions don't cost me anything. I can even use trusted services to do direct banking when I want to buy something online so the seller can instantly verify the transaction and I don't have to deal with entering numbers. But then again I live in Europe and our banking system doesn't run on physical paper checks delivered by carrier pigeons. I wonder how much it would cost to upgrade and maintain the US banking system compared to moving the entire US to crypto or Bitcoin.
- adoxyz 4y ago
  That's something I've never understood as a benefit of Bitcoin. In my 20+ years of digital spending, I've never run into an issue (or know of anyone) that's spent the same money twice.
  - birracerveza 4y ago
    Do you live in a first world country? That may be why.
    - hnbad 4y ago
      M-Pesa exists: https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa Crypto/Bitcoin is frequently touted as a solution for banking the unbanked. But the transaction fees alone make the technology useless for that. Existing solutions like M-Pesa are widely adopted and work. They don't even have to make up new currencies to use it.

cowtools 4y ago

>Far from “not exactly how market cap works”, this is more or less “not even close to how market cap works”. >Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation. A “store of value” has always been an ill considered term - but this is not the argument against it. Who cares? The general point here still stands: bitcoin's valuation will have to double every halfening (in terms of some indicator like USD) in order for the cost of security (total block reward) to stay constant in (terms of some indicator like USD). >What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature. Any cryptocurrency can do this, and many do not have bitcoin's crippled market cap or development structure. The question is this: "Why bitcoin?". Bitcoin's sole advantage over other cryptocurrencies is its name brand.

rabuse 4y ago
No, it doesn't. Bitcoin's difficulty automatically scales based on how fast the previous blocks were "solved". With that, if miners start dropping off, then the protocol will adjust for the falloff in "hashrate".
- adgjlsfhk1 4y ago
  the problem is that Bitcoin mining has to be sufficiently popular for the network to be secure. if the amount of miming ever drops too low, it becomes attackable.
  - Animats 4y ago
    Which has happened to many of the lesser altcoins. Look for a boom in that, with all those underutilized GPU miners.
  - sph 4y ago
    How would the amount of mining drop too low? There are only two cases: - Miners fall off the face of the Earth. Bitcoin is still valuable so others rush to their place because there is money to be made. - Bitcoin stops having any meaningful value due to other factors, so there is no reason to mine. There is no option that Bitcoin is valuable and everybody stops mining thus opening the network to attack.
    - cowtools 4y ago
      >- Miners fall off the face of the Earth. Bitcoin is still valuable so others rush to their place because there is money to be made. Your logic does not follow. What I am saying is this: You cannot continue to halve the mining rewards while maintaining network security. At some point you reach a point where the cost/benefit of attacking bitcoin (whether that be a deliberate 51% attack or a selfish mining scheme) outweighs the cost/benefit of mining faithfully. There may be some irrational agents who continue to mine at a loss, but they will be outnumbered by rational agents with more capital.
      - sph 4y ago
        Your argument assumes that the Bitcoin price stops rising after halving, which does not make any economical sense. And even when all Bitcoin has been mined, transaction fees will prop miners up (though it hasn't happened yet so it's valid to be doubtful this'll happen in practice) And also depends what you mean by securing. All clients, miners and not, are capable of checking transaction and discarding "insecure" and invalid chains. I don't need a miner to tell me if your transaction is valid or not.
wyager 4y ago
You seem to be missing the existence of transaction fees.

VictorPath 4y ago

> Econ 101 time: value is subjective. Human beings merely use value as a description - it does not exist inside of any object or inside of any equation Econ 201 time: value is concrete, the definition of value is subjective. I can say that the value of two exchanged objects are concrete - that they have the same embedded value.

rabuse 4y ago
What is the point of this statement exactly?
skybrian 4y ago
That's a simplifying assumption used to make the accounting practical. But knowing that someone bought something on Amazon doesn't tell you how much the buyer would have paid or how low the seller would have been willing to go. (There are gains from trade and who gets them depends on negotiations and the competitive situation.) Also, one or even both of them may have made a mistake. People return things they purchased all the time, and they may regret purchases they don't return. We are fortunate that for many kinds of goods, we usually don't have to pay the full value of what we buy, due to competition.
gweinberg 4y ago
No,that's econ negative 1. People don't exchange things because they are of equal value, they exchange things because each feels himself better off after the trade.
- imtringued 4y ago
  That means money makes us lazy because it is superior over goods and we feel worse off when we give up liquidity.
  - pas 4y ago
    and that's certainly happening. money now is better than money later (time value of money, net present value discounting), during economic downturns people don't start buying the dip like there's no tomorrow, even though it's very likely that they would make bank in 5-10 years. (because people are risk averse) similarly we are bad at managing spread out risks (climate change, road traffic incidents)

lottin 4y ago

If bitcoin was good at being internet dollars, people would use bitcoin in the same way that they use dollars. They don't.

birracerveza 4y ago
Last time I checked, people can and do pay for things using Bitcoin and crypto. Just because YOU don't doesn't mean it doesn't happen.
- Bakary 4y ago
  People sometimes treat established fiat currencies as a speculative or at least arbitrage-based asset, but they are a tiny minority compared to those who use it as well, currencies. With crypto the proportions are reversed. Those who use it as a currency are a tiny minority compared to those who speculate on it.
  - birracerveza 4y ago
    lottin commented that people don't use crypto as a currency, which is flat out wrong. Nothing you said changes that fact. Just because the majority uses it as a speculative asset doesn't mean it's not being actively used as a currency.
    - Bakary 4y ago
      I don't want to misrepresent their argument, and I don't want to go into a gotcha contest, but that's not what I got from the GP's comment. They said that bitcoin wasn't used the way dollars are used, which is different from saying that they are never used as currency. Currently, dollars are used as a currency first and an asset a distant second. Bitcoins and other crypto are used as an asset first and as currency a distant second. That might change, especially with Ethereum, but for now I agree with the GP that things are not looking rosy when it comes to functioning as an online dollar.
  - jboy55 4y ago

hnbad 4y ago

> What Bitcoin is good for is being internet dollars that can’t be spent twice. That’s a nontrivial feature. Funny. My bank account does that too and transactions don't cost me anything. I can even use trusted services to do direct banking when I want to buy something online so the seller can instantly verify the transaction and I don't have to deal with entering numbers. But then again I live in Europe and our banking system doesn't run on physical paper checks delivered by carrier pigeons. I wonder how much it would cost to upgrade and maintain the US banking system compared to moving the entire US to crypto or Bitcoin.

adoxyz 4y ago
That's something I've never understood as a benefit of Bitcoin. In my 20+ years of digital spending, I've never run into an issue (or know of anyone) that's spent the same money twice.
- birracerveza 4y ago
  Do you live in a first world country? That may be why.
  - hnbad 4y ago
    M-Pesa exists: https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa Crypto/Bitcoin is frequently touted as a solution for banking the unbanked. But the transaction fees alone make the technology useless for that. Existing solutions like M-Pesa are widely adopted and work. They don't even have to make up new currencies to use it.