7 ms·

Bitcoin has proven to be an inflation resistant store of value enabling private and fast transactions to anywhere in the world - seems pretty successful to me d

Bitcoin has proven to be an inflation resistant store of value enabling private and fast transactions to anywhere in the world - seems pretty successful to me despite being constantly derided by hacker news for over 10 years now.

angry_albatross 3y ago
The value will deflate at some point, it's kind of a mathematical certainty. We cannot extract more money from the system than we put in, since Bitcoin is a non-productive asset. It does not generate revenue the way that a business/company does. And someone has to pay for the electricity of the miners, so money is draining out of the system, making it a negative sum game that people are playing. I would also disagree that the transactions are fast or private.
- bottlepalm 3y ago
  Private as in independent of going through any bank or institution like you would have to do to move money internationally in any other form. A store of value like gold, the dollar, or Bitcoin has nothing to do with generating revenue - only the intrinsic value of how hard is it to create more - dollars can be printed, a gold vein can be discovered tomorrow that would crash the price, Bitcoin on the other hand there's no chance of creating more than what's planned - which makes it a great store of value in turn valuable.
  - angry_albatross 3y ago
    One nice thing about gold is that we don't have to keep paying money for gold to continue to exist. It will sit on a shelf and not charge us any money for sitting there. Bitcoin exists on a network of computers that need electricity to run. If we stopped paying for this network to run, the bitcoin would stop existing, since the ownership of bitcoin really is solely determined by the ownership records on this computer network. That is my argument, that Bitcoin cannot maintain its value long term because the value is leaking out of the system in the form of electricity bills. Furthermore, we cannot let these bills become too small, or else the network becomes vulnerable to a 51% attack, so as a society we collectively must pay a large amount of "rent" on this store of value, which causes the value in this value pool to slowly deflate over time. We have been overcoming this drain so far by "investors" continuing to pour money into the system, but those investors cannot possibly get all of their money back, because it's been spent on electricity.
    - bottlepalm 3y ago
      By your own argument gold is expensive - expensive to secure, expensive to transport, slow to transport (time is money), expensive to verify. So yes it does cost money to hold and transact gold. So your same 'leaky' argument applies. Maintaining any store of value or currency is never free, but the benefits far outweigh the costs as now we have an inflation resistant medium on which to trade goods and services with.
      - angry_albatross 3y ago
        Well I'm not trying to argue for gold being a good store of value either, it might not be. But another reason why I would prefer to have gold is that people make use of gold to make jewelry and electronics, so that creates a demand that helps to prop up its value. The point I was making is that in a passive state, just sitting on a shelf, I believe that the cost of maintaining ownership of all the gold in the world is orders of magnitude lower than the cost of maintaining the entire bitcoin network, and I think that must continue to be the case due to the threat of 51% attacks. (If the cost of running the bitcoin network drops below a certain threshold, it becomes profitable for a rogue actor to rent a large amount of compute power and force in some fraudulent transactions.) So I believe that the "leaky bucket" effect is stronger with bitcoin than it is with gold, and there isn't a similar real world use case of bitcoin similar to the manufacturing of jewelry like there is for gold to counteract this leak. Therefore, the total value held by all of the holders of bitcoin must be declining due to this leak, which counteracts the idea that it is inflation resistant in the long term.
        bottlepalm 3y ago
        Your passive analogy doesn't work because Gold needs to be secured and defended, which requires energy or other people are going to steal it. Just like Bitcoin needs to be secured and defended with compute for at least new transactions. A 51% attack will allow you block new transactions or double spend coins you have, not spend or steal other people's coins on the ledger because you don't have the private keys for those.
wpietri 3y ago
Almost every word of that is untrue in practice. But let's focus on the core part, "successful". Let's compare with M-PESA, a money transfer solution that started around the same time. M-PESA has steadily grown, doing 26 billion transactions last year. [1] Bitcoin was somewhere around 100m transactions for the same period. [2] That's about 0.5% of the volume. And its worse than the raw numbers suggest, in that the M-PESA transactions were things with positive economic impact, whereas a lot of the Bitcoin activity was driven by speculation or crime. And that's wildly smaller than the number of credit and debit transactions that happened over the same time, of course. Bitcoin was hoping to be "electronic cash", but the shift away from physical cash was toward the already existing digital payment mechanisms, not Bitcoin. Merchant adoption, always small, went into decline years ago. So no, Bitcoin was not successful in the sort of terms that match its initial goals or what was hyped in the early years. [1] https://www.statista.com/statistics/1139181/m-pesa-transaction-volume/ https://www.statista.com/statistics/1139181/m-pesa-transacti... [2] based on eyeballing this: https://ycharts.com/indicators/bitcoin_transactions_per_day https://ycharts.com/indicators/bitcoin_transactions_per_day
- bottlepalm 3y ago
  Read my post, I said successful as a 'store of value' not 'electronic cash'. Bitcoin is more akin to gold - an inflation resistant store of value. There is a premium for transacting it which means you should convert it into a more inflation prone transactional currency if you want to spend it.
  - wpietri 3y ago
    Well look at those goalposts move. Bitcoin's original purpose was precisely electronic cash: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf But if you'd like to shift focus to why "store of value" is also wrong, I'm glad to. A store of value needs to be more stable than the thing you're moving out of. It also needs to be relatively liquid, and should have low transaction costs. But Bitcoin is very volatile compared with major fiat currencies, and also when compared with gold. Transaction costs are relatively high. The market is thinly traded, and is widely believed to be manipulated. Gold, in contrast, is more liquid, cheaper to trade in, and much better regulated. So no, Bitcoin doesn't make for a good store of value. People wanting to store value would generally be much better off buying index funds, which are also pretty inflation resistant, and also have a positive return. But if they want to avoid equity exposure, then the gold standard for this is, well, gold. Bitcoin is terrible by comparison.

angry_albatross 3y ago

The value will deflate at some point, it's kind of a mathematical certainty. We cannot extract more money from the system than we put in, since Bitcoin is a non-productive asset. It does not generate revenue the way that a business/company does. And someone has to pay for the electricity of the miners, so money is draining out of the system, making it a negative sum game that people are playing. I would also disagree that the transactions are fast or private.

bottlepalm 3y ago
Private as in independent of going through any bank or institution like you would have to do to move money internationally in any other form. A store of value like gold, the dollar, or Bitcoin has nothing to do with generating revenue - only the intrinsic value of how hard is it to create more - dollars can be printed, a gold vein can be discovered tomorrow that would crash the price, Bitcoin on the other hand there's no chance of creating more than what's planned - which makes it a great store of value in turn valuable.
- angry_albatross 3y ago
  One nice thing about gold is that we don't have to keep paying money for gold to continue to exist. It will sit on a shelf and not charge us any money for sitting there. Bitcoin exists on a network of computers that need electricity to run. If we stopped paying for this network to run, the bitcoin would stop existing, since the ownership of bitcoin really is solely determined by the ownership records on this computer network. That is my argument, that Bitcoin cannot maintain its value long term because the value is leaking out of the system in the form of electricity bills. Furthermore, we cannot let these bills become too small, or else the network becomes vulnerable to a 51% attack, so as a society we collectively must pay a large amount of "rent" on this store of value, which causes the value in this value pool to slowly deflate over time. We have been overcoming this drain so far by "investors" continuing to pour money into the system, but those investors cannot possibly get all of their money back, because it's been spent on electricity.
  - bottlepalm 3y ago
    By your own argument gold is expensive - expensive to secure, expensive to transport, slow to transport (time is money), expensive to verify. So yes it does cost money to hold and transact gold. So your same 'leaky' argument applies. Maintaining any store of value or currency is never free, but the benefits far outweigh the costs as now we have an inflation resistant medium on which to trade goods and services with.
    - angry_albatross 3y ago
      Well I'm not trying to argue for gold being a good store of value either, it might not be. But another reason why I would prefer to have gold is that people make use of gold to make jewelry and electronics, so that creates a demand that helps to prop up its value. The point I was making is that in a passive state, just sitting on a shelf, I believe that the cost of maintaining ownership of all the gold in the world is orders of magnitude lower than the cost of maintaining the entire bitcoin network, and I think that must continue to be the case due to the threat of 51% attacks. (If the cost of running the bitcoin network drops below a certain threshold, it becomes profitable for a rogue actor to rent a large amount of compute power and force in some fraudulent transactions.) So I believe that the "leaky bucket" effect is stronger with bitcoin than it is with gold, and there isn't a similar real world use case of bitcoin similar to the manufacturing of jewelry like there is for gold to counteract this leak. Therefore, the total value held by all of the holders of bitcoin must be declining due to this leak, which counteracts the idea that it is inflation resistant in the long term.
      - bottlepalm 3y ago
        Your passive analogy doesn't work because Gold needs to be secured and defended, which requires energy or other people are going to steal it. Just like Bitcoin needs to be secured and defended with compute for at least new transactions. A 51% attack will allow you block new transactions or double spend coins you have, not spend or steal other people's coins on the ledger because you don't have the private keys for those.

wpietri 3y ago

Almost every word of that is untrue in practice. But let's focus on the core part, "successful". Let's compare with M-PESA, a money transfer solution that started around the same time. M-PESA has steadily grown, doing 26 billion transactions last year. [1] Bitcoin was somewhere around 100m transactions for the same period. [2] That's about 0.5% of the volume. And its worse than the raw numbers suggest, in that the M-PESA transactions were things with positive economic impact, whereas a lot of the Bitcoin activity was driven by speculation or crime. And that's wildly smaller than the number of credit and debit transactions that happened over the same time, of course. Bitcoin was hoping to be "electronic cash", but the shift away from physical cash was toward the already existing digital payment mechanisms, not Bitcoin. Merchant adoption, always small, went into decline years ago. So no, Bitcoin was not successful in the sort of terms that match its initial goals or what was hyped in the early years. [1] https://www.statista.com/statistics/1139181/m-pesa-transaction-volume/ https://www.statista.com/statistics/1139181/m-pesa-transacti... [2] based on eyeballing this: https://ycharts.com/indicators/bitcoin_transactions_per_day https://ycharts.com/indicators/bitcoin_transactions_per_day

bottlepalm 3y ago
Read my post, I said successful as a 'store of value' not 'electronic cash'. Bitcoin is more akin to gold - an inflation resistant store of value. There is a premium for transacting it which means you should convert it into a more inflation prone transactional currency if you want to spend it.
- wpietri 3y ago
  Well look at those goalposts move. Bitcoin's original purpose was precisely electronic cash: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf But if you'd like to shift focus to why "store of value" is also wrong, I'm glad to. A store of value needs to be more stable than the thing you're moving out of. It also needs to be relatively liquid, and should have low transaction costs. But Bitcoin is very volatile compared with major fiat currencies, and also when compared with gold. Transaction costs are relatively high. The market is thinly traded, and is widely believed to be manipulated. Gold, in contrast, is more liquid, cheaper to trade in, and much better regulated. So no, Bitcoin doesn't make for a good store of value. People wanting to store value would generally be much better off buying index funds, which are also pretty inflation resistant, and also have a positive return. But if they want to avoid equity exposure, then the gold standard for this is, well, gold. Bitcoin is terrible by comparison.