6 ms·

The price of bitcoin should generally not be considered newsworthy. There is no underlying value there, and engaging in this weird distributed Ponzi scheme is h

The price of bitcoin should generally not be considered newsworthy. There is no underlying value there, and engaging in this weird distributed Ponzi scheme is harmful to society. We can all do our part to help make it irrelevant by ignoring it completely, or maybe engaging in thoughtful conversations with the people who have been misled into thinking that this is a reasonable "investment".

kraftman 3y ago
This may be a dumb question, but whats the underlying value of regular money? From my understanding it used to be backed by gold but isnt anymore, and governments print more when they need it?
- GenerWork 3y ago
  It's backed by government force.
- its_ethan 3y ago
  One (of several) ways to think about this would be that money backed by the government treating it as the legal tender for settling any and all debts within that country. So the underlaying value is partially just trust in that governments ability to enforce laws related to the exchange of money and/or settling of debts between it's citizens/users of the money. If a government issued money but never imposed/enforced penalties for failing to pay debts, that money would probably be pretty useless (less underlaying value), and some other form of money would emerge (probably one backed by actual value, like gold/scarce resources).
- staticman2 3y ago
  People don't want to barter so they agree to take money. It's useful because you don't want to take your salary in hens or goats or GPUs or whatever and trade them for things you need. That use provides the value. History doesn't suggest that trading with papers that can be exchanged with gold works better, is my understanding. The U.S. was on a gold standard during the great depression.
- mindcandy 3y ago
  From what I understand, the US Dollar is backed by: The IRS requires taxes be paid in dollars. It's a federal offense to refuse payment in dollars for purchases under US jurisdiction. The US has negotiated other countries to require payment in dollars for oil and maybe other goods. The world generally has confidence in the dollar as a fairly stable currency that is unlikely to collapse. What did I miss? My understanding of what backs Bitcoin is: By mining Bitcoin, you are provably putting yourself into a financial loss and therefore are provably motivated to turn that around into a profit. Buying Bitcoin is also equivalent to mining in this regard. That means around the world, millions of people are motivated to the tune of nearly a trillion dollars to ensure that the system continues to not only keep working, but grow more valuable.
  - kraftman 3y ago
    > That means around the world, millions of people are motivated to the tune of nearly a trillion dollars to ensure that the system continues to not only keep working, but grow more valuable. I guess I'm asking why this isnt valuable? It seems like a large portion of the world has agreed to trade assets in USD and assign various values of there assets to the value of USD, and much smaller portion of the world has agreed to do the same with BTC, so the differences is that you have to pay your taxes with one and you dont with the other?
  - friend_and_foe 3y ago
    Well, the mining stuff has a role, but in reality, the thing that backs bitcoin is the same thing that backs gold. What backs gold? You might say, that's a silly question, gold is just gold. But why then is it valuable? The answer is it's scarcity. The same is true of bitcoin. Gold mining is destructive and incurs an energy expenditure. Economically, it incurs a capital expenditure and a venture must demonstrate a risk profile, a probability of return justifying the venture. The two endeavors have similar profiles, with bitcoin though the amount you can mine is predetermined. In gold, it is soft predetermined in that it is known generally that it gets more difficult over time to extract and more expenditure is needed, more powerful techniques must be developed. In the bitcoin world this is straightforward, "more powerful techniques" are just more transistors per square inch configured to hash SHA256. The "more difficult over time" is just competition with people who have already developed more efficient machines. Capital expenditure is pure energy, not digging pits or pumping solvents or electrolytes into veins. And scarcity is absolute.
- dakial1 3y ago
  You might also ask what is the underlying value of gold. You can do nice stuff with it and has some industrial applications, but it held value historically because of its scarcity. That's why countries changed it, because they realized their economies were more valuable that their gold stash (and it gave much more economic policy freedom) An economist might give you a more intricate answer, but basically the underlying value of the (fiat) money today is basically the power of the issuing country's economy and government (who is the one guaranteeing the fiat validity)
  - kraftman 3y ago
    So gold had value because of its scarcity. Why can't bitcoin have value due to its scarcity?
    - EA-3167 3y ago
      Because the former scarcity is real, and driven by economic factors, and the latter is a fiction that burns energy to create noise.
      - kraftman 3y ago
        I'm not sure I understand why expending energy to mining more gold than we actually need, so that the excess can be used to represent money, is worse than expending engery to verify scarcity and transactions. If the argument is efficiency then there are so many other examples of society being inneficient, why is it an issue for bitcoin but not for other industries?
        bb88 3y ago
        In the case of BTC and gold, mining puts downward price pressure as new "resources" are "discovered". Miners need to sell the gold/BTC to recoup the cost associated with mining. In BTC it's energy, in gold it's equipment/labor. In a free market, we would expect the inefficiencies to be removed from the economy over time. New competition, new ideas, etc. In the case of BTC, removing PoW would remove the downward price pressure it sees today. The miners don't really want BTC, they want USD.
- skybrian 3y ago
  Government tax collection, which in turn depends on the economic health of the nation. If a country’s economy collapses and/or the government is weak at collecting taxes then inflation becomes more likely. One effect is that the government currency is the unit of value for tax accounting. For the US, you need to figure out what your income is in dollars in order to do your taxes. For assets in other currencies, you need to convert. Another effect is taking tax payments in government currency. However, I suspect it would be much the same if the government did the currency exchange for you? Whoever does the exchange will drive up the demand for government currency.
- haunter 3y ago
  >but whats the underlying value of regular money That I can spend it.
  - kraftman 3y ago
    Which means someone will agree to trade it with your for something you want, or something you can use to trade with something you want. You can take your USD and trade it for EUR to buy a coffee in france. You can also take BTC and trade it for EUR to buy coffee in france. In both instances the person selling you the EUR beleives that they can resell what you are giving them? So I'm struggling to see how they have different underlying values.
bhollan 3y ago
A friend of mine escaped the Myanmar coup via bitcoin, so I don't think it's a purely zero-value enterprise. I agree, and there are many economists who also agree, that there is a strong odor of "tulips". But that's literally been the line from the haters for over a decade. That said, I was laughing off environmental concerns over it until I read that, electrically, it's effectively a 'ghost state' in the US. https://www.eia.gov/todayinenergy/detail.php?id=61364 https://www.eia.gov/todayinenergy/detail.php?id=61364
- rossjudson 3y ago
  Two questions: 1) How many people do you think are successfully escaping evil regimes via Bitcoin? 2) Energy concerns around Bitcoin/Crypto have been well-known for years. For you, how did it stay in the "laughing off" state until your position changed? My off-the-cuff answer on energy would be to make it fully illegal to use grid electricity for mining, but that mining operations are free to generate their own electricity (and even sell the excess back to the grid, possibly replacing some set of peaker activities).
  - bhollan 3y ago
    1) I think it depends on how you define all parts of "escaping evil regimes". But it's a fair point. 2) I studied electrical engineering and I just hadn't run the numbers. The numbers I had seen in most of the other articles didn't impress me in terms of national scale. I have long-envisioned a "solar-miner-in-a-container" that could help impoverished nations. It would be a shipping container with 40-50 solar panels, a satellite internet kit, as well as a small server rack for mining. It could generate electricity, revenue, (shade) and if the mining part fails, it's a power source and an internet cafe.
  - LAMike 3y ago
    Why don't you ask people in Egypt or Venezuela?
RetpolineDrama 3y ago
>There is no underlying value there Plainly wrong on its face when they are immediately exchangeable for $50k USD, which no one in their right mind would argue "has no underlying value". The rest of the argument can be dismissed as easily. That said, your argument sums to "it's not newsworthy because it's X and X is bad". Unfortunately for you, newsworthy news is more often than not bad thanks to human psychology.
- baal80spam 3y ago
  > immediately I doubt that. > $50k USD Uh, minus a hefty exchange fee.
  - RetpolineDrama 3y ago
    I, and many other people, can execute a sale for very low rates and have a wire transfer hit my bank account in <24h. Even coinbase is pretty fast these days and will give $50k/day wire limits to anyone with a pulse.
- tayjohno 3y ago
  Liquidity ≠ value. There are plenty of highly liquid investments that are quite speculative, like gold, but you can at least make some reasonable assumptions and say "Would people still pay for a gold ring if it cost $1,000/oz? $10,000/oz? $100,000/oz? There's a natural feedback because of the underlying value of the object. How do you do the same with Bitcoin? People point to factors of the technology as having some inherent value, but if things like divisibility or the distributed ledger were what give cryptocurrencies their value, then any crypto currency should be just as valuable as any other. There are other intangibles that help explain why Bitcoin out-values other coins, like the brand recognition, or the network effect, but there's no explanation for what those are worth. The problem with this is that bitcoin goes up _because_ bitcoin goes up, and bitcoin goes down _because_ bitcoin goes down. There are no other levers to move the price other than sentiment.
  - RetpolineDrama 3y ago
rvz 3y ago
> We can all do our part to help make it irrelevant by ignoring it completely, Good luck with that. As much as you hate it or not, Bitcoin, Ethereum and all the other cryptocurrencies are here to stay. The next time Bitcoin crosses another milestone up, down or sideways, I shouldn't see you complaining about it again on HN.
- npoc 3y ago
  Bitcoin's going to eat the world. The rest are going to 0.
lurking15 3y ago
> We can all do our part to help make it irrelevant by ignoring it completely Streisand effect would like to have a word
tnel77 3y ago
You definitely seem open to polite conversation.

kraftman 3y ago

This may be a dumb question, but whats the underlying value of regular money? From my understanding it used to be backed by gold but isnt anymore, and governments print more when they need it?

GenerWork 3y ago
It's backed by government force.
its_ethan 3y ago
One (of several) ways to think about this would be that money backed by the government treating it as the legal tender for settling any and all debts within that country. So the underlaying value is partially just trust in that governments ability to enforce laws related to the exchange of money and/or settling of debts between it's citizens/users of the money. If a government issued money but never imposed/enforced penalties for failing to pay debts, that money would probably be pretty useless (less underlaying value), and some other form of money would emerge (probably one backed by actual value, like gold/scarce resources).
staticman2 3y ago
People don't want to barter so they agree to take money. It's useful because you don't want to take your salary in hens or goats or GPUs or whatever and trade them for things you need. That use provides the value. History doesn't suggest that trading with papers that can be exchanged with gold works better, is my understanding. The U.S. was on a gold standard during the great depression.
mindcandy 3y ago
From what I understand, the US Dollar is backed by: The IRS requires taxes be paid in dollars. It's a federal offense to refuse payment in dollars for purchases under US jurisdiction. The US has negotiated other countries to require payment in dollars for oil and maybe other goods. The world generally has confidence in the dollar as a fairly stable currency that is unlikely to collapse. What did I miss? My understanding of what backs Bitcoin is: By mining Bitcoin, you are provably putting yourself into a financial loss and therefore are provably motivated to turn that around into a profit. Buying Bitcoin is also equivalent to mining in this regard. That means around the world, millions of people are motivated to the tune of nearly a trillion dollars to ensure that the system continues to not only keep working, but grow more valuable.
- kraftman 3y ago
  > That means around the world, millions of people are motivated to the tune of nearly a trillion dollars to ensure that the system continues to not only keep working, but grow more valuable. I guess I'm asking why this isnt valuable? It seems like a large portion of the world has agreed to trade assets in USD and assign various values of there assets to the value of USD, and much smaller portion of the world has agreed to do the same with BTC, so the differences is that you have to pay your taxes with one and you dont with the other?
- friend_and_foe 3y ago
  Well, the mining stuff has a role, but in reality, the thing that backs bitcoin is the same thing that backs gold. What backs gold? You might say, that's a silly question, gold is just gold. But why then is it valuable? The answer is it's scarcity. The same is true of bitcoin. Gold mining is destructive and incurs an energy expenditure. Economically, it incurs a capital expenditure and a venture must demonstrate a risk profile, a probability of return justifying the venture. The two endeavors have similar profiles, with bitcoin though the amount you can mine is predetermined. In gold, it is soft predetermined in that it is known generally that it gets more difficult over time to extract and more expenditure is needed, more powerful techniques must be developed. In the bitcoin world this is straightforward, "more powerful techniques" are just more transistors per square inch configured to hash SHA256. The "more difficult over time" is just competition with people who have already developed more efficient machines. Capital expenditure is pure energy, not digging pits or pumping solvents or electrolytes into veins. And scarcity is absolute.
dakial1 3y ago
You might also ask what is the underlying value of gold. You can do nice stuff with it and has some industrial applications, but it held value historically because of its scarcity. That's why countries changed it, because they realized their economies were more valuable that their gold stash (and it gave much more economic policy freedom) An economist might give you a more intricate answer, but basically the underlying value of the (fiat) money today is basically the power of the issuing country's economy and government (who is the one guaranteeing the fiat validity)
- kraftman 3y ago
  So gold had value because of its scarcity. Why can't bitcoin have value due to its scarcity?
  - EA-3167 3y ago
    Because the former scarcity is real, and driven by economic factors, and the latter is a fiction that burns energy to create noise.
    - kraftman 3y ago
      I'm not sure I understand why expending energy to mining more gold than we actually need, so that the excess can be used to represent money, is worse than expending engery to verify scarcity and transactions. If the argument is efficiency then there are so many other examples of society being inneficient, why is it an issue for bitcoin but not for other industries?
      - bb88 3y ago
        In the case of BTC and gold, mining puts downward price pressure as new "resources" are "discovered". Miners need to sell the gold/BTC to recoup the cost associated with mining. In BTC it's energy, in gold it's equipment/labor. In a free market, we would expect the inefficiencies to be removed from the economy over time. New competition, new ideas, etc. In the case of BTC, removing PoW would remove the downward price pressure it sees today. The miners don't really want BTC, they want USD.
skybrian 3y ago
Government tax collection, which in turn depends on the economic health of the nation. If a country’s economy collapses and/or the government is weak at collecting taxes then inflation becomes more likely. One effect is that the government currency is the unit of value for tax accounting. For the US, you need to figure out what your income is in dollars in order to do your taxes. For assets in other currencies, you need to convert. Another effect is taking tax payments in government currency. However, I suspect it would be much the same if the government did the currency exchange for you? Whoever does the exchange will drive up the demand for government currency.
haunter 3y ago
>but whats the underlying value of regular money That I can spend it.
- kraftman 3y ago
  Which means someone will agree to trade it with your for something you want, or something you can use to trade with something you want. You can take your USD and trade it for EUR to buy a coffee in france. You can also take BTC and trade it for EUR to buy coffee in france. In both instances the person selling you the EUR beleives that they can resell what you are giving them? So I'm struggling to see how they have different underlying values.

bhollan 3y ago

A friend of mine escaped the Myanmar coup via bitcoin, so I don't think it's a purely zero-value enterprise. I agree, and there are many economists who also agree, that there is a strong odor of "tulips". But that's literally been the line from the haters for over a decade. That said, I was laughing off environmental concerns over it until I read that, electrically, it's effectively a 'ghost state' in the US. https://www.eia.gov/todayinenergy/detail.php?id=61364 https://www.eia.gov/todayinenergy/detail.php?id=61364

rossjudson 3y ago
Two questions: 1) How many people do you think are successfully escaping evil regimes via Bitcoin? 2) Energy concerns around Bitcoin/Crypto have been well-known for years. For you, how did it stay in the "laughing off" state until your position changed? My off-the-cuff answer on energy would be to make it fully illegal to use grid electricity for mining, but that mining operations are free to generate their own electricity (and even sell the excess back to the grid, possibly replacing some set of peaker activities).
- bhollan 3y ago
  1) I think it depends on how you define all parts of "escaping evil regimes". But it's a fair point. 2) I studied electrical engineering and I just hadn't run the numbers. The numbers I had seen in most of the other articles didn't impress me in terms of national scale. I have long-envisioned a "solar-miner-in-a-container" that could help impoverished nations. It would be a shipping container with 40-50 solar panels, a satellite internet kit, as well as a small server rack for mining. It could generate electricity, revenue, (shade) and if the mining part fails, it's a power source and an internet cafe.
- LAMike 3y ago
  Why don't you ask people in Egypt or Venezuela?

RetpolineDrama 3y ago

>There is no underlying value there Plainly wrong on its face when they are immediately exchangeable for $50k USD, which no one in their right mind would argue "has no underlying value". The rest of the argument can be dismissed as easily. That said, your argument sums to "it's not newsworthy because it's X and X is bad". Unfortunately for you, newsworthy news is more often than not bad thanks to human psychology.

baal80spam 3y ago
> immediately I doubt that. > $50k USD Uh, minus a hefty exchange fee.
- RetpolineDrama 3y ago
  I, and many other people, can execute a sale for very low rates and have a wire transfer hit my bank account in <24h. Even coinbase is pretty fast these days and will give $50k/day wire limits to anyone with a pulse.
tayjohno 3y ago
Liquidity ≠ value. There are plenty of highly liquid investments that are quite speculative, like gold, but you can at least make some reasonable assumptions and say "Would people still pay for a gold ring if it cost $1,000/oz? $10,000/oz? $100,000/oz? There's a natural feedback because of the underlying value of the object. How do you do the same with Bitcoin? People point to factors of the technology as having some inherent value, but if things like divisibility or the distributed ledger were what give cryptocurrencies their value, then any crypto currency should be just as valuable as any other. There are other intangibles that help explain why Bitcoin out-values other coins, like the brand recognition, or the network effect, but there's no explanation for what those are worth. The problem with this is that bitcoin goes up _because_ bitcoin goes up, and bitcoin goes down _because_ bitcoin goes down. There are no other levers to move the price other than sentiment.
- RetpolineDrama 3y ago

rvz 3y ago

> We can all do our part to help make it irrelevant by ignoring it completely, Good luck with that. As much as you hate it or not, Bitcoin, Ethereum and all the other cryptocurrencies are here to stay. The next time Bitcoin crosses another milestone up, down or sideways, I shouldn't see you complaining about it again on HN.

npoc 3y ago
Bitcoin's going to eat the world. The rest are going to 0.

lurking15 3y ago

> We can all do our part to help make it irrelevant by ignoring it completely Streisand effect would like to have a word

tnel77 3y ago

You definitely seem open to polite conversation.