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It's digital currency without counterparty risk and no inflation risk. Similar to why gold is useful as a store of value. You can hide it, and if nobody knows i

It's digital currency without counterparty risk and no inflation risk. Similar to why gold is useful as a store of value. You can hide it, and if nobody knows it exists nobody can take it from you. The downside is if people know you have it you can be robbed. If you are a normal person in a stable country it's not terribly useful. If you are a normal person in a not so stable place, it can be very useful to you.

skybrian 3y ago
It's odd how people say "no inflation risk" when the price of Bitcoin goes down sometimes, and it's the same thing. Inflation is a price change. The difference, of course, is that the price of Bitcoin also goes up sometimes.
- brigadier132 3y ago
  Look, I'm not talking about it as a speculative asset, I'm just stating why it can be useful. And by inflation risk I meant risk of being devalued due to artificial increases in supply.
  - skybrian 3y ago
    The thing is, users don’t care why the currency lost value, just that it did. Fixing one reason for that is only a start. Inelastic supply means the price depends entirely on demand, so it will shoot up and down when demand changes. This is a speculator’s playground. But another word for the situation causing a price increase is a shortage. Stability comes from elastic supply that responds to demand. Algorithmic stablecoins are snake oil, but they do appear to have more stable prices until they collapse. To prevent that, there needs to be someone willing to buy back the currency when demand collapses (losing a lot of money in the process) rather than running away like everyone else. Does Bitcoin have enough die-hard believers to do that? So far they’ve been able to stave off complete collapse and come back stronger, but in the future, who knows. When investors get spooked and sell off Bitcoin ETF’s, what happens?
throw0101c 3y ago
> It's digital currency without counterparty risk and no inflation risk. Similar to why gold is useful as a store of value. Not being able to reverse transactions is itself a risk, and a deflationary currency that is susceptible to hoarding isn't a great idea IMHO. And given gold's fluctuating value (though better than BTC's), I'm not sure I'd consider it a good store of value; it certainly isn't a good inflation hedge: * https://www.nber.org/papers/w18706 https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 Neither in the short-term, nor the longer-term: > Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the value of gold essentially derives from its capacity to preserve real capital and purchasing power.”† I select this particular quotation because of the prestige of the organization and the position of the spokesman, but statements in this vein can be found in great numbers. They can be traced back for generations and in many countries. How can this proposition so contrary to statistical fact become so widely believed and quoted? Possibly because gold has preserved capital in cataclysmic cases it is easy to infer that it can be trusted to do the same in less severe circumstances. To extrapolate from gold’s protection in singular catastrophes to its use as a strategy against cyclical infation is an example of faulty inductive reasoning. * PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram-TheGoldenConstant.pdf http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram... * https://www.pwlcapital.com/will-gold-save-the-day/ https://www.pwlcapital.com/will-gold-save-the-day/ And being gold-backed does not help with price stability either: * https://archive.is/FWKcL https://archive.is/FWKcL / https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... In fact, having a currency / monetary base that cannot be easy grown can hinder economic growth: * https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine The sooner countries abandoned the gold standard, the sooner they started recovering from the Great Depression: * https://delong.typepad.com/sdj/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/sdj/2013/10/the-great-depression-...
- brigadier132 3y ago
  I'm not arguing for the US to replace it's currency with bitcoin. I'm saying why it can be useful and it's not purely a scam. I would never advocate for someone to put all their money into bitcoin but if you reach a level of wealth in your life (that does not have to be that high) maybe you start to think about what happens if your country suddenly becomes a dictatorship and it makes sense to store a very small percentage of your wealth so that if the worst does happen your family can be protected.

skybrian 3y ago

It's odd how people say "no inflation risk" when the price of Bitcoin goes down sometimes, and it's the same thing. Inflation is a price change. The difference, of course, is that the price of Bitcoin also goes up sometimes.

brigadier132 3y ago
Look, I'm not talking about it as a speculative asset, I'm just stating why it can be useful. And by inflation risk I meant risk of being devalued due to artificial increases in supply.
- skybrian 3y ago
  The thing is, users don’t care why the currency lost value, just that it did. Fixing one reason for that is only a start. Inelastic supply means the price depends entirely on demand, so it will shoot up and down when demand changes. This is a speculator’s playground. But another word for the situation causing a price increase is a shortage. Stability comes from elastic supply that responds to demand. Algorithmic stablecoins are snake oil, but they do appear to have more stable prices until they collapse. To prevent that, there needs to be someone willing to buy back the currency when demand collapses (losing a lot of money in the process) rather than running away like everyone else. Does Bitcoin have enough die-hard believers to do that? So far they’ve been able to stave off complete collapse and come back stronger, but in the future, who knows. When investors get spooked and sell off Bitcoin ETF’s, what happens?

throw0101c 3y ago

> It's digital currency without counterparty risk and no inflation risk. Similar to why gold is useful as a store of value. Not being able to reverse transactions is itself a risk, and a deflationary currency that is susceptible to hoarding isn't a great idea IMHO. And given gold's fluctuating value (though better than BTC's), I'm not sure I'd consider it a good store of value; it certainly isn't a good inflation hedge: * https://www.nber.org/papers/w18706 https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 Neither in the short-term, nor the longer-term: > Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the value of gold essentially derives from its capacity to preserve real capital and purchasing power.”† I select this particular quotation because of the prestige of the organization and the position of the spokesman, but statements in this vein can be found in great numbers. They can be traced back for generations and in many countries. How can this proposition so contrary to statistical fact become so widely believed and quoted? Possibly because gold has preserved capital in cataclysmic cases it is easy to infer that it can be trusted to do the same in less severe circumstances. To extrapolate from gold’s protection in singular catastrophes to its use as a strategy against cyclical infation is an example of faulty inductive reasoning. * PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram-TheGoldenConstant.pdf http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram... * https://www.pwlcapital.com/will-gold-save-the-day/ https://www.pwlcapital.com/will-gold-save-the-day/ And being gold-backed does not help with price stability either: * https://archive.is/FWKcL https://archive.is/FWKcL / https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... In fact, having a currency / monetary base that cannot be easy grown can hinder economic growth: * https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine The sooner countries abandoned the gold standard, the sooner they started recovering from the Great Depression: * https://delong.typepad.com/sdj/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/sdj/2013/10/the-great-depression-...

brigadier132 3y ago
I'm not arguing for the US to replace it's currency with bitcoin. I'm saying why it can be useful and it's not purely a scam. I would never advocate for someone to put all their money into bitcoin but if you reach a level of wealth in your life (that does not have to be that high) maybe you start to think about what happens if your country suddenly becomes a dictatorship and it makes sense to store a very small percentage of your wealth so that if the worst does happen your family can be protected.