5 ms·

Which secondary markets do you mean? There's plenty of liquidity on the big exchanges' spot markets, for example there's around $1B worth of bitcoin exchanged

by npoc 2y ago

Which secondary markets do you mean? There's plenty of liquidity on the big exchanges' spot markets, for example there's around $1B worth of bitcoin exchanged daily for USD on Coinbase alone, 24/7. Investors in bitcoin are in two camps - the custodians and the miners: - custodians contribute towards running the network through transaction fees - once you've bought bitcoin, you can store it for as long as you like free of charge, with just another transaction fee when you sell. The more value you store in bitcoin, the lower the relative fee as it's unrelated to transaction size. You could store $10M for 100 years for a 0.004% transaction fee. - miners pay for the mining costs through selling the bitcoin that they mine together with the transaction fees collected. It's very similar to the gold market, but the transaction fees are much less, and the commodity is digital with all the benefits that brings e.g. sending $1B worth around the world in minutes for around $2 currently. On top of that the total supply doesn't double every 40 years (halving the value) which is the case for gold.

lolc 2y ago
Yeah sorry secondary market is not a proper term for what I wanted to say. I meant the liquidity is not on Bitcoin itself but on the exchanges. That means the technical guarantees of Bitcoin the protocol are not in effect for most trades. So will people keep paying to operate the net?
- npoc 2y ago
  Liquidity for every traded commodity is always on the exchanges - that's why exchanges exist - to provide liquidity. I think you might be trying to say that most bitcoin is custodied on exchanges, and doesn't change hands via the bitcoin network itself? That could well be correct, and makes the exchanges a second-layer network with more emphasis on speed and low transaction price than security. "People" (bitcoin owners) pay for the operation of the net via a free market on transaction costs. If less people start using the base-layer bitcoin network, the transaction costs reduce due to less demand, and therefore it becomes more attractive to use. Transactions on the base layer are a scarce resource just like bitcoin itself, and follow the same laws of supply and demand. If you try answering my questions on gold in response to your other comment, you should start to get a better idea of things.
  - deleted 2y ago
    [deleted]
  - lolc 2y ago
    What do you mean by "getting a better idea of things"? The rules governing Bitcoin are chosen by humans. It's a cultural artifact. We have very limited abilities to affect the distribution of gold. The two are not alike.
    - npoc 2y ago
      Yes and no. The rules governing bitcoin are chosen by a very large number of human beings, with a lot of commitment (not just a vote, but with substantial amounts of their money). The rules make bitcoin very close to ideally hard money, better than anything nature has provided directly because nature's constrained by limitations of the physical world. The majority of the commitment is because of these very rules, and so the rules can no longer be changed, except for widely agreed changes that would make it even harder. Not only that, but harder money (i.e. low supply inflation) will always go up in price relative to softer money, all else being equal. Even if someone introduced a new version of bitcoin that was softer money AND managed to convince a majority to upgrade to it (practically impossible unless by mistake), the previous version would ultimately still prevail as people realised it was harder and switched back to it, just as more and more value is flowing out of fiat currencies, real estate, gold etc into bitcoin. The genie is out of the bottle now. So the answer really is that both are governed by rules no one can change and the rules governing bitcoin issuance are by far superior (perfectly predictable issuance tending to zero). And my questions about gold were hypothetically supposing that we could change the rules governing its issuance. Feel free to have a think about them and leave your comments.
      - lolc 2y ago
        Bitcoin is the actively mined motherlode of pure sunk cost fallacies. The funniest thing about it is how by design it's deflating to zero as people eventually lose access to their keys.

by npoc 2y ago

lolc 2y ago

Yeah sorry secondary market is not a proper term for what I wanted to say. I meant the liquidity is not on Bitcoin itself but on the exchanges. That means the technical guarantees of Bitcoin the protocol are not in effect for most trades. So will people keep paying to operate the net?

npoc 2y ago
Liquidity for every traded commodity is always on the exchanges - that's why exchanges exist - to provide liquidity. I think you might be trying to say that most bitcoin is custodied on exchanges, and doesn't change hands via the bitcoin network itself? That could well be correct, and makes the exchanges a second-layer network with more emphasis on speed and low transaction price than security. "People" (bitcoin owners) pay for the operation of the net via a free market on transaction costs. If less people start using the base-layer bitcoin network, the transaction costs reduce due to less demand, and therefore it becomes more attractive to use. Transactions on the base layer are a scarce resource just like bitcoin itself, and follow the same laws of supply and demand. If you try answering my questions on gold in response to your other comment, you should start to get a better idea of things.
- deleted 2y ago
  [deleted]
- lolc 2y ago
  What do you mean by "getting a better idea of things"? The rules governing Bitcoin are chosen by humans. It's a cultural artifact. We have very limited abilities to affect the distribution of gold. The two are not alike.
  - npoc 2y ago
    Yes and no. The rules governing bitcoin are chosen by a very large number of human beings, with a lot of commitment (not just a vote, but with substantial amounts of their money). The rules make bitcoin very close to ideally hard money, better than anything nature has provided directly because nature's constrained by limitations of the physical world. The majority of the commitment is because of these very rules, and so the rules can no longer be changed, except for widely agreed changes that would make it even harder. Not only that, but harder money (i.e. low supply inflation) will always go up in price relative to softer money, all else being equal. Even if someone introduced a new version of bitcoin that was softer money AND managed to convince a majority to upgrade to it (practically impossible unless by mistake), the previous version would ultimately still prevail as people realised it was harder and switched back to it, just as more and more value is flowing out of fiat currencies, real estate, gold etc into bitcoin. The genie is out of the bottle now. So the answer really is that both are governed by rules no one can change and the rules governing bitcoin issuance are by far superior (perfectly predictable issuance tending to zero). And my questions about gold were hypothetically supposing that we could change the rules governing its issuance. Feel free to have a think about them and leave your comments.
    - lolc 2y ago
      Bitcoin is the actively mined motherlode of pure sunk cost fallacies. The funniest thing about it is how by design it's deflating to zero as people eventually lose access to their keys.