7 ms·

I never quite understand this stuff, maybe someone can help. Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my unders

I never quite understand this stuff, maybe someone can help. Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my understanding of the motivation behind Bitcoin, at least. If so, why does it make sense that people can "generate" cash by proving some amount of work done? This of course cannot be done with normal cash. Is the main functionality of these cryptocurrencies supposed to be "people can send currency to each other", or "people generate currency -- a number -- and sell this currency for real life money"?

gear54rus 5mo ago
> If so, why does it make sense that people can "generate" cash by proving some amount of work done? Because you need an incentive for 'miners' to participate in transaction processing. Main functionality is transactions which are not controlled by any single entity (like the government). Most of it is speculation unfortunately, which gives it a bad name, drowning out real usecases.
- ourmandave 5mo ago
  So now I'm wondering, why wouldn't they just charge a transaction fee in Monero? Why mine at all? If you want to scale up to Mastercard levels.
  - dale_glass 5mo ago
    A transaction fee of what? To take a fee from a transaction there has to be a transaction to take a fee from, which needs some sort of "coin" that came from somewhere. Somebody has to create a money supply and distribute it somehow. When the network first comes into existence, nobody has any money, so where does it come into being from? Mining is what generates the coins. And you need mining because otherwise you need some other issuing organism. Without decentralized mining you get a central issuer, and that's untrustworthy and possible to shut down.
    - latchkey 5mo ago
      It is subtle, but PoW mining itself doesn't generate coins. It isn't like someone is digging a hole in the ground and extracting gold. PoW miners are rewarded for correctly validating transactions, with newly minted coins. The whole proof of work thing is that you proved that you validated a transaction by expending energy, and the network pays you for that security service. Miners then need to sell those coins on the open market in order to pay for their capex/opex, which creates the market. The open question is that if you have a fixed supply of coins that eventually runs out, what will carry the miners? It'll be increased fees or the network will switch to another solution.
      - AureliusMA 5mo ago
        Agreed with your explanation. I would add a different way to make sense of it. Proof of work allows for what Keynes called "Bancor". BTC is succesful because unlike fiat central banks, the money supply isn't dictated by interest rates (and thus loans) but by the effort of participants. The price of BTC is almost irrelevant, BTC itself is a paradigm shift. Regarding the fixed supply, it's only fixed because participants agree to the consensus algorithm that fixes it. Many cryptocurrencies have different tokenomics, such as ETH's rules under PoS. BTC miners could vote onchain for a hard fork to change the 21M cap - or another solution.
        latchkey 5mo ago
        Full disclosure, I was a bitcoin, and 5MW litecoin miner, and 150,000 GPU ETH miner, so I was pretty deeply involved in it for many years. Correct on the rest, but I just want to say that I was intentionally avoiding discussing specific tokens or the politics due to HN's stance on crypto.
        donaldjbiden 5mo ago
        The money supply of BTC has a fixed schedule. It has nothing to do with the effort of participants.
      - dale_glass 5mo ago
  - proxytoshi 5mo ago
    [dead]
tony69 5mo ago
Broken Money by Lyn Alden is a good book on the topic
- AureliusMA 5mo ago
  Lyn Alden is great. Andreas Antonopoulos is also a great educator.
yosamino 5mo ago
> If so, why does it make sense that people can "generate" cash by proving some amount of work done? Think of it this way: If you pay with physical cash, there are people somewhere who do the work of digging ore out of the ground, smelting it, shaping it into coins, cutting and printing paper and so on. All these people do that, because they get paid in the same currency that they themselves have minted. It turns out that nobody has yet found a way to create a digital decentralized currency that that works without incorporating a similar concept of incentivizing the creation of currency.
- Hilliard_Ohiooo 5mo ago
  ETH is trying right now with proof of ownership.
  - littlecranky67 5mo ago
    Which automatically makes in possibly centralized (you can never ever guarantee that not a single entity - or group of colluding entities - hold the majority stake and thus excert control).
    - Orygin 5mo ago
      Isn't the point of Proof of Stakes that you hold some amount of coin to exert that control. If someone or some group get majority stake, doing anything nefarious would result in crashing the coin value, and thus nuke their own coin value?
      - tardedmeme 5mo ago
        Yes, but they can make it up with some other gain in value. For example if you're a US state agency tasked to destroy the Chinese economy, you might overall benefit from buying a ridiculous amount of Chinese money and then setting it on fire, if it means everyone else's Chinese money catches fire too.
        deleted 5mo ago
Hilliard_Ohiooo 5mo ago
yes, Bitcoin was hijacked by the company, Blockstream and they injected the SegWit and RBF attacks to kill it as a currency, Bitcoin Cash still functions as Bitcoin however. Monero is similar to Bitcoin Cash, a useful replacement for cash in most cases.
- AureliusMA 5mo ago
  Bitcoin Cash's value begs to differ.
- tardedmeme 5mo ago
  segwit is an optimization, not an attack wtf. I'd get it if you said Ethereum Classic, since that fork actually did come from an attack on the protocol that successfully reversed transactions on the main chain, but Bitcoin Cash is not of that nature.
  - hggh 5mo ago
    SegWit added unnecessary complexity (~5,000 LOC) to a problem that could be solved just increasing the max block size (1 LOC)
ulrikrasmussen 5mo ago
It's just a mechanism to incentivize mining. The alternative is that miners are paid only via fees, but that risks making it prohibitively expensive to transact. Minting new coins distributes the cost of mining over all holders by inflating the currency a little bit. Fees are still necessary to avoid spamming.
- tardedmeme 5mo ago
  Bitcoin was intended to be funded entirely by transaction fees and the minting was just to jumpstart the currency, which is why the new coin minting rate tends to zero. This was a naïve mistake. Other cryptocurrencies have start high and approach a lower nonzero value.
  - hggh 5mo ago
    > Bitcoin was intended to be funded entirely by transaction fees Transaction fees used to be free, but miners started to require at least 1 sat/b, to prevent "spamming" the mempool, so... no.
earnesti 5mo ago
> This of course cannot be done with normal cash. Normal cash is just printed out from thin air by those who have the power. In that sense (some) cryptocurrencies are better because at least the process is open.
- AureliusMA 5mo ago
  Fiat money is proof of stake, except the failure mode is economic collapse or military collapse.
- victorbjorklund 5mo ago
  Is it not printed out of thin air by those that have compute power ?
  - AureliusMA 5mo ago
    Running computer power costs a lot more than thin air.
    - deleted 5mo ago
      [deleted]
ArchieScrivener 5mo ago
Yes, Bitcoin is a replacement for central banking currencies. Its the first few lines of the white paper. This is how money works. If you use a medium of exchange and unit of account for goods and services then that medium must increase at the same rate as the increase in goods and services otherwise you get second and third order effects such as inflation, contraction, rising unemployment, etc., directly impacting its ability to act as a unit of account. In Bitcoin you don't generate cash, you earn block rewards for acting as a consensus broker which otherwise would require a central banking settlement layer. This activity, tied directly to the transaction layer, acts to maintain the equilibrium between increases in goods and services and expansion of the money supply. Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments. Driven primarily by the fear of missing out and market manipulation since Bitcoin is heavily centralized.
- lern_too_spel 5mo ago
  > Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments Insomuch as beanie babies are a store of value. Speculative assets only have value as long as there are more greater fools to buy in. When you've exhausted the supply of greater fools, there is no more reason to buy the speculative asset because its price won't go up, so it will fall to its intrinsic value, which is the worth of a normal stuffie for a beanie baby (roughly $5) or the worth of a number stored on other people's disks for a Bitcoin (roughly $0), which is the value ultimately stored. Wall Street is only involved in Bitcoin to facilitate trade between fools because we have collectively done a poor job of regulating this madness, allowing so many fools to eventually lose their money to a distributed Ponzi scheme and sanctioned countries.
  - Tr3nton 5mo ago
    You can't send a Beanie Baby to someone on the other side of the planet instantly.
    - lern_too_spel 5mo ago
MithrilTuxedo 5mo ago
They're meant to replace the bank. Cryptocurrencies allow market participants to communicate value to each other without having to trust other market participants or an institution. Mining verifies transactions and commits them to the public record, earning the miner a fee for their work.
xorcist 5mo ago
Before a new currency exists, it doesn't exist. Someone has to mint it. It has to be inflated into existence, in the monetary sense. How is this done? For a state or central bank the answer is obvious: The state or bank itself prints it. For a private actor the technical means is perhaps less obvious, but the actor behind the currency obviously gets to decide. For a decentralized open source project, it is less clear. You could do it so every node in the system gets a piece of every newly printed unit of currency, but if it is free to run a node everyone could just run a billion nodes and take all the currency for themselves. Bitcoin solved the problem with Proof of Work, which is elegant because both the double spend problem and the minting problem is solved together. Every node has to prove it has run a unit of useless computation and inflation is spread evenly across worker nodes. This led to a split between nodes and miners with the use of specialized hardware, but the basic premise still holds. Crypocurrencies in general are very different. Ethereum, the second most popular, was created by a private actor and the that actor decided to print 72 M for themselves and promptly sold 80+% before the release of the software which gave rise to the term ICO which was very trendy for several years. After the initial release inflation continued according to the miner model.
serial_dev 5mo ago
You can't "generate cash" for doing some amount of random work. You are getting paid for securing the network and keeping it decentralized, and this payment is done in the native token of the network. It's an incentive mechanism, it's a reward for the people who provide the infrastructure for the network.
deleted 5mo ago
[deleted]
BugsJustFindMe 5mo ago
There are two parts of an answer to this, because your questions are somewhat divergent: > why does it make sense that people can "generate" cash by proving some amount of work done? This of course cannot be done with normal cash. People do generate money when they work, in a sense, because money doesn't have value. Money represents value. To really understand that you need to think about what money is and why it was invented in the first place. Before the invention of money there was only direct exchange; I do/give something for/to you and you do/give something for/to me in return. But what if you want what I have but I don't want what you have? Or what if we want something from each other but are too far apart to make the exchange directly? Well, we find a third participant who can act as a kind of transfer agent. They could, for instance, have something I want that you don't want and also want something from you. They trade with you first so now you have something from them that you don't want that you can then trade to me for the thing you want, and everyone is happy. This extends to arbitrarily many, dozens or hundreds even, of intermediate steps. Now it should be easy to recognize two things: 1) Everyone needing to store a bunch of stuff they don't actually want just so they can pass it on to the next person can become a huge burden for everyone. And how do you store labor anyway? You can't. You can only store goods. 2) Organizing dozens of intermediate links is an extremely difficult problem to solve just so you can get what I have. The first one can be solved by exchanging IOU vouchers instead. The holder of the voucher becomes entitled to the thing that hasn't yet been given or done. Storing those vouchers is trivially easy compared to storing the things. And you can just as easily store vouchers for work that hasn't been done yet as you can for goods that haven't been given yet. The second one can be solved by saying what if people put their vouchers into a central voucher bank instead of passing all their vouchers around to each other directly, and then the central voucher bank organizes all the intermediate steps for people without people needing to figure out who has the vouchers they need to complete the chain. And then once you're there, why even use specific IOUs at all? Why not have all the vouchers be generic but you get different amounts of them instead of different kinds that you can then use freely for anything? And that's obviously what money is. And from there a new thing should become obvious: The money itself doesn't have any intrinsic value. The labor/good behind it does. Money is just a way of representing the value of something you did/produced in a form that can be easily traded for other things. It's the medium of exchange, not the product. And when there are fewer vouchers in the system relative to what's being produced, each voucher becomes worth more (deflation), and vice versa (inflation). And then the government literally prints and destroys vouchers as needed to try to keep a balance. That is a thing that happens. And so what if there can be prolonged time delays between you doing your work and you receiving your vouchers under some systems? Time delays are not inherent, just practical for bookkeeping. And when long time delays are not practical for bookkeeping they become shorter. > Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my understanding of the motivation behind Bitcoin, at least. Only as an unrealistic pretense in the current climate. The reality is that a currency needs to be both moderately inflationary and also very stable to be useful as a medium of exchange of goods/services. You never want it to be a better financial decision to hold onto currency forever instead of using it, and you also never want people to randomly wake up destitute. And regardless of whether bitcoin is technically inflationary in the near term, it is not practically inflationary, and it's definitely not stable.
dhosek 5mo ago
One of the weird things about our world is that money is central to everything, but it’s hard to understand how it works. There’s a great deal of handwaving around how, for example, dollars are created, much of which is, in fact, not correct at all (most dollars are created not by the government, or even the Federal Reserve, but by private banks, via a mechanism which I will not pretend to fully understand). The big flaw of Bitcoin, to my mind, is that it is an inherently deflationary currency. Deflation is one of those things that seems great on the surface: prices go down, not up, but when that happens it ends up creating an economic incentive to avoid spending since why buy something today if it will be cheaper tomorrow, and this ends up causing economic activity to slow down or stop entirely. A small amount of inflation, on the other hand creates an incentive to either spend money or invest it in something that will provide a better than inflation return, whether that’s putting it in a high-yield savings vehicle or making capital or financial investments. With deflation, you can just leave your funds in cash (where they will not provoke any economic growth) and get a return.
- ballofrubber1 5mo ago
  I’d argue that this is more of a feature than a bug. The assumption behind the “deflation is bad” argument is that spending itself is the goal. But spending is not automatically good. Productive spending and productive investment are good. Wasteful consumption, speculation, and forced risk-taking are not. If money holds its value, people become more selective. They still buy food, housing, tools, entertainment, experiences, and things they genuinely want. Humans have needs, preferences, status impulses, advertising pressure, and finite lives. Demand does not disappear just because money is sound. What disappears is some of the artificial urgency to spend before your cash loses value. The more important point is investment. In an inflationary system, holding money is punished, so everyone is pushed out onto the risk curve. You are not only investing because an opportunity is great; you are investing because the currency is being diluted and you need to escape it. That distorts the real cost of capital and makes mediocre investments look better than they are in nominal terms. With harder money, investment has to beat the return of simply holding the money. That is a healthy hurdle rate. Capital should have to prove that it creates real value. If an investment only makes sense because the denominator is being debased, or because everyone is forced into assets to avoid inflation, then maybe that investment was not as productive as it looked. This also matters for inequality. Inflation does not hit everyone equally. People with capital can protect themselves by owning stocks, real estate, ETFs, businesses, and other assets. They can diversify, borrow against assets, and ride asset inflation. Poorer people are more likely to hold wages and cash, so they are the ones whose purchasing power gets diluted first. Then they are told to “just invest,” but they are competing against people who already have capital, better access, better tax treatment, and more room to take risk. So inflationary money quietly forces the poor to compete with the rich on the rich person’s playing field: asset ownership. A broad ETF may look like a safe wealth-preservation tool for someone with money, but for someone living paycheck to paycheck, the need to buy risk assets just to avoid being diluted is itself a problem. A deflationary or hard-money system would probably reduce some marginal consumption and speculative investing. But that is not obviously bad. It may mean fewer bad investments, less artificial asset inflation, and more pressure for capital to flow only into things that genuinely outperform money itself. It would also be much more sustainable, not just economically but materially: if money no longer pressures everyone to consume and invest constantly just to outrun debasement, there is less incentive to waste real-world resources on unnecessary production, overconsumption, and short-lived goods. The fear is that nobody would spend. But people do not stop buying things just because they expect their money to hold value. They stop buying things that are not worth giving up good money for. That sounds like discipline, not economic failure.
dragonwriter 5mo ago
> Are cryptocurrencies supposed to be a potential replacement for real life cash? They are supposed to be a medium of exchange. “Real life cash” is one of many forms of money; even for any particularly currency, like dollars, a very small fraction of use is “real life cash”. But, yes, in the most extreme visions, cryptocurrencies replace other currencies for all uses. More moderate visions, however, exist. So, as always when you use “supposed”, the answer is undefined without qualifying it as to by whom it is supposed. > If so, why does it make sense that people can "generate" cash by proving some amount of work done? Because there needs to be some mechanism to provide the currency supply, and also some incentive for people to provide the infrastructure on which the currency system relies. For fiat money systems the first is typical policy making in a central bank, and the second is government action to control competition in the banking space and to support banks, reinforcing the profitability of banks. Mining serves both of those functions in a cryptocurrency system (both reinforcing the profitability of transaction network participants and providing the mechanism by which currency supply is managed.) > Is the main functionality of these cryptocurrencies supposed to be "people can send currency to each other", or "people generate currency -- a number -- and sell this currency for real life money"? Participants in a currency system selling it for other currencies (FOREX) is a feature of every currency system in a world with more than one currency. Again, the degree to which each of those is “supposed” to be the main function depends on exactly whose supposition you are looking at it.
- Terr_ 5mo ago
  > More moderate visions, however, exist. So, as always when you use “supposed”, the answer is undefined without qualifying it as to by whom it is supposed. And in some cases, which mutually-inconsistent argument the same entities are making. For example, when the thing's a dollar-replacing currency at the start of the interview, and can't-miss investment commodity by the end of it.
tardedmeme 5mo ago
Bitcoin was designed to be a replacement for real life cash, but it ultimately failed in this role. Nonetheless it was a great experiment that essentially invented the industry. Most cryptocurrencies, if we go only by their number, are designed to make their creators rich and moderately succeed at that. This is your ERC20s, pump dot fun, et cetera. If we only consider ones that have any serious chance of being usable as actual currencies, these days they're usually designed to run arbitrary money-like programs known as "smart contracts", of which traditional money is just one. Money can't be sent until it's generated, that's the same whether you're talking bitcoin or dollars. There's always a rule for who gets the new money when it's created, and somehow the rule always ends up being "rich people get the new money". Dollars go to politicians and big bankers, bitcoins go to big compute farms, ethers go to big bankers, monero goes to big compute farms. The aforementioned get-rich-quick currencies go to their creators, if course.
- hggh 5mo ago
  > Bitcoin was designed to be a replacement for real life cash, but it ultimately failed in this role The BTC implementation clearly has failed in this role, but not Bitcoin protocol (look at BCH, for instance)
kerkeslager 5mo ago
> Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my understanding of the motivation behind Bitcoin, at least. This was the original stated purpose, yes. But this works poorly in practice. Hypothesized frictionless tooling that would make it easy to make purchases with crypto has not emerged. Nowadays it's held more like a speculative asset with value that comes from scarcity and demand, much like gold (though gold has some industrial application which Bitcoin does not).
cyberax 5mo ago
[flagged]
- nout 5mo ago
  It's also couple percent cheaper to send money internationally using bitcoin as the "rails" when compared to e.g. Wise. Even for sending money from classical bank in one country to a classical bank in another country. On bigger amounts you can save quite a lot of money.
proxytoshi 5mo ago
[dead]
protocolture 5mo ago
In a distributed system you still need all the features of the centralised system. For a currency, that means you still need issuance, and you still need security. Miners, glossing over a lot of theory, provide security in exchange for receiving issuance. They can be seen like the decentral bank of the crypto world.
marsten 5mo ago
Bitcoin attempted to replace cash, but failed because the transaction costs are orders of magnitude too high. The high cost of zero-trust makes it a desirable medium of exchange only for criminals and scammers. In an effort to make Bitcoin a reasonable medium of exchange, various businesses arose to act as intermediaries/market makers. But this violates the trust-free model – and many of those intermediaries have proven to be outright scams. It turns out that trusting an intermediary to handle your cryptographically untraceable asset is not a wise thing to do. So that leaves Bitcoin in a similar category as gold. You're either a paranoid type for whom the high cost of holding and transacting the asset is a price you're willing to pay for an asset that could survive a global meltdown. OR you extend trust to various intermediaries (gold ETFs, bitcoin ETFs for example) and treat it as just another tradable financial asset. Bitcoin is undeniably the cleverest way anyone ever became a billionaire. Nakamoto's sole contribution was posting an anonymous 9 page whitepaper to the internet and voila, today he (or she, or it) is worth $80+ billion.
- max51 5mo ago
  >Bitcoin attempted to replace cash, but failed because the transaction costs are orders of magnitude too high. The current fees are less than 0.40$. It may be too high for a starbuck coffee, but that's way lower than the fees charged by a credit card provider if you are purchasing something over 50$. On a 2%+0.10$ structure, you only need to transfer around 15$ before your credit card fee is higher than the current average BTC tx fee.
rcbdev 5mo ago
> This of course cannot be done with normal cash. Yes, it can be! Just open a bank.
epolanski 5mo ago
> Are cryptocurrencies supposed to be a potential replacement for real life cash? I think the better word would be alternative, rather than replacement. Crypto currencies have way too many flaws to be really useful as currencies. Not just usability, technology, fees, etc, but the very deflationary nature of most of them makes them unsuitable as a currency because the incentive is hoarding, not spending. But...you can still use them as a mean of transferring money. So they are absolutely an alternative.

gear54rus 5mo ago

> If so, why does it make sense that people can "generate" cash by proving some amount of work done? Because you need an incentive for 'miners' to participate in transaction processing. Main functionality is transactions which are not controlled by any single entity (like the government). Most of it is speculation unfortunately, which gives it a bad name, drowning out real usecases.

ourmandave 5mo ago
So now I'm wondering, why wouldn't they just charge a transaction fee in Monero? Why mine at all? If you want to scale up to Mastercard levels.
- dale_glass 5mo ago
  A transaction fee of what? To take a fee from a transaction there has to be a transaction to take a fee from, which needs some sort of "coin" that came from somewhere. Somebody has to create a money supply and distribute it somehow. When the network first comes into existence, nobody has any money, so where does it come into being from? Mining is what generates the coins. And you need mining because otherwise you need some other issuing organism. Without decentralized mining you get a central issuer, and that's untrustworthy and possible to shut down.
  - latchkey 5mo ago
    It is subtle, but PoW mining itself doesn't generate coins. It isn't like someone is digging a hole in the ground and extracting gold. PoW miners are rewarded for correctly validating transactions, with newly minted coins. The whole proof of work thing is that you proved that you validated a transaction by expending energy, and the network pays you for that security service. Miners then need to sell those coins on the open market in order to pay for their capex/opex, which creates the market. The open question is that if you have a fixed supply of coins that eventually runs out, what will carry the miners? It'll be increased fees or the network will switch to another solution.
    - AureliusMA 5mo ago
      Agreed with your explanation. I would add a different way to make sense of it. Proof of work allows for what Keynes called "Bancor". BTC is succesful because unlike fiat central banks, the money supply isn't dictated by interest rates (and thus loans) but by the effort of participants. The price of BTC is almost irrelevant, BTC itself is a paradigm shift. Regarding the fixed supply, it's only fixed because participants agree to the consensus algorithm that fixes it. Many cryptocurrencies have different tokenomics, such as ETH's rules under PoS. BTC miners could vote onchain for a hard fork to change the 21M cap - or another solution.
      - latchkey 5mo ago
        Full disclosure, I was a bitcoin, and 5MW litecoin miner, and 150,000 GPU ETH miner, so I was pretty deeply involved in it for many years. Correct on the rest, but I just want to say that I was intentionally avoiding discussing specific tokens or the politics due to HN's stance on crypto.
      - donaldjbiden 5mo ago
        The money supply of BTC has a fixed schedule. It has nothing to do with the effort of participants.
    - dale_glass 5mo ago
- proxytoshi 5mo ago
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tony69 5mo ago

Broken Money by Lyn Alden is a good book on the topic

AureliusMA 5mo ago
Lyn Alden is great. Andreas Antonopoulos is also a great educator.

yosamino 5mo ago

> If so, why does it make sense that people can "generate" cash by proving some amount of work done? Think of it this way: If you pay with physical cash, there are people somewhere who do the work of digging ore out of the ground, smelting it, shaping it into coins, cutting and printing paper and so on. All these people do that, because they get paid in the same currency that they themselves have minted. It turns out that nobody has yet found a way to create a digital decentralized currency that that works without incorporating a similar concept of incentivizing the creation of currency.

Hilliard_Ohiooo 5mo ago
ETH is trying right now with proof of ownership.
- littlecranky67 5mo ago
  Which automatically makes in possibly centralized (you can never ever guarantee that not a single entity - or group of colluding entities - hold the majority stake and thus excert control).
  - Orygin 5mo ago
    Isn't the point of Proof of Stakes that you hold some amount of coin to exert that control. If someone or some group get majority stake, doing anything nefarious would result in crashing the coin value, and thus nuke their own coin value?
    - tardedmeme 5mo ago
      Yes, but they can make it up with some other gain in value. For example if you're a US state agency tasked to destroy the Chinese economy, you might overall benefit from buying a ridiculous amount of Chinese money and then setting it on fire, if it means everyone else's Chinese money catches fire too.
      - deleted 5mo ago

Hilliard_Ohiooo 5mo ago

yes, Bitcoin was hijacked by the company, Blockstream and they injected the SegWit and RBF attacks to kill it as a currency, Bitcoin Cash still functions as Bitcoin however. Monero is similar to Bitcoin Cash, a useful replacement for cash in most cases.

AureliusMA 5mo ago
Bitcoin Cash's value begs to differ.
tardedmeme 5mo ago
segwit is an optimization, not an attack wtf. I'd get it if you said Ethereum Classic, since that fork actually did come from an attack on the protocol that successfully reversed transactions on the main chain, but Bitcoin Cash is not of that nature.
- hggh 5mo ago
  SegWit added unnecessary complexity (~5,000 LOC) to a problem that could be solved just increasing the max block size (1 LOC)

ulrikrasmussen 5mo ago

It's just a mechanism to incentivize mining. The alternative is that miners are paid only via fees, but that risks making it prohibitively expensive to transact. Minting new coins distributes the cost of mining over all holders by inflating the currency a little bit. Fees are still necessary to avoid spamming.

tardedmeme 5mo ago
Bitcoin was intended to be funded entirely by transaction fees and the minting was just to jumpstart the currency, which is why the new coin minting rate tends to zero. This was a naïve mistake. Other cryptocurrencies have start high and approach a lower nonzero value.
- hggh 5mo ago
  > Bitcoin was intended to be funded entirely by transaction fees Transaction fees used to be free, but miners started to require at least 1 sat/b, to prevent "spamming" the mempool, so... no.

earnesti 5mo ago

> This of course cannot be done with normal cash. Normal cash is just printed out from thin air by those who have the power. In that sense (some) cryptocurrencies are better because at least the process is open.

AureliusMA 5mo ago
Fiat money is proof of stake, except the failure mode is economic collapse or military collapse.
victorbjorklund 5mo ago
Is it not printed out of thin air by those that have compute power ?
- AureliusMA 5mo ago
  Running computer power costs a lot more than thin air.
  - deleted 5mo ago
    [deleted]

ArchieScrivener 5mo ago

Yes, Bitcoin is a replacement for central banking currencies. Its the first few lines of the white paper. This is how money works. If you use a medium of exchange and unit of account for goods and services then that medium must increase at the same rate as the increase in goods and services otherwise you get second and third order effects such as inflation, contraction, rising unemployment, etc., directly impacting its ability to act as a unit of account. In Bitcoin you don't generate cash, you earn block rewards for acting as a consensus broker which otherwise would require a central banking settlement layer. This activity, tied directly to the transaction layer, acts to maintain the equilibrium between increases in goods and services and expansion of the money supply. Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments. Driven primarily by the fear of missing out and market manipulation since Bitcoin is heavily centralized.

lern_too_spel 5mo ago
> Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments Insomuch as beanie babies are a store of value. Speculative assets only have value as long as there are more greater fools to buy in. When you've exhausted the supply of greater fools, there is no more reason to buy the speculative asset because its price won't go up, so it will fall to its intrinsic value, which is the worth of a normal stuffie for a beanie baby (roughly $5) or the worth of a number stored on other people's disks for a Bitcoin (roughly $0), which is the value ultimately stored. Wall Street is only involved in Bitcoin to facilitate trade between fools because we have collectively done a poor job of regulating this madness, allowing so many fools to eventually lose their money to a distributed Ponzi scheme and sanctioned countries.
- Tr3nton 5mo ago
  You can't send a Beanie Baby to someone on the other side of the planet instantly.
  - lern_too_spel 5mo ago

MithrilTuxedo 5mo ago

They're meant to replace the bank. Cryptocurrencies allow market participants to communicate value to each other without having to trust other market participants or an institution. Mining verifies transactions and commits them to the public record, earning the miner a fee for their work.

xorcist 5mo ago

Before a new currency exists, it doesn't exist. Someone has to mint it. It has to be inflated into existence, in the monetary sense. How is this done? For a state or central bank the answer is obvious: The state or bank itself prints it. For a private actor the technical means is perhaps less obvious, but the actor behind the currency obviously gets to decide. For a decentralized open source project, it is less clear. You could do it so every node in the system gets a piece of every newly printed unit of currency, but if it is free to run a node everyone could just run a billion nodes and take all the currency for themselves. Bitcoin solved the problem with Proof of Work, which is elegant because both the double spend problem and the minting problem is solved together. Every node has to prove it has run a unit of useless computation and inflation is spread evenly across worker nodes. This led to a split between nodes and miners with the use of specialized hardware, but the basic premise still holds. Crypocurrencies in general are very different. Ethereum, the second most popular, was created by a private actor and the that actor decided to print 72 M for themselves and promptly sold 80+% before the release of the software which gave rise to the term ICO which was very trendy for several years. After the initial release inflation continued according to the miner model.

serial_dev 5mo ago

You can't "generate cash" for doing some amount of random work. You are getting paid for securing the network and keeping it decentralized, and this payment is done in the native token of the network. It's an incentive mechanism, it's a reward for the people who provide the infrastructure for the network.

deleted 5mo ago

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BugsJustFindMe 5mo ago

There are two parts of an answer to this, because your questions are somewhat divergent: > why does it make sense that people can "generate" cash by proving some amount of work done? This of course cannot be done with normal cash. People do generate money when they work, in a sense, because money doesn't have value. Money represents value. To really understand that you need to think about what money is and why it was invented in the first place. Before the invention of money there was only direct exchange; I do/give something for/to you and you do/give something for/to me in return. But what if you want what I have but I don't want what you have? Or what if we want something from each other but are too far apart to make the exchange directly? Well, we find a third participant who can act as a kind of transfer agent. They could, for instance, have something I want that you don't want and also want something from you. They trade with you first so now you have something from them that you don't want that you can then trade to me for the thing you want, and everyone is happy. This extends to arbitrarily many, dozens or hundreds even, of intermediate steps. Now it should be easy to recognize two things: 1) Everyone needing to store a bunch of stuff they don't actually want just so they can pass it on to the next person can become a huge burden for everyone. And how do you store labor anyway? You can't. You can only store goods. 2) Organizing dozens of intermediate links is an extremely difficult problem to solve just so you can get what I have. The first one can be solved by exchanging IOU vouchers instead. The holder of the voucher becomes entitled to the thing that hasn't yet been given or done. Storing those vouchers is trivially easy compared to storing the things. And you can just as easily store vouchers for work that hasn't been done yet as you can for goods that haven't been given yet. The second one can be solved by saying what if people put their vouchers into a central voucher bank instead of passing all their vouchers around to each other directly, and then the central voucher bank organizes all the intermediate steps for people without people needing to figure out who has the vouchers they need to complete the chain. And then once you're there, why even use specific IOUs at all? Why not have all the vouchers be generic but you get different amounts of them instead of different kinds that you can then use freely for anything? And that's obviously what money is. And from there a new thing should become obvious: The money itself doesn't have any intrinsic value. The labor/good behind it does. Money is just a way of representing the value of something you did/produced in a form that can be easily traded for other things. It's the medium of exchange, not the product. And when there are fewer vouchers in the system relative to what's being produced, each voucher becomes worth more (deflation), and vice versa (inflation). And then the government literally prints and destroys vouchers as needed to try to keep a balance. That is a thing that happens. And so what if there can be prolonged time delays between you doing your work and you receiving your vouchers under some systems? Time delays are not inherent, just practical for bookkeeping. And when long time delays are not practical for bookkeeping they become shorter. > Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my understanding of the motivation behind Bitcoin, at least. Only as an unrealistic pretense in the current climate. The reality is that a currency needs to be both moderately inflationary and also very stable to be useful as a medium of exchange of goods/services. You never want it to be a better financial decision to hold onto currency forever instead of using it, and you also never want people to randomly wake up destitute. And regardless of whether bitcoin is technically inflationary in the near term, it is not practically inflationary, and it's definitely not stable.

dhosek 5mo ago

One of the weird things about our world is that money is central to everything, but it’s hard to understand how it works. There’s a great deal of handwaving around how, for example, dollars are created, much of which is, in fact, not correct at all (most dollars are created not by the government, or even the Federal Reserve, but by private banks, via a mechanism which I will not pretend to fully understand). The big flaw of Bitcoin, to my mind, is that it is an inherently deflationary currency. Deflation is one of those things that seems great on the surface: prices go down, not up, but when that happens it ends up creating an economic incentive to avoid spending since why buy something today if it will be cheaper tomorrow, and this ends up causing economic activity to slow down or stop entirely. A small amount of inflation, on the other hand creates an incentive to either spend money or invest it in something that will provide a better than inflation return, whether that’s putting it in a high-yield savings vehicle or making capital or financial investments. With deflation, you can just leave your funds in cash (where they will not provoke any economic growth) and get a return.

ballofrubber1 5mo ago
I’d argue that this is more of a feature than a bug. The assumption behind the “deflation is bad” argument is that spending itself is the goal. But spending is not automatically good. Productive spending and productive investment are good. Wasteful consumption, speculation, and forced risk-taking are not. If money holds its value, people become more selective. They still buy food, housing, tools, entertainment, experiences, and things they genuinely want. Humans have needs, preferences, status impulses, advertising pressure, and finite lives. Demand does not disappear just because money is sound. What disappears is some of the artificial urgency to spend before your cash loses value. The more important point is investment. In an inflationary system, holding money is punished, so everyone is pushed out onto the risk curve. You are not only investing because an opportunity is great; you are investing because the currency is being diluted and you need to escape it. That distorts the real cost of capital and makes mediocre investments look better than they are in nominal terms. With harder money, investment has to beat the return of simply holding the money. That is a healthy hurdle rate. Capital should have to prove that it creates real value. If an investment only makes sense because the denominator is being debased, or because everyone is forced into assets to avoid inflation, then maybe that investment was not as productive as it looked. This also matters for inequality. Inflation does not hit everyone equally. People with capital can protect themselves by owning stocks, real estate, ETFs, businesses, and other assets. They can diversify, borrow against assets, and ride asset inflation. Poorer people are more likely to hold wages and cash, so they are the ones whose purchasing power gets diluted first. Then they are told to “just invest,” but they are competing against people who already have capital, better access, better tax treatment, and more room to take risk. So inflationary money quietly forces the poor to compete with the rich on the rich person’s playing field: asset ownership. A broad ETF may look like a safe wealth-preservation tool for someone with money, but for someone living paycheck to paycheck, the need to buy risk assets just to avoid being diluted is itself a problem. A deflationary or hard-money system would probably reduce some marginal consumption and speculative investing. But that is not obviously bad. It may mean fewer bad investments, less artificial asset inflation, and more pressure for capital to flow only into things that genuinely outperform money itself. It would also be much more sustainable, not just economically but materially: if money no longer pressures everyone to consume and invest constantly just to outrun debasement, there is less incentive to waste real-world resources on unnecessary production, overconsumption, and short-lived goods. The fear is that nobody would spend. But people do not stop buying things just because they expect their money to hold value. They stop buying things that are not worth giving up good money for. That sounds like discipline, not economic failure.

dragonwriter 5mo ago

> Are cryptocurrencies supposed to be a potential replacement for real life cash? They are supposed to be a medium of exchange. “Real life cash” is one of many forms of money; even for any particularly currency, like dollars, a very small fraction of use is “real life cash”. But, yes, in the most extreme visions, cryptocurrencies replace other currencies for all uses. More moderate visions, however, exist. So, as always when you use “supposed”, the answer is undefined without qualifying it as to by whom it is supposed. > If so, why does it make sense that people can "generate" cash by proving some amount of work done? Because there needs to be some mechanism to provide the currency supply, and also some incentive for people to provide the infrastructure on which the currency system relies. For fiat money systems the first is typical policy making in a central bank, and the second is government action to control competition in the banking space and to support banks, reinforcing the profitability of banks. Mining serves both of those functions in a cryptocurrency system (both reinforcing the profitability of transaction network participants and providing the mechanism by which currency supply is managed.) > Is the main functionality of these cryptocurrencies supposed to be "people can send currency to each other", or "people generate currency -- a number -- and sell this currency for real life money"? Participants in a currency system selling it for other currencies (FOREX) is a feature of every currency system in a world with more than one currency. Again, the degree to which each of those is “supposed” to be the main function depends on exactly whose supposition you are looking at it.

Terr_ 5mo ago
> More moderate visions, however, exist. So, as always when you use “supposed”, the answer is undefined without qualifying it as to by whom it is supposed. And in some cases, which mutually-inconsistent argument the same entities are making. For example, when the thing's a dollar-replacing currency at the start of the interview, and can't-miss investment commodity by the end of it.

tardedmeme 5mo ago

Bitcoin was designed to be a replacement for real life cash, but it ultimately failed in this role. Nonetheless it was a great experiment that essentially invented the industry. Most cryptocurrencies, if we go only by their number, are designed to make their creators rich and moderately succeed at that. This is your ERC20s, pump dot fun, et cetera. If we only consider ones that have any serious chance of being usable as actual currencies, these days they're usually designed to run arbitrary money-like programs known as "smart contracts", of which traditional money is just one. Money can't be sent until it's generated, that's the same whether you're talking bitcoin or dollars. There's always a rule for who gets the new money when it's created, and somehow the rule always ends up being "rich people get the new money". Dollars go to politicians and big bankers, bitcoins go to big compute farms, ethers go to big bankers, monero goes to big compute farms. The aforementioned get-rich-quick currencies go to their creators, if course.

hggh 5mo ago
> Bitcoin was designed to be a replacement for real life cash, but it ultimately failed in this role The BTC implementation clearly has failed in this role, but not Bitcoin protocol (look at BCH, for instance)

kerkeslager 5mo ago

> Are cryptocurrencies supposed to be a potential replacement for real life cash? This was my understanding of the motivation behind Bitcoin, at least. This was the original stated purpose, yes. But this works poorly in practice. Hypothesized frictionless tooling that would make it easy to make purchases with crypto has not emerged. Nowadays it's held more like a speculative asset with value that comes from scarcity and demand, much like gold (though gold has some industrial application which Bitcoin does not).

cyberax 5mo ago

[flagged]

nout 5mo ago
It's also couple percent cheaper to send money internationally using bitcoin as the "rails" when compared to e.g. Wise. Even for sending money from classical bank in one country to a classical bank in another country. On bigger amounts you can save quite a lot of money.

proxytoshi 5mo ago

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protocolture 5mo ago

In a distributed system you still need all the features of the centralised system. For a currency, that means you still need issuance, and you still need security. Miners, glossing over a lot of theory, provide security in exchange for receiving issuance. They can be seen like the decentral bank of the crypto world.

marsten 5mo ago

Bitcoin attempted to replace cash, but failed because the transaction costs are orders of magnitude too high. The high cost of zero-trust makes it a desirable medium of exchange only for criminals and scammers. In an effort to make Bitcoin a reasonable medium of exchange, various businesses arose to act as intermediaries/market makers. But this violates the trust-free model – and many of those intermediaries have proven to be outright scams. It turns out that trusting an intermediary to handle your cryptographically untraceable asset is not a wise thing to do. So that leaves Bitcoin in a similar category as gold. You're either a paranoid type for whom the high cost of holding and transacting the asset is a price you're willing to pay for an asset that could survive a global meltdown. OR you extend trust to various intermediaries (gold ETFs, bitcoin ETFs for example) and treat it as just another tradable financial asset. Bitcoin is undeniably the cleverest way anyone ever became a billionaire. Nakamoto's sole contribution was posting an anonymous 9 page whitepaper to the internet and voila, today he (or she, or it) is worth $80+ billion.

max51 5mo ago
>Bitcoin attempted to replace cash, but failed because the transaction costs are orders of magnitude too high. The current fees are less than 0.40$. It may be too high for a starbuck coffee, but that's way lower than the fees charged by a credit card provider if you are purchasing something over 50$. On a 2%+0.10$ structure, you only need to transfer around 15$ before your credit card fee is higher than the current average BTC tx fee.

rcbdev 5mo ago

> This of course cannot be done with normal cash. Yes, it can be! Just open a bank.

epolanski 5mo ago

> Are cryptocurrencies supposed to be a potential replacement for real life cash? I think the better word would be alternative, rather than replacement. Crypto currencies have way too many flaws to be really useful as currencies. Not just usability, technology, fees, etc, but the very deflationary nature of most of them makes them unsuitable as a currency because the incentive is hoarding, not spending. But...you can still use them as a mean of transferring money. So they are absolutely an alternative.