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This is essentially the "it will become so valuable, no one will want it anymore" argument. There are uses of Bitcoin that are complementary to traditional cur
by gojomo 14y ago
This is essentially the "it will become so valuable, no one will want it anymore" argument.
There are uses of Bitcoin that are complementary to traditional currencies, and can survive both volatility and a large level of hoarding.
One example: an enabler of quick, distant, irreversible transfer under software mediation. That is, you get the transactional Bitcoin you need from a trusted source, then engage in a transaction with a distant/less-trusted source in a matter of minutes. Neither the overall level nor volatility of Bitcoin's pricing level matters much in such a scenario, but it still enables new kinds of transactions.
Also, for a post that includes 15 footnotes, one whopper of a claim goes without support: "Bitcoin is not meant to be an investment it’s meant to be a currency."
Sweeping claims about what Bitcoin or currencies are "meant to be" need more support and careful definition. Maybe, because Bitcoin is something new that's only made possible by computers, networks, and cryptography, it doesn't exactly fit into the classic categories and purposes.
- hilko 14y agoVery well put. I think past experiences are definitely reason to be cautious, but too often it seems that analysis neglects to even consider the fact that there is no direct equivalent to Bitcoin. It remains to be seen if Bitcoin is 'worth' its current valuation, but I think it's obvious that it has and will continue to have uses in the future.
- itsprofitbaron 14y agoThere are direct equivalents to Bitcoin and I am interested in a global virtual currency however, I don't believe that Bitcoin is going to be it. I believe that Bitcoin's value is more of a speculative digital asset rather than a currency because, there are two reasons to own Bitcoin - either to derive indirect utility through purchasing goods with Bitcoin in the future OR the expectation that Bitcoin will rise in monetary value. Currently, Bitcoin can be considered elastic (to some extent) although it’s subject to future diminishing elasticity meaning that, in the long run there will be a finite supply of Bitcoins and an inelastic supply (after all there are only 21M of them). However, a long-run inelastic and fixed supply currency is not useful for a real world economy because, currencies are supposed to be used as a medium of exchange to facilitate transactions which, allows the multiplier effect kick in and increase the economies wealth. Whereas due to the deflationary spiral you're incentivised to hoard Bitcoins & let them appreciate in value instead which is the opposite effect of what a currency is meant to do.