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Are we even able to analyse Bitcoin as we would fiat currencies or precious metals? Why is this assumption left unstated and unanalysed? Cryptocurrencies have

Are we even able to analyse Bitcoin as we would fiat currencies or precious metals? Why is this assumption left unstated and unanalysed? Cryptocurrencies have several interesting properties that these traditional mediums of exchange do not, for example: - the supply is fixed and precisely known at any point in time, with very little chance of that ever changing by unilateral decision (e.g. politics, war); surely this will factor into future decisions to price goods and services, in the same way businesses already factor inflation into their business models - low transaction costs for high value cross-border payments could see a niche use that no fiat currency can compete with (unless you somehow believe there will be a unified global real-time gross settlement system or the like any time soon) - settlement times could also see a niche use that no fiat currency can compete with (if it works, and your transaction is confirmed in seconds/minutes/hours rather than days as with ETFs, then I foresee people using it for certain value transactions) - accessibility (just look at M-PESA in Kenya -- everybody has cellphones, but moving physical cash around is expensive and dangerous) - up until all the coins are mined, and probably for some time thereafter, the value will be quite volatile; after that, however, value will pretty much reflect real economic activity and volatility will be less predictable -- why is there this obsession over the present volatility? All the coins will be mined within a fixed time frame provided 1 person continues mining, which is almost a certainty, and eventually the price will have to stabilise. I fear the article is comparing apples and oranges. Maybe the author just wants to sow FUD while he buys some cheap BTC :) Don't get me wrong - I have my doubts that Bitcoin has what it takes (among other things, I think the initial unequal distribution of wealth is a serious problem), but cryptocurrencies in general are likely to be a successful and inevitable medium of exchange at some point in the future.

maxerickson 13y ago
It's merely very unlikely that the supply changes. Current accepted wisdom is that rewriting the client to produce more coins would fracture the currency. Future accepted wisdom may change. It's also hard to beat cash for settlement times.
- ryanjshaw 13y ago
  Rewriting the client is not sufficient. You need to convince everybody to run the new client. I don't see that happening as easily as you presume. It is highly likely that cryptobanks will come into place in the future (cryptocurrencies are not very layperson friendly right now), with traditional contractual law ensuring the cryptobanks do not suddenly change the rules under client's noses. I disagree regarding cash. You're making a blanket statement and I'm saying there are niches where cash sucks. Aside from the M-PESA example I've given, another is overseas travel. Cash can be a big waste of time - depending on your local laws, obtaining forex prior to departure can be a pain (e.g. in South Africa), the withdrawal fees are exorbitant and often unclear, the risk of theft significant, you have to be aware of local exchange rates and if you want to save money you have to be aware of the exchange rate of the cash you have on hand vs. your debit and/or credit card processor etc., then when you get back (again in South Africa at least) you have to resell your forex within 30 days, and you also have limitations on how much you can purchase in a year. Another is cash payments over a certain value -- again in South Africa, walking around with more than a certain amount of cash in your pocket is asking for trouble.
  - maxerickson 13y ago
    Yes, I understand you would have to get widespread acceptance of the new client. I don't think it is likely (hence 'fracture the currency'). I didn't say cash was always better than bitcoin, I just pointed out that it is very hard to beat on settlement times (and you revised your comment to say fiat currency rather than cash). Maybe I replied to an early draft.

maxerickson 13y ago

It's merely very unlikely that the supply changes. Current accepted wisdom is that rewriting the client to produce more coins would fracture the currency. Future accepted wisdom may change. It's also hard to beat cash for settlement times.

ryanjshaw 13y ago
Rewriting the client is not sufficient. You need to convince everybody to run the new client. I don't see that happening as easily as you presume. It is highly likely that cryptobanks will come into place in the future (cryptocurrencies are not very layperson friendly right now), with traditional contractual law ensuring the cryptobanks do not suddenly change the rules under client's noses. I disagree regarding cash. You're making a blanket statement and I'm saying there are niches where cash sucks. Aside from the M-PESA example I've given, another is overseas travel. Cash can be a big waste of time - depending on your local laws, obtaining forex prior to departure can be a pain (e.g. in South Africa), the withdrawal fees are exorbitant and often unclear, the risk of theft significant, you have to be aware of local exchange rates and if you want to save money you have to be aware of the exchange rate of the cash you have on hand vs. your debit and/or credit card processor etc., then when you get back (again in South Africa at least) you have to resell your forex within 30 days, and you also have limitations on how much you can purchase in a year. Another is cash payments over a certain value -- again in South Africa, walking around with more than a certain amount of cash in your pocket is asking for trouble.
- maxerickson 13y ago
  Yes, I understand you would have to get widespread acceptance of the new client. I don't think it is likely (hence 'fracture the currency'). I didn't say cash was always better than bitcoin, I just pointed out that it is very hard to beat on settlement times (and you revised your comment to say fiat currency rather than cash). Maybe I replied to an early draft.