Bitcoin: The Idea That Eats Smart People(vanityfarce.com)
vanityfarce.com
Bitcoin: The Idea That Eats Smart People
https://www.vanityfarce.com/bitcoin/investing/2021/02/24/bitcoin.html
140 comments
trident5000(8)
When articles get basic, easily verifiable facts wrong, I immediately start to doubt the quality of the whole article. Here it says:
> " By comparison, there are just under 50 billion Swiss Francs in circulation today, which are worth around $56bn USD."
There are about 90 billion Swiss Francs in circularion in cash alone. If you add to that all the Swiss Francs in accounts with the Swiss National Bank, we are at 722 billion, which is in the same ballpark as the Bitcoin market cap with about 800 billion Swiss Francs.
Source: https://data.snb.ch/de/topics/snb#!/chart/snbmobalech
> " By comparison, there are just under 50 billion Swiss Francs in circulation today, which are worth around $56bn USD."
There are about 90 billion Swiss Francs in circularion in cash alone. If you add to that all the Swiss Francs in accounts with the Swiss National Bank, we are at 722 billion, which is in the same ballpark as the Bitcoin market cap with about 800 billion Swiss Francs.
Source: https://data.snb.ch/de/topics/snb#!/chart/snbmobalech
You know what's a little ironic, is that the questions and uncertainty in this thread about how many Swiss Francs actually exist are trivial to answer with Bitcoin.
FWIW, it is surprisingly(?), not so trivial with many other cryptocurrencies.
FWIW, it is surprisingly(?), not so trivial with many other cryptocurrencies.
Um no, he isn't wrong. Yes he could word it better but circulating currency is correct. Source - Wikipedia. https://en.wikipedia.org/wiki/Swiss_franc#Circulation I think you have a misunderstanding about circulation.
You are the one who is incorrect here. The incorrect figure you linked to is a ciculation metric for the forex market, not the amount of CHF in circulation.
As the parent comment correctly noted, CHF M0 Base money (ie: the amount of monetary base in circulation) is aproximately 722B : https://tradingeconomics.com/switzerland/money-supply-m0
As the parent comment correctly noted, CHF M0 Base money (ie: the amount of monetary base in circulation) is aproximately 722B : https://tradingeconomics.com/switzerland/money-supply-m0
We can certainly discuss definitions (as I understand it, GP's number is the number of bank notes in circulation plus the amount of money in checking accounts in the blue line, and bank notes alone in the red line). But Wikipedia lists the number from 2010, which is completely outdated. Counting only bank notes it's 88 bn CHF today.
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"As of March 2010, the total value of released Swiss coins and banknotes was 49.6640 billion Swiss francs" Last I checked coins and banknotes don't exclusively make up the money supply.
EDIT: Crux of the issue here is that circulation is the wrong metric to use (money supply would be far more accurate).
EDIT: Crux of the issue here is that circulation is the wrong metric to use (money supply would be far more accurate).
Again. Circulation. -> https://en.wikipedia.org/wiki/Currency_in_circulation I believe article is focusing on using Bitcoin as currency and how it consumes more energy than driving a Tesla 2500 miles per transaction. Offsetting sustainability gains against climate change. Source-> https://www.statista.com/statistics/881541/bitcoin-energy-co...
Indeed. The author is pointing out how Bitcoin was introduced by Satoshi as a decentralized cryptocurrency that would have lower transaction fees (enabling small transactions) and not having to depend on large intermediaries, but here we are and almost no one in the Bitcoin community considers it a good currency, transaction fees are much higher than the main alternatives (ACH or Visa—with the exception of international wire transfers which charge similar fees), and centralized online wallets and exchanges like Coinbase are where most of Bitcoin action actually happens now.
Satoshi’s paper is really good. More people should revisit it, and it’s even more interesting with hindsight today.
Satoshi’s paper is really good. More people should revisit it, and it’s even more interesting with hindsight today.
One thing I've noticed with bitcoin related threads is that people who have bitcoin tend to be much more defensive when there's any anti-coin criticism, which is kind of amusing.
Another thing I wonder with bitcoin in particular is if everyone had bitcoin and no other currency, and something like COVID happened, what entity would provide liquidity in order to help those affected by a disaster?
disclaimer: I do not hold any crypto.
Another thing I wonder with bitcoin in particular is if everyone had bitcoin and no other currency, and something like COVID happened, what entity would provide liquidity in order to help those affected by a disaster?
disclaimer: I do not hold any crypto.
It's normal to be defensive, as what your net worth is put in is one of the most important decisions of your life, like a religion.
I'm sure a person who uses apartments as a store of value in San Francisco (and renting them out) would be quite defensive if the city would want to get rid of zoning regulations.
I'm sure a person who uses apartments as a store of value in San Francisco (and renting them out) would be quite defensive if the city would want to get rid of zoning regulations.
> Another thing I wonder with bitcoin in particular is if everyone had bitcoin and no other currency, and something like COVID happened, what entity would provide liquidity in order to help those affected by a disaster?
What? It's not specific to the way you transact. Governments are providing liquidity, if the whole world used crypto they would do payouts the same way just in crypto. Perhaps I misunderstand the question.
What? It's not specific to the way you transact. Governments are providing liquidity, if the whole world used crypto they would do payouts the same way just in crypto. Perhaps I misunderstand the question.
Modern governments usually provide liquidity by simply printing money out of thin air and giving it to those who need it. This causes inflation potentially but is thought to be a fair trade for stimulus.
What "entity" would give people bitcoins?
What "entity" would give people bitcoins?
Oh, well that's kinda the whole point, it has real value beyond the whims of a centralized body, you can't do that, save for a rainy day.
None actually, inflation is felt immediately on Bitcoin. The government would have to keep their books in order, which thankfully crypto also helps.
Market making in crypto is usually done by overcollateralized liquidity pools, farming and staking.
Market making in crypto is usually done by overcollateralized liquidity pools, farming and staking.
They would not be able to immediately mint trillions of dollars of crypto assets (at least not bitcoin specifically).
> what entity would provide liquidity in order to help those affected by a disaster?
For most of history, countries couldn't make money appear out of thin air (outside of mining more silver or later gold, which has practical limits). In good times countries made a tax surplus that they could spend in bad times. Or they borrow money from financiers and pay it back later.
For most of history, countries couldn't make money appear out of thin air (outside of mining more silver or later gold, which has practical limits). In good times countries made a tax surplus that they could spend in bad times. Or they borrow money from financiers and pay it back later.
And we saw how a blind obedience to those principles prolonged the Great Depression[1]. FDR's economic reforms, including getting the world economy off the Gold Standard, propelled the recovery and allowed the US to meet the needs of the war effort.
1. https://www.history.com/news/how-did-the-gold-standard-contr....
1. https://www.history.com/news/how-did-the-gold-standard-contr....
It certainly has disadvantages. Great Britain lost their US colonies in large part because they needed to raise taxes to pay for their debts.
But the power to just print money has to be used responsibly, there's no shortage of examples of countries damaging their economy by triggering hyperinflation. And if you want a global currency there is no institution that would be trusted with that kind of responsibilty by enough countries.
But the power to just print money has to be used responsibly, there's no shortage of examples of countries damaging their economy by triggering hyperinflation. And if you want a global currency there is no institution that would be trusted with that kind of responsibilty by enough countries.
Not sure how your first point is relevant. The Great Depression was in the 1930s, the US colonies declared their independence in 1776.
Of course the power to print money comes with responsibility. That isn't up for debate.
I think you will find hyperinflation more tightly correlated with economic sanctions that cut off countries from the global trade market. A currency is worthless if you can't buy goods with it.
It's a phenomena that grew out of western imperialists that levied massive debts on their former colonies in exchange for independence. Colonies that reneged on those debts were sanctioned. Physically and violently prevented from engaging in trade, ships pilfered etc. Many new governments responded by printing the money those debts were issued in - if they could.
Of course the power to print money comes with responsibility. That isn't up for debate.
I think you will find hyperinflation more tightly correlated with economic sanctions that cut off countries from the global trade market. A currency is worthless if you can't buy goods with it.
It's a phenomena that grew out of western imperialists that levied massive debts on their former colonies in exchange for independence. Colonies that reneged on those debts were sanctioned. Physically and violently prevented from engaging in trade, ships pilfered etc. Many new governments responded by printing the money those debts were issued in - if they could.
> what entity would provide liquidity in order to help those affected by a disaster?
Maybe if governments weren’t able to paper themselves out of bad decisions, they would make fewer bad decisions?
Maybe if governments weren’t able to paper themselves out of bad decisions, they would make fewer bad decisions?
Governments made plenty of bad decisions when money was still tied to the gold standard.
And to fix those bad decisions, they resorted to drastic measures like seizing property. Gradual inflation of fiat currency is a dramatic improvement over those days.
And to fix those bad decisions, they resorted to drastic measures like seizing property. Gradual inflation of fiat currency is a dramatic improvement over those days.
I guess next year's taxes will have to be paid in NewGovCoin, which nobody has yet. Then hand out NewGovCoin to those who need help.
this is one of the "selling points" of most cryptos isn't it? that the # of assets in circulation is fixed and not susceptible to manipulation by a central entity
If everyone had Bitcoin and no other currency you'd have a feudal hellscape. Maybe the bitocracy would offer victims some sort of indenture...
COVID coin!
YC's best investment to date will likely be Coinbase when the IPO lands, if the price ranges are correct.
The very first Hacker News comment on Bitcoin was jdoliner's "while this is exceptionally cute, no one is ever going to take it seriously" - perhaps it's time to admit that yes, maybe, there is something going on here.
The very first Hacker News comment on Bitcoin was jdoliner's "while this is exceptionally cute, no one is ever going to take it seriously" - perhaps it's time to admit that yes, maybe, there is something going on here.
That's not true. An earlier comment was "brilliant, this could finally end the recession!" https://news.ycombinator.com/item?id=600327. I understand the fun in scouring the past for outrageously wrong comments, but let's be fair.
You haven't quoted jdoliner accurately either: https://news.ycombinator.com/item?id=600813. What he actually wrote was not quite that flagrantly dismissive or wrong, even in hindsight. (This reminds me a bit of the famous comment that was posted in the first Dropbox thread on HN, which people love to cite in a way that I don't think is fair to the commenter. His username keeps getting repeated as an emblem of pedantic dismissal, which is not actually what he was doing. https://news.ycombinator.com/item?id=23229275)
Edit: FWIW, there was at least one earlier HN thread on cryptocurrency, predating Bitcoin: https://news.ycombinator.com/item?id=253963. It was pretty good and even (in the case of https://news.ycombinator.com/item?id=253999) prescient:
The bigger problem is that everyone has a incentive to run their computers day and night cranking out solutions, which burns up lots of natural resources and processor time for a zero-sum result.
You haven't quoted jdoliner accurately either: https://news.ycombinator.com/item?id=600813. What he actually wrote was not quite that flagrantly dismissive or wrong, even in hindsight. (This reminds me a bit of the famous comment that was posted in the first Dropbox thread on HN, which people love to cite in a way that I don't think is fair to the commenter. His username keeps getting repeated as an emblem of pedantic dismissal, which is not actually what he was doing. https://news.ycombinator.com/item?id=23229275)
Edit: FWIW, there was at least one earlier HN thread on cryptocurrency, predating Bitcoin: https://news.ycombinator.com/item?id=253963. It was pretty good and even (in the case of https://news.ycombinator.com/item?id=253999) prescient:
The bigger problem is that everyone has a incentive to run their computers day and night cranking out solutions, which burns up lots of natural resources and processor time for a zero-sum result.
>> The bigger problem is that everyone has a incentive to run their computers day and night cranking out solutions, which burns up lots of natural resources and processor time for a zero-sum result.
In 2008! That is nuts! Thanks for sharing.
In 2008! That is nuts! Thanks for sharing.
I appreciate the correction on the timing - I didn't check the comment ids when I discovered it initially and I've repeated the claim more than once, so mea culpa. Still, I don't think I'm outrageously wrong. Being fair, the earlier comment you cite is in the same thread.
That precursor thread is excellent history, thanks also for that.
EDIT: Wait, are we not both wrong here? Isn't this the first? Which, honestly, might be funnier: https://news.ycombinator.com/item?id=599936
That precursor thread is excellent history, thanks also for that.
EDIT: Wait, are we not both wrong here? Isn't this the first? Which, honestly, might be funnier: https://news.ycombinator.com/item?id=599936
That is indeed the earliest of the three.
I don’t like Bitcoin at all but I like coinbase.
Coinbase gives people what they want, quickly and conveniently, with a price ppl are okay with. A great business
Bitcoin is not a thing ppl should want (IMO)
It’s like going in a 7-11 and buying cigarettes or scratchoffs. I still like 7-11
Coinbase gives people what they want, quickly and conveniently, with a price ppl are okay with. A great business
Bitcoin is not a thing ppl should want (IMO)
It’s like going in a 7-11 and buying cigarettes or scratchoffs. I still like 7-11
Everything 7-11 sells is addictive. They're literally drug dealers set up on corners. But I really enjoyed this analogy.
Technically you're correct in that food withdrawal will kill you, but that doesn't make the observation any less obtuse.
So what you’re saying is, if someone gives you 1 BTC you will give it to me for free since it’s not useful to you?
Ahhh, the old "i was there when it started but was above it and happy I didn't buy in and make 100000% gains" argument.
Yes, I'm sure he's really savoring that one.
Yes, I'm sure he's really savoring that one.
I watched bitcoin. I remember people spending 50BTC for pizzas, or whatever. I mined a couple dozen and threw that laptop away. I don't feel like I missed out.
I invest because I want value. I want to own a part of something that generates value to the world. I invest to meet my goals (which I've already done without BTC). I invest to sleep well knowing that my money is making me money. BTC offers none of this. I challenge you to name any value BTC provides beyond moving money from one jurisdiction to another. (Which is still value, but not one I need, nor feel the need to speculate in.)
Am I bitter others got rich? Nope. Do I wish I was richer? Not really, I'm doing fine, I don't spend what I have anyway. Do I worry about BTC mania infecting others and possibly causing harm where it's not needed? Yes.
That is why BTC is a bad idea. It's pure speculation. There is no value beyond what someone else will pay you for it.
I invest because I want value. I want to own a part of something that generates value to the world. I invest to meet my goals (which I've already done without BTC). I invest to sleep well knowing that my money is making me money. BTC offers none of this. I challenge you to name any value BTC provides beyond moving money from one jurisdiction to another. (Which is still value, but not one I need, nor feel the need to speculate in.)
Am I bitter others got rich? Nope. Do I wish I was richer? Not really, I'm doing fine, I don't spend what I have anyway. Do I worry about BTC mania infecting others and possibly causing harm where it's not needed? Yes.
That is why BTC is a bad idea. It's pure speculation. There is no value beyond what someone else will pay you for it.
> I mined a couple dozen and threw that laptop away. I don't feel like I missed out.
> I invest because I want value.
So you want value, but you don't feel that you missed out by throwing out over a million dollars worth of assets? (couple dozen at ~50k/BTC valuation).
Sure it has no value beyond what someone else will pay you for it, but today somebody else would literally be willing to give you over a million dollars for it.
> I invest because I want value.
So you want value, but you don't feel that you missed out by throwing out over a million dollars worth of assets? (couple dozen at ~50k/BTC valuation).
Sure it has no value beyond what someone else will pay you for it, but today somebody else would literally be willing to give you over a million dollars for it.
That's like counting angels on a head of a pin.
Would I have sold it before 50k? yes, yes I would.
Can I accurately predict what someone would pay me for it tomorrow? No. Can I estimate the amount it will return to me in 10 years through dividends, or earnings growth, or repurchases (or in BTC's case, lost wallets)? No. Is there regulation protecting my investment? Not really.
It is a purely speculative investment.
If you want to go find my laptop, it's in a landfill in Massachusetts somewhere. Have at it! It was an early macbook. It has a Daft Punk sticker I bought at Newbury Comics.
Value is NOT price. BTC objectively has no little to no value. Price, sure, it's all over the place.
What is the par value of a BTC? What's the earnings yield on it? ROIC? ROE? How is it providing jobs to people (beyond speculators)? It is (objectively) a drag on society and progress.
No thank you.
Would I have sold it before 50k? yes, yes I would.
Can I accurately predict what someone would pay me for it tomorrow? No. Can I estimate the amount it will return to me in 10 years through dividends, or earnings growth, or repurchases (or in BTC's case, lost wallets)? No. Is there regulation protecting my investment? Not really.
It is a purely speculative investment.
If you want to go find my laptop, it's in a landfill in Massachusetts somewhere. Have at it! It was an early macbook. It has a Daft Punk sticker I bought at Newbury Comics.
Value is NOT price. BTC objectively has no little to no value. Price, sure, it's all over the place.
What is the par value of a BTC? What's the earnings yield on it? ROIC? ROE? How is it providing jobs to people (beyond speculators)? It is (objectively) a drag on society and progress.
No thank you.
Price is value if you sell at that price. You then would gain currency which you could exchange for something that you think is a better value.
You're making my point for me. BTC has no value. To be useful, I need it to be something else.
I have made so much more in salary and investment growth than those BTC in the same time. I provide value to the world, and world has rewarded that. BTC provides nothing but speeding the heat-death of the universe and hodl memes.
I have made so much more in salary and investment growth than those BTC in the same time. I provide value to the world, and world has rewarded that. BTC provides nothing but speeding the heat-death of the universe and hodl memes.
BTC is up about 10x from it's year low right now. Are you saying you have 10xed your networth with salary in that timeframe?
Nope. I'm saying I've made more since I mined the bitcoin, apologies if that didn't make sense.
Ok, I have a proposition. Let's negotiate. How many BTC/year do you require for me to buy all of your work product, for the rest of your life? How many BTC do you want? Choose carefully.
I posit, there is no amount we can agree on to make this transaction.
Ok, I have a proposition. Let's negotiate. How many BTC/year do you require for me to buy all of your work product, for the rest of your life? How many BTC do you want? Choose carefully.
I posit, there is no amount we can agree on to make this transaction.
If you don't want to be any richer, then why do returns, dividends, yields or earnings growth matter?
It's great that you're successful enough that throwing away over a million dollars worth of BTC isn't a big deal for you, but that's a life-changing amount of money for most folks. I'm making no claims about the features or benefits of BTC, but one million dollars worth of bitcoin is primarily useful because it can be exchanged for one million dollars, today, right now. It doesn't need any additional features, promises, guarantees or selling points.
It's great that you're successful enough that throwing away over a million dollars worth of BTC isn't a big deal for you, but that's a life-changing amount of money for most folks. I'm making no claims about the features or benefits of BTC, but one million dollars worth of bitcoin is primarily useful because it can be exchanged for one million dollars, today, right now. It doesn't need any additional features, promises, guarantees or selling points.
Again, you're making the point for me. You agree that bitcoin has no value on its own, it offers nothing but what I can sell it for to another sucker.
1M is life changing, agreed. But there's no reason to have known it would be worth that. There's no reason to believe it will be worth that tomorrow. Yet someone else, possibly far less astute than I am, is on the other end of that trade. For every dollar in wealth it created for me, it destroys for someone else. Nothing else has happened but I got lucky, timing was good, and I robbed wealth from others. That 1M would be better spent on people's salary, or a dozen Teslas, or a bathroom in the bay area. But, it was given to a jerk who downloaded some program and ran it for a couple of days in 2009 (or whenever I did, it's not important).
BTC is objectively bad. It is objectively speculation. It is objectively a random number. That is all. It is a shame we place any price on it, when the money spent speculating on it could create actual wealth.
1M is life changing, agreed. But there's no reason to have known it would be worth that. There's no reason to believe it will be worth that tomorrow. Yet someone else, possibly far less astute than I am, is on the other end of that trade. For every dollar in wealth it created for me, it destroys for someone else. Nothing else has happened but I got lucky, timing was good, and I robbed wealth from others. That 1M would be better spent on people's salary, or a dozen Teslas, or a bathroom in the bay area. But, it was given to a jerk who downloaded some program and ran it for a couple of days in 2009 (or whenever I did, it's not important).
BTC is objectively bad. It is objectively speculation. It is objectively a random number. That is all. It is a shame we place any price on it, when the money spent speculating on it could create actual wealth.
It is you who is making my point for me. I agree that the 1M would be better spent on any of those things, rather than rotting away in a refuse site somewhere in MA. My argument was never that BTC is a good investment or even that it's worth the opportunity cost. I was just arguing against the "nothing of value was lost" mentality you have at throwing away all this BTC.
Put another way - If somebody were to buy SNAP stock, it's also a purely speculative investment (no dividends, no votes, etc). I may think this is a poor use of money, but I'm still confident if somebody gave me some SNAP stock I'd convert it into USD instead of just straight up throwing it into a dump somewhere and claiming I didn't miss out on any value.
Put another way - If somebody were to buy SNAP stock, it's also a purely speculative investment (no dividends, no votes, etc). I may think this is a poor use of money, but I'm still confident if somebody gave me some SNAP stock I'd convert it into USD instead of just straight up throwing it into a dump somewhere and claiming I didn't miss out on any value.
I wonder if we will ever see a pro-Bitcoin article on HN
There were lots of them a decade ago when it seemed possible that it might be an interesting and useful technology.
Seemed possible? It is... based on it's 100 million users. But, probably not used as expected ten years ago. Things change?
It isn't "used" by ~100 million "users", it is speculated on by ~100 million speculators. You could literally create a derivative contract unlinked to any asset, and "use" it in the same way, if you could market it. So yes, it has been a marketing success, but not a technological one.
It's speculated on by everyone, yourself included. How can you not define people who hold or spend or trade bitcoin as users?
That's a silly way to think about speculation. I'm not speculating on where the ball is going to land on some arbitrary roulette table at an arbitrary casino in Vegas; I'm just not playing the game.
The people who spend it are users, but the people who hold and trade it are just speculators. I'm not a user of the target retirement fund in my 401k, I'm just speculating that it's a well balanced way to grow retirement funds.
The people who spend it are users, but the people who hold and trade it are just speculators. I'm not a user of the target retirement fund in my 401k, I'm just speculating that it's a well balanced way to grow retirement funds.
Regardless of where you stand as far as the ideological/financial/economic/technological goals of Bitcoin as described in Satoshi’s original paper, it’s definitely a real nerd-snipe, and before you know it, you are intellectually and financially invested in it. And then there’s no avoiding the natural human tendency to rationalize that decision. :)
Of course, rationalizing works both ways with sour grapes! But I still think greed is a stronger motivator than envy. :)
Of course, rationalizing works both ways with sour grapes! But I still think greed is a stronger motivator than envy. :)
Related to this, I actually think one of the best critiques of Bitcoin is by Elon Musk. He’s rich enough to not care as much about not having bought in early and has significant experience with financial systems. Also, it’s funny because a large part of the Chattering class (which includes me because I’m on Twitter and the author of this article) seem to think he’s somehow a Bitcoin champion.
He makes solid arguments as to why Dogecoin, a joke alt-coin, has some technical features that legitimately make it an improvement on Bitcoin.
I don’t agree with him on hating fiat currency, but it’s a good critique.
Regarding fiat with Fed-like policies, it’s actually a feature that those who would hoard fiat cash sort of low level hate it because they know it’s somewhat inflationary and so they look for better places to put it... The idea being that they should put it to productive use by hiring people and/or investing in efficiency-improving/labor-saving capital equipment or whatever. (Of course, plowing it into Bitcoin doesn’t really help that goal, so in some ways, Bitcoin is crowding out productive investments...)
He makes solid arguments as to why Dogecoin, a joke alt-coin, has some technical features that legitimately make it an improvement on Bitcoin.
I don’t agree with him on hating fiat currency, but it’s a good critique.
Regarding fiat with Fed-like policies, it’s actually a feature that those who would hoard fiat cash sort of low level hate it because they know it’s somewhat inflationary and so they look for better places to put it... The idea being that they should put it to productive use by hiring people and/or investing in efficiency-improving/labor-saving capital equipment or whatever. (Of course, plowing it into Bitcoin doesn’t really help that goal, so in some ways, Bitcoin is crowding out productive investments...)
Gold has a market cap 10X+ bigger than Bitcoin, why can't I buy beer with my gold coins?
Not sure I understand hype complaint - isn't any value of goods in economy based on what people think they are worth and not their "objective" value ?
Not really. People don't drive up the price of milk because they think it's a cool thing to have, they just want to drink it and pay what they think is a reasonable price to do so.
> What GME demonstrated was the power of the meme in the stock market, and that an asset price could increase its value by over 20x for no fundamental reason.
He has never heard of bubbles before GME?
> People point to the rising price of bitcoin as evidence of the truth in their narratives, but the reality is that bitcoin could be rising for no reason at all.
Could be? It's blindingly obvious to everyone (except the author?) that it's all speculation.
Also he failed to mention the most plausible ways that Bitcoin loses value. Governments ban it, or some other cryptocurrency comes along that solves the technical issues with Bitcoin.
He has never heard of bubbles before GME?
> People point to the rising price of bitcoin as evidence of the truth in their narratives, but the reality is that bitcoin could be rising for no reason at all.
Could be? It's blindingly obvious to everyone (except the author?) that it's all speculation.
Also he failed to mention the most plausible ways that Bitcoin loses value. Governments ban it, or some other cryptocurrency comes along that solves the technical issues with Bitcoin.
Blindingly obvious to everyone (except to today's 100 million users).
Bitcoin has two incredible properties. Most critics downplay the first, and never even mention the second.
One is that amounts, tiny or astronomical can be safely transferred and settled without trusted 3rd parties, in a matter of minutes. I think people know this.
The other property is that it is completely impossible to counterfeit it. There is no possible way to fake bitcoin. You can try claiming you own bitcoin that doesn't exist, but if someone wants proof, there is no way for you to fake it. There is no way to counterfeit it with clever artistic skill, specialized machinery, nothing that can do this. This also means that if you own bitcoin (meaning you control the keys), you really own it. You don't own some promise of future bitcoin payment, an entry in a volatile database at your bank or brokerage, an IOU, or some faked certificate. You own real, trivially verifiable, bitcoin. Also, no trusted 3rd party is needed to ensure this.
That is the value of bitcoin.
One is that amounts, tiny or astronomical can be safely transferred and settled without trusted 3rd parties, in a matter of minutes. I think people know this.
The other property is that it is completely impossible to counterfeit it. There is no possible way to fake bitcoin. You can try claiming you own bitcoin that doesn't exist, but if someone wants proof, there is no way for you to fake it. There is no way to counterfeit it with clever artistic skill, specialized machinery, nothing that can do this. This also means that if you own bitcoin (meaning you control the keys), you really own it. You don't own some promise of future bitcoin payment, an entry in a volatile database at your bank or brokerage, an IOU, or some faked certificate. You own real, trivially verifiable, bitcoin. Also, no trusted 3rd party is needed to ensure this.
That is the value of bitcoin.
Tiny amounts literally cannot be settled in minutes. To get a transaction in an hour requires a much higher transaction fee ($11 as of my writing now) than an equivalent Visa purchase (which clears faster). I can buy a $1 (fee-inclusive) candy bar with a Visa from a vending machine and the transaction costs literally pennies and is approved in seconds with no prior relationship with the owner of the vending machine.
You can argue $10-100 is “tiny,” if you like, but as Bitcoin is today, it is only really useful for large transfers. Or perhaps medium sized transfers if you live in a place like Venezuela. This is less true even for other blockchain-based cryptocurrencies for two reasons: 1) they’re less popular so less demand for transactions 2) they use a larger blocksize and/or shorter time between blocks (both of which have drawbacks and limits).
Regardless of what the Satoshi white paper said, base blockchain simply doesn’t scale well globally for small transactions. Currently still doable for medium and large transactions, but if 7 billion people used Bitcoin as it is now (limited to 7 transactions per second), they could only settle to the blockchain once every billion seconds on average (a billion seconds is over thirty years).
You can argue $10-100 is “tiny,” if you like, but as Bitcoin is today, it is only really useful for large transfers. Or perhaps medium sized transfers if you live in a place like Venezuela. This is less true even for other blockchain-based cryptocurrencies for two reasons: 1) they’re less popular so less demand for transactions 2) they use a larger blocksize and/or shorter time between blocks (both of which have drawbacks and limits).
Regardless of what the Satoshi white paper said, base blockchain simply doesn’t scale well globally for small transactions. Currently still doable for medium and large transactions, but if 7 billion people used Bitcoin as it is now (limited to 7 transactions per second), they could only settle to the blockchain once every billion seconds on average (a billion seconds is over thirty years).
I do think there's a use case for zero-confirmation transactions which, although are not settled fully, have to pass a long list of acceptance rules to be fully propagated to the mempool across the network. While this doesn't have the full double spend protection that you get after 6+ confirmations— its arguably reasonable enough to use network mempool quorum for buying a cup of coffee.
Beyond that though, there are a number of solutions at layer 2 that can be used here as well, lightning network being the most widely used at this point.
Beyond that though, there are a number of solutions at layer 2 that can be used here as well, lightning network being the most widely used at this point.
Right. The solution to small transactions is to use another thing which is not Bitcoin (although I suppose if you felt like it you could denominate it in Bitcoins without settling the transaction...). And/or compromise on the decentralized trustlessness thing.
Well thats not entirely true. Lightning network _does_ use bitcoin smart contracts settled on-chain as a way to provide more liquidity for efficient payment routing. So it is bootstrapped to the same decentralization/trustlessness (mostly).
The analogy here is that its like saying: using TCP (layer 4) for transport reliability isn't giving up on IP (layer 3), its building on top of it. You still get the benefits of the basal level protocol.
The analogy here is that its like saying: using TCP (layer 4) for transport reliability isn't giving up on IP (layer 3), its building on top of it. You still get the benefits of the basal level protocol.
"an equivalent Visa purchase (which clears faster)"
How long does it take for a Visa purchase to clear equivalently to bitcoin? I think to be equivalent to bitcoin it would have to be, I have some cash, and now someone else has that cash. Not a promise of cash. Not a balance in my bank's database. Actual cash. How long does that take using the Visa network?
EDIT: also, what are all the costs involved in that Visa transaction? Payer has to travel to an ATM, deposit cash, Payee has to set up a merchant account or use stripe or something, they have to travel to an ATM, withdraw cash, etc., etc.
How long does it take for a Visa purchase to clear equivalently to bitcoin? I think to be equivalent to bitcoin it would have to be, I have some cash, and now someone else has that cash. Not a promise of cash. Not a balance in my bank's database. Actual cash. How long does that take using the Visa network?
EDIT: also, what are all the costs involved in that Visa transaction? Payer has to travel to an ATM, deposit cash, Payee has to set up a merchant account or use stripe or something, they have to travel to an ATM, withdraw cash, etc., etc.
> Tiny amounts literally cannot be settled in minutes.
Your right. It wouldn't be worth $1T now if that was true. It certainly wouldn't be worth $1T if the you could only do 7 bitcoin transactions per second. With the addition of the ligthning network transacting Bitcoin happens in milliseconds, with an unlimited number in parallel and the fee is well under a a cent right now.
Why Mastercard announced they were moving into Bitcoin is mystery of course. But I can't help wondering if the cost of a lightning transaction where they control the nodes compared the cost of trip a debit card takes (customer bank --> customer master card --> merchant terminal --> merchant bank) passing through the sticky fingers of two banks, was a factor.
Your right. It wouldn't be worth $1T now if that was true. It certainly wouldn't be worth $1T if the you could only do 7 bitcoin transactions per second. With the addition of the ligthning network transacting Bitcoin happens in milliseconds, with an unlimited number in parallel and the fee is well under a a cent right now.
Why Mastercard announced they were moving into Bitcoin is mystery of course. But I can't help wondering if the cost of a lightning transaction where they control the nodes compared the cost of trip a debit card takes (customer bank --> customer master card --> merchant terminal --> merchant bank) passing through the sticky fingers of two banks, was a factor.
Why do cryptocurrency discussions go from 0 to foaming at the mouth so fast? I've never seen more unconditional confidence.