The thing I find most interesting about cryptocurrency is something Bitcoin doesn't support: zero-knowledge proofs. Cryptographers have come up with very elaborate mathematical schemes by which it's possible to prove to someone that a fact is true and that you know it, without revealing to them what that fact is.
Right now the main use of this is in cryptocurrencies where nobody knows where transactions come from or where they go, yet they can still be certain that all the transactions add up correctly. (I'm deliberately not mentioning the names of these because I'm not a cryptocurrency promoter, but you can look them up if you care.)
But from my limited knowledge, the zero-knowledge proof technology is pretty general, and when you think about mixing it with smart contracts, things could get pretty futuristic. Like imagine a loan, where neither party has any way of knowing who the other is, but the creditor still knows with certainty that they are the most senior creditor.
Of course the problem remains that all this is internal to the blockchain, and the real-world legal system might happily just reach in and screw it all up.
but what is the value of NOT knowing who your debtor/creditor is? In real life banks/markets specialize in obtaining that knowledge. why would I lend money to someone I don't know? I feel like the certainty of seniority is a minor improvement to the already existing legal guarantees a creditor can obtain.
true! unclear whether there's any value in this. the whole thing doesn't really make sense if both parties are willing to reveal information to each other, or even willing to trust a third party as a go-between.
i think it is pretty cool that this can be made to work at all, though. it opens up some genuinely new possibilities, and maybe some of those possibilities will actually be useful.
You say: "Of course, there’s still the argument that Bitcoin will eventually die. I guess I see two ways that could happen. "
Isn't there a third problem? Proliferation of alternative cryptocurrencies is effectively a glut of supply in 'systemic risk hedging assets', no? A technically superior altcoin (say, one that requires less energy expenditure) could greatly dilute the value of any other coin serving the same purpose.
Energy expenditure actually props up the price. A currency that is relatively cheap to mine/get isn’t going to be very valuable. There’s a reason why aluminum hasn’t supplanted gold as a store of value, after all, even though it is shinier and was actually more valuable during Napoleon’s time (people didn’t know how to extract aluminum from ore back then so pure aluminum was extremely rare).
Anyway, the short answer for why BTC is very unlikely to be supplanted is network effects. Other crypto currencies may have some value too (just like platinum, palladium, etc. do), but none of those metals have gold’s market cap.
I don't feel like I fully understand this argument, but feel free to replace "requires *less* energy" with "requires *more* energy", or any other technical improvement.
> Anyway, the short answer for why BTC is very unlikely to be supplanted is network effects.
Network effects are clearly very important, but there are many cases of new entrants overwhelming the network effect stranglehold of the incumbent(s) (e.g. social networking platforms were already well-developed by the time Facebook came along). I'd love to see an analysis of why this hasn't happened already for BTC. Maybe as long as cryptocurrencies haven't yet saturated the demand for hedging, they are not yet in contention with each other?
Go back to my aluminum/gold example. Technological improvements made aluminum much cheaper to get vs. gold. What then happened to the price of aluminum vs. gold?
I like to think of Bitcoin as a very successful, proof of concept of a blockchain derived value store and exchange. But it's a one trick wonder. Great for money laundering, hard money speculation and ... Yeah. That's about it.
Where things get a lot more interesting is the new distributed finance stuff coming on line using ethereum. You and and all your closest buddies could each launch your very own stock market, lending platform and insurance company.
It's like the early feature phones with a couple of games on it compared to the iphone. A competent, but fixed function device vs a whole platform anyone can leverage to build thier own apps.
This doesn't mean bitcoin is doomed, but rather it will keep some high value, but eventually dwarfed by the vastly more flexible ecosystem surrounding it.
a) The average cost per bitcoin transaction is now in the $20s.
b) Stories are popping up constantly about how people lost their bitcoin/had it stolen/spent it foolishly on food or land.
Secondly, while 2017/2018 was a retail pump and dump - 2020/2021 is an institutional pump and dump.
Harris Kupperman detailed exactly what would happen in a series of posts at AdventuresinCapitalism.com from COVID start until the end of 2020:
1) Arbitragers making 40%+ a year risk free by shorting Grayscale and buying bitcoin drove BTC out of its $6K early COVID lows to above its multi-year trading range around $10K.
2) Once trading range was exceeded, a reflexive dynamic ensued. Hedge funds not in bitcoin are heavily pressured by relative performance stats and limited partners to get into it. Each buyin further pressures BTC prices up and hedge fund holdouts. And unlike stock (cough Tesla), bitcoin truly is limited without any requirements for earnings or delivery of product.
3) Speaking of Tesla: Elon's running in front of a crowd and calling it a parade means something. Not exactly sure what but he's a rock star among the pumpers.
So BTC the nerd art continues, but don't mistake a specific short term institutional phenomenon for something structural - any more than GameStop's short squeeze as anything but a generational trading blip.
I've busted criminals and taken down literally thousands of bitcoins in criminal proceeds.
Bitcoin is nerd art - every one a Mona Lisa. This can be value but it isn't one of actual utility. Mona Lisas aren't money. And Mona Lisas don't consume ginormous amounts of electricity, facilitate cyber crime or have visible percentages of all Mona Lisas stolen.
Someone else in the comments has mentioned that it isn't that great a hedge against system collapse if it requires the internet to still work.
The quote about not mixing politics with investing seems like a non sequitur; the people discussed are mixing their politics with politics. Why should they feel positive about something with the emissions of a mid-sized country whose main utility seems to be buying drugs and illegal guns?
Also, you can always (for a reasonable timescale) mine more gold, but I thought the total number of bitcoins was fundamentally limited. Stross has stated that bitcoins would thus be too deflationary to use as a currency, although I don't know if there are ways around this.
Yes, BTC really would be an awful currency. Much like gold, which, when massive new veins were not being opened up, enforced deflation/disinflation on the economies that pegged their current to that barbaric relic back in the day. But as a protection of net worth if you are in a local/regional pot of excrement, ownership of BTC/gold/(diamonds, so long as many people think they are valuable and the marketing behemoth keeps reinforcing the brainwashing) is good to have.
If Bitcoin were the only crypto currency possible, there might be some
Value in it, like gold. The problem is you can easily make another crypto (as many have done). Why would a crypto ever be worth more than the marginal cost to produce? More inexplicable, why did Tesla spend $1.5B on crypto when the could easily have made their own? Why is Bitcoin worth more than other cryptos that do the same thing? The answer is, people are buying the brand. It’s Beanie Babies v. other collectible stuffed animals. People are paying for an entry in a public database.
Bitcoin is never going to be an effective currency because what many proponents view as a feature is a bug. There is no government and reserve bank behind it to keep it stable. Picture trying to enter a
long term (or even annual) contract denominated in Bitcoin—going to pay an employee 2 Bitcoin/yr?—good luck to you and the employee.
And mostly there aren’t really any business transactions in Bitcoin even where companies purport to accept it—the Bitcoin is converted to dollars. This is evident when you need a refund. You may have paid a Bitcoin when you made your purchase a month ago, but when you refund comes you are not going to get your Bitcoin back—you’re going to get an amount Bitcoin equal to the dollar value of the product when you purchase it. If Bitcoin doubled, your refund is only going to be half a Bitcoin.
But isn't this always the problem? Bitcoiners are just goldbuggers of the future. They want to find ways that we can all agree that their fortunes are insulated from Democracy. But they're not. Eventually, the crowd wins.
Huh? I see gold still being around. Valued fairly highly these days too. Granted, goldbugs are silly, but I doubt you’d find many BTCbugs, and in any case, what does “the crowd winning” look like?
“On time” meaning within a millennia, give or take? We’ve seen generational wealth last centuries in many different historical time periods. And stuff like war and invasion was more likely to overturn than internal strife (though they go hand in hand).
FB is a natural monopoly. Most efficient if everyone only has to go one place to see their friend’s cat photos or share political grievance with the like minded. Marketplaces are natural monopolies—EBay especially, Amazon too—one stop shopping is easiest.
Bitcoin is like Visa or MC or AMEX. They have to get people that want that form of electronic payment to accept it—but once you do, one is like another.
So again, it’s a brand, there is nothing Bitcoin does that any other crypto can’t. I see why Joe Shmoo might not be able to start a crypto lots of people want to use—but Elon Musk? He just spent $1.5B on Bitcoin where he could have created Tesla crypto for less and leveraged his own brand.
Crypto is just an entry in a public database. Which database people like or use is just branding.
No. A natural monopoly means a natural trend that deliver efficient status of the market.
Facebook is not a natural monopoly, the people like to have more social networks, Facebook has more value only for the network effect, and still they need constantly make improves in order to mantain the crown. Probably the last news about privacy and censure will bring the fall of Facebook.
Bitcoin, in other terms, also have the network effect but also has the best protocol, the time show that PoW is better that PoS. The network need the miners for protection.
The fees rises but new solutions come like LN or the binance chain.
Bitcoin is not the king of crypto for be the first, his ecosystem also show to be the best.
Do you know hooooow maaany times in my life I've heard and read people argue against every single thing I've adopted?
I remember Time magazine writing about Steve Jobs "Failed iTunes" -- they said it turned out no one wanted to buy music when there was torrenting available.
And years before that, why would you want digital music, when the quality was so bad compared to analog?
Not an outlier example -- populist publications I've read usually argue against something before its adoption. It's how they show love
I'd like to understand more about this concept of Bitcoin (or gold, etc.) being a "hedge against system failure." I get it with gold if we're talking about Krugerrands in your basement along with your cans of tuna fish. But is that how people own gold? I thought all the people bidding up the price of gold were obtaining *claims* of gold actually being held in some vault who knows where. If the system truly did collapse (apart from, say, just seeing really high inflation), how would you be sure that you could go get your gold pieces to keep you breathing in the Great Dystopia that follows?
And, obviously, the same for Bitcoin. It's totally reliant on a system that has at its foundation functioning government. If the government collapses, how do you know the Internet won't follow? And if that collapses what happens to all those wonderful Bitcoins in your "wallet"?
I don't really buy the hedge against collapse argument. I feel like Bitcoin is more like over-priced modern art. Who knows what the "true value" of a Warhol is (whatever that would mean), but you're cool to be one of the elite to have gotten possession of it, especially if you got in early on.
It’s not really the coolness factor. Unlike a Warhol and like gold, anybody (with at least a little bit of money) can get some BTC/gold (obviously you need more than a little bit of money to own a Warhol).
As for systemic collapse, yes, obviously, BTC/gold/diamonds can’t protect you from a worldwide systemic collapse/awfulness. But they can definitely protect you against local/regional collapse/awfulness. A current-day Venezuelan fleeing or someone trying to escape Nazi-occupied lands in 1940 would much rather have BTC now/diamonds then than whatever the local currency is/was.
If Salvadoreans have been stashing USD as a risk hedge - it is not good for the state - as this stash is in cash - and pressures the local exchange and has no productive use
With BTC and the circulation of USD,if the USD cash starts circulating,it is good for the nation and the banks,and some of the USD will find its way into the banks,and be used for economic activity.
People will take out their hidden USD,buy BTC and SPEND THE MONEY or SPEND THE APPRECIATION IN THE BTC OR THE PROFIT - and that is a gain for the nation.If the banks sell the BTC,then the PHYSICAL DOLLARS,WILL MOVE INTO THE BANK - AND THE NATION CAN USE THE USD,NOT TAKE IMF LOANS,AND THE PEOPLE WILL HAVE DIGITAL DOLLARS WHICH CANNOT BE STOLEN,BURNT,TORN,COUNTERFEITED OR DAMAGED.
Boosting demand for a DIGITAL DOLLAR (BTC),is better than the PHYSICAL USD.
Money laundering cannot happen with the BTC,as the person WHO SELLS THE BTC TO THE STATE,AND RECEIVES USD IN HIS BANK - will have a name and identity,and will need to explain the proceeds,as the date of his acquisition of the BTC,is known.
Even if such a fool exists,he would be trapped by the state,with the BTC.
THE ADVANTAGE TO THE PEOPLE, IS THAT ALL BTC TRADES FOR BUYING BEER OR FOOD ETC.IS OUT OF THE TAX NET, FOR THE SHOPKEEPER , AS THE STATE WILL NEVER KNOW THE SALES MADE IN BTC - UNLESS THE SHOPKEEPER DISCLOSES IT TO THE STATE.
SO THE SHOPKEEPER MAY OFFER LOWER PRICES AND ALSO IF BTC FALLS,HE MAY NOT HIKE HIS RATES AS HE BOUGHT THE GOODS WHEN BTC WAS HIGHER - AND HE EXPECTS IT TO GO STILL HIGHER ! dindooo hindoo
The Govtt of Salvador,should commit that every Salavadorean,can surrender his BTC to the bank,and get USD,at any time.dindooohindoo
"Salvador has a debt burden and a bad economy".What should the govtt do ? Print more currency and move into hyper inflation,and civil war ?
Or adopt the US Dollar - which is like outsouring the treasury and monetary policy of Salvador,to the US Fed
The people with money need a currency to part their assets,from the point of safety and risk.If they pile into USD,the local currency will crash.If they exit Salvador,business and employment will collapse.
SOLUTION = ALT CURRENCY,which will keep the rich in Salvador,and give options to locals,to use USD or local exhange,or Alt-currency.
WHAT IS THE OPTION ?
CHINESE YUAN ?
EURO ?
OR BTC ?
EVEN THE PBOC CANNOT CONTROL FAKE YUAN/REMIMBI IN CHINA.
Enjoyed this one. Is anything happening on the Ledger of Record front that Balaji S Srinivasan @balajis says "will ultimately become the decentralized layer of facts that underpins all narrative"? https://twitter.com/balajis/status/1290326486382022656
Noah, there’s a specific flaw in the argument about it being a hedge against system failure.
The Bitcoin _network_ cannot function without the internet, which makes the coins themselves useless during disaster and conflict.
There are 2 weirder scenarios for any current hodler:
- Internet Balkanization. If conditions arise that sever the network into large enough minority chunks, the ledgers could come into conflict.
-More forks like Bitcoin cash cause fragmentation. In addition to solving “the offline problem”, the current global transaction volume is still unable to exceed 10tx/sec for technical reasons. That’s wildly inadequate, and major code changes are required. These (as yet unknown) functional changes will have trade offs that will be wildly difficult to organize “the mining community” on.
There would be a BTC internet. It could even live on an inter-inter-network almost like a VPN or TOR. There are already Bitcoin forks that have proven this - Alias.
Conflict and disaster scenarios often fuck up comms networks. It’s a deliberate tactic in war, and transmit distance is very challenging to overcome without things like radio towers.
The thing I find most interesting about cryptocurrency is something Bitcoin doesn't support: zero-knowledge proofs. Cryptographers have come up with very elaborate mathematical schemes by which it's possible to prove to someone that a fact is true and that you know it, without revealing to them what that fact is.
Right now the main use of this is in cryptocurrencies where nobody knows where transactions come from or where they go, yet they can still be certain that all the transactions add up correctly. (I'm deliberately not mentioning the names of these because I'm not a cryptocurrency promoter, but you can look them up if you care.)
But from my limited knowledge, the zero-knowledge proof technology is pretty general, and when you think about mixing it with smart contracts, things could get pretty futuristic. Like imagine a loan, where neither party has any way of knowing who the other is, but the creditor still knows with certainty that they are the most senior creditor.
Of course the problem remains that all this is internal to the blockchain, and the real-world legal system might happily just reach in and screw it all up.
Yeah, that's pretty neat!
This can be implemented in Lightning or Omni - maybe even BTC core https://bitcoincore.org/en/2016/02/26/zero-knowledge-contingent-payments-announcement/
but what is the value of NOT knowing who your debtor/creditor is? In real life banks/markets specialize in obtaining that knowledge. why would I lend money to someone I don't know? I feel like the certainty of seniority is a minor improvement to the already existing legal guarantees a creditor can obtain.
true! unclear whether there's any value in this. the whole thing doesn't really make sense if both parties are willing to reveal information to each other, or even willing to trust a third party as a go-between.
i think it is pretty cool that this can be made to work at all, though. it opens up some genuinely new possibilities, and maybe some of those possibilities will actually be useful.
You say: "Of course, there’s still the argument that Bitcoin will eventually die. I guess I see two ways that could happen. "
Isn't there a third problem? Proliferation of alternative cryptocurrencies is effectively a glut of supply in 'systemic risk hedging assets', no? A technically superior altcoin (say, one that requires less energy expenditure) could greatly dilute the value of any other coin serving the same purpose.
Energy expenditure actually props up the price. A currency that is relatively cheap to mine/get isn’t going to be very valuable. There’s a reason why aluminum hasn’t supplanted gold as a store of value, after all, even though it is shinier and was actually more valuable during Napoleon’s time (people didn’t know how to extract aluminum from ore back then so pure aluminum was extremely rare).
Anyway, the short answer for why BTC is very unlikely to be supplanted is network effects. Other crypto currencies may have some value too (just like platinum, palladium, etc. do), but none of those metals have gold’s market cap.
> Energy expenditure actually props up the price.
I don't feel like I fully understand this argument, but feel free to replace "requires *less* energy" with "requires *more* energy", or any other technical improvement.
> Anyway, the short answer for why BTC is very unlikely to be supplanted is network effects.
Network effects are clearly very important, but there are many cases of new entrants overwhelming the network effect stranglehold of the incumbent(s) (e.g. social networking platforms were already well-developed by the time Facebook came along). I'd love to see an analysis of why this hasn't happened already for BTC. Maybe as long as cryptocurrencies haven't yet saturated the demand for hedging, they are not yet in contention with each other?
Go back to my aluminum/gold example. Technological improvements made aluminum much cheaper to get vs. gold. What then happened to the price of aluminum vs. gold?
Could!
This is spectacular. Thank you for this
Thanks!! :-)
First time reader. This was great.
Thanks!
You made me curious about my bitcoin holdings... I had forgot about them... damn.
Did you find out you're rich now?
I wish. But I can afford to buy you a beer one day.
I accept!
I like to think of Bitcoin as a very successful, proof of concept of a blockchain derived value store and exchange. But it's a one trick wonder. Great for money laundering, hard money speculation and ... Yeah. That's about it.
Where things get a lot more interesting is the new distributed finance stuff coming on line using ethereum. You and and all your closest buddies could each launch your very own stock market, lending platform and insurance company.
It's like the early feature phones with a couple of games on it compared to the iphone. A competent, but fixed function device vs a whole platform anyone can leverage to build thier own apps.
This doesn't mean bitcoin is doomed, but rather it will keep some high value, but eventually dwarfed by the vastly more flexible ecosystem surrounding it.
A money launderer will only see it as means of money laundering
Ethereum has only 5 apps with more than 1000 daily users. The top being UniSwap with 50k DAU. It’s very hard to use and expensive.
I agree that DeFi has a lot of potential, but I am not too sure about the Eth / Metamask combo.
Bitcoin has zero fundamental value:
a) The average cost per bitcoin transaction is now in the $20s.
b) Stories are popping up constantly about how people lost their bitcoin/had it stolen/spent it foolishly on food or land.
Secondly, while 2017/2018 was a retail pump and dump - 2020/2021 is an institutional pump and dump.
Harris Kupperman detailed exactly what would happen in a series of posts at AdventuresinCapitalism.com from COVID start until the end of 2020:
1) Arbitragers making 40%+ a year risk free by shorting Grayscale and buying bitcoin drove BTC out of its $6K early COVID lows to above its multi-year trading range around $10K.
2) Once trading range was exceeded, a reflexive dynamic ensued. Hedge funds not in bitcoin are heavily pressured by relative performance stats and limited partners to get into it. Each buyin further pressures BTC prices up and hedge fund holdouts. And unlike stock (cough Tesla), bitcoin truly is limited without any requirements for earnings or delivery of product.
3) Speaking of Tesla: Elon's running in front of a crowd and calling it a parade means something. Not exactly sure what but he's a rock star among the pumpers.
So BTC the nerd art continues, but don't mistake a specific short term institutional phenomenon for something structural - any more than GameStop's short squeeze as anything but a generational trading blip.
Bitcoin has zero fndamental value to you because you have ZERO knowledge about it.
1. Transaction costs are already being taken care by lightning network.
2. People did not lose their bitcoin by buying food/land, they made an conscious choice to spend their bitcoin.
And this phenomenon is going on strong from 10+ years. So as I say to uninformed people "Have fun staying poor"
Yeah buddy, think what you want to.
I've busted criminals and taken down literally thousands of bitcoins in criminal proceeds.
Bitcoin is nerd art - every one a Mona Lisa. This can be value but it isn't one of actual utility. Mona Lisas aren't money. And Mona Lisas don't consume ginormous amounts of electricity, facilitate cyber crime or have visible percentages of all Mona Lisas stolen.
Someone else in the comments has mentioned that it isn't that great a hedge against system collapse if it requires the internet to still work.
The quote about not mixing politics with investing seems like a non sequitur; the people discussed are mixing their politics with politics. Why should they feel positive about something with the emissions of a mid-sized country whose main utility seems to be buying drugs and illegal guns?
Also, you can always (for a reasonable timescale) mine more gold, but I thought the total number of bitcoins was fundamentally limited. Stross has stated that bitcoins would thus be too deflationary to use as a currency, although I don't know if there are ways around this.
Yes, BTC really would be an awful currency. Much like gold, which, when massive new veins were not being opened up, enforced deflation/disinflation on the economies that pegged their current to that barbaric relic back in the day. But as a protection of net worth if you are in a local/regional pot of excrement, ownership of BTC/gold/(diamonds, so long as many people think they are valuable and the marketing behemoth keeps reinforcing the brainwashing) is good to have.
If Bitcoin were the only crypto currency possible, there might be some
Value in it, like gold. The problem is you can easily make another crypto (as many have done). Why would a crypto ever be worth more than the marginal cost to produce? More inexplicable, why did Tesla spend $1.5B on crypto when the could easily have made their own? Why is Bitcoin worth more than other cryptos that do the same thing? The answer is, people are buying the brand. It’s Beanie Babies v. other collectible stuffed animals. People are paying for an entry in a public database.
Bitcoin is never going to be an effective currency because what many proponents view as a feature is a bug. There is no government and reserve bank behind it to keep it stable. Picture trying to enter a
long term (or even annual) contract denominated in Bitcoin—going to pay an employee 2 Bitcoin/yr?—good luck to you and the employee.
And mostly there aren’t really any business transactions in Bitcoin even where companies purport to accept it—the Bitcoin is converted to dollars. This is evident when you need a refund. You may have paid a Bitcoin when you made your purchase a month ago, but when you refund comes you are not going to get your Bitcoin back—you’re going to get an amount Bitcoin equal to the dollar value of the product when you purchase it. If Bitcoin doubled, your refund is only going to be half a Bitcoin.
Wow, arguing your way into poverty.
Just don't be jealous in future of people who got rich with crypto and shout Tax the rich.
But isn't this always the problem? Bitcoiners are just goldbuggers of the future. They want to find ways that we can all agree that their fortunes are insulated from Democracy. But they're not. Eventually, the crowd wins.
Huh? I see gold still being around. Valued fairly highly these days too. Granted, goldbugs are silly, but I doubt you’d find many BTCbugs, and in any case, what does “the crowd winning” look like?
The crowd winning looks like the rich getting taxed. Or eaten. That train doesn't come around often, but it always comes on time.
“On time” meaning within a millennia, give or take? We’ve seen generational wealth last centuries in many different historical time periods. And stuff like war and invasion was more likely to overturn than internal strife (though they go hand in hand).
You can make a new social media app in 10 minutes -- why is Zuckerberg the 3rd richest person on the planet?
Do you have a Twitter account? Very sharp post.
Take in to account network effects.
Anyone can easily start a social network, so why hasn’t FB been dethroned yet?
FB is a natural monopoly. Most efficient if everyone only has to go one place to see their friend’s cat photos or share political grievance with the like minded. Marketplaces are natural monopolies—EBay especially, Amazon too—one stop shopping is easiest.
Bitcoin is like Visa or MC or AMEX. They have to get people that want that form of electronic payment to accept it—but once you do, one is like another.
So again, it’s a brand, there is nothing Bitcoin does that any other crypto can’t. I see why Joe Shmoo might not be able to start a crypto lots of people want to use—but Elon Musk? He just spent $1.5B on Bitcoin where he could have created Tesla crypto for less and leveraged his own brand.
Crypto is just an entry in a public database. Which database people like or use is just branding.
No. A natural monopoly means a natural trend that deliver efficient status of the market.
Facebook is not a natural monopoly, the people like to have more social networks, Facebook has more value only for the network effect, and still they need constantly make improves in order to mantain the crown. Probably the last news about privacy and censure will bring the fall of Facebook.
Bitcoin, in other terms, also have the network effect but also has the best protocol, the time show that PoW is better that PoS. The network need the miners for protection.
The fees rises but new solutions come like LN or the binance chain.
Bitcoin is not the king of crypto for be the first, his ecosystem also show to be the best.
Do you know hooooow maaany times in my life I've heard and read people argue against every single thing I've adopted?
I remember Time magazine writing about Steve Jobs "Failed iTunes" -- they said it turned out no one wanted to buy music when there was torrenting available.
And years before that, why would you want digital music, when the quality was so bad compared to analog?
Not an outlier example -- populist publications I've read usually argue against something before its adoption. It's how they show love
Perfect post! What about the possibility that in the end it's only a XXIst century's Ponzi scheme?
I'd like to understand more about this concept of Bitcoin (or gold, etc.) being a "hedge against system failure." I get it with gold if we're talking about Krugerrands in your basement along with your cans of tuna fish. But is that how people own gold? I thought all the people bidding up the price of gold were obtaining *claims* of gold actually being held in some vault who knows where. If the system truly did collapse (apart from, say, just seeing really high inflation), how would you be sure that you could go get your gold pieces to keep you breathing in the Great Dystopia that follows?
And, obviously, the same for Bitcoin. It's totally reliant on a system that has at its foundation functioning government. If the government collapses, how do you know the Internet won't follow? And if that collapses what happens to all those wonderful Bitcoins in your "wallet"?
I don't really buy the hedge against collapse argument. I feel like Bitcoin is more like over-priced modern art. Who knows what the "true value" of a Warhol is (whatever that would mean), but you're cool to be one of the elite to have gotten possession of it, especially if you got in early on.
It’s not really the coolness factor. Unlike a Warhol and like gold, anybody (with at least a little bit of money) can get some BTC/gold (obviously you need more than a little bit of money to own a Warhol).
As for systemic collapse, yes, obviously, BTC/gold/diamonds can’t protect you from a worldwide systemic collapse/awfulness. But they can definitely protect you against local/regional collapse/awfulness. A current-day Venezuelan fleeing or someone trying to escape Nazi-occupied lands in 1940 would much rather have BTC now/diamonds then than whatever the local currency is/was.
I thought the total possible number of bitcoins was limited, which might support the comparison to Warhols instead of gold.
It is, but the number of virtually identical cryptos is infinite. Bitcoin today, Buttcoin tomorrow.
The total amount is finite (but currently still growing), but they can be divided infinitely so it’s not possible to run out.
you mean like you can cut a pizza into 6 slices or 8 slices. And you won't run of of pizzas.
Excellent! Could not have said better - so did not try...
SALVADOR NEEDS BTC AS THE GAME PLAN IS DIFFERENT
If Salvadoreans have been stashing USD as a risk hedge - it is not good for the state - as this stash is in cash - and pressures the local exchange and has no productive use
With BTC and the circulation of USD,if the USD cash starts circulating,it is good for the nation and the banks,and some of the USD will find its way into the banks,and be used for economic activity.
People will take out their hidden USD,buy BTC and SPEND THE MONEY or SPEND THE APPRECIATION IN THE BTC OR THE PROFIT - and that is a gain for the nation.If the banks sell the BTC,then the PHYSICAL DOLLARS,WILL MOVE INTO THE BANK - AND THE NATION CAN USE THE USD,NOT TAKE IMF LOANS,AND THE PEOPLE WILL HAVE DIGITAL DOLLARS WHICH CANNOT BE STOLEN,BURNT,TORN,COUNTERFEITED OR DAMAGED.
Boosting demand for a DIGITAL DOLLAR (BTC),is better than the PHYSICAL USD.
Money laundering cannot happen with the BTC,as the person WHO SELLS THE BTC TO THE STATE,AND RECEIVES USD IN HIS BANK - will have a name and identity,and will need to explain the proceeds,as the date of his acquisition of the BTC,is known.
Even if such a fool exists,he would be trapped by the state,with the BTC.
THE ADVANTAGE TO THE PEOPLE, IS THAT ALL BTC TRADES FOR BUYING BEER OR FOOD ETC.IS OUT OF THE TAX NET, FOR THE SHOPKEEPER , AS THE STATE WILL NEVER KNOW THE SALES MADE IN BTC - UNLESS THE SHOPKEEPER DISCLOSES IT TO THE STATE.
SO THE SHOPKEEPER MAY OFFER LOWER PRICES AND ALSO IF BTC FALLS,HE MAY NOT HIKE HIS RATES AS HE BOUGHT THE GOODS WHEN BTC WAS HIGHER - AND HE EXPECTS IT TO GO STILL HIGHER ! dindooo hindoo
The Govtt of Salvador,should commit that every Salavadorean,can surrender his BTC to the bank,and get USD,at any time.dindooohindoo
"Salvador has a debt burden and a bad economy".What should the govtt do ? Print more currency and move into hyper inflation,and civil war ?
Or adopt the US Dollar - which is like outsouring the treasury and monetary policy of Salvador,to the US Fed
The people with money need a currency to part their assets,from the point of safety and risk.If they pile into USD,the local currency will crash.If they exit Salvador,business and employment will collapse.
SOLUTION = ALT CURRENCY,which will keep the rich in Salvador,and give options to locals,to use USD or local exhange,or Alt-currency.
WHAT IS THE OPTION ?
CHINESE YUAN ?
EURO ?
OR BTC ?
EVEN THE PBOC CANNOT CONTROL FAKE YUAN/REMIMBI IN CHINA.
Only way is BTC.dindooohindoo
Enjoyed this one. Is anything happening on the Ledger of Record front that Balaji S Srinivasan @balajis says "will ultimately become the decentralized layer of facts that underpins all narrative"? https://twitter.com/balajis/status/1290326486382022656
Kikusui hontou ni Oishi Katta
Noah, there’s a specific flaw in the argument about it being a hedge against system failure.
The Bitcoin _network_ cannot function without the internet, which makes the coins themselves useless during disaster and conflict.
There are 2 weirder scenarios for any current hodler:
- Internet Balkanization. If conditions arise that sever the network into large enough minority chunks, the ledgers could come into conflict.
-More forks like Bitcoin cash cause fragmentation. In addition to solving “the offline problem”, the current global transaction volume is still unable to exceed 10tx/sec for technical reasons. That’s wildly inadequate, and major code changes are required. These (as yet unknown) functional changes will have trade offs that will be wildly difficult to organize “the mining community” on.
https://www.blockchain.com/charts/transactions-per-second
There would be a BTC internet. It could even live on an inter-inter-network almost like a VPN or TOR. There are already Bitcoin forks that have proven this - Alias.
There will always be a master / longest chain.
Conflict and disaster scenarios often fuck up comms networks. It’s a deliberate tactic in war, and transmit distance is very challenging to overcome without things like radio towers.