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Comment by skizm | Hacker News Reader

Bitcoin purists will say that, eventually, there is no "cash out" phase. 1 BTC = 1 BTC and who cares about what the dollar equivalent happens to be. Once everything is in BTC you will never exchange it for dollars.

Do you spend dollars today wondering if tomorrow the Euro will be worth more or less? No, so why would you care what the dollar equivalent to a BTC is when everything you buy is priced in BTC?

This is long term obviously. The reason the price is "high" now is because there is a finite amount. ~21 million BTC is the max that can ever exist at once. So, theoretically if you replaced the world's currencies with BTC, having a single BTC would make you incredibly wealthy.

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I'm sure there are some "bitcoin purists" who think someday bitcoin will be used to buy everything, but that's certainly a minority viewpoint.

There's a more pragmatic way to think about it.

Bitcoin can coexist just fine with national currencies, and with other cryptocurrencies, and with precious metals. Bitcoin doesn't need to "win" by replacing any of these.

Bitcoin is valuable because it's a secure way to store and transfer value between people.

If bitcoin is never used to buy your morning coffee, that's OK. If only 1% of the population finds bitcoin useful, that's OK, too.

Dollars, euros and yen are better than bitcoin in many use cases, and bitcoin can do things that dollars, euros and yen cannot do in other use cases.

The simple fact is that many people find bitcoin useful, and that's what makes it valuable.

Yeah, I think there's a strange amount of both fans and people who dislike bitcoin that think bitcoin can only be valuable if it's on a path to complete adoption, replacing other currencies.

I see it more like a decentralized PayPal alternative, and I keep seeing it pop up in more places that I buy stuff online and I've made personal transactions with it to other people, so it's providing value to me and seems to be on a reasonably successful path.

I know miners will hate me for saying this it will bring up the lightning network but I think the transaction costs are too high. They have to come down (close to zero if not zero) even if it means miners and node operators are working for no gain. I don't understand why it means that Bitcoin is insecure for people to be able to mine in their gpu.

Maybe we need to leave Bitcoin alone and come up with another currency for low value transactions that happen frequently? I'm thinking like buying coffee or groceries.

>I don't understand why it means that Bitcoin is insecure for people to be able to mine in their gpu.

What do you mean? People can mine with a gpu, but they won't make much because of the many miners using much faster ASICs. If you think Bitcoin should have been made so that ASICs weren't possible: a number of altcoins agree with that idea, but there's an argument to be made that optimized hardware is always possible, and by making it hard to make, it makes it more likely that a single small group who manages to make optimized hardware will be the only one to do so for a large time period, will be able to make huge amounts of profits funding more hardware, and at that point will easily be able to get up to >50% of the network hash rate (which breaks Bitcoin's decentralization and allows rewriting the blockchain). By using a proof-of-work that's relatively straight-forward to optimize means that when the possible mining rewards eventually incentivize development of ASICs, it's likely that multiple groups will be able to build them.

Yes, but this way you're trading an elite made of hardware specialists and people that can afford to hire hardware specialists, with an elite made of people that can afford to fill datacenters with the most specialized hardware. Mining quickly becomes a game of "who can throw the most money into the problem" and ends up skewing the pool significantly because you are rewarded with money for winning the game, which means you can afford even more of the specialized hardware. That's the big thing with Bitcoin: All the miners are rich folks (these days, mostly Chinese) with huge datacenters and tons of cheap electricity. I have 12 of the USB ASIC miners that are many times unable to even pay for themselves in electricity costs because the difficulty is so high, which is the problem that squeezes out grandma's GPU miner and pushes even more people out of the mining game (not to even mention the ballooning size of the blockchain).

Sort of. There is a potential that if you take over the network that it all becomes worth nothing because users understand the trust problem and cash out in the lead up. Or the users elect to not use your currency, it could still hold value, as the blockchain until that point is valid, but it remains paused until the 51% is resolved. This encourages you to work covertly to organize the 51% stake and you have to hold it in secret or all your coin/power may become worthless. It's essentially the cold war and in the same way, it's in everyone's best interest to avoid destroying the value of the coin by being selfish in an attempt for differential advantage.

Sure, and to this point, there have been at least a handful of times when the 51% attack could have happened, as well-known, related mining pools could have combined their power to achieve the majority. It has been plausible before, and I'd imagine what you mention is the reason it still hasn't happened. It would destroy the coin, because who knows what happened while they had majority. There would probably be some kind of fork, and I'm sure the value would diminish. It would be messy for everybody.

It doesn't need to be another currency. You could have a lower security blockchain tethered to the main one, with higher capacity and lower fees but still carrying Bitcoin transactions. In general those are called sidechains, and there is a particular proposal right now called drivechain that might be worth a second look.

There are several other ways of transacting in Bitcoin outside the main replicated-everywhere-forever blockchain, Lightning perhaps being the most well known (with the defining feature of instant transactions).

Most of these systems are hard to implement without unmalleable txids, so interest will likely pick up now that we have segwit on the main chain. Those systems never left the idea stage while transactions were free but there's significantly more interest now. There are lots of interesting developments going on.

The real value is in the underlying technology of the platform, the blockchain. Instant, secure transfers of value to anyone in the world at minimal cost with a publicly auditable ledger. There are also many cool things that can be built on top of the tech, including secure online voting: https://followmyvote.com/online-voting-technology/blockchain...

Instant as "as soon as miners picked it up and added a few chain segments". And so far no digital system offers all requirements for proper anonymous secure online voting: 1. you can only vote once; 2. you can verify your vote was properly counted; 3. others cannot find out how you voted, even with your cooperation.

We'll see whether someone will ever come up with some system satisfying them all...

Basically bitcoin becomes digital gold, and I think that's the most likely outcome of it.

Can you elaborate on how that is going to happen? Not trying to flame, I can see a world where people use BTC for everything, but I am confused at how that will happen with current valuation.

BTC is worth thousands of dollars, so if everyone starts using BTC will people pay irrational fractions of BTC for bread and milk at the supermarket? will there be some adjustment? How will other entities handle conversion and exchange? Will the general population have some compulsatory event to liquidate their own bank accounts into BTC funds?

Could this change asset valuation worldwide(Real estate, investment funds, etc)? If no government entity mediates currency value and printing can they tax your earnings if companies pay through some decentralized medium? What happens when nobody is paying taxes?

How about other cryptocurrencies, is there some kind of zero-sum game race to the top going on? Can they co-exist in the long term purist scenario?

Some of these questions are probably extremely stupid as I have little financial and economics knowledge and I am almost illiterate when it comes to Bitcoin, and I don't know how it works for the average joe if this purist scenario becomes true.

Most wallets have started communicating values in "mBTC" - whose price is within an order of magnitude of a dollar.

Bitcoin is deflationary by design. This is problematic for any country to then adopt, as it removes a major economic lever.

What is Bitcoin doing? The BTC network is a service. At the time of this writing, there are upwards of 30-100+ functioning cryptocoin networks which offer the same distributed ledger functionality of BTC wallets and a few with more unique features and trustworthy dev teams.

The arbitrary supply of and rules which define how minted coins are rewarded is an important aspect of each of these cryptocurrencies, and if the limited edition deflationary aspect was valuable then maybe we should all buy into that BTC clone with 42 coins in "circulation".

BTC isn't rare, it's just the AOL of cryptocoins right now. Slow and over priced. There are better alternatives.

I'm not an expert on BTC or anything. In fact I'm not even long on BTC. I don't think it will work in the long term. That said I'm just answering questions as I understand them:

> BTC is worth thousands of dollars, so if everyone starts using BTC will people pay irrational fractions of BTC for bread and milk at the supermarket? will there be some adjustment?

The block chain supports values as small as 0.00000001 BTC (called a Satoshi). More terms will be coined as more common denominations eventually are used to buy things.

> How will other entities handle conversion and exchange? Will the general population have some compulsatory event to liquidate their own bank accounts into BTC funds?

There will be no single event, over time people will simply not use their local currency any more in favor of BTC. Slowly, over time, the population will lose trust in fiat and gain trust in BTC. This may occur over decades or more.

> Could this change asset valuation worldwide(Real estate, investment funds, etc)? If no government entity mediates currency value and printing can they tax your earnings if companies pay through some decentralized medium? What happens when nobody is paying taxes?

I'm not sure about these. Right now if you sell things for BTC I'm pretty sure you have to pay taxes on the "fair market value" of the BTC, which I have no idea what that would be (maybe the average price at the time of the payment?). I assume people long on BTC are hoping laws will adapt by the point when it is widely accepted.

> How about other cryptocurrencies, is there some kind of zero-sum game race to the top going on? Can they co-exist in the long term purist scenario?

I mean, a cryptocurrency is only as valuable as the trust people have in it. So all the same rules/theories apply to other cryptos the same as BTC. BTC just happens to be the most popular at the moment, and therefore has the highest market cap (not even sure if this term applies).

  >There will be no single event, over time people will simply 
  not use their local currency any more in favor of BTC. 
  Slowly, over time, the population will lose trust in fiat 
  and gain trust in BTC. This may occur over decades or more.

The BTC network processes about 3 transactions per second. Bitcoin advocates will tell you this doesn't matter, or it can be improved with a future fork - which by then why not just make a newly designed protocol/altcoin network entirely ?

(Consider: is what they're telling you based on their current investments that they'll sell off after you've bought in? Now think of what happens when a hedge fund, or other early adopter who has acquired several thousand coins or if there's whales who've traded their way to now own %10 of the coin supply in the network. What happens if they divest and crash the 'value' of this coin 'investment'?)

The great thing about cryptocoins is you can create an improved protocol and if it's better then previous protocols, the users will migrate.

There's a lot of misinformation flying around because people are trying to spam their investments into their cryptocoin service networks which they've bought into (or engineered a marketing pump and dump scam, i.e. premined ICOs like antshares) in hopes that they can later sell at excessively inflated prices because of some arbitrarily limited "supply" which a programmer just typed into the software running their network.

You don't measure inches in miles. You use a unit suitable to your needs.

>BTC is worth thousands of dollars, so if everyone starts using BTC will people pay irrational fractions of BTC for bread and milk at the supermarket? will there be some adjustment?

"1 bitcoin" is a truly arbitrary amount, just like "1 pound of gold" is arbitrary. They're both divisible.

> BTC is worth thousands of dollars, so if everyone starts using BTC will people pay irrational fractions of BTC for bread and milk at the supermarket?

This is moot until/unless BTC undergoes significant changes. It's not suited for this kind of transaction at all, IMO.

But let's say confirmation times were orders of magnitude faster and we wanted to cross the threshold to supermarket transactions. I think we'd still denominate the purchases in the local fiat currency anyways. The only way this would change is if producers and distributors had their costs anchored in BTC. But this seems very unlikely to occur in the next decade.

Not sure why you'd be downvoted. This is what some purists think and it's a popular meme. [1]

[1] http://imgur.com/gE8hDnY

Is it a big deal that a BTC can never be lost and later found?

On a long enough timeline, won't lost credentials result in BTC that are functionally permanently out of circulation?

Interesting question. Since there's a limited supply theoretically on a long enough timeline every BTC will be lost.

Currently Bitcoins can be divided to 8 decimal places, and if eventually that's not enough the protocol can be upgraded.

Correct - you can increase the units in circulation without destroying the purchasing power of those who currently hold the asset, which is a huge advantage over traditional fiat currency.

You can do the same with fiat currencies. It's called redenomination [1].

[1] https://en.wikipedia.org/wiki/Redenomination

> ~21 million BTC is the max that can ever exist at once

Just to clarify: it's not that there can only be 21 million BTC 'at once'...unless there's a big change in its design that the majority support.

There will only be 21 million BTC ever. If the keys for 1 million of them are lost, then those will never be replaced.

> Do you spend dollars today wondering if tomorrow the Euro will be worth more or less? No

Actually, yes; there's plenty of countries where they use the USD or Euro instead of their local currency because the local currency suffers from high inflation or instability. There's other countries where the currency is tightly linked to the dollar. Both because the dollar is a stable currency, one that isn't influenced by supply / demand like BTC is - BTC is a finite resource, dollars are theoretically infinite.

But be careful about only mentioning the views of "Bitcoin purists." That sounds like a pretty extreme view, and will be dismissed as a straw man by the Bitcoin fans or optimists, who likely vastly outnumber the "purists."

> Do you spend dollars today wondering if tomorrow the Euro will be worth more or less? No, so why would you care what the dollar equivalent to a BTC is when everything you buy is priced in BTC?

Moving the analogy a bit: everything we buy is priced in Reais. However, we still care if tomorrow the Dollar is worth more or less, since it does impact the price of several kinds of goods. For instance, the Dollar increasing in value will lead to computers getting more expensive.

In the same way, even if everything were to be priced in Bitcoins, the exchange rate between Bitcoin and USD would still be significant, unless and until the USD ceased to exist.

But this is exactly the point - in countries where the local currency versus USD has had volatility comparable to BTC, it's been a big problem. E.g. in South Korea, where the volatility (and general upwards trend) in the Won last year was an order of magnitude less than BTC, the currency fluctuations have caused major losses and uncertainty for exporters. If you walk around Seoul, there are signs everywhere showing the current exchange rate.

Of course that will never happen in our lifetimes because in the real world people and companies have to pay taxes. The larger sovereign states — which exercise effective monopolies on violence over geographic areas — won't agree to accept payments in cryptocurrencies which they can't control. Even if you conduct transactions in BTC or something similar you'll eventually have to exchange it for the local fiat currency to pay taxes.

> So, theoretically if you replaced the world's currencies with BTC, having a single BTC would make you incredibly wealthy.

The rules can and have changed with just majority (of compute power) consensus through forks. They could be changed to make it inflationary.

I think traditional currency can remain solvent longer than cryptocurrency can remain irrational.

If/when the limit of 21 million is reached, the miners would/will increase the limit. Over time the incentives of BTC holders and BTC miners diverge. One of the many reasons a viable PoS is important, as it merges these two groups into one.

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