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Comment by tomkarlo | Hacker News Reader

Is the supply really "limited"? Sure, there's finite number of "coins" that can be generated. But unlike physical objects, there's not really any special property of that unit. Also, you can just generate a new currency of more units and similar utility (as has happened many times recently.)

Objects in the real world have utility that's directly linked to their unit value. That's not necessarily true for Bitcoin... if it goes up 10X, I can just use 1/10 as much and get the same exact transaction result. So why is it "limited" from a supply/demand perspective?

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> Objects in the real world have utility that's directly linked to their unit value.

But that's not true of money...whether it's official fiat money, many local currencies, or even gold, which has some utility but not near enough to support its total value.

I'd say that an analogy with diamonds works: There is an infinite supply of lab-made-diamonds, however they are not fungible with real diamonds. Them being substitute goods, lab-made-diamonds may have negatively impacted the price, but real diamonds are still considered scarce.

This analogy isnt complete though because it doesnt take into account network health. Its easy to make a cryptocurrency, but hard to build a network large enough to defend against various attacks. There are many, man coins out there suseptible to double spending - bitcoin is the most secure, and this security adds some value in itself.

Maybe you're jumping to the conclusion too fast. Most coins don't have publicly declared vulnerabilities (ie there might be many 0days). But it might be untrue that bitcoin price is not being manipulated (an attack itself on the network) based on multiple articles on HN alone.

So bitcoin might not be too unique or valuable.

There is nearly an infinite supply [for all practical purposes] of mined diamonds, for that matter. And lab-made diamonds are real, and aside from the early versions being a little too perfect they are indistinguishable from mined diamonds.

> There is an infinite supply of lab-made-diamonds, however they are not fungible with real diamonds.

Ada Diamonds sells lab-grown diamonds and jewelers can't tell https://news.ycombinator.com/item?id=17228369

De Beers admits defeat over man-made diamonds https://news.ycombinator.com/item?id=17183603

There's an infinite supply, but there's non-zero cost associated with accessing incremental units in that supply. (And some would say diamonds are an artificially constrained market anyway.) With crypto, there's arguably an unlimited supply at zero cost.

> With crypto, there's arguably an unlimited supply at zero cost.

I like that one. Makes it seem like its a perpetual motion machine and we all know how that ends.

The mining cost is actually quite high for bitcoin, there's a friction involved that's being overcome.

They pretty much are fungible with natural diamonds. High quality synthetics can't be told by eye from equivalent quality naturals.

If they're < 1ct., it doesn't pay to have them analyzed.

"Real" diamonds have always been considered scarce, but only because of marketing. De Beers, AlRosa, etc. have very large reserves of natural diamonds. Over time, they will become genuinely scarce, as the industry agrees that economically recoverable deposits of natural gems will decline after about 2020.

Diamonds aren’t scarce. They are just unevenly distributed, and a few cartels own the means of production. The resale market for all but the most valuable diamonds is complete crap, because deBeers keeps bringing enough new diamonds to market every year to meet demand.

while the supply of digital coins is infinite (you could fork btc, or any other chain, or create different coins that could then be forked) the supply of Bitcoins is finite & knowable. this is a component of the argument by "maximalists" who suggest that alternate coins/tokens are bullshit by design, and anybody who thinks they aren't is necessarily in favor of inflationary money.

> Objects in the real world have utility that's directly linked to their unit value.

Could you explain what this means to you? I don't understand what you're saying

Bigger diamonds are more desirable than larger diamonds, not because of the price, but because they look better and are sparklier and harder to lose and all sorts of other real-world metrics.

If I want $1000 of bitcoin, I don't care whether that value is in 1 BTC, 100BTC, or 0.0001BTC. They are otherwise identical to me.

Therefore, the fact that the total of all bitcoins in circulation can't exceed 23 million is irrelevant unless you care about the value of 1 BTC, which is only the case if you are trying to sell them for more than you paid.

What he said above: unless you have a long or short position, you don't care whether you get a full unit or some fraction thereof.

There are some elements of behavior economics that counter this - people like to buy lower-priced coins and stocks because they get "more" of them, from a unit perspective. But rationally, there's no reason to consider 1 BTC @ $10 any different from 0.1 BTC @ $100, hence the number of "units" seems potentially irrelevant.

but is the same not true of trading USD for EUR? If I want $1000 of EUR, I don't care whether that is 1 EUR, 100, or .01. The value is in the ecosystem.

Bitcoin is still at the beginning of the beginning of any sort of ecosystem. Everyone expects way more from it than is possible. It is/will deliver on the things it is designed to.

You're correct that I don't care about the value of 1 BTC (or 1 EUR) unless I can sell it, but you imply only selling it for USD again. When it is widespread enough to be a currency, you can 'sell' it for goods and services.

Yes, but people argue that the finite supply of Bitcoin is a fundamental advantage vs. currencies. The supply of a currency isn't really infinite, but it's quite flexible when you consider that giving credit effectively "creates" more currency and expands the monetary supply. (I'm not clear why BTC won't eventually have this issue as well if folks start lending / borrowing it.) All the BTC really avoid is increases in the monetary supply via the printing of additional currency, which is arguably a feature of traditional money, in that the central government can intentionally tighten or ease the monetary supply to help manage economic volatility.

while the supply of digital coins is infinite (you could fork btc, or any other chain, or create different coins that could then be forked)

This is bull. It's not zero cost to fork a cryptocurrency. It's not zero cost to mine. The supply of a digital good might well be very large. However, it will most certainly be finite.

You could fork the cryptocurrency and let miners decide their reward.

Then you're limited to "What's the biggest number that a miner can name in the finite amount of memory available?", which has the ultimate limit of a Busy Beaver function.

BB(n) for n > 1500 behaves like an infinity in many important ways.

Then you're limited to "What's the biggest number that a miner can name in the finite amount of memory available?"

Then just apply my original argument. It's not zero cost to mine. It's not zero cost to fork. The supply of cryptocurrency will be very large, but it will be so many x orders of magnitude smaller than BB(kerjillion), that x itself might be larger than the number of every cryptocoin ever made and every cryptocoin that ever will be made.

The useful thinking is about the computational limits of our current civilization, not infinities or redonkulous numbers.

You don't need to fork it, or mine it. You just use a smaller amount.

My point was that other traditional "store of values" have inherent value based on their utility per amount, which means that the finite supply has implications for people who want to use it. Bitcoin doesn't have that - it's purely useful in terms of what you can trade it for (much like a dollar.) Hence the fact that there's only so many "units" is kind of uninteresting, because a fractional unit is no less useful.

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