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Comment by kd5bjo | Hacker News Reader

All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all. There must be a central registry of them somewhere.

Money as understood by economists is not physical currency (coins, notes, etc), but an emergent property of the institutional use of IOUs of various kinds, like debts and fractional reserves. These also exist in the bitcoin world, and have already caused problems— How long did MtGox operate without reserves? Does Bitfinex actually have the reserves it claims to? If Bitcoin were immune from the problems of fiat currency, these questions wouldn’t even make sense to ask.

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> These also exist in the bitcoin world, and have already caused problems— How long did MtGox operate without reserves?

Exchanges are not part of the bitcoin world, they are bridges to it.

Longer version of the above remark: what bitcoin is truly about is financial sovereignty, or, to put it in more layman's terms, lack of counterparty risk. The bitcoins held in a bitcoin exchange are mismanaged funds, you should never leave your cryptofunds in the exchange: "not your keys, not your coins".

PS: These days, you can even find "bridges", i.e. exchanges, that don't have even this problem anymore, e.g. HodlHodl exchange, which doesn't hold customer's funds, so it's impossible to achieve a fractional reserve malpractice.

I’m less concerned with philosophy and how people “should” be managing their assets than I am observing what people actually choose to do. The exchanges exist, their actions affect the value of bitcoin, and the value of bitcoin affects them. Therefore, any analysis of the bitcoin ecosystem must take them into account in one way or another.

Similarly, there’s no fundamental barrier to promising to pay someone bitcoins later that you don’t currently possess. That’s the seed of a credit-based economy, and also the piece of the fiat system that makes things so complicated. It is disingenuous to make a comparison that includes this complexity on one side but not the other without giving justification.

It's no longer "philosophy" but education and awareness. The longer bitcoin exists, the more custodial exchanges get hacked and consequentially the better knowledgeable bitcoin users we will have.

You cannot bring points against bitcoin which actually happen more in centralization-backed entities than in decentralized scenarios.

There are plenty of examples of bank runs and other crises pre-regulation and pre-fiat currency, dating all the way back to the 1600s— that’s about as decentralized as you can get. If you want to argue that there’s something fundamentally different this time around, that’s fine, but I’d appreciate evidence rather than assertions.

In fact, the least problematic time in terms of bank runs appears to be the years of the highly-centralized Bretton-Woods system post-WW2 (1).

It’s also not like holding bitcoins yourself is entirely risk-free. You can accidentally expose your private key and have your money stolen or you can lose your private key and have it locked away forever. Either scenario means you no longer get to use your money, and any defense against one makes the other more likely; it’s a difficult balance to ask people to get right.

(1) https://en.m.wikipedia.org/wiki/Bretton_Woods_system

Giving me an example of decentralisation set in the 1600s? Dude... The best way to finish this convo is the way Satoshi replied once: "If you don't believe it or don't get it, I don't have the time to try to convince you, sorry"

Every greenback may be registered. But physical currency is only a small amount of the actual circulating money supply.

Due to fractional reserve banking, banks lend money they don't have. Banks are only required to have 10% of the money they loan on reserve.

You loan currency to a bank in the form of deposits, they keep some of that on premises due to the reserve requirement and loan out the rest to their other customers. In exchange for letting the bank use your money, you get insurance and a tiny interest payment.

Other than it being too young and inconsequential for people to bother, what property does bitcoin have that works against this scheme? Banks have worked this way since long before modern fiat currencies were developed, and they’ve always increased the money supply without minting new coinage. Whether it’s gold bullion, federal reserve notes, or bitcoin keys in their vaults doesn’t seem to make much difference.

Bitcoin is much like cash in that you can choose to opt out of making your money available for fractional reserve.

Why with cash many don't do that, beats me. According to Keynes, people should withdraw their cash when there is no interest to be gained ("liquidity trap"). In practice, people don't, and that makes Bitcoiners crazy: good marketing makes (especially badly informed) people act uneconomically, since they think they are saving, while they are actually investing in an indifferent manner.

Other important aspects of Bitcoin are, that it makes the money supply transparent, and everybody can validate transactions. This is not as simple with cash or gold.

> Why with cash many don't do that, beats me.

The banks provide a service that has some intrinsic value: They protect your cash better than you can, and store it in a place that is physically separate from your home.

Home thefts occur with a higher frequency than bank thefts, and someone who's known to keep large quantities of cash in there home becomes a bigger target. If your money is stored in a bank, you're more exposed to a banking system collapse but insured against ordinary theivery. If your home is destroyed, then your money is still safe; if your bank goes bust you still have your home (or at least the things inside it).

Keeping cash does not mean one has to keep it at home. You can actually leave it in a safe at the bank and just use the bank as a warehouse.

In this case you have to pay a small fee, but you decrease the amount of cash that can be used for loans, and thus make loans more expensive, leading to better rates for lenders in the future. (At least this is my understanding at the moment - still getting into the topic, so please excuse if I am oversimplifiying.)

> All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all.

Most money (specifically, most US dollars) are not in the form of coins or notes. See: https://www.quora.com/How-many-dollars-are-there

~1.4 Trillion USD in notes ~60 Trillion USD total

coins are certainly less than notes, but I'm not sure how much less, so let's guesstimate no more than 0.5 Trillion, and that's a stretch. So, about 97% of money is not in notes and coins.

This is certainly true. My point was that I see no evidence that, should bitcoin become mainstream, the situation would be any different- nothing about bitcoin prevents its use as the basis for a credit economy like notes are now and bullion coins were before them.

And it’s the credit that’s making things complicated, not the central banks.

Bullion is usually not the basis for a credit economy. I remember reading Graeber's "Debt: The First 5000" about this point, but I forget the details. And if we're talking about an "illusory basis" (i.e. much more money than there is bullion) - so in a sense it doesn't matter all that much whether it's Gold or BitCoin. You won't have the distributed nature of BitCoin then, because banks would create "BitCoin-backed credit", i.e. banks create the money.

What confidence do you get out of serial numbers and existence of registry if there’s an entity that can freely print few more trillions?

Mtgox was a private enterprise that was managed by incompetent/malicious individuals, why does this always come up in bitcoin discussions? Mtgox is an example why you need to care about owning your money. People who lost money in mtgox didn’t own those money, they gave them away for a promise to have them returned.

Your description of money shows that you still treat it as an elementary system of debits and credits from a global ledger instead of an algebra of transactional commerce.

No, in fact they do not keep track of each individual dollar. At least for aggregate money supply; perhaps they do keep track of M0. I am not sure.

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