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Comment by wslh | Hacker News Reader

> From a very simplistic perspective, it can be compared to gold.

It is indeed very simplistic to compare it to gold and this is sadly part of the Bitcoin narrative. Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison. We can imagine than if a Bitcoin2 is created with similar economic properties and gain more traction it will automatically replace the Bitcoin1 as a store of value. Obviously, this can happen to gold either but with much less probability thinking on all the financial network gold is part of.

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Gold has a recognition as an store of value based on its network effects while Bitcoin network effect is pretty low in comparison.

Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes.

Also, gold's store of value power is also attributed from its stock to flow ratio (the difficulty of inflating gold supply). Bitcoin has an even better stock to flow ratio, which is why its often compared to gold.

> Not sure I understand why you believe Bitcoin's network effects are lower than golds. The more people willing to accept a unit of Bitcoin, the more useful Bitcoin becomes.

Gold is more connected to the regulated financial world than Bitcoin. The network effect is not only about user base but interrelation with other systems. Not saying that Bitcoin could not have a bigger place but it is not there yet.

I see, you're saying gold is basically more established in the current financial system.

It might just be semantics, but when you say gold has stronger network effects than bitcoin, I'm imagining that an additional user provides X value to the gold system, but an additional bitcoin user only adds X-1 value to bitcoin. Which I believe isn't true, both networks probably follow the same marginal utility curves.

Tether (USDT) has more volume than Bitcoin which could mean that the network effect ironically turns to stable coins connected to fiat money taking advantage of permissionless protocols and not caring about the native assets like Bitcoin or Ethereum.

Stable coins like Tether are mostly used by large exchanges for liquidity purposes.

Retail users rarely use USDT to buy/sell goods or exchange with one another. It is also not really permissionless because you need to register with the administrators of USDT and wire a bank transfer if you ever want to convert your USDT to USD. All fiat backed stablecoins have this inherent flaw of having an intermediary party to "parent" transactions. An example of this is Tether banlisting addresses of suspected stolen coins.

Just gonna quickly fork this gold and call it silver

What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2". Some even with overwhelming support from powerful actors. If they fail like they have during Bitcoin's infancy, later on they have no chance.

> What you describe is exactly the property of Bitcoin. Have a look at how many forks have tried to create "Bitcoin2".

I am saying we don't have yet that Bitcoin2 yet and the sum of people and organizations using cryptocurrencies is pretty low comparing to their potential of a Bitcoin2 occurring with more user base.

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