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Comment by acdha | Hacker News Reader

It further highlights how Bitcoin has failed to deliver on any of the heavily advertised changes. Most people do not use Bitcoin and if you talk to to the few who do they almost inevitably are using something like this which keeps all transactions in a real currency.

The reason you should care about that is a pure fiat currency like Bitcoin only has value with other people who agree. Using USD for all real transactions means that merchants continue to have no reason to take on the additional risk and expense of directly accepting it. It lets some speculators cash out but it's not contributing to the growth of the system or give anyone who hasn't already bought in a reason to do so.

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I fail to see your point. It's much better to keep your money as bitcoin because it appreciates in value vs. fiat currency. With payment solutions like this, you get the benefit of a solid currency and also be able to spend it easily.

> because it appreciates in value vs. fiat currency

So did Beanie Babies, until they didn't. But the point of Bitcoin was not supposed to be a vehicle for speculation, it was supposed to be...

well, I've been around HN long enough to know that it's impossible to finish that sentence in a way everyone would agree with. But, remember all those breathlessly optimistic posts and essays from early 2010s about what Bitcoin could be? It seems pretty inarguable that the Bitcoin of 2020 ain't that, and isn't on track to be.

I think most of the progress is actually being slept on. The other day I was checking in with a buddy who works in the crypto space, and he was describing a whole world I wasn’t aware of where people have been driving forward many of those original ideas - decentralized exchanges, flash loans, literally billions (with a B) of dollars of value being moved through a ton of different systems and use cases. Not the “one currency to rule them all” vision, but people are creating lots of cool things with crypto whether they see a lot of use or not.

Bitcoin is a pure fiat currency, which means it only appreciates if you can talk other people into believing it's worth more since it lacks intrinsic value or the inherent demand of a sovereign currency. The theoretical basis for its value is the network of other people who have also bought in but if you're using the credit card network to make transactions in USD you're not giving merchants a reason to accept it directly or seeing any advantages from using Bitcoin.

If you enjoy speculation, that's no more weird than keeping your money in a stamp collection but you don't grow into a real part of the financial system by giving people fewer reasons to care.

I don't think you're using the term Fiat currency properly. Gold is only worth something if other believe it is worth something. It's use in electronics and industry only makes up around 7% of total supply [0].

Yet, gold isn't a fiat asset because its value is anchored to its physical properties. It is finite and cannot be freely created. It doesn't oxidize, is resistant to most acids and other corrosives, and has the highest specific gravity of any naturally occurring element. It is a naturally good store of value because of these properties.

Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics. Take that as you will, but both assets are much more solid than Fed Coin (USD) which is effectively backed by the government's commitment to enforce the federal reserve act while trying their best--and failing--to resist printing more and more money to perpetuate an unsustainable system.

[0] - https://www.statista.com/statistics/299609/gold-demand-by-in...

Here’s the definition of the term I’m using - note that the term does not require government backing:

https://en.m.wikipedia.org/wiki/Fiat_money

The source of your misunderstanding is here:

> Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics.

The Bitcoin algorithm has some interesting properties but they don’t have much practical value to balance the enormous inefficiency and, far more important to this topic, that doesn’t make any particular blockchain valuable - anyone who wants those properties can set up their own for free without enriching the current Bitcoin holders. The only reason why you would consider those hashes to be worth paying money for is the community belief that they have a certain value - nobody has any need to use it otherwise. That’s why Bitcoin is an especially pure fiat currency: the community consensus is quite literally the only thing backing it’s valuation. In contrast a currency like the US dollar has curbs on fluctuation not just from much greater usage but also because millions of people receive it from government salaries and purchases or need that currency to pay taxes — unlike Bitcoin, which has value only to the extent that you can find someone else who thinks it’ll be worth more in the future.

Other elements have higher specific gravity than gold (iridium, osmium, maybe tungsten and Platinum, id have to check the last two. )

Presumably what gvhst means is "It's useful gold is dense, as if there were cheaper denser metals you could create fake gold bars by gold-plating alloys of equal density"

After all, you can already get gold-plated tungsten bars [1] from companies like chinatungsten as 'novelty paperweights' [2] - even though tungsten is fractionally less dense than gold.

As iridium and osmium are traded in very low volumes and toxic/acidic, platinum is more expensive than gold, and tungsten is fractionally lighter, fake gold is seldom undetectable.

[1] https://www.google.com/search?q=tungsten+gold+bar&tbm=isch [2] http://www.paper-weight.cn/products-show.html

Bitcoin is digital gold, essentially a reserve currency but not very useful for small daily transactions. All of the criticisms of Bitcoin can be equally leveled against gold, and have been (“barbaric relic” as Bernanke called it). And yet even central banks still hold massive amounts of gold. So I don’t see any reason why Bitcoin can’t fill the same role that gold does in the modern financial system.

Unlike gold, Bitcoin has zero intrinsic value and hasn't been used by as currency by civilisations throughout human history.

Central banks would be crazy to hold Bitcoin. If a better technology came along which had mass adoption Bitcoin could be made worthless overnight. Many people predicted this could happen in 2017 during the rise of Ethereum.

Personally I can't ever see bitcoin surpassing the the market cap. of gold.

There is no such thing as "intrinsic value".

There is only the law of supply and demand. Econ 101.

Even the argument that something has intrinsic value because you have a use for it is flawed: how much is a gallon of breathable air worth?

A gallon of air is tremendously useful. How much does it cost ?

Infinite Supply = Zero Value.

There is no such thing as "Intrinsic Value".

You might want to read this:

https://en.m.wikipedia.org/wiki/Intrinsic_value_(numismatics...

Gold has intrinsic value based on the industrial and jewelry uses: you could lose a lot more over the industrial demand point but it won’t go below that point because people use it for things other than speculation.

In contrast, random hashes have no value outside of a particular community consensus. You can’t do anything with them and the ones in the Bitcoin blockchain have no more inherent value than those in any other network.

>[Bitcoin] only appreciates if you can talk other people into believing it's worth more

I would say the same about gold (though you probably disagree). Gold has some "intrinsic value" (e.g., as a plating on electrical conductors) but would be worth much much less if no one believed that it is a good way to store money.

But perhaps more importantly, Bitcoin differs drastically from most fiat currencies in that its rate of inflation is capped: over 85% of all bitcoin that will ever be created have already been created.

The same BTW cannot be said of gold, which is being mined at an increasing rate:

https://fee.org/media/30406/figure-1_bitcoin_inflation.png

https://fee.org/media/30407/figure-2_inflation_bitcoin_gold....

Why does bitcoin appreciate in value vs. fiat currency?

it doesn't have to, but governments can't steal from the poor and give to the rich as effectively if they don't devalue the currency. It's such a mind trick that it gets nearly universal support regardless of if the policymakers is on the left or the right, and everyone who is opposed to it is labeled a kook. If it's gradual enough the increasing divide between the rich and poor will be pointed at other causes like 'capitalism'. Naturally, governments would like to continue such a universally beloved source of revenue, so the state of affairs of bitcoin vs fiat is unlikely to change, and of course bitcoin and similar forms are like to suffer restrictions and limitations imposed on it by governments.

It's also worth noting that the meteoric rises of bitcoin since its inception has very little to do with this fundamental form of cryptocurrency relative appreciation, outside of attracting the kooks who want to believe in alternatives.

Because it has a rapidly declining stock to flow ratio, which will soon be even lower than gold. It will be the hardest form of money ever devised.

This rapidly declining inflation rate is undesirable as it necessarily concentrates wealth in early adopters.

Other coins are even harder in just creating ALL supply in one instant. That makes them both harder and worse.

A constant emission would minimize concentration of wealth yet still have inflation rate going to zero.

Because central banks are hyperinflating fiat currencies whereas bitcoin has a fixed supply and a lower velocity of money.

Hyperinflation is an economics term with a defined meaning which does not match how you're using it: https://en.wikipedia.org/wiki/Hyperinflation

You're also making the mistake of assuming equal demand: Bitcoin is inherently deflationary but it's also completely voluntary — few people use it and nobody is required to use it. Bitcoin's high variability over the years shows that speculator demand can last for years but there's no lock-in and many competing options. There are a few people who've put large amounts of money into it but statistically almost nobody uses it so there's little defense against a competitor because most people have no sunk cost and most of the percentage who do have only a small holding at risk.

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

USD is being actively and significantly devalued (take a look at the US Dollar Index, as an example), as are most other major fiat currencies. I was using hyperinflation a bit hyperbolically, but the point still stands. One potential interpretation for the the appreciation of bitcoin vs. USD (which, I should add, is the longest its ever been over 10K/btc spot) over the last few weeks is a reaction to the ongoing attempts to jumpstart the various economies of the world that have been put on life support since the start of the pandemic.

Obviously bitcoin and USD don't have equal demand curves, but compare the supply curves: stable vs. arbitrary. If you're comparing two assets, they don't necessarily need to have equivalent instantaneous demand functions - that seems a bit specious.

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

> even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts.

Sir, do you want workers to make a fair wage? We can't have that. You should be supporting inflation.

"The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’ — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s."

- Paul Krugman, visionary & scholar

And how does that refute what he says about inflation and deflation?

Because it is better money, and it's more desirable to own. There isn't a simple answer on why it's better money.

Here's a long answer to the question: https://medium.com/@danhedl/planting-bitcoin-sound-money-72e...

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