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Comment by JumpCrisscross | Hacker News Reader

> if you view it as a savings technology then it's the best one that's ever been created

Bitcoin is a terrible savings vehicle for the same reason cash in checking accounts or collectibles are: there is no basis for its value.

Baseless assets other than gold have been numerously proposed, usually about once every generation in every cultural sphere going back to Republican Roman times, but unvaryingly fall out of favor. This is why savvy portfolios consist of productive assets, not Beanie Babies.

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That's exactly why Bitcoin is interesting. It is currently being accepted as having it's own value, just like gold. It's an experiment that seems to be working.

Cash or collectibles don't have the same monetary properties as bitcoin or gold. Most importantly, they can be created from thin air.

Bitcoin does not have value of its own. What can you do with a Bitcoin as printed code or eWallet without functioning Bitcoin economy?

It is fiat tied to used value not means to gain value.

On the other hand, you can manufacture useful things from metals, including precious metals. Heck, even old school non-precious metal coins have some of that value.

that's not why gold is valuable, historically. Historically gold is valuable because it's rivalrous, fungible, and most importantly, easily verifiable.

You can assess approximate purity of the metal with very low-level technology (https://en.wikipedia.org/wiki/Touchstone_(assaying_tool)). Transactions thus have a lowered barrier of trust. Before gold and money, you could only transact in debt to labor (see debt: 5000 years) or socialized obligations, and to be sure the person would conduct that labor, you had to trust them, or trust society to honor the obligation.

More interestingly in particular, once gold came into being, two people could reliable transact over a very long social distances, (without necessarily knowing each other's reputation). You just had to trust an intermediary party to transport the gold. Nonetheless, that opened markets up considerably.

This is correct. Gold is the original “it’s valuable because everyone agrees it is,” and retains that first mover advantage. Over the centuries there have been numerous challengers. Almost all (silver being a notable exception) failed.

Indeed. That does not negate its base value even in barter. (Though it's much lower.)

And especially items made with the use of gold can get really worthwhile - such as semiconductor chips...

So in a funny indirect way, Bitcoin is tied to gold. Both of which are tied to specific costs of labour. Bitcoin however requires a lot of expensive infrastructure to run to be worth anything. (Esp. networking, required to ensure no fake mined bitcoins are in circulation.)

Even printed cash is better at this.

The whole state is required for printed cash to be worth anything. I doubt it's cheaper in any comparison.

I think just saying "it's only valuable because it's agreed upon" is shortchanging gold. Its verifiability is an intrinsic property if ever there was one, and has to do with quantum relativistic effects in its outer electron shell that only gold has.

Your explanation doesn't make it clearer to me. It looks like you're missing a step between no basis in value and being a terrible savings vehicle. As a saver, I don't care about the basis, I care that the money doesn't get too discounted with time, and I care about the risk.

What am I missing?

> As a saver, I don't care about the basis, I care that the money doesn't get too discounted with time, and I care about the risk

Basis links the asset to other assets. That makes it less likely your asset will singularly get discounted relative to the broader economy, i.e. lose purchasing power. It is still exposed to systemic risk, but so is everything.

Baseless assets, like diamonds and paintings and Bitcoin, derive their value solely from perceptions. That can be somewhat stable over the short term (up to 20 to 30 years). But it tends to fall apart between generations or through culture-changing crises.

Put another way, investment assets are tied to productive uses in some way. Baseless assets are not.

> Bitcoin is a terrible savings vehicle for the same reason cash in checking accounts or collectibles are: there is no basis for its value.

10 years is a long time to hold an erroneous belief based on a misunderstanding of what money and assets are. I had the same wrong beliefs as you do now for a long time and misallocated capital at a crucial moment. Parker Lewis explains[0]:

> [Bitcoin] is backed by the only thing that backs any form of money: the credibility of its monetary properties. Money is not a collective hallucination nor merely a belief system.

An interpretation:

Money is an emergent property of human cooperation to allocate capital, labour, and limited resources. (i.e. economics). Productivity is the use of time and energy in the satisfaction of human preferences.

What are the properties a money, be it gold, cowrie shells, baseball cards, nudes, exploits, fiat currency (legal tender), must strive to meet for humans to recognise it as "a money": durability, portability, divisibility, uniformity, limited supply (scarcity), and acceptability. [1]

Incidentally, if you pick up a US dollar bill, you'll see the inscription: "this note is legal tender, for all debts public and private." Therefore, that note derives its value from the implicit debt underlying it. That debt is based on some person's labour in the creation of a product or delivery of a service.

[0] https://unchained-capital.com/blog/bitcoin-is-not-backed-by-... [1]: https://www.stlouisfed.org/education/economic-lowdown-podcas...

> Therefore, that note derives its value from the implicit debt underlying it

That is not what legal tender and “for all debts public and private” mean [1]. That language refers to dollars being currency “courts of law are required to recognize as satisfactory payment for any monetary debt”.

On the Parker Lewis article, it’s cute but contrived. A straw man. Bitcoin is backed by nothing. U.S. dollars are, similarly, backed by nothing. Saying they’re suspended by shared perceptions is technically true, but implicitly re-defines backing to a meaningless word.

[1] https://en.m.wikipedia.org/wiki/Legal_tender

> That is not what legal tender and “for all debts public and private” mean [1]. That language refers to dollars being currency “courts of law are required to recognize as satisfactory payment for any monetary debt”.

That's exactly what I said: that physical note has value only in so far as there is a debt with which to pay it. That debt is the value someone else's productivity created. If your dollars are backed by nothing, please send them all to me so I can keep them for you.

> Incidentally, if you pick up a US dollar bill, you'll see the inscription: "this note is legal tender, for all debts public and private." Therefore, that note derives its value from the implicit debt underlying it.

There's no such thing. That it can be used to pay debts doesn't mean there are debts underlying it, implicit or explicit. It means that if you incur a debt, and you have one, you can use it to resolve the debt.

> That it can be used to pay debts doesn't mean there are debts underlying it, implicit or explicit. It means that if you incur a debt, and you have one, you can use it to resolve the debt.

This is a misunderstanding that guides the idea that we can print money arbitrarily. I'm not saying I am right but I am saying that there's a distortion in our understanding of fiat currency that we need to keep thinking about by examining our base assumptions.

Consider: The only reason to receive a dollar is because I've provided you with a service or product. You need to pay for that, therefore you have incurred a debt (we might agree that you pay in 30 days, but even if you pay in 16ms, you had a debt for that amount of time). That dollar, then, is the value of that debt, which is the value of my labour. When it's not the value of my labour, you have either underpaid or overpaid. That dollar is just a paper. The only reason you or I think it's valuable is because we can use it to pay such debts that actually exist in reality. A dollar is an abstract unit of such a debt.

It's legal tender because a government promises to enforce debt repayments using fiat. The government creates the currency, the enforces its ability to pay individuals using that currency, and requires individuals to pay the government, through taxes, in that currency.

It should then be easy to measure the productivity of a nation by "looking" at the total money supply. If we print money, then prior valuations of productivity in such transactions are debased: I gave you a dollar for your algorithm yesterday, but today there are twice as many dollars. You would have charged me 2 dollars, had you known more would be printed!

That's the hypothesis: a dollar is a measure of value of the debt incurred during transactions between productive humans/machines. Holding that dollar implies a debt to me was paid. The dollar stores the value of that productivity for me and allows me to pay a future debt I will incur.

  dollar <- debt <- transaction <- productivity.

So humour me and ask yourself: what if the dollars in existence are, in fact, backed by debts on productivity. What are the implications on monetary policy.

It’s automated fiat.

Cash is a bad savings vehicle not because its based on trust, but because they keep printing more of it and it already reached price maturity in terms of market cap (its saturated in how many people keep wealth in it, especially as an inflationary asset).

Bitcoin has been a very good savings vehicle over the past 12 years in terms of long term moving average. Like social networks such as facebook, gold, etc, it has network value and these tend to be hard to break when at scale (there are many forks and all are worth nothing). Bitcoin is now (aside from ETF's and 401k's) the single most held liquid tradable asset on earth. More people own it than stock in Apple (not in ETF or 401k form).

You think the gold MC is based on utility? There is not a 9 trillion electronic plating and jewelry market. Jewelry is also by extension speculation on the metal. 95% of golds market cap is through the same value social network that gives bitcoin value. Except I've owned physical gold and its a pain in the ass for so many reasons. Bitcoin is a better store of wealth. Its something that is useful and limited to many including myself and has reached the beginnings of mass adoption. It has value.

So you can continue to call it a beanie baby but that old phrase has been said since 2011. How long can you shake the cane at the sky? Even JP Morgan and Goldman Sachs have come around in addition to Paypal and the others. The entire legacy financial system is adopting at this point.

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