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I very rarely hear the bitcoin crowd claiming anything around bitcoin as money, but more like gold; a store of value that is admittedly difficult to move around. You can't pay your taxes in any asset that isn't money. The government isn't going to take a bar of gold (or if they will, I certainly don't know how to give it to them), and they definitely won't take your Micky Mantle baseball card or Rembrandt painting unless you've gotten so far down the hole that they've got people liquidating those things to wring the money out of them to pay your debt. There are a lot of things that represent monetary value that definitively aren't money and can't be used as such, but that doesn't negate their value.
That's an interesting claim, especially since you don't specify _stable_ store of value. Do you believe that trading cards are not a store of value? Or shares? The only inherent value of a trading card is that you can wipe your ass with it or set it on fire to stay warm, and yet people often pay hundreds of dollars (or more!) for them.
I try and keep that in mind when I feel too tempted to get into the predictions game.
I wouldn't get into Bitcoin either, though.
(Might be fun to do a “your worst tech predictions” topic on HN.)
This is an example of a tech person extrapolating their expertise outside tech. Bitcoin is an experiment in economics as much as it’s an experiment in technology. Just because the network is slow to process transactions doesn’t mean the entire system is worthless.
The first 90% of the article isn’t bad, but IMO author didn’t really backup his claims.
If.
If you have a sports car that is limited to do 15mph, but can actually do 215mph if you remove the artificial limiter, then you don't need a technological breakthrough to get the car to go to 215mph.
https://www.youtube.com/watch?v=92AYj_9W7x0 - Why is Block Size 1MB Andreas Antonopoulos
There's simple trade-off between decentralized and bandwidth requirements. If you raise the limit you reduce the pool of those that run full nodes thereby centralizing the network at which point you're undermining the point of a decentralized ledger.
The steel-man version of the Bitcoin/crypto future is that most people would use trust-based institutions to perform instant transactions (like credit cards and Venmo), just that the ultimate step involves an hour long blockchain transaction rather than a days-long ACH batch file. The fact that the Blockchain also enables individual point-to-point payments (albeit slowly) in a trust-less way is more of a replacement to having to mail somebody an envelope/briefcase full of cash, which is currently the only way one can transact if one is blacklisted by the centralized institutions. And depending on your political leanings, you might still prefer to use centralized payments on top of Bitcoin/crypto instead of on top of USD because with the former, there's little room for funny business by central bank reserve messing with the supply of money.
Same-day ACH exists today. Even for international transactions. Most ACH batch files can be processed in as little as an hour. To the extent there's anything preventing "instant transactions" its (1) AML regulations and (2) internal/contractual (Visa, etc.) fraud prevention, not the ACH process.
What Bitcoin allows you to do is build a financial system comprised of products that look like Venmo, credit cards, banks, etc on top of a currency system that's 1) censorship resistant (unlike ACH), and 2) independent of central bank monetary policy (unlike most fiat currencies).
The degree to which you care about (2) is obviously based on your political leanings, but (1) basically turns paper-money in-person transactions into something that can happen between strangers over the Internet unencumbered. Most crypto bulls hope that the vast majority of people use instant bank-driven payments, just based on the blockchain at the lowest layer, rather than USD-over-ACH.
And to be clear, I'm not really a crypto bull and I don't really have a horse in the race. But this is the steel-man argument for crypto.
In theory, it's two-fold:
1) That you have the option to use the same money in that account in a trust-less way. In the USD/cash world, the only way to do this is to withdraw money from my bank, put it in an envelope, and mail it to the recipient. In the crypto world, you might still use a Visa card or a centralized money transfer product to transact day-to-day, but if you want to (just as an example) donate to an adult entertainer on OnlyFans/PornHub (blacklisted by the major CC networks), you can do that off the same crypto wallet via the blockchain. Another (perhaps more topical) example: there are a handful of companies that are effectively persona non grata to the tech world, like Parler and Gab, effectively cut off from PayPal/Visa/MC/etc. If you want to transact with them digitally, the crypto model allows you to do that without mailing briefcases of cash.
2) The underlying currency is deflationary and immune to the whims of a state-run central bank. This is only valuable to you if you're worried about hyperinflation and the money printer.
> Put differently, if there were a cryptocurrency whose price did not fluctuate, how would you convince me to use it?
If the above reasons aren't important to you, the other point I think is that crypto doesn't need 100% adoption to be successful. It's another currency option for those that don't trust the USD or JPY or EUR, and a fully realized crypto/fintech ecosystem affords one the ability to live their entire life off of one of these cryptocurrencies while still interoperating with fiat currencies via exchanges like Coinbase. ~1.5% of the world uses JPY day-to-day, and that’s a perfectly viable currency.
> It is completely unambiguously obvious to me that Bitcoin, a brilliant achievement technically, is functioning as a Ponzi scheme, siphoning money from the pockets of rubes and into those of exchange insiders and China-based miners.
Can anyone confirm/debunk this claim:
> A few large holders commonly referred to as whales continue to own most Bitcoin. About 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency’s blockchain control 95% of the digital asset, according to researcher Flipside Crypto.
* https://www.bloomberg.com/news/articles/2020-11-18/bitcoin-w...
Isn't this exactly what Bitcoin is?
if you think Bitcoin is complex and expensive to maintain, what do you think it costs to run the U.S. Dollar system?
For that reason and that reason alone I would never ever bet against BitCoin.
I also wouldn't bet my house on it, but digital currencies really could turn out to a be much more efficient currency system than our current state issued currencies.
If you want it to be a currency, it needs to be able to expand its supply to meet demand as a medium of exchange. Otherwise you get huge deflation.
Instead, Bitcoin was designed to have a very finite amount of supply. And - shockingly - anyone trying to use it as a medium of currency would find that viewing the world through the lens of Bitcoin has been massively, hugely deflationary (meaning: the cost of a Bag Mac has fallen dramatically in terms of Bitcoin, as has your paycheck).
That same 'feature' is what made it the darling of speculators. It's like the feature that makes it a dysfunctional currency is also what made it successful as a tool of speculation.
That's not an indictment of crypto generally - hopefully other coins that were designed to more intelligently expand supply as the demand for them increased as a medium of exchange, and these other coins would exhibit more price stability, a core requirement of a functional currency.
Crypto brings some great decentralized features, and its creators deserve credit for it. But combining that innovation with some understanding of monetary economics would truly unleash its potential as an alternative to state-sponsored currency.
> An ECB publication states that bitcoin’s theoretical roots are in Austrian economics[11]. Bitcoin corresponds with Austrian economic ideas in that bitcoin was intended to provide a monetary alternative that is beyond the reach of governments to regulate. Bitcoin has correspondence with libertarian ideas, which have some relationship with Austrian ideas. In the USA, my experience is that bitcoin proponents appear to have obtained their theory from science-fiction, radical libertarian popular literature, anti- government/anti-tax activism, and often from nothing that is apparent except their own thoughts.
Couldn't say it better myself.
Smart enough to understand tech trends, but not smart enough to introspect using logical fallacy.
SMORT
After reading this we should be careful not to make an argument from fallacy. This may be a fallacious argument but that does not mean the conclusion is wrong.
nor does it make it right either.
It does however show how consistently rather knowledgeable people in one domain confidently make bad faith arguments about how bitcoin is bad with bad logic.
Given the history of how financial bubbles play out, I personally would not recommend shorting it outright.
[0]: https://www.cmegroup.com/trading/equity-index/us-index/bitco...
As you mention, market timing is always a problem in such trades. A problem more specific to Bitcoin is that the market is not all that liquid, and that it is subject to the whims of some whales. Last of all, I suspect that Bitcoin bets might carry a significantly higher counterparty risk that e.g. shorting TSLA.
What the author misses, and what many on HN miss, is that technical expertise does not translate into financial/economic expertise. You may grok Bitcoin on the CS level and still totally misunderstand the economics.
[1]: https://www.coindesk.com/ohio-becomes-first-us-state-to-allo...
Digital money without trusting a centralized authority. However, Ethereum is even more interesting in that it can be a 'world computer' for things other than money.
I'd be more curious about something less obvious, e.g. in 2030 50% of software running was not written by humans or the like.
In my opinion you should approach it like you would any other form of speculation: risk what you're comfortable losing and have a plan for when you'll take your winnings.
Coincidentally, that's exactly how a Ponzi Scheme works.
He talked about limited transaction rates then too.
> The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.
> What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.
[…]
> Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
> Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
[…]
> A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
* https://www.berkshirehathaway.com/letters/2011ltr.pdf
In some ways this is a form of Greater Fool Theory: you'll only make a profit if someone comes along later and is willing to pay more for it, as it otherwise doesn't not have any productive use.
* https://en.wikipedia.org/wiki/Greater_fool_theory
And given it was designed to have a finite amount, that means it is deflationary over the long-term which incentivizes hoarding.
An observation from a paper I ran across:
> An ECB publication states that bitcoin’s theoretical roots are in Austrian economics[11]. Bitcoin corresponds with Austrian economic ideas in that bitcoin was intended to provide a monetary alternative that is beyond the reach of governments to regulate. Bitcoin has correspondence with libertarian ideas, which have some relationship with Austrian ideas. In the USA, my experience is that bitcoin proponents appear to have obtained their theory from science-fiction, radical libertarian popular literature, anti- government/anti-tax activism, and often from nothing that is apparent except their own thoughts.
* https://arxiv.org/pdf/1312.2048.pdf
* https://arxiv.org/abs/1312.2048
I remain skeptical about any mainstream use. Though having a bit (<5%) in one's portfolio isn't crazy as some 'play money'.
Similarly I don't bother holding gold (bullion or ETFs), but if someone has a portfolio with a few percentage points' worth it isn't unreasonable. Generally gold isn't as useful as many people think it is:
Do I care that Android devices have larger market share? Not at all. Apple is on the high end, profitable part.
Should you care that the crypto ecosystem has a few bad actors, and may not be for 90% of the population? Not at all, and for the same reason.
Some customers are said to be the "harbinger of failure" [1]. Considering the author employment history, I might say the same: some employees may be harbingers of doom for the company that hires them.
If he had been working at Apple (=>iPhone) instead of Sun then Google, he might have had more of a point... but still, past performance not being indicative of future performance, I'm extremely cautious about old hackers who think they know it all and extrapolate WAY outside their area of competence.
[1] https://news.mit.edu/2015/harbinger-failure-consumers-unpopu...