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Comment by osrec | Hacker News Reader

I believe Bitcoin is the experimental precursor to proper distributed money.

For some reason, even though BTC was meant to be "money", it is now being treated as an asset (at a basic level, an asset is something you hold onto, as it produces additional value, unlike money, which tends to devalue if not put to work).

It's almost as if the next big idea in distributed money will be around disincentivising "asset" like behaviour.

Assets are terrible things to use for everyday transactions, which is why I don't quite consider Bitcoin "money" just yet.

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If we're just passing money around, why do we need a separate currency at all? Stablecoins already exist, but they're not popular because all of the speculative value has been removed.

Bitcoin's real invention was censorship resistance, by incentivizing distributed miners to arrive at consensus about transactions in a way that no single miner could control. Sadly, that same distributed incentive is responsible for Bitcoin's ever-increasing energy usage.

I think BTC energy consumption is a major issue, as is speed and capacity. I'm actually not sure what real problem BTC is actually solving currently!

Also, I don't quite understand your first question. Care to elaborate?

If you’re not sure what real problem bitcoin is solving then you are living in a bubble.

30% of the world unbanked. Bitcoin provides a way for them to store their money.

If they're unbanked, how do they buy bitcoin? You can't just hand over notes for bitcoin in that many places, can you?

Stablecoins aren't popular?

In the last 24 hours, there's been $108B traded.

https://www.coingecko.com/en/stablecoins

> why do we need a separate currency at all? Stablecoins already exist

Monetary policy

Stable coins are incredible for cashing gains when you are unsure of future movements. All without having to transact back into fiat. You can then earn generous interest rates on your stable coins (Uniswap, etc.), far higher than any bank currently offers.

Check out Nano. No fees, no mining, near-instant transactions, and fixed supply.

https://docs.nano.org/protocol-design/introduction/#abstract

The eventual distributed money could be bitcoin-associated without being bitcoin itself. For example, DAI[1] is (AFAICT) a derivative of Ethereum, but pinned to USD. It relies on the underlying store of value that Ethereum represents, but isn't tied to the value.

[1] https://en.wikipedia.org/wiki/Dai_(cryptocurrency)

DAI isn't so much a derivative of Ethereum, rather it is a dApp (decentralised app) that runs on the Ethereum smart contract technology.

ERC-20 tokens are the magic that enable second-layer "currencies" such as DAI and others to work on top of Ethereum. There are other tokens, even WBTC (Wrapped Bitcoin).

DAI itself is backed by a basket of token-based assets such as WBTC, WETH, USDC, USDT etc.

The Ethereum dApps are definitely a fun rabbit-hole to dive into, e.g. UniSwap, Synthetix and other DeFi applications.

The main problem as I see it is the transaction costs are very high (I looked into using UniSwap but it was going to cost > $50 to transact what I wanted). However, in the next few years the Eth2 improvements will help scale the network and hopefully see transaction prices fall.

I think the way to discourage hoarding behavior is inflation. Cryptocurrency follows similar models of scarcity like Bitcoin. Some cryptos have tail emission. None of them has any meaningful inflation.

I designed Bitflate. It's a cryptocurrency with 7% inflation. The rate is moderately high to make it the opposite of Bitcoin. But it's not too high to cause hyperinflation. Bitflate is a Bitcoin software fork. So there are possibilities to create hybrid cryptos that have inflation rates between 0 and 7%.

Check out my project: https://bitflate.org/.

Great at discouraging hoarding I'm sure!

But how can this encourage adoption?

Who would want to hold an asset that is designed to lose purchasing power?

If nobody wants to hold it, then nobody wants to get it as payment.

I designed the reward schedule with 4 halvings. The schedule benefits early adopters. It is as follows:

Era Reward

0 50 (10 million coins)

1 25

2 12.5

3 6.25 (21 million coins)

4 6.56

...

10 9.85 (31 million coins)

...

30 38.11 (122 million coins)

Even though the supply inflates at 7%, it is still limited. There can be short-term speculation. If short-term adoption rises faster than 7%, the coin can gain value.

We're still in the early phases of mining. The reward schedule creates scarcity to allow the coins to gain value.

I think Freicoin is what you're looking for:

http://freico.in

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