Bitcoin: The Idea That Eats Smart People
vanityfarce.com
vanityfarce.com
> " By comparison, there are just under 50 billion Swiss Francs in circulation today, which are worth around $56bn USD."
There are about 90 billion Swiss Francs in circularion in cash alone. If you add to that all the Swiss Francs in accounts with the Swiss National Bank, we are at 722 billion, which is in the same ballpark as the Bitcoin market cap with about 800 billion Swiss Francs.
Source: https://data.snb.ch/de/topics/snb#!/chart/snbmobalech
EDIT: Crux of the issue here is that circulation is the wrong metric to use (money supply would be far more accurate).
Satoshi’s paper is really good. More people should revisit it, and it’s even more interesting with hindsight today.
As the parent comment correctly noted, CHF M0 Base money (ie: the amount of monetary base in circulation) is aproximately 722B : https://tradingeconomics.com/switzerland/money-supply-m0
FWIW, it is surprisingly(?), not so trivial with many other cryptocurrencies.
The simplest possible emission is 1 per second forever.
The very first Hacker News comment on Bitcoin was jdoliner's "while this is exceptionally cute, no one is ever going to take it seriously" - perhaps it's time to admit that yes, maybe, there is something going on here.
Coinbase gives people what they want, quickly and conveniently, with a price ppl are okay with. A great business
Bitcoin is not a thing ppl should want (IMO)
It’s like going in a 7-11 and buying cigarettes or scratchoffs. I still like 7-11
You haven't quoted jdoliner accurately either: https://news.ycombinator.com/item?id=600813. What he actually wrote was not quite that flagrantly dismissive or wrong, even in hindsight. (This reminds me a bit of the famous comment that was posted in the first Dropbox thread on HN, which people love to cite in a way that I don't think is fair to the commenter. His username keeps getting repeated as an emblem of pedantic dismissal, which is not actually what he was doing. https://news.ycombinator.com/item?id=23229275)
Edit: FWIW, there was at least one earlier HN thread on cryptocurrency, predating Bitcoin: https://news.ycombinator.com/item?id=253963. It was pretty good and even (in the case of https://news.ycombinator.com/item?id=253999) prescient:
The bigger problem is that everyone has a incentive to run their computers day and night cranking out solutions, which burns up lots of natural resources and processor time for a zero-sum result.
That precursor thread is excellent history, thanks also for that.
EDIT: Wait, are we not both wrong here? Isn't this the first? Which, honestly, might be funnier: https://news.ycombinator.com/item?id=599936
In 2008! That is nuts! Thanks for sharing.
One is that amounts, tiny or astronomical can be safely transferred and settled without trusted 3rd parties, in a matter of minutes. I think people know this.
The other property is that it is completely impossible to counterfeit it. There is no possible way to fake bitcoin. You can try claiming you own bitcoin that doesn't exist, but if someone wants proof, there is no way for you to fake it. There is no way to counterfeit it with clever artistic skill, specialized machinery, nothing that can do this. This also means that if you own bitcoin (meaning you control the keys), you really own it. You don't own some promise of future bitcoin payment, an entry in a volatile database at your bank or brokerage, an IOU, or some faked certificate. You own real, trivially verifiable, bitcoin. Also, no trusted 3rd party is needed to ensure this.
That is the value of bitcoin.
You can argue $10-100 is “tiny,” if you like, but as Bitcoin is today, it is only really useful for large transfers. Or perhaps medium sized transfers if you live in a place like Venezuela. This is less true even for other blockchain-based cryptocurrencies for two reasons: 1) they’re less popular so less demand for transactions 2) they use a larger blocksize and/or shorter time between blocks (both of which have drawbacks and limits).
Regardless of what the Satoshi white paper said, base blockchain simply doesn’t scale well globally for small transactions. Currently still doable for medium and large transactions, but if 7 billion people used Bitcoin as it is now (limited to 7 transactions per second), they could only settle to the blockchain once every billion seconds on average (a billion seconds is over thirty years).
Beyond that though, there are a number of solutions at layer 2 that can be used here as well, lightning network being the most widely used at this point.
The analogy here is that its like saying: using TCP (layer 4) for transport reliability isn't giving up on IP (layer 3), its building on top of it. You still get the benefits of the basal level protocol.
How long does it take for a Visa purchase to clear equivalently to bitcoin? I think to be equivalent to bitcoin it would have to be, I have some cash, and now someone else has that cash. Not a promise of cash. Not a balance in my bank's database. Actual cash. How long does that take using the Visa network?
EDIT: also, what are all the costs involved in that Visa transaction? Payer has to travel to an ATM, deposit cash, Payee has to set up a merchant account or use stripe or something, they have to travel to an ATM, withdraw cash, etc., etc.
Your right. It wouldn't be worth $1T now if that was true. It certainly wouldn't be worth $1T if the you could only do 7 bitcoin transactions per second. With the addition of the ligthning network transacting Bitcoin happens in milliseconds, with an unlimited number in parallel and the fee is well under a a cent right now.
Why Mastercard announced they were moving into Bitcoin is mystery of course. But I can't help wondering if the cost of a lightning transaction where they control the nodes compared the cost of trip a debit card takes (customer bank --> customer master card --> merchant terminal --> merchant bank) passing through the sticky fingers of two banks, was a factor.
Another thing I wonder with bitcoin in particular is if everyone had bitcoin and no other currency, and something like COVID happened, what entity would provide liquidity in order to help those affected by a disaster?
disclaimer: I do not hold any crypto.
For most of history, countries couldn't make money appear out of thin air (outside of mining more silver or later gold, which has practical limits). In good times countries made a tax surplus that they could spend in bad times. Or they borrow money from financiers and pay it back later.
1. https://www.history.com/news/how-did-the-gold-standard-contr....
But the power to just print money has to be used responsibly, there's no shortage of examples of countries damaging their economy by triggering hyperinflation. And if you want a global currency there is no institution that would be trusted with that kind of responsibilty by enough countries.
Of course the power to print money comes with responsibility. That isn't up for debate.
I think you will find hyperinflation more tightly correlated with economic sanctions that cut off countries from the global trade market. A currency is worthless if you can't buy goods with it.
It's a phenomena that grew out of western imperialists that levied massive debts on their former colonies in exchange for independence. Colonies that reneged on those debts were sanctioned. Physically and violently prevented from engaging in trade, ships pilfered etc. Many new governments responded by printing the money those debts were issued in - if they could.
What? It's not specific to the way you transact. Governments are providing liquidity, if the whole world used crypto they would do payouts the same way just in crypto. Perhaps I misunderstand the question.
What "entity" would give people bitcoins?
Market making in crypto is usually done by overcollateralized liquidity pools, farming and staking.
I'm sure a person who uses apartments as a store of value in San Francisco (and renting them out) would be quite defensive if the city would want to get rid of zoning regulations.
Maybe if governments weren’t able to paper themselves out of bad decisions, they would make fewer bad decisions?
And to fix those bad decisions, they resorted to drastic measures like seizing property. Gradual inflation of fiat currency is a dramatic improvement over those days.
Of course, rationalizing works both ways with sour grapes! But I still think greed is a stronger motivator than envy. :)
He makes solid arguments as to why Dogecoin, a joke alt-coin, has some technical features that legitimately make it an improvement on Bitcoin.
I don’t agree with him on hating fiat currency, but it’s a good critique.
Regarding fiat with Fed-like policies, it’s actually a feature that those who would hoard fiat cash sort of low level hate it because they know it’s somewhat inflationary and so they look for better places to put it... The idea being that they should put it to productive use by hiring people and/or investing in efficiency-improving/labor-saving capital equipment or whatever. (Of course, plowing it into Bitcoin doesn’t really help that goal, so in some ways, Bitcoin is crowding out productive investments...)
The people who spend it are users, but the people who hold and trade it are just speculators. I'm not a user of the target retirement fund in my 401k, I'm just speculating that it's a well balanced way to grow retirement funds.
Yes, I'm sure he's really savoring that one.
I invest because I want value. I want to own a part of something that generates value to the world. I invest to meet my goals (which I've already done without BTC). I invest to sleep well knowing that my money is making me money. BTC offers none of this. I challenge you to name any value BTC provides beyond moving money from one jurisdiction to another. (Which is still value, but not one I need, nor feel the need to speculate in.)
Am I bitter others got rich? Nope. Do I wish I was richer? Not really, I'm doing fine, I don't spend what I have anyway. Do I worry about BTC mania infecting others and possibly causing harm where it's not needed? Yes.
That is why BTC is a bad idea. It's pure speculation. There is no value beyond what someone else will pay you for it.
> I invest because I want value.
So you want value, but you don't feel that you missed out by throwing out over a million dollars worth of assets? (couple dozen at ~50k/BTC valuation).
Sure it has no value beyond what someone else will pay you for it, but today somebody else would literally be willing to give you over a million dollars for it.
Would I have sold it before 50k? yes, yes I would.
Can I accurately predict what someone would pay me for it tomorrow? No. Can I estimate the amount it will return to me in 10 years through dividends, or earnings growth, or repurchases (or in BTC's case, lost wallets)? No. Is there regulation protecting my investment? Not really.
It is a purely speculative investment.
If you want to go find my laptop, it's in a landfill in Massachusetts somewhere. Have at it! It was an early macbook. It has a Daft Punk sticker I bought at Newbury Comics.
Value is NOT price. BTC objectively has no little to no value. Price, sure, it's all over the place.
What is the par value of a BTC? What's the earnings yield on it? ROIC? ROE? How is it providing jobs to people (beyond speculators)? It is (objectively) a drag on society and progress.
No thank you.
I have made so much more in salary and investment growth than those BTC in the same time. I provide value to the world, and world has rewarded that. BTC provides nothing but speeding the heat-death of the universe and hodl memes.
Ok, I have a proposition. Let's negotiate. How many BTC/year do you require for me to buy all of your work product, for the rest of your life? How many BTC do you want? Choose carefully.
I posit, there is no amount we can agree on to make this transaction.
It's great that you're successful enough that throwing away over a million dollars worth of BTC isn't a big deal for you, but that's a life-changing amount of money for most folks. I'm making no claims about the features or benefits of BTC, but one million dollars worth of bitcoin is primarily useful because it can be exchanged for one million dollars, today, right now. It doesn't need any additional features, promises, guarantees or selling points.
1M is life changing, agreed. But there's no reason to have known it would be worth that. There's no reason to believe it will be worth that tomorrow. Yet someone else, possibly far less astute than I am, is on the other end of that trade. For every dollar in wealth it created for me, it destroys for someone else. Nothing else has happened but I got lucky, timing was good, and I robbed wealth from others. That 1M would be better spent on people's salary, or a dozen Teslas, or a bathroom in the bay area. But, it was given to a jerk who downloaded some program and ran it for a couple of days in 2009 (or whenever I did, it's not important).
BTC is objectively bad. It is objectively speculation. It is objectively a random number. That is all. It is a shame we place any price on it, when the money spent speculating on it could create actual wealth.
Put another way - If somebody were to buy SNAP stock, it's also a purely speculative investment (no dividends, no votes, etc). I may think this is a poor use of money, but I'm still confident if somebody gave me some SNAP stock I'd convert it into USD instead of just straight up throwing it into a dump somewhere and claiming I didn't miss out on any value.
He has never heard of bubbles before GME?
> People point to the rising price of bitcoin as evidence of the truth in their narratives, but the reality is that bitcoin could be rising for no reason at all.
Could be? It's blindingly obvious to everyone (except the author?) that it's all speculation.
Also he failed to mention the most plausible ways that Bitcoin loses value. Governments ban it, or some other cryptocurrency comes along that solves the technical issues with Bitcoin.