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Comment by PragmaticPulp | Hacker News Reader

The section about the fallacy of limited cryptocurrency supply is one of the key insights missing from many Bitcoin discussions:

> For those reasons the “limited supply” argument isn’t as true as it might appear—e.g., if Blackberries were in limited supply they still wouldn’t be worth much because they were replaced by competitors that were more advanced.

I agree that Bitcoin is interesting as an alternative asset, but the narratives have outstripped the facts as it becomes just another speculative trading instrument on the non-blockchain exchanges.

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I agree but to play Devil's advocate I think the answer is "the network effect". Facebook could be replaced at any time, yet it continues to dominate social media. At some point, BTC could become, if it has not already, big enough to become self-sustaining.

Regarding free services, one could have said the same thing about Orkut or Myspace. Community tends to flock in via one door, and flock out via another door, as long as the product or service is free.

In this case however, completely agree with you. BTC is a paid network (a very expensive one at that). It could remain self-sustaining for quite long.

The analogy doesn't really work because cryptocurrencies aren't interchangeable the way phones are. A better analogy would be if each phone could only talk to people using the same phone brand. If everyone is on iphone and you need an iphone to talk to anyone you care about, the iphone becomes more valuable because of its scarcity. The network effects of bitcoin and the lack of interchangeability between different cryptocurrencies helps secure bitcoin's spot as the leader.

But people almost invariably don't need BTC to transact with people they care about (the number of people with BTC denominated payment obligations is relatively small, and most stuff that can be bought with BTC can be bought with other methods). And as flawed as many exchanges may be, they make cryptocurrencies very interchangeable, especially compared with phones.

Blackberry actually did have a proprietary messaging system, it just wasn't anywhere near enough lockin because most people used Blackberry for other reasons, the non-proprietary messaging layers were actually better and Blackberry's popularity turned out to be nearly all down to being first in class.

This would be true if Bitcoin transaction fees put it in reach of every-day transactions, but they don't and likely never will. Bitcoin is for HODLing, not for transacting.

Bitcoin can be used for transacting if you're not looking for instantly verified transactions.

In ye olden days, when Bitcoin was a few cents worth, transaction costs were tiny. I really doubt Satoshi et al predicted Bitcoin to be so unstable, so as to make transaction costs pretty much out of reach for 99% of normal everyday transactions.

That’s the underappreciated argument. If we to assume that the collective will power is all it takes to create an alternative asset, e.g. the narrative “gold is old, we need a new one” then it follows that it can and will be repeated. I don’t see why people not born yet would play by the rules of the future “Bitcoin wealthy elites” when they could become elites themselves by hyping another asset/cryptocoin instead. Thus even if the narrative of “store of value” and “hedge against inflation” turns out to be correct, I still don’t believe Bitcoin supremacy will last longer than a single human generation.

I said this years ago, only I used Nokia instead of BlackBerry (see slides ##8-11):

https://www.slideshare.net/nivertech/limited-supply#8

What's the fallacy you're debunking, and who commits it? I'm not aware of anyone arguing that Bitcoin is highly valuable because all things with a limited supply are highly valuable.

The deflationary nature of Bitcoin is a commonly used property to assert that Bitcoin is designed to increase in value over time due to artificially programmed scarcity.

However, I don't think GP's parallel lines up, as another commenter pointed out.

In any case, a single satoshi, which is the smallest denomination of Bitcoin (10^-8 of a Bitcoin), is worth about 0.05 cents as of writing this comment. If Bitcoin didn't have such large transaction costs, slow transactions, and price stability, it's scarcity would be way less of an issue due to this really large level of division of a single coin.

That doesn't sound right. $50,000 * 10^-8 is $0.0005, or 0.05 cents.

Oops, my mistake.

Bitcoin is an asset in the same way that a piece of paper with my signature on it is an asset. Why some people think cryptocurrencies are revolutionary is beyond my comprehension.

You're absolutely right, it is.

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