Comment by DubiousPusher | Hacker News Reader

Comment by DubiousPusher | Hacker News Reader

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I don't know why there's an article that makes the rounds once a month analogizing bitcoin to some other thing when..

1 bitcoin is its own thing

2 bitcoin has a clear analog in the form of gold

Collectibles are a terrible analogy because

1 they are not fungable and bitcoin is

2 they are not easily converted into currency whereas bitcoin is

3 they carry novelty and bitcoin does not (cryptocurrency may carry some novelty but each individual bitcoin does not).

4 their value is based on nostalgia turned speculation whereas bitcoins is more complex (though still speculative)

5 neither is really good for anything other than maybe as a value store (though both are questionable on that front too)

I could go on. Gold is genuinely a pretty good analogy for bitcoin. People buy both believing they can be converted into money later or directly traded. Both have pools of true believers, spectators and novelty purchaers. The main difference is simply that bitcoin does not have the long history that gold does.

> bitcoin does not have the track record that gold does.

That's a heck of an understatement - Gold's track record dates back essentially to the beginning of civilization or earlier.

I would argue, that the last 100 years had about the same amount of human history as millions years before them.

There’s something true to that.

Agred. It is an important distinction.

> they are not fungable and bitcoin is

Bitcoin is not fungible. Bitcoins can be distinguished by their transaction history. Governments are blacklisting addresses and all bitcoins that have passed through them are now tainted. Exchanges already reject deposits containing coins tainted by association with blacklisted individuals or even coin mixing services.

Blacklisting doesn’t change fungibility. It just means some exchanges are refusing to do business with people who believe in privacy.

A government can scream and shout but they cannot block a bitcoin transaction.

Fungibility means coins are indistinguishable from each other. Bitcoin does not have this property: the origin of each coin can be traced all the way back to its minting.

Governments cannot block transactions but they can stop people from accepting the coins. Money that can't be spent is worthless.

Yes and in some cases that matters. But for most practical purposes, two coins are interchangeable. As in,if you're sending me bitcoin, I don't really care which coin in the wallet you send me.

I could use your argument to say U.S cash is not fungible because each bill has a serial number. And the government occasionally tracks bills with a given number.

Not true even within the bitcoin specification itself. Look at how transaction fees are calculated. Older coins pay less fees than newer coins. They are not fungible. It’s one of bitcoins biggest weaknesses. Even Adam Back agrees with that (Google some older ltb episodes)

> Older coins pay less fees than newer coins.

And some circulated currency becomes more valuable because of its collectability or changes in its composite metals. But we do not say the system of currency itself has been rendered I fungible. I have ceded the technical point here several times. But for most practical purposes it is fungible because most users of bitcoin do not care which coin they get when they recieve it nor which one they lose when they recieve it.

The point everyone is trying to make is that because the bitcoins are technically not fungible they will, over time, also become practically not fungible due to, eg government intervention (AML, CO2, whatever). That is pretty much set in stone.

I doubt it. I would bet most people will not care.

It's a bit different. Yes it's true that, for instance, if a pallet of USD with sequential serial numbers went missing, the FBI would probably knock on your door if you tried to put some of them in the bank. But as far as I know, if those dollars made it into circulation and you obtained them by legal means, it doesn't become illegal for you to spend them.

It's not that different though. At times there are dollars which have become not fungible. We don't say this makes the whole system not fungible. Because in most transactions, most of the time, people don't distinguish between the units of exchange.

In some highly technical way, is the medium not fungible? Sure. Just as in prison exchange of cigarettes there might be someone who won't take Parliaments and someone else who wants only Marbs. But most of the time, most people, exchanging most coin, consider them interchangable. And in any financial tool that is what matters. Not theory but how people treat it.

Fungibility is not a binary, it's on a continuum. A dollar bill is almost 100% fungible, with some exceptions as you have mentioned. A dollar token (i.e. the number in your bank account) is basically 100% fungible.

Bitcoins are far less fungible. If you can look at all the transactions which have occurred in the past on a given token, and retroactively decide it is unfit for exchange, this is categorically different than saying you can put a dollar bill through the washer and make it unusable.

It's not whether people could start judging every satoshi differently, it is whether they do.

Generally, to a percentage very close to 100%, people are not doing that.

> A government can scream and shout but they cannot block a bitcoin transaction.

Blacklisting bitcoins gained from mined blocks containing blacklisted addresses would easily do that.

Probably processing transactions from those addresses already is illegal with current laws. Why should you be able to earn transaction fees from that?

Blacklisting definitely changes fungibility. Some bitcoins are different than others, because of their history.

Why? If cash is stolen it becomes tainted. If it becomes too damaged for circulation it is no longer spendable. We don't then say this makes paper currency not fungible.

I'm not an expert but I keep reading that bitcoin isn't fungible. Each bitcoin has a unique ID and public provenance, and that there are other coins that are truly fungible, like Monero - am I way off the mark?

You're spot on. It's possible to trace every wallet a coin passed through. If your coin ever passed a blacklisted address, it's tainted and nobody will accept it. Exchanges are already rejecting deposits containing coins that passed through mixing services.

Monero is fungible because it's private. Every transaction is signed by lots of users and nobody can tell where the coins are actually coming from. There's no way to tell them apart.

Fungibility implies interchangeability not privacy.

In monero's case, the blockchain privacy is what provides fungibility. The fact nobody knows where the coins are coming from makes them interchangeable.

That's a nice feature but it doesn't change that for most practical purposes bitcoin is fungable.

It may not be de jure fungible but for most practical purposes it is. As in, when you go to exchange it for money or something else, most people don't care about which coin you give them. In my mind this makes it de facto fungible.

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