Hacker News Reader

Comment by lottin | Hacker News Reader

> It’s really no different that buying stocks on an exchange.

Actually, the difference is quite substantial. Stocks are fractional ownership of businesses and businesses create value by transforming inputs into an output that is worth more than the inputs combined. In comparison, bitcoin is a virtual commodity, and commodities (virtual or otherwise) don't produce anything, this is why they're sometimes called non-productive assets. This means bitcoin cannot create wealth. If somebody get rich by investing in bitcoin it must be always at the expense of other bitcoin investors.

View on HN

Commodities have value in and of themselves though.

Bitcoin is a security for an electronic trading game that takes inputs and gives back less than that input.

Then on top of that there is this technological/economic quasi religion that is a random bundle of economic half truths but the followers beliefs are reinforced by the price going up.

Cryptocurrencies create value by creating a financial system that solves some problems that traditional finance can't. For instance, a person in some underdeveloped country can accept a payment from US, however, if there was no Bitcoin then the person would have to rely on SWIFT network (which the country might not be a part of, or under sanctions like Iran). Or just a fact that you can't be randomly locked out from your account due to cancelling or any other reason. Buying a portion of Bitcoin is like buying shares of a bank which provides a service of accepting, sending and storing your money.

Ethereum creates value by providing an infra for dApps that provide financial instruments (like deposits, lending, etc) which also create value.

> Buying a portion of Bitcoin is like buying shares of a bank

Bitcoin payments are settled by "miners". It's therefore the miners who provide the service of settling bitcoins transactions, not the bitcoins themselves (which are the things being transacted from one wallet to another). Yes, miners create value by providing this service, and they get paid for it with transaction fees. However owning bitcoin doesn't confer you ownership rights of the bitcoin mining business, therefore owning bitcoin is completely not like owning shares of a bank which does confer such rights.

there is a loophole here that I think is worth mentioning.

What does getting rich mean? If you compare bitcoin to the USD, its value “increases”. But if you compare bitcoin with bitcoin you have the same amount of bitcoin today you had yesterday. So what really happens is you can buy more goods with the same amount of btc, in time, because of its scarcity.

So bitcoin can create wealth in the sense that the quantity of goods you exchange for it increases over time (if people buy into using it that is).

No, you don't get it. Prices are set by the supply and demand, which means the fact that something is scarce doesn't mean absolutely anything in terms of what its price will be in the future. Second, the fact that some asset price has increased doesn't mean wealth has been created. For example, if your house increases in value, this only means that your personal wealth has increased. In fact you personal wealth has increased at the expense of the people who are buying houses at over-inflated prices, while the stock of wealth in the economy remains unchanged. The only way to create wealth is to produce stuff, and bitcoin produces nothing.

No no no. You don’t get it. You cannot make up your own definition of wealth and go meta (personal wealth vs WEALTH) as soon as the point you’re trying to make no longer works.

Something scarce that has any demand at all will see a rocketing price for it. That’s what scarce means. Of course it’s supply and demand and all that jazz but usually scarcity + any kind of demand leads to a high price.

No, you fail at elementary economics in a typical bitcoin-fan fashion. Your personal wealth is your share of overall wealth in the economy. Your share will increase or decrease whenever you become wealthier or poorer relative to others. This is what happens when there are changes in the relative prices of assets, wealth is redistributed. And, again, scarcity isn't a predictor of price. Scarce means in short supply. It doesn't imply, by any stretch of the imagination, high price. No school of economic thought claims such nonsense.

sure thing buddy. only you can understand what wealth means.

> you fail at elementary economics in a typical bitcoin-fan fashion

Instead of being condescending here is a tip for you: learn about bitcoin before writing it off. Who know, one day you might even change your mind.

> No school of economic thought claims such nonsense.

Can you google things? Do me and youself a favor and google "the scarcity principle"

Here I'll do it for you: https://www.investopedia.com/terms/s/scarcity-principle.asp

I guess some schools of economic thought do claim such nonsense. Maybe you should have a word with them.

But wait there is more: https://www.merriam-webster.com/dictionary/scarce

scarce: deficient in quantity or number compared with the demand : not plentiful or abundant

Wow, who would have guessed it's in the actual definition of the word?

> I guess some schools of economic thought do claim such nonsense.

And what would that school of economic thought be exactly?

> Wow, who would have guessed it's in the actual definition of the word?

The definition of the word 'scarce' implies the notion of high price?

yes: deficient in quantity or number compared with the demand

if you believe in all the economic bs we are being fed, something scarce is going to increase in value until it's no longer scarce. that's literally the definition: deficient in quantity or number compared with the demand

> yes: deficient in quantity or number compared with the demand

If you want to go with that definition, then bitcoin isn't scarce by definition. Something can have a fixed supply and be abundant compared with the demand.

> But if you compare bitcoin with bitcoin you have the same amount of bitcoin today you had yesterday.

Yup. So the people who were in on it early will have significantly more bitcoin than anyone who gets it by the time its hard to get it.

Reply on news.ycombinator.com