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Comment by xiphias2 | Hacker News Reader

Sure, if you are serious, the Bitcoin Standard book is a worthy read. But what’s important is that Bitcoin solves the inflation problem, and proof of work is the only system that we have for getting rid of the Cantillon effect of modern banking: the closer people get to the top of the central banks, the richer they get and destroy life for those who don’t have access to the inner layers of central banking. With Bitcoin it’s really hard to make profit with mining, as there’s a perfect (otherwise useless) competition. Some altcoins are reintroducing the Cantillon effect using proof of stake, and of course the market will decide on which is the more efficient system.

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On a philosophical level, I think the flawed premise you’re presenting here is that inflation is a problem that needs to be solved. Inflation is unpopular because it’s effectively a tax on unproductive wealth. Inflation incentivizes investment because idle wealth will lose it’s value at the rate of inflation.

On a technical level, Bitcoin is worse than a currency because it’s value can fluctuate wildly constantly and transaction fees are high. I don’t know what’s going to happen when we get a “Run on the bank” type of scenario but I suspect it’s not going to be good for the little guy.

The ability of central banks to manage a crisis isn’t a bug, it’s a feature. The trade off is one we’ve made throughout history, we have to give control to other folks who may not have our best interest at heart.

I fundamentally believe Bitcoin will collapse the next time we have a global economic catastrophe and it’ll have no tools to handle it.

This is where market competition is a great thing for people who believe in market competition. For people who like the central banking based financial system and think that inflation is a good thing can stay in it, and for people like me having an alternative is great, and it changed my life totally. I understand people who can’t bear the price fluctuations, as I have seen my net worth drop 80-90% 3 times in the last 8 years, and it wasn’t easy on me psychologically. I still use it, as I see a debit based financial system more honest than a credit based system.

Regarding the transaction fees it’s not higher or lower than the current system, but very different. For me it’s actually much lower than my bank fees (sending a wire transfer from Europe to US is usually $20 charge for me, while Bitcoin fees are usually about $0.8, but it’s changing over time depending the usage of the system).

> On a philosophical level, I think the flawed premise you’re presenting here is that inflation is a problem that needs to be solved. Inflation is unpopular because it’s effectively a tax on unproductive wealth. Inflation incentivizes investment because idle wealth will lose it’s value at the rate of inflation.

Inflation is a tax on those without assets or the available capital to invest in assets. It's a form of wealth transfer to those with assets. Increasing economic inequality is not good for anyone, and some would say the US is already close to a breaking point.

https://www.statista.com/statistics/219643/gini-coefficient-... https://blogs.imf.org/2020/12/11/when-inequality-is-high-pan...

> Inflation incentivizes investment

Inflation induces investment and consumption. Ultimately, central bank wants to create GDP growth through inflation because any GDP growth is good, that's the basic dogma.

Since we're talking about climate change, it's clearly morally wrong for the central bank to print money to create arbitrary GDP growth because GDP growth creates emissions and furthers climate change. It's a deathtrap really, and the most sinister mechanism ever created. We should probably ban it along with Bitcoin.

Bitcoin doesn't solve the inflation problem. Nothing can solve the inflation problem in real terms because the real world is decaying.

Also if the Cantillon effect exists, then it applies to every single dollar spent inside the economy, not just to "printed money". E.g. if there is a mechanism that sucks out "printed money" to the top, then there is also a mechanism that sucks out not "printed money" to the top. If you understand that, then the "printed money" exists to replenish money at the bottom of the economy where it inevitably gets sucked back to the top.

Hint: Positive interest rates redistribute wealth upwards.

> Bitcoin solves the inflation problem

With a cool little 300% increase in the value of single BTC over the single year, with some years seeing it go over 1000%, you're right, it solves the inflation problem by making it a ponzi scheme! Sweet!

Inflation might a problem but a world where countries would no longer be able to adjust the value of their money isn’t scarier?

Wouldn’t we be giving up an essential lever to adjust to changing economical conditions?

> Wouldn’t we be giving up an essential lever to adjust to changing economical conditions?

Who’s we? You, I, and most people have zero ability to move those levers. The question is should they have access to those levers and I firmly believe the answer is no. I’d rather have a world with sound money and no one in control than the people who have dominated the west for the last 100+ years.

We as “citizen of a nation”?

If nations no longer control their money, does it mean they can go bankrupt? They can no longer adjust their money to influence their commercial balance? Would have the EU and the US been able to create stimulus packages? What about adjusting the inflation to the economic growth rate of a country?

(Genuinely asking)

> If nations no longer control their money, does it mean they can go bankrupt?

Yes, happens all the time where countries default on their debt obligations even when they "control" their money.

> Would have the EU and the US been able to create stimulus packages?

Yes its called taxation, and maintaining a reserve. Just like how normal people save up for a rainy day. They can even borrow money (bonds) from the public like they've done for hundreds of years.

> What about adjusting the inflation to the economic growth rate of a country?

The vast majority of failed monetary systems in the last hundred years is due to central banks printing too much money. So maybe we should stop letting the central banks attempt to control something they barely understand?

We could replace the contract company 'Federal Reserve' (not gov't agency and no gov't employees) with a growth rate formula. Let me know how readily they take that idea.

The only thing that changes is that governments have to raise the taxes from people explicitly instead of a hidden inflation tax. I think it’s great for goverments as well, as it gives them more responsibility over how they are spending money. Norway of a great example of people paying high taxes because they see the government as responsibly spending and reinvesting its tax revenue. I never asked money from other people in my life, I was spending only what I earned, and I feel this way of living is a more honest and sustainable way of living.

How do you keep inflation within an economic zone between 2 and 3 percent without control over your money? No matter if the economic growth is between -1% and 10%?

Bitcoin has a built in inflation schedule. If you believe that over long term price inflation of scarce assets (like New York real estate) will follow the inflation of the emission of the currency (which I believe), Bitcoin will make sure it will stay under 1% in the future.

Right now Bitcoin is in the adoption phase, that’s why people are seeing the crazy price moves, but I expect it to normalize in the future (maybe 10 years from now).

I am not talking about scarce assets but of the entire economy of a country. Concretely, how would bitcoin would manage to keep inflation in a healthy range (1.5%-3%) given that we can no longer decide to emit or remove money from the system as the situation evolves? If the world goes into recession vs know an economical boom, you don't want to emit the same amount of money into the system.

Also, if two economic zones have very different growth rates, how does that work with a global currency like bitcoin?

Can you tell me a period of time from history when governments were removing money from the system (spending less than they were raising taxes and paying back their bonds without creating more debt)? It never happens. What governments are doing is unsustainable, people are not happy with the trillions of dollars they are printing and buying up scarce assets (which are the most imporant things for people…good luck living in an email inbox for free).

If by inflation you mean the rise in general prices, or the destruction of the purchasing power of the monetary unit, then the track record is that btc will continue to be deflationary in that your purchasing power will be increased. If you don't like increased purchasing power, there are alternatives such as holding most any government issued monetary unit.

thanks for responding. why does bitcoin remove this cantillion effect? Remember that Roger Ver, who was in the room when Segwit 2 was discussed, decided to go forth with the bitcoin cash fork, which pleased the miners. It appears to me that miners are able to turn profit, that's why we see new mining facilities popping up around the world. also, does the market actually select the most efficient technology? Anecdotally speaking, crypto "investors" en masse appear to know very very little about the underlying tech - most appear to invest because "number goes up" Finally, there is legitimate risk of societal collapse on the table due to climate collapse. Is that something you factored into your perspective?

The segwit+bitcoin cash fork was a technically very complex situation. Miners loved the Bitcoin cash fork as bigger block sizes centralize the system (makes block transfer time longer, which makes it easier to do selfish mining and harder for small miners to take part of the system, especially through TOR relay). Read the blocksize wars book (I listened to the audiobook and loved it) for an in depth explanation, it’s awesome.

Also Bitmain was using covert ASICBOOST: the Merkle-Damgard construction allows reusing the first part of the SHA256 computation, but Segwit broke that unofficial internal optimization that Bitmain was using for mining.

In that fork companies and miners thought that they can change the verification rules, as many people are just looking at the chain with the longest proof of work, not real full nodes. What they didn’t realize that with Bitcoin people who are long term holders with significant amount of money understand how crucial it is to run their own full nodes to verify all the rules, and just use miners for deciding the order of the transactions (instead of the rules to follow as well).

I personally sold all of my Bitcoin cash the first time I could make a Bitcoin cash transaction and bought Bitcoin with it (which wasn’t easy, as it had problem with difficulty adjustment).

The market is working slowly: people right now don’t understand how difficult is to run their own Ethereum full node (I wanted, but it’s incredibly hard to even get a description of how to do a full verification from the genesis block).

The main problem with the altcoin ecosystem is that exchanges make money of people transacting altcoins instead of just holding 1, so people get into the altcoin casino, losing lots of money (I have friends who have done this sadly). Sadly market works by smart and patient people taking advantage over other people (I try to help people to stay Bitcoin only, but it’s incredibly hard with some people, especially men…my female friends invest less money, but hold much more patiently, and get rewarded).

Lastly about the societal collapse: it is happening with fiat currencies anyways. I see the current CO2 emission problem as a $10T-$50T problem, while the inflation of fiat currencies as a $500T problem. Bitcoin will solve the inflation problem in 10 years (it has a yearly 2x adoption rate), and I believe people will care more about the environment after they don’t have to worry about paying their rent every month while working off their ass.

And how do you calculate that the C02 problem could be solved with $10T - $50T? And over what time period could an investment of 10T solve the problem? And how would it be done?

Inflation isn't a bad thing necessarily.

Moderate inflation is good for debtors and keeps money circulating around the economy: those with savings can invest it in a way that keeps up with inflation. Deflation causes hoarding of money and economic collapse (like the Depression of the 1930s). Central banks try to manage inflation to keep is low but nonzero.

Can you explain how that Ponzi scheme works? I read parts of the source code before I invested in Bitcoin, and it looked to me like an open, honest system with easy-to-understand, clean code (unlike what Ponzi was doing, which is basically lying about customer deposits).

I had doubts about elliptic curve digital signatures being safe enough to hold my money (I’m still thinking of using Lamport signatures in a multisig, as I trust them more), but I don’t see other serious problem with the system.

It’s a Ponzi scheme cos it’s not being used for purchasing goods and services.

Bitcoins only value is it’s value relative to dollars, euros etc, which have purchasing power.

So ultimately all the Bitcoin has to be converted back to dollars, euros etc for people to see a return on their investment. The only way to do that is to sell the Bitcoin to someone else who has dollars (presumably for more dollars than you bought the Bitcoin originally).

So as the cycle continues each new generation of investors needs to find another bunch of suckers to offload their Bitcoin to and get their dollar reward. And they need that next set of people to consistently pay a higher price than they did.

Eventually people will struggle to find buyers and be left holding the bag.

This wouldn’t necessarily be the case if Bitcoin got used as a real currency. But that’s clearly not happening at this stage, people laugh at the idea of buying Pizza with it or whatever. So it’s just a Ponzi-like scheme. Tbh it’s more like a penny stock scam of old.

> Inflation isn't a bad thing necessarily.

if you are already rich...

If you are already rich then you are forced to invest your money for the benefit of workers. The fact that the rich own assets is not a mistake. They're supposed to own them. Savings must be invested, directly or indirectly or else people end up unemployed.

Inflation is worst for the rich with piles of cash sitting around (and it incentives them to invest which is beneficial too).

For workers it’s not a disaster if wages rise. For people with mortgages it can be great.

Absolutely no inflation ever is a bad thing - see the Great Depression.

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