But I do think digital currency has intrinsic value, in that for now, it affords you anonymity to commit crimes in a way that ordinary currency does not. I’m not happy about it, but this is a form of value.
If at any point in time there is a way to tie your identity to _any_ of the transactions made in your lifetime, then all of your other transactions get deanonymized retroactively. Maybe you made a mistake, maybe a bug is introduced into the Bitcoin software, maybe the government passes a new law, etc.
Cash doesn't have this issue. The bills I'm paying with when buying coffee at Starbucks, don't give you visibility into all of the purchases I've made with cash for the past 20 years.
The only exception would be crypto like Monero, but it's not the rule. Bitcoin is the flagship coin which somehow got people to think it's anonymous.
All it takes is for the government to require you to use the same wallet that's tied to your identity and then every citizen's transaction, past or future, is traceable to a degree that is just not possible with cash. That's a dangerous capability and we, the people, should make sure not to slowly end up in such a situation.
That's not what we mean in finance when we say fungible.
But that's not very realistic. If bitcoin were to become the primary way to pay for things, you're going to be buying physical goods with it. If you order something online then they have your shipping address to associate with your wallet. If you buy something at a physical store then they can see you and know what wallet paid them.
And lets say you maintain one wallet for the secret all-digital stuff and another wallet for everything else (or however many wallets makes sense for you), it's better that way, but all you have to do is slip up once with the secret wallet to be screwed. Everything you did with that secret wallet can now be associated with you even if the transaction happened 20 years ago.
Isn't there? Ethereum kind of has revenue in that transaction fees for smart contract execution are burned (effectively a stock buyback)
It has around ~$19B in revenue extrapolated at the current rate (although it's issuing more than $20B a year for now, planning to reduce issuance some time later this year)
You can send 10BTC to me, you're from Azerbaijan and I'm from France, all cool and nice until I want to cash out on that 10BTC... do you think I can receive 380k EUR on my bank without some government agency knocking on my door and accusing me of money laundering, asking me where this money comes from, asking me to pay taxes on it?
If you are forbidden by law from sending money from A to B you cannot send it, either because you cannot send from A, you cannot receive in B, a mix of the two or whatever. You can send me crypto but since I cannot buy food with crypto I need to cash out sooner or later so that's end game.
If you can send money from A to B it's way cheaper and more secure to send it using our current banking system. And BTW you pay a fee to turn money into crypto, in many cases you pay a fee to send crypto and lastly you pay another fee to turn that crypto back into money, sending crypto is not free.
I have neither.
BTW half of my family lives in South America and I'm in Italy, we have no problem in sending money back and forth and it is cheaper to use a bank than exchanging via crypto.
Also I cannot ask my 85 years old grandma to join Coinbase or Kraken or whatever, but she has a bank account and it works pretty neatly (and yet again, it's waaaaay cheaper than Coinbase fees for example)
That "Filipinos in the UAE" is bullshit. Their problem is not about crypto vs banks, their primary problem is the UAE.
the crypto-dream (which, i admit is a nice outcome) is that no entity _could_ make such a transaction forbidden under a new regime of crypto finance.
And it is true that today, some gov'ts can have an outsized effect over people that would not be under their juristiction - such as people in iran being sanctioned by the US.
Unfortunately, crypto is hardly being used this way, nor will it be in the near to medium term future.
They are getting paid for a service, ridiculously low fees generally. Do you know how much does it costs you an international bank transfer? Between 0 and 0.6% if you're unlucky.
> That alone is enough of a use case to justify adoption.
No, it's not, it's the usual niche use case problem no one I know ever cared for. When was the last time you heard "I want to send money to my aunt in India but those goddamn banks are so expensive!!!!"
Sure, but plenty of tech companies have never paid dividends and never will. FB's shareholders would have legal claim to a portion of: a) a buyout (but nobody could afford to take FB private), b) a liquidation (so, you're buying in in case FB goes bankrupt), or c) future dividends (but FB's boy-king privileged stockholder doesn't want to pay dividends)...
Which I think was Ben's point.
What? Bitcoin is radically transparent. The vast majority of crimes are committed with standard currencies like $USD. If 'crime' is the only value you see, you're extremely ignorant.
What is the bull case for $USD? What properties does it have that make it superior to currencies like $BTC in your opinion?
Second, when some large heist in the past happened on the chain, the largest exchanges announced they won't exchange proceeds from these addresses. It may still not be impossible to withdraw into fiat, but certainly it was harder. Eventually, there will be more regulation from US and other countries' bodies, some of it will benefit crypto holders, some inconvenience them some more.
One example could be of a Government Body that oversees crypto fraud. If you had some coin stolen and you are able to prove they were yours and are unable to communicate with the party who took your coins, these assets can go into some form of public "coins on red notice list", where government puts them there, and exchanges can see the addresses and know not to accept or exchange these assets. If someone tries to, exchange can show them a notice information, instead of completing transaction. Another list government can maintain is "public call notice" (I'm just making these names up) similar to how public hearings are made. In this scenario, government can call up on an owner of some specific questionable coins to explain transactions behind. If no owner comes up in 30 days, these coins could be again put on "red notice" list.
The bottom line is, since exchanges are regulated by governments, the governments will surely regulate even more. Ultimately because everything is transparent on a block chain, certain coins can become "dirty" just like money becomes tainted, and exchange or even possession of these coins can be made unlawful.
It’s not Ford’s fault that someone didn’t drive safely, and yet they’re required to build cars with safety features. Bitcoin’s design ensures that these mistakes happen regularly, and most users end up paying a “I can’t believe it’s not a bank” exchange to hold their Bitcoin for them due to the many irrecoverable risks if you do it yourself.
Since we can assume that some people will die without making arrangements to pass on their keys, then isn't it guaranteed that a non-inflationary cryptocurrency like BTC would eventually consist solely of lost, unreachable coins?
What again does Bitcoin solve for over this?
Another thing: if someone steals money from me and I can prove it, and law can find him, and trial him, etc. I want the possibility to have my money back not some “coins on red notice”.
That I can spend USD in just about any shop or for any transaction, legal or not. While crypto "currencies"? I'd say: not so much.
There are crypto credit cards now that allow you to achieve the same effect.
Assuming this advantage disappears, are there any other bull cases for $USD?
Also my value of USD hasn't dropped 30% in the last month.
No one needs incentive to spend. You will spend if you have plenty to spend. Having a currency which gains in value will take you there.
That’s some pretty fanta-dreamy-economics. How can it possibly be true for everybody? Money from heaven?
As a matter of fact crypto "currencies" are a rotten medium for saving due to their volatility.
Sure, they may go up in value. But then that's pure speculation, certainly not saving.
You cannot blame the theory, you cannot blame the system… we have a saying in Italy: opportunity makes the thief. Blame the people, not abstract entities.
Is a deflationary system better or a solution? I don't know.
Deflationary currencies have been an abject disaster in all fronts, and there is nothing particularly contentious about them from even the most contrarian of positions.
1 BTC is worth 1 BTC.
The fed manipulating the USD and affecting the trading pair of USD/BTC is probably what you’re referring to.
tautologically true, but irrelevant. That's like saying gold costs 1 ounce per ounce, and that price has never changed in the history of its existence.
Current economic pricing happens with USD for most activities, and thus you need to be pricing BTC under USD.
Until the day people would easily accept BTC directly (and hold it instead of converting it into USD), you cannot price BTC in BTC.
In a longer span: BTC is down 33% against EUR in the last 3 months.
> 1 BTC is worth 1 BTC.
That’s tautological, so devoid of any information.
Is Bitcoin a currency or an "investment"? (Here's a hint: you don't want a "bull case" for a currency.)
Yes you do. Because currencies are a position to store value just like every other “investment”. Currencies can go bad and become literally worthless via hyperinflation, for example. And some currencies will hold their buying power better than others. To not consider whether your currency has a strong bull case… or whatever you want to call it… is basically blindly trusting it. That’s closer to faith and hope that logic.
Even assuming it completely disappears we still need to solve:
- energy inefficiency of BTC
- extremely low number of transactions per unit of time
- a currency lacking the possibility of reversing transfers is not compatible with most legal systems
- full traceability of my wallet transactions open to the public
- volatility
And those are the first I can think of while paying little attention because I’m watching a movie…
It's questions like yours that never get answered when others are trying to sell me on cryptocurrencies. These are basic questions that must have answers before BTC would ever be able to operate as a currency at all, let alone the currency.
Then you changed subject about being bullish when replying. So you must either decide: are we talking about currencies or about speculative assets?
There are no reasons to be bullish about currencies, that’s not their purpose.
Whether you hold currencies, stocks, cryptos - these are all positions with various possible outcomes. A currency can become worthless through hyperinflation, for example. So yes, you absolutely should be sizing up your currency position and deciding whether it is to your advantage to hold it.
You can say a currency bull case is that it’s stable representation of value. That thesis could play out or completely break down depending on how the government in control of the currency behaves themselves.
Anyway if you think about bulls and bears you are not thinking of currencies, you better put your money into more volatile markets. A bullish currency is against our modern conception of how economical models work, so I wouldn’t place my money on it.
I’m not saying you shouldn’t place your money on BTC or other crypto, it’s kind of a good time right now since we are full bear and a bull period is probably starting soon. I mean, by watching historical trends and aknowledging the contingencies that pushed down values in those last months, maybe we’ll have to wait some time but it should bull during 2022.
All in all, crypto market is still not a currency market but an asset market. Just for one simple reason: crypto (currencies?) are still not currencies. When crypto will turn into currencies you’ll start seeing a inexorable slow bearish course for all of them, it’s economics baby ;)
this is an incorrect premise from which to draw any conclusions tho. Hypothetically, if this was true, then it would also imply the world economy and order to be changing, such that your way of life is going to be turned upside down.
For example, world war 3.
The reason you want money is that you know people around you want it and you can use it to acquire goods.
Now, what makes USD a superior currency:
- you don't need internet to use it
- you don't need third party centralized unregulated services to use it (unless you want to run a full node)
- you can exchange it with ease, in multiple formats. Give your daughter 0.0000000000045 bitcoins for lunch.
- no fees for using it.
- practically scales to infinity vs few hundreds transactions per minute.
- doesn't require energy to run. The energy required by each transaction covers the needs (heating and transport included) of a family of 5 for days
- very stable, I know how much things will cost a minute, hour or days from now, so my daughter eats even if whales are short squeezing markets by lunch time.
- used mostly to buy services and goods vs never used to buy anything but other currencies.
- inflationary, creates pressure to spend and invest rather than hoarding. Deflative currencies don't make sense to spend. Why would I buy X today at n bitcoins, if the deflative nature of bitcoin will make it more scarce and will make X cheaper. Why spend bitcoin today, if in few months there will be new highs and I can buy even more and so on.
- de facto currency of international trade. Some countries like Russia try to do international trade in euro. What can have higher consensus?
- 250 years of history
- regulated through democratic means and under clear laws for the benefit of most; vs unregulated, mostly owned by few early anarco capitalists (i know people with thousands and thousands of bitcoin) and offshore scams. Basically very few people own most of bitcoins there are out there, very few people control most of the network.
I think the list can get infinitely longer but it gets boring.
These debates get rehashed ad nauseum, but of course the same could be said of the USD, GBP, etc.. Currencies are exchanged to meet debt, contract, or tax obligations denominated in a particular currency. Trade is the common mode by which a currency has to be exchanged. For instance, if an American company buys British goods denominated in GBP, it will either exchange USD for GBP to close the transaction or borrow GBP that it must similarly pay back in GBP. The net result in either case is that it buys GBP and sells USD. If the UK government levies a duty/tax on the transaction, that too generates a demand for GBP requiring an exchange.
Now it is of course somewhat unclear whether a significant economy exists in crypto that generates debts/taxes denominated in crypto that would create a steady/cyclical demand for crypto. It requires either that some productive center of the economy is demanding payment in crypto, or that governments are demanding tax payments in crypto, or both. If either is simply willing to accept multiple possible currencies, then demand flows through the most favorable path. Perhaps a modicum of anonymity is part of this calculus, but costs, difficulty, and risks also probably play a role.
My point is that the economic analysis of your claims is more complicated. Buying currency serves a classical finance purpose that is unrelated to your analysis of equities. I think the climate and regulatory consequences of crypto are very serious, but I generally agree with those who say the credit/payments industry is predominantly parasitic. But those who say that no mechanism should exist to control the money supply based on economic conditions are just charlatans and simpletons and should be ignored.
Cash may be more in absolute value terms, but in per dollar terms, is cash used more for crimes than regular transactions than crypto?
What difference am I missing?