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Comment by lrvick | Hacker News Reader

Bitcoin has value for the same reason Visa has value.

A medium of exchange is a tool, and tools people use have value.

I grant the majority of the market is speculation but many of us actually regularly use Bitcoin for things like payroll, settling debts, cheap international value transfer, buying coffee, and for cash-like privacy for online purchases.

For those like me that have been continually buying, saving, and spending bitcoin for a decade, vs simply speculating, dollar cost averaging kicks in. Even 300% price swings do not matter all that much in the long run.

Those that go all-in short term looking to gamble get wrecked, but that is often the case in trading. Bitcoin will be healthier when the short term traders are forced out.

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> Bitcoin has value for the same reason Visa has value.

No. Visa has contracts, offices, and cash. They have over $81B in assets, over $12B of which is cold hard cash.[1]

Visa also has employees who know what they're doing. Bitcoin has cryptocurrency industry people working on its behalf. It's not the same thing.

Bitcoin has people and companies invested in it (emotionally and financially). Visa has almost a hundred billion dollars in assets, and the market believes they'll be able to make even more (hence the almost $400B market cap).

Visa's market cap is just 4-5x its current assets.[2]

Bitcoin has no assets. It's just speculation. It can't be liquidated even in theory.

[1] https://s1.q4cdn.com/050606653/files/doc_financials/2022/q2/...

[2] ok, so it also has liabilities. But my point stands. Visa has value in a way that Bitcoin doesn't.

> Bitcoin has no assets.

Cash just as well "has no assets". You can't just compare bitcoin to a corporation and get something that makes sense.

Two things:

> You can't just compare bitcoin to a corporation and get something that makes sense.

1) I agree. I was replying to a comment that did.

> Cash just as well "has no assets".

2) USD is backed, ultimately, by the full force of the nuclear armed state and multiple branches of the biggest military the world has ever seen. If you think the US government will allow USD to become irrelevant then you are going to be very disappointed. Bitcoin has no such thing.

Russia has a nuclear armed military also. Strong enough to deter the US from direct confrontation.

Yet, somehow they have never been a prime destination for investment.

Economy matters as well. And loss of faith in the USD cannot be fixed with a few mushroom clouds.

I know. And the USD is not just backed by the military. War is just diplomacy failed.

It's just the most obvious backing.

It's enough to send fines, most of the time. Actually just the threat of fines. If foreign then diplomatic carrots and sticks.

I'm commenting on the absurd notion that the USD is backed by nothing, commonly said with "but BTC is backed by math".

You're right. Mushroom clouds won't help the USD. But the implication of it helps.

Actual acts the US does are more subdued. Overthrow democracies and invade smaller countries.

But could the US do it if it had no nukes and a military the size of Mexico's?

The US even buys support, including keeping USD the medium of exchange (thus creating USD demand, thus giving USD value) including be providing military guarantees.

Russia and China have great militaries too, but the US is a league of its own in its ability to apply it anywhere on the globe.

Russia does not.

The reason the US (and USD) has been winning is, as I'm sure you'd agree, a complex and huge topic full of not just strategy but also history. But it doesn't change the fact that without the US military and its ability to project it worldwide it would be MUCH weaker.

Russia lost 50 million people in the war, at a time when the US was sitting as pretty the only major country not blown to bits, and it was holding the IOUs.

No one said that USD is going anywhere. As you pointed out for bitcoin, the people who work on or invest in bitcoin are not part of the asset. This is the same for USD also. Visa equity is the most different amongst the three.

Like I said, I was not the one starting the comparison.

> Bitcoin has value for the same reason Visa has value.

No. Bitcoin has utility. Screws have utility also, they just don't have very much value.

Visa has value (on top of it's utility) because it is able to take a 1-3% cut of all payments that use the visa network.

Suppose bitcoin gave the equivalent utility as visa but for negligible fees. In this world, you would have the same utility for a lower cost, and the equity value of Visa would conceivably go to zero. My point is that converting utility to value depends on the ability to monetize something. If there was somehow a screw monopoly, I'm guessing the "value" of screws would go way up even with fixed utility. This of course was also true when the cost of producing a screw was much higher in the past. Technology is deflationary.

I don't know what the value of bitcoin should be (nor do I think it has comparable utility to visa), but we are undoubtedly in world where too much value is extracted from financial services relative to the utility that they provide. I think that will be disrupted, but have no idea what, if anything, will be valuable after it is disrupted.

A stock of Visa has value but little utility. A Visa credit card maybe has value on the black market.

But the card itself has no value other than said black market. It has loads of utility though.

Maybe you can use it to scrape off the ice on your car windows in a cold winter day... so that would be maybe a nickel?

Further I can call citibank to get a free replacement visa card. So the value of the credit card seems to be close to zero.

FWIW the global industrial fastener industry totaled $86 billion of revenue in 2020, or about $11/person: https://www.grandviewresearch.com/industry-analysis/industri...

Beautiful retort to a lazy argument.

Using this logic, we can value 1 bitcoin at 7/1700* 442billion /21 million = 87$ (Bitcoin Tps divided by Visa TPS times first visa market cap I found divided by number of Bitcoins ).

Except if course, if you buy a piece of visa, you get a dividend and legal rights, while owning a Bitcoin gets you the privilege of paying miners to extract that value. So really, that 7/1700*442e9 $ is the value of those who own the network (the miners), not the users.

The miners have no incentive to mine unless there are a large number of people choosing to exchange Bitcoin giving it buying power to offset electricity cost.

So you are saying there is no value to be extracted? Shocking

I feel certain you understood that is not at all what I was saying.

> many of us actually regularly use Bitcoin for things like payroll

Please define "many" when it comes to settling payroll to employees.

I run a high-risk security and applied cryptography consulting firm so naturally most of my clients are in the crypto-asset industry. Multiple offer payroll in crypto-assets to all staff, and one pays all employees in it exclusively to avoid hires that do not have an interest in the space. I pay most subcontractors in Bitcoin too.

Unlike paying in company stock you do not deal with nonsense like AMT or blackout periods.

I for one am thankful for the regular clients that pay me in crypto-assets, and wish all would. It saves me having to buy from exchanges. Makes for an easy dollar-cost-averaging strategy too.

So the advantage of using crypto is that it is good for those that use crypto? Your argument is circular.

> avoid hires that do not have an interest in the space

> saves me having to buy from exchanges

Money is kind of like that; it's a delusion. The problem is something is always breaking that delusion by printing more of it. But not everything can be printed. If you can't print, the delusion can be pretty hard to break. If the delusion is never broken, it's actually a good thing to use as money.

You omitted one of their arguments:

> Unlike paying in company stock you do not deal with nonsense like AMT or blackout periods.

so pay in cash, not funny stock.

I guess GP likes it? I think plenty of hobbies, sports, and events are stupid. But there are whole industries built around them.

While that’s true, people don’t often get their paycheck in Funko Pops or LEGO.

You shouldn't have your wealth stored in a medium of exchange, while expecting capital appreciation exceeding or even comparable to the equity market. That kind of volatility is a sign of there being something seriously wrong with that medium of exchange.

Storing wealth in an -inflationary- asset like fiat currency is a stupid move, I grant. I store value in a mix of fixed quantity or -deflationary- assets that are useful or interesting to me like art, vehicles, real estate, and yes... crypto-assets. The latter is perhaps the most volatile but also has the highest liquidity, is fireproof, can be traded for other assets anonymously, etc. Tradeoffs.

Calls fiat currency inflationary while advocating a "currency" that has had (as of this moment) 45.92% inflation YoY and is rapidly getting worse.

Nice religion you got there.

Normally by inflation it is meant "monetary inflation", price has no bearing on this.

So you agree it's not money then.

That is irrelevant here. The argument that bitcoin is not inflationary is merely that it has a supply cap. USD has no supply cap but it obviously has lower price volatility. That said, it is the Fed's goal to purposefully reduce the purchasing power of USD by 2% every year, so the trajectory is clear.

Your point about fiat currency is also irrelevant here. Bitcoin has been inflationary in the real world in actual practice. At least over the timescales we're talking about. While fiat currency has been inflationary, Bitcoin has been even more so.

And again back in reality, measures (interest rate increases) to counteract inflation in the fiat currency also make Bitcoin an unattractive "investment":

"The higher [interest] rates go, the more cost to hold an asset that does not produce anything." - Jamie Dimon, CEO JP Morgan

Bitcoin for a while was an unproductive but speculatively "profitable" (for non-greater fools) place to shove money when interest rates were low. Now that money is moving out.

You are conflating price volatility with inflation. Stocks are also down in price this year for the same reason. Stocks are not inflationary either.

I believed all of that until the day I actually tried to accept it as currency at my business.

It doesn’t work. Other things do the job much cheaper and faster… and without burning a small country worth of energy.

> Bitcoin has value for the same reason Visa has value.

I disagree, Visa has value because it is a company that earns profits, ~$10B in FY 2021 ($5.xx per share, 2B shares outstanding)

Bitcoin is not a company that earns profits, so any value ascribed to BTC cannot be for the same reasons Visa has value. In fact, BTC has zero intrinsic value.

Visa has also has value because it adds trust to the system. You can contest your charges and a lot of the fees go towards keeping that trust. Credit cards have tons of abuse but it’s backed by a level of insurance. I stopped using crypto because the fees were so high, it wasn’t simple (unless you use an exchange) and doesn’t come with that trust. Even the exchanges themselves fail because they are gambling with customer cash essentially. It’s like if my bank decides to put all the cash it was holding for me into Iraqi dinar because it has a feeling it was going to go up.

Visa is not a medium of exchange. This is a sad take.

I assume you have used credit cards.

Visa is a company processing transactions for a medium of exchange, which is USD (or other currencies).

Visa is not a medium of exchange any more than a local bank is.

So Visa is similar to miners on Bitcoin blockchain and bitcoin is the medium of exchange?

As a medium of exchange, the price of one bitcoin should be kind of meaningless. As long as you can quickly do the transaction and cash out on the other end, it shouldn’t really matter if BTC IS $100 or $100,000.

As a lower bound it would need to be high enough to support the largest supported transaction. If the market cap of bitcoin was only $100, you could not transact $200.

> many of us

There are 8 billion of us on this planet.

There are maybe a hundred thousand bitcoin holders.

A fraction of them actively use bitcoin.

By any metric, “many of us” is an grossly incorrect statement.

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