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Comment by NikolaNovak | Hacker News Reader

If I understand the core underlying issue (as opposed to downstream result) is a currency that lost majority of its value through volatility.

Who can look me in the eye with a straight face and say bitcoin protects against volatility? That bitcoin "protects exactly" against mismanaged economy and corrupt government?

It's become my mantra but I swear people on HN don't understand how crappy life can get, how oppressive governments can get, how many rights and things we take for granted can be taken away by thugs, and believe a super high tech complicated software stack can magically fix it. sorry if that sounds harsh, but you know what, it is also harsh to listen to hungry angry oppressed people and constantly claim "bitcoin can fix that for ya".

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> Who can look me in the eye with a straight face and say bitcoin protects against volatility?

In 5y, 1 USD went from 3.44 Turkish Lira to 17.94; Sri Lankan Rupee collapsed overnight from ~200 to ~360 per USD. Argentine Peso went from 17 to 134 per USD in 5 years.

I can easily look you in the eye and say that for countries with shitty governance and poorly managed economies, Bitcoin is a far better bet than their local currencies. So far, a common alternative was USD but after it was demonstrated that even a nuclear armed country like Russia can lose its USD reserves overnight, I think a lot of countries would be looking for alternatives. Bitcoin and Gold are credibly neutral alternatives.

You are simply saying one of two things:"deflationary thing would be nice to keep your savings in" and "the USD is a strong currency". What kept people from buying gold, bitcoin or commodities or other speculative assets in those countries? The fact that they are still a bad currency, because a currency is ultimately what your state demands taxes in and wants/subsidizes for transactions to be in. A currency without a state is just a ledger with faithful devotees, and as we see with tornado cash and the continued lack of a bitcoin or Crypto economy producing basic things like food, it faith doesn't seem to be enough (which is ironic because we call traditional currencies fiat now to differentiate from Crypto, when we should call them tax-based and fiat respectively)

+1 on this, you nailed the issues exactly! Bad fiat currency is simply a proxy for bad state, bad government, bad governance. USD is safe and sound as long as USA and USG are. Would reuse tax-based and fiat-crypto - you got that right too - except for fear of all mighty confusion. :-) Money, currency, banking are confusing enough for most people already.

> USD is safe and sound as long as USA and USG are.

I agree. People living in USA or Eurozone may not see the need for BTC since they have good stable governments with well-managed currencies[1]. People outside of those pockets, however, need some option to escape from their governments' corruption and tyranny. BTC is a neutral, and hence better, option. Because if your country falls out of favor of USG, your savings just became a collateral damage when USG imposes sanctions n all.

[1] this sentence might come as a shock to some since news media constantly paints apocalyptic picture. But US and Eurozone is a really good area of the world to live in.

Yes, agreed. I understand what you mean. I grew up in "in Europe but not quite european" country. I hope at some point e.g. BTC version 23 is going be as convenient to use as is a credit card - no need to DL 300GB, wait 10 mins for transaction etc, but yes still I can hold my own keys. That will be the technical part solved. The societal part - where we place trust in yet unknown future people, removed from us in place and time, to do useful stuff for me b/c here&now I do useful stuff for third set of people - will follow. The best system that's evolved this far, Fiat - or as a grandparent wrote tax-backed money - is abused often (not by US, EU - they are the good guys; plenty others like Zimbabwe, Yugoslavia etc impoverishing millions - they are bad guys) enough that there is scope for improvement. Trust can be proxied as simple as 1-5 stars... but that may need lots of control - and so on.

> The fact that they are still a bad currency, because a currency is ultimately what your state demands taxes in and wants/subsidizes for transactions to be in.

I guess you have not lived in a third world country. I have, for multiple decades. And I have seen first hand how black market or under-the-table transactions work. There is a huge economic activity in corrupt countries which happens out of government taxation reach. Bitcoin is a perfect instrument for that. Bitcoin or USD or Gold are great options for preserving value of your savings in such countries. For ordinary transactions, Bitcoin or USD are much better since Gold is harder to exchange in exact quantities needed for the transaction.

Done that. As a store of value - USD has lower volatility than BTC => USD wins as a store of value. As a medium of exchange - USD paper notes are more convenient to work with (on balance) => USD wins as a medium of exchange. Hence - people in 3rd world countries are not silly or un-informed to prefer another country fiat currency (from a - comparatively - well enough run country), over theirs' (badly run) country fiat.

> As a store of value - USD has lower volatility than BTC => USD wins as a store of value.

Depending on your place of residence, USD may have a high tail risk if your country decides to cross USG's plans. For those places, better to have a non-USD non-EUR alternative. Only Gold and BTC come to my mind.

Even when the country gov is hostile to USG, the citizens will still use USD. Citizens use cash, USD notes - not USD bank accounts. No bank accounts are involved. The relations between USG and the local gov bears no consequence to the use of cash. I saw through civil wars in the 1990s, and did not see a single use of gold for anything. The next big state fiat was used for everything. Sorry for the downer.

In 1y, 1 BTC went from USD$47,113 to USD$24,735 (365 days period). If you compare from the high point, it went from USD$67,582 to USD$24,735. Doesn't sound like a good store of value, sure it's (theoretically) better than the 500% inflation of the Turkish Lira but anything is better than that.

> [...]but after it was demonstrated that even a nuclear armed country like Russia can lose its USD reserves overnight,

That's purely due to sanctions, which can affect cryptocurrency as well due to the entire ledger being public.

> ...but anything is better than that.

And how many Turkish people can hold something that is not Turkish Lira as easily as bitcoin?

How would they hold bitcoin to begin with if they need to pay for local services? How would they get paid in bitcoin, or do they need to convert their funds to bitcoin ahead of time? In such a case they could’ve easily picked USD instead.

Holding foreign currency (USD)is not that easy and if there is a "corralito" event like the one that happened in Argentina, your USD is at risk too.

Indeed everyone holds non-local currency too. I'd presume USD and/or EUR have taken on the role of "store of value". I lived through collapse of a state 30yrs ago, and exactly that happens: locals refuse to hold the local currency (that reflecting on the health of the state is quickly losing value), there is a vigorous fx exchange market (either white-legal, grey-tolerated, or black-illegal but existing), and locals exchange their savings from local to foreign fiat currency. No one ever used gold, not once I saw gold being used for anything. Nor any other commodity. Foreign fiat currency that is stable is much more practical and convenient. Until BTC is as convenient as a credit card, can't see it used as "means of exchange". As store of value - maybe, but foreign currency maybe again more stable less risky (on humant time horizons), so again wins for that too over BTC. Sorry for the spoiler.

> That's purely due to sanctions, which can affect cryptocurrency as well due to the entire ledger being public.

Woah boy, that's a lot to unpack. I guess you heard some news about recent sanctions to TornadoCash... and then you thought that cryptocurrency can be confiscated/frozen as what happened with Russian's USD reserves?

What has happened so far: some arrest of at least one developer, some freezing of some (centralized-)stablecoin accounts, some closure of github accounts, etc. But pure (as in, not centralized stablecoin) cryptocurrency stored in cold wallets cannot be frozen at all; and that's the whole point of cryptocurrency.

No, I was not referring to or using Tornado as example here. I was referring to US sanctions on Russia forbidding trade, therefore causing Russia to fall back on their reserves and unable to access further USD reserves.

Cryptocurrency is vulnerable to this as well because, even if you have a cold wallet and run your own node, your transactions are still public and taint every wallet that receives your coins. Vendors might not want to trade with you so that they don’t get the same treatment, exchanges might not want to risk their entire liquidity to cash your BTC out, etc.

Dollar cash is as valuable in Russia as it was before. I don’t know why countries use electronic dollar. Just use cash. Nobody can arrest it. I don’t know the precedents at least. If Germany would refuse to accept those, Chinese will accept it.

Last time I checked, it was illegal to take more than $10k out of Russia per person. Even private plane passengers were thoroughly checked for cash (something completely unheard of before). And yes, governments all around the world have, and will arrest your cash.

>Who can look me in the eye with a straight face and say bitcoin protects against volatility?

Can you really say with a strait face that you think BTC's volatility is worse than literally losing your bank account with all it's content?!

People who live in places like the US forget that the average fiat currency has a lifespan of roughly half your life expectancy (37yr irrc).

Whereas Bitcoin has been around for hundreds of years and is still going strong.

Bitcoin was invented in 2009 so it's been around for exactly 13 years. And its value is extremely volatile.

Imagine if money didn't exist at all and we invented it today. It would be such an enormous technological game changer its value would change very very rapidly as we're going from zero to a huge "market cap" very quickly.

Imagine a pool. If you fill it with a lot of water rapidly, there's going to be a lot of turbulence. Doesn't mean that in the long run, as it gets filled, it won't settle down.

The volatility argument doesn't consider the fact that it's gone from zero to something big players and states invest in in 13 years. And that frankly it was not good enough to be digital cash but it's getting there. That's bound to cause a lot of turbulence.

So are you suggesting?:

Hang on tight

Buy more coin

It will stabilize some day

I'm not suggesting anything. I'm just saying it's early to say how volatile it is in the long term. In the short term, it's a roller coaster for sure.

But economically and mathematically speaking, a deflationary currency tends to be less volatile than an inflationary one.

Do whatever you want with your money.

> a deflationary currency tends

While Bitcoin might be a deflationary currency (i.e. max supply), cryptocurrency more generally has infinite supply (anyone can start a currency).

> Can you really say with a strait face that you think BTC's volatility is worse than literally losing your bank account with all it's content?!

No. But BTC is worse— it comes with all of the volatility and the risk of losing your account with all it’s content.

its

> Can you really say with a strait face that you think BTC's volatility is worse than literally losing your bank account with all it's content?!

Ask Luna holders for their opinion on this matter, it seems they experienced pretty much the same thing (or holders of any other crashed cryptocoin). Bitcoin itself might not be down 100%, but it also lost a serious amount of value in the last half year. Plus, there are a lot of ways to completely loose your bitcoin, be it hardware failure or scams.

So yes, I can say with a pretty straight face that Bitcoin is not a great protection against volatility, which is what the original comment claimed.

Luna ≠ Bitcoin

Indeed, it would be like blaming the USD because I lost my shirt at the casino.

The problem about crypto is that all the scam coins and get-rich-quick schemes gave a bad name to that famous piece of technology.

Luna =/= Bitcoin

No serious person involved in crypto would keep their wealth in a coin like Luna. They will buy it for speculative purposes, but that’s about it.

Why would you drag down Bitcoin to the level of the know scammer/shitcoin/altcoin Luna???

>the average fiat currency has a lifespan of roughly half your life expectancy (37yr irrc).

Just like our products, fiat currencies have planned obsolescence and limited lifespans, this is because permanent money is a fantasy that cannot exist in the real world. Almost nothing in the real economy is permanent, not even humans.

If you want a currency that lasts forever it will have to not only have children, it will also have to be able to die like humans.

Ever heard of gold? It worked well for 4000 years, at least.

> Who can look me in the eye with a straight face and say bitcoin protects against volatility? That bitcoin "protects exactly" against mismanaged economy and corrupt government?

You are conflating volatility and corruption

Bitcoin won't protect you against the former (and neither did the lebanese pound), but it does offer protection against the latter.

With bit coin, and other cryoto, being using as the go to way to oay ransom attacks I highly doubt bitcoin does anything other than making corruotion easier.

And tech support scammers use Apple gift cards, so obviously Apple is just a giant scam too

If gift cards were everything Apple did, yes thatbwould be true. Since obviously gift cards are not everything Apple does, it is clearly not true.

After the Roman empire fell common things were still priced in equivalents of the old currency everywhere even though the currency was dead. When converting BTC to anything, the common denominator it will be compared to for purposes of trade is another equivalent everyone intuitively knows the value for such as the US dollar.

> Who can look me in the eye with a straight face and say bitcoin protects against volatility

I can do so. As volatile as crypto is, it is still much less volatile than a national currency in a collapsing country.

People in the west and in 1st world countries are much too privileged to see this though.

>>People in the US or Europe are much too privileged to see this though.

I have no idea why you'd think so, thank you very much.

https://en.wikipedia.org/wiki/Economy_of_the_Socialist_Feder...

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Federal_...

> no idea why you'd think so

You have no idea why Id think the average person living in the west right now is dealing with significantly less problems than people living in a country that is experiencing full scale economic collapse?

Really? I think it is pretty self evident that most people living in the west are dealing with much smaller problems than people living in places like Lebanon right now.

If someone is unable to see this pretty basic fact, that their lives are likely much better than the people experiencing full scale economic collapse, then I guess that privilege is stronger than I expected.

The West is just doing it in slower motion due to having more knobs to pull to let steam out of the reactor — so to speak.

I have replied to your original comment, as it was written then.

You have now edited it, which fair enough, but therefore I think your "really? You can't imagine why I'd say this [...]" Is unwarranted and I cannot meaningfully address it anymore.

Great, so then you agree with me completely that people living in the west are dealing with significantly less problems than people who are living in an collapsing economy, which is my point.

When people say Europe they don't understand it means so many countries, they just think of France, Italy and Germany.

If it were true that somehow a crypto currency could hold its own in a collapsing economy surely it would just lead to massive queues/shortages? If the economy isn't producing enough it really doesn't matter what sort of currency you use, it's gonna be bad for almost everyone. It may make some difference in terms of foreign debt.

> If it were true that somehow a crypto currency could hold its own in a collapsing economy

I am not sure why you are speaking in hypotheticals. The economy of lebanon did collapse. And if you were holding bitcoin, you'd be much better off than holding that local currency.

Economies collapse all the time, around the world. And because the coin is a global market, it is insolated from local collapse.

> it really doesn't matter what sort of currency you use

But it did matter! Just look at the current situation, in Lebanon right now. If you were holding the local currency, you'd be screwed. If you were holding a global currency, you'd be much better off.

Assuming you could buy basics from an international market and somehow get them delivered to you at a reasonable price using said global currency, true. But how realistic is that?

Would you be? If the economy doesn't produce enough food, what food there is just goes up in price. You can say "buy from the global market" but that requires having money, a tall order for a country with a weak economy.

> Would you be?

Think about the existing right now situation. Imagine if someone, in lebanon, had 50k USD equivalent, in a lebanon bank.

Now, imagine the same person, who had 50k equivalent value, in not the lebanon bank.

Who's better off? Clearly the person who had the global currency.

> You can say "buy from the global market" but that requires having money

Oh, you mean like the money that now wasn't confiscated or inflated away to being worthless? That money?

Yes, that is what you would use the money for. The money that now wasn't taken away, or was not made worthless, is what you would use to buy things.

Situation A: you have no money. Or you have 10 thousand percent inflated money.

Situation B: you do have money, in a global currency. And yes that money can be used to buys things from the international market.

Situation B is better. Much better.

Only if there's actually a mechanism in place to get such things to your door. Various regulations and logistical impediments are likely to mean many basics simply cannot be shipped from overseas and delivered to you just because you were holding currency to buy it with. But I suppose at least you can keep your Netflix subscription (assuming the infrastructure to keep high speed internet connectivity is still being maintained adequately and you can afford to pay for that).

I always wonder if these collapses happen all around the world, why does nobody have the decency to simply accept Bitcoin in their local farm as payment?

Of course there are many reasons, probably the most prominent being that you need to download a 400GB blockchain on your device to actually be secure. No wonder all these Bitcoin people want their technology to have as few transactions as possible, because popularity will ruin it's decentralized nature.

This means you will need a custodial solution like lightning which merely uses game theory to create rewards and incentives for following the rules in a decentralized way but ultimately it is still custodial and knowing and trusting the counterparty is still superior.

This gets to the crux of the problem. Due to the custodial nature of scaling Bitcoin transactions, you will have a centralised organization that can be shut down by the government. The local Bitcoin bank or PayPal equivalent will have the exact same problem as any other bank.

If you argue that this entity can exist outside of the borders of the collapsing country, so do USD banks. Despite its flaws even the USD is a better medium of exchange than Bitcoin.

> why does nobody have the decency to simply accept Bitcoin in their local farm as payment

Farmers do not accept payment in any currency on their farm. They sell futures on the commodity market before the growing season begins to lock in a price and hedge against volatility.

> you need to download a 400GB blockchain on your device

You can use light wallets such as Electrum without trusting a third party, and with no loss of security (though it potentially sacrifices privacy).

Even if that weren't true, a 512GB drive costs $10 these days. That shouldn't be a barrier for anyone.

> This means you will need a custodial solution like lightning

Lightning is not custodial. You do not need to trust any counterparty.

etc.

This entire comment is very misinformed.

> “This entire comment is very misinformed.”

Could be the reply added to most of HN comments about Bitcoin/crypto.

Thanks for replying.

It’s strictly better and gives you more options.

You can try to get out of your country with your wealth intact.

It doesn’t magically solve all your issues, but it’s definitely better to have some access to your wealth than having it confiscated.

> You can try to get out of your country with your wealth intact.

Sure, but how scalable is that? I'm not really interested in solutions that are only going to work for a tiny % of the population.

It’s pretty scalable - just depends on technical capability.

People in countries like Venezuela and occupied Ukraine have managed to make it work.

Good point - if 12 million people could leave Ukraine in the middle of a war in principle a decent % of Lebanon's population could do the same. You do wonder what effect that might have on the chance of the economy then recovering again within a reasonable timeframe.

> "You do wonder what effect that might have on the chance of the economy then recovering again within a reasonable timeframe."

Yeah - my take on this is if the government has failed the people to this extent then the people have the right to exit and the government should not be able to hold them and their wealth hostage. Naturally if the government can, it probably will, which is why the capability of self custody provided by bitcoin (and other cryptocurrency) is such a powerful thing.

Sure you could get this by hoarding cash or gold in theory, but in practice that's way harder and it's way harder to safely move it, especially across a border.

With BTC you memorize 12 seed words and you're good, can go anywhere and recreate access to your wealth on the other side safely.

Once again. 2 situations.

Situation 1: Person has no money, or worthless money.

Situation 2: Person has 50k USD worth of global currency.

Situation 2 is obviously better. Massively. It is absurd to pretend like situation 2 isn't clearly, obviously, and massively better.

Yes there are some issue with global trade, or whatever. But it is clearly, and obviously better, to have 50k USD in an offshore account, or 50k worth of currency somewhere else.

Think about this situation, specifically. No, it is not just "you can keep your Netflix subscription".

That is a bad argument. It is worth more than that.

> Various regulations and logistical impediments

No. You would be wrong to just say "regulations" means that having 50k worth of USD money somewhere is now worthless. I can promise you, that anyone at all, living basically anywhere in the world would be better if if they had 50k USD in an offshore account.

You cannot seriously, with a straight face say "yep! Having 50k in an offshore account is worthless!"

> You cannot seriously, with a straight face say "yep! Having 50k in an offshore account is worthless!"

Good job I didn't say it seriously then, or at all, for that matter.

I was writing in context of a thread about a guy who "robbed" a bank to get back his own money to pay for essentials. I still don't see how owning crypto or any sort of global currency would have helped him (or the millions of other Lebanese currently in the same boat) very much at all.

> Good job I didn't say it seriously then, or at all, for that matter.

Awesome! So then you agree that having 50k$ of equivalent value, outside of the lebanon bank would not be worthless, and would instead be worth a lot! Glad you agree with me.

> I still don't see how owning crypto or any sort of global currency would have helped him

Well, it would be because now they have 50k$ of equivalent value, in a place that is not the Lebanon bank. Therefore the Lebanon bank can't take it from them.

That is how it would have helped. Having that money, outside of a local collapsing banking system, would mean that any of those people would now have 50k$ of value, in a place that the Lebanon bank can't take it.

And you agree with me on this, because you are not saying "yep! Having 50k in an offshore account is worthless!".

You aren't saying that. Which means that you agree with me completely, that it would not be worthless to have that money, or equivalent value of that money, in an offshore account.

"Worthless" and "unhelpful in this situation" are not the same thing.

I guess I’m protesting that while B is better for an individual, it doesn’t work for the whole country. It’s the equivalent of having a well-connected relative abroad to get you out. It’s a godsend, but it doesn’t scale.

Actually, you’d be way better off with a stack of crisp $100 US bills or silver coinage.

Good luck finding a way to convert your bitcoin into some sort of locally fungible currency while that economy is in a state of collapse and the crypto brokers are on a similar path.

Unless your crypto is with one of the many exchanges currently in the process of collapsing and blocking withdrawals... While the rich guys running the show walk away with mass profits. Yeah, definitely better.

You're basically making the same argument as 'just swap all your money for a different currency.'

It's interesting, I seem to always see these comments on behalf of people who might find crypto useful to avoid local currency issues, not people actually doing it.

> Unless your crypto is with one of the many exchanges

Bitcoin believers always say - "not your keys, not your coins". I am sure you have heard it a million times by now since you also seem to be keeping tabs on which crypto exchanges are collapsing.

I think Crypto sceptics are the ones more likely saying "not your keys, not your coins..."

Either or: the tech flourishes with this use.

> If I understand the core underlying issue (as opposed to downstream result) is > a currency that lost majority of its value through volatility

No, that is incorrect, the Lebanese pound did not lose it’s value through volatility. It lost it’s value through debasement, a fractional reserve and outright theft by the central bank of Lebanon.

Here is an article that explains the process [1].

Successive governments used bank savings as a piggy bank beginning after the 1975-1990 civil war. Things accelerated in 2016 when the banks started paying unsustainable interest rates on savings to entice savers in a grand government-sponsored Ponzi scheme that ended in 2019 when banks could no longer pay back savers and froze accounts.

Had the savings been held in Bitcoin, on-chain, no government or central bank could have stolen the savings. 1 BTC=1 BTC on-chain and there can be no debasement, no freezing of funds, and no ponzinomics. Despite Bitcoin’s short-term volatility, as a self-custody asset, it would have been the ideal store of value for Lebanese savers. Remember, the Lebanese pound has been debased by 10x, even if you can access those funds. Bitcoin truly does fix this.

[1] https://www.reuters.com/world/middle-east/lebanons-financial...

Bitcoin can't fix this because it would promote even more corruption, imagine if politicians sole goal in their political career was to get Bitcoin as soon as possible to live off their constantly growing savings? How do you get Bitcoin as fast as possible? Corruption is quick and dirty.

Especially when bitcoin has lost almost 2/3 of its value in the last year.

And increased in value well well over 10x in last few of years but go on.

Other comments laid it out already, but you don’t understand the underlying issue. Volatility is unrelated to the risks I’m talking about.

Your criticism doesn’t sound harsh, just wrong.

Not because of volatility

It's because of fractional reserve and banks and governments colluding to print money out of thin air or just spend most of it.

Volatility is a different problem: I agree btc is not the solution, we need a political solution for that.

And maybe a currency backed by real things (not necessarily precious metals, common goods would represent the economy better). Either the bank has it and I can get it anytime or it's fraud.

>It's because of fractional reserve and banks and governments colluding to print money out of thin air or just spend most of it.

Have you ever considered that the way money is currently structured requires ever more creative solutions that sound pointless and counterproductive yet are entirely necessary to keep it alive?

Yes it's volatile that's why you don't put all your money into it. Diversification!

I think it’s people who, in good faith, still deeply believe in the theory behind Bitcoin but ignore or dismiss the decade of experiments showing it just isn’t working.

The fact that you could hold some % of your wealth in BTC (in self custody) and have insulated yourself from the failure of the Lebanese currency is evidence that it is working.

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