Do you think that the most important thing about the value of something is the finite supply of it?
Fiat currency is theoretically infinite since we abolished the gold standard, but seems to be compelling.
Why would bitcoin be more compelling than gold (a finite store of wealth) or fiat currency (a fluctuating/volatile/infinite store of wealth)
This is as true as saying that the United States Department of Treasury sets the supply of dollars in stone. Bitcoin is as fixed as the relatively small number of parties who run the network want it to be. If enough of them wanted to fork it, remove the deflationary model, change their rewards, etc. most users would be dragged along for the ride because there’s no anchor.
There’s nothing preventing Bitcoin miners from modifying the Bitcoin supply algorithm and inflation rate, except for their collective unwillingness to do so.
Bitcoin block rewards go down over time in Bitcoin terms—but so far the long term trend has been that the rewards have gone up in USD terms. We have never seen a sustained, long-term decline in the block reward in USD terms.
When we have seen short-term declines in the USD-denominated block reward, the hash rate has also declined—meaning a good number of miners have stopped mining.
What happens if the price of Bitcoin stagnates in the long term? Will miners still mine when the block reward is slashed again? Or will they decide to modify the algorithm to ensure that they remain profitable?
In fact, a majority of miners did try to strongarm a fork 5 years ago, and they failed, because the users did not agree. There was even been a book written about it. https://www.amazon.com/Blocksize-War-controls-Bitcoins-proto...
If they tried again, they would fail again -- literally nobody would agree to a fork whose purpose is to enrich miners at the users' expense.
The Bitcoin Cash fork happened when prices were rising and the inflation rate was still high. What would the balance of power have been if the block reward were 1/16 what it was at that time? What if the only miners willing to stay in the network were trying to exploit it in some other way, because the block reward was insufficient an incentive?
In that kind of environment, both users and miners might start looking to make changes.
The security issue with less miners is the whole 51% attack, but even with a substantial drop in miners, it would still mean the attacker would need many thousands of nodes. Seems like that kind of energy and spend would be more profitable mining.
But transaction fees are determined based on supply and demand for transactions, not based on how much value on the chain is secured by them.
These are only tangentially related, and the strategy of 'store of value' makes them even less well coupled.
Unless there is high demand for transacting, then the economic pressure will be for the cost of attacking the chain to come down, and double spending the value stored on the chain will increasingly become more appealing than transaction fees.
The current equilibrium relies on the supply increasing.
It is absolutely possible but not practical. The selling point of bitcoin in this regard is that the work needed to take over the network is relative to the size of the network.
You can 51% a small shitcoin all day. It might cost you $50,000 to do it and now you control a coin that has become worthless because it got hacked by you.
I would not be surprised if a large crypto exchange takes over bitcoin mining some time in the future. Crypto gamblers don't really care about decentralisation or censorship resistance. They only want the number to go up.
An uncapped emission like 1 coin per second forever would be more immutable as it is simple as possible (not to mention much fairer) and leaves no uncertainty about long term security.
https://www.investopedia.com/tech/history-bitcoin-hard-forks...
Creating new digital currencies is also rampant. It seems to me that a finite representation of the current wealth of the economy (the money in circulation) is not even desirable. New things are being created all the time that increase that wealth. It seems reasonable to be able to adjust the amount of currency in circulation to reflect that.
Or just use dollars.
No thanks :)
One of the original arguments for BitCoin was that it would maintain it's value during inflationary periods - clearly something it has not achieved. The justification for BitCoin seems to be a moving target - depending on whatever the perceived problems are - Dr BitCoin's economic cure all.
Aka it’s less of a crazy speculative investment and more of an actual currency.
If I send $1000 USD to my friend in Australia using bitcoin how much AUD do they receive? And what does that process look like?
Hi, I've worked in the global mineral exploration industry for decades, both as a mine worker, an exploration geophysicist, and as a compiler of a global DB that now backends the S&P mineral intelligence division.
Let's clear up some things about gold.
1) It's valuable because it's valued ..
That's pretty much it, it's kind of rare, its shiny, it "stands alone" as a noble metal that doesn't easily react.
2) Much needed - it's used in jewellry, it's essential in high end long life zero maintaince space electronics ... a great deal of other uses (Gold Speaker Cables!!) are just pure performative BD (ie. it's not "essential") - other metals are in the same ballpark for conductivity, etc.
3) The greatest single application for gold, once mined at great expense, is to be formed into ingots and sit about as bullion as "proof" of work (digging a super pit and spending > billion to recover it per annum) and proof of wealth.
It's more or less solid crypto that persists after the power goes out, can be worn as shiny jewellery, and has some neat niche applications that it is essential for.
I'm not a huge cyrpto fan, although I did hang on the cypher punk boards where the bitcoin paper was first announced (as I have a math background) - I'm no fan of the vast amount of energy wasted (IMHO) on both gold extraction and bitcoin mining.
There's nothing in the world with such a long history of a solid investment that goes back to ancient times on a global scale.
So basically, cryptocurrency (i.e. proof of work limited shiny token) has "a long history of a solid investment that goes back to ancient times on a global scale"
If you can’t see literally any axis along which Bitcoin and gold are comparable, then I can’t really help you. It’s obvious there are some ways the two are comparable, even if you think these comparisons are weak or ultimately insufficient to hold up the price.