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Comment by BadBadJellyBean | Hacker News Reader

Bitcoin and all other cryptocurrencies don't have a value assigned like normal currency. That means you almost never pay in bitcoin but in the bitcoin trading value of some currency. Instead of $5 you pay the current trading value of $5 in bitcoin. That is why it doesn't work as a currency and people are complaining about how they struggle with crypto volatility. No one really thinks about how many bitcoins they have just how much that is worth in "real" money.

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You can say the same thing about gold.

At least gold is a physical good that has some use. I don't like gold speculations but bitcoins are literally just bits in a distributed database. But that is not even the problem. Most money is digital. The problem is the acceptance. It's primary use seems to be just trading it back and forth without trading it for goods.

They are bits that are cryptographically true and unique. It may not be tangible but now we are getting into philosophy of mathematics and whether math is real or not? I believe in math therefore I believe in cryptography.

>> I believe in math therefore I believe in cryptography

You aren't really believing in math. Doubling the number of Bitcoin in the world is not blocked by mathematics (trivially change the constant in the source code), it is blocked by a consensus of humans believing in the artificial scarcity that a system robustly provides. For instance, if Bitcoin ever adopts post quantum cryptography, the math breaks - it is a technical fork. But, since a vast majority of participants (maintainers, miners and holders) will likely agree that it is a good idea this new fork will be named "Bitcoin" and everyone will be happy. Not math at all, rather a broad consensus among humans.

I'm not suggesting Bitcoin is a bad investment at all, but believing in it because it "is math" is not correct.

They are unique but they will cease to exist if everyone stops mining and doesn't keep a backup. They are just charges on a storage medium. You cannot use them for anything but to either keep in a wallet or move around. The transactions might be immutable but they are not persistent if not constantly tended to. Gold will stay gold for a long time without intervention.

Most normal currencies are the same as bitcoin/crypto in that they are mostly digital but at least they have some mostly agreed upon value within their system. They don't need to be converted to another currency to find out which goods I can exchange for them.

Im not a crypto person I own zero cryptocurrency - yes, it will only ever be worth what someone thinks its worth. If it all gets turned off it goes to zero, but if the network is up and someone is willing to act as an exchange, it will have value - even if it drops back to 10c. If it has some value, it can be used to move that value around. If it can be used to move that value around, then people will think it has value. Thus I dont think bitcoin is going away, though its value relative to USD could go anywhere

> Most normal currencies are the same as bitcoin/crypto in that they are mostly digital but at least they have some mostly agreed upon value within their system

The Dollar has an agreed-upon value of 1 Dollar per Dollar, the Euro of 1 Euro per Euro and the Bitcoin of 1 Bitcoin per Bitcoin. There are no agreed-upon values in any currency in free market. In socialism, they would dictate that a pound of butter had to cost 1unit of some currency. But in capitalist free markets, the value of a currency is always measured realtive to others things, being it goods (such as a standardized shopping baskets used for CPI) or other currencies or assets. For example, there is no way to determine if the dollar raised or fell - it always has a value of one dollar. But there is the DXY ("dixie") dollar index, where the value of the dollar is measured by its trading price with a basket of other currencies. Now if the DXY falls, you can say the dollar lost value. You could also say, the foreign currencies increased in value. It is always relative.

Plus, 100 dollars bought a whole lot of things 50 years ago, a lot less things 30 years ago, and today the same 100$ buy a lot less than that. There is no agreed upon value, it is supply and demand.

Mathematics does not actually exist; it is merely a simplification of geometry. Without geometry, mathematics would not exist.

You left out paying ransom, buying illegal guns and drugs, evading taxes, evading sanctions, settling inter-cartel debts, and bribing certain important world leaders

The USD still rules (by several magnitudes) for the use cases you mention.

I dislike crypto as much as the next guy but, the normal currencies are not very different.

Agreed apart from the fact that most currencies don't need to be converted to another currency first to determine which goods I can exchange for them. I agree that most currencies have no inherent value, only an agreed upon value.

That is a chicken and egg problem. Look at argentina pre Miley, when the dollar/peso exchange rate was fixed and you couldn't freely exchange. People would still prefer the dollar over the peso, even though you couldn't legally agree on dollar prices in contracts such as rentals. So people were using the dollar to save in, and exchange for peso when they needed to exchange goods.

My point being, you can have two competing currencies and exchange between them. In Argentinas case, the currency competition was healthy as politicians couldn't conceal their bad financial policies due to the hyper inflated exchange rate for pesos.

Bitcoin behaves exactly like a fiat currency would if driven completely by market forces. It's a good thought experiment in what the exchange rate would look like if the currency value is purely derived from demand and supply.

No, it behaves like a speculative asset. The price goes up as long as the number of people who believe it will go up increases, causing more people to buy it. Once the supply of greater fools is exhausted, there is no reason for anybody to hold it because it's price isn't going up, so they sell to find something else that goes up. This causes more people to sell so they don't lose more until the price falls to the non-speculative utility of the asset, which is 0.

I've never understood why you'd need a currency specifically for Italian cars.

Two actually! Fiat vs Ferrari. https://ferrari-imports.enigmatechnologies.dev/

The reason it doesn’t work as a currency is that the transaction costs are way way to high for that. A single transaction it is literally the price of 1-2 million visa transactions. This is by design, bitcoin will never be a competitive system for payment processing, without adding centralized “2nd layer” systems, and at that point why not just use a centralized system to begin with. It makes sense, a distributed system that does the same work millions of times cannot compete with a centralized system that does it once.

You use outdated information. Modern Lightning, a layer 2 solution based on Bitcoin, does Bitcoin transactions in less than a second for less than any Visa fee. More to it, you can send transfers of less than 10satoshis (less than a cent) for fees in the millisatoshi range on an economical scale. Visa/Mastercard won't ever offer transfer fees of less than fixed 10cent per transaction, making micropayments impossible, and 1$ payments super expensive (more like 20cent fees on the dollar). That is one of the reasons why W3C web payments API was cancelled.

As i understand it, all the lightning transactions happen off chain and the results are then published afterwards. So you are back to trusting a payment processor to avoid double spend. And, if you can do that, you don’t need BTC to begin with. Its just integrating bitcoin with another system that is actually able to do transactions. BTC alone remains horrible at that.

No, your understanding is incorrect - please do your homework and learn about lightning - you will be amazed. Lightning is zero-trust just as bitcoin is, there is no central instance. There is no "publishing" either. You can chose to not run your own lightning node (custodial vs. self-custodial wallets), then this becomes true. But that is the same as not running your own bitcoin wallet but using Exchanges, Banks etc. to hold your Bitcoin for you.

Lightning uses so called hashed time locked contract (HTLC) between nodes backed by bitcoin 2-of-2 wallets, with punishment options baked into the transaction script if people try to unilateraly reallocate funds from the channel. The channels between nodes form a payment network, where each node forwards funds (in return for a small fee).

To use a metaphor: bitcoin is the gold, lightning are green dollar notes with a guarantee to exchange those notes for gold anytime - just as our monetary system was before 1971 when Nixon broke that promise. Lightning is built in a way that it is decentralized and that promise can never be broken. And you can send those notes via the internet in sub-seconds.

Thanks, I accept that it requires less trust than using a central ledger, still it cannot provide the level of trustlessness bitcon can, if it could why use btc? I totally agree with your analogy, but in my view that just underlines that BTC is not useable as a currency, just as gold is not.

> if it could why use btc?

You still don't grasp lightning fully, and I totally understand because it a complex concept. It is not its own crypto, it is not a token, and lightning does not even use a blockchain. It is a layer 2 network, meaning it builds upon BTC and requires BTC node to run (to monitor the new blocks and publish transactions). So lightning cannot replace bitcoin, it augments it.

Thank you. It's a good point, but what I am trying to say is that lightning cannot provide the level of security BTC does, hence the need to constantly return to the safety of the block-chain. There is no free lunch: Security in the lightning network must break down/i.e. require more trust as the number of node-jumps in a transaction increases, and perhaps as the number of transactions in the channel increases as well. If not, then lightning solves the distributed double spend problem in its own (efficient) way, that we should just use instead of BTC.

Would you agree with me that lightning 'stretches' each BTC transaction by using clever tricks ala. aggregation, checksums, hashing, etc.? I buy that this scales the number of transactions dramatically, especially between a limited number of parties. It might be that this is stretches far enough be make BTC useful as a currency, but I remain very doubtful of that. If that is indeed the case, it seems that BTC has managed to fail as a currency for other reasons.

You obviously haven't looked into the tranasaction economics of the Lightning Network. And things will only be mentally priced in USD until we switch to something else - quite possibly Bitcoin.

I have, and as I have said to others the lightning network is not some magic that makes distributed PoW efficient, it just lets you conduct a bunch if transactions off chain and then record the end result. You could do that with fiat currency as well. BTC does one thing: lets users transact without possibility of double spending, without trusting any other users. Lightning network removes that last part, so you are just back to VISA/PayPal/Banks etc etc.

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