Comment by ArchieScrivener | Hacker News Reader

Comment by ArchieScrivener | Hacker News Reader

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ArchieScrivener

Yes, Bitcoin is a replacement for central banking currencies. Its the first few lines of the white paper.

This is how money works. If you use a medium of exchange and unit of account for goods and services then that medium must increase at the same rate as the increase in goods and services otherwise you get second and third order effects such as inflation, contraction, rising unemployment, etc., directly impacting its ability to act as a unit of account.

In Bitcoin you don't generate cash, you earn block rewards for acting as a consensus broker which otherwise would require a central banking settlement layer. This activity, tied directly to the transaction layer, acts to maintain the equilibrium between increases in goods and services and expansion of the money supply.

Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments. Driven primarily by the fear of missing out and market manipulation since Bitcoin is heavily centralized.

> In Bitcoin you don't generate cash, you earn block rewards for acting as a consensus broker which otherwise would require a central banking settlement layer. This activity, tied directly to the transaction layer, acts to maintain the equilibrium between increases in goods and services and expansion of the money supply.

Block rewards have no connection to transaction volume or economic activity, the protocol is designed such that bitcoin supply increases at a predictable (and diminishing) rate. Bitcoin is deflationary by design, which is one of the major issues that stopped it from becoming anything other than a speculative store of value.

Yes, they absolutely do. That's what dictates difficulty. It is not deflationary, deflation is not the same as supply constraint. Deflation is a reduction in price level, constraining supply is precisely how it moderates the equilibrium of value which is why it is a threat to existing monetary control.

The bitcoin price level reduces as an effect of bitcoin's design, therefore it's a deflationary design.

Well, for now. Obviously it can't reduce forever, and it will eventually slam back up to infinity (bitcoin will collapse) when no normal person feels like it's worth getting any because so much of it is already owned by wealthy people. Until that happens we're surfing the Ponzi wave. Inflationary designs are way more stable.

> Wall Street got ahold of it and now Bitcoin is primarily acting as a Store of Value for the purpose of speculative investments

Insomuch as beanie babies are a store of value. Speculative assets only have value as long as there are more greater fools to buy in. When you've exhausted the supply of greater fools, there is no more reason to buy the speculative asset because its price won't go up, so it will fall to its intrinsic value, which is the worth of a normal stuffie for a beanie baby (roughly $5) or the worth of a number stored on other people's disks for a Bitcoin (roughly $0), which is the value ultimately stored. Wall Street is only involved in Bitcoin to facilitate trade between fools because we have collectively done a poor job of regulating this madness, allowing so many fools to eventually lose their money to a distributed Ponzi scheme and sanctioned countries.

You can't send a Beanie Baby to someone on the other side of the planet instantly.

Which is why they're more difficult for Russia and North Korea to steal and less useful speculative assets for them to fund their regimes.

Roughly the same argument could be applied to gold, and yet it has been used as a value store for ages.

Can't say I like crypto, but I think better arguments can be made against it.

Gold has a use value.

90% percent of gold is used in jewelry or bars so use value isn't that much unless price is prohibiting use cases.

Jewellery is a use for gold, people like it because it is pretty and shiny and easily worked not just because it is rare.

The artificial scarcity and lack of actual use of bitcoin really isn’t the same.

So do beanie babies. Might be less than gold, but that's why I'm calling this argument flawed.

The second part is that despite these disclaimers, I don't think gold has, in modern history, or will in our lifetimes, reach a price reflecting just the use/intrinsic value. The reasons being twofold: the storage of value IS a use itself; and importantly, which applies to Bitcoin and others, there are always people that will be willing to buy the dip, which is how the requested new generation of "fools" comes from.

> the storage of value IS a use itself

And for this, having a private ledger is cheaper and more efficient for moving stored value in a way that is recoverable by law and doesn't support sanctioned regimes.

1 Trillion of market cap can stay wrong longer than some random loud mouth on the internet can stay right about why everybody else is wrong. There is no 'intrinsic' value to most bits of information written on paper or disks, by some definition.

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