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Comment by wyager | Hacker News Reader

>a very naive view of some basic economic concepts.

Which concepts in particular are you referring to?

For one, there's a massive disconnect in distinguishing between the value of the currency and currency as a medium of exchange. For example, most sites and discussions focus on the value of BTC vs USD. Very few look at volatility and transaction volume.

>Very few look at volatility

That is fair. Do you think this is an insurmountable disadvantage?

>and transaction volume.

I don't know about that. Bitcoiners have been very vocal about the regularly increasing transaction volume since its inception. See https://blockchain.info/charts/n-transactions-excluding-popu...

Using Bitcoin is basically, like using a foreign currency, with the only difference, that in case of a the conventional currency you might actually live in the country it is used.

In other words, whenever you use Bitcoin you take on FX risk. This means, that Bitcoin is something you wouldn't want to store value in for the long-term.

Hedging that risk will also prove a major headache, since there aren't that many Bitcoin contracts out there, and the ones that are, carry some major credit risk with them.

It's different than most other foreign currencies in the sense that it's variance in value is MUCH higher than your usual currency. I would consider storing my personal fortune in CHF, JPY, USD, or even EUR but never in BTC.

Exactly, the volatility is why people wouldn't use it as a store of value.

P. S. I like how you went "...or even EUR" ;)

>This means, that Bitcoin is something you wouldn't want to store value in for the long-term.

I can think of a reason you would want to. Bitcoin is strictly supply-limited, and all fiat currencies are not. One might decide that, despite Bitcoin's volatility, the expected change in unit value over time is higher than that of any (inflationary) fiat currency.

With the difference that other fiat currencies are spectacularly unlikely to be declared illegal in your jurisdiction. There's a non-zero chance of your "bitcoin stored value" being about as desirable as a few suitcases full of cocaine, if your local laws fall that way.

I wonder if tip4commit have even considered whether any of the unsolicited donations they're collecting for are intended for residents in any of the non-green countries here: http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country ? If you're a contributor to an open source project and you live in Bangladesh, this is about as welcome as receiving illegal drugs in the post in return for your open source project commits. (Yeah, a bit of hyperbole there, but still...)

http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country

>With the difference that other fiat currencies are spectacularly unlikely to be declared illegal in your jurisdiction.

So we've gone from "it's volatile" to "it's maybe, potentially, illegal at some point in the future"?

Well, there are a few reasons I wouldn't be worried about this. A) It's not likely that Bitcoin will be banned outright in most countries. B) If it were to be banned outright, you'd likely have plenty of notice and be able to sell it before the laws took effect.

Also, it is not as if the project is actually sending Bitcoin to the developers; it is simply making it available for them to claim. A more comparable analogy would be if a sweepstakes in Colorado told me I had won some free marijuana; even though marijuana is illegal in my state, I am not legally culpable unless I actually claim the winnings.

> If it were to be banned outright, you'd likely have plenty of notice and be able to sell it before the laws took effect.

Ah, but who would want to buy Bitcoin in that scenario?

People in countries where it was not going to be outlawed, or customers who planned to use it for illegal purposes anyway.

True - like I said, I was being hyperbolic...

I still think the "potentially illegal at some point in the future" is a real consideration in the discussion about using Bitcoin "to store value in for the long-term".

As for the difference between "sending Bitcoin to developers" vs "making it available for them to claim" - think about how you'd feel if someone in Colorado was running a website saying "Donate marijuana to wyager for each of his upvoted HN comments!", then had your local police come round to your place asking you about"your" 7oz of illegal drugs? However "in the right" you are, being put in that position without being asked, and having "that guy" argue about whether he needs to stop doing it when you complain... I personally wouldn't want to be involved in those arguments, nor would I be at all happy about other people supporting :that guy"'s rights to keep doing it.

True, if we expect the BTC FX risk to be lower, than the inflation risk of the best possible fiat currency choice, then BTC would be the superior choice.

Bitcoin is strictly supply-limited, but there are an unlimited number of altcoins.

(I see Bitcoin advocates pushing people to stop using altcoins. It's unclear to me what force they can put behind this admonition.)

Friction, lowest friction tends to win and bitcoin demands friction to run the blockchain. I don't think electronic exchange mechanisms are daft, but I do think the bitcoin model is.

>bitcoin demands friction to run the blockchain

It requires (electrical) power. I don't think this could reasonably be called "friction". When I think "friction", I think of burdens imposed on users. Bitcoin has relatively few of those.

Cost per transaction of $19 is a fair amount of friction - https://blockchain.info/charts/cost-per-transaction

>Cost per transaction of $19 is a fair amount of friction

Haha, I have no idea what that chart is talking about. It might be in cents. Even then, it seems expensive.

My phone client uses a ~$0.05 fee, I think.

All fees are optional. Your transaction might just take longer without one.

Yeah, just thinking about that fee graph. I have no idea of the transaction size it is based on and without that it is pretty useless.

There are about 500 transactions per block; each block contains 25BTC + fees (the fees are negligible at the moment). At the current price of $350/BTC that means that the revenue per transaction is 25*350/500 = $17, which means that the cost per transaction should be around that area. This means that the low transaction fee is actually massively subsidized by the fixed block reward.

The failure, nay the pigheaded refusal, to learn from history.

BitCoin is faux money and will likely be recorded as the "Dutch Tulip Bubble" [0] of our times.

Intentions and wishful thinking alone are not enough to create revolutions. Crises are invariably required to change such fundamental concepts as value of currency in the public's mind, and it has to happen on a massive scale in a tiny span of time. BitCoin will be no more than the butt of jokes in another decade unless it finds it's destiny in a crisis made for it to shine.

[0] http://en.m.wikipedia.org/wiki/Tulip_mania

You haven't actually mentioned any economic principles; you've just compared Bitcoin to a historical bubble (of which there were certainly many) without any evidence supporting this comparison.

>BitCoin is faux money

Could you expand on this? How do you define "faux" money?

OK, you're making 2 different claims. The first claim is that Bitoiners refuse to learn from history. But the second claim is that crises are required for revolutionary change (history says, I presume). So how are Bitcoiners refusing to learn from history? By trying in the first place? Or by failing to manufacture a crisis?

And really, linking to the wikipedia page of tulip mania, as if we haven't heard that trope 10,000 times?

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