EU has mandatory insurance for €100k in savings accounts. Of course, there're all kinds of scams running all the time disguised as "investment saving accounts"...
At what point are the miners/network considered the centralized institution?
Are corporations considered “decentralized institutions” in the world of bitcoin enthusiasts? After all corporations are made up of decentralized shareholders that can vote for and change the directors.
If that doesn’t fit...what about a credit union? Like bitcoin there are no “owners/shareholders” of credit unions they are simply comprised of members.
> At what point are the miners/network considered the centralized institution?
Very much this; I'm fairly sure that if there is an organization that wants to direct / control btc, all they have to do is open up their (real money) wallet and get the majority mining capacity. If they first drop the value of BTC by selling or whatnot, miners / automatic miners will switch to more profitable currencies so the total hashes / second will lower, making a hostile takeover easier.
You make it sound so easy, just open up your wallet and get the majority mining capacity!
Tell me, how would someone with near-unlimited money go about doing that? Will they just conjure up the hardware needed to make 15 Trillion hashes per second?
In theory yes, but as the other answer states, you would raise an immense amount of money WITHOUT the public realising who would than just abandon whatever mining-based Crypto we're talking about
Not sure if representative for "bitcoin enthusiasts", but here is how I see it:
As the written word spread in Europe after BC, it layed an important cornerstone for democracy and changed the world for good. Noone would argue with that, right?
Ok, so let's look at Europe from 500BC-1300BC. Corrupt monks forging official documents, under some goverments up only about 60-80% of the were real. Monks were people of god, so noone really investigated. For a long time, the emperor would sign with a simple line, because he couldn't actually write. Wow, how is that more valuable than spoken word?! Where is your democracy? Women can't read, poor can't read. Knowledge is stored exclusively by the church. Turns out writing things down is actually a really backward philosophy! Or is it?
And that's where we're with Crypto right now, IMO. I'm not saying this is as revolutionary as writing, not even close. I'm not even saying it will turn into a good thing. BUT I really like the underlying idea, the concept, of it. Of course there are greedy shitheads, companys taking advantage, fraud and projects which are uterly useless. But yet I didn't came across an argument which convinced that the concept of non-centralizing via blockchain can't work.
So, to actually answer your question, I think we shouldn't mix up the discussion about the philosophy, potential and future of Blockchain with individual cases like "is this pump and dump worse than 2008 greed of banks" (which is also an important discussion, but a seperate one).
Personally, I'd be fine with all that if not for the elephant in the room - the superlinearly growing, unbounded energy upkeep required to support cryptocurrencies. That one single reason alone outweights all the potential benefits you allude to.
Given that PoS is still not adopted in a meaningful way, I feel those differences are merely constant factors, they don't change the trend. But I might be wrong about that, I'm not up to date with bleeding-edge cryptocurrency developments.
My comment shouldn’t come off as all bad/anti-blockchain.
While modern view has corporation as these evil centralized entities...the first “stock corporations” were a welcome invention, allowing distribution of risk and a share in profits.
I personally love the idea of an immutable and distributed ledger. And while bitcoin may have been helpful as an example of a potential use for a blockchain, it has failed to fulfill the intended use of the creator (peer 2 peer digital currency). I think in a lot of ways because while blockchain itself may have some democratic characteristics, the example of bitcoin as a currency is anything but democratic. Bitcoin is something bought and sold, the inventor(s) have 1,000,000 and new comers will be hard pressed to have equal power.
Then again the way democracy is used as a term and romanticized is kind of a joke to me. From the fact the US is often called a democracy (it’s not it’s a constitutional republic), to the idea it took women about 2,500 years to get the right vote, to the realities of democracy only works until it doesn’t then might is right (see the democratically elected parties: taliban, hezbollah, hamas).
And you think this bank (re: the article) falls outside of those? You won't be able to get your btc out quickly in this one either. Same with online exchanges for that matter.
Exchanging directly for cash at or above market rates is definitely practical with LocalBitcoins. There are a large number of brokers there that do it professionally and value their reputation on the platform much higher than they value the potential for ripping you off.
Of course, if you need to liquidate $1B in Bitcoin, that's going to take time, but you can still do it much faster than you could get it out of a Cypress bank in 2014.
What is this threat model where if a government tries to freeze your assets having BTC stops everything bad? If a government is trying to freeze your assets you have a lot of other problems that are bigger than simply not having access to your bank account.
Oh remember those securitized mortgages we sold you? Yeah, they're worthless now. By the way we bought insurance on them becoming worthless, because we were pretty sure this would happen when we sold them to you.
There's a difference between keeping cash in a bank which is FDIC insured and putting money in investments; particularly in the US where robbery was/is called investment strategy.
Yes but it's important to note that the FDIC insurance is only for your USD-denominated balance.
Your BTC (or all crypto?) balance is insured by Lloyd's. I assume this is only insured against thefts/failures of Coinbase's, so if your balance were stolen by attackers who had your Coinbase credentials I suspect your balance would not be covered. But this might be similar to your liability from normal online banking fraud/theft?
The fact that Coinbase pays those private insurance premiums makes them the no-brainer suggestion to people who are considering holding some BTC.
In my country, the limit is per natural person, not per bank account. Legal persons don't get it (they get a different one though - because of this, there is a very important distinction between business and personal account).
The problem with raising the insurance is that banks pay for it, and the FDIC maintains a fund for paying out claims. If the amount at risk was higher, fees would have to be higher and the FDIC would have to keep an enormous amount of cash on hand. Hell, even at that level, the FDIC was badly stressed during the 2008 crisis. The point of the FDIC anyway is not to protect rich people from all losses, but to prevent runs on banks and promote stability in the system. Most depositors don't have that much money.
Yes, but since commercial banks and investment banks were allowed to merge after 70 or so years, banks certainly have a lot more income than they used to.
Can you just loan your money directly to the US Government?
In the UK the "National Savings & Investment" bank is actually outright owned and operated by the British government, specifically for this purpose. Instead of raising money commercially with a debt security, and then having banks buy that take savings from their customers to afford the securities and keep a cut as profit, the NS&I gets rid of the middle man and just borrows money directly from citizens at a decent interest rate with zero risk‡.
‡ Obviously the government itself might fail, but you're exposed to that risk anyway, so it didn't add any risk to involve NS&I here.
But there are lots of types of US bonds and you can literally buy as much as you want (~$500b worth of them trade every day), it's the most liquid market in the world.
Oh, yeah, I forgot that individuals can buy Treasuries directly from the government, I was thinking they only could on the secondary market which would not have been responsive to the query.
> Nobody is going to keep a billion dollars in a savings account, which FDIC insurance would not even come close to covering anyway.
If you spread it around 4,000 banks (there are 5,593, so this technically possible), it would, since the limit is $250,000 per depositor per bank per ownership category (I'm assuming avoiding the overhead of manipulating ownership categories, which could shrink the number of banks needed further.)
Those were speculative investments, not bank accounts. Nobody lost money in an FDIC insured account.
The comparison is also dubious for another reason: everyone who did even the tiniest bit of diligence knew the mortgage and derivative markets were in a huge bubble. Phrases like “liar loan” were common, they had to invent new ways to rate derivatives which didn’t meet the traditional standards, etc. but so many people were banking on the greater fool theory lasting long enough for them to cash out before it popped. All the crash proved was that the traditional banking standards were there for a reason and the people who never abandoned them were fine.
This is relevant in the Bitcoin discussion because we see the same dynamic where people who pay attention to the fundamentals are saying it’s a bubble and the get rich quick crowd is saying that the rules are completely different now because magic.
It is relevant because the mantra of "traditional financial institutions have your best interests at heart, unlike those Bitcoin scammers" is demonstrably false.
That’s a rather blatant strawman: it’s literally a textbook example of the value of regulation and laws which make that happen, not the goodwill of bankers.
You mean the laws and regulations written by lobbyists paid by the bankers? Do you mean the regulators who leave their Federal jobs for multi-million dollar per year jobs at the banks they formerly regulated? Are those the ones you're talking about?
You seem to be implying that the regulations / laws and the banks are two separate entities. They're increasingly the same. Which means that yes, it is basically their goodwill we're dependent on, or more accurately how much they think they can get away with before there's literal blood in the streets.
I think at the highest levels they already do operate without any regulation. When you get to write your own regulations and there's a revolving door between the regulatory agencies and the companies they're suppose to regulate, there is no meaningful regulation.
Bitcoin and other digital currencies are a threat to them because there is no central agency in charge of it that they can infiltrate and control the way the have with government-run currencies. At least, they haven't found a way to control and manipulate it, yet.
People are always losing money to old-fashioned scams, regardless of currency. It's a lot easier to learn about and protect yourself from simple, hundred year old scams than the brand new, never before seen scams the financial industry comes up with.
wrt old-fashioned scams in my sibling's comment... they've been around much longer than they've been outlawed for. arguably, we would have better herd-immunity to them if we'd never outlawed them in the first case.
yes, there's no recourse to losing your BTC. it's a good thing you were only playing around, or you'd be really screwed.
if you mortgaged your house, well... that wasn't very smart was it. I'm sure you won't make that mistake again, and I think/hope we as a society/culture can work to help you recover from that.
whatever the case, if you lose your money/btc/shirt the banks won't be much help to you.
What in the world are you talking about? There are a number of avenues you have to reverse fraudulent transactions with banking products that aren't available with BTC.
Tell me the last time a major bank shut down and its proprietors ran off with all the deposits. Or what is the BTC equivalent to a chargeback if services aren't rendered? What protection does it offer if someone steals your information and makes fraudulent purchases with your money?
You're conflating properties of a payment processor like Visa, with properties of a currency. What's the equivalent of a charge back if I pay in cash for services that aren't rendered? It's called a "lawsuit", and there's no reason you couldn't use it if you paid with Bitcoin.
With Bitcoin, unlike cash, there is also a public record that you did in fact pay, so the defendant couldn't lie and say you never paid when they just hid the cash under their mattress.
Likewise, there's no reason a payment processor like Visa couldn't process payments in Bitcoin and provide fraud protection if that is something people want. Bitcoin isn't there yet, but neither was cash until about 50 years ago, out of thousands of years of usage.
That's true, but Bitcoin has been marketed as a replacement for both traditional currency and traditional payment processors, and certainly encourages people to keep way larger amounts in "cash" than they'd otherwise be comfortable with.
That may be an argument for stronger regulations, not no regulations. As the bitcoin world has repeatedly proven that abuse will happen without the same institutions — ever notice how the various scam/incompetent exchanges end up in the same courts for the same reasons? It’s just harder and less likely to be successful because they weren’t practicing any semblance of responsible practice before.
>the rules are completely different now because magic.
Currency that isnt controlled by any government is different. Previously that was limited to gold only. Gold was hard to move and expensive to keep safe. Bitcoin can be sent for free using exchanges or on a piece of paper or about 1000 other ways.
So we’re back to using a federated model with most people using trusted third parties and hoping there are enough laws and regulatory oversight to prevent them from abusing that trust? This sounds oddly familiar…
This is true for you & I. But the wealthy aren't concerned about the FDIC insurance as their balances are far in excess of what would be covered by it. They follow the health of a bank very closely as they stand to lose a great deal of money if it becomes insolvent.
Many people think what prompted the sale of Wachovia to first Citibank (briefly .. sort of) then Wells Fargo for $15.1 billion [0] in October of 2008 was the implosion of their MBS holdings in their Golden West Financial acquisition. If you recall, Golden West had the "Pick a Pay" program, where borrowers could decide how much their mortgage payment would be (potentially even less than the interest portion, where the remaining amount was lumped back in to the balance)
What really happened was the wealthy depositors in Wachovia got wind that the bank was in trouble and initiated massive withdrawals, causing a run on the bank. If the sale to WF hadn't happened that weekend and restored confidence in the bank, Wachovia would likely have not opened their doors on the following Tuesday. Source: coworkers who were there at the time.
so btc was part of this crazy fake news narrative all along or is this just being made up on the fly and this is your regular click bait churn that is the new norm in journalism?
the writing on this has all the telltales of a unresearched fakenews/paid advert, e.g.: "Hackers have also proven adept at setting traps on computers to access cold-storage devices the moment they’re online. More traditional criminals have committed home invasions and kidnappings. Some Bitcoin tycoons have resorted to hiding their identities, fortifying their homes and studying self-defense." ...and that's not a crazy person being interviewed quote, this is the author saying.
It makes sense that Goldman Sachs and Newyork Stock Exchange are working on Bitcoin trading allowing wealthy clients to own Bitcoin.
At this point it's definitely mainstream and if enough of the billionaires own it, they can definitely manipulate the price. Not sure how would Governments control this
>the global currency of the future, that they need to buy some, and that he’s the man to safeguard it.
Looks like in the future people hoard currency instead of spending and investing it then. That ought to be interesting.
It also demonstrates the costs associated with non-reversible transactions, these vaults aren't storing gold ingots or priceless artifacts, just private keys. Banks around the world don't need to worry too much about this (well, within reason) because if somebody manages to break into their digital vault not everything is lost and they can mitigate the damages retroactively.
With bitcoin "if you don't hold the keys, you don't own the coins" but if you do hold the keys you better be absolutely paranoid with them because there's no plan B if they get compromised or destroyed. For this reason I think that even if cryptocurrencies manage to become mainstream many people (including myself) would rather let a bank manage and insure their wallet than manage it themselves. Too stressful otherwise.
The correct response to erosion of value is investing as long as there are good investments to be found. This is the idea behind inflationary money (which is a broader concept than Keynesianism).
The important ideas of Keynes in a nutshell:
* Monetary velocity: wealth is a verb, not a noun. The wealth of nations is measured in their rate of transactions, not how much cash or idle assets they are hoarding.
* Idle vs. productive investment: if currency is deflationary people will store currency, a non-productive investment. If currency is inflationary people will invest it in productive activities.
I don't agree absolutely 100% with these, but I think Keynes was at least onto something especially with the first. The problem with the first is that velocity also includes transactions that don't actually do anything or that even "create" negative value. Gambling increases monetary velocity but doesn't accomplish anything and may actually destroy value. A real value-centric velocity statistic is impossible because value is a biological/humanistic concept and is non-computable. The main problem with the second is that if people are pessimistic about investments they will still hoard, but using things like real estate and gold. Another problem with the second point is that over-using this strategy to drive investment creates bubbles, as we have seen.
Finally I must point out that Keynes gets a ton of flak for stuff he did not advocate, like insane levels of public and private debt. Keynes would have been shocked and horrified at the levels of debt in our current system, and in fact his whole counter-cyclic government spending strategy was designed to prevent this.
Blame politicians and banks for the debt problem, not Keynes. Politicians invoke Keynes when they want to ratchet up spending during downturns but then they conveniently forget the other part-- namely that Keynes also advocated reducing government spending and repaying debt proportionally during times of abundance. Keynes basically argued that government could be used as ballast against economic oscillation.
I said nothing about Keynes -- I said Keynesianism. You understood this meaning well.
Would you concede that the economic policies rooted in Keynes's ideas created an environment that allowed for the snowballing issues we have?
The issue that isn't present in your comment is top-down imposed order vs. bottom-up emergent order. To me, the former is degenerative, while the latter is sustainable.
Savings accounts were replaced by checking accounts after the great depression. They still called them savings accounts, but people had no idea that 'savings' meant people did not have instant + reliable access to it.
So now we have 0.01% interest 'savings' accounts! They are just as liquid as our checking accounts.
But there's a huge difference. With old fashioned "savings", the money was in a bank, which in turn would use it to invest it elsewhere. In other words, the money would still circulate in the economy.
On the other hand, these bitcoins that are hoarded in a bunker are extracted from the economy as long as they are there.
The implications are big: with the current trend of concentrating wealth to only a small fraction of the population, at least all that money is not 'gone'. Even though the rich probably don't pay much taxes over it, their banks will invest it in other companies.
If this bitcoin hoarding ever becomes a trend, the consequences for the economy will be disastrous.
today's market cap for BTC is around 158 Billion$. so we're talking about something around 7% of the world supply, "locked in an underground bunker".
What's not clear to me: is this just the keys stored underground and clients have access? or is this "cold storage"?
I'd speculate that more than 7% of the world's gold is locked up in bunkers, where it can be accounted for and borrowed against.
Nobody is shocked to know that gold is stored in vaults. Nobody is shouting that the folks buying overpriced coins from stupid mints are going to decimate the world economy with their irresponsible hoarding.
We're all just totally comfortable that, yeah... in a situation where a-bombs start dropping, gold would probably be a functional store of value.
Nobody is shocked because at least gold has a historical value and won't dissappear. When the a-bombs start dropping, nobody is going to want a piece of steel with an engraved bitcoin wallet key
But what bitcoin owner is going to be willing to sell up and lock in their losses? They'll keep HODLing to the end, with only the occasional sale (to someone else in the ever-shrinking circle of people who care about bitcoin) to meet immediate needs.
Bitcoin seems to have already undergone a deflationary collapse. Its original goal of Internet money has been abandoned in favor of the concocted idea that it is a "store of value." Unfortunately it's a poor store of value since it requires a constant stream of electricity to maintain. Gold, land, and other traditional idle stores of value just sit there and are free to maintain with the exception of the cost of physical security. On top of this Bitcoin is fragile as it requires an operating Internet or at least operating computers. In the event of a severe stress or collapse scenario it will cease to exist, while gold and other assets will continue to be viable units of tradable value.
I still don't understand why significant deflation is a desirable characteristic for a currency. Mild deflation is tolerable unless the economy is experiencing hyper-growth like the early 20th century, but Bitcoin is more deflationary than gold. Strong economic arguments that I don't have time to type in can be made that an ideal currency (as a medium of exchange) is slightly inflationary (in the monetary base sense) to the degree that the economy as a whole is growing.
Edit: collapse you say? But its value has held up! But this is exactly what happens (for a while) in a deflationary collapse. The value of money skyrockets but its velocity tanks.
Of course given all of Bitcoin's undesirable characteristics as a store of value I suspect that its value in USD/EUR/etc. will eventually tank as well. This might take a while unless something causes a panic since the market for BTC is slow and thinly traded.
IMHO all deflationary cryptocurrencies will undergo this kind of collapse.
Of course not all cryptocurrencies need be deflationary. Software defined money can be programmed to do anything you want it to do within the bounds of what is possible under e.g. the CAP theorem and other relevant concepts from distributed systems.
Cryptocurrency as a system is also inflationary in a whole-systems sense as new money can be created by forking a code base or creating a token on those coins (e.g. Ethereum) that support it. This argument holds as long as all these currencies are reasonably fungible without too much hassle. As it stands things like shapeshift.io make converting them fairly easy at least for the popular ones.
It doesn't work because we need life to be alive. We don't really need bitcoin for anything though. But you're right that in the very long term remaining alive on earth, or even in the universe at large is going to be a huge issue. Wasting energy mining cryptocurrencies isn't going to help. I wonder who's going to be the first person building a dyson sphere to power a BTC miner.
Life isn't outgrowing Earth's capacity to absorb sunlight (nor Earth's capacity to radiate heat). Earth's energy flux is good for supporting life for the next 2 billion years.
Cryptocurrencies are designed to waste increasing amounts of energy that grow both with time and the popularity of the system. Right now we're not able to pull energy from Sun fast enough to power them (see all the global energy issues, fossil fuels, etc.). And even if we eventually could, cryptocurrencies would only grow to consume all available energy. And even if we could keep up with that, it's an incredibly unnecessary waste if you compare all the other uses that energy could be put to. The guarantees that cryptocurrencies give are not worth the upkeep.
And that's all without discussing the other side of the coin - waste heat.
> Right now we're not able to pull energy from Sun fast enough to power them (see all the global energy issues, fossil fuels, etc.)
Actually there are thousands of other things that take way more energy and pollute way more than cryptocurrency mining. In fact you can locate your miners anywhere, unlike, say, your shipping vessels. So there's an incentive to place the miners next to, say, hydrothermal plants.
Why aren't you fervently arguing for the other orders-of-magnitude-larger polluters to be replaced? Lord knows we have alternatives to them too.
By the way, do you know about Bitcoin's emission curve and what is going to happen to mining after bitcoins are no longer emitted?
> And even if we eventually could, cryptocurrencies would only grow to consume all available energy.
That's a lot of energy! Could you provide some kind of grounds for your opinion here?
> Why aren't you fervently arguing for the other orders-of-magnitude-larger polluters to be replaced? Lord knows we have alternatives to them too.
Because here I'm arguing against the trend, not just absolute magnitude. Almost every other human endeavour has incentives to reduce waste and upkeep. Cryptocurrencies require ever increasing energy use for maintaining the system.
(Note that I also frequently argue against various zero-sum games in the economy, like advertising, which are yet another unnecessary waste of precious resources. I try to be consistent with that position.)
> what is going to happen to mining after bitcoins are no longer emitted?
Isn't it true that Bitcoin requires continuous energy expenditure through mining to maintain the integrity of the network?
> That's a lot of energy! Could you provide some kind of grounds for your opinion here?
I'm talking about the dream/goal scenario of cryptocurrency advocates, in which cryptocurrencies replace fiat and become the new basis for the entire global economy. And the grounds are that the system is designed in a way that you literally make money burning electricity, so as long as electricity is cheaper than payoff somewhere (or you can steal some), there's strong incentive for everyone to try and burn energy.
> And the grounds are that the system is designed in a way that you literally make money burning electricity, so as long as electricity is cheaper than payoff somewhere (or you can steal some), there's strong incentive for everyone to try and burn energy.
Which increases energy costs until that profit gets small.
As long as there is a more valuable use for energy than getting a 0.1% profit mining Bitcoin, I don't see why mining would ever consume all energy, that's ridiculous.
That's because - and everyone but the uninformed or idealists know this - it's an investment product. It's simply not suitable as a currency, because one, inflation / instability, and two, it can only do what, a dozen transactions a second, if that? That's not nearly enough to become a viable currency.
Bitcoin has no inflation, there are only a given number of total bitcoins in existence, which many (myself included) would argue makes it a poor currency.
> there are only a given number of total bitcoins in existence, which many (myself included) would argue makes it a poor currency.
I have always question who says this. What makes you think deflation would be bad?
My conspiracy is that governments require inflation to print themselves out of bad policy. Without government abilities to do this, the government performs poorly. Common citizens do not lose 2-4% of their income in inflation.
Does investment really grind to a halt though? I'm thinking people would just demand a higher return on their investments before they parted with their cash. Recently, many countries had negative interest rates. So I suppose people were being incentivized to find "investments" that would return 0% on their money. Was that a good thing?
Also, inflation means everyone needs to be investors or the money they worked hard for evaporates. Why should we force Joe Sixpack into being an investor for the good of the economy? He should be able to focus on earning money from his trade without having to worry about investing due to inflation being forced upon him.
Well, it's discouraged, but yes, basically. Under inflation, you need to invest money just to stay even. The lower inflation is, the less urgent the need to invest. With deflation, you're somewhat incentivized not to lend. A fixed money supply guarantees deflation, so yes, this would significantly reduce lending and the economic growth that lending stimulates.
> Also, inflation means everyone needs to be investors or the money they worked hard for evaporates. Why should we force Joe Sixpack into being an investor for the good of the economy?
If Joe Sixpack lives paycheck-to-paycheck he can ignore inflation entirely, it doesn't affect him a whit. Once he gets some savings, if he doesn't like risk he can buy bonds or something and continue ignoring inflation. But since you brought it up and since this seems to be a point of confusion for a lot of people, yes, let's see how a fixed money supply would affect Joe Sixpack.
If the government stops printing money, we are guaranteed to get deflation any time the GDP grows, right? With money supply held constant, "The US currency deflated by 2% last year" is equivalent to saying "The US GDP grew by 2% last year." And what makes the GDP grow? Joe Sixpack and his friends, out there mining ore or building furniture or otherwise increasing the amount of value in the world.
2% deflation also means that anyone with savings sees the buying power of their savings increase by 2%. If Scrooge McDuck has $5M in his mattress, his inflation-adjusted net worth increased by $100,000. He can retire and spend the rest of his life living very comfortably on the equivalent of $90k/year, and despite him doing no work, despite him incurring no financial risk, somehow every year he'll get a little wealthier.
How is that possible? Who's paying for his life of luxury? Joe Sixpack. Deflation is quite literally a tax by capital on labor. As long as the GDP is increasing, arguing for deflation is tantamount to saying, "I think some of that GDP growth created by workers should go to anyone with money." AFAIK this is universally understood to be a Bad Thing (tm) by virtually everyone.
> If Scrooge McDuck has $5M in his mattress, his inflation-adjusted net worth increased by $100,000. He can retire and spend the rest of his life living very comfortably on the equivalent of $90k/year, and despite him doing no work, despite him incurring no financial risk, somehow every year he'll get a little wealthier.
He'll have to part with some of his wealth whenever buying something, and eventually it will still run out. It's not a stock that produces dividends, you have to spend the principal to take advantage of the value growth. Think of it as owning a $5M home that you have to sell a part of each time you buy something, even though the house increases in value.
> How is that possible? Who's paying for his life of luxury? Joe Sixpack. Deflation is quite literally a tax by capital on labor.
Joe Sixpack's salary would increase in value by default. As in, by default salaries would track GDP growth, how does that look like a tax to you? Companies will have to actively tell people "we're going to reduce your salary", which helps workers in the negotiation.
> How is that possible? Who's paying for his life of luxury? Joe Sixpack.
Or whoever is after the currency, just like whoever wants to buy a house pays for equity value growth.
> "I think some of that GDP growth created by workers should go to anyone with money." AFAIK this is universally understood to be a Bad Thing (tm) by virtually everyone.
As opposed to "I think some of that GDP growth created by workers should go to banks so that they can charge interest on everyone else and make easy profits."
And it doesn't take a scientist to realize that when things will be cheaper tomorrow people tend to avoid making purchases today. (Think back to when home prices were crashing, there wasn't exactly a rush of people to buy homes that were declining in value.)
Yes, essential spending would happen. But why upgrade your car, or go out to eat, or go on a vacation, or all the other non-essential spending that powers our economy? Even a very small change in these behaviors has huge effects because one person's spending is another person's income.
> why upgrade your car, or go out to eat, or go on a vacation, or all the other non-essential spending that powers our economy?
I find 0 of those good. Upgrading your car when you dont need to is wreckless spending. Maybe the Economy changes to become more conservative and less environmentally damaging.
Going out to eat + vacations are unnecessary expenses. And btw, I completely doubt people are going to stop doing those 3.
Consumer spending is what keeps everyone employed. Even in Silicon Valley because who do you think is buying all the ads?
> Upgrading your car when you dont need to is wreckless spending.
But that's what creates the used car market, which is much bigger than the new car market. When people stop buying new cars it means tons of layoffs, which means tons of reduced spending by all the previously employed auto workers, which means more businesses lay people off, etc etc.
I'm sure you do. But the chef who makes their living cooking food doesn't. The person who makes their living running tours doesn't. And the people employed by both definitely don't.
Consumer spending going away means business spending going away which means jobs go away... Which means more consumer spending goes away and you can fill in the rest.
Personal Consumption Expenditures make up ~70% of the US GDP. Unless you really enjoy recessions you don't want to see it go down.
Yes, that's common sense, but we shouldn't trust it blindly.
From what I can tell, the evidence on the expected deflation you're talking about paints a different picture: https://www.bis.org/publ/work186.pdf
You ask why people would buy stuff when they'll be cheaper later, but then again, why do people buy stuff now when they could put the money on the stock market and take it out later, when it will be worth more than the product costs?
I wouldnt use an entry level economics class to judge technology that eliminates risk of government hyperinflation and lowers/eliminates cost of transactions.
The economic benefits of free/low cost transactions and money that can be saved/spent rather than invested may have its own benefits.
> I wouldnt use an entry level economics class to judge technology that eliminates risk of government hyperinflation and lowers/eliminates cost of transactions.
I didn't, the question was "What makes you think deflation would be bad?". That is entry level economics and has nothing to do with technology.
Deflation via credit default has shown to be harmful to wider economy 2x times in US history (monetary shocks). I am not aware of any conclusive study that a deflationary currency is bad for investment and progress. The easy counterpoint is Gold, which is often deflationary (when economic growth outpaces gold mining). We have had 10k years of investment that have shown your basic statement is false (deflationary currency causes investment to grind to a halt).
Inflationary fiat or credit based currency is a relatively new invention (1972 in the US). I have not seen any serious analysis showing that real investment has radically improved since going off the gold standard. Real investment has been growing for decades as real wealth increases, inflationary currency hasn't changed that very much AFAIK.
Did you miss the "essentially in name only" part? It was fixed to gold, but they also fixed the price of gold by outlawing [1] people from owning it! When they wanted to deflate the USD they just raised the price of gold [2]. It was a crude fiat system.
Without inflation, i.e. fixed money supply, it would be impossible for a majority of loans to be repaid with interest, or give a positive return to investments.
Note that this fact is independent of how well the borrower or business performs. (This is like a zero-sum game).
So, it would be irrational for investors or lenders to part with their deflationary money, as the net profit is always zero (or negative because of other costs).
I am very interested to know if there is a way around this problem.
Bitcoin seems to be best for hording and spending. It holds value and can be transferred easy and cheap.
You can still have companies using currencies that incentivise loan/investing. Bitcoin currently exists and the loans keep being written.
I think as bitcoin grows its going to become big and boring. No 10x gains, not even 2x gains, like 10% swings over the course of a year. It wont be fun, it will be a store of value if you dont trust fiat. Right now I think its crazy undervalued which is causing the explosion of crypto. As BTC gets bigger, investment will start to look better as it provides better returns.
It can't get any bigger, the transaction limits, the "halvings", the liquidity issues after over a decade of operation, so I guess that experiment has run its course.
A deflationary currency regime would raises the bar for both investment and consumption. Investors would be choosier about speculative opportunities because the yield on the risk-free asset would be much, much higher. Consumers would still buy essentials, but they'd be extremely incentivized to hold currency rather than spend it.
Regardless of whether or not a deflationary end-state is better or worse, it seems non-controversial that the transition from our current situation to a deflationary one would be absolutely brutal. We're talking about turning the global economy on it's head.
> Investors would be choosier about speculative opportunities because the yield on the risk-free asset would be much, much higher.
It won't help how choosy investors are, or how well the economy performs. The money supply is fixed. So for someone to make 120 bitcoins from an investment of 100 bitcoins, someone else has to lose 20 bitcoins, which would be other investors, or the public (workers / consumers).
Are you saying that with an inflationary system, where the money supply is not fixed, for someone to make 120 dollars from 100, the 20 extra dollars comes from.... where? Thin air?
The alternative to inflationary currency is not zero-sum. For someone to make 120 bitcoins from an investment of 100 bitcoins, that investment would have to actually produce 20 bitcoins of value, and that person has to get people to pay the higher price for something he has improved or created with it. That is the whole idea. Its how most economies worked up until 1913 or so. We built civilization without "inflation."
Anyway, I would say it is less about deflationary vs inflationary, and more about transparency of control (even if automated) of the money supply, a movement away from usury and debt based fiat (which would be a return to a value based system), and finally, decentralization of value exchange.
Bitcoin growing its value (deflating) is precisely the problem because then you have no reason to take the risk to invest in the first place since you'll reap the benefits by merely doing nothing and holding your coins that keep getting more valuable.
At the same time, it allows you to put brakes on your investment ("lose only up to the deflation!") and invest more. And since your other savings are growing in value as well, you are able to invest more and into more risky projects.
>the transition from our current situation to a deflationary one would be absolutely brutal.
We currently have many currencies, if Bitcoin is so absurdly better, then maybe there would be a transition. Otherwise I'm sure many currencies will be used based on the application.
Deflation is not a viable strategy for a currency. It's bad because it makes hoarding a valuable strategy and hoarding reduce the amount of currency in circulation leading to even more deflation. Who wants to use a mean of exchange actually discouraging exchange ?
The alternative really is between low inflation and price stability. Government tends to prefer low inflation because it encourages people to invest their assets in a productive way and because it's actually pretty difficult to avoid any inflation via monetary policy.
Deflation reduces demand and increases hoarding. Why spend when tomorrow my deflated currency will be worth more than today? The currency then acts less and less like a currency (sound familiar?). In a deflationary environment, wages would go down over time and workers do not accept reduced wages vs increased wages even if their purchasing power remains the same in both cases. With small amounts of inflation, wages rise over time and people spend those raises, which helps fuel the economy.
At the most basic level the function of a currency is: I gave you this amount of goods and services today, you give me a ticket that's good for goods and services from you (or others) in the future. Ultimately those obligations need to gradually decay away to nothing if they're unused, just to stop someone hoarding for ages and then causing chaos when they call in their debts. "Hey, remember those 100 chickens you got from me 5 years ago, you owe me 90 chickens now" seems a lot more socially sustainable over the long term than the reverse.
I don't agree with people talking about a deflationary spiral (has it ever happened?), but there is another issue.
In a deflationary model, old money gets more and more valuable with time. In 50 years, it's possible that one Bitcoin will be worth 10M€.
What happens then when someone finds a stash of 100k BTC on their grandpa's attic? They can destabilise the whole economy.
With inflationary currencies it's never an issue - a money is either in circulation, or "evaporates". If you find your grand-grandfather's savings on the attic, they won't be worth too much (even if it's still a fortune). If you find your grand-grandfather's crypto-savings, you're a trillionaire, and a king of the world.
Intentional monetary inflation creates a value gradient, wherein the first spend of a new dollar can buy more than the second spend, and so on, until the knowledge that the new dollar is in circulation has normalized.
Now, what happens when you always spend new dollars into circulation through the same entity, but then remove old dollars at the same rate from those who only acquire dollars after they have been value-normalized? If you are an entity that can create new money, and destroy old money, you effectively get a discount on everything you buy. To a lesser extent, the same applies to anyone that can hoard a large enough quantity of money. You can withdraw a quantity from circulation, wait for prices to normalize for the new money supply, then buy at a lower price from hoarded money until people realize the circulating supply is now larger and raise their prices.
The counter to this is to restrict fiat money creation and discourage hoarding. Bitcoin already has a fixed-in-stone schedule for the creation of its money supply, but there is no way to stop someone from accumulating a large quantity, and then using the size of that hoard to act like a central bank.
Investments need to have intrinsic value. Under the new spin that bitcoin isn’t intended to be a currency, it makes little sense as an investment because there’s no value in any particular set of random numbers. If nobody is using it except for speculation, where’s the incentive to pay to keep that network running?
I'm not disagreeing with you on the distinction between an investment and a speculative position, but know that the value is in the confirmations of old transactions piled up which make it extremely difficult to retroactively mutate the ledger. Lots of people don't understand that well yet.
Bitcoin transaction times aren’t much better - I see recent times in the 15-80 minute range on average, well in the thousands range earlier this year.
It’s also odd not to acknowledge that banks have had electronic transfers for decades. You wait seconds for a card transaction and almost every financial institution allows you to do transfers without visiting a physical office.
I can transfer value within seconds using Zelle, Venmo, Paypal, Square, etc., for free right where I'm sitting now. Nowhere near a bank.
AFAIK, Bitcoin takes a minimum of 10 minutes assuming that I wish to pay the going transaction fee, or as long as 3 days (or even never!!!) if I use a de minimis fee. And that's assuming a significant risk that the value of the value transferred will not have the same value by the time the transaction actually goes through.
How much value does that really add? Traditional banking doesn’t have many problems with that and it’s moot for most people because the bank has to honor commitments even if they make an error.
Why don’t you demonstrate some of that alleged understanding to answer the question? Start by producing evidence supporting your belief that there is some significant problem with transaction history modification and move on to why that problem cannot be more efficiently addressed using proven cost-effective techniques.
If contracts are written and priced in BTC, then it will behave like a commodity. Since supply is limited, it's value will fluctuate based on demand (e.g. the need to acquire bitcoin to satisfy the contract).
I'm not saying this is actually happening, but when/if it does, it will work no differently than other currencies.
Why would anyone choose to do that without some huge advantage to make up for the risks? The only reason seems to be ideological commitment and that doesn’t seem like an especially large market.
I would agree that for the general public there appears to be little upside (currently). For the fantastically wealthy that want to move large amounts of capital outside the purview of the tax man or regulators, it has tremendous upside. The same holds for illicit markets. Because those markets do not exist in isolation, the demand effect will spill over into the broader market (because arbitrage).
I'm not a fan of BTC or cryptocurrency, but I think there is definitely a case that nefarious use could bootstrap it into a real asset.
If you’re looking to evade taxes or otherwise commit serious crimes, why on earth would you do so using an immutable public ledger? Any mistake and you’ve gift-wrapped the case for the prosecution.
Probably because you can do the laundering step through a web of anonymous servers sitting on the darknet rather than through fraudulent incorporations which have a lot more surface area for detection and also leave immutable paper trails.
> there’s no value in any particular set of random numbers
What is the "intrinsic value" in e.g. an iPhone? Would that value exist without humans? I would say no, it only has value because people are willing to pay for it. So I'm left wondering what principled distinction you can draw between a particular set of random numbers and a particular arrangement of metal and glass, both of which people want, to determine that one has intrinsic value and one does not.
iPhones do useful things which aren’t dependent on you selling them. There’s nothing which you can do with bitcoin other than buy things so it’s only valuable to the extent that it does that better than the alternatives.
Intrinsic value is a value that derives from the use of properties of the thing. It's not a derived value that requires the imposition of an additional layer of context to make the property valuable.
The iPhone, or any other phone, has the intrinsic value of being usable as a computing device, entertainment device, communications device, camera, thrown weapon, etc. If you want to be pedantic about it, the components that make up the iPhone have the intrinsic values of being usable for one or more of the above functions, and the materials that go into those components have the intrinsic value of being usable in industrial/commercial products or processes.
A bitcoin literally has no use inherent use on its own. It's simply a number. The exchange of these numbers has no intrinsic value, it would be like me and Adam exchanging a 2 and a 3 (not dollars or anything other units, literally just the numbers). Any value from the exchange is an additional layer of context imposed by me and Adam on the transaction--it's not intrinsic to the bitcoin itself.
> The iPhone, or any other phone, has the intrinsic value of being usable as a computing device, entertainment device, communications device, camera
Okay, but you're just shifting the value down the line. What makes computing or entertainment valuable, other than the fact that they are things humans want?
Speak for yourself. I use bitcoin all the time for payments.
Peer to peer using coinbase(email) for free and instant to friends.
Shift card for free and instant at merchants.
Bitcoin is beyond blockchain, companies have built products to trade BTC instantly, free, using the infrastructure already existing. The transaction time 'problem' doesnt really exist if you are into crypto, you know how to use it.
And I dont trust USD like I trust BTC. Historically Fiat currencies are awful.
Fiat has ushered in an absolutely amazing period of global growth that has made us unbelievably wealthy. But there is inflation, so why not go with the thing that has no history?
> We've had gold, and it was a massive equalizer between major powers.
The gold standard was one of the worst fiscal policies ever. Its use was directly responsible for the destruction of millions of lives. Arguing to bring it back shows incredible nativity and a severe lack of history.
I suggest you read up on how horrible of an idea the gold standard was before you spout this kind of nonsense.
Since around 1980, all the "amazing global growth" has largely gone to those who own and hold financial instruments, while those who make and those who serve have just been treading water all this time.
I can't imagine how unbelievably wealthy I would feel if my class's wages had risen commensurate with increases in productivity, but I certainly don't feel all that rich now.
And yet social mobility has also been stagnant in the developing world for the last 30 years. So offshoring made a few people outside of W.Europe/US more rich in the 80's, but then the party was over for them, and it was back to the wealthy class sucking up all the excess production, everywhere.
The question answers itself: they weren't. It also beggars belief that they were regularly spending bitcoins that was shifting in value by hundreds of USD in a matter of hours. The would be irrational to the point of lunacy if true, but I don't believe it is.
> If I need to spend 2$ at taco bell, I'll just use my bitcoin.
The currency you're using is USD, since that's how Taco Bell set their prices and it's how you're measuring the value of your bitcoins (via the exchange rate).
I've yet to see any business set their prices in bitcoin. Everyone accepting bitcoin payment is setting their prices in fiat currency (e.g. $2), and accepting an equivalent amount of bitcoin (based on market rates); i.e. treating bitcoin as a payment gateway rather than a currency.
It also beggars belief that they were regularly spending bitcoins that was shifting in value by hundreds of USD in a matter of hours. The would be irrational to the point of lunacy if true
How so? What matters is the price at the time of transaction, no?
It's a matter of opinion. However, the only reason for bitcoin to exist is to avoid banks and payment processors. Hence it's illogical to make heavy use of coinbase/etc. regardless of what opinion you have.
Bitcoin has many downsides (volatility, no recourse, vast energy usage, paranoid wallet security, high fees, long confirmation time, etc.) and one upside (no need to trust processors/banks).
If you think that processors/banks are bad, then you might find that the upside outweighs the downsides, and make many on-chain bitcoin transactions. Yet you shouldn't use coinbase/etc. in this case, since they're a bank/processor, hence you'd be removing the only upside that bitcoin has.
On the other hand, if you don't think that processors/banks are bad, then the upside of bitcoin isn't worth all of the downsides. You might as well use regular currency, with all of its advantages over bitcoin (instant payments, lower fees, lower volatility, recourse, less paranoid security, etc.). In this case there's no need to use coinbase/etc. because there's no need to use bitcoin.
Those intermediaries do serve a role in converting between traditional currencies and cryptocurrencies, but it only makes sense to use them occasionally, e.g. buying a stash of bitcoins and immediately 'withdrawing' them to your private, on-chain-only wallet. If you're regularly converting back and forth, or maintaining a non-zero balance on their systems, you would always be better off doing something else (either sticking to fiat, or sticking to crypto).
So correct me if I'm wrong, but the way you're using Bitcoin gives you no magical crypto guarantees the currency is supposed to offer?
I increasingly feel that pro-crypto arguments are mostly motte and bailey. So Bitcoin is better than fiat because it's decentralized and censorship-resistant, with everything forever stored in the blockchain. It's also more convenient and efficient than fiat in daily use - when we discard all the decentralization and anti-censorship guarantees, skip the blockchain and use it as a private-issued, unregulated fiat.
> when we discard all the decentralization and anti-censorship guarantees, skip the blockchain and use it as a private-issued, unregulated fiat.
That is an option.
I dont care about 'trust' when I spend 2 dollars at taco bell on my shift card. I dont care about 'trust' when I give my friend 200 dollars with coinbase email.
5 bitcoin? Yeah I'll take that out of coinbase.
But this is a payment platform IMO. I use paypal and venmo too. They dont charge fees and I dont really care about decentralization magic.
He gets the "magical crypto guarantees" for 99% of his money, and only waives them for a small part that is "in-flight."
This isn't at all different from the way many people separate their investments and savings accounts from their checking accounts, except that in this case, the investment/savings accounts get "magical crypto guarantees."
What's the backup for various failure cases? House fire? I'd guess off-site backups. House fire that kills you? Do you stick recovery instructions to your backup in a will, or how do you leave money to your heirs? (Or just you don't?)
Right but that would be my worry. If I die and nobody knows how to get at my assets, that really fucks over my heirs. With traditional financial institutions, the courts know how to figure out how to disburse your money after death.
Traditional currency is backed by the requirement that it be used in transactions conducted with the issuing government, and also by the requirement that it be accepted as a method of payment for all debts under the jurisdiction of that government.
That does not change anything in practice, just ask Venezuela how that goes for them. If people don't believe in your currency it's game over. The only backing traditional currency has is that people believe in them.
The problem with Venezuela is definitely not that people stopped believing in the currency. That's a consequence, not the cause. It's not like people are going to wake up some day and stop believing in the dollar. If the economy of the USA was to collapse however, then that would be a problem.
> Bitcoin is beyond blockchain, companies have built products to trade BTC instantly, free, using the infrastructure already existing
If bitcoin is "beyond blockchain", than what is it? Just a table of transactions in a Real Database™? If yes, whats the point?
You've just layered a very bank-sounding, very-centralized construct on top of your space-age "trustless" decentralized blockchain. How is it at all revolutionary since you've basically gone and re-invented a much shitter version of the credit card and traditional (evil) fiat banking.
> And I dont trust USD like I trust BTC. Historically Fiat currencies are awful.
I feel like bitcoin people live in some kind of alternate reality that I simply don't understand. Is it the fact that they have so much invested in the concept that they lose the ability to think clearly? Is it a cult? A religion?
I'm not sure, but it sure is an interesting phenomenon.
>I feel like bitcoin people live in some kind of alternate reality that I simply don't understand.
I can tell. You seem to think Bitcoin is another inflationary currency.
The excitement is that, Donald Trump doesnt have control over Bitcoin. China doesnt have control over bitcoin. No government does. People with computers have control over it. There are 21,000,000 Bitcoin ever ever ever. No amount of awful government can change that.
>How is it at all revolutionary since you've basically gone and re-invented a much shitter version of the credit card and traditional (evil) fiat banking.
Like I said, Bitcoin is rare and digital. I think you are complaining about payment processing companies. I have had an excellent experience using these companies with no fees on instant transactions.
Provably false. Bitcoin has been forked into multiple chains numerous time, creating many more then 21 million tokens. Given that there is no trademark on the term "Bitcoin", some of these forks can rightfully claim themselves to be The True Bitcoin.
In addition, there are thousands of other non-forked blockchains that are nearly identical to bitcoin, save for a few minor configuration changes.
> Bitcoin is rare and digital.
Absolutely false. Bitcoin is digital and infinitely creditable. This has been proven over and over again.
>The excitement is that, Donald Trump doesnt have control over Bitcoin. China doesnt have control over bitcoin. No government does. People with computers have control over it. There are 21,000,000 Bitcoin ever ever ever. No amount of awful government can change that.
It's already banned in some countries, and many tax it. Evading those laws comes with risks, so many or most people comply. Exchanges end up being forced to hand some data over to the IRS/others. Overall, governments seem to have control over it nearly the same as they have control over the trade of anything else.
"The excitement is that, Donald Trump doesnt have control over Bitcoin. China doesnt have control over bitcoin. No government does. People with computers have control over it. There are 21,000,000 Bitcoin ever ever ever. No amount of awful government can change that."
What I don't understand is how you think your are insulated with bitcoin. If Trump does something so catastrophically stupid that USD is worthless, what will be the effects on the worldwide economy? How will bitcoin insulate you from something like the 07 recession, it won't make finding a job easier. At least the gold peppers can claim there is some value left in gold in a hypothetical nuclear post apocalypse, BTC instantly becomes worthless without widespread internet access. Without network access, what value is in a blockchain?
> How will bitcoin insulate you from something like the 07 recession, it won't make finding a job easier.
Obviously you're not 100% protected, but you're more protected from anything that doesn't affect the entire world.
Or do you think that holding dollars exposes you to an Amazon bankruptcy just as much as holding Amazon gift cards?
> BTC instantly becomes worthless without widespread internet access. Without network access, what value is in a blockchain?
Have you looked around at the world you live in? If network access ceases to exist the entire economy will collapse, I don't think Bitcoin is your biggest worry there.
Re the cult thing: I read an eye-opening paragraph about it somewhere. Basically, yeah, if you've invested in it, you have to either fool everyone else to buying into your cult, so the price will rise and future-you can cash-out and make a profit, or more likely, you're trying to convince yourself that past-you wasn't an idiot that just burned a lot of money. Or worse, you've convinced yourself that the USD will turn to toilet paper, soon, soon!
It's applying the formula of the shit book "The Secret" ("if you want it really hard, the universe will give it to you") to getting rich...
This is why I think that the buttcoin subreddit is one of the better places to learn and have an honest discussion about bitcoin. Sure,its not that main purpose of that subreddit and there there is still some bias, but the bias is nothing compared to the alteratives
Fiat money loses purchasing power by design. This rate has accelerated when governments need to raise money. They have been seized overnight.
In 2020, Bitcoin will inflate slower than most fiat currencies. The culture enforces that this rate will not increase arbitrarily. Storing it in a digital safe you control will prevent seizures.
Are fiat people living in a cult or can they present arguments in good faith?
I agree it's not an effective currency. But I disagree that it's an investment. I think the correct technical term is speculation.
Investment is where you find something producing value in the real world and then buy and hold a piece of that. You're expecting a long stream of returns from the value being produced. Speculation is where you are making a bet on price movements in a way where economic productivity is irrelevant.
When people buy and sell commodities and currencies, they're speculating. They don't care about utility. There's no economic value being created, so one's investment doesn't grow during the time you hold, say, gold. Instead, it's a zero-sum activity: considering all participants together, wins and losses are equal. (Well, technically, losses are larger than wins, because there are always overhead costs.)
Bitcoin is easy to mistake for an investment, because it's meant to be deflationary. (It was even easier to mistake for one during the period where it only went up.) But I don't think holding Bitcoin means you own a slice of an economically productive asset. I think it's just a bet that the commodity price will go up, in the same way you bet if you buy gold or euros.
By that reasoning, investing in gold is also speculation. Because it only has minimal industrial uses and most of its value comes from the fact that people say it has value.
And a piece of art is not a productive asset either. Yet, it can and will have value. I don't think there is anything inherently wrong with that.
I'm happy to invest in things that I believe are likely to go up in value, whether those are companies, mineral rights, art, watches, Bitcoin, or water deposits.
Tulips and jewelry at least look pretty.
And you're trusting, at least, the implementation and the underlying math. Personally the risk of recourse-less outweighs the value of trust-less.
They do not have the same utility. I can walk out of my house and find people deriving value from wearing jewelry. Trustless, distributed ledgers, on the other hand, not so much.
At the moment, Bitcoin's primary non-speculative use case is light financial crime: money laundering, capital control evasion, ransomware, buying various illegal stuff, ponzi schemes, etc. I agree that it's possible that one day trustless, distributed ledgers will deliver enormous amounts of value. But it's important to distinguish between delivered value and potential value.
The only developments in cryptocurrency that I've personally found interesting have been smart contracts. Even then, there's no reason that couldn't be done by a traditional financial institution using fiat currency. The fact that smart contracts were first implemented with cryptocurrency is an implementation detail, not a fundamental requirement.
Frankly, I'd probably rather use smart contracts with regular currency. If there was some kind of scam or theft then the financial institution might be able to reverse some of the charges.
Most of the advantages of cryptocurrency don't really sound like advantages to me.
Exactly. Reversability by a trusted party when things go wrong can be a huge benefit.
Even financial markets will do it as needed. I used to write trading software. Some of our traders were trading on the DTB; being German, they were sticklers for rules. One day our traders jumped on something and made a lot of money. But it turned out that somebody at another company had fat-fingered an order at a very low price for a very large quantity. Large enough that it would have destroyed their company.
The exchange decided there was no point in that, so they unwound all the trades. I thought our guys would be mad. They were a little disappointed to lose the expected profit, but they were otherwise fine with it. They didn't see any sense in that kind of destruction just for a short-term gain.
I would argue that there is a good argument to be made that gold is a speculative investment. Look at how similar the scammy "buy gold now" ads are to the crypto ads. There is also a large contingent of the gold market that is holding it not to make money, but as a store of value for after government collapses. The preppers that buy gold aren't that much different than the crypto-libertarians that fear currency collapse/manipulation.
Never mind the fact that if widespread inflation or deflation occurs, the value of bitcoin will suffer as well.
Although bitcoin is a speculative investment, it can be argued to have some utility. Unfortunately, that utility mainly revolves around making purchases the government doesnt agree with.
It's also been used to hide assets from taxation. The IRS seems to being growing increasingly aware of this, so the utility is probably going to become negative soon.
Why do you say gold jewelry has utility? Because people are willing to pay for it? How does that distinguish gold jewelry from Bitcoins, which people are also willing to pay for?
Well, it only looks pretty to you if you're into that type of thing. I don't think it would be hard to find people who don't think gold jewelry looks good. My point is that the utility is entirely dependent on the subjective experience of the user.
That’s true but the belief that gold has cosmetic value goes back for thousands of years. Even if you ignore that something like two thirds of consumption is industrial, that’s a huge track record to conflate with … basically nothing. It’s on the scale of saying there’s no reason why your band couldn’t be as valuable as the Beatles.
There's plenty of stuff more expensive than gold, the reason gold is used is because it's shiny-bling.
People in the past have traded using seeds as fiat, but they wore shiny or coloured things like shells, polished stones, polished metals.
Human vision is attracted to shiny and brightly coloured artefacts, it's not entirely subjective. This is why you can trick a child to accept a shiny coin in exchange for a high value item, or currency note, or even for a higher value coin that has less polish.
All value is defined in relation to a specific person. There's no movie, for example, that everybody likes. But that doesn't mean that entertaining people isn't valuable.
There's still a difference between use-value (looks pretty, albeit subjectively, to you) and exchange-value (looks resalable, albeit in your estimation, to someone else). There's a difference between what you want to do with the thing, and what you can do with the thing yourself, without someone else with whom to transact.
> Cryptocurrencies are (currently) pure speculation.
False. Cryptocurrencies are _mostly_ speculation. Go to any dark web site and everything for sale is being transacted in crypto. Look at XRP - there are clearly large commercial organizations using that crypto for business purposes.
Yes, buying gold with the intention of selling it later is speculation. Buying anything with the intention of selling it later for a higher price is speculation.
If you were a jewelry-maker, I suppose you could call buying gold an investment.
Index funds receive dividends from the stocks, so you're investing.
This may be hidden from you if the index fund (or your broker) automatically reinvests. But either way, you own economically productive assets that a) create value for customers, and b) throw off a stream of cash. Even if the S&P 500 is at the exact same level in 50 years, you'll still gain significantly. That's obviously not true of commodities (e.g., gold, silver) or currencies.
The beauty of Bitcoin and the whole crypto "space" is that they are more than just mere ponzi schemes. Don't let the pedants get to you--the crypto space transcends the entire gamut of frauds, scams and schemes. They're not only ponzi schemes but pyramid schemes, MLM scams, a pump & dump scams, exit scams, exchange scams, securities fraud, and a bunch of other named and unnamed scams you'd find in wikipedia.
Often times these scams are deeply layered, with scammers scamming other scammers.
Sometimes just best to simplify the whole thing as "a scam" instead of iterate through every single sub-scam, sub-fraud and sub-scheme that exists within the entire ecosystem. The whole thing is really quite remarkable and would be much more enjoyable to watch if it wasn't such a massive drain on earth's resources.
Your view seems to be to throw out the baby with the bathwater. The crypto space is full of scams, PnDs, etc. The crypto space is also full of world-changing technologies that will affect our economies and societies significantly. Both are true, and you'll be remiss to ignore that part.
I don't think it is a very good store of value - we mostly need store of value in the special cases of wars, extreme crises, and similar stuff - for normal times we can invest our money into businesses that really produce something. But bitcoin does not seem to be very usable in these circumstances. It is not well tested. It is also in danger of being replaced by some other cryptocurrency. And I don't thing there is space for more than two or three of them - just like money gravitated into gold and silver.
>if you do hold the keys you better be absolutely paranoid with them because there's no plan B if they get compromised or destroyed
One could do multi-signature wallets with Bitcoin. So, for example, there could be three keys: one with you, one with your significant other, and one with a third party custodian, and it'd take, say, 2 out of 3 signatures to spend out of the wallet. It doesn't change the bearer nature of Bitcoin, which, some would argue, is a feature.
this, among the myriad other points missed by the discussion, is what's special about BTC (arguably, other digital "currencies", as well)
there's so much more to BTC. it's not simply any one of the [currency, investment, speculation] because it's also a [transaction network, messaging platform, clock, vault].
> "Looks like in the future people hoard currency instead of spending and investing it then. That ought to be interesting."
That sounds like the current to me. Too much is locked up (in too few hands) instead of doing what currency should do. That is, reduce the friction of trade (i.e., goods, skills, etc.) Currency is a lubricant. It's no surprise things are drying up.
What group is hoarding currency? With interest rates and the global economy roaring low we've had an explosion of investing in the past few years. I don't know of one group of people that would benefit from holding cash in the present environment
People have been investing in stocks, but entrepreneurship is declining. [1] What I think this person is getting at is that the increased economic activity doesn’t seem to be correlated with opportunity for social mobility, regardless of whether the value is stored in securities or currency.
Top 1%? They have more wealth than ever and keep accumulating more and more while the differences in wealth between everybody else end the top class keep widening.
Look at Warren Buffer, one of the best investors in the world and he has hundred billion dollars just sitting around as he sees no good investment opportunities.
Apple & other companies are hoarding money as well, much faster than they can spend it or invest. Instead they are buying back there shares because what else to do with all that cash.
What is Warren Buffet’s cash holdings? There’s a good chance they are in Treasuries or Money Market accounts which mean that money is being used by banks or the government to loan and invest. It isn’t like he has a room in his house filled with cash. The idea that cash is being hoarded is absurd. On deposit at a bank isn’t “hoarding” as the bank is able to make use of that capital to provide loans. Without the “rich” “hoarding” cash, banks have less capital which means it’s harder for you to get a car loan because the supply of money available to lend would be less.
These class-warfare arguments are interesting because rarely do they actually include the benefits to the financial system. These arguments also make the assumption that governments are more efficient at spending money than individuals, a claim that just isn’t proven out by facts. Dead-weight loss is a real thing. Warren Buffet spending a dollar means a dollar goes into the economy. The the State of California spending a dollar means that perhaps $0.75 actually goes into the economy.
What you seem to be arguing for is redistribution. But redistribution has deadweight losses as well as the unintended consequences of changing behavior. Perhaps a new business wouldn’t be started if taxation were at 75% — the reward wouldn’t be worth the risk, so the new economic activity from the new business wouldn’t happen at all — the associated jobs and tax revenue from that new venture would be zero.
Individuals with a million dollars to create a business would create more than a million dollars in economic activity because they’d ostensibly be producing a product or a service which would result in more economic benefit than the taxable value of that million dollars. If government taxed that money at 100%, and just completely redistributed it, that would result in $1 million - x% actually reaching the economy because government doesn’t create any new value and in fact, it reduces value because of unavoidable deadweight loss. Not to mention government taxing that money at 100% means that money wouldn’t likely be earned in the first place — why even bother?
The government created the computer and the internet...funds most major pharmaceutical, chemical, material sciences, and theoretical scientific research. The value created by the US government alone is estimated to be in the low hundreds of trillions and that's just measuring value created to this date.
The reduction of friction created by government regulation is estimated to provide a value equal in many cases to 100% of the price of the transaction (as in, the transactions simply wouldn't happen without government regulation creating sufficient trust between the parties).
Excessive taxation is a burden, but taxation in itself is not.
A poor village in africa has starvation. They do not produce enough food to feed themeslves properly. So they are given an aid of 10,000 U$S. So they turn to their own farmers and say "Behold the currency, we were dry of it before and we were dry of food because of it. Now take the money and transform it into abundance and plenty!"
The farmers put the bills in the ground, right next to the seeds, but it does not make the farm more plentiful. The villagers learnt the hard lesson: that plenty does not follow money.
>You fucking idiots stop burying the money in the ground and use it as a medium of exchange.
And lo, as everyone has more faith in the US treasury than the village tin roof hut a market was opened in the middle of the village and they exchanged the dollars for food grown by farmers less stupid then them.
The villagers then became wealth investment managers and charged fees to the farmers to invest their money, which involved holes in the ground.
Your analogy is flawed because the larger issue is that poor villagers can only buy US products with US dollars which means they import food from the US which then displaces domestic production. This causes even more poverty because of the high percentage of subsistence farmers in africa.
If you really wanted to help them grow their economy then you would try to offshore production into that country which leads to infrastructure investments and productivity growth.
I completely agree with you that the concentration of wealth in the hands of a tiny portion of the population is a huge problem today, but don't deflationary cryptocurrencies make it objectively worse?
At least if the current "1%" hoard dollars or euros in their mattress they slowly lose their wealth thanks to inflation. After a generation or two they'll have lost a significant share of their treasure. Therefore they have an incentive to actually invest the money to fight the effects of inflation. In doing so they contribute to the economy.
With a deflationary currency like bitcoin it goes like this:
1/ Buy bitcoins
2/ Bury your keys in a bunker in Antartica
3/ There is no step 3, just watch as you become wealthier while doing absolutely nothing. You want a loan to start your business or buy a house? Well tough luck, you should have mined BTC in 2013.
The deflationary nature of Bitcoin is why it managed to be successful in the first place, it gives a strong incentive to be an early adopter. However in the long term I don't see how it's sustainable, it makes it borderline useless as a currency. On the other hand I don't see how an inflationary cryptocurrency could gain traction if it's not backed by a huge entity such as a government or multinational company because who would bother buying SimiasCoin if you know it's going to lose value at a steady pace in the future? And why would a government or multinational corporation bother creating a cryptocurrency they can't easily control instead of printing bills like they do today?
That's definitely not what the overwhelming majority of people buying bitcoin today are counting on though. Like, at all. Otherwise "HODL" wouldn't be the meme it is. It doesn't make sense to hold inflationary currency.
I disagree. HODLing is a thing not primarily because hodlers believe in deflationary aspect of bitcoin, it’s because inflationary schedule is known beforehand and is not subject to change by bunch of central bankers and more importantly it’s the belief in that value will increase due to growing adoption.
>it’s the belief in that value will increase due to growing adoption.
Right, deflation.
"In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but deflation increases it. This allows one to buy more goods and services than before with the same amount of currency."
Merely increasing the number of available coin doesn't create inflation unless it matches the demand for it.
Not only that, things you need like energy food and education aren’t included in core inflation.
So what happens is, the finance people use freshly printed money to buy up the things all the poor little people need. But let’s not call it speculation.
Crypto is a democratizing force in a corrupt and unaccountable world.
So your point is that the current system is broken because our currencies are not truly inflationary if you're super rich and powerful because you get to print money so we should switch to a currency that's deflationary by design so that they don't even have to bother printing money? How does that work?
>Crypto is a democratizing force in a corrupt and unaccountable world.
Assuming that cryptocurrencies are successful they might cause some turmoil in the top 1% as early adopters with thousands of BTCs become the new 1% and current rich people who missed the bus might drop among the pleb. But after this initial period what happens? People who HODLed thousands of BTC will be hugely rich and remain so, people who don't have a lot of money still have to pay for housing and food so they can't save money to bridge the gap.
And I don't really see how Bitcoin are going to help with corruption and accountability when one of its main use cases today (beyond speculation) are powering online black markets.
> So your point is that the current system is broken because our currencies are not truly inflationary
No, I'm arguing traditional currency is no longer necessary. Rich people don't own currency, they own assets. Currency is for poor schmucks who don't know how finance works. Currency is for a convenient way of taxing the masses and devaluing their life's savings at the behest of the 1%.
What's the solution? Asset backed certificates. Store your savings in a diversified portfolio backed by the incredibly valuable "means of production". These certificates can be settled in real-time given their levels of liquidity. Merchants can sell things denominated in one asset, and customers can pay with arbitrary certificates (say, apple stock) - settlement occurs at transaction time instantly.
> Crypto is a democratizing force in a corrupt and unaccountable world.
Howso? The ultra-wealthy elites managed to seize control of crypto in like two years. They control all of the major mining ops and a huge % of the coins themselves.
"Crypto is a democratizing force in a corrupt and unaccountable world."
People say this all the time without backing it up. Tell us, exactly how is that true? What is the exact feature of BTC that somehow makes it incorruptible, and changes millenia of human behavior? What exactly about BTC would prevent the wealthy people from buying up all the things the poor little people need?
There are many ways of holding currency without being affected by inflation. This is what wealth management plans do.
One simple tool used for this:
> Treasury Inflation-Protected
Securities (or TIPS) are the inflation-indexed bonds issued by the U.S. Treasury. The principal is adjusted to the Consumer Price Index (CPI), the commonly used measure of inflation. When the CPI rises, the principal adjusts upward. If the index falls, the principal adjusts downwards.[8] The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal, thus protecting the holder against the official inflation rate (as asserted by the CPI)
What they are doing is, by definition, not hoarding their cash. TIPS are a form of investment usually classified as very-low risk (but correspondingly relatively low gains).
You are splitting hairs here. When people say that Apple is sitting on cash obviously they do not mean that they have 250 billion in one current bank account.
But that's a very important distinction don't you think? Actually even having money stagnant in a bank account does somewhat contribute to the economy because of fractional reserve banking. On the other hand having bitcoins buried in a bunker contributes absolutely nothing.
Yeah, but right now, that money is locked in bank accounts, investment vehicles, etc, where the money can actually be used for stuff by others. With crypto, that money is locked away in "cold storage" where it's not available to do anything.
You can at the very least make copies of the keys, and have your protection protocol be "wipe when anything suspicious is detected". You can't do that with gold.
If you're incentivized (as these incentivized crypto-assets are) to hold onto something until enough other people perceive it's value as being higher (whether tricked into it through various methods or other), needing them to legitimize and realize the value, then people will hold onto it - and they'll use part of their resources to bring other people into the game.
If society adopts these incentivized crypto-assets that $10B the could become valued at trillions of dollars, which then is buying power shifted away from society as a whole - and where those holders have done no work to actual make those gains. This attracts enough bad actors and incentives bad behaviour.
No key is safe from a brute force attack that covers the alphabet of key and the length of the key.
What you're describing is a dictionary attack and it trades comprehensiveness for speed.
There's many more words than characters in any language. Using words as your alphabet gets you ($WORDS)^N possible passwords of length N instead of 128^N for an ascii alphabet. For humans remembering random words is easier.
Choosing a grammatically correct sentence instead of random words is little different in terms of complexity reduction than choosing a word based password (e.g. Password1) instead of random characters.
Obviously if the attacker can build a target specific dictionary they'll have a higher probability of success.
I said password for the private key, not the private key itself. I store my PKs in KeePass databases with a crazy number of rounds, so each password guess attempt takes 2-3 seconds on a modern CPU. Good luck bruteforcing that.
let a bank manage and insure their wallet than manage it themselves. Too stressful otherwise.
This just goes to show where the hype and misunderstanding around this has led.
It is not too far off to say bitcoin's only reason for being, is to "hold them yourself," i.e. conduct all your financial dealings with zero third parties.
A bank holding your bitcoins is just nonsensical if you understand the relative merits of each system.
The merits of the banking system are a centralized efficiency in conducting "transactions at a distance," and economies of scale in preventing fraud, theft, and other losses,
Trying to inject bitcoin into the banking system is like trying to re-insert a vestigial organ into a species long after the organ has been pruned from the evolutionary tree.
Nobody seems to have much interest in bitcoin's purported raison d'etre, but are more interested in a perceived potential for appreciation. That much of past appreciation has been shown to be the result of various systemic manipulations, rather than genuine organic demand, seems not to register with most people, or is unknown.
That perceived potential for appreciation would seem to eventually rest on people having an interest in using bitcoin for the uses around which it was designed. Should that day come, a shift from the game of "musical chairs-hot potato-hype machine," to a system of digital cash, the system would require a major re-working to support the number of users one would think would be proportional to the current valuation.
But like you said most people aren't comfortable or willing to shoulder this sort of risk in their financial lives.
Another curiosity, or countervailing force to bitcoin's design goals is the ever growing 'blockchain' record that needs to be stored locally to partake in the bitcoin system in the spirit it was conceived.
The blockchain is growing at a fairly constant rate, has anyone ever plotted blockchain growth relative to projected future storage costs and bandwidth capabilities necessary to onboard new users?
So what is the point of bitcoin other than the original goal of "be your own bank"?
But not just your own bank, your own datacenter as well!
The people hording bitcoin makes the value of the ones spending it more valuable. Without people hording it, you wouldn't have any of the profits regular people have been getting.
People hoard capital now (currency being one form). Look at the result of the tax cuts leading to stock buy backs
This is more motivation to transition from currency based societies and focus on outcomes that benefit labor first
It’s plain there is no free market when currency monopolists can control not just what we work on looks like, but whether anything is worked on at all
There is great demand for the end of war, housing, social services, and universal healthcare. Cottage industry can rise around that instead of digital assistants that schedule hair cuts.
But we’re forced to prioritize the tasks the currency monopolists dictate, putting our own communities second
Adam Smith only mentions a markets in the context of a free labor market for workers of equal condition to move about freely
Mandate universal healthcare. It’s just as important to a secure and free nation as guns and is a potent first step to saying “we’re not interested in addressing the needs of stock markets and distant currency monopolists.”
What? In what world is QE 1,2, and 3, the dramatic and unprecedented expansion of the ECB's balance sheet, and the BOJ and SNB openly buying equities "focused on eliminating inflation"?
Economics are not physics. They rely only assumptions that only make sense in our culture
Capitalism is like metric or imperial measuring systems; human invention to service human motivation
Like metric and imperials there’s nothing in physics that prevents us from being more socialist
It’s a matter of public will, as has been shown in the past with revolution and fall of empires.
I’d rather we focus on enabling those that want to meet the demand on display in the contexts I’ve mentioned
If people with all the dollars won’t enable that, to hell with their claims of being rich. They can hang onto all them dollars while we instead focus on getting those demands met
So if we let a bank manage bitcoin, perhaps the bank could issue paper receipts that are backed by said bitcoin, and those pieces of paper could circulate instead of using the blockchain.
What I don't understand is if fiat currencies are so bad, why do people express the value of bitcoin in a fiat currency (like USD)? They are just like the goldbugs, hoping and praying that the world will collapse back into the dark ages
>why do people express the value of bitcoin in a fiat currency (like USD)?
Mostly because businesses do accounting and pay taxes in usd, so bitcoin is just used as a pass through gimmick to make sales. There is no path to the price stabilization of bitcoin, it's purely deflationary, no one is going to set prices in something that has no monetary policy.
There is a very important difference between fiat currencies backed by nothing and fiduciary media that is backed by a commodity like gold. You can't walk into the Federal Reserve with a thousand dollars and demand them to be converted into physical gold - that right was abolished in the 1930s.
> perhaps the bank could issue paper receipts that are backed by said bitcoin, and those pieces of paper could circulate instead of using the blockchain.
Feel free to use them, I won't. There's no point when Bitcoin is so simple to move.
> What I don't understand is if fiat currencies are so bad, why do people express the value of bitcoin in a fiat currency (like USD)?
Because it's one of the most practical things to measure against, because almost everything is also measured against it?
I don't get this argument, if I say a car is worth $20k that means the car is actually worthless because I'm measuring it's value in USD?
Or someone in the US saying that meters are actually a stupid and useless unit because before everyone gets used to using it you have to constantly convert it to imperial.
Let's do this little thought experiment: If some wealthy people stored their keys on a ship and that ship sunk to the bottom of the Atlantic, would anyone go diving there to retrieve those keys in say 50 years? What if it was gold on the ship?
This is a problem/misfeature with cryptocurrencies: You are never truly sure that you own any of it, until you spend/send it elsewhere.
No matter what layers of indirection(multi-party-sigs,bio-metric based encryption, etc) you put on it, at the end the private key has to come out in order to use it.
With Gold, you see gold in your vault, you know it is yours.
You see dollar in your pocket you can be sure you can spend that dollar tomorrow.
You see a strip of paper with your private key in your pocket, there is no guarantee that you can spend those cryptocoins tomorrow.
You see a private key(encrypted or not) on that Gold Bar, you do not know that it is truly yours unless you managed all steps of the encryption yourself.
If you did manage all the steps of encryption yourself, then storing that information in a vault was pretty much pointless.
I suppose one way these vaults can offer some sort of safety is that you come to them with your wallet, you make an onchain transaction into wallet whose private keys require both you and the vault to decrypt.
This way both parties can be reasonably sure that the wallet stays unaffected until you come with a request to open it.
Still a problem remains, you have to trust the vault to stick around and not lose their encryption keys.
If you do not need vault's keys to open your wallet you've gained nothing by storing your keys at the vault.
If you need the vault's keys you have to put your faith in vault not mishandling those keys, which means a single point of failure.
According to its proponents, Bitcoin is digital gold. (Interestingly it’s not an “electronic currency” anymore even though that was the original title of the 2008 whitepaper. I suppose Lightning Network or something is supposed to fix that with new transaction layers backed by the Bitcoin gold.)
One aspect of gold’s historical value is that it’s traditionally recognized even in societies in collapse. I’ve never understood how Bitcoin is supposed to hold its value in such an event — something on the scale of nuclear war, or Germany in 1945.
After an EMP wipes out data centers and cell phone towers, you can probably still bribe people with Krugerrands. Who’s going to accept Bitcoin transfers when the infrastructure is either gone or under military control?
Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?
> Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?
The idea is that the transactions are irreversible and you cannot rely on any number of police officers or judges to fix a theft.
The bunkers are for security's sake, not preserving-wealth-in-an-apocalype's sake.
The police officers and judges can put you in jail, which is generally worse than having your assets confiscated. I’m not sure how Bitcoin helps.
What I’m trying to understand is how Bitcoin advocates’ promise of it being a store of value independent from governments can be valid when the system depends on extremely sophisticated infrastructure that was built and enabled by governments.
Your points are valid. IMO the key tradeoff b/w gold (analog) and bitcoin (digital) is extra resiliency vs usability.
If there were a systemic collapse breaking governments, knocking off power and telecom networks etc, gold would be immediately most valuable. But more quickly than fiat, bitcoin would be useful.
Power and telecom systems are more resilient to systemic collapse (& have more bouncebackability) than a functioning government and its currency. Some semblance of critical systems would come online whether put up by government, armies, warlords, cooperatives etc (See Somalia as an example). When those systems are online, bitcoin can be sent and received.
In short:
in terms of usability: Fiat > Bitcoin > Gold
in terms of resilience: Gold > Bitcoin > Fiat
You need a hash rate at least vaguely close to the pre-collapse hash rate, or else the network will grind to a halt. Will they be physically capable of that?
This assumes a sudden collapse event happening within the 10 minutes that it takes to reset the hash rate. I'm struggling to think of global scenarios where that can happen so quickly.
What are the chances that collapse is a sudden event vs a cascading deterioration event?
Sure! The difficulty is supposed to adjust approximately every two weeks, and it readjusts based on how quickly blocks were found after the previous readjustment. The target is for blocks to take an average of 10 minutes.
The trick is that the difficulty adjustment time is not actually measured in weeks (or seconds), but in blocks. Since blocks are supposed to take 10 minutes, the difficulty readjusts every 2016 blocks. It looks at the time needed to complete the last 2016 blocks, and readjusts so that the next 2016 blocks will take two weeks at that rate.
If the hash rate is steady, then that readjustment will happen close to the two-week mark, and of course it will do very little because the rate is steady.
If the hash rate is increasing, then the period becomes smaller. As a simplified example, consider what happens if the hash rate is constant for the first week of an adjustment period, and then doubles. The first 1008 blocks took a week. The next 1008 blocks will take about 3.5 days. The next readjustment will therefore happen after about 10.5 days, not 14 days. The real Bitcoin network looks a little bit like this: over its lifetime, the actual difficulty readjustment period has averaged 13.17 days, not 14 days, because of the steadily increasing hash rate.
Now consider the opposite case, where the hash rate is cut in half after a week. The second batch of 1008 blocks will take two weeks, for a total of three weeks.
Worse, consider a case where the hash rate is cut in half every week. You'll (probably) never reach the next difficulty readjustment, and blocks will take longer and longer to mine until they're taking days or weeks instead of just 10 minutes. You could get into a spiral where a single event that significantly cuts the hash rate results in the network becoming much slower and less useful, so people use it less, so miners earn less, so they drop out and the hash rate drops further, etc.
It's hard to say just how the real-world hash rate would change in response to a catastrophe, of course. Maybe that sort of shock wouldn't happen. But this is the general idea of why Bitcoin could run into trouble due to a quick but not quite immediately apocalyptic decrease in the hash rate.
And that is why Bitcoin is designed against these kinds of events. It's very unlikely that everything would be wiped out or everything would be under military control. There's always strong economic incentives to keep it running and secure.
If you're concerned about an EMP wiping out electronics systems worldwide then surely it'd be smarter to horde weapons, food and antibiotics, than Bitcoin OR gold.
Youre basing your argument on the assumption that ALL datacenters have been wiped out. Its unlikely the entire world will engage in global warfare on a scale large enough to disable the internet, which the bitcoin network relies upon. Also, historically government currencies destabalize during war, so bitcoin would probably retain or increase in value, not diminish.
> After an EMP wipes out data centers and cell phone towers
If such a thing happens on a large scale there will be hundred of millions of deaths. All major cities will simply collapse.
See recent articles how London can only survive for 4 days without electricity, after that there will be no food.
The modern society is incredibly fragile. Everything is just in time, there are no stocks or buffers. Bitcoins will be the least of your worries in such an event. Your Krugerrands will also not be of much value. Nobody will be stupid to give you food or gas for a piece of metal.
That's why more and more people getting involved in scams and get-rich-schemes on a platform with superlinear and unbounded energy upkeep is something that worries me deeply. Energy and climate is something that very well may break our society.
> Energy and climate is something that very well may break our society.
Unfortunately, if you run almost any process that humans are doing right now that has even 1% growth, in 1000 years, that's a factor of 21000x (.5% is 146x), and we're dead. So pretty much everything has to reach an S curve and stabilize, or we are totally F'd. Population, energy usage, land usage, food, trash, inflation, everything.
That's another reason to invest in space exploration :).
But yes, we should be minimizing wasteful growth where we can. Food will have to grow in lockstep with population, but the growth of trash is something we can reduce. And there's especially no need to add artificial high-growth energy sinks like cryptocurrencies to the mix.
I really think this opinion is short-sighted. And it comes from a less extreme version of the same place that 9/11 deniers operate from; normal humans don't want to naturally think about loss of control and what that loss of control would look like. So its easier to just say "if this happens we're all fucked, don't even try"
There is practically no evidence in history where gold had fungible value then became worthless. Nothing else matters; everything else is conjecture, opinion, and extrapolation.
Yes, we live in a very fragile society. Yes, if complete collapse happened, there would be a period of extreme chaos when millions, hundreds of millions, die.
But the chaos would stabilize, barring any extenuating factors like a T-Virus. And in that world, maybe US Dollars would still hold some value. History says Gold probably will. Bitcoin though? Bitcoin requires a global network of miners. It would require having access to the original blockchain that gives your wallet value. In the best likelihood, the currency would splinter into every small network that can still run miners. And when energy is so expensive that you need all of it to power your lights, vehicles, and medical equipment, why would anyone spend it on an expensive mining rig, even if all the complex computer equipment necessary to make it run were widely available?
And then a guy walks into town with a bag full of gold. Suddenly Bitcoin isn't looking all that valuable as a currency. I'll sell my extra food to the guy with the gold, because the guy with antibiotics down the street would also sell to the guy with the gold, and the guy in the town over with car parts would also sell to the guy with the gold. That's what makes currency work; people, not software.
That guy with a bag full of gold will most likely not be the one who had that bag of gold when chaos erupted, that was my point.
Those who survive the chaos will be the ones strong enough and ruthless enough to organize themselves into powerful gangs. The nerd with a bag of gold will most likely be killed and it's gold stolen.
Being a prepper with an underground bunker will also not be of much value, you will just be seiged out.
If you are rich, what you'll need is a small private army to protect you, a small working force to feed you and the army, and the political skills to be able to enter into the right alliance after that.
I does not require internet. You can make a wallet without, although it wont be very useful without moving btc into it which will require internet or some peer to peer network with the blockchain on it.
That seems like nonsense. If things are that much of a mess, internet & electricity will presumably be spotty and computers will cease manufacture (& slowly decay until failure). Better to have tangible currency. Will that be USD, or precious metals, or ammunition? I don't know, but I'd bet on something you can touch.
In such a scenario, bitcoin will have no value. Localized disasters occur more frequently than one would expect, and in such disasters, a pure barter economy exists.
During the Bosnian War, things that became highly valuable were: bullets, liquor, antibiotics, lighters, and of course food [0]. Bitcoin, or any other currency, was the last thing on anyone’s mind.
I'd also make the comment that the parent was suggesting a world-wide scenario. If such a scenario were localized, Bitcoin would make a lot of sense, assuming migration were a possibility (that is not always the case, as in the Bosnian War). An example of this would be the current situation in Venezuela.
Don't apologize the notion is deservedly laughable. BTC only has value in a technologically advanced society that you expect to continue. If you are concerned with societal collapse it is the absolute worst thing to expect to have value.
I heard an interesting analysis of long term crypros, by Jeff Berwick IIRC, that BTC will become the holding coin and transactions will happen on alts. My intuition agrees, tho I hold no coins so am impartial. He is sharp generally and claims to nail predictions, have not verified, so I lean toward agreeing but would obv research before I buy into any strategy. Another video I saw examined the amount of BTC in terms of some unit of energy relative to current global usage. I don’t wish I bought some in 2010/11 but I’d sure be sitting pretty if I had less regard for the polar bears!
If you want to understand just how difficult managing cryptographic material is for the technically illiterate, look no further than Xapo.
It's not "Bitcoin" that Xapo stores, but private keys. In underground bunkers. This no doubt gives some people a warm fuzzy.
But Bitcoin's history is littered with the wreckage of companies that took it on themselves to store private keys on behalf of others.
I don't know when Xapo will fail, but if history is any guide it's just a matter of time. The weakest link in their system is the people involved.
Consider this tortured statement:
If Xapo’s deep cold storage vaults were hacked, Xapo would cover the loss from its own reserve but the hack could be bigger than the reserve which would cause a net loss to our customers.
In other words, a Xapo depositor would eat the loss in the event of a successful attack on the cold storage system.
The funny thing about all of this is that private key management isn't difficult when you know how. Given the vast sums of money being stored, you might think that certain big fish would want to take the time to do it right.
This kind of debate by selective vocabulary is frustrating.
If a poor or middle class person sits on the cash he has, he's "saving". If a wealthy person sits on the cash he has, he's "hoarding".
Regardless of the topic at hand, let's be consistent enough in our terms to think and discuss the issues fairly and clearly without all the pejorative terms. If we have to resort to name-calling, we might not have a very good point.
A person has 250 units of food sitting in a room, earns them at 2 units per day, and can consume them at 1 unit per day. They have saved 250 units such that if they stopped earning, they'll be alright.
Another person has 2,500,000,000 units of food sitting in a room, earns them at 200,000 units per day, and can consume them at 100 units per day (not as filling but tastier let's say). They are... also only saving? C'mon.
The problem with this line of thinking is it assumes a specific purpose, then name-calls based on that premise.
Maybe consumption isn't the goal and you're unaware of it. If I have as much food as a grocery store, I'm a hoarder because consumption is my goal. The grocery store isn't hoarding (or even saving) food because consumption isn't the goal. Retail sales are the goal.
Again, I'm not here to fight about economics. That wasn't my point. My point was ridicule isn't an argument. Calling someone a hoarder may make you feel good, but it isn't an argument.
Degree matters, it often makes all the difference; as such, we have different adjectives to describe those different degrees.
In my hypothetical, while technically true that both are "saving", it is more descriptive to use "hoarding" for the latter case, both in an objective sense to describe the degree and in a subjective sense to describe how that degree of storage should be evaluated.
Their goal is to save obscene amounts of wealth that will never ever be used, could never ever be used by a single person in a natural lifetime, "I've saved so much WAOW!" Who cares. Wealth is gained on the shoulders of giants, all the people and technology that came before us. Maybe it should be harder, much harder for people to save levels of money that most everyone would describe as hoarding.
The wealthy saving/hoarding so much money, having so much power relative to the masses is leading to super great outcomes?
Key Management Systems will be an extremely lucrative business if anyone can come along and get it right. Coinbase could be a leading candidate to operate one, but the opportunity is there for a small player with top tier security talent.
The word 'hoarding' demonizes 'saving,' which in most Keynesian economies is considered leakage. It's really a question of values. Inflationary currencies encourage consumption; deflationary ones encourage savings. High consumption does increase demand, and apparently a faster growth in the economy. One could argue that this almost forced consumption for the sake of faster economic growth is what causes malinvestment and the associated boom-and-bust cycles.
One could be hesitant about spending away their Bitcoin to buy a shiny new bigger TV, while they'd happily part with USD for the same expense. Former, I'd say, has a more natural alignment with our incentives to spend thoughtfully.
Also, I am not sure if everyone shares the value of eating the planet at a faster rate for employment and GDP numbers.
> I'm not sure why encouraging people to bury their wealth in the ground instead of doing something useful with it is something we want to be doing.
Savings is not "burying their wealth in the ground", it's building a safety net for the future. At least for everyday people. Most people would be better off doing that than blowing it on big screen tv's, boats, and cigarettes. If more people did that, society would be better off too.
I don't really get why when it comes to crypto energy consumption, the discussion board becomes reactionary. I mean portugal is now running on 100% renewables. Shouldn't this point be more about renewables? You know, what about the electric car? That'll consume lots of energy too.
Inflationists / consumptionists have been demonizing savers and sound money since the 1700s, if not earlier. They enjoy the artificial boom induced through inflation of the money supply and then blame gold or speculation or "animal spirits" for the bust. They think that if we could only got back to the consumption levels of the boom, then we'd be "back on track." This never works, and the calls for consumption are usually special pleading by bank-connected interests that stand to benefit from monetary inflation.
We will see the pattern continue with Bitcoin, the most sound money the world has ever known (no matter how high the price goes, you cannot increase supply beyond the scheduled issuance). This time is different, however. The consumer can (and should) control her own private keys, which means not trusting a bank, which historically will inflate the money supply to its own benefit. Forced confiscation of privately-held Bitcoin will be much more expensive than previous confiscations of gold already held in vaults.
Unfortunately, those wealthy savers with their money in the vaults mentioned in the article will have their Bitcoin confiscated when things get bad enough. Too many in the space have already learned the hard way what happens when you trust your coins to a centralized institution.
This is just more evidence that my theory on why Bitcoin was developed, may actually hold water.
It was never about the GFC, failing banks or some crazy libertarian dream. It was all because someone was upset that the "million dollar bank transfer codes (or the two keys geographically separated that have to be turned at the same time, or the special secret crypto laptop in the zero halliburton that can transfer billions instantly and untracably)" trope from all those crime films was complete bullshit, and that in reality most money is protected by horrifyingly thick layers of mediocre bureaucracy and somebody wanted to be the mahatma gandhi of making those sorts of situations actually plausible in the real world.
404 comments
[ 4.6 ms ] story [ 312 ms ] threadOh wait, that's cryptocurrency startups...
Also, Bitcoin is not a startup.
Are corporations considered “decentralized institutions” in the world of bitcoin enthusiasts? After all corporations are made up of decentralized shareholders that can vote for and change the directors.
If that doesn’t fit...what about a credit union? Like bitcoin there are no “owners/shareholders” of credit unions they are simply comprised of members.
Very much this; I'm fairly sure that if there is an organization that wants to direct / control btc, all they have to do is open up their (real money) wallet and get the majority mining capacity. If they first drop the value of BTC by selling or whatnot, miners / automatic miners will switch to more profitable currencies so the total hashes / second will lower, making a hostile takeover easier.
Tell me, how would someone with near-unlimited money go about doing that? Will they just conjure up the hardware needed to make 15 Trillion hashes per second?
As the written word spread in Europe after BC, it layed an important cornerstone for democracy and changed the world for good. Noone would argue with that, right?
Ok, so let's look at Europe from 500BC-1300BC. Corrupt monks forging official documents, under some goverments up only about 60-80% of the were real. Monks were people of god, so noone really investigated. For a long time, the emperor would sign with a simple line, because he couldn't actually write. Wow, how is that more valuable than spoken word?! Where is your democracy? Women can't read, poor can't read. Knowledge is stored exclusively by the church. Turns out writing things down is actually a really backward philosophy! Or is it?
And that's where we're with Crypto right now, IMO. I'm not saying this is as revolutionary as writing, not even close. I'm not even saying it will turn into a good thing. BUT I really like the underlying idea, the concept, of it. Of course there are greedy shitheads, companys taking advantage, fraud and projects which are uterly useless. But yet I didn't came across an argument which convinced that the concept of non-centralizing via blockchain can't work.
So, to actually answer your question, I think we shouldn't mix up the discussion about the philosophy, potential and future of Blockchain with individual cases like "is this pump and dump worse than 2008 greed of banks" (which is also an important discussion, but a seperate one).
Does that make any sense?
While modern view has corporation as these evil centralized entities...the first “stock corporations” were a welcome invention, allowing distribution of risk and a share in profits.
I personally love the idea of an immutable and distributed ledger. And while bitcoin may have been helpful as an example of a potential use for a blockchain, it has failed to fulfill the intended use of the creator (peer 2 peer digital currency). I think in a lot of ways because while blockchain itself may have some democratic characteristics, the example of bitcoin as a currency is anything but democratic. Bitcoin is something bought and sold, the inventor(s) have 1,000,000 and new comers will be hard pressed to have equal power.
Then again the way democracy is used as a term and romanticized is kind of a joke to me. From the fact the US is often called a democracy (it’s not it’s a constitutional republic), to the idea it took women about 2,500 years to get the right vote, to the realities of democracy only works until it doesn’t then might is right (see the democratically elected parties: taliban, hezbollah, hamas).
Not allowing very large balances to be withdrawn at once.
Complying with asset freeze orders.
They also have much lower transaction fees.
Of course, if you need to liquidate $1B in Bitcoin, that's going to take time, but you can still do it much faster than you could get it out of a Cypress bank in 2014.
https://www.reuters.com/article/cyprus-bankofcyprus/cyprus-c...
Wait, are we talking about MtGoX? Or Coinbase? Or Bitfinex? Or any of the many smaller exchanges that did the same thing right before they collapsed?
Oh remember those securitized mortgages we sold you? Yeah, they're worthless now. By the way we bought insurance on them becoming worthless, because we were pretty sure this would happen when we sold them to you.
Coinbase supports wallets for USD...is it only USD wallets that are FDIC insured?
https://support.coinbase.com/customer/portal/articles/166237...
Your BTC (or all crypto?) balance is insured by Lloyd's. I assume this is only insured against thefts/failures of Coinbase's, so if your balance were stolen by attackers who had your Coinbase credentials I suspect your balance would not be covered. But this might be similar to your liability from normal online banking fraud/theft?
The fact that Coinbase pays those private insurance premiums makes them the no-brainer suggestion to people who are considering holding some BTC.
>The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category.
https://www.fdic.gov/deposit/deposits/faq.html
FWIW, I think it should definitely be higher than $250K. Probably $10M or so.
In the UK the "National Savings & Investment" bank is actually outright owned and operated by the British government, specifically for this purpose. Instead of raising money commercially with a debt security, and then having banks buy that take savings from their customers to afford the securities and keep a cut as profit, the NS&I gets rid of the middle man and just borrows money directly from citizens at a decent interest rate with zero risk‡.
‡ Obviously the government itself might fail, but you're exposed to that risk anyway, so it didn't add any risk to involve NS&I here.
Well, you can buy, e.g., savings bonds directly, but only $25,000 worth per year.
If you spread it around 4,000 banks (there are 5,593, so this technically possible), it would, since the limit is $250,000 per depositor per bank per ownership category (I'm assuming avoiding the overhead of manipulating ownership categories, which could shrink the number of banks needed further.)
The comparison is also dubious for another reason: everyone who did even the tiniest bit of diligence knew the mortgage and derivative markets were in a huge bubble. Phrases like “liar loan” were common, they had to invent new ways to rate derivatives which didn’t meet the traditional standards, etc. but so many people were banking on the greater fool theory lasting long enough for them to cash out before it popped. All the crash proved was that the traditional banking standards were there for a reason and the people who never abandoned them were fine.
This is relevant in the Bitcoin discussion because we see the same dynamic where people who pay attention to the fundamentals are saying it’s a bubble and the get rich quick crowd is saying that the rules are completely different now because magic.
You seem to be implying that the regulations / laws and the banks are two separate entities. They're increasingly the same. Which means that yes, it is basically their goodwill we're dependent on, or more accurately how much they think they can get away with before there's literal blood in the streets.
I think at the highest levels they already do operate without any regulation. When you get to write your own regulations and there's a revolving door between the regulatory agencies and the companies they're suppose to regulate, there is no meaningful regulation.
Bitcoin and other digital currencies are a threat to them because there is no central agency in charge of it that they can infiltrate and control the way the have with government-run currencies. At least, they haven't found a way to control and manipulate it, yet.
yes, there's no recourse to losing your BTC. it's a good thing you were only playing around, or you'd be really screwed.
if you mortgaged your house, well... that wasn't very smart was it. I'm sure you won't make that mistake again, and I think/hope we as a society/culture can work to help you recover from that.
whatever the case, if you lose your money/btc/shirt the banks won't be much help to you.
/s
With Bitcoin, unlike cash, there is also a public record that you did in fact pay, so the defendant couldn't lie and say you never paid when they just hid the cash under their mattress.
Likewise, there's no reason a payment processor like Visa couldn't process payments in Bitcoin and provide fraud protection if that is something people want. Bitcoin isn't there yet, but neither was cash until about 50 years ago, out of thousands of years of usage.
Currency that isnt controlled by any government is different. Previously that was limited to gold only. Gold was hard to move and expensive to keep safe. Bitcoin can be sent for free using exchanges or on a piece of paper or about 1000 other ways.
Easy to move gold is almost magic.
What about the transaction fees? Someone has to pay for all of the mining hardware and electricity.
But even if we are back to that model, it still uses ultra rare BTC where there are 21,000,000 BTC ever ever ever.
The US currency just keeps inflating.
This is true for you & I. But the wealthy aren't concerned about the FDIC insurance as their balances are far in excess of what would be covered by it. They follow the health of a bank very closely as they stand to lose a great deal of money if it becomes insolvent.
Many people think what prompted the sale of Wachovia to first Citibank (briefly .. sort of) then Wells Fargo for $15.1 billion [0] in October of 2008 was the implosion of their MBS holdings in their Golden West Financial acquisition. If you recall, Golden West had the "Pick a Pay" program, where borrowers could decide how much their mortgage payment would be (potentially even less than the interest portion, where the remaining amount was lumped back in to the balance)
What really happened was the wealthy depositors in Wachovia got wind that the bank was in trouble and initiated massive withdrawals, causing a run on the bank. If the sale to WF hadn't happened that weekend and restored confidence in the bank, Wachovia would likely have not opened their doors on the following Tuesday. Source: coworkers who were there at the time.
[0] https://dealbook.nytimes.com/2008/10/03/wells-fargo-to-merge...
Long argument about instrinsic value
Peaceful resolution where we agree not to kill each other if our portfolios fuck us over
Capital controls are real
the writing on this has all the telltales of a unresearched fakenews/paid advert, e.g.: "Hackers have also proven adept at setting traps on computers to access cold-storage devices the moment they’re online. More traditional criminals have committed home invasions and kidnappings. Some Bitcoin tycoons have resorted to hiding their identities, fortifying their homes and studying self-defense." ...and that's not a crazy person being interviewed quote, this is the author saying.
At this point it's definitely mainstream and if enough of the billionaires own it, they can definitely manipulate the price. Not sure how would Governments control this
Looks like in the future people hoard currency instead of spending and investing it then. That ought to be interesting.
It also demonstrates the costs associated with non-reversible transactions, these vaults aren't storing gold ingots or priceless artifacts, just private keys. Banks around the world don't need to worry too much about this (well, within reason) because if somebody manages to break into their digital vault not everything is lost and they can mitigate the damages retroactively.
With bitcoin "if you don't hold the keys, you don't own the coins" but if you do hold the keys you better be absolutely paranoid with them because there's no plan B if they get compromised or destroyed. For this reason I think that even if cryptocurrencies manage to become mainstream many people (including myself) would rather let a bank manage and insure their wallet than manage it themselves. Too stressful otherwise.
People hoard(ed) currency in the past and present as well
The important ideas of Keynes in a nutshell:
* Monetary velocity: wealth is a verb, not a noun. The wealth of nations is measured in their rate of transactions, not how much cash or idle assets they are hoarding.
* Idle vs. productive investment: if currency is deflationary people will store currency, a non-productive investment. If currency is inflationary people will invest it in productive activities.
I don't agree absolutely 100% with these, but I think Keynes was at least onto something especially with the first. The problem with the first is that velocity also includes transactions that don't actually do anything or that even "create" negative value. Gambling increases monetary velocity but doesn't accomplish anything and may actually destroy value. A real value-centric velocity statistic is impossible because value is a biological/humanistic concept and is non-computable. The main problem with the second is that if people are pessimistic about investments they will still hoard, but using things like real estate and gold. Another problem with the second point is that over-using this strategy to drive investment creates bubbles, as we have seen.
Finally I must point out that Keynes gets a ton of flak for stuff he did not advocate, like insane levels of public and private debt. Keynes would have been shocked and horrified at the levels of debt in our current system, and in fact his whole counter-cyclic government spending strategy was designed to prevent this.
Blame politicians and banks for the debt problem, not Keynes. Politicians invoke Keynes when they want to ratchet up spending during downturns but then they conveniently forget the other part-- namely that Keynes also advocated reducing government spending and repaying debt proportionally during times of abundance. Keynes basically argued that government could be used as ballast against economic oscillation.
Would you concede that the economic policies rooted in Keynes's ideas created an environment that allowed for the snowballing issues we have?
The issue that isn't present in your comment is top-down imposed order vs. bottom-up emergent order. To me, the former is degenerative, while the latter is sustainable.
So now we have 0.01% interest 'savings' accounts! They are just as liquid as our checking accounts.
The implications are big: with the current trend of concentrating wealth to only a small fraction of the population, at least all that money is not 'gone'. Even though the rich probably don't pay much taxes over it, their banks will invest it in other companies. If this bitcoin hoarding ever becomes a trend, the consequences for the economy will be disastrous.
What's not clear to me: is this just the keys stored underground and clients have access? or is this "cold storage"?
I'd speculate that more than 7% of the world's gold is locked up in bunkers, where it can be accounted for and borrowed against.
Nobody is shocked to know that gold is stored in vaults. Nobody is shouting that the folks buying overpriced coins from stupid mints are going to decimate the world economy with their irresponsible hoarding.
We're all just totally comfortable that, yeah... in a situation where a-bombs start dropping, gold would probably be a functional store of value.
But they'll want a bunch of a heavy yellow metal? At least the small piece of steel is easier to carry around.
These bitcoins were bought with cash, which is now sitting in the sellers "savings" account. The dollars did not disappear in thin air.
I still don't understand why significant deflation is a desirable characteristic for a currency. Mild deflation is tolerable unless the economy is experiencing hyper-growth like the early 20th century, but Bitcoin is more deflationary than gold. Strong economic arguments that I don't have time to type in can be made that an ideal currency (as a medium of exchange) is slightly inflationary (in the monetary base sense) to the degree that the economy as a whole is growing.
Edit: collapse you say? But its value has held up! But this is exactly what happens (for a while) in a deflationary collapse. The value of money skyrockets but its velocity tanks.
http://charts.woobull.com/bitcoin-velocity/
Of course given all of Bitcoin's undesirable characteristics as a store of value I suspect that its value in USD/EUR/etc. will eventually tank as well. This might take a while unless something causes a panic since the market for BTC is slow and thinly traded.
IMHO all deflationary cryptocurrencies will undergo this kind of collapse.
Of course not all cryptocurrencies need be deflationary. Software defined money can be programmed to do anything you want it to do within the bounds of what is possible under e.g. the CAP theorem and other relevant concepts from distributed systems.
Cryptocurrency as a system is also inflationary in a whole-systems sense as new money can be created by forking a code base or creating a token on those coins (e.g. Ethereum) that support it. This argument holds as long as all these currencies are reasonably fungible without too much hassle. As it stands things like shapeshift.io make converting them fairly easy at least for the popular ones.
"Earth is a poor store of life because it requires a constant stream of light to maintain." Hm no, that doesn't work...
Why was Bitcoin invented; what problem does it solve?
Cryptocurrencies are designed to waste increasing amounts of energy that grow both with time and the popularity of the system. Right now we're not able to pull energy from Sun fast enough to power them (see all the global energy issues, fossil fuels, etc.). And even if we eventually could, cryptocurrencies would only grow to consume all available energy. And even if we could keep up with that, it's an incredibly unnecessary waste if you compare all the other uses that energy could be put to. The guarantees that cryptocurrencies give are not worth the upkeep.
And that's all without discussing the other side of the coin - waste heat.
Actually there are thousands of other things that take way more energy and pollute way more than cryptocurrency mining. In fact you can locate your miners anywhere, unlike, say, your shipping vessels. So there's an incentive to place the miners next to, say, hydrothermal plants.
Why aren't you fervently arguing for the other orders-of-magnitude-larger polluters to be replaced? Lord knows we have alternatives to them too.
By the way, do you know about Bitcoin's emission curve and what is going to happen to mining after bitcoins are no longer emitted?
> And even if we eventually could, cryptocurrencies would only grow to consume all available energy.
That's a lot of energy! Could you provide some kind of grounds for your opinion here?
Because here I'm arguing against the trend, not just absolute magnitude. Almost every other human endeavour has incentives to reduce waste and upkeep. Cryptocurrencies require ever increasing energy use for maintaining the system.
(Note that I also frequently argue against various zero-sum games in the economy, like advertising, which are yet another unnecessary waste of precious resources. I try to be consistent with that position.)
> what is going to happen to mining after bitcoins are no longer emitted?
Isn't it true that Bitcoin requires continuous energy expenditure through mining to maintain the integrity of the network?
> That's a lot of energy! Could you provide some kind of grounds for your opinion here?
I'm talking about the dream/goal scenario of cryptocurrency advocates, in which cryptocurrencies replace fiat and become the new basis for the entire global economy. And the grounds are that the system is designed in a way that you literally make money burning electricity, so as long as electricity is cheaper than payoff somewhere (or you can steal some), there's strong incentive for everyone to try and burn energy.
Which increases energy costs until that profit gets small.
As long as there is a more valuable use for energy than getting a 0.1% profit mining Bitcoin, I don't see why mining would ever consume all energy, that's ridiculous.
I have always question who says this. What makes you think deflation would be bad?
My conspiracy is that governments require inflation to print themselves out of bad policy. Without government abilities to do this, the government performs poorly. Common citizens do not lose 2-4% of their income in inflation.
Literally economics 101. Investment grinds to a halt and progress along with it.
Also, inflation means everyone needs to be investors or the money they worked hard for evaporates. Why should we force Joe Sixpack into being an investor for the good of the economy? He should be able to focus on earning money from his trade without having to worry about investing due to inflation being forced upon him.
Well, it's discouraged, but yes, basically. Under inflation, you need to invest money just to stay even. The lower inflation is, the less urgent the need to invest. With deflation, you're somewhat incentivized not to lend. A fixed money supply guarantees deflation, so yes, this would significantly reduce lending and the economic growth that lending stimulates.
> Also, inflation means everyone needs to be investors or the money they worked hard for evaporates. Why should we force Joe Sixpack into being an investor for the good of the economy?
If Joe Sixpack lives paycheck-to-paycheck he can ignore inflation entirely, it doesn't affect him a whit. Once he gets some savings, if he doesn't like risk he can buy bonds or something and continue ignoring inflation. But since you brought it up and since this seems to be a point of confusion for a lot of people, yes, let's see how a fixed money supply would affect Joe Sixpack.
If the government stops printing money, we are guaranteed to get deflation any time the GDP grows, right? With money supply held constant, "The US currency deflated by 2% last year" is equivalent to saying "The US GDP grew by 2% last year." And what makes the GDP grow? Joe Sixpack and his friends, out there mining ore or building furniture or otherwise increasing the amount of value in the world.
2% deflation also means that anyone with savings sees the buying power of their savings increase by 2%. If Scrooge McDuck has $5M in his mattress, his inflation-adjusted net worth increased by $100,000. He can retire and spend the rest of his life living very comfortably on the equivalent of $90k/year, and despite him doing no work, despite him incurring no financial risk, somehow every year he'll get a little wealthier.
How is that possible? Who's paying for his life of luxury? Joe Sixpack. Deflation is quite literally a tax by capital on labor. As long as the GDP is increasing, arguing for deflation is tantamount to saying, "I think some of that GDP growth created by workers should go to anyone with money." AFAIK this is universally understood to be a Bad Thing (tm) by virtually everyone.
He'll have to part with some of his wealth whenever buying something, and eventually it will still run out. It's not a stock that produces dividends, you have to spend the principal to take advantage of the value growth. Think of it as owning a $5M home that you have to sell a part of each time you buy something, even though the house increases in value.
> How is that possible? Who's paying for his life of luxury? Joe Sixpack. Deflation is quite literally a tax by capital on labor.
Joe Sixpack's salary would increase in value by default. As in, by default salaries would track GDP growth, how does that look like a tax to you? Companies will have to actively tell people "we're going to reduce your salary", which helps workers in the negotiation.
> How is that possible? Who's paying for his life of luxury? Joe Sixpack.
Or whoever is after the currency, just like whoever wants to buy a house pays for equity value growth.
> "I think some of that GDP growth created by workers should go to anyone with money." AFAIK this is universally understood to be a Bad Thing (tm) by virtually everyone.
As opposed to "I think some of that GDP growth created by workers should go to banks so that they can charge interest on everyone else and make easy profits."
How will you pay for things if you dont spend Bitcoin?
I find 0 of those good. Upgrading your car when you dont need to is wreckless spending. Maybe the Economy changes to become more conservative and less environmentally damaging.
Going out to eat + vacations are unnecessary expenses. And btw, I completely doubt people are going to stop doing those 3.
> Upgrading your car when you dont need to is wreckless spending.
But that's what creates the used car market, which is much bigger than the new car market. When people stop buying new cars it means tons of layoffs, which means tons of reduced spending by all the previously employed auto workers, which means more businesses lay people off, etc etc.
I'm sure you do. But the chef who makes their living cooking food doesn't. The person who makes their living running tours doesn't. And the people employed by both definitely don't.
Personal Consumption Expenditures make up ~70% of the US GDP. Unless you really enjoy recessions you don't want to see it go down.
From what I can tell, the evidence on the expected deflation you're talking about paints a different picture: https://www.bis.org/publ/work186.pdf
You ask why people would buy stuff when they'll be cheaper later, but then again, why do people buy stuff now when they could put the money on the stock market and take it out later, when it will be worth more than the product costs?
I wouldnt use an entry level economics class to judge technology that eliminates risk of government hyperinflation and lowers/eliminates cost of transactions.
The economic benefits of free/low cost transactions and money that can be saved/spent rather than invested may have its own benefits.
I didn't, the question was "What makes you think deflation would be bad?". That is entry level economics and has nothing to do with technology.
Deflation via credit default has shown to be harmful to wider economy 2x times in US history (monetary shocks). I am not aware of any conclusive study that a deflationary currency is bad for investment and progress. The easy counterpoint is Gold, which is often deflationary (when economic growth outpaces gold mining). We have had 10k years of investment that have shown your basic statement is false (deflationary currency causes investment to grind to a halt).
Inflationary fiat or credit based currency is a relatively new invention (1972 in the US). I have not seen any serious analysis showing that real investment has radically improved since going off the gold standard. Real investment has been growing for decades as real wealth increases, inflationary currency hasn't changed that very much AFAIK.
The dollar has been fiat since the 1930s. The gold standard from 1933-1972 was essentially in name only.
45-72 was bretton woods era which was still fixed price to gold.
It was only after 1972 that the value was allowed to be free floating, not tied to an amount of gold https://en.wikipedia.org/wiki/Nixon_shock
[1] https://en.wikipedia.org/wiki/Executive_Order_6102
[2] https://en.wikipedia.org/wiki/Gold_Reserve_Act
Without inflation, i.e. fixed money supply, it would be impossible for a majority of loans to be repaid with interest, or give a positive return to investments. Note that this fact is independent of how well the borrower or business performs. (This is like a zero-sum game).
So, it would be irrational for investors or lenders to part with their deflationary money, as the net profit is always zero (or negative because of other costs).
I am very interested to know if there is a way around this problem.
Bitcoin seems to be best for hording and spending. It holds value and can be transferred easy and cheap.
You can still have companies using currencies that incentivise loan/investing. Bitcoin currently exists and the loans keep being written.
I think as bitcoin grows its going to become big and boring. No 10x gains, not even 2x gains, like 10% swings over the course of a year. It wont be fun, it will be a store of value if you dont trust fiat. Right now I think its crazy undervalued which is causing the explosion of crypto. As BTC gets bigger, investment will start to look better as it provides better returns.
It can't get any bigger, the transaction limits, the "halvings", the liquidity issues after over a decade of operation, so I guess that experiment has run its course.
Ergo, there must be a hole in your theory somewhere.
Regardless of whether or not a deflationary end-state is better or worse, it seems non-controversial that the transition from our current situation to a deflationary one would be absolutely brutal. We're talking about turning the global economy on it's head.
It won't help how choosy investors are, or how well the economy performs. The money supply is fixed. So for someone to make 120 bitcoins from an investment of 100 bitcoins, someone else has to lose 20 bitcoins, which would be other investors, or the public (workers / consumers).
The alternative to inflationary currency is not zero-sum. For someone to make 120 bitcoins from an investment of 100 bitcoins, that investment would have to actually produce 20 bitcoins of value, and that person has to get people to pay the higher price for something he has improved or created with it. That is the whole idea. Its how most economies worked up until 1913 or so. We built civilization without "inflation."
Anyway, I would say it is less about deflationary vs inflationary, and more about transparency of control (even if automated) of the money supply, a movement away from usury and debt based fiat (which would be a return to a value based system), and finally, decentralization of value exchange.
We currently have many currencies, if Bitcoin is so absurdly better, then maybe there would be a transition. Otherwise I'm sure many currencies will be used based on the application.
The alternative really is between low inflation and price stability. Government tends to prefer low inflation because it encourages people to invest their assets in a productive way and because it's actually pretty difficult to avoid any inflation via monetary policy.
In a deflationary model, old money gets more and more valuable with time. In 50 years, it's possible that one Bitcoin will be worth 10M€.
What happens then when someone finds a stash of 100k BTC on their grandpa's attic? They can destabilise the whole economy.
With inflationary currencies it's never an issue - a money is either in circulation, or "evaporates". If you find your grand-grandfather's savings on the attic, they won't be worth too much (even if it's still a fortune). If you find your grand-grandfather's crypto-savings, you're a trillionaire, and a king of the world.
these happened all the time before central banks were created; see the two-century CPI plot: http://www.businessinsider.com/chart-inflation-since-1775-20...
Intentional monetary inflation creates a value gradient, wherein the first spend of a new dollar can buy more than the second spend, and so on, until the knowledge that the new dollar is in circulation has normalized.
Now, what happens when you always spend new dollars into circulation through the same entity, but then remove old dollars at the same rate from those who only acquire dollars after they have been value-normalized? If you are an entity that can create new money, and destroy old money, you effectively get a discount on everything you buy. To a lesser extent, the same applies to anyone that can hoard a large enough quantity of money. You can withdraw a quantity from circulation, wait for prices to normalize for the new money supply, then buy at a lower price from hoarded money until people realize the circulating supply is now larger and raise their prices.
The counter to this is to restrict fiat money creation and discourage hoarding. Bitcoin already has a fixed-in-stone schedule for the creation of its money supply, but there is no way to stop someone from accumulating a large quantity, and then using the size of that hoard to act like a central bank.
It’s also odd not to acknowledge that banks have had electronic transfers for decades. You wait seconds for a card transaction and almost every financial institution allows you to do transfers without visiting a physical office.
AFAIK, Bitcoin takes a minimum of 10 minutes assuming that I wish to pay the going transaction fee, or as long as 3 days (or even never!!!) if I use a de minimis fee. And that's assuming a significant risk that the value of the value transferred will not have the same value by the time the transaction actually goes through.
I'm not saying this is actually happening, but when/if it does, it will work no differently than other currencies.
I'm not a fan of BTC or cryptocurrency, but I think there is definitely a case that nefarious use could bootstrap it into a real asset.
> there’s no value in any particular set of random numbers
What is the "intrinsic value" in e.g. an iPhone? Would that value exist without humans? I would say no, it only has value because people are willing to pay for it. So I'm left wondering what principled distinction you can draw between a particular set of random numbers and a particular arrangement of metal and glass, both of which people want, to determine that one has intrinsic value and one does not.
The iPhone, or any other phone, has the intrinsic value of being usable as a computing device, entertainment device, communications device, camera, thrown weapon, etc. If you want to be pedantic about it, the components that make up the iPhone have the intrinsic values of being usable for one or more of the above functions, and the materials that go into those components have the intrinsic value of being usable in industrial/commercial products or processes.
A bitcoin literally has no use inherent use on its own. It's simply a number. The exchange of these numbers has no intrinsic value, it would be like me and Adam exchanging a 2 and a 3 (not dollars or anything other units, literally just the numbers). Any value from the exchange is an additional layer of context imposed by me and Adam on the transaction--it's not intrinsic to the bitcoin itself.
Okay, but you're just shifting the value down the line. What makes computing or entertainment valuable, other than the fact that they are things humans want?
Peer to peer using coinbase(email) for free and instant to friends.
Shift card for free and instant at merchants.
Bitcoin is beyond blockchain, companies have built products to trade BTC instantly, free, using the infrastructure already existing. The transaction time 'problem' doesnt really exist if you are into crypto, you know how to use it.
And I dont trust USD like I trust BTC. Historically Fiat currencies are awful.
Fiat has ushered in an absolutely amazing period of global growth that has made us unbelievably wealthy. But there is inflation, so why not go with the thing that has no history?
Inflation has destroys savings for the masses who keeps cash more than investment. We've seen this a half dozen times in the last 100 years.
The gold standard was one of the worst fiscal policies ever. Its use was directly responsible for the destruction of millions of lives. Arguing to bring it back shows incredible nativity and a severe lack of history.
I suggest you read up on how horrible of an idea the gold standard was before you spout this kind of nonsense.
Oh please, war happens for land, population, and resources. Gold is one of the resources.
Anyone want to send this kid the link to 'We invaded Iraq because Saddam wanted to use Euros/RMB to trade oil?'
Can you propose some reading material?
Since around 1980, all the "amazing global growth" has largely gone to those who own and hold financial instruments, while those who make and those who serve have just been treading water all this time.
I can't imagine how unbelievably wealthy I would feel if my class's wages had risen commensurate with increases in productivity, but I certainly don't feel all that rich now.
I'm sure it's just a coincidence but the 1980s was the beginning of the "off-shore everything" trend.
I bought BTC at 200, 400, 800, 1200, 3000, 11,000, and 7,000.
I like BTC wayyy better than USD. If I need to spend 2$ at taco bell, I'll just use my bitcoin.
https://www.investopedia.com/terms/d/dollarcostaveraging.asp
This a completely emotional argument, there's no logic behind it, you could also regret spending $2 at Taco Bell instead of on Bitcoin.
It's the same thing.
The currency you're using is USD, since that's how Taco Bell set their prices and it's how you're measuring the value of your bitcoins (via the exchange rate).
I've yet to see any business set their prices in bitcoin. Everyone accepting bitcoin payment is setting their prices in fiat currency (e.g. $2), and accepting an equivalent amount of bitcoin (based on market rates); i.e. treating bitcoin as a payment gateway rather than a currency.
How so? What matters is the price at the time of transaction, no?
Shift card had like a 10$ fee for printing the card, but its free and instant.
The only time I did an on-chain transaction in the last 3 years was moving money to another exchange to buy alt-coins.
So you used a "totally not a bank, but really a bank" bank, eh?
2FA > a piece of paper under my bed.
But also I keep my bitcoin in lots of places, a few bucks in coinbase for free transactions is like keeping cash in my wallet.
It's a matter of opinion. However, the only reason for bitcoin to exist is to avoid banks and payment processors. Hence it's illogical to make heavy use of coinbase/etc. regardless of what opinion you have.
Bitcoin has many downsides (volatility, no recourse, vast energy usage, paranoid wallet security, high fees, long confirmation time, etc.) and one upside (no need to trust processors/banks).
If you think that processors/banks are bad, then you might find that the upside outweighs the downsides, and make many on-chain bitcoin transactions. Yet you shouldn't use coinbase/etc. in this case, since they're a bank/processor, hence you'd be removing the only upside that bitcoin has.
On the other hand, if you don't think that processors/banks are bad, then the upside of bitcoin isn't worth all of the downsides. You might as well use regular currency, with all of its advantages over bitcoin (instant payments, lower fees, lower volatility, recourse, less paranoid security, etc.). In this case there's no need to use coinbase/etc. because there's no need to use bitcoin.
Those intermediaries do serve a role in converting between traditional currencies and cryptocurrencies, but it only makes sense to use them occasionally, e.g. buying a stash of bitcoins and immediately 'withdrawing' them to your private, on-chain-only wallet. If you're regularly converting back and forth, or maintaining a non-zero balance on their systems, you would always be better off doing something else (either sticking to fiat, or sticking to crypto).
Not true. If your purpose is holding inflation-resistant money, payment processors and bitcoin banks may be perfectly ok.
I increasingly feel that pro-crypto arguments are mostly motte and bailey. So Bitcoin is better than fiat because it's decentralized and censorship-resistant, with everything forever stored in the blockchain. It's also more convenient and efficient than fiat in daily use - when we discard all the decentralization and anti-censorship guarantees, skip the blockchain and use it as a private-issued, unregulated fiat.
That is an option.
I dont care about 'trust' when I spend 2 dollars at taco bell on my shift card. I dont care about 'trust' when I give my friend 200 dollars with coinbase email.
5 bitcoin? Yeah I'll take that out of coinbase.
But this is a payment platform IMO. I use paypal and venmo too. They dont charge fees and I dont really care about decentralization magic.
This isn't at all different from the way many people separate their investments and savings accounts from their checking accounts, except that in this case, the investment/savings accounts get "magical crypto guarantees."
This isn't rocket science.
I dont keep most of my bitcoin in coinbase.
The only thing I will say is that I keep my bitcoin in MANY locations and MANY wallets.
my bad
If bitcoin is "beyond blockchain", than what is it? Just a table of transactions in a Real Database™? If yes, whats the point?
You've just layered a very bank-sounding, very-centralized construct on top of your space-age "trustless" decentralized blockchain. How is it at all revolutionary since you've basically gone and re-invented a much shitter version of the credit card and traditional (evil) fiat banking.
> And I dont trust USD like I trust BTC. Historically Fiat currencies are awful.
I feel like bitcoin people live in some kind of alternate reality that I simply don't understand. Is it the fact that they have so much invested in the concept that they lose the ability to think clearly? Is it a cult? A religion?
I'm not sure, but it sure is an interesting phenomenon.
I can tell. You seem to think Bitcoin is another inflationary currency.
The excitement is that, Donald Trump doesnt have control over Bitcoin. China doesnt have control over bitcoin. No government does. People with computers have control over it. There are 21,000,000 Bitcoin ever ever ever. No amount of awful government can change that.
>How is it at all revolutionary since you've basically gone and re-invented a much shitter version of the credit card and traditional (evil) fiat banking.
Like I said, Bitcoin is rare and digital. I think you are complaining about payment processing companies. I have had an excellent experience using these companies with no fees on instant transactions.
Provably false. Bitcoin has been forked into multiple chains numerous time, creating many more then 21 million tokens. Given that there is no trademark on the term "Bitcoin", some of these forks can rightfully claim themselves to be The True Bitcoin.
In addition, there are thousands of other non-forked blockchains that are nearly identical to bitcoin, save for a few minor configuration changes.
> Bitcoin is rare and digital.
Absolutely false. Bitcoin is digital and infinitely creditable. This has been proven over and over again.
This is absurd. You could say the same for the dollar and the canadian dollar. You seem to think a new currency devalues every other currency.
It's already banned in some countries, and many tax it. Evading those laws comes with risks, so many or most people comply. Exchanges end up being forced to hand some data over to the IRS/others. Overall, governments seem to have control over it nearly the same as they have control over the trade of anything else.
What I don't understand is how you think your are insulated with bitcoin. If Trump does something so catastrophically stupid that USD is worthless, what will be the effects on the worldwide economy? How will bitcoin insulate you from something like the 07 recession, it won't make finding a job easier. At least the gold peppers can claim there is some value left in gold in a hypothetical nuclear post apocalypse, BTC instantly becomes worthless without widespread internet access. Without network access, what value is in a blockchain?
Obviously you're not 100% protected, but you're more protected from anything that doesn't affect the entire world.
Or do you think that holding dollars exposes you to an Amazon bankruptcy just as much as holding Amazon gift cards?
> BTC instantly becomes worthless without widespread internet access. Without network access, what value is in a blockchain?
Have you looked around at the world you live in? If network access ceases to exist the entire economy will collapse, I don't think Bitcoin is your biggest worry there.
I thought China had over 50% of the mining power
It's applying the formula of the shit book "The Secret" ("if you want it really hard, the universe will give it to you") to getting rich...
In 2020, Bitcoin will inflate slower than most fiat currencies. The culture enforces that this rate will not increase arbitrarily. Storing it in a digital safe you control will prevent seizures.
Are fiat people living in a cult or can they present arguments in good faith?
Investment is where you find something producing value in the real world and then buy and hold a piece of that. You're expecting a long stream of returns from the value being produced. Speculation is where you are making a bet on price movements in a way where economic productivity is irrelevant.
When people buy and sell commodities and currencies, they're speculating. They don't care about utility. There's no economic value being created, so one's investment doesn't grow during the time you hold, say, gold. Instead, it's a zero-sum activity: considering all participants together, wins and losses are equal. (Well, technically, losses are larger than wins, because there are always overhead costs.)
Bitcoin is easy to mistake for an investment, because it's meant to be deflationary. (It was even easier to mistake for one during the period where it only went up.) But I don't think holding Bitcoin means you own a slice of an economically productive asset. I think it's just a bet that the commodity price will go up, in the same way you bet if you buy gold or euros.
[1] Warren Buffett has talked about this distinction a lot, over the years. E..g: http://www.businessinsider.com/warren-buffett-investors-vers...
And a piece of art is not a productive asset either. Yet, it can and will have value. I don't think there is anything inherently wrong with that.
I'm happy to invest in things that I believe are likely to go up in value, whether those are companies, mineral rights, art, watches, Bitcoin, or water deposits.
What else? However, gold has some utility as jewelry etc. Cryptocurrencies are (currently) pure speculation.
At the moment, Bitcoin's primary non-speculative use case is light financial crime: money laundering, capital control evasion, ransomware, buying various illegal stuff, ponzi schemes, etc. I agree that it's possible that one day trustless, distributed ledgers will deliver enormous amounts of value. But it's important to distinguish between delivered value and potential value.
Frankly, I'd probably rather use smart contracts with regular currency. If there was some kind of scam or theft then the financial institution might be able to reverse some of the charges.
Most of the advantages of cryptocurrency don't really sound like advantages to me.
Even financial markets will do it as needed. I used to write trading software. Some of our traders were trading on the DTB; being German, they were sticklers for rules. One day our traders jumped on something and made a lot of money. But it turned out that somebody at another company had fat-fingered an order at a very low price for a very large quantity. Large enough that it would have destroyed their company.
The exchange decided there was no point in that, so they unwound all the trades. I thought our guys would be mad. They were a little disappointed to lose the expected profit, but they were otherwise fine with it. They didn't see any sense in that kind of destruction just for a short-term gain.
Never mind the fact that if widespread inflation or deflation occurs, the value of bitcoin will suffer as well.
Although bitcoin is a speculative investment, it can be argued to have some utility. Unfortunately, that utility mainly revolves around making purchases the government doesnt agree with.
People in the past have traded using seeds as fiat, but they wore shiny or coloured things like shells, polished stones, polished metals.
Human vision is attracted to shiny and brightly coloured artefacts, it's not entirely subjective. This is why you can trick a child to accept a shiny coin in exchange for a high value item, or currency note, or even for a higher value coin that has less polish.
Gold's utility as jewelry stems from its high value as a precious metal.
It's circular reasoning though, since we're also saying that it's high value is underpinned by its use as jewelry.
E.g. the Incas used gold for jewelry despite it being fairly abundant.
False. Cryptocurrencies are _mostly_ speculation. Go to any dark web site and everything for sale is being transacted in crypto. Look at XRP - there are clearly large commercial organizations using that crypto for business purposes.
If you were a jewelry-maker, I suppose you could call buying gold an investment.
I'm buying shares of an S&P 500 index now with the intention of selling them at a higher price in ~40-50 years. Am I a speculator or an investor?
This may be hidden from you if the index fund (or your broker) automatically reinvests. But either way, you own economically productive assets that a) create value for customers, and b) throw off a stream of cash. Even if the S&P 500 is at the exact same level in 50 years, you'll still gain significantly. That's obviously not true of commodities (e.g., gold, silver) or currencies.
The beauty of Bitcoin and the whole crypto "space" is that they are more than just mere ponzi schemes. Don't let the pedants get to you--the crypto space transcends the entire gamut of frauds, scams and schemes. They're not only ponzi schemes but pyramid schemes, MLM scams, a pump & dump scams, exit scams, exchange scams, securities fraud, and a bunch of other named and unnamed scams you'd find in wikipedia.
Often times these scams are deeply layered, with scammers scamming other scammers.
Sometimes just best to simplify the whole thing as "a scam" instead of iterate through every single sub-scam, sub-fraud and sub-scheme that exists within the entire ecosystem. The whole thing is really quite remarkable and would be much more enjoyable to watch if it wasn't such a massive drain on earth's resources.
You're right though, it is more than just a mere ponzi scheme: https://en.wikipedia.org/wiki/Heaven%27s_Gate_(religious_gro...
As if you have some secret wisdom of divine nature
You’re using words and language that have been repeated to you over and over by those you perceive to have some authority
Let’s not wrap this in mysticism to continue satisfying your headspace
Doesn't take that to be informed. Studying a subject for example will do.
In fact in this case, to reach the same conclusions, all it needs is common logic.
>You’re using words and language that have been repeated to you over and over by those you perceive to have some authority
Or he made up his own mind -- ever thought of that possibility?
How can we know we made up our minds when we don’t know where such a capacity to do so starts and ends?
If I study reading tea leaves I am simple informed in nonsense
Studying economics is studying bartering habits of the people that control the bartering system
It’s not hidden knowledge. It’s watching culture norms and encoding those in daily behavior
It’s more religion than science
I don't think it is a very good store of value - we mostly need store of value in the special cases of wars, extreme crises, and similar stuff - for normal times we can invest our money into businesses that really produce something. But bitcoin does not seem to be very usable in these circumstances. It is not well tested. It is also in danger of being replaced by some other cryptocurrency. And I don't thing there is space for more than two or three of them - just like money gravitated into gold and silver.
One could do multi-signature wallets with Bitcoin. So, for example, there could be three keys: one with you, one with your significant other, and one with a third party custodian, and it'd take, say, 2 out of 3 signatures to spend out of the wallet. It doesn't change the bearer nature of Bitcoin, which, some would argue, is a feature.
this, among the myriad other points missed by the discussion, is what's special about BTC (arguably, other digital "currencies", as well)
there's so much more to BTC. it's not simply any one of the [currency, investment, speculation] because it's also a [transaction network, messaging platform, clock, vault].
That sounds like the current to me. Too much is locked up (in too few hands) instead of doing what currency should do. That is, reduce the friction of trade (i.e., goods, skills, etc.) Currency is a lubricant. It's no surprise things are drying up.
[1] https://fivethirtyeight.com/features/the-slow-death-of-ameri...
Look at Warren Buffer, one of the best investors in the world and he has hundred billion dollars just sitting around as he sees no good investment opportunities.
Apple & other companies are hoarding money as well, much faster than they can spend it or invest. Instead they are buying back there shares because what else to do with all that cash.
These class-warfare arguments are interesting because rarely do they actually include the benefits to the financial system. These arguments also make the assumption that governments are more efficient at spending money than individuals, a claim that just isn’t proven out by facts. Dead-weight loss is a real thing. Warren Buffet spending a dollar means a dollar goes into the economy. The the State of California spending a dollar means that perhaps $0.75 actually goes into the economy.
What you seem to be arguing for is redistribution. But redistribution has deadweight losses as well as the unintended consequences of changing behavior. Perhaps a new business wouldn’t be started if taxation were at 75% — the reward wouldn’t be worth the risk, so the new economic activity from the new business wouldn’t happen at all — the associated jobs and tax revenue from that new venture would be zero.
Individuals with a million dollars to create a business would create more than a million dollars in economic activity because they’d ostensibly be producing a product or a service which would result in more economic benefit than the taxable value of that million dollars. If government taxed that money at 100%, and just completely redistributed it, that would result in $1 million - x% actually reaching the economy because government doesn’t create any new value and in fact, it reduces value because of unavoidable deadweight loss. Not to mention government taxing that money at 100% means that money wouldn’t likely be earned in the first place — why even bother?
The government created the computer and the internet...funds most major pharmaceutical, chemical, material sciences, and theoretical scientific research. The value created by the US government alone is estimated to be in the low hundreds of trillions and that's just measuring value created to this date.
The reduction of friction created by government regulation is estimated to provide a value equal in many cases to 100% of the price of the transaction (as in, the transactions simply wouldn't happen without government regulation creating sufficient trust between the parties).
Excessive taxation is a burden, but taxation in itself is not.
The farmers put the bills in the ground, right next to the seeds, but it does not make the farm more plentiful. The villagers learnt the hard lesson: that plenty does not follow money.
>You fucking idiots stop burying the money in the ground and use it as a medium of exchange.
And lo, as everyone has more faith in the US treasury than the village tin roof hut a market was opened in the middle of the village and they exchanged the dollars for food grown by farmers less stupid then them.
The villagers then became wealth investment managers and charged fees to the farmers to invest their money, which involved holes in the ground.
If you really wanted to help them grow their economy then you would try to offshore production into that country which leads to infrastructure investments and productivity growth.
I wonder if you can trace parallels between this observed circumstance, and our current low interest rates & low levels of inflation.
At least if the current "1%" hoard dollars or euros in their mattress they slowly lose their wealth thanks to inflation. After a generation or two they'll have lost a significant share of their treasure. Therefore they have an incentive to actually invest the money to fight the effects of inflation. In doing so they contribute to the economy.
With a deflationary currency like bitcoin it goes like this:
1/ Buy bitcoins
2/ Bury your keys in a bunker in Antartica
3/ There is no step 3, just watch as you become wealthier while doing absolutely nothing. You want a loan to start your business or buy a house? Well tough luck, you should have mined BTC in 2013.
The deflationary nature of Bitcoin is why it managed to be successful in the first place, it gives a strong incentive to be an early adopter. However in the long term I don't see how it's sustainable, it makes it borderline useless as a currency. On the other hand I don't see how an inflationary cryptocurrency could gain traction if it's not backed by a huge entity such as a government or multinational company because who would bother buying SimiasCoin if you know it's going to lose value at a steady pace in the future? And why would a government or multinational corporation bother creating a cryptocurrency they can't easily control instead of printing bills like they do today?
Right, deflation.
"In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but deflation increases it. This allows one to buy more goods and services than before with the same amount of currency."
Merely increasing the number of available coin doesn't create inflation unless it matches the demand for it.
Long story short, they don't.
So what happens is, the finance people use freshly printed money to buy up the things all the poor little people need. But let’s not call it speculation.
Crypto is a democratizing force in a corrupt and unaccountable world.
>Crypto is a democratizing force in a corrupt and unaccountable world.
Assuming that cryptocurrencies are successful they might cause some turmoil in the top 1% as early adopters with thousands of BTCs become the new 1% and current rich people who missed the bus might drop among the pleb. But after this initial period what happens? People who HODLed thousands of BTC will be hugely rich and remain so, people who don't have a lot of money still have to pay for housing and food so they can't save money to bridge the gap.
And I don't really see how Bitcoin are going to help with corruption and accountability when one of its main use cases today (beyond speculation) are powering online black markets.
No, I'm arguing traditional currency is no longer necessary. Rich people don't own currency, they own assets. Currency is for poor schmucks who don't know how finance works. Currency is for a convenient way of taxing the masses and devaluing their life's savings at the behest of the 1%.
What's the solution? Asset backed certificates. Store your savings in a diversified portfolio backed by the incredibly valuable "means of production". These certificates can be settled in real-time given their levels of liquidity. Merchants can sell things denominated in one asset, and customers can pay with arbitrary certificates (say, apple stock) - settlement occurs at transaction time instantly.
Howso? The ultra-wealthy elites managed to seize control of crypto in like two years. They control all of the major mining ops and a huge % of the coins themselves.
People say this all the time without backing it up. Tell us, exactly how is that true? What is the exact feature of BTC that somehow makes it incorruptible, and changes millenia of human behavior? What exactly about BTC would prevent the wealthy people from buying up all the things the poor little people need?
One simple tool used for this:
> Treasury Inflation-Protected Securities (or TIPS) are the inflation-indexed bonds issued by the U.S. Treasury. The principal is adjusted to the Consumer Price Index (CPI), the commonly used measure of inflation. When the CPI rises, the principal adjusts upward. If the index falls, the principal adjusts downwards.[8] The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal, thus protecting the holder against the official inflation rate (as asserted by the CPI)
If society adopts these incentivized crypto-assets that $10B the could become valued at trillions of dollars, which then is buying power shifted away from society as a whole - and where those holders have done no work to actual make those gains. This attracts enough bad actors and incentives bad behaviour.
Your password can be stored in your memory. Or it can be something like the 100th sentence in your favorite book.
You must use securely-generated random key phrases, or you will lose your coins.
What you're describing is a dictionary attack and it trades comprehensiveness for speed.
There's many more words than characters in any language. Using words as your alphabet gets you ($WORDS)^N possible passwords of length N instead of 128^N for an ascii alphabet. For humans remembering random words is easier.
Choosing a grammatically correct sentence instead of random words is little different in terms of complexity reduction than choosing a word based password (e.g. Password1) instead of random characters.
Obviously if the attacker can build a target specific dictionary they'll have a higher probability of success.
Bitcoin is cryptography's biggest bug bounty.
This just goes to show where the hype and misunderstanding around this has led.
It is not too far off to say bitcoin's only reason for being, is to "hold them yourself," i.e. conduct all your financial dealings with zero third parties.
A bank holding your bitcoins is just nonsensical if you understand the relative merits of each system.
The merits of the banking system are a centralized efficiency in conducting "transactions at a distance," and economies of scale in preventing fraud, theft, and other losses,
Trying to inject bitcoin into the banking system is like trying to re-insert a vestigial organ into a species long after the organ has been pruned from the evolutionary tree.
Nobody seems to have much interest in bitcoin's purported raison d'etre, but are more interested in a perceived potential for appreciation. That much of past appreciation has been shown to be the result of various systemic manipulations, rather than genuine organic demand, seems not to register with most people, or is unknown.
That perceived potential for appreciation would seem to eventually rest on people having an interest in using bitcoin for the uses around which it was designed. Should that day come, a shift from the game of "musical chairs-hot potato-hype machine," to a system of digital cash, the system would require a major re-working to support the number of users one would think would be proportional to the current valuation.
But like you said most people aren't comfortable or willing to shoulder this sort of risk in their financial lives.
Another curiosity, or countervailing force to bitcoin's design goals is the ever growing 'blockchain' record that needs to be stored locally to partake in the bitcoin system in the spirit it was conceived.
The blockchain is growing at a fairly constant rate, has anyone ever plotted blockchain growth relative to projected future storage costs and bandwidth capabilities necessary to onboard new users?
So what is the point of bitcoin other than the original goal of "be your own bank"?
But not just your own bank, your own datacenter as well!
This is more motivation to transition from currency based societies and focus on outcomes that benefit labor first
It’s plain there is no free market when currency monopolists can control not just what we work on looks like, but whether anything is worked on at all
There is great demand for the end of war, housing, social services, and universal healthcare. Cottage industry can rise around that instead of digital assistants that schedule hair cuts.
But we’re forced to prioritize the tasks the currency monopolists dictate, putting our own communities second
Adam Smith only mentions a markets in the context of a free labor market for workers of equal condition to move about freely
Mandate universal healthcare. It’s just as important to a secure and free nation as guns and is a potent first step to saying “we’re not interested in addressing the needs of stock markets and distant currency monopolists.”
The solution to hoarding capital is inflation or direct taxation of asssts.
Look at an inflation chart from 1900-today. 1984-today is basically flat. It’s never been less risky to hoard dollars.
Economics are not physics. They rely only assumptions that only make sense in our culture
Capitalism is like metric or imperial measuring systems; human invention to service human motivation
Like metric and imperials there’s nothing in physics that prevents us from being more socialist
It’s a matter of public will, as has been shown in the past with revolution and fall of empires.
I’d rather we focus on enabling those that want to meet the demand on display in the contexts I’ve mentioned
If people with all the dollars won’t enable that, to hell with their claims of being rich. They can hang onto all them dollars while we instead focus on getting those demands met
What I don't understand is if fiat currencies are so bad, why do people express the value of bitcoin in a fiat currency (like USD)? They are just like the goldbugs, hoping and praying that the world will collapse back into the dark ages
Mostly because businesses do accounting and pay taxes in usd, so bitcoin is just used as a pass through gimmick to make sales. There is no path to the price stabilization of bitcoin, it's purely deflationary, no one is going to set prices in something that has no monetary policy.
Feel free to use them, I won't. There's no point when Bitcoin is so simple to move.
> What I don't understand is if fiat currencies are so bad, why do people express the value of bitcoin in a fiat currency (like USD)?
Because it's one of the most practical things to measure against, because almost everything is also measured against it?
I don't get this argument, if I say a car is worth $20k that means the car is actually worthless because I'm measuring it's value in USD?
Or someone in the US saying that meters are actually a stupid and useless unit because before everyone gets used to using it you have to constantly convert it to imperial.
No matter what layers of indirection(multi-party-sigs,bio-metric based encryption, etc) you put on it, at the end the private key has to come out in order to use it.
With Gold, you see gold in your vault, you know it is yours.
You see dollar in your pocket you can be sure you can spend that dollar tomorrow.
You see a strip of paper with your private key in your pocket, there is no guarantee that you can spend those cryptocoins tomorrow.
You see a private key(encrypted or not) on that Gold Bar, you do not know that it is truly yours unless you managed all steps of the encryption yourself.
If you did manage all the steps of encryption yourself, then storing that information in a vault was pretty much pointless.
I suppose one way these vaults can offer some sort of safety is that you come to them with your wallet, you make an onchain transaction into wallet whose private keys require both you and the vault to decrypt.
This way both parties can be reasonably sure that the wallet stays unaffected until you come with a request to open it.
Still a problem remains, you have to trust the vault to stick around and not lose their encryption keys.
If you do not need vault's keys to open your wallet you've gained nothing by storing your keys at the vault.
If you need the vault's keys you have to put your faith in vault not mishandling those keys, which means a single point of failure.
It's easier to verify than opening a vault to check on your gold.
One aspect of gold’s historical value is that it’s traditionally recognized even in societies in collapse. I’ve never understood how Bitcoin is supposed to hold its value in such an event — something on the scale of nuclear war, or Germany in 1945.
After an EMP wipes out data centers and cell phone towers, you can probably still bribe people with Krugerrands. Who’s going to accept Bitcoin transfers when the infrastructure is either gone or under military control?
Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?
The idea is that the transactions are irreversible and you cannot rely on any number of police officers or judges to fix a theft.
The bunkers are for security's sake, not preserving-wealth-in-an-apocalype's sake.
What I’m trying to understand is how Bitcoin advocates’ promise of it being a store of value independent from governments can be valid when the system depends on extremely sophisticated infrastructure that was built and enabled by governments.
... and which continued existence and operation requires stable governments keeping most of the planet bound by the rule of law.
If there were a systemic collapse breaking governments, knocking off power and telecom networks etc, gold would be immediately most valuable. But more quickly than fiat, bitcoin would be useful.
Power and telecom systems are more resilient to systemic collapse (& have more bouncebackability) than a functioning government and its currency. Some semblance of critical systems would come online whether put up by government, armies, warlords, cooperatives etc (See Somalia as an example). When those systems are online, bitcoin can be sent and received.
In short: in terms of usability: Fiat > Bitcoin > Gold in terms of resilience: Gold > Bitcoin > Fiat
Am I missing anything here?
What are the chances that collapse is a sudden event vs a cascading deterioration event?
The trick is that the difficulty adjustment time is not actually measured in weeks (or seconds), but in blocks. Since blocks are supposed to take 10 minutes, the difficulty readjusts every 2016 blocks. It looks at the time needed to complete the last 2016 blocks, and readjusts so that the next 2016 blocks will take two weeks at that rate.
If the hash rate is steady, then that readjustment will happen close to the two-week mark, and of course it will do very little because the rate is steady.
If the hash rate is increasing, then the period becomes smaller. As a simplified example, consider what happens if the hash rate is constant for the first week of an adjustment period, and then doubles. The first 1008 blocks took a week. The next 1008 blocks will take about 3.5 days. The next readjustment will therefore happen after about 10.5 days, not 14 days. The real Bitcoin network looks a little bit like this: over its lifetime, the actual difficulty readjustment period has averaged 13.17 days, not 14 days, because of the steadily increasing hash rate.
Now consider the opposite case, where the hash rate is cut in half after a week. The second batch of 1008 blocks will take two weeks, for a total of three weeks.
Worse, consider a case where the hash rate is cut in half every week. You'll (probably) never reach the next difficulty readjustment, and blocks will take longer and longer to mine until they're taking days or weeks instead of just 10 minutes. You could get into a spiral where a single event that significantly cuts the hash rate results in the network becoming much slower and less useful, so people use it less, so miners earn less, so they drop out and the hash rate drops further, etc.
It's hard to say just how the real-world hash rate would change in response to a catastrophe, of course. Maybe that sort of shock wouldn't happen. But this is the general idea of why Bitcoin could run into trouble due to a quick but not quite immediately apocalyptic decrease in the hash rate.
According to its detractor, Bitcoin is digital comedy gold, so everybody agrees.
If such a thing happens on a large scale there will be hundred of millions of deaths. All major cities will simply collapse.
See recent articles how London can only survive for 4 days without electricity, after that there will be no food.
The modern society is incredibly fragile. Everything is just in time, there are no stocks or buffers. Bitcoins will be the least of your worries in such an event. Your Krugerrands will also not be of much value. Nobody will be stupid to give you food or gas for a piece of metal.
That's why more and more people getting involved in scams and get-rich-schemes on a platform with superlinear and unbounded energy upkeep is something that worries me deeply. Energy and climate is something that very well may break our society.
Unfortunately, if you run almost any process that humans are doing right now that has even 1% growth, in 1000 years, that's a factor of 21000x (.5% is 146x), and we're dead. So pretty much everything has to reach an S curve and stabilize, or we are totally F'd. Population, energy usage, land usage, food, trash, inflation, everything.
But yes, we should be minimizing wasteful growth where we can. Food will have to grow in lockstep with population, but the growth of trash is something we can reduce. And there's especially no need to add artificial high-growth energy sinks like cryptocurrencies to the mix.
There is practically no evidence in history where gold had fungible value then became worthless. Nothing else matters; everything else is conjecture, opinion, and extrapolation.
Yes, we live in a very fragile society. Yes, if complete collapse happened, there would be a period of extreme chaos when millions, hundreds of millions, die.
But the chaos would stabilize, barring any extenuating factors like a T-Virus. And in that world, maybe US Dollars would still hold some value. History says Gold probably will. Bitcoin though? Bitcoin requires a global network of miners. It would require having access to the original blockchain that gives your wallet value. In the best likelihood, the currency would splinter into every small network that can still run miners. And when energy is so expensive that you need all of it to power your lights, vehicles, and medical equipment, why would anyone spend it on an expensive mining rig, even if all the complex computer equipment necessary to make it run were widely available?
And then a guy walks into town with a bag full of gold. Suddenly Bitcoin isn't looking all that valuable as a currency. I'll sell my extra food to the guy with the gold, because the guy with antibiotics down the street would also sell to the guy with the gold, and the guy in the town over with car parts would also sell to the guy with the gold. That's what makes currency work; people, not software.
Those who survive the chaos will be the ones strong enough and ruthless enough to organize themselves into powerful gangs. The nerd with a bag of gold will most likely be killed and it's gold stolen.
Being a prepper with an underground bunker will also not be of much value, you will just be seiged out.
If you are rich, what you'll need is a small private army to protect you, a small working force to feed you and the army, and the political skills to be able to enter into the right alliance after that.
It's pointless if nobody wants it anymore.
Apparently, even the financially wealthy can be common sense poor.
During the Bosnian War, things that became highly valuable were: bullets, liquor, antibiotics, lighters, and of course food [0]. Bitcoin, or any other currency, was the last thing on anyone’s mind.
[0] - http://www.shtfplan.com/emergency-preparedness/a-survival-q-...
It's not "Bitcoin" that Xapo stores, but private keys. In underground bunkers. This no doubt gives some people a warm fuzzy.
But Bitcoin's history is littered with the wreckage of companies that took it on themselves to store private keys on behalf of others.
I don't know when Xapo will fail, but if history is any guide it's just a matter of time. The weakest link in their system is the people involved.
Consider this tortured statement:
If Xapo’s deep cold storage vaults were hacked, Xapo would cover the loss from its own reserve but the hack could be bigger than the reserve which would cause a net loss to our customers.
https://blog.xapo.com/what-would-happen-if-xapo-got-hacked/
In other words, a Xapo depositor would eat the loss in the event of a successful attack on the cold storage system.
The funny thing about all of this is that private key management isn't difficult when you know how. Given the vast sums of money being stored, you might think that certain big fish would want to take the time to do it right.
The same is true of Coinbase. Somehow they've been fine.
If a poor or middle class person sits on the cash he has, he's "saving". If a wealthy person sits on the cash he has, he's "hoarding".
Regardless of the topic at hand, let's be consistent enough in our terms to think and discuss the issues fairly and clearly without all the pejorative terms. If we have to resort to name-calling, we might not have a very good point.
Another person has 2,500,000,000 units of food sitting in a room, earns them at 200,000 units per day, and can consume them at 100 units per day (not as filling but tastier let's say). They are... also only saving? C'mon.
Maybe consumption isn't the goal and you're unaware of it. If I have as much food as a grocery store, I'm a hoarder because consumption is my goal. The grocery store isn't hoarding (or even saving) food because consumption isn't the goal. Retail sales are the goal.
Again, I'm not here to fight about economics. That wasn't my point. My point was ridicule isn't an argument. Calling someone a hoarder may make you feel good, but it isn't an argument.
In my hypothetical, while technically true that both are "saving", it is more descriptive to use "hoarding" for the latter case, both in an objective sense to describe the degree and in a subjective sense to describe how that degree of storage should be evaluated.
Their goal is to save obscene amounts of wealth that will never ever be used, could never ever be used by a single person in a natural lifetime, "I've saved so much WAOW!" Who cares. Wealth is gained on the shoulders of giants, all the people and technology that came before us. Maybe it should be harder, much harder for people to save levels of money that most everyone would describe as hoarding.
The wealthy saving/hoarding so much money, having so much power relative to the masses is leading to super great outcomes?
freedom fighter <-> terrorist
interrogation <-> torture
free trader <-> smuggler
saver <-> hoarder
We've been conditioned to respond to certain words in very specific ways. Politicians and media know this and will always use it to their advantage.
https://www.forbes.com/sites/francescoppola/2018/04/21/bitco...
One could be hesitant about spending away their Bitcoin to buy a shiny new bigger TV, while they'd happily part with USD for the same expense. Former, I'd say, has a more natural alignment with our incentives to spend thoughtfully.
Also, I am not sure if everyone shares the value of eating the planet at a faster rate for employment and GDP numbers.
You mean "investment"
> deflationary ones encourage savings
I'm not sure why encouraging people to bury their wealth in the ground instead of doing something useful with it is something we want to be doing.
Savings is not "burying their wealth in the ground", it's building a safety net for the future. At least for everyday people. Most people would be better off doing that than blowing it on big screen tv's, boats, and cigarettes. If more people did that, society would be better off too.
We will see the pattern continue with Bitcoin, the most sound money the world has ever known (no matter how high the price goes, you cannot increase supply beyond the scheduled issuance). This time is different, however. The consumer can (and should) control her own private keys, which means not trusting a bank, which historically will inflate the money supply to its own benefit. Forced confiscation of privately-held Bitcoin will be much more expensive than previous confiscations of gold already held in vaults.
Unfortunately, those wealthy savers with their money in the vaults mentioned in the article will have their Bitcoin confiscated when things get bad enough. Too many in the space have already learned the hard way what happens when you trust your coins to a centralized institution.
And as we all know, it's been one long, slow economic collapse since the 17th century.
The boom-bust cycle is brought about by inflationary banking.
Can the wealthy not just use their art/gems/gold storage choice. Do hardware wallets need power?
It was never about the GFC, failing banks or some crazy libertarian dream. It was all because someone was upset that the "million dollar bank transfer codes (or the two keys geographically separated that have to be turned at the same time, or the special secret crypto laptop in the zero halliburton that can transfer billions instantly and untracably)" trope from all those crime films was complete bullshit, and that in reality most money is protected by horrifyingly thick layers of mediocre bureaucracy and somebody wanted to be the mahatma gandhi of making those sorts of situations actually plausible in the real world.