To me, BTC looks like an inefficient way to partially solve a problem that doesn’t exist — the problem of trust.
It’s only a partial solution because it only deals with the money in a transaction and not the goods/services.
In addition, it also exists purely by consensus and is therefore just as vulnerable to majority demands for inflation (the limit of 21 million is a choice, not a fundamental constraint).
Furthermore, I do not believe that there is a real problem of trust to be solved, not because governments never mess up currencies (of course they do), but because right now they are not messing up currencies — the stability of most major currencies demonstrates that they are broadly trusted, and conversely the value of BTC fluctuates wildly compared to fiat or resource-backed currencies because it isn’t broadly trusted.
It’s also inefficient by design, being a proof-of-work that doesn’t solve real-world problems, and also limits itself to a really small number of daily transactions over all uses of the currency.
You can't trust the government (or the central banks) to not dilute your savings by increasing the money supply - something they have already been doing in 2020 at an unprecedented rate which will continue in 2021.
While Bitcoin might not be the payment system some have been hoping for, it surely provides a hedge against the incoming increase in inflation rates which is why institutional investors are increasingly replacing cash reserves with bitcoin.
> You can't trust the government (or the central banks) to not dilute your savings by increasing the money supply
I expect the government to do so, and I also expect that it will usually be done in a controlled fashion and for broader economic benefit. Conversely, I expect that when Bitcoin goes wrong and the 21 million unit limit is replaced (call it “Bitcoin Future Fork” or whatever), this will be done by people not too familiar with hyperinflation.
I’m also hedging against inflation with property, although I could also hedge against it with shares or precious metals.
I suspect many don't and many underestimate the effect inflation has on their savings.
> Conversely, I expect that when Bitcoin goes wrong and the 21 million unit limit is replaced (call it “Bitcoin Future Fork” or whatever)
Bitcoin is 10 years old, there are already numerous forks which changed several parameters of the original Bitcoin implementation. According to their market value, all of them failed in comparison. In fact, Bitcoin's hesitation to implement breaking changes (hard-forks) may be what the market finds valuable.
> I suspect many don't and many underestimate the effect inflation has on their savings.
Most people don’t have significant cash savings. I forget the percentage, but a ridiculously high fraction of the USA population can’t put together $1,000 for an emergency.
> Bitcoin is 10 years old
Early days then. The Euro is only 22 years old, and decimalisation of GBP [0] happened about 50 years ago. Both still have people shaking their canes and dreaming of the Before Times.
Also: the 5,600,000-fold deflation of BTC in that time makes it almost, but not quite, as impressively unstable as hyperinflation, just in the other direction — it’s not a good thing for the economy when everyone holds onto their money instead of spending it.
> Most people don’t have significant cash savings.
Unfortunately those are often the same people that get hit the hardest once inflation increases the sales prices while their salaries remain stagnant and they can't afford hedge options.
> The Euro is only 22 years old [...] the 5,600,000-fold deflation of BTC in that time makes it almost, but not quite, as impressively unstable as hyperinflation.
The initial exchange rates of the Euro was determined by the European Central Bank whereas Bitcoin is decentralized and started with an "exchange rate" of literally zero (they were gifted via mail and forums).
Calculating a fold-increase or 'volatility' on this timescale is thus arbitrary (you could just as well argue it's "infinite"). The SD of daily returns as a volatility measure for Bitcoin has decreased from >10% in 2011 to <4% in 2020 and the 3-month realised volatility is mostly comparable to and sometimes even lower than "traditional" tech stocks like AAPL and AMZN.
Dominant risk in Bitcoin is not volatility or 0-day anymore but key management (e.g. exchange hacks, wallet loss, scams/phishing attacks). GBTC for example is an ETF-like trust which allows you to invest in Bitcoin without holding any.
Interesting side note: ~9% of currently available Bitcoins are held by companies on their balance sheets (~7% by companies which are publicly tradable btw).
HN might still be cautious about Bitcoin, but the market thinks it has matured.
To me, BTC looks like an inefficient way to partially solve a problem that doesn’t exist — the problem of trust.
It’s only a partial solution because it only deals with the money in a transaction and not the goods/services.
In addition, it also exists purely by consensus and is therefore just as vulnerable to majority demands for inflation (the limit of 21 million is a choice, not a fundamental constraint).
Furthermore, I do not believe that there is a real problem of trust to be solved, not because governments never mess up currencies (of course they do), but because right now they are not messing up currencies — the stability of most major currencies demonstrates that they are broadly trusted, and conversely the value of BTC fluctuates wildly compared to fiat or resource-backed currencies because it isn’t broadly trusted.
It’s also inefficient by design, being a proof-of-work that doesn’t solve real-world problems, and also limits itself to a really small number of daily transactions over all uses of the currency.