These stories usually spur more enthusiasm for buying cryptocurrency, but ironically those buyers aren’t interested in spending cryptocurrency using their MasterCard.
They’re hoping other people will buy cryptocurrency from these announcements, driving the price up. Or, more likely, they’re just hoping other people will buy cryptocurrency and not use it in these spending systems.
Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want.
Should also note that MasterCard crypto transactions almost certainly won’t be settled on the blockchain. Not with $8 Bitcoin transaction fees. They’ll just be denominated in cryptocurrency and people can deposit/withdraw in certain cryptocurrencies. MasterCard only needs to buy and sell on the blockchain as needed to provide an FX window. The actual transactions would be stored in traditional database systems (aside from customer deposits/withdrawals, just like Coinbase)
Why? Because MasterCard would get to act as an exchange and collect exchange fees. Exchange fees are a great way to charge consumers for spending their own money in 2021, when normal credit cards actually pay people 1-2% to use them. Cryptocurrency’s inefficiency is their financial upside.
What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)?
Currency and its exchange rate needs to be relatively stable for the world to put trust into it. Saying that BTC is stable, but the rest of the world's fiat currency is fluctuating makes no sense.
US dollar provides stability and security, I feel confident that a cappuccino will cost me $4. Crypto's volatility deters me from using it, simply put. There is no buffer that you would have with a Treasury. Converting from BTC to coffee makes BTC exchange rate go down.
Your view must be skewed by privilege of having stable currency. Currency of my country lost 250% of its value over last 7 years. It's not bitcoin-level volatile, but close to it. Thankfully I have an option to use USD to hoard money, but that option is not something that's given, in many countries you just can't exchange for fair price.
I agree that for someone living in US or EU there's no much point using BTC.
It's sad that this aspect of the conversation so often gets replaced by everything else. This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. We're still not there, but that should be the north star for crypto (again, in my opinion).
Say everyone in an unstable economy were paid in usd. If that country has foreign deficit, if that country has high government debt. What happens? How can the government keep paying its own employees? How does it pay retiree checks? How does it subsidize farming when needed? As long as a country cannot print usd itself, this is a fast shortcut to unemployment, hunger, etc...
Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa.
> Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa.
That's a good point. Too many people propose individualist solutions to social problems, and all their "solution" would do is make the social problem worse.
I think that stems often stems from an overzealous faith in free markets, which leads to a distorted idea that individual self interest factored over all of society always results in social benefits, so you only need to consider things from the perspective of an individual (which is also far more familiar to most people). Sometimes individual self interest does lead to social benefits, but often it doesn't.
Markets only exist within the context of a political system.
They are just a tool to reach a certain policy outcome. The idea of using the free market to replace poor governance is laughable.
It's the opposite. You have to set the right policies and incentives and only then will the free market show its true beauty. Markets fail or succeed because of improper or proper governance.
It's like a genetic/ML algorithm that is optimizing for a cost function. If your cost function is awful your algorithm will be awful but that's not an argument in favor of getting rid of cost functions entirely.
Suppose you've got two political systems each vying for legitimacy. They each have their own currency, and their own set of policy outcomes.
Is it so laughable that whichever one achieves the best results for its users will be the one to establish both market and political dominance? Is letting such a competition play out via the value of their respective currencies any better than traditional means of resolving this kind of conflict (i.e. war)?
I'm not saying I have ultimate faith in the market to do the right thing--it frequently doesn't. But it sounds like you're saying that it can't.
Granted, BTC's political system involves allocating power based on who can waste the most energy--so it's a pretty laughable alternative to existing governments--but in principle I don't see why markets can't mediate the rise and fall political systems in a way that roughly mirrors the way that political systems mediate the rise and fall of companies.
There's that saying:
- Those who make peaceful revolution impossible make violent revolution inevitable.
It seems to me that collectively changing whose currency we use based on their capacity for sound governance is the kind of peaceful revolution that we ought to strive for.
A market doesn’t work in countries without a strong government, since for a market to work, there needs to be faith that the other party isn’t going to break the rules of the market. If you’re trying to sell your goods and someone comes in with a gun, then you have to hope that either you have a gun or can call police. If you have to resort to using a gun, then that leads to huge costs and lots of dead people.
I'm not gonna say that that doesn't happen, but it's surely not the only thing that happens in places without an authority. People want to exchange goods, and they're typically willing to be clever in order to make that happen.
Already cryptocurrencies are implementing webs of trust to guard against this kind of thing (CirclesUBI). There are also things like MAD escrow (particl). And there's the old fashioned way, which is to get the community together and set up your own impromptu government.
I'm not saying that markets function well without readily available trust. But to say that they cease to exist in those contexts is surely taking it too far.
That's precisely the main innovation of Bitcoin. Without the aid of a central authority, people are able to decide on a set of rules that must be respected to play in the market. People can switch to different "markets" with different rules at will.
The value of these markets is itself decided through a free market.
Given a sufficient level of digitization, it's not hard to imagine how many kind of real world markets could be backed by Bitcoin-like systems.
Except for very narrow use cases I don't see how the rules you can enforce in a digital space like a blockchain network help when you don't have a stable meatspace system of law. A bitcoin transaction can be mathematically as bullet proof as you want, but that doesn't help make your meatspace assets any more bullet proof.
It doesn't take much law to make cryptocurrency secure for a person to hold: just protection from home invasion and torture. It can work quite well in otherwise highly dysfunctional societies.
Other forms of property ownership are much more fragile, and require a much more sophisticated legal system.
Ok, so no one can steal my crypto. But what if they accept my payment, and then they don't give me the items I payed for? Or vice versa - if I'm selling something and I give them the item, but they don't initiate the payment? What if the company I work for isn't transferring the BTC in our contract at the end of the month, because they ran out because their own customers haven't been paying?
With a regular currency, the government can print more money and at least have a chance for things going back to normal once the currency has a chance to go back up in value. But with a currency that's not controlled, you won't get payed in worthless money (inflation), you just won't get payed at all! And instead of getting back your lost value if the currency rises in power, you'll have to hope the contract will be honored at a later date, or massively overload the legal system.
Commerce generally works quite well, to the point that it works even when there is no legal compulsion to not cheat.
Bad actors are ostracized while good actors build followings, leading to reputation acting as an effective mechanism to find good actors to trade with, and incentivize people to become good actors.
In any case, when people are free to choose between government-recognized currency and non-governmental digital currency, they will choose the one that best suits each circumstance, leading to greater overall utility.
Yes, in a functioning economy. Here we are discussing what happens as an economy breaks down - as people stop being able to pay their debts, for various reasons.
I thought you were talking about economies with poorly functioning states, like say Ethiopia or Kenya. In these places, markets work quite well, they are just limited in the range of products and services they offer. They have limited access to the most useful financial and payment systems, like PayPal, due to undeveloped banking systems, blacklisting by governments of advanced economies, and bans by their own govermments.
Cryptocurrency offers a much more accessible alternative to global payment systems to the people living in these countries.
Usually, markets work quite well because they work face to face. Internet commerce on the other hand is usually extremely risky business if you don't have access to parties which can control that risk: strong, fair states that enforce complex laws in cases of disputes; 3rd parties that assume some of the risk, such as PayPal or eBay.
Bitcoin solves none of these problems. Sure, it allows you to at least assume this risk, which your country otherwise doesn't, so it's not nothing. But it's at best a band-aid.
It also doesn't protect you in any way from your employer not paying your salary on time, from being wrongfully terminated, from not being able to get a loan, from business partners not paying their debts because they can't sell their own products etc. These are usually the problems that a non-functioning state and non-functioning economy face.
>>Internet commerce on the other hand is usually extremely risky business if you don't have access to parties which can control that risk: strong, fair states that enforce complex laws in cases of disputes; 3rd parties that assume some of the risk, such as PayPal or eBay.
Cryptocurrencies can be used in person too.
With respect to eCommerce, EBay worked extremely well simply because of reviews. Not because of laws. And yes, people came to trust eBay, which was due to its faithful fulfilment of its obligations as a platform steward, not due to regulatory requirements imposed on it.
Will that be enough? AFAIK, every country's government (or some warlord) has a monopoly on violence and the law. If they wanted to, they could easily just draft a law mandating crypto to be stored in particular forms else can't be used/traded. Or they could simply invade your home on some bullshit pretext and seize all of your crypto. Both instances have happened before
(and have been posted on HN too) and I've seen both of them in both autocracies and Western democracies.
Imo, there's nothing better to secure your assets better than some form of monopoly on the law, or a monopoly on violence, or even better a combination of the two. This is also why billionaire classes simply consider crypto a wealth store asset and not a secure store of assets.
In theory, there is nothing an autocratic government can't do to you.
But leaders pay a political price for instituting draconian enforcement measures, while their country pays an economic price, which makes them less likely. It's one thing to send armed agents to storm the homes of executives of a large private bank to shake down the bank. It's another to do it against end-users at a scale where it becomes effective.
You may be right about the most secure form of property. Many don't have access to jurisdictions that can offer people in their income class that kind of security of property. For them, I think in some situations cryptocurrency can be a very secure form of property comparatively speaking. Cryptocurrency can be thought of as a poor man's offshore bank account, literally speaking.
> Many don't have access to jurisdictions that can offer people in their income class that kind of security of property. For them, I think in some situations cryptocurrency can be a very secure form of property comparatively speaking. Cryptocurrency can be thought of as a poor man's offshore bank account, literally speaking.
Actually I didn't mean monopoly on the law and monopoly of violence that way. I meant that billionaires invest a lot of cash into politics and personal security (legal and otherwise) for good reason. It would be very hard for a politician to go head to head against a billionaire donor, since he would just donate to the other guy the next time. Similarly, they get to influence a lot of things including who might head the city's police force or what policies to implement on a regional or national level. It's the same thing everywhere, whether you're in the Indian or Pakistani badlands, the heart of the EU or smack in the middle of NYC or SF.
I agree with crypto being the poor man's offshore, but a poor man wouldn't need an offshore. Not to mention, the barrier to open an offshore account is much less than the cost of BTC right now.
>>It would be very hard for a politician to go head to head against a billionaire donor, since he would just donate to the other guy the next time.
Yes true.
>>I agree with crypto being the poor man's offshore, but a poor man wouldn't need an offshore. Not to mention, the barrier to open an offshore account is much less than the cost of BTC right now.
Offshore bank accounts are very costly and difficult to get. They are also not that secure, considering how many have given up on financial privacy in the face of the warrantless-financial-mass-surveillance aka AML push by the dominant political powers, and leaks like the Panama Papers.
> But leaders pay a political price for instituting draconian enforcement measures, while their country pays an economic price, which makes them less likely. It's one thing to send armed agents to storm the homes of executives of a large private bank to shake down the bank. It's another to do it against end-users at a scale where it becomes effective.
I don't think the political price is as high as you think, and armed agents don't have to storm the homes of end-users at scale. All they have to do is storm enough homes discourage people by making it clear the risk is real, and everyone internalizes the rules.
If cryptocurrency is contraband, it's the worse kind of contraband because it advertises that you use it to the authorities through easily monitored channels (since you have to connect to identifiable internet services to use it).
>>All they have to do is storm enough homes discourage people by making it clear the risk is real, and everyone internalizes the rules.
I suspect the scale of enforcement needed to discourage widespread usage would be very large, and incur political and economic costs that are prohibitive. That's corroborated by the fact that the USD circulates widely in countries suffering high inflation, despite it being in the best interest of the elite of these countries for people to only use the national currency.
>>If cryptocurrency is contraband, it's the worse kind of contraband because it advertises that you use it to the authorities through easily monitored channels (since you have to connect to identifiable internet services to use it).
Only if public access to strong encryption is prohibited, and there are economic costs associated with a country doing that.
That's right, but what's new about this time is that the "how bad things have to get before we rethink laws and governance"-threshold had changed, as has the "how efficient of a government we'll accept before we stop iterating"-threshold.
Governments run themselves but until recently, economies didn't. Now that there are two memes (besides violence) that are each independently capable of mediating coersion on a global scale, we can play them against each other and select for the one we like best.
Governments have always (always) been involved in economies. Rome imported hundreds of tons of grain a year and gave them out free to its citizens. Hammurabi’s code mandated fixed medical payments and regulated professions. Don’t get me started on China. And taxation has been around as long as there has been agriculture, although it’s much better nowadays since the taxman won’t come in and tax all the food you own just before winter, leaving you to starve.
Yes. Police is regulated and has a lot of conventions (laws) and resources that enforce those conventions. Ultimately, it goes back to a fairly well-resourced court of law, which is willing to take a fairly high cost to make a decision, as a shared cost paid through taxes.
With individuals making those decisions, the decisions will be made at much lower cost, and this will result in lower quality of decisions.
If it’s you using a gun, you get Somalia. If it’s the police using a gun, you get the US. (If it’s the police using a baton, you get the UK). It works because the threat isn’t just physical harm but also social consequences. Even going back through history, there would be governmental consequences for not abiding by fair trade, whether that was the local lord throwing you in the stockades or the rest of your tribe ostracizing you.
Of course Hong Kong is now different, but that's not because the government changed its policies, but there is a different government in power.
Singapore had the benefit of a trade port, but it kept importance as such and expanded into becoming a important financial center as well as punching well over its weight in terms of innovation. They have invested in education and provide a stable environment for business.
I will review. Russ Roberts is pretty good. He leans closer to no governance than any.
Still, Hong Kong being different now is because the powerful (China) changed the government to favor themselves. This is actually an example of government falling to powerful interests in short order.
Thank you! Sure fine at some base level there is still technically market in a purely anarcho-capitalist system but that doesn't suddenly imply that the markets we have aren't essentially a pseudo-central planning systems that actually work.
A market is useless if it doesn't actually allocate goods and labor efficiently and in the way people want.
This is why I called Bitcoin “naive and antisocial”. I perceive a long-standing willingness on the part of crypto proponents to willfully ignore why monetary policy exists and how it is tied to society’s needs. Self-governance cannot be cast aside in favor of a currency managed by a network of miners remote from the Economic output, debt and other expressions of local social economy. I called it evil and I wasn’t being hyperbolic.
Of course monetary policy is good for the guys implementing it, crypto is here for the rest of us. Making monetary policy tied to a currency and immutable is one of the great benefits of crypto, akin to having monetary policies be part of constitution.
I don't believe it will be a benefit. Current monetary policy is to keep inflation positive and low, while addressing economic shocks that make money velocity low by increasing the supply.
A low positive inflation effectively makes all prices that are denominated in a fixed amount of the currency slowly lower. This helps the economy - ie, people and companies acting in the economy - deal with changes more easily, since their contracted prices are going down. It also avoids the problem with deflation: Keeping money to spend in the future makes more sense to an individual, thus money velocity goes down, thus less things happen (and all actors earn less.)
That's also why increasing the money supply for crises is good: It allows the same activity to go on, even if each unit of currency moves less. People can get paid the same even if everybody save up money. If there's a fixed amount of currency, they can't, since the currency that would be used to pay them is now bound up in their savings.
> A low positive inflation effectively makes all prices that are denominated in a fixed amount of the currency slowly lower. This helps the economy - ie, people and companies acting in the economy
This helps the people who have capital and is paid for by the people who only have wages. I am a person that only has a wage, so I choose bitcoin.
(self-)governance is big topic in crypto. I predict that crypto will reinvent all the societal structures and processes to form a digital market+government+jurisdiction because a currency alone can't address all the problems you mentioned.
> As long as a country cannot print usd itself, this is a fast shortcut to unemployment, hunger, etc...
We don’t even need to make up hypothetical examples. We have a live one in Greece. The Greek citizens went through this exact ordeal for the exact reason you stated. They couldn’t print EUR and the ECB wouldn’t extent monetary support to Greek government.
I think the real reason is that Greece was more or less forced by the EU to accept austerity and a bad loan it can't possibly repay. The leadup to this was irrelevant.
They were eventually given the right to “print” EUR. One of the many problems with the euro system that periphery countries have unfortunately been subjected too.
They are not. Germany is a net exporter, obviously not all the countries can be net exporter at the same time.
You can't have a stable monetary union without a fiscal capacity. The inevitable debt crisis in the Euro-zone are stopped by the ECB buying debt in the secondary markets.
The hypocrisy of the system is obvious to however takes the time to see how it works.
I don't think the answer to this question plays out the way you want it to...
1. Countries that have natural resources can raise capital when they need to, either by selling/taxing rights to those resources or by selling nationalized resources. Ecuador for example uses the dollar and also produces about a half of a million barrels of oil per day.
2. For many developing countries, the whole point of using the dollar is that it precludes monetary over-engineering or corrupt practices that give rise to inflation. This makes the economy safer for the have-nots, who have fixed local-denominated savings and/or earn a fixed local-denominated wage.
3. Simply using the dollar makes it easier to facilitate trade, tourism, and remittances. Panama does a lot of shipping and transit. Ecuador is a tourist destination. Remittances are the major source of foreign income to El Salvador.
Those countries that accept dollars and also maintain a dollar-pegged local currency are able to conduct monetary policy while also establishing a measure of confidence in the stability of their currency.
What you are missing in your detail is that ecuador actually got itself into a very serious currency bind precovid, and it seems to be staying that way.
So this would validate parent comment and actually negate your assertion that parent was incorrect.
That being said, this is half the story. And its the other part that matters. This is the first time ecuador gets in trouble post USD adoption. Where it goes from here will directly prove or disprove the very thesis, that parent comment assumed was a foregone conclusion.
Thus , your refutation may be correct after all, except for what i believe are different reasons.
> ecuador actually got itself into a very serious currency bind precovid, and it seems to be staying that way.
Ecuador had protests over removal of fuel subsidies to satisfy IMF debt conditions in Oct 2019. Hard to see how that's a "currency bind" in any sense.
> This is the first time ecuador gets in trouble post USD adoption.
Uh...what? You're just making stuff up.
Ecuador defaulted on two bond issues in 2008.
Ecuador had to borrow billions from China in 2015 when petroleum prices collapsed. This affected the country for two or three years. Public sector workers had to wait months for their salaries at times. In an alternate reality where Ecuador uses its own currency, the government would have printed its way through that problem and the resulting devaluation would have hurt everyone with savings or wages.
A currency bind as in, they have no reserves to pay for their expenses / debt. This specific sort of problem no country that can print their own currency has but that doesnt mean that such recourse does not cause problem on its own. But thats not my point.
I dont argue for printed currency. We are actually in agreement there. I'm responding to parent halukakin who said
"Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa. "
I contend that ecuador could prove that statement wrong. The 2008 crisis caught everyone off guard. Once Ecuador comes out of this crisis, we will really see if this experience will be enough to institute good governance reforms which were elusive during the constant ups downs of local currency inflation.
This is an accurate statement when approached from a top down nation / state level. Approached from the level of an average person living in countries with highly volatile currencies, they just want a currency that is not reliably going to be less than it was the day before. It allows those people the opportunity to detach from the issue of "poor governance" over which they have no control and gives them some independence from it.
This is especially true for refugees. They run the very real risk of being killed for any money they are carrying but if one has one's keys memorized then no one knows you have funds and you are somewhat safer.
Over 1/3 of the world's population lives in countries with declining or unstable democracies, crypto currencies provide a small cushion from that in some situations.
If the economy is not working, people won't get the value they are used to. This can essentially be handled in 2 ways:
1. Inflation, which means that everyone is getting the money they are owed, but can't do as much with them
2. Defaults/bankruptcy/breach of contract - people and businesses just run out of money and stop paying their debts
If your country can print money, you will be in situation 1. If your country can't print money (e.g. because it is using BTC or USD or Euros or whatever currency they can't control), then you'll be in situation 2.
I for one prefer situation 1, because there is a chance of recovery from there, and normal life can go on somewhat naturally.
This is a fair point. I have never seen btc taking the place of a nations money. Rather I see it as an alternative means of storing value that can also be used as a means of exchange independent of the monetary supply. BTC will always be measured in dollars/euros/etc.
>>What happens? How can the government keep paying its own employees? How does it pay retiree checks? How does it subsidize farming when needed? As long as a country cannot print usd itself, this is a fast shortcut to unemployment, hunger, etc...
In these countries, those in power rob the public blind. They steal the country's wealth and do anything they can to hold on to and expand their power. Giving the state more power just means giving the elite more power to rob.
The point is that when a state is inept and driving the country into bankruptcy, the grey/black market can be a lifeline keeping people alive.
You don't want to chain the population to the efficacy of state, by closing off avenues to non-state payment-systems and currencies.
The internet, and the currencies built on it, can provide alternate, superior governance systems for financial and economic collaboration that can operate in parallel with state-administered ones.
"Strong currencies are not the solution to poor governance."
Yes they are.
It's really upside down that you'd point out that 'governments can just print money to pay people!' as somehow being an advantage of good governance.
Well, partly, but it depends on a high degree of integrity, if absent, will entail total dissolution.
In absence of a government with integrity, then a 'strong currency' such as one that the government has no control over, say a Caribbean Island that uses USD for example, is preferable to anything else.
"Good governance and democracy makes a country and its currency strong. Not vice versa. "
First - democracy has nothing to do with it.
Second - 'good governance' is the opposite of printing money to pay bills.
In an unstable economy, USDs or Euros are preferable to worthless paper or Bitcons.
> Say everyone in an unstable economy were paid in usd.
Then that country would be paying the unseen tax of inflation as the US banking system prints more and more USD. Said country would basically be a US colony.
It may not be optimal for certain reasons to use USD, and they'd lose some advantages, but there are others to be gained that might make it worth it.
To the extent there are no real capital controls on USD anywhere - and - the US Fed is separate from the government, then nobody is going to be a 'colony' of the US by using USD.
TIL Zimbabwe, Ecuador, El Salvador, Palau, East Timor and the British Virgin Islands are all "basically US colonies".
What about countries that don't use the dollar as currency directly, but keep a fixed exchange rate to the dollar - they would be paying the unseen tax of inflation too, right? With a fixed exchange rate if the dollar value falls, so will the value of their currency. So that would mean Hong Kong, Cuba, Jordan and the Netherlands are all "basically US colonies" too. (China may be kind of surprised about that first one.)
Does this work for other currencies, or just $USD? Are Martinique, Andorra, Montenegro and Kosovo "basically EU colonies"? - they all use the Euro as currency, but are not part of either the EU or the EEA.
We don't actually have to hypothesize about what would happen if an unstable economy switched everything over to dollars (or Euros), either directly or by exchange rate peg, because it has already happened, many times.
Montenegro and Ecuador are effective colonies in their most developed areas.
Most of the valuable property in major metros is owned directly by US-based or EU-based emigrees , who paid top dollar for property that has a ROC duration in excess of 20 years.
Most of the metro areas on these countries are rapidly turning hollow projects which cheap rents or undeveloped land. It is quickly becoming like paris.
Flat rental 2000 EUR. Buy price: 2M EUR.
When someone that is not a local is taking all your valuable land... Thats the textbook definition of colony
Your argument from incredulity doesn't make what I say less true. Maybe my language was a bit strong, but there's no denying if somebody can freely make more of something you value, then they're gaining from your use of said valuable.
This happens in many countries already, the inflation tax of the US banking system is 2% and not an issue. That does not make Panama or Hong Kong US colonies.
Exactly. The Bitcoin folks like to point to a "shadow cabal" that controls US currency as though that same problem doesn't exist in Bitcoin's architecture. At least we know the names of everyone serving on the Federal Reserve's board.
Bitcoin, on the other hand, can be controlled by any miner or group of miners having over 50% of the network's hash rate[1]. We don't know the identities of the miners and we have seen them engage in political actions that change the behavior of the currency[2].
asks for evidence, gets link with evidence, dismisses as "nutters" without addressing the evidence at all. He is showed you the CPI as calculated pre-1980 with a page explaining the changes in methodology and why they're flawed. How is that "nutters"? You aren't having a discussion in good faith.
Why don’t you provide some data instead of conjecture. We generally don’t accept that the government inflation numbers are just plain wrong without substantiation.
That being said parent did not help himself throwing statements out there without a foundation.
Here is what i believe he should have said:
CPI for goods fails in the following:
Accounting for changes in sizes and quality of certain products (i.e. instead of raising prices vendor will lower quality or amount of product )
Accounting for healthcare costs is fundamentally flawed. This only factors out of pocket costs when the majority of americans are effectively paying 80% of healthcare premiums via reduced grosd wages in the form of "employer contributions"
Accounting for substitutions of products in the cpi itself which are not reliable substitutes, or the exclusion of certain items (housing) which are clearly inflationary.
There is also a lot of criticism made for the boskin commision changes https://en.m.wikipedia.org/wiki/Boskin_Commission to cpi which messed with base prices and thus with true measurement of cpi.
Data always trumps common sense, that's why we have science :) - if science had a motto that would be it! Sometimes we need more data, but common sense is often trivially wrong.
I would argue we do in fact need data to show the sky is blue. The data shows us the sky is not in fact "blue" but rather a blend of various peaks and valleys of radiation. [2] It's not so much blue as a bunch of colors at once that happen to be blue-dominant. Further it’s actually the “inverse of blue” in that blue is allowed to pass but all the other colors are absorbed.
> Accounting for substitutions of products in the cpi itself which are not reliable substitutes, or the exclusion of certain items (housing) which are clearly inflationary.
Housing on a $/sqft basis has tracked inflation since the 1970s across the US. What's changed is zoning policy, but zoning policy isn't a function of money supply. [1]
A reduction in welfare is not necessarily inflation or monetary policy, it can just as easily be social policy. You can't pin all society's ills on the evil Fed and their consistent and predictable 2% rate of inflation.
> Accounting for healthcare costs is fundamentally flawed.
Healthcare costs exceed inflation. That's not a function of monetary policy, it's a function of a fundamentally flawed healthcare system in the US that needs to be fixed. That's not the Fed's job, that's social policy.
> There is also a lot of criticism made for the boskin commision changes https://en.m.wikipedia.org/wiki/Boskin_Commission to cpi which messed with base prices and thus with true measurement of cpi.
Peoples needs, wants and expectations change over time. In the same way the S&P 500 and Dow Jones cycle through companies that are no longer relevant, doing so with the CPI basket is the only rational thing to do. For instance, Caviar and Lobster used to be crap food for poor people -- they're crazy expensive now. Is that inflation? Of course not. Totally fair to eject them from the basket.
>Good governance and democracy makes a country and its currency strong. Not vice versa.
The issue with this argument is that good government is a very hard problem that in many cases has no clear immediate solutions. While things like crypto many not be a solution they are a vood stopgap solution for the problems created by bad governments - at least until we can get thw good governance problem solved
Normally the government leverages its power to keep its currency stable. If a country fails at that, the residents tend to switch to another country’s currency, for example USD is widely accepted in countries with unstable currencies, and this makes sense, since a lot of commodity prices are set in USD.
What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something.
The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.
I agree assets with fixed inflation, be them cryptocurrencies or precious metals, make poor currencies, but some cryptocurrency projects are actually working on algorithmically price-stable currencies (ie. a cryptocurrency with a dynamic supply, not pegged to another fiat currency).
When/if the supply problem is solved, and a more environnementally friendly consensus mechanism than PoW developed, there won't be many arguments against adopting cryptocurrencies as the default payment method.
Devils advocate - it is possible the large swings are also because it does not have the counterbalancing effect of a large economy on it, and as it gets used more often that will change.
Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect.
Right now the usage of it is low, small changes in this equation have an outsized effect.
For some countries official rate is terrible and buying USD unofficially is dangerous (it's prohibited and you can end up with fake dollars). BTC might be somewhat safer, as can keep anonymity and there's no fake BTC.
About volatility: you're right but the thing is: even if BTC is volatile, over longer period its value rises up. Nobody lost any USD yet if he kept his BTC long enough.
But none of that requires cryptocurrencies in their current form.
You’re talking about a supranational currency, and I have sincere doubts that grifters of all sorts would not try to take over and manipulate such a currency, as they have for bitcoin.
The governance is more important than the tech IMO.
Why is encouraging people in such countries to use <some cryptocurrency> better than making the US Dollar more accessible to these people? If stability is the goal, I find it hard to accept that DogeCoin is the answer to the developing/third world's economic problems.
How is usd tho? Sure its more stable than bitcoin, but in the last months and years it relatively lost value to eur/chf when bitcoin only increased. Both solutions have issues however only one made holding money lucrative
You're right, we're still not there yet. I love the idea of cryptocurrency but it's being treated more like a speculative investment vehicle than a currency for goods & services. Sure, you can buy some stuff with it but its volatility is generated through all of the speculators.
It needs to be stabilized if we're ever going to replace fiat currency.
" This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. "
This was never the promise of blockchains or decentralized currencies because those things cannot fulfill the promise.
There's a much more pragmatic answer and that's to use Euros, USDs, Pounds or RMBs for a decade or so until the government has legitimacy.
'Cash' is useful in these economies.
Also, it's possible to provide digitized banking for the purposes of transferring money without the notion of introducing new, funny currencies.
Why would someone give btc against a more risky local money?
What I wonder is, why is it more convenient for someone who has some unstable money available to trade it for btc rather than euro directly for example? - i assume the end goal is to convert it back to a real money you can use to purchase thing?
They wouldn't. A lot of cryptocurrency justifications hinge on made up scenarios. They also ignore the fact that it costs money to even send or spend most cryptocurrency, or the fact that it must be liquidated in 99.9% of spending scenarios, and ignore the challenges in buying or selling cryptocurrency in the first place.
Most exchanges require several forms of ID and verification to buy or sell cryptocurrency. I had to use a smartphone to take a picture of myself with my photo ID before I could even use most exchanges. Someone who doesn't have photo ID, computer or a working smartphone are out of luck in that scenario.
Bitcoin might make sense for remittance, with the intention that it is then liquidated after being received.
It's less regulated so it's more likely people will make poor trades - maybe it's not in their interest as you are implying, but they do it anyway.
Countries can make owning foreign currency illegal. BTC is easier to hide than Euros (cash or electronic). You can trade BTC back to cash without a paper trail by writing down a private key.
In terms of why someone would sell BTC for a failing currency? Maybe they are also a local and have expenses to pay. Otherwise, it's likely the seller is selling for USD or something and there's an intermediate conversion so someone else who needs it ends up with the local currency. It's pretty common to get out of the currency as much as possible (assets, other currencies, BTC) then only dip back in for as little as possible to pay local expenses.
> This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion.
Well, except that the conversion into/out of fiat and the access to the network to transact the crypto are all things the government will usually be quite able to interfere with.
> Currency of my country lost 250% of its value over last 7 years. It's not bitcoin-level volatile, but close to it.
The way I understand volatility, it means wild swings in both directions over short periods. Your country’s currency however has been monotonically weakening. And the citizens have been able to react to that steady decline by storing their wealth in different forms, as you said yourself that you’ve been storing it in USD.
For sure even USD denominated assets have periods of volatility as we saw March last year when the entire world sought to refuge in the safety of US treasury bills or currency. Oil too witnessed some crazy gyrations like negative future pride. But they are in reaction to the extraordinary phase the world was going through then, when the world and hence the business practically shut down. Something which hasn’t happened in at least a generation.
Butcoin prices on the other hand regularly swing 10-15 in a day. Definitely not something you’d call stable compared to any of the world’s current currencies. Perhaps these swings will dampen over time?
> Your view must be skewed by privilege of having stable currency. Currency of my country lost 250% of its value over last 7 years. It's not bitcoin-level volatile, but close to it. Thankfully I have an option to use USD to hoard money, but that option is not something that's given, in many countries you just can't exchange for fair price.
> I agree that for someone living in US or EU there's no much point using BTC.
This is quite a tenuous argument however.
First, currency is only intended to be stored for as long as necessary to purchase the necessities of life or value preserving investments. Losing 250% of value over 7 years is an inflation rate of 14% annually, a hair over 1% per month. At the end of each month you're left with 99% of the value you started the month with. That's sub-optimal but certainly not a dealbreaker if everything else were stable and functional.
The early 1980s in the US had similar inflation rates [1].
Assuming your country isn't sanctioned you could have dropped that money into all sorts of safe havens.
Further, the issue is of course transaction fees. They're about $20 each right now, and the only place those fees are palatable are rich countries with stable financial systems. In countries without stable financial systems they're prohibitively expensive. You can avoid that with Layer 2, but of course, Layer 2 offers none of the benefits you seek with Bitcoin in the first place. Exchanges are centralized, trustful and censorable.
It genuinely, truly meets the needs of nobody who isn't speculating.
It's basically the "ruined fresco" of payment methods. From a distance it looks right but as you zoom in you realize mistakes were most definitely made. [2]
It doesn't make a difference whether a currency is paper or digital - if digital currency takes over in your country, the exact same thing will happen. The government will regulate its use, punish those using crypto 'unlawfully', and print more when it needs to, making it lose value.
See, it doesn't matter what the technology behind a currency is, it ain't going anywhere on your government's turf without permission. They have the ability, if they choose, to go door to door looking for 'unlawful money launderers' or any other designation they slap on the use of crypto and there's nothing you can do about it.
Unless it acquired significant negative value, no, it didn't.
I'm not sure if you mean it declined to 1/2.5 times it's value (-60%) following the popular-but-annoying usage of “n times less” but converted to percentage (it's an idiom that isn't used with percentages and is mathematically wacky to start with) or if you mean to say it declined by 2.5 times it's post-decline value (-71%), using the ending rather than the starting value to calculate the percentage change.
"However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent month-on-month, 89.7 sextillion percent year-on-year in mid-November 2008."
I recall interviews with government employees, who were quitting in droves. The Government wasn't keeping up with inflation, so at the end of 2 weeks, your check was basically worthless.
The place was falling apart.
People would run to the bank, cash pay checks, and buy STUFF. Anything. Anything physical. TVs, couches, bikes, blenders, ANYTHING. In one interview, a woman's living room was filled with random pieces of furniture, stacked to the ceiling, and a TV.
To trade. For barter.
Because even an hour later, that paycheck was worth so much less.
Yeah, it's crazy sad. Apparently the same thing is starting to happen now in Zimbabwe again with a 737.9% annual increase. At this point they are screwing over their people and any reasonable citizen shouldn't rely on or trust the currency at all.
For mere hyper-inflation, it seems there's a cap of 100% value loss. It's something else together to lose more value than there was in the first place.
Even if BTC were available to all countries, it wouldn't have stopped local currency value losses. And ironically hoarding stronger currencies makes local currencies lose value even faster.
Isn't it 250% loss in buying value? So because of inflation everything now cost 2,5x what it did. Usually your paycheck can afford 100 apples but after inflation your paycheck can only afford 40.
Sure, but that was not the claim by the parent. It's a bit unintuitive the way the parent wrote the claim, but the parent said the currency lost its value by 250% which is not really possible. What I think the parent means is that it became 2,5 times less worth. That is, what before could buy 100 apples can now buy 40 apples since 100/1=100 and 100/2,5=40, and as you say it, that means the value is down by 60% - same thing. At least that is how I understand what the parent claimed.
> I agree that for someone living in US or EU there's no much point using BTC
at the moment, but we are seeing institutional failure all around. as trust in the institutions fall, the importance and value of crypto/decentralization increases.
My guess is they meant their equivalent of the $4 cappuccino is now $10 (or more) in their local currency, which while not mathematically correct is probably the most intuitive way to understand it (as compared to losing 60% which would more than double prices).
In all honesty though if you started using BTC as your main currency*, replacing your national currency, one day you'd have your money in BTC, the next day their value would be wiped out. We're not talking about a slow and steady decline, halving of the value in a decade. We're talking "no money to buy food for the next few months". Many people in countries with unstable currencies are particularly vulnerable to this kind of fluctuations because in general they have nothing to absorb the shock, no assets, no savings, etc. Unlike traders these people can't just wait for the rebound, by that time they're bankrupt.
BTC is useful for exactly the scenarios it's almost exclusively used in now: speculative transactions (buy low, sell high), or transactions for less than legal stuff and the overwhelming majority of proponents are in these 2 camps. There's a much smaller group of proponents made up of people who don't understand currencies in general (besides the basics, like spending them), or cryptocurrencies in particular.
I'm sure some form of electronic tender would fill this role you're describing but it's not BTC and probably none of the major cryptocurrencies on the market now.
* (putting aside the network capacity, number of transactions/sec, the cost of producing a BTC and of a transaction, etc. which make it completely unsuitable for the purpose of using the currency instead of just storing and trading it, which is probably the only significant purpose of BTC today)
I don’t think you’re wrong. You might be missing a bigger game though.
BTC is fundamentally deflationary in nature - let’s ignore the price volatility and the like for now, I’ll cover that later.
It has also so far proven incredibly resistant to attack, both inside and outside the community and despite easy billion dollar payouts if an attack would be successful.
There are also efforts making good progress (lightning network among others), addressing structural issues, and large scale semi regulated brokers with good track records (coinbase, kraken).
The price volatility is speculative, and while some is get rich quick (well, a lot), some is also what happens in a deflationary spiral.
If we speculate that Bitcoin will end up being a ‘not able to be broken by a greedy gov’t like all the other currencies’ means of exchange, the current price is cheap. Every large institution will need some to clear central bank type transactions (the part that may be what ends up on the blockchain), and 14 million ish isn’t enough at current prices.
If we speculate that will never happen; the current price is ridiculous and it’s all just a giant Ponzi scheme.
Frankly, neither of these options it is fair to rule out, and the volatility is because of uncertainty and the wide variability in value for Bitcoin between these options.
We’re entering a stage where global attitudes are shifting to one of distrust, especially between countries and citizens and their gov’ts, and some means of exchange that doesn’t require a distrusted entity to play nice has value, even if it isn’t 50k per.
I agree but in the grand scheme of currencies and payment infrastructures they barely got out the door.
I believe today and for the foreseeable future BTC will be adequate almost exclusively for speculative traders and people who need legal deniability. Most people throw around narrow interpretations for why BTC would be good and they're all good explanations if you look just at selected arguments. Take the "BTC is great as a currency in countries with steady high inflation" stance which might hold if you consider only a really narrow set of set of BTC criteria.
I'm not ruling out anything for some future really. As a personal opinion I believe there's room for e-coins (I'll stay away from the "crypto" nomenclature as they may not rely on a blockchain or crypto per se) but BTC in particular has no real room in a CB for more than a fad (also speculative). Think at the central mandate of a CB: price stability and inflation. Controlling these is quintessentially antithetical to BTC as a main currency, or as a currency. BTC as a decentralized currency takes central banking out of the equation. Or conversely central banks take decentralized currencies out of the equation.
So even if you think of it pragmatically, no government or central bank (since they should be as independent from each other as it gets) would allow replacing the country's currency with BTC both for "selfish" reasons - they'd lose control. But maybe even more importantly for national security reasons. No country wants a coin which can be sent spinning just because some CEO (or worse, your enemy) decided to pull a shady maneuver for personal gain.
The kind of control currencies need to be fit for the purpose of a general, national currency for your citizens simply precludes using BTC at that scale. Should BTC ever become as "big" as a real national currency I'm certain it would show many of the same cracks. Except the small players (average Joe) would have nobody to turn to when things go sour. No central authority, no central responsibility. You see this whenever there's a new hack or financial maneuver that parts people from their hard earned cryptomoney how they suddenly lose that blind faith in "the coin that governments can't control" and start asking for regulation. You can only regulate when you have control.
First part of your argument - Isn’t this literally the argument against every new anything?
Second part - I think you’re also misunderstanding? Central banks hold gold and other countries currencies for international clearing, export/import, and national security reasons. A central bank is not holding them for price stability and inflation control. Only a small handful of central banks (the fed) meaningfully target those goals, and if they do it is for their own fiat currency.
If you think a central bank is going to hesitate to hold a useful asset for international exchange purposes if a ‘ceo or worse your enemy’ could send it spinning, you’re not paying attention? China’s central bank holds at least $1 trillion US dollars for instance [https://en.m.wikipedia.org/wiki/Foreign-exchange_reserves_of...], along with Euros and every other currency useful for it’s goals. There is a huge variety of foreign reserves currencies in wide use [https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A...] covering everything from Chinese renmenbi to Swiss Francs and UKP. All of these change dramatically relative to each other on short notice, all are enemies or economic competitors with some selection of people using them as reserve currencies, and there is no central authority to go crying to if one of them defaults on their debts or inflates their currencies.
And third part - I’m not saying it’s likely any government would replace it’s fiat currency with BTC or any other currency out of it’s control. I’m saying Zimbabwe and many other places don’t really run on their local currency, they run on what people use (currently dollars in most cases, but some places BTC is getting traction) - because their gov’ts destroy the utility of the their local currencies and people can’t trust it.
> First part of your argument - Isn’t this literally the argument against every new anything?
Oh, that wasn't meant to be an argument against something new. As I said repeatedly, it's an argument against BTC as it exists now and as it will be for the foreseeable future. The expectations for a stable "national" currency are incompatible with the pillars of BTC. That was my original point.
The Fed, the ECB, the Central Bank of China all have price stability and inflation as a mandate, of course for their own currency. And this should already hint that they want control over their national currency. Gold and other countries' currencies are explicitly things that are regulated by the respective countries and/or "relatively" stable. I'm not aware of any national currency as volatile as BTC. They're all substantially more more resilient to outside manipulation because they're regulated and traceable. Governments and Central Banks don't want their country or citizens to rely on a currency they don't have any control over especially in places like US, EU, China, Japan. Just think of the UK refusing to give up the GBP to adopt the EUR because it involved losing control of the currency. So while I can imagine a bank (central or commercial) holding BTC one day as an asset, I'm having a really hard time seeing the "unregulated currency BTC" being used as a "national currency" in any place that matters.
> If you think a central bank is going to hesitate to hold a useful asset for international exchange purposes if a ‘ceo or worse your enemy’ could send it spinning, you’re not paying attention?
If you were to ask Mario Draghi or Christine Lagarde they would tell you no CB should hold BTC. I'm not saying I can see the future but I'm trying to understand what you know and they don't.
When China deliberately weakened the yuan to gain an advantage in the trade war with US (to boost exports) it was immediately noticed and attributed and that could be (was?) used as justification for sanctions and tariffs. Bitcoin is decentralized and pseudo-anonymous.
> I’m saying Zimbabwe and many other places don’t really run on their local currency, they run on what people use (currently dollars in most cases, but some places BTC is getting traction) - because their gov’ts destroy the utility of the their local currencies and people can’t trust it.
So they rely on a well regulated currency like the USD. How would BTC improve on this? The USD is stable enough for Zimbabwe to use because it's under central control.
Taking more practical approach for the regular person, at the absolute minimum a currency is supposed to come with consumer protections that are derived from regulation. BTC was specifically designed to curtail regulations. This won't be fixed by faster or more efficient networks. That can't be "fixed" at all because it's one of BTC's tenets: stay unregulated and out of gov't control. So your citizens are not only using an unregulated currency that offers them no protections, they're also extremely vulnerable to outside manipulation.
BTC is an unstable coin, that cannot be regulated to offer consumer protections or complying with anti money laundering laws. In theory this recommends it to speculators and people who are looking to be shielded from the law. The reality just happens to match the theory to a T.
Some e-currency will surely fit the bill one day though but I'm not entirely sure if there's one to be both regulated and unregulated at the same time, to make everyone happy.
I think you're fundamentally misunderstanding my comment, and we're mostly agreeing with each other - apologies if I wasn't clear!
I was quite explicitly referring to speculative future events, and how their odds of happening directly impact current pricing of bitcoin.
USD is reasonably well regulated now and has been historically - by some definition - at least as well as any of its competitor currencies, though none of them are looking particularly great right now by traditional measures.
What are the odds it will remain so for 10 years? 20 years? 50 years? Less than 100%, better than 0%.
As BTC addresses issues over the next 10, 20, 50 years - could it be a viable option for central bank clearing in the way JPY, USD, or gold is now? What are the odds? 100%? 0%?
With the work, attention, and considering the existing progress it's made, will it be a viable option for a trans-national or even national currency over the same time frames? What are the odds? 0%? 100%?
I'm pointing out that 1) none of those options is clearly a 0% or 100% outcome over the time frames we're talking about 2) depending on your individual judgement and how optimistic or pessimistic you are about various parts of these equations, depends on what you think BTC's value currently is.
Even people just hedging their bets against a not impossible outcome can lead to a deflationary spiral, leading to high prices until there is clear data one way or another where things will end up.
Let’s talk larger game - assume the btc-denominated economic zone becomes non-negligible in size. The best defense for neighboring economic zones is good fiscal governance. Because BTC land will be an anarchic mess. It will have multiple germanies and Greece’s and Nigeria’s within it, and Cartel controlled sub zones, etc. who will deal with rising levels of indebtedness in BTC instruments? Who will deal with fraud, cartels seizing companies and households’ reserves, or simply defaulting on debt in this “trust less” Dystopia?
Vastly different levels of productivity between regions of the same economic zones or between zones can result in crazy social friction without trade regulation and controls - how will BTC land manage this friction?
Additionally - the energy and security requirements of btc zone participants will become crushing. Why will market participants continue to labor in this spiraling High energy hell when they can retreat to the much lower energy state of a trustful, managed economic zone? It will be like a breath of fresh air.
This is pretty misleading though, 2008 the USD tanked. GBPUSD and EURUSD were crazy high and currencies like RON, PLN had bigger swings, but if you look 20 years you can't say things have changed that much, esp with all the other changes in the world.
Interestingly we have the opposite problem, our customers mostly pay in USD and many of our employees are paid in EUR, which is pretty high vs USD lately, and that difference costs us quite a lot.
> Currency of my country lost 250% of its value over last 7 years.
I doubt population of your country at large can afford bitcoin transaction fees for their daily shopping.
BTW, are you saying that your currency has negative value now? I assume you mean a 2.5x inflation multiplier over 7 years, or +14% per year. That's mild compared to an order of magnitude walk of the BTC-USD rate over just one year.
The only real use case for BTC I see is moving capital between jurisdictions.
" Currency of my country lost 250% of its value over last 7 years. "
The problem is not your Central Bank, it's almost assuredly a total dysfunction of government and the civil services - which will have effects more far reaching that Central Bank problems.
The solution is not BTC.
It's to use something common and trusted, temporarily, like USD or Euros until there is enough credibility in the system for external parties to accept your own currency.
Or - to overthrow your government, install leaders with integrity and hope that international bodies accept the change, because if they do, you'll be in a much easier position issuing your own currency than having to issue debt in a foreign denomination.
Put another way: it's not a currency problem, it's a governance/management problem that exhibits itself in currency problems and other things.
BTC will not really help you have a better managed government.
The average person in your neighbour hood is sitting reading the paper, contemplating: “I’m worried about inflation. should I buy some Bitcoin, or should I overthrow the government? I think I’ll try the overthrow option today”
Bitcoin, at least, absolutely does not solve this problem. Let's leave aside its volatility for now and assume it magically stays at exactly the same price. You are then left using a currency where each transaction costs several dollars and takes a half an hour, and that's the present state of affairs when no one is using it. So you would keep your cryptocurrency in a bank and transfer it through the normal channels, which opens it up to the same government controls you're concerned about. That's if you're allowed to hold cryptocurrency at all.
Hyperinflation is a problem of massive corruption and incompetence in government. It doesn't happen by accident in an otherwise stable society. If you're concerned about hyperinflation, you should assume the bank (or "exchange") will be subverted and transactions will be censored. Bitcoin was built to solve those problems, but does not scale and so cannot.
This is, by the way, the only situation where I'm at all sympathetic to cryptocurrencies. If someone can come up with a cryptocurrency that scales and that isn't controlled by cartels, I'll be glad that it can be used in unstable parts of the world.
30 mins for FINAL international settlement of arbitrary $ amounts between $0.001 - $100B IS fast - and the uptime for the BTC network is 100% since inception ~2011.
If you're really wanting to compare apples to apples - For traditional banks doing cross border transactions, it takes up to five days at most global banks, not counting weekends or bank holidays to actually settle with a lot more intermediaries involved.
> So you would keep your cryptocurrency in a bank and transfer it through the normal channels
You do your daily spending through the normal channels, sure, but why would you need to keep your cryptocurrency savings in a bank in such a situation?
Bitcoin is fantastically slow. It can handle about 120 million transactions per year. That is absolutely 100% unusable for anything at scale. If 30 million people used Bitcoin, they could each do about one transaction every three months and the fees would be sky-high. That is not good enough, not even for savings.
Other cryptocurrencies are faster by smallish constant factors. None of them, at this time, are scalable. None of them are fast enough to be usable by millions of people.
I used to think cryptocurrency was a solution in search of a problem, but the Robinhood fiasco has made me think otherwise. I find their clearing house explanation woefully insufficient in details, and open to the possiblity of being technically the truth but misleading (for example, they gave mass margin to lots of new accounts so they technically lacked collateral, but if they stopped new signups then cleared cash non-margin accounts would have been able to freely trade).
Some might call me a conspiracy theorist, but the fact remains there’s no good way to verify any of what they’re telling us is true, other than to trust people with billion dollar reasons to mislead, or rely on an SEC which has repeatedly failed to do its job and stand up to big institutions (see Moody’s subprime ratings, or Robinhood already getting fined by SEC but for trivial amounts).
There’s certainly pump and dumps, fraud and manipulation in crypto, but some could argue a lot of stocks exist right now with terrible fundamentals but huge market caps that nobody labels a pump and dump because “serious” institutions say the valuations are “forward looking.”
All this is to say, finance is a game with massive incentives to deceive and manipulate. We see that in the traditional finance space and in the crypto space . But long term, Id argue in many ways the decentralized nature of crypto lends itself to far more transparency than our traditional systems.
Now, that doesn’t mean it makes sense to buy coffee with crypto, or that a specific coin is the solution, especially one with the type of technical challenges BTC has. But in a broader sense, I do think decentralized finance is starting to look more and more like the future, if the alternative is to continually put trust into institutions that repeatedly betray that trust.
Call me back when crypto is being used for anything normal - buying groceries, homes, pay checks, etc rather than trading and speculation. As of now, if my job attempts to pay me in DogeCoin I will quit and file a complaint with the NLRB. The thing is, no matter how much you think the current financial system is crooked, there is always a way to settle disputes through courts and regulators.
The worst financial hiccups happen in areas without regulation. There were no rules on selling subprime mortgages or shorting more stock than exists, but unlike in the cryptoverse if something blows up it can be patched with legislation and restitution to victims. If your crypto gets stolen or a coin gets pumped and dumped, there is no recourse. With no connection to the real world comes no trust and no mercy.
In switzerland both our national amazon alternative (relatively huge) and main food delivery network accept bitcoin and several other crypto currencies. Including weird stuff like Tron and Monero.
I spend more in crypto some months than other currencies.
so nice to see the hackernews crowd finally figuring it out!
i totally agree with you. i feel that if you keep digging, you'll find yourself convinced over time that BTC's "technical challenges" are not the flaws that they originally appear, and that in the long run crypto does make sense as a currency itself, in addition to a financial infrastructure.
Also, could you please stop posting unsubstantive comments generally? You've unfortunately been doing a ton of that lately. We're trying for something a bit different than that on this site—if you'd optimize more for signal/noise in your HN comments, we'd appreciate it.
Full disclosure: I own about $11 worth of bitcoin if I round up a bit, so this might be biased.
The most convincing "point" of bitcoin I've heard is to accomodate transfer of large sums of money across borders, quickly, with minimal transaction costs and oversight. Everyone here can afford the fee to transact 8 billion dollars worth of bitcoin. And settlement happens in seconds to a couple minutes. That's appealing to people trying to move millions or billions of dollars around.
Yeah, sure settlement in Bitcoin happens within a few minutes. Getting that converted into usable money is a whole other story, no?
I can basically think of two scenario types when you are in need of international, spontaneous money transfer:
a) "I just got carjacked in Sierra Leone and need some money for an hotel and a flight home"
b) "I have some weird novel business and I would like to pay my contractors in East Timor biweekly"
I cannot image using Bitcoin for either, first one because of the convert-to-money-thing, second one because of the volatility. There is also some kind of - how do you call this - meta-trust that I just don't have in Bitcoin: Go off-grid for two weeks and there is a non trivial chance that some weird shit happened within crypto that is now an obstacle (crash or rally, outlawing, split, ...). That does not happen with US dollars.
I got the feeling that this is yet another incredibly obscure use case that doesn't even really work Bitcoin fanatics (not directed at the quite reasonable parent comment) use to justify their gambling and Lambo-dreams. Just like "it could be the new gold" or "what if the US gov collapses".
But I am certainly no expert in international money transfer by any means, so feel free to change my mind!
> Go off-grid for two weeks and there is a non trivial chance that some weird shit happened within crypto that is now an obstacle
For people in countries with a more stable economy/currency, this is very true. Even in countries with a bigger inflation, things are a bit more predictable.
But of course, different countries/economies/currencies have different realities.
>Go off-grid for two weeks and there is a non trivial chance that some weird shit happened within crypto that is now an obstacle (crash or rally, outlawing, split, ...). That does not happen with US dollars.
That is fair, but it would be more accurate to say 'has not happened with US dollars since 1930'. Currencies collapse is not that unusual an occurrence, my own (German) grandparents live through five separate currency regimes in the same country. Being truly uncorrelated with most other investments can be a real selling point for a hedge like BTC.
Disclosure: I own several cryptocurrencies including BTC which I mentally categorise as 'collectables'.
No if you have millions or billions basic wire transfers are instant and cheap. It is more interesting for if you have a few hundred or a few thousand dollars, where a $10-$50 fee is significant. Or you want to bypass regulations or bureaucracy eg send money to a friend in Argentina or Lebanon which have currency controls.
Bitcoin's use as a way of bypassing currency controls is one of the best arguments against it, because governments, already prone to suspicion towards anything that might upset their monetary policy, will have no quarter towards anything that upsets their laws.
This is woefully incorrect. Wire transfers are neither instant nor cheap, depending on the source and destination country.
If you wire from US to US, or EU to EU, they yeah, maybe.
The moment you move large sums across borders, especially to /from countries that aren't in the US's "good guys" list (as dumb and childish as that sounds, this is typical language in USistan for politicians and media), things gets very tricky.
That’s the thing. By the time the transfer takes place, BTC exchange rate is now 7% off. How convenient is the transfer mechanism when the underlying is a speculative instrument?
Until BTC exchange rate gets stable or gets pegged do the ground, it’s gonna float around in the air of extreme volatility and manipulation - pretty risky adventure to transfer large sums of money.
This is problematic for layer 1 settlement for sure. But there are layer 2 solutions that can help with the slippage issue (lightning network being the most prevalent). With a sufficient density of multisig wallet availability, as a proxy for liquidity, transactions are near-instant.
That said, there are differences in settlement guarantees at layer 2 that might make certain use cases less optimal.
Sure. Layers, like the Internet is made up of protocol layers.
Bitcoin on-chain is layer one: slow, sure, and after 6 confirmations considered irreversible and immutable.
Layer 2 protocols would include the lightning network and the liquid bitcoin protocols - both systems designed for different use cases, with differing technological benefits and risks. There may be other layer 2 systems that I'm not aware of.
Some might consider the OpenBazaar marketplace protocol, the Open Timestamps (https://opentimestamps.org/) application, or the Bisq decentralized bitcoin/fiat exchange to be layer 2 applications, as they're built directly on top of bitcoin but includes protocols. But I think they're simple examples of the kinds of applications that can be built on top of the programmable trust-net that bitcoin represents.
Because bitcoin is a decentralized and permissionless technology protocol, anyone who thinks of a way to build on top of it can do so---without needing anyone else's permission.
Layer 3 might be applications built on top of layer 2, such as the censorship resistant Juggernaut chat app, built on top of the lightning network: https://www.getjuggernaut.com/. As layer 2 matures, I imagine we'll begin to see a wave of creativity unleashed globally as people create layer 3 applications.
Yea this terminology is borrowed from the OSI model for networking, with which you're likely familiar. It originally was used as just an analogy, but has increasingly just become the way the space describes (and markets) the different protocol layers of cryptocurrencies generally.
We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.
Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.
People should spend or invest thoughtfully, but they should spend or invest - if people are encouraged to hoard a pile of wealth so they can live off the labour of others while contributing nothing themselves, that's bad for society. So central banks tend to aim for low but nonzero inflation (e.g. the Fed's 2% target).
One reason I dislike inflation is that I don't want my currency -- a utility object -- having opinions about my financial life. Inflationary monetary policy and its consistent 'nudge' to spend is the economic equivalent of the pop-up.
Of course, you could argue that a hard cap is equally opinionated. But I think it's a much more 'neutral' position, where it deflates because of real economic growth, and you spend it because of your own time preference.
Not really. If you can earn risk free appreciation on a currency the smart thing to do is not spend it. This incentivizes hoarding money, not making smarter investments.
Nope, you are therefore incentivized to spend that money in objects or services that will bring in more value to you than the risk-free "interest" or gains brought by the mere deflation. Ergo, smarter investments.
No, it disincentivizes investments full stop. People aren’t making dumb investments deliberately. You don’t get any new information about whether an investment is smart or not based on your currency being deflationary.
In developed countries (ex in Europe), fiat currency officially loses at least 2% of its worth each year on average (or you yourself lose 2% worth of purchasing power every year, depending on how you see it). In reality it's much more of course.
Bitcoin gains 200% of its worth each year on average.
Owning bitcoin, any investment you make that brings home more than 200% a year (+ fin. taxes - fiat inflation) when risk-adjusted is worth making.
Anything else is an objective loss, so you want to really assess what it will bring you subjectively before making it.
In other words, "given that you are basically paid by the financial system to hold bitcoin, any bitcoin you spend should be for something that you value more than what it pays", i.e a smarter investment.
I’m talking about currency not appreciating commodities, assets or investment. The US dollar, and the currencies of most western nations, is/are in fact controlled and inflate at a targeted rate.
When I think about inflation, I think about the purchasing power of money for the basket of goods I'm likely to purchase. I'm less interested in theoretical or academic concepts like the rate of growth of M2 or the velocity of money. Preserving purchasing power over time is my priority.
But the people who run the euro zone and the dollar zone have it setup for (they hope) constant mild inflation. This incentivizes a search for productive investments like ycombinator instead of hoarding treasure, which is not a productive investment
We do not have controlled inflation (I'm assuming you're talking about USistan). Please remember that the fed is an independent institution which refuses to get audited.
I am beyond sick of this Libertarian lie that has somehow gone mainstream. The Federal Reserve is audited bi-annually by both a public and private commission
In regards to your first point, inflation is targeted at ~2.5% a year. Some years do better and some do worse but on average that is the inflation rate. I challenge you to look at the inflation rates (provided below) in the first half of last century and provide a reasoned argument for why having years with +16% inflation (and years with -10% inflation) is a better system of currency than what we have now where people freak out if the deviation is over 2%. The gold standard provided a volatility that only hurt those with less money, and the argument your making is a fallacy (and is the reason I left the Libertarian party four years ago.)
Forget million and billions. Hasn't anyone on this thread lived and worked abroad? Transferring 10s of thousands from the US to the EU or vice versa costs a ton in the banks skimming off the back of exchange rates that they choose and fees. There are ways to do it via trading accounts but it's a pain.
It's actually pretty cheap and easy these days with a transferwise account. But I agree, it used to be a massive pain, and still is for smaller currencies or more closed-off banking systems like japan.
> And settlement happens in seconds to a couple minutes
That is incorrect. On average it takes 10 minutes to mine a block, but you have to submit the transaction to be included in the block, so > 10 minutes before it appears on the blockchain.
However, there are actually many block chains, as miners creates block in parallel, it’s the longest one that is the “official”, but the minute you see your transaction in a block, you do not know if this block will stay in the longest chain, so in general you want at least 5 new blocks, after your block, before it is considered “safe”.
So now we are talking about one hour to do a transaction, and that assumes that the network is not overloaded, because there is also a cap on number of transactions that can be included in a block.
All in all, it is a terrible system for fast transactions.
But how quickly does SWIFT or ACH settle? When one wires money overseas, settlement is counted in days, not minutes or hours as in bitcoin's case. Most of us use layer 2 or 3 solutions in our legacy national currency systems, such as Cash App, PayPal, Venmo, etc. Non elite don't have access directly to FedWire or ACH or SWIFT... it all has to pass through banks and other 'trusted third parties.'
Also, eventually most lower-value transactions in bitcoin will be on layer two technologies, like the lightning network (peer to peer) or liquid bitcoin (federated peer to peer, mostly for exchanges and traders to quickly move funds between exchanges).
It doesn't take days. RTGS is named rhat for a reason.
If you're also doing FX that'll be minutes for major currencies. Should you be going through a network of correspondence banks from obscure bank to obscure bank it might be longer but even then rarely days. If currency controls some dalay depending on regulatory setup. Even if the banks do netting, cheaper than RTGS, that should be just a couple of hours between reasonably large banks.
What you may have is a problem with your bank or it using ACH.
I live and work in the US, but originally I'm from Croatia. I wire money every month to my family back there.
It takes 5 work days for the wire to fully clear. Since 5 days is a full work week, it almost always bleeds over to the weekend and in reality takes 7 days.
BTC might still be a terrible system for international transactions but it's still 168 times faster than the one that exists now.
> BTC might still be a terrible system for international transactions but it's still 168 times faster than the one that exists now.
It is 168 times faster than what you currently use.
There are services like TransferWise who specialize in fast international money transfers.
I could imagine that part of your delay is because the bank your family use (in Croatia) does not themselves handle international transfers, so they go through an intermediary bank, only adding delays.
I have often done ~12 hours international wires from Wells Fargo (U.S.) to Asia, and here the delay could simply have been due to the time zone.
Within the European Monetary Zone I often see money arrive in 10-30 minutes (crossing borders).
That's a fair comment. I don't use Transferwise, rather just wire money via Chase Bank to an IBAN account. You are right that there is an intermediary bank involved in the process.
Also yes, within Europe, an IBAN to IBAN transfer is pretty much instantaneous. However US is not in the IBAN system, so that's a different story.
There are probably multiple reasons why the transfer takes a week, but the spirit of my comment was that an hour long (at worst) transaction time for BTC is actually very fast if you look at it through the international money transfer lens.
My worry is that we will continue to see the pace of international money transfers increase as competition, trust and infrastructure improves.
Bitcoin, on the other hand, is limited structurally by the very mechanism that guarantees its accuracy. Today miners burn 77Kwh of energy to mine the block that records your transaction[1]. Sure hashing tech might get more efficient, but the block mining complexity increases to keep their discovery rate constant at one every 10 minutes[2]. This does not set a cap on the energy usage of mining for the network.
Staking (for Ethereum 2.0) will be the mechanism over the current proof of work method. This will reduce the energy cost significantly by removing the requirement of mining.
I don't know. I never tried doing that. Amazon is pretty useless in Croatia so that probably wouldn't work, but there might be some prepaid cards that would.
I don't know, haven't explored that option honestly.
Awesome, go to the supermarket, pay with BTC and wait there for an hour for your transaction to complete.
Or try to buy anything time/quantity limited, so you don't get it because the transaction took too long to complete.
Meanwhile, in Canada, I just do a money transfer by email without any fees (if sending more than $10), and it's almost instant if the receiver have auto-deposit set up.
Actually the article mention " select crypto" but not the BTC.
And to be honest I do not see the point for them to support a decentralised currency like. just complying with the regulatory rules ( KYC, anti Money laundering,etc...) Would be a real nightmare
Possibly something like Zelle (in the US, not sure where else). Using someone's contact information (phone or email) you can send money to them quickly and easily. They can set it up with whichever bank and change it as they desire, no banking information never needs to be communicated between the two parties.
I don’t think I’d be making decisions on risk for BILLIONS of dollars based on something “usually” being in my favor.
Also, stablecoins staying “stable” is a huge risk you are taking on if you use them.
Again, if you have billions of dollars, you are going to be doing a lot more risk analysis and want a lot less uncertainty than you are going to get with any sort of cryptocurrency that exists today.
People who want to move millions or billions of dollars around don't care about a $30 wire fee. What they do care about is recourse in the case of fraud or mistakes, which Bitcoin by design does not give you.
Moving large amount of money without government interference, however, is certainly a feature of Bitcoin that fiat currency usually doesn't have. And there are some (though perhaps not many?) non-shady reasons why someone might want this.
I've never understood this argument. Moving large amounts of one currency between countries isn't expensive or slow (relative to how quickly you typically need to do this). Assuming you are allowed to do it at all. Oversight is a different story, but there aren't many legitimate reasons to want to do that (probably none that aren't problematic). There are, of course, a ton of illegitimate reasons but that's a different conversation.
Getting that 1mm+ from one currency to another is a whole different story, but that story only gets worse if you involve crypto.
Paying $40 in wire fees to move $200 sucks, but it's just not an issue on large transactions. So I think your real use case is lots of small transactions, not a few big ones. And unless you can spend the crypto directly, the volatility can kill this application pretty easily.
It is not that simple once you cross borders to countries USD is used by all kinds of criminals. When you have honest business, you are screwed by the system.
Here in Brazil, getting money in and out is a nightmare if above 5k USD.
I live in Brazil and work for a US company. My first month payment took 3 months to clear, and because of 3 accumulated payments I got audited and the 4th pay got delayed again. The first one that cleared in 3 days was the 6th payment. All payments were charged 40 USD to my employer, but 20 was charged by middle man every month.
I also have a US based health insurance but (again) I currently live in Brazil. I had a surgery reimbursement be withheld for 65 days, I had to send dozens of documents and when they finally cleared, I had not only lost to exchange rates, on middle man bank took 20 USD and my branch in Brazil took an extra 170 USD.
I agree that paying for things directly with bitcoin doesn't make sense. However, that doesn't mean bitcoin doesn't have a use case as a global settlement network and volatility isn't what's important, it's liquidity, which bitcoin has far more of then any other cryptocurrency.
For an example of this take a look at something like Strike Global using bitcoin's lightning network.
>it's liquidity, which bitcoin has far more of then any other cryptocurrency.
"Far more of than any other cryptocurrency" is kind of a moot point. Does "bitcoin" (the people converting it to cash) have enough reserves in any real currency to cover even 10% of its value? There's no federal government backing it, and as best I can tell nothing to prevent the proverbial "run on the bank".
I still struggle to see how bitcoin has anymore intrinsic value than collecting pokemon cards. It's worth something right up until it isn't without a major government supporting it.
It doesn't sound like you bothered reading the link I posted. Price volatility caused by a "run on the bank" doesn't really matter if you are sending payments between two people using different currencies. The link I posted describes an app that as an example allows a payment to be sent from someone in the US to someone in Europe and have it settled instantly. Bitcoin is only used on the end of each transaction and converted in and out of dollars and euro's instantaneously making it's price irrelevant.
The intrinsic value argument is old and tired at this point so I'm not even going to bother with it.
Yes, Bitcoin at this stage is extremely volatile and anyone buying it to hold as an investment should understand it can lose or gain a lot of value quickly. However, it does have multiple use cases at this point that clearly the market has determined have some type of value. We're still figuring that out.
As a side note, if you do some digging you can find some pretty good on-chain analytics that can theoretically put a sort of floor on the price based on how coins have moved over time. There are now quite a few sites like glassnode.com, cryptoquant.com, coinmentrics.io etc that provide this data or if you are technical enough set up your own node and verify it for yourself.
I DID read the link. As with everything bitcoin related, the actual meat of the problem is hand-waved away with marketing BS.
>Strike then takes the bitcoins and automatically converts them back into Euros using its real-time automated risk management and trading infrastructure.
Really, they convert Bitcoin into Euros with a "real-time automated risk management and trading infrastructure"? That explains literally nothing. Who owns the Euro currency that is willing to sell it for bitcoin? Where is the liquidity coming from?
Have you ever used a cryptocurrency exchange? I admit, there have been some bad actors in the space as there is in any nascent technology, but at this point there are a number of legitimate and even regulated exchanges in multiple jurisdictions.
You can easily look up the volume traded on these exchanges. There are still some shady exchanges out there so I’d mainly look at the more trusted/regulated ones like Coinbase Pro, Bitstamp, Gemini, Kraken etc.
Strike has already released a working app for US customers that I’ve been using without issue for payments to friends and family as an alternative to Venmo/PayPal.
I guess you still haven't explained where the liquidity is coming from. Coinbase and the rest explicitly call out the fact that there is NOT instant settlement, and that your request may or may not be fulfilled at the agreed price.
That means Strike needs to have reserve currency to cover any fluctuations between the time they "instantly settle" your transaction, and when they actually are able to convert that into USD or Euro or insert currency at an exchange.
I keep getting downvotes and yet nobody can explain the magic handwaving to me with anything other than "but my transaction worked". It's great that's working when their transaction flow is probably measured in the hundreds of thousands of dollars, but plenty of pyramid schemes churn along just fine until they grow.
I believe Strike is upfront about the fact they are using the stable coin USDC at the exchange for that part of the transaction. USDC is backed by Circle and Coinbase and is probably regarded as the most trusted centralized stable coin.
The downvotes are probably because of the “intrinsic value” and Ponzi scheme arguments which people that have been in this space for a decade have grown tired of.
You're right to distinguish between currencies with exogenous demand (like USD) and those like BTC. But the "bank run" comment makes no sense, even for beanie babies.
Bank runs exist in a fractional reserve context -- because banks lend out their deposits (which stimulates growth), your listed balance is actually an IOU. That is, an obligation to "cover" deposit balances, which can be met or not.
Now think of people trading beanie babies. One person sells a beanie baby, the other person parts with $10k. What is there to "cover"? Who is keeping what in reserve? The answer is nothing and nobody --- in a world where beanie babies were currency, this would be perfectly fine.
tl;dr you actually need (fractional-reserve) banks for a "run on the bank"
If you live in a situation where the only local fiat currency is even worse, then the “volatility fee” of cryptocurrency may be well worth the money to decouple yourself from that bad fiat currency risk. Maybe you can purchase things directly with the cryptocurrency, or maybe you just wait until you can drive across the border to a place with more stable fiat currency, sell cryptocurrency for that currency, and buy milk. Simple currency exchange or traditional custodial stores of value like precious metals wouldn’t work, since you’re still beholden to the original fiat currency problem.
At any given time, some small slice of world currency demand will be focused on this “protection from unstable fiat currency” and some other small slice would be like a prepper mindset hedging their perceived risk of facing that (eg “but what if the US dollar collapses?” from people with very extreme risk aversion preferences).
That total “market cap” demand for cryptocurrency will surely be way, way lower than traditional fiat currencies, but it may still be much higher than the current total market cap for crypto, which means there is room for completely rational speculative buying and holding of crypto, depending on your outlook and risk preferences, for perfectly sound reasons.
I highly doubt Bitcoin is ever going to become a major direct medium of exchange. But also it does not need to become that. It can offer big value in a lesser role that would still justify speculative buying of crypto today.
If someone is in a country with a collapsing local currency, they still have to transfer that money to a Bitcoin exchange before they can transfer the Bitcoin.
If the currency is collapsing, who’s going to trade Bitcoin for the collapsing currency? That’s the necessary first step in this process.
If I’m just trying to cross the border with Bitcoin in my mind wallet so I can convert it back to cash on the other side, why does it matter if 1 BTC is $10 or $10,000,000? It doesn’t, because moving money round-trip through a currency is a matched pair of buy and sell trades in a short period. Net zero, long term.
This narrative that Bitcoin is somehow going to save refugees from oppressive governments is possible, but deeply flawed in practice. Either way, it’s not a long term driver of demand.
Frankly, it’s far more likely that the dictators of such countries would use Bitcoin to flee the country with their citizen’s money and avoid prosecution than the other way around.
> If the currency is collapsing, who’s going to trade Bitcoin for the collapsing currency?
Well, you'd probably find someone wanting to trade Bitcoin for goods, and as part of the transaction, someone else would end up using local currencies to buy those goods.
... Of course, in the general case, you're probably more likely to find someone who wants to trade USD for those goods.
This is why you would speculatively buy Bitcoin and hold it long before that happened, at a time when people are happy to accept your fiat currency for Bitcoin. People learning from experience in Venezuela, Zimbabwe, North Korea, would probably feel glad to put some fraction of savings into crypto just in case, knowing that the interim volatility risk of it sitting in crypto is a worthwhile price to pay to have a reserve money supply that does not need to pass back through their original fiat currency on the way to being spent (as precious metals, stocks, bonds, securities, options, etc. all would).
Ok, now lets say you did the Bitcoin thing and your assets are safe. You are still suffering from poor governance and Bitcoin isn't going to change that one bit.
You can take a bus to Colombia and actually buy food or medicine. You call that nothing, so fine, don’t but Bitcoin if that works for you. It’s surprising you don’t think others might possibly disagree.
> If you live in a situation where the only local fiat currency is even worse
Then you start buying and transacting with good old Yankee dollars, as the good people in places like Zimbabwe and Argentina and Cuba and other such places have done, because this is the low volatility option and dollars are widely accepted. You don't buy the cryptocurrencies, as they are subject to wild price swings and only marginally accepted.
If you can't buy dollars, something like gold is a much better hedge than bitcoin.
Gold would specifically not be a good choice in that situation, because you have to pay a custodian to deal with the gold and store it for you. That means either transacting in the original risky fiat currency any time you convert between the currency and gold (such as to buy things), or else transacting in the original risky fiat currency to get a foreign exchange to another currency and then transacting with a custodian - which defeats the whole purpose of converting the asset away from the original fiat currency that exposes untenable risk.
But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is. Things like "Petrodollar" https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol... increase the volume and provide additional stability. As "market cap" of bitcoin increases, so does the stability. All things considered, bitcoin still is very bad because of the transaction throughput which still remains an unsolved problem. I don't see how arbitrage can happen on the price if the transactions are so expensive. I guess BTC will end up living in the various exchange siloses
> But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is.
I don't think it's that simple. Transaction volume doesn't just appear from nowhere.
IMHO, the stability of the US dollar mainly comes from the geopolitical & economic position of the US coupled with trust that its government won't totally mismanage it. Bitcoin has neither of those things and never will.
> Transaction volume doesn't just appear from nowhere.
Indeed, it takes time to bootstrap a currency. That’s why it’s absurd to expect Bitcoin to be stable when it’s less than 10% the market cap of any other significant reserve asset, and may plausibly keep increasing its dominance in the reserve asset market.
> Bitcoin has neither of those things and never will.
I disagree - I trust much more strongly that Bitcoin will not be mismanaged than the USD, because bitcoin is governed by very simple and utile rules that are practically impossible to change, whereas the USD can be and has been inflated substantially.
I don’t think your first point (the economic position of the US) is as important as you think, especially as Bitcoin comes to be the reserve asset of a larger and larger set of productive economic actors.
> I disagree - I trust much more strongly that Bitcoin will not be mismanaged than the USD, because bitcoin is governed by very simple and utile rules that are practically impossible to change, whereas the USD can be and has been inflated substantially.
Following fixed, unchanging rules is kind of the opposite of being managed, let alone well-managed.
> ...especially as Bitcoin comes to be the reserve asset of a larger and larger set of productive economic actors.
"If" not "as": that hasn't happened yet and it's quite likely that it won't happen.
> For a monetary asset, being “managed” is a liability.
I'm not so sure of that. For instance: Bitcoin isn't money, but something that people hoard and speculate on. If it was more actively managed, its parameters could perhaps have been tweaked until it started actually acting more like money.
I've always wondered why people are so obsessed with petrodollar recycling? The USD has been a global reserve currency since the 1920s and superseded the GBP completely post-Bretton Woods. The petrodollar mechanism is not what caused the USD to be stable nor a safe haven asset. It's because the US has strong property rights, deep and liquid capital markets, a large and diverse economy and most importantly is willing to absorb the financial flows associated with being the reserve currency (mercantilist economies will not accept the appreciation these bring).
Did you mean "market share" (as in, notional share of all transactions) as opposed to "market cap" (as in, the sum of all bitcoin supply, multiplied by the current price)?
It sounds like you've made up your mind about Bitcoin, but I believe you've missed the big picture. The above video, if you watch it with an open mind, will help you to glimpse it. Hint: it's not about cappuccino, it's about living in a world of competitively devaluing currencies and resulting asset inflation.
You haven't shared "the point" just a link to MicroStrategy, a failed software company whose CEO had to pay an $11 million dollar SEC settlement decades ago for cooking the books, making a desperate Hail Mary play buying near the top of a speculative mania in a bid to gain relevancy. MSTR is the new "Long Island Iced Tea" -> "Long Blockchain Inc" rebrand [1]
Humorously enough, the same is roughly true of Tesla, a car company which sells 5% as many cars at Toyota while valued about twice what the entire rest of the car market put together is worth.
Their only source of profit is selling carbon credits to traditional automakers who won't need them anymore as they're all moving electric too. One more Hail Mary distraction to maintain the one thousand three hundred P/E ratio. In a manufacturing business. Not software with zero marginal cost. Manufacturing. The industry average P/E is right around 15.
> ...it's about living in a world of competitively devaluing currencies and resulting asset inflation.
Currency is an intentionally-lossy temporary store of value. It only needs to hold its value for as long as it takes you to buy assets with them. At 2% inflation it does. Anything else is a straw-man you'd recognize if you attended ECON 101.
Asset inflation isn't inflation, it's an ROI. CPI is inflation.
This is a typical set of r/Bitcoin talking points that are easily debunked.
You know, your point about Tesla has given me lots of conflict. What did I miss? Obviously this question came when I sold off my TSLA stock at 500$ thinking — it was overvalued — and then watching it rise to the equivalent of 4,000$. I reached the conclusion it’s no longer solely about cash flow and debt ratios and market cap and addressable market and whatever other traditional metrics we previously used to value companies. The emotional component has become more important.
People are buying TSLA because they want to do something about climate change. Or maybe cause they worship Musk. This is probably holding for other companies in other industries. Bitcoin is definitely not only being bought because it’s digital gold. It’s being bought because people are emotionally attached to resetting the system. A bunch of middle fingers to the dollar rich (Bitcoin poor) by a bunch dollar poor (Bitcoin rich). This is why people are buying BTC.
Whether it is TSLA or BTC — value itself is being disrupted.
> People are buying TSLA because they want to do something about climate change.
I hope given Tesla's new affinity with Bitcoin that what they want to do is "make it worse" lol. Tesla is literally selling its green energy credits to dirty car companies, then throwing it at Chinese coal miners.
The market goes through particularly bubblicious periods of pricing mania from time to time. It's happening now, it's happened before, and it'll happen again. I wouldn't read too much into it.
"..in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company." - Benjamin Graham
Prior to the pandemic stimmy money, poor people weren't investing and middle class folks were. When the pandemic hit, poor people lost their jobs, middle class folks kept them. Both poor and middle class folks received stimmy money. The middle class folks invested it.
The whole run up there were trillions on the side-line, and folks who remember 2008 weren't about to let another V shaped recovery pass them by. They plowed money into whatever they could. Literally everything exploded in value last year. My personal trading account is up almost 14X on a 1-year basis today.
It's nothing to do with fundamentals, just a bubble. It'll revert in time, and then it'll grow again.
Again, Tesla makes climate change worse by investing in Bitcoin so if climate change is the driver they should sell ASAP. I think you're overestimating the average speculator's love of the environment.
Yes, this time could be different. Past performance is not an indication of future performance. That said, it would be the first time something's gone parabolic upward (while lacking the fundamentals) without retracing, and I don't see any reason this time would be different.
I’m not debating the subtleties of Tesla’s carbon footprint. Im just asking what if the people buying TSLA are not buying for profit? What if they are buying because they believe it is the way they can fight climate change.
Will it eventually retrace? Probably. Almost surely. But it will probably not matter at that point relative to today.
I think we are in an era where stocks are mostly detached from fundamentals. Ask yourself who truly cares about fundamentals? It’s the uber wealthy who are trying to preserve their capital. Wealth disparity is huge so those numbers are fewer.
The Robinhood investors aren’t pouring over spreadsheets to decide where the best PE ratio tradeoff is most favorable. They aren’t trying to balance growth and income. They are literally buying whatever hyped them the most.
Now regarding the AMD chart. You should consider it in context of their defeat by Intel and subsequent turnaround. That, I think, drove the price movements shown in the chart. Did profit taking from amazing runs also matter? Probably. But you can’t ignore that AMD was nearly bankrupt and had to reinvent itself because it lost so much ground to Intel.
I think you can't judge whether TSLA is overvalued or not until they are no longer instantly selling out of all their products. People are bullish on TSLA because they have a product that many, many people want, more than they have the capability to supply.
Once they have their peak production capacity and have surplus stock across all markets we will get a better idea of their true value.
The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.
Yes, I agree, but I'm confident they're not worth twice the sum total of the entire car market by themselves.
> The most that the price of TSLA and BTC have in common is that both their values can be represented on a graph.
Well, that and one holds a chunk of the other. They're also surprisingly heavily correlated from a price action POV. I suspect there's a bit more going on than meets the eye. Burry tweeted the crazy level of correlation a few days ago.
CPI probably doesn't reflect inflation the way Fed looks at it. They use PCE[1]:
>An accurate measure of inflation is important for both the U.S. federal government and the Federal Reserve's Federal Open Market Committee (FOMC), but they focus on different measures. For example, the federal government uses the CPI to make inflation adjustments to certain kinds of benefits, such as Social Security.[3] In contrast, the FOMC focuses on PCE inflation in its quarterly economic projections and also states its longer-run inflation goal in terms of headline PCE.
That's quite interesting but the overall picture is the same in both CPI and PCE. It's just another way to measure inflation in consumer goods and services. Compare that to the usual Bitcoin advocates talking about inflation of the dollar relative to Bitcoin. It's measuring something completely different.
Your view on currency exposes your extremely elitist bias.
Are you aware that a large portion of the population is unable to purchase assets? What do you say to these people? What do you say as the dollars they earn pay less of their rent? Less of their healthcare? Soon...less of their groceries?
Nah quite the opposite. The world has had 14 years to buy Bitcoin. Happened at the same time as the iPhone. Everyone in these poor countries has iPhones or android devices and nobody wants Bitcoin for them except the first world pushers. I defer to the locals. If they thought it was any good they’d use it. They don’t.
I would tell those people that if their government is broken they have bigger problems than their currency and once they solve their leadership problems the currency won’t be an issue anymore. Tough but true. Nothing there changes with Bitcoin and it’s $20 transaction fees.
Right, yeah, if you pretend how much AAPL appreciated matters to anyone, asset inflation counts. Otherwise, it's CPI, and [citation needed] if you want to posit otherwise.
Housing, healthcare, education and childcare costs matter. I don’t believe CPI is accurately capturing the skyrocketing costs of these things, which are the most significant expenses for most households.
And yet you and everyone else are unable to produce any meaningful sources or analysis that justify your beliefs. [citation needed] and we can talk about it.
Healthcare is a social policy matter, not monetary policy, and nothing to do with increase in the money supply. You take that up with your representatives not the Fed.
Housing is a function of city council zoning policy. You take that up with your city council not the Fed, or with the federal government it you want Japanese style zoning rules. [1]
Childcare is social policy, not monetary policy, and you take that up with your representatives not the Fed.
You can't just point to anything you don't like and say the Fed Did It or is responsible for it. All they do is control the money supply. Nothing more.
A reduction in your welfare isn't inflation. Necessities can outpace inflation. It's bad social policy, but it happens. What you fail to understand is that these prices will continue to outstrip a platonic ideal even if denominated in Bitcoin because the increase in pricing has nothing to do with monetary policy. Any temporary reprieve is due to speculative mania.
On average, the price per square foot of housing in the US is exactly the same now as it was in the 1970s, on an inflation adjusted basis. [1] In major metros, that number is higher, because of city policy, but on average, the number is flat. That means on an inflation adjusted basis in rural areas houses are cheaper per square foot.
Once you take into account that interest rates are about 1/5th of what they were back then, it's clear, housing is actually more affordable now than it ever was (per square foot).
Yes, zoning matters in rural areas. Minimum size rules, minimum setback rules -- all sorts of code changes -- have conspired alongside the 20% decrease in average family size and the changing tastes for more space, to make houses twice as big. Same price per square foot -- or lower! -- Twice as big. Twice as expensive.
I was wrong to say it has "nothing" to do with it, but it is by far not the dominant force as evidenced by the numbers.
If you're unhappy about poor folks not being able to afford the houses that's again social policy not monetary policy. I am too. But inflation isn't why.
By all means have at those windmills though, and please, cite your sources so we can have a debate on facts.
[edit] You're missing my point. Pricing in metros is more expensive because of council policy. Pricing outside the city is higher because they're twice as big. End of story. Please CITE YOUR SOURCES. This. Is. Not. Inflation.
You having a worse quality of life is not inflation.
Yes, white flight may or may not contribute to it. That's not Fed policy. That's social policy. And that's my point.
You're not necessarily wrong that the causes of the increases in prices for things like healthcare, etc. are due to policy issues, among other things. But you can kind of make that argument for any good or service - that that the increase in the price of x is a "specific industry/policy issue" and not a "monetary issue".
That doesn't negate the fact that people are still paying higher prices. If the fed is mandated with controlling the increase in prices then it is still upon them to address it, no? The fact that monetary policy is not a primary cause of the good/service specific inflation is irrelevant.
> That doesn't negate the fact that people are still paying higher prices. If the fed is mandated with controlling the increase in prices then it is still upon them to address it, no? The fact that monetary policy is not a primary cause of the good/service specific inflation is irrelevant.
If 'everything is going up the same amount' then sure. If one particular contributor makes an outsized move in the wrong direction what's the fed to do? Fire up the printer at the cost of all of the other areas of life that aren't going up?
Healthcare contributes to inflation, sure, but if government passes a 50% tax on all healthcare procedures overnight, that's not the Fed's job to rectify. It's not their job to fight Congress on how relatively expensive certain things are. If the government decides healthcare should only be for the rich (...er) then it's not the Fed's job to change that.
They would account for what the newly more expensive healthcare cost does to inflation as a whole, and increase or decrease the money supply to match.
Their job is systemic, not targeted. Want cheaper healthcare? Talk to congress, not Janet Yellen.
>Housing costs have nothing to do with the Fed? Really? You don’t believe record low mortgage rates are driving demand at all?
Imagine if you are a bathroom remodeling company and people are building new bathrooms for $5k. You can build a bathroom for $4K. Suddenly the fed is loosening its monetary policy and people are building bathrooms like crazy with their bathroom mortgages. They are willing to pay $10k per bathroom but your costs didn't change. It's now extremely profitable to build bathrooms and that's exactly what you are going to do. You're going to hire lots of workers so that everyone can get their bathrooms. Turns out, a competitor does the exact same thing but they sell their bathrooms for $9k. Add more competitors and the price will be very close to the cost of construction.
Now replace the bathroom with the entire house. Suddenly you realize something. It's very difficult to find land to build your new house and even if you did you would have to upzone the property by tearing an existing property down and building a 2-3 story multifamily home there. Unfortunately, doing this is illegal in many places and where it is legal permits are being denied for arbitrary reasons.
You can't tell me that construction companies can't make money off new construction because the cost of housing is too low.
Rural and unincorporated areas have strict zoning too. Look at Tuolomne county (https://www.arcgis.com/apps/webappviewer/index.html?id=3e926...) for an example I could easily find a graphic for. The vast majority of privately-held land in the county is zoned RR (brown, 1 unit per 5 acres), AG (1 unit per 18.5 acres), or TPZ (1 unit per 37 acres).
Inflation adjusted $/sqft on average across the US housing costs exactly the same as it did in the 1970s. With interest rates 1/5 of what they were back then, each square foot is actually much more affordable.
I admit I misspoke, because of course, monetary policy controls interest rates, but I maintain that a change in affordability is not dominated by inflation but rather other social policies. Houses are twice is big and families are 20% smaller.
> Inflation adjusted $/sqft on average across the US housing costs exactly the same as it did in the 1970s.
> Inflation adjusted
Inflation is a result of monetary policy. So when you’ve adjusted the price for the monetary policy, you see that 50 years of capital accumulation and efficiency has been soaked up by monetary policy.
> I admit I misspoke, because of course, monetary policy controls interest rates, but I maintain that a change in affordability is not dominated by inflation but rather other social policies. Houses are twice is big and families are 20% smaller.
Things are supposed to get cheaper as capital accumulates. Social policies undoubtedly have an effect. So does increasing the money supply. An increase in the number of currency units necessarily causes each unit to be worth less, ceteris paribus.
> Happy to debate more but [citation needed].
I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false.
> "I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false."
No, it's not, you're looking at half the equation. Value of money is a function of both supply and velocity. If velocity drops but supply increases commensurately, each unit of currency corresponds to the same amount of physical goods. [1]
This should be dead obvious to you, as the money supply doubled last year but the price of Apples went up 2%. Not 100%. Same with the entire CPI basket. Housing actually got cheaper. Rent went down a ton.
> Inflation is a result of monetary policy. So when you’ve adjusted the price for the monetary policy, you see that 50 years of capital accumulation and efficiency has been soaked up by monetary policy.
We are talking in constant dollars that have a 0% notional rate of inflation. That's what inflation-adjusted means in this context.
What do you mean by "50 years of capital accumulation"? People don't accumulate or hold dollars for exactly this reason. They accumulate and hold assets and value, whose performance matches or exceeds inflation.
> Things are supposed to get cheaper as capital accumulates. Social policies undoubtedly have an effect. So does increasing the money supply. An increase in the number of currency units necessarily causes each unit to be worth less, ceteris paribus.
I'm not sure what that means. Things aren't supposed to get anything as capital accumulates.
An increase in number of currency units may or may not cause each unit to be worth less, as velocity is the missing half of the equation. With that in mind the goal is each unit to be worth 2% less each year, to incentivize higher velocity of money and investment.
It's a straw man to say that your buying power drops 2% each year as a result of inflation. You're only penalized for inflation for the period between you receiving the dollars and using them to purchase assets whose performance exceeds inflation.
> No, it's not, you're looking at half the equation. Value of money is a function of both supply and velocity. If velocity drops but supply increases commensurately, each unit of currency corresponds to the same amount of physical goods. [1]
for consumer goods, “velocity” is the rate at which those goods are consumed. People aren’t generally choosing to starve themselves or pay rent on 4 apartments according to economic conditions.
i should have included “ceteris paribus” with my statement but I thought it was obviously implied.
> This should be dead obvious to you, as the money supply doubled last year but the price of Apples went up 2%. Not 100%. Same with the entire CPI basket. Housing actually got cheaper. Rent went down a ton.
Ceteris is not paribus. The increase in money supply soaked up all the decrease in prices people ‘should’ have experienced.
> We are talking in constant dollars that have a 0% notional rate of inflation. That's what inflation-adjusted means in this context.
I understand what “inflation-adjusted” means. Once you adjust for the price increase due to people’s dollars being worth less, the commodity costs the same. Of course people aren’t paying in notional inflation-adjusted dollars, they are paying in the actual dollars that have depreciated, so they end up paying more for less, because of monetary policy. The value they miss out on accrues to people who get the new money earlier.
> What do you mean by "50 years of capital accumulation"?
I mean that the capital stock of the economy has increased over the past 50 years as a result of people investing their surplus in capital goods. This results in increased productivity and (ceteris paribus) a lower real cost of goods and services.
> People don't accumulate or hold dollars for exactly this reason. They accumulate and hold assets and value, whose performance matches or exceeds inflation.
Yes, because monetary policy results in depreciation of fiat currency.
> I'm not sure what that means. Things aren't supposed to get anything as capital accumulates.
Things are supposed to get cheaper as capital accumulates because labor is more efficient when combined with tools, resulting in more outputs and the subsequent decrease in real price.
> An increase in number of currency units may or may not cause each unit to be worth less, as velocity is the missing half of the equation.
You’re missing the part where I said “ceteris paribus”, a commonly specified requirement for assertions about the connection between theory and economic reality.
> It's a straw man to say that your buying power drops 2% each year as a result of inflation. You're only penalized for inflation for the period between you receiving the dollars and using them to purchase assets whose performance exceeds inflation.
It’s not a strawman, its literally the case.
Additionally this requirement to invest dollars before they depreciate leads to asset prices skyrocketing without support from the underlying fundamentals. This leads to people who are already invested (the rich, the wealthy, the established old money, the upper class) gaining disproportionately, and new investors being priced out. Hence monetary policy is directly responsible for the rich getting richer and the poor being left behind.
>I’m not sure how to proceed. The notion that one could print money and have each currency unit correspond to the same amount of physical goods is prima facie false.
The entire problem is that it's not false at all. There are various ways to produce more physical goods without employing more domestic workers. Every time the fed is printing money that money gets invested in a way that does not result in decreased unemployment. It's being used to produce more physical goods which keeps the price of physical goods constant.
Ultimately the only truly scarce "good" is labor. Everything derives from it. If prices are not rising that means labor is not scare at all, which is idiotic because there are lots of ways to productively deploy that labor.
> The entire problem is that it's not false at all. There are various ways to produce more physical goods without employing more domestic workers. Every time the fed is printing money that money gets invested in a way that does not result in decreased unemployment. It's being used to produce more physical goods which keeps the price of physical goods constant.
I was unclear and I should have included ceteris paribus, but you’re correct. The fed keeps the price of goods constant when it should be decreasing.
> Ultimately the only truly scarce "good" is labor. Everything derives from it. If prices are not rising that means labor is not scare at all, which is idiotic because there are lots of ways to productively deploy that labor.
Raw materials are also truly scarce, and you’ve neglected to apply the same level of analysis here as you did above.
There's actually considerable debate on the subject. I find it reasonable that things which are outside the CPI basket can indeed experience inflation.
If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?
> If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?
Not necessarily, no. The value of money is a function of supply and velocity. If the velocity went down and the supply went up 25% the fed can still nail its 2% target. [1, 2, 3] If the velocity increases next year the fed can shrink the supply commensurately to maintain its targets.
That's very interesting I was not familiar with the concept of velocity.
It still seems to me that velocity can vary depending on the underlying entity. So unless every asset has the same velocity measure as the items in the CPI basket, it seems that there has to be some amount of inflation somewhere like possibly US equities.
The idea of velocity is pretty simple. If you print a $1T coin and hand it to me, then I throw it in a safe and forget the code, did the increase in supply cause any material increase in inflation experienced at the point of sale by the average person? Probably not. The supply went up, but the average velocity went down commensurately.
How this interacts with assets is in my opinion not super clear. Pricing of assets is supply and demand, unlike the CPI basket. The CPI basket is based on human need. There's no human need for AAPL shares. However, there's a ton of stimulus money, and folks who remember 2008's V-shaped recovery, and a bunch of people stuck at home day trading. I think that's much more likely to be driving asset prices than supply. After all supply is enacted by changing lending parameters.
To the extent asset prices don't put pressure on CPI, they reflect an increase in welfare, not an increase in inflation.
The velocity of a particular Bitcoin arrives at 0 given enough time. Bitcoin get lost. These Bitcoin cannot move and thus contribute to the deflation of Bitcoin. They effectively shrink the money supply.
These people are all disingenuous actors. They know the point, but they want to flood all of these threads and act clueless. Bitcoin is digital gold, gold's replacement. It's been here for 12 years and yet, all these actors show up in every Bitcoin thread. It's the greatest monetary shift in hundreds of years.
ArcticBull below me shows up in EVERY single Bitcoin thread to trash talk Bitcoin. Here's where we are at; some love Bitcoin, and others show up just to talk trash. Bitcoin is only going to grow beyond $100k the next couple years regardless of how sourly "ArcticBull" wants to astroturf.
Bitcoin is a modern day example of what happens when you have a currency that has deflation instead of inflation at it's core.
It becomes actually more expensive to buy anything in the present, as a result, consumers stop purchasing, and as a result economic activity decreases.
DigitalGold is also non-sensical, because that is simply designed to track against inflation, to prevent the loss of today's buying power tomorrow because of inflation. But when something appreciates 10,000x it's not really a hedge against inflation anymore, but a different speculative instrument entirely.
The irony behind bubbles is that you cannot profit off of them by acting rationally. If everyone participating in the bubble were acting 100% rationally, the bubble wouldn't exist in the first place.
> ArcticBull below me shows up in EVERY single Bitcoin thread to trash talk Bitcoin. Here's where we are at; some love Bitcoin, and others show up just to talk trash. Bitcoin is only going to grow beyond $100k the next couple years regardless of how sourly "ArcticBull" wants to astroturf.
So what? My argument has never been about price but about fundamentals. The fundamentals are crap. I don't care if gets to $100K in the "next couple of years" and neither should you. The price going up doesn't make it good, the price going down doesn't make it bad.
Spending an Argentina of power for 7 tx/sec makes it horrifyingly bad.
Wanna make a 100% ROI? That's not that hard. Risky, but you can make one overnight if you spend some time on r/WallStreetBets.
Hedge fund managers are never going to publicise an impartial view about anything, especially not something they are heavily invested in. Forming a positive opinion about Bitcoin based on what two hedge fund managers, both bullish on BTC, have to say, seems pretty dumb.
Unless fiat is abolished, the price of something in BTC will always be pegged to USD. As USD devalues as a result of inflation, the price of a product in BTC decreases.
I don't see the difference between someone in Venezuela choosing to hold their net worth in BTC (which could halve at any moment), versus their native, rapid inflationary currency. Both are risky, but if the central bank sorted itself out and fixed the currency issue, no one will have any reason to hold BTC any more.
Please don't fall for the trap of calling actual money fiat as if bitcoin wasn't fiat. If at some point bitcoin becomes money it will be fiat money, as bitcoin is not backed by a commodity. So far bitcoin isn't money because it's not the most liquid asset. In order to buy anything with bitcoins, first you'll have sell them for actual money and use that to buy stuff, hence not money.
Indeed - if your government is crap, you have bigger problems to worry about than your currency. Once you sort out the government you no longer have to worry about your currency. There's no world where simultaneously you have an untrustworthy government and you can bandaid over it with crypto.
Any real value analysis of Bitcoin that doesn't take Tether into account isn't worth much. As long as the whole crypto market is built around a currency issued by an unregulated and unaudited company with a mile-long list of past controversies, any unbiased take on the future of Bitcoin has to allow for a significant downside risk.
Tether is a real Michael Burry moment for me. They claim to have 30 billion in reserves right now and are "printing" a billion tethers at a time. Yet nobody can confirm their reserves and the company itself is absurdly opaque.
Either there is an incredible amount of criminal fraud behind this or... this is perfectly reasonable?
Yes, but as long as nothing is stopping them from simply minting out of thin air, I wouldn't bet against their ability to keep pushing the prices up.
Daily volumes of tether trades are consistently a high multiple of the total supply. (Today it's 130bln vs 30bln.) So I don't know if it's safe to even trust that number.
As per Steins law, anything that cannot go on forever must eventually stop. Question is how long?
>What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)?
BTC is only volatile as not enough people use it. Further, if you stay on USD, every year a cappuccino will cost you more. Fractional reserve banking is practically a license to print USD. We're not funding the stimulus or really any of our government via tax anymore. Inflation is the real tax.
"unstable, volatile, frantically manipulated currency"
-- this is often the case with any news, not just "pump and dump" schemes. Take the Chinese CNY. The CCP have been undervaluing it for years for the purpose of attracting business.
the USD is very much subject to social media and traditional news manipulation. When the US decides it wants a stimulus package or other types of debt, it drives down the dollar's value. Granted the US is good about making payments to creditors, i.e bonds, it is not immune to fluctuation.
It is sad but the way of the dollar is slipping and the global demand currency. It is slowly being replaced by the CNY and other market demands.
USD price does fluctuate and inflate over time yes, but the difference is that this is essentially an invisible effect on day to day life for anyone that is not doing forex trading.
The reason the US dollar is "stable" is partially due to the fact that it is backed by the US government. It is a requirement that businesses operating in the US accept payment in US dollars. Until somewhere mandates that bitcoin _must_ be accepted, it will never truly be a currency, the same way that gold is not a currency, and the same way that wheat, or potash, or shares in GME is not a currency.
There's also a concept of "sticky" prices that most economists are quite familiar with - this assists in keeping the price of a coffee stable, whether or not technophiles accept it or not. Even if the price of the US dollar fell by 50% today, your coffee would still cost you around $2 or $3 tomorrow (assuming the coffee shop was even open).
> It is a requirement that businesses operating in the US accept payment in US dollars.
People and businesses in the US have to pay the US government in US dollars, but there's no law requiring that a business accept any particular currency.[1][2]
That said, if you do try to make your own currency, the feds will find some way to shut you down.[3]
By Austrian economics- you can have stable prices OR stable money. We are being scammed for the last 100 hundred years, and the price volatility one sees in Bitcoin et al. is precisely the reflection of actual supply and demand constantly battling it out on the marketplace.
The fact that dollar or euro seem stable is only possible with the violent tempering of national banks and the like of IMF. They only seem stable.
Money as a measure of value for other goods is something that is crashing constantly and will continue to do so until we let go of of the crazy attempt to do so.
*no intended for you personally, just a good place to plug my two cents (pun intended)
I'd advise anyone to read some Mises or the Dao of Capital by Spitznagel, the book is whip smart and applicable to basically any endeavour.
How can you possibly back up the claim that the USD is stable? My grandparents were able to buy several acres of land and build a house for 80k in the 1970s. Doing the same today costs 500k+!!! It's completely outrageous. Ths USD is far from stable and anyone who thinks so is either insanely privileged or ignorant!
Because the cappuccino will continue to cost them $4 tomorrow, next week and next month. Sure, its value changes and a cappuccino may even cost a different amount sometime in the future, but its easy to know the value of the money you have because the exchange rate between dollars and items in the shop doesn't change so much.
Contrast that with bitcoin, where the value often changes by many, many cappuccino's in a single day.
Moderate inflation is a feature, not a bug, due to sticky wages [1]. Without inflation you get longer lasting recessions and worse unemployment.
[1]: https://en.wikipedia.org/wiki/Nominal_rigidity
Like Tether? They’re currently in the middle of a fraud case alleging they are not at all backed by USD and thus the peg is supported by fiat and liable to fall off.
(I mean this in the dictionary sense of the word fiat that gives meaning to the phrase fiat currency. I don’t mean tether is supported by fiat currency)
I am totally on board a pegged crypto currency that tracks US dollar. For me and many others I presume, stability is far more important than anything else that crypto currencies have to offer.
Well there are certainly plenty to choose from, the major downside to stablecoins is that you need to place trust in the mechanism that ensures they are actually stable. Tether is the biggest one and it's pretty unclear whether they are trust worthy.
IMO one of the most important properties of cryptocurrencies is that you only need to place trust in the code & that the miners are selfish.
Not to invalidate your point, but Tether is a particularly untrustworthy example. USDC is another centralized stablecoin that's more transparently managed than Tether, and then DAI is a decentralized stablecoin that keeps its value through a smart contract that manages collateral and minting in order to keep its value steady.
Volatility is a non-issue with the release of CME futures. You can short Bitcoin or Ethereum futures to lock in your price with respect to USD at any time.
The base futures contracts are 5 Bitcoin i.e. notional value of $200k, but that's merely an inconvenience and not a fundamental blocker to subdivide the futures contract or have someone do it for you.
I think for years payment companies like Bitpay have had price guarantees for merchants(probably using futures in the backend), but you do have more counterparty risk dealing with unregulated exchanges.
It’s reasonable to expect the value of Bitcoin to stabilize as it becomes a more popular store of value.
The US dollar provides stability and security over a very short timescale. It’s been inflating for decades (punishing dollar holders and waged/salaried workers) and based on the current political environment (insane dollar printing, “MMT” having political currency, etc.) there’s a substantial risk of serious dollar instability in the next few decades.
These currencies will inflate in value as their network grows wider. Each new user adds value like a telephone network. Eventually, there will be a point where everyone who wants to be connected is connected, they have bought the bitcoin they want and bitcoin prices reach an steady state. At that point, it should be stable enough to use as a currency.
Its not MLM its network effects. Every node added to a transactional network adds real world value to that network. Its etreamly evident in telephone networks.
The reason people would want to buy bitcoin once it has grown out of its speculation is the vast marketplace of people and vendors who accept bitcoin as tender + the use of bitcoin as a hedge against the inflation of your local fiat currency.
It becomes another investment vehicle to diversify with.
MLM dynamics actually do apply to monetized assets in some cases. Cf. “Bubble Theory Of Money”, Gresham’s Law.
Once the speculation upside is gone, you would use Bitcoin because it’s the best available reserve and settlement asset. What are your other options? Inflationary USD or Yuan? Few rational actors would prefer to hold those.
Investors don't have to choose between investing in Bitcoin or parking their money in cash.
The stock market, real estate, commodities, and other assets don't lose their value if USD inflates.
The narrative that the only two choices are to buy Bitcoin or lose out to inflation is a fiction designed to convince people to buy more Bitcoin. Bitcoin isn't the only investment option.
> Inflationary USD or Yuan? Few rational actors would prefer to hold those.
Does the Fed have anything it can do on the demand side? I'm pretty rusty on my macroeconomics, but I thought you needed fiscal policy to buy stuff if you want to juice demand.
Edit: I thought it was obvious, yet in response to comment below - theoretically to get real inflation one has to adjust the M3 for the growth of the total amount of "stuff" in the economy. As that growth is just 1-2%/year , the M3 shape is visually indistinguishable from the real inflation on any given time period of up to several years.
In response to your edit, I don't know how you can claim that "real" (according to who? you?) inflation is somehow divorced from the purchasing power of a dollar. What matters to most humans is how far their wages go at the shop.
Hand-waving at money supply and "total amount of stuff" without reference to prices makes as much sense as arguing "Well obviously daily commutes were shorter in 2019 than 1919 because cars are much faster than horses. Just look at my chart of relative top speeds!"
> A more exact definition of inflation is a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise.
> Inflation refers to a rise in the average level of prices sustained over time, which also corresponds to a fall in the internal (domestic) purchasing power of money.
Investing in Bitcoin seems like investing in GameStop: so many people are obsessed and want in on it but almost nobody really understands what’s going on or why the value is growing. They just want the easy money. Regardless of whether Bitcoin is a good investment or not, this is not a healthy way for an investment market to work
A lot of currencies in the world are not stable and some are worse than some shitcoin. Also, there are some ridiculous restrictions on what you can do with your own money. For example in India you simply can't leave the country with your money. What are you going to do ? Bitcoin is helpful.
> Crypto's volatility deters me from using it, simply put.
There is stable coins which have held a consistent peg against the US dollar for a couple of years now. You get all the benefit of high APY yield (relative to a bank account) and none of the volatility of a Doge or a BTC.
Really the only time you want to actually spend crypto is for regulated items. Porn + sex related items, and drugs. Maybe firearms and illegal information (ie. stolen credit cards, account credentials, malware).
This move by MC seems at odds with their recent spat with Pornhub, but I would not be the first to accuse financial organisations of hypocrisy.
Bitcoin is used as a speculative investment today only because it is so underpriced. Once its value stabilizes, its use in day to day transactions will grow.
> Should also note that MasterCard crypto transactions almost certainly won’t be settled on the blockchain.
And neither are USD transactions. In fact, USD doesn't even have a blockchain! The great thing with Bitcoin is once you want to cash out your Bitcoin, you can take it with you "on chain" without any intermediary (and it's a bit more convenient than carrying bags of cash).
Bitcoin is used as a speculative instrument because by definition it is deflationary. Which means it is more expensive to buy something with it today, then tomorrow. Just look at Chamath's tweet about how he bought a property for Bitcoin in 2014 for $1.4MM but today that same amount of bitcoin would be $100MM+
This creates an environment there is never a reason to use the currency for a purchase, strictly because it's supply is completely limited and never increasing over time.
Since the world economy continues to grow as GDP, output, and the population grows, it stands to reason that if Bitcoin in any way parallels our real world economic scenario, it would continue to rise in price per unit, because the overall GDP continues to increase.
As a result, it in fact never stabilizes, unless overall GDP stops growing.
Since it never stops growing, it never makes sense to use it for a purchase, and so you have a flywheel effect of ever increasing upward price pressure.
And this can go on until GDP is forced to shrink because people and businesses are all hoarding crypto tokens instead of participating in the real economy. This happened almost a hundred years ago when the world got too excited about gold. It' scary to think it could happen again with cryptocoins.
What historical period are you referring to? If you look at the first 200 years of US history, for example, there was plenty of real world growth on spite of slow price deflation. Gold and silver jointly backed the banking system until the Federal reserve started the current USD system in 1913.
In much of the rest of the world, the 40 years prior to WW1 were largely characterized by economic growth, while on an international (albeit decentralized on a national level) gold standard.
Probably an unpopular opinion on a VC site, but to some degree recessions are good and needed to weed out underperforming and utterly useless companies to free up resources. The lack of such and bail-outs/rescuing attempts by governments to "save jobs" [1] have delayed necessary restructuring for way too long. Also, if recessions are the norm rather than the exception I'd expect people and companies to be more prepared (e.g. by being less leveraged, keeping more savings), so that the actual event isn't as bad on a personal level and it's just about capital reallocation.
[1] an especially bullshitty argument, since ideally we'd want to get rid of jobs that don't add (enough) value to make the economy more efficient. I think the wasted human resources and ingenuity are the greatest tragedy.
Except low aggregate demand recessions do no such thing. It's often the opposite. Recessions keep alive inefficient manual labor intensive, low tech service industries because they make available cheap unemployed/underemployed labor. That's on top of the inefficiency of people doing nothing and living off of unemployment benefit/welfare.
Under performing companies get much more efficiently "creatively destructed" in an economy that is running hot where only the more efficient, well tooled businesses can afford employees at tight labor market wages. On top of this, fewer human resources are left wastefully idle.
High interest rates weed out underperforming companies. That's exactly what inflation is for. The reality is that CPI inflation is still dead and the fed is irresponsibly following a 0% interest rate strategy that will never work out.
Perhaps the pre-WW1 period is too different from today because we're still living in the 100-year+ experiment if central banks and applied Keynesian theory. If the Austrian school's business cycle theories are correct, recessions are longer and more painful under central banks' manipulated monetary markets because malinvestments are rarely cleared from the economy: those enterprises get bailed out instead, and taxpayers foot the bill.
Do you have a source for asserting that people saving gold caused the great depression?
It is only by definition deflationary if you are specifically talking about price deflation. I know that has grown to be the popular use of the term but inflation/deflation is much better defined by the increase/decrease in the supply itself. By that definition, BTC is still inflationary for the near future until it hits the 21 million BTC limit. It's just far less inflationary than USD.
It’s ironic that the best bull case for Bitcoin is that maybe it’s so devoid of actual use cases that no one can tell if it’s overpriced relative to its (lack of) utility.
Remember that in the near term the block reward is fixed in BTC and variable in electricity costs. The more expensive BTC, the more power is wasted mining. The BTC has to be sold off as its mined and paid to electric companies. To sustain this selling, more new money has to come in as a function of price to retain stability.
At current price and block reward, Tesla's investment of $1.5B pays only 6 weeks of electric bills.
"Once its value stabilizes, its use in day to day transactions will grow." and how will it grow when it's a fixed amount of currency with a fixed amount of transactions per second?
You can divide it over and over. The source code is a living document and transaction speed can be implemented either off chain, in the code base itself, or otherwise.
It’s weird to see so many opinions on this website that think BTC is a static thing that can’t or won’t adopt useful pull requests that miners agree are useful.
It’s like if it were the mid-90’s and everyone was just as skeptical of e-commerce of the web in general.
There was a fierce debate that lead to a hard fork over increasing transaction throughput by raising the block size, so I think it's really not a given that BTC will change to increase transaction speed.
Also, one problem people have with Bitcoin is that the idea of every node of the network storing and processing every transaction is fundamentally not scalabe. Sure BTC can change and adapt, but it's hard to overcome a fundamental design shortcoming.
Right and look at the result - Bitcoin Cash is a failure. This is true democracy. We tested both solutions and the champion still stands.
When there is incentive (if there ever is) then miners will adopt changes that make sense. But you need a true consensus. This built in conservatism is a great feature of BTC.
Funny how all voices of reason in the Bitcoin threads get downvoted into oblivion. I'm upvoting your posts to make them seen. Correct. Bitcoin Cash was a fork that tried to prove an incorrect point, and lost the fairest way possible.
Increasing block size is simply a bad idea. You do not move fast and break things in mission-critical code. Bitcoin is more focused on working (as it does) and remaining secure. Bitcoin is the best money the world has EVER seen, and it's not important to be able to buy frivolous things with Bitcoin. What is important is making sure value transfer is safe and secure. Those of us who routinely truly use Bitcoin understand we can easily send $50-100 or whichever value you prefer and put in low fees around $0.50-2 and just wait on the money to securely transfer. Not many of us using Bitcoin care if that takes 1-24 hours. The currency aspect is very beta yet, and may even take a few more years to mature and will have to come in layer 2.
>It’s weird to see so many opinions on this website that think BTC is a static thing that can’t or won’t adopt useful pull requests that miners agree are useful.
False. It will never be a mainstream medium of exchange because its block size can only handle 10 transactions per second.
It will be a reserve asset, used to back actual payment systems.
And eventually other newer technologies will supplant it, as long as there are “synthetic bitcoins” that can be on that new network, crypto collateralized.
If that new network launches as a sidechain though, then free unstaked BTC will be a perpetually dwindling amount of coins, and perpetually going up in price like collectibles or gold. With no other thing giving them value other than everyone else wanting it, and the miners / HODLers shilling it. It is a perfect investmen vehicle, it can go to $50 Billion a free coin once most coins are staked in other things. So, ironically, competitors better in every way will drive up the price for those who don’t switch and keeo HODLing for decades. And mining rewards will be worth so much that electricity will be wasted on a bigger and bigger scale until people can’t afford to power their homes since bitcoin mining makes more $. It’s sad... but where is the flaw in the logic
Yes there are, thanks to positive control from central banks. That's the point of central banks. Provide and maintain stability through the active expansion and contraction of supply against an index.
Show me a currency that has the exact same inflation figures every month for a single year and I'll send you a bitcoin.
Or alternately, just view a currency index like the DXY to see very closely that nothing comes close to this.
Here is what some real inflation data looks like (as viewedin terms of CPI). It can't even decide if it wants to stay positive or negative on a monthly basis.
> Show me a currency that has the exact same inflation figures every month for a single year and I'll send you a bitcoin.
That's strictly not a goal. The goal is a long-to-medium term target average.
> Or alternately, just view a currency index like the DXY to see very closely that nothing comes close to this.
DXY has little to do with domestic spending power, only the relative strength of one currency compared to a basket of other foreign currencies when spending abroad.
High vs low DXY measures the relative pricing of imports vs exports. Strong dollar means cheaper imports. Weak dollar means more competitive exports. This isn't really inflation related, it's a separate target. After all, I believe every central bank in the DXY basket has the same inflation targets to within a reasonable band. [1]
People overwhelmingly spend within the country not abroad.
> It can't even decide if it wants to stay positive or negative on a monthly basis.
That monetary policy takes time to be reflected in measurements in a multi-trillion dollar system isn't a bug.
The data you show me looks pretty. darn. good.
> ... and I'll send you a bitcoin.
Please don't. I care about the earth too much to have you blow 22 days (650kWh) of electricity and 100g of e-waste on you sending me one. If I wanted a Bitcoin I'd have plenty. You're welcome to sell it at an exchange, and donate the proceeds to an environmental organization like Ducks Unlimited [2].
That of course has the double effect of reducing the price, which reduces the quantity of electricity wasted on its production and security, which reduces CO2 emissions -- while also saving the wetlands.
You still haven't provided any data of any country showing consistent inflation. Hell, do it over a 10 year period annually. You still can't. No bitcoin for you and the wetlands.
Again, the goal is not to have the number exactly on every single year, it's to have it within a range. It's within a range. It's within a pretty tight range. Mission accomplished, even in light of the crazy pandemic years and everything else that's happened in the last 12 years.
Also, The fixed amount is a rule that has not been hit yet. It can be changed is software as nothing on chain prevents more then the total allowed BTC. its just a good idea that the amount of BTC is limited.
I’m in the minority in that I’d like to be able to spend my cryptocurrency in a way that:
1. The card handles also selling some off for taxes every transaction and put that in an interest-accruing account.
2. The card tracked my capital gains for each transaction for easy reporting on taxes.
3. The card provider will help manage fees - I’d rather bulk deposit funds to a layer2 and have fee-less payments over having to wonder what the current network fee is.
I’d prefer if it wasn’t MasterCard since I use Visa cards, but I can’t complain too much.
The reason I want this is that I have a lot of money in cryptocurrencies and I’d rather not sell them into other assets at the moment.
My bank mainly issues Visa cards. I’ve had multiple cards throughout my life, and I’ve never had a master card before.
I’d like to just add this feature to my existing cards that I already have set up for payments.
Completely off topic:
What I really want in life is:
1. If I could have a virtual credit card that could act as a proxy card and would let me use different cards based on the items I was purchasing (ex: if I’m getting gas, one of my credit cards may give better rewards)
2. A virtual mailing address that would resolve to my current address when used with any shipping provider. I move every few years and hate mail forwarding and updating my address everywhere.
Not necessarily if one works for a firm that moves you every few years. My family and I have lived in 5 cities in the past six years, due to changing work assignments.
> 1. The card handles also selling some off for taxes every transaction and put that in an interest-accruing account.
> 2. The card tracked my capital gains for each transaction for easy reporting on taxes.
How should it ever do that? It would basically have to limit you to spend Bitcoin that you acquired over that exact same card (like when you buy Bitcoin via PayPal) and that you hold in a virtual wallet provided by that card network operator. Otherwise they'd be unable to tell how many $ you paid to acquire the Bitcoin you just spent.
As a related question: how comfortable would you be with a cryptocurrency-backed electronic payment card that would require you to keep your Bitcoin in the wallet of Visa/MasterCard/whatever (or their associated banks or crypto custodians) in order to spend them?
> Otherwise they'd be unable to tell how many $ you paid to acquire the Bitcoin you just spent.
This is a massive reconciliation and record keeping overhead problem if you live in a jurisdiction that taxes crypto transactions for capital gains/losses. Michael Saylor said just recently in his interview with What Bitcoin Did that MicroStrategy plans to only use bitcoin as a treasury reserve asset and not as a transactional currency precisely because of the record keeping overhead.
How is this not solved by simply selling portions into fiat that cover expected spending needs, i.e. budgeting, and then transferring to bank account which is tied to your current credit card?
"Spending" and "transacting" is a solved problem, namely fiat and credit.
Why do crypto-assets, specifically Bitcoin, need to solve this problem?
Yikes. I was going to reply this is my biggest question/concern.
Cap Gains on btc profit is crazy insane. I guess it's offset if value increases 100% since you bought - but that's still a big tax tax on anything you buy.
Maybe you can get lucky and set some type of tax advantage first in first out during down swings to take a loss?
When Visa and MasterCard will warm up to bitcoin they will have ideal product for all the bitcoin millionaires.
When you are long on bitcoin you almost don't care about volatility. Because you can't predict the future the only good time to buy bitcoin is when you have too much dollars and the only good time when to sell bitcoins is when you have not enough dollars.
Sure, now you have 10 mln dollars in BTC at all tine high, and 2 mln after price drops but in day to day purchases it doesn't matter.
MasterCard could offer joint dollar-bitcoin account that works as follows:
You have some amount of dollars on that account, whenever you pay for something price is deducted from dollar balance.
If dollar balance is insufficient then some portion of bitcoin is sold automatically from your bitcoin balance to give you some multiples of thousands of dollars. You could also have manual trading available if you want to gamble a bit and buy some bitcoins if it dropped to 20% of last ATH or sell some ... I don't know when... when you are drunk and think you can predict the end of the bull run..
Not sure how much bitcoins would someone entrust MasterCard with current bankruptcy law but if it was significant enough amount then all bitcoin millionaires would get to use their fortunes totally hassle free.
> Sure, now you have 10 mln dollars in BTC at all tine high, and 2 mln after price drops but in day to day purchases it doesn't matter.
This doesn't track at all, unless it is a safe assumption that the general trend of Bitcoin will always be up, and you are able to time the market to do any major withdrawals at higher prices. Or, you don't have any major withdrawals, and you luck out in that your many small withdrawals average out at a higher price.
None of that is guaranteed, and with Bitcoin's volatility, you're in for a bit of a ride every step of the way.
For people who have big Bitcoin hoards due to (say) mining back when mining was cheap, maybe they won't mind the swings so much since all of it is "free surprise money", but this doesn't really work for people who bought into Bitcoin in the last 5 years or so (either by buying coins with fiat currency, or by building expensive mining rigs and burning electricity).
(If you're solely talking about the first kind of person, then: apologies! In that case I think you're pretty much on the nose.)
Compare this to wealth of Elon Musk. This month he's the richest person on planet, two months ago he wasn't even in top 10 (I think). Did anything changed for him? No. Can he not be the richest man on the planet in two months? Sure. Will it change anything for him? Still no.
I pretty much think about people who got into bitcoin early and they have more than 1000% gain and just hodl because they don't have much use for that kind of money.
Their daily purchases would be minuscule percentage of their bitcoin wealth.
The future would be very weird if the singular determinant of a person's success in life is how early they invested in Bitcoin.
Which is one of many reasons why we're not going to have a mass switchover to Bitcoin. It wouldn't actually benefit the average person, but it would make early adopters ridiculously wealthy for having clicked the right buy button at the right time and not lost their private key along the way.
In reality, once Bitcoin becomes a mechanism for the early adopters to wield wealth over the later adopters, everyone who didn't get rich early on will switch to playing a different game. No reason to go all-in on Bitcoin if the system is stacked in so far in favor of early adopters that you'll never be one of the wealthy ones.
>In reality, once Bitcoin becomes a mechanism for the early adopters to wield wealth over the later adopters, everyone who didn't get rich early on will switch to playing a different game. No reason to go all-in on Bitcoin if the system is stacked in so far in favor of early adopters that you'll never be one of the wealthy ones.
Where I live, this is how some people my age are starting to feel about real estate. Maybe that's why cryptos are so popular, for better or worse, among younger people.
This isn't a new situation or unique to Bitcoin, though.
It's the exact same story for any high net worth investors with most of their net worth tied up in stocks.
If you have 10 million dollars invested, be it stocks or Bitcoin, then pulling out $10K (0.1%) here and there to top up your cash account or pay your credit card off each month isn't exactly a huge deal. Investing that last 0.1% into stocks or Bitcoin at all times doesn't make a measurable impact on your overall returns.
This is very similar to what I'm currently doing, just borrowing against my Bitcoin holdings using MakerDAO, I have good liquidity on a day to day basis and my Bitcoin is still appreciating.
As long as there's no bugs in the smart contract, I don't plan on ever paying down that debt, since I expect the value of BTC to rise much faster than the value of my debt. My liquidation price is very low and if it were to reach that, it would mean a catastrophe anyways.
>Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want.
That's a misunderstanding of how these things work. If selling drove the price down, then the price would never go up! Why? Because nobody can buy without a sale on the other side of the transaction. The common belief that selling lowers the price comes from the fact that if you put out a big sell-now order on a market, it will eat through the asks sitting there already. However in the slightly longer term others will put up new asks, up to the equilibrium where the price is close enough to the perceived value that there's no money to be made, after tax, by going in to move it closer. The phrase "Sell! Sell! Sell!" is based on the idea of selling at any price because you want to get rid of it so badly, but that's not a normal sale. That only happens when a party suddenly realizes that they have too much of something, not when they are doing everything as expected.
There are two sides of an orderbook. There are sell orders (ask) and buy orders (bid).
When your sell order is higher than the highest bid it will be put onto the order book. If your buy order is lower than the lowest ask it will be put onto the order book.
You can sell or buy instantaneously by fulfilling an existing order. When you do a market order the exchange automatically presents you with the most favorable order. Once that favorable order is gone it will take the second most favorable order and so on. Each new order is less favorable than the last one.
By repeatedly selling Bitcoin you are clearing the order book on the buy side. Less buyers mean lower prices.
But the whole point of a bank doing something like this, is that they have the reserves needed to not have to buy/sell on the open market. They can take your "sold" token and give you the observed market rate for it; then put the tokens you gave them in their own holding account, listing them on the exchange for the price they're willing to pay, and wait. They're in no hurry to liquidate.
If a buyer then comes along who's willing to pay that price—and that price is higher than the current market price for the token—then the token goes up in value.
A system for spending Bitcoin would inherently put sell orders in at market price (directly or indirectly). This consumes the highest priced bids and moves the price down.
It’s the same story with any currency. Basic foreign exchange concepts.
Smart sellers don't sell everything at the market price as soon as they can, because that would cut through the crust of fair asks into the mantle of waiting opportunists. Instead they spread it out, at a rate the ongoing volume can bear.
You don't sell Bitcoin every time you buy bread, the merchant obtains bitcoin and sells it when they think they should. If nobody is holding Bitcoin, you have to buy it when you buy bread, which means there's a 1:1 balance between buying and selling with each transaction. If everybody is holding bitcoin, then the merchant will not mind waiting a little to offload it, because they know they will do better by taking their time.
I guess you're describing a situation where Bitcoin is used purely as a store of value and never as a medium of exchange. I can agree that a fiat store of value, if never used as a medium of exchange, or even a numeraire, is on very shaky ground.
Baker definitely should sell Bitcoin every time someone buys bread, otherwise they would be taking on currency risk, which is insane. Since they paid for flour/labor/amortized capex in fiat, if BTC price moves down they won’t be able to cover their obligation. This means a baker need to sell at least as much BTC as would cover their fiat costs. Since bakery margins are low it means they should sell most of the BTC they get every time someone buy bread from them.
Again, in real/practical world merchants are not there to invest in crypto, they are there to produce tangible goods and collect surplus of exchange tokens —- everything that is not profit needs to be de-risked.
Mastercard just tries to be relevant in an environment where they will not be relevant anymore.
Just look at the Nano cryptocurrency for example: 0 fees and <1 second transactions. You can send 0.00001 dollar or 9 billion to anyone in the world at any time. All you need is a phone.
Crypto is going to disrupt a lot of things. If it's not clear by now, you will be in for a surprise.
> Just look at the Nano cryptocurrency for example: 0 fees and <1 second transactions. You can send 0.00001 dollar or 9 billion to anyone in the world at any time. All you need is a phone.
Sounds great! But why can't we just use that technology to move our existing money around? Why do I have to trade my USD for NANO, transfer the NANO, and then trade the NANO back to USD at the other end?
Why wouldn't I simply engage with a bank that lets me use the same open-source technology to simply move the USD from one place to another? I don't want to become an investor in Nano just to transact any more than I want to buy PayPal shares to use PayPal.
We can and do, they're called stablecoins. It's not possible to send fiat around unless you digitise it first, and this needs to be done in such a way that it's impossible to mint more in the process and such that this is verifiable by everyone - hence (most) stablecoins.
Edited to add:
Also XRP is used as a bridge-currency to automagically do what you described, but with XRP in place of NANO. This is a product that due to regulatory uncertainty is not widely used yet, but it is still offered to, and used by various banking and payment firms who have signed up for it with Ripple. It's been hampered by the SEC in the US, but is still used elsewhere.
Mastercard is a payment support platform. They take the burden off of the business owners and let them focus on their business instead of the minutia of interfacing with the financial system. That doesn't go away with cryptocurrencies. In fact it might be more needed than ever as there are now multiple payment networks with lots of intricacies such as coin storage, keeping track of transactions for taxes, etc.
Visa and Mastercard are likely still going to be important in the future just for the sheer fact that business owners will take at least a decade to update their backend stack to be sophisticated enough to handle the various payment APIs, UX problems, etc that crypto brings. With Visa and Mastercard your existing PoS terminals still work (now with crypto) and you can continue focusing on selling books or groceries or whatever else you do instead of being a financial systems engineer.
That's from an end users perspective. From a merchant's perspective if they provide that QR code they now have the additional burden of custody of a bunch of crypto assets which means learning about, installing, making a specific bank account to sell the coins, dealing with tax burdens, etc which is a lot of work and risk for someone already overworked and stressed by their primary business.
Or they can just use a payment network like Visa or Mastercard and not have to worry about any of that. You pay with BTC or ETH and the merchant receives USD. Everyone's happy. The merchant doesn't have to hire an additional crypto-specialized IT person or spend 6 months diving down the rabbit hole like we did. They just run their business.
Yeah and those accountants charge by the hour. Crypto taxes take up a lot of hours (and that's if your accountant already knows how to deal with crypto). The vast majority of small businesses don't have dedicated accountants and having to pay for the overhead of dealing with crypto is not in their already strained budgets.
A friend of mine basically put it this way: bitcoin can't become medium of exchange before it becomes medium of value.
You can read this as: if you are holding btc, it's in your best interest to hold more without selling.
> If it’s in your best interest to buy and never sell, why would anyone want to use it for exchange?
It's not in your best interest to buy and never sell. Current investors are just incredibly short sighted. If bitcoin isn't usable by (and useful to) the majority of the world, it will never get enough investment to serve as a buffer against the drastic price swings caused by speculators.
Smart investors know that simply holding coins isn't enough in the long run. Finding new use cases and encouraging adoption and use is the only way crypto stands a chance.
When people say it's deflationary, they mean "in the long run". Bitcoin has a fixed, predetermined inflation schedule which approaches zero over time. So, considering the inflation schedule alone, it's "eventually" deflationary.
When you start to account for other things like lost and unrecoverable coins, it becomes severely deflationary and much sooner. Things like grandpa taking his encrypted wallet to the grave or in the case of bitcoin BTC, small coins that can't be moved because the fee is higher than the coin's value.
At the time of writing this, coins worth less than ~ $6.15 (USD) aren't able to be spent*. That means if you bought a $4 coffee with BTC and paid with a tenner (a coin [input] worth $10) , you'd lose the change. It would remain unspendable until the network starts unclogging.
* By "arent able to be spent" I mean, reasonable fee estimations for getting the transaction into a block within an amount of time that you can be sure the transaction won't get dropped from the mempool. I used https://bitcoiner.live to estimate the fee which was the most generous of the three I looked at.
It's getting wider ownership over time so BTC supply is increasingly limited per person/entity interested in it, and the increase in supply is at a decreasing rate over time. This wider ownership and the (ultimately) fixed amount means that it will, even if not monotonically, be a deflationary currency (to the extent that it even is a currency). The rate of new BTC production has to overcome this deflationary pressure, and since there's always less coming out over time the potential inflationary pressure of minting new BTC will become increasingly insignificant.
Any currency with a limited supply will tend to be deflationary over time, though not necessarily experiencing a deflationary spiral depending on the overall economy around it. An active economy will see enough movement of the currency that deflation will, hopefully, be small. But an inactive economy (like bitcoin's) with people hoarding rather than spending will see higher-than-healthy (from an economic perspective, it's great for the hoarders if they can use it later) deflation rates.
Inflation isn’t strictly a measure of the monetary base. The dominant factor in “inflation” of (almost?) all cryptocurrencies is demand, not supply.
Now, you can make the argument that that’s not really inflation - that BTC won’t predictably ~double in value every year going forward, and therefore one shouldn’t be afraid to spend it - but the idea that the tiny rate of increase in supply should be a major factor in that decision is pretty silly. Also, it’s not obvious that it’s being mined faster than it’s being eliminated due to lost keys.
Contrary to the pop-culture definition, inflation isn’t purely driven by fiscal policy or money supply. Supply and demand (aka cost-push inflation and demand-pull inflation) are the main drivers. Fiscal policy modulates these factors, but inflation existed long before fiscal intervention.
Bitcoin adoption is a deflationary process because an increasing number of people are competing over a fixed (ultimately) supply of Bitcoin.
If more people want Bitcoin, the price goes up. Why do more people want Bitcoin? Because the price goes up. The cycle reverses when the price starts going down.
Deflationary relative to the USD and other fiat currencies. The world is never going to run primarily on BTC, so talking about inflation purely in terms of number of BTC is a bit pointless :)
> If it’s in your best interest to buy and never sell, why would anyone want to use it for exchange?
Define best interest here. I mean saving money and investing it to make more money is also in everyone's best interest, but that is certainly not the case. So why is that?
There's a difference between investing in companies, states, and individuals (stocks, bonds, loans), saving in a bank (depending on the structure is usually tied to some kind of investment like those, but not controlled by the saver), and hoarding something under the mattress.
Holding BTC is the same as the last one. The holdings are not invested in anything remotely productive, it's just speculation on the future value.
I would have to disagree with you. Seeing what has happened to crypto the last few years, it's very apparent that things are changing. Everyone on here is talking like bitcoin or any other crypto is the disease and not a symptom. I believe that it's merely a symptom, a anarchy of sort, against the old ways.
Investing money in productive enterprise is the thing that is in societal benefit. Investing money in a virtual asset that has no other benefit and massive ecological costs is not a benefit.
We will see. As far as I can tell, it's the productive enterprises and everyday people that are ruining the environment. But hey, your comment sounded smart, which is the the real goal here.
Although I follow the logic, I think your friend is wrong. A consequence of trying to make bitcoin BTC a "store of value" first has led to huge investment centralization as well as a drastic reduction in the number viable use cases.
Investment centralization is bad because it makes it much more susceptible to regulatory capture by the industries crypto stands to disrupt. We're already seeing this now. The same big banks that called crypto a scam have suddenly become bullish after a few years of quietly buying coins. We need regular people on the streets advocating for crypto.
The reduced use cases is a problem because it minimizes adoption and the network effect, both of which are vital for the long term survival of the network.
If your goal is to buy and never sell, then btc is the ideal investment. You can buy the btc, destroy your private key, and nobody will ever be able to sell it, not even your grandkids poking around in the attic 20 years after you have died.
> How do you apply this logic to USD? You either want to hold it or want to use it?
Of course it applies. Holding lots of dollars (e.g. as hard cash or in a checking account) is stupid. That is the purpose and benefit of (mild) inflation: to incentivise consuming or investing them.
Also people don't expect the dollar to become more valuable anytime soon, so spending it doesn't effect seller's remorse a day later, which happens to everyone spending ETH or BTC these days.
And, since USD is inflationary, we expect it to become less valuable (real value) over time which encourages investment and spending today. Since we don't have crazy levels of inflation this doesn't fully discourage savings (with a 10% or higher inflation rate you have very little incentive to save, with 1 or 2% your savings lose value over time, but slow enough that it's still worth saving). Economies are improved and sustained by moving money, not by stagnant money.
2% inflation over 30 years destroys over half the purchasing power of the saved money. So no, moderate inflation doesn't encourage saving. It encourages the unbridled consumerism that has created environmental catastrophe.
Bitcoin, as a deflationary asset, encourages lower time preference, which encourages saving and real investing (generating real world value rather than paper gains), resulting in less consumerism and better stewarding of resources.
I said it doesn't fully discourage it. I did not say that it encourages saving. Read my post.
BTC does not encourage real investing, only hoarding. The hoarded BTC is not used in any productive investment or way because no one will loan it when it gains much more value than most businesses can produce merely by existing. When it can increase in apparent value by 100% in just a few weeks, there is no reason to invest your BTC because no business (or very few, and none sustainably) will have similar returns.
> Economies are improved and sustained by moving money, not by stagnant money.
A common misconception. The health of an economy lies in the goods that are exchanged; money is merely a placeholder. They are improved by producing more goods than are consumed, which creates room for investment in capital goods (tools for enhancing the productivity of goods and labor) and the research and development of improved technology (learning to make better tools).
"Stagnant" money just means that more goods were produced than were consumed, and the surplus was not actively invested. The surplus still exists, and continues to fuel investment (by others) so long as the money remains unspent. The "stagnant" money is off the market, not competing for goods and services, and as such contributes to a reduction in prices similar to what would occur if that money were simply destroyed (albeit temporarily), shrinking the money supply. In effect this leaves the decision about how the surplus of goods should be invested up to other market participants.
If the owner of the "stagnant" money knows of ways to invest which would provide an ROI better than the average rate of return on the market (i.e. the rate of deflation) then they should do so, earning themselves a profit and raising the average rate of return. However, below-average investments—malinvestments—would lower the average rate of return and reduce overall economic growth, and ought to be discouraged. It's better for everyone for the owner to simply sit back, "hoard" the money, and receive a passive reward for producing more than they consumed than it would be for them to actively invest in ventures with below-average realized returns and thus divert resources from better-performing ventures, but that is exactly what an actively inflationary monetary policy encourages by driving people who lack the competency to choose good investments to invest in the market anyway merely to avoid losses due to money supply inflation.
It would've been better if I'd been more deliberate with that sentence, you're right. "money" was my shorthand for "things moving in the economy, including financial measures like cash and the exchange of goods and services". Just measuring the movement of money means that two people could create an apparently vibrant economy by exchanging $1,000 between them every minute of every day, but such an economy would be absolutely bereft of any real value or health.
"Stagnant" was my way of referring to hoarded money that's not actually invested in anything. Yes, it's equivalent to removing it from the economy and it reduces the nominal price of goods and services, which also means it reduces the nominal wages (over time). Which means old money is given a much stronger benefit in the economy when they finally spend it, and new money (including new entrants like an 18 year old getting their first full time job) are severely penalized not due to any actual lack of skill or ability, but due to their entering the economy 100 years too late.
But inflation isn’t a problem, it’s a benefit. We want people to spend or invest (in production) their money; economy works best when money is actively circulated, not hoarded. The problem with a totally fixed money supply is that as productivity grows new investments are disincentivizes, as a fixed currently holder get the benefits of aggregate productivity increases (through deflation) without risking his money in investing in companies.
If its only taxes that are forced on us, why then do US notes say that they're legal tender for all debts public and private. That sounds like force to me: I may want payment in bitcoin or Swiss francs or whatever, but if the payee wants to pay me in USD in the USA, am I free to refuse their payment as non-valid? Or am I forced to accept Federal Reserve Notes?
> if the payee wants to pay me in USD in the USA, am I free to refuse their payment as non-valid?
Yes.
Legal tender for debts only means that you have to accept the notes if you have issued credit to the payer. For example, if they ate at your restaurant and came to settle the bill, they would owe you the amounts printed on the menu for the items that they ordered, but if they came into your cheese shop and wanted to buy some Swiss cheese, you could choose to only carry out the transaction if they paid in Swiss Francs.
Absolutely. Bitcoin as a store of value had to come before its use as a medium of exchange. Why would anyone exchange a currency for a product when you didn't expect its value to hold until you could use it? If its only value was driven by the demand as a medium of exchange, its value would fluctuate with this demand. In the early days this would be detrimental to its ability to serve the role as a medium of exchange. How long would you need to hold your coins before there was enough demand for exchange again?
It is the speculators buying and holding that create the expectation that its value will hold over time, thus making it viable as a medium of exchange.
> Exchange fees are a great way to charge consumers for spending their own money in 2021, when normal credit cards actually pay people 1-2% to use them
Credit card companies in the US are a special kind of evil. They charge huge fees, force vendors not to pass the fees on to customers, and then pretend to be the consumer's best friend by returning a bit of the fees to them.
They insert themselves between buyer and seller, drive prices up, and their customers think they are saving money.
Paying with Bitcoin or any other cryptocurrency requires the customer to pay the transaction fees.
Regardless of what you think about credit card companies, which payment method do you think the average consumer would choose?
1) Pay by credit card, get 2% cash back, reserve option to reverse charges if vendor fails to deliver, don't lose all of your money if you lose your credit card.
2) Pay by Bitcoin, pay $8 transaction fee, wait 10-30 minutes for transaction to be confirmed, resubmit if transaction fee was too low, no recourse if vendor runs away with your money, lose all of your money if you forget your password.
Realistically, any crypto-as-payment service will either charge the merchants large fees (to cover risk, volatility, exchange, transaction costs) and/or collect profit on the exchange rate.
There's no free lunch, but the lunch is definitely not cheaper on the Bitcoin side for average transactions.
Nothing stops you from having Bitcoin credit cards. In fact they already exist.
Dollar bills don't have any of the advantages you mentioned either. How fast and secure do you think mailing them to some company is?
A lot of these arguments are really just cherry-picking whichever portion of the financial system best suits your argument at the time and pretending they're only possible if they're built on top of pieces of paper.
> Dollar bills don't have any of the advantages you mentioned either. How fast and secure do you think mailing them to some company is?
No one mails paper dollar bills around.
Bitcoin always sounds fantastic when compared to these straw-man alternate universes where everyone is mailing dollar bills around, but let's stick to reality where no one does that.
> pretending they're only possible if they're built on top of pieces of paper.
USD isn't literally built on top of paper money. Cryptocurrency, however, is literally invented out of thin air by programmers. New cryptocurrencies are released every week. Even Bitcoin gets forked at times.
Right, and that somehow didn't stop USD credit cards from existing.
But for BTC it's either the base chain is better for every single use case or it's a giant waste of time.
> USD isn't literally built on top of paper money.
Right, there's also virtual USD and then there's all the USD above M1 that doesn't even exist as physical dollars or Fed reserves but is just willed into existence via debt.
> Cryptocurrency, however, is literally invented out of thin air by programmers.
As opposed to being invented out of thin air by bankers. At least BTC is publicly auditable and verifiable.
> New cryptocurrencies are released every week. Even Bitcoin gets forked at times.
So what? You can start making PragmaticPulpDollars, how is that a problem for USD?
We're not actually certain whether Mastercard will include volatile cryptocurrencies, such as Bitcoin. Reading this article (https://arstechnica.com/tech-policy/2021/02/mastercard-will-...), their requirements suggest supporting stablecoins (i.e. USDC). These cryptocurrencies are pegged to the dollar and should be backed by a reserve. In that case, your argument about price movements doesn't apply here.
Stablecoins are, in theory, just a cryptocurrency representation of actual money in the bank somewhere.
I'm all for it, if it's properly audited and confirmed that the funds are in place.
I'm a huge proponent of cryptocurrency technology as long as it doesn't:
1) Depend on wasting ever-increasing amounts of electricity doing arbitrary useless proof-of-work
2) Create a new currency out of thin air, when all we really want is a way to move our existing money around. I don't want to have to buy an arbitrary cryptocurrency from some early adopters at an inflated price just to move my USD from point A to point B.
That's a rather heavy should. I'd bet dollars to pesos at least some of them are operating fractional reserve schemes, or have the reserve "invested" in crypto.
Four or five years ago I mined Dogecoin on a lark using a laptop for a month. I converted that to BTC at some point and it's worth more than I ever anticipated. It won't change my life but I could have some fun with the money.
I'm not inclined to transfer it to USD, but I'd happily spend some of it were it easy to do so. Maybe buy some stocks, upgrade my PC, or get a PS5 and some games? Sure, why not!
I'm only sitting on it because it's a hassle to use it, not because I believe it's going to suddenly grow 100x in size. If I really cared about the growth I'd immediately move it to some index funds.
> I'm not inclined to transfer it to USD, but I'd happily spend some of it were it easy to do so.
Spending it is effectively the same thing as converting it to USD.
Why are you hesitant to convert it to USD to buy something, yet you'd be happy to have a 3rd party service handle the BTC-USD conversion in the background and collect their profit on the exchange?
There's no free lunch. Mastercard isn't doing this out of a desire to offer free services to the people. They're collecting profit by offering worse exchange rates than you can get on an exchange by yourself. Same story for PayPal and other providers.
There's a big difference. Having to find an exchange and hook everything up to my bank account is a hassle (especially when I have no need to do it). Sending BTC to somebody using an Android app isn't and is something I have done frequently (e.g. donating BTC to parties who have helped me or offer something I enjoy).
I don't want a world where I have to transfer the BTC to USD to use it, I want a world where I can just use it. MasterCard acting an an intermediary is fine with me, somebody has to bootstrap this.
You’re ignoring the consumer’s transaction fee for making the purchase in the first place. Who pays that?
Even if you turn this into a credit card that a consumer pays off once a month, how many consumers want to pay $8 for the privilege of paying their credit card bill?
Also, $8 is just the current transaction fee, with virtually zero vendors accepting Bitcoin. If Bitcoin became popular, the transaction fees would become prohibitively expensive. The transaction fees have been in the $60 range before, and that’s still before any widespread vendor adoption.
Bitcoin isn’t usable for transactions at scale. It’s by design. Bitcoin has rejected proposals to increase the block size. Bitcoin holders don’t want anyone doing anything with Bitcoin other than holding it
If you send me bitcoin in exchange for a widget, I'm eventually going to want to spend that bitcoin and I may not be doing that on the Visa network. At some point they have to offload those transactions back to the blockchain so the coins can actually get to my wallet.
If they go the DB route as you suggest, they would basically be creating Visa Bucks, backed by bitcoin (which they'd have to buy), that can only be spent on the Visa network.
> At some point they have to offload those transactions back to the blockchain so the coins can actually get to my wallet.
The vast majority of Bitcoin exchange participants choose to keep their coins in the exchange, not their own personal wallet.
> If they go the DB route as you suggest, they would basically be creating Visa Bucks, backed by bitcoin (which they'd have to buy), that can only be spent on the Visa network.
Every exchange uses a DB backend.
They only engage with the blockchain when someone performs a withdrawal to another institution that they don't have an agreement with, such as when you withdraw to your wallet.
And you will pay the transaction fees for that blockchain interaction ($8+ currently). If you're not paying transaction fees for other operations on their platform, it's clearly not touching the blockchain.
Every exchange operates this way. It isn't a new concept.
> Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want.
Is this necessarily true? If you have a merchant that accepts cryptocurrency why would that drive down the price? (e.g. Tesla [1])
It requires a network-effect for it to work, if more and more vendors accept crypto then how is that fundamentally different that fiat currency to buy raw materials and pay employees with?
In a hypothetically pure Bitcoin economy, that could work. But If we all switched to Bitcoin, the speculative upside would be exhausted and we’d be stuck with all of Bitcoin’s flaws and limitations. If you think $8 transaction fees are high now, how bad do you think it will be if every transaction was suddenly a Bitcoin transaction? Trick question, because Bitcoin has hard used block size limitations and it literally cannot support transactions at scale. By design.
With the speculative upside removed, why would anyone choose to use Bitcoin? Why Bitcoin over any other cryptocurrency with significantly better technology?
I don't understand why you're assuming we need a pure Bitcoin economy for there to be a network effect. If sufficient number of vendors accept Bitcoin that will be enough to create a network effect. Once you have a network effect with a size less than the size of the entire economy there will always be upside to own Bitcoin since that size can continue to grow.
I don't understand why you're assuming companies would willingly choose to use Bitcoin over banking alternatives.
Even companies who transact in Bitcoin generally won't be sending Bitcoin blockchain transactions on the blockchain with all of the associated fees, not to mention risks of keeping your company's money in a computer program where a rogue employee or hacker could simply embezzle the money instantly and irreversibly. They'd use banking services, which would handle the transactions for them off the blockchain (charging exchange fees as appropriate).
Not to mention: Using Bitcoin as a currency only sounds good in times when the price is going up. As soon as it starts becoming volatile again (it will) everyone remembers that maybe it's not a great idea to keep your company's funds tied up in one of the most volatile currencies of all time.
* International transactions easier than regular currencies
* No third-party seizure
* Security and control (user autonomy)
* Anonymity, privacy and no tracking (just make sure your wallet ID is not to your personal ID)
* No risk of chargebacks (better for vendors)
* Transparent and neutral (how much did you trust banks in 2008?)
You may not value some of the above and indeed some vendors may not, but I don't think you can say that is true about everyone.
In practice, companies have zero desire to be their own banks.
The liability would be massive, and the risk of a rogue employee walking away with the private keys is just too high. It's a two-edged sword: Those same upsides are just as attractive to potential embezzlers as they are to honest companies.
In an era where we hear about database breaches and security incidents on a daily basis, do you honestly believe that companies would do better by operating their own cryptocurrency wallets?
So what happens in practice? Companies would still use banking services, just like they always have. Banks would "hold" the cryptocurrency and handle transactions for them.
because price is currently calculated similar to how stocks are calculated. While not entirely accurate, it essentially goes down when there are more sellers than buyers, and up when there are buyers but little sellers.
What drives prices up, is more people buying than selling at market rate, which requires the market rate to go up, in order to find more sellers.
If I buy a Tesla with bitcoin and Tesla keeps recirculating the same bitcoin or at least majority of it to purchase raw material without selling it why does that must drive down the price of bitcoin?
> Spending cryptocurrency would result in selling that cryptocurrency
Not necessarily. I could give you the address of 0.001 BTC over the MasterCard network and you give me something I can eat (I don't know if this is how it will work, but why not?) No BTC is converted in fiat currency. You can hoard you BTCs for years or change them in dollars as soon as you receive them. Your choice.
They downvoted you but technically you are right. And yet MasterCard could make it work because double spending those coins would be a fraud and they'll go after their double spending customers. They can guarantee the coins with the weight of their legal department.
Regardless, "spending" Bitcoin in an economy where Bitcoin isn't the dominant currency will, on average, result in downward price pressure.
Unless you restrict the transactions to only be among Bitcoin users, which isn't going to happen because the providers make their money from exchange fees.
It's strange that so many commenters are going through mental gymnastics to pretend that the only rational thing to do with Bitcoin is to buy or trade it, but never sell it.
And the people buying it even though they don't want to spend via mastercard are smart to do so.
They understand that it's building up the network effects, creating onramps, and improving the ecosystem.
Over the long run I highly doubt mastercard will be a meaningful player in the crypto space but they definitely have the ability to hasten its adoption.
If your credit card gives you 1% back but charges walmart 2% and walmart takes this 2% into account when setting their prices then you aren't getting paid to use your credit card you are paying 1%.
I think MasterCard will use a different type of cryptocurrency than you are familiar with, called "stablecoins", like the USDC and/or DAI. These are pegged to the USD and never go up or down.
Most likely, they will use things like a "state channels" for the actual transactions. State channels are like pre-paid cards, where the channel gets settled after the entire card is spent.
But why? Well, cryptocurrency makes sense over traditional currency, because it's programmable, auditable & composable with many other dapps that exist on the blockchain.
> Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down.
An economy based on BTC would be highly deflationary as no one would want to spend - why buy something today when it'll be cheaper in a week or a month? Scarcity isn't necessarily a good feature for a currency. Ideally supply of a currency should increase as more people enter the economy. Such a currency would aim for stability instead of aiming for the currency itself to increase in value (as happens for BTC or even physical gold).
> why buy something today when it'll be cheaper in a week or a month?
Because you need it today?
We already see this all the time in subsets of the market which experience deflating prices. If you wait a year to buy that fancy device you're wanting there will most likely be a better model available at a lower cost. People still buy the current model, though, because there is a cost to waiting which offsets the expected price deflation.
It's a different situation when the currency itself is deflationary, not the goods being purchased.
Instead of thinking in terms of buying a phone, think of this in terms of capital allocation and investment.
Deflationary currencies are designed to accrue value to those who don't use them. An economy built on the idea of incentivizing people to not spend any money is not good at all.
Everyone knows about the downsides of excessive inflation, but deflationary spirals are a well-known economic problem. In short: Deflation reduces demands for goods, which causes producers to lower production targets, which causes people to be laid off, which further reduces demand for goods and so on.
A hypothetical Bitcoin economy rewards early adopters massively at the expense of newcomers. The current wealth situation is already heavily biased toward older generations, even on an age-adjusted basis (see charts: https://www.wealthmanagement.com/client-relations/illustrati... ). If you think that's bad, just imagine a Bitcoin economy where the underlying financial system accrues wealth to the older holders, at the expense of newcomers to the system.
People love Bitcoin because they think they're the ones getting in at the ground floor, getting wealthy at the expense of the new arrivals. The love for Bitcoin would flip very quickly as young people realize they're deeply on the losing end of that deal.
> An economy built on the idea of incentivizing people to not spend any money is not good at all.
It's better not to induce anyone to over-spend or under-spend. I would not advocate a deliberately deflationary monetary policy any more than I would advocate a deliberately inflationary one. The supply should remain as constant as possible so as to avoid injecting noise into a very important economic signaling mechanism regarding the dividing line between socially beneficial investment (above-average returns) and malinvestment (below-average returns). Between the two, though, IMHO it's better to err on the side of deflation. It's easier to correct for underconsumption or underinvestment (just start spending or investing more) vs. getting back resources which have already been wasted on unproductive excess consumption or malinvestment. When you inflate the money supply in an attempt to drive people to consume more than they need or else invest in ventures that may or may not actually make a positive contribution to the average rate of return just to avoid being penalized for holding cash you're actively contributing to the destruction of wealth and making everyone collectively worse off. (Though of course not everyone is worse off; those individuals closest to the supply of new money benefit disproportionately from receiving it at pre-inflated rates before it becomes diluted throughout the economy.)
"Deflationary spirals" are a well-known economic myth. There is no general correlation between monetary deflation and a shrinking economy, much less a self-destructive feedback loop. Gradual, unforced deflation does not significantly affect the demand for goods—people still need things now, they can't just wait forever for prices to improve—and while nominal wages do obviously decrease over time, nominal prices of consumer goods tend to decrease even faster, resulting in an increase in purchasing power. As opposed to the situation with money supply inflation, where prices tend to rise faster than wages.
Bitcoin, as an asset, is wildly inflating. I could buy 1 BTC for $5K not long ago, but now it costs me almost $50K to buy the same exact amount of Bitcoin.
Inflation isn't strictly a function of the fed or the supply. Inflation can happen from demand-pull, which is definitely happening in the Bitcoin world.
Now that the cryptocurrency cat is out of the bag, the idea of a singular deflationary cryptocurrency only works if you pretend that all of the other cryptocurrencies don't exist.
Instead, we're seeing constant supply growth in the cryptocurrency space as new altcoins come online all the time. Even Bitcoin itself has been forked multiple times, effectively increasing the supply (albeit with caveats). I can trivially exchange BTC for BCH, so it doesn't really matter much that they're on different chains now.
The idea that cryptocurrency supply is fixed only works if you deliberately ignore all but 1 cryptocurrency.
A move like this can increase the confidence that the Bitcoin price won't go down in the long-term - that is, someone do wants to spend their bitcoin in the future, and signals of greater market confidence increase the perceived likelihood of that.
The more I believe bitcoin is here to stay, the more comfortable I feel allocating savings in it.
This time is also a bit different; 2017 was almost entirely retail, this time it's a lot more businesses and institutions driving the BTC market.
> ...ironically those buyers aren’t interested in spending cryptocurrency using their MasterCard.
> They’re hoping other people will buy cryptocurrency from these announcements, driving the price up.
So what? Does every investor use the products of the companies they invest in? Professional investors don't care about that, they care about how well the company is doing and what they think its trajectory will be (up or down), not whether they personally will use the services offered.
Bitcoin isn't a company, though. It's an asset. Bitcoin itself doesn't do better or worse or grow in value. It's just moving up and down according to supply and demand.
Spending crypto using a card is actually what people want in order to avoid taxes on crypto as it's treated as a security from the IRS tax perspective.
Anyone who has made money on crypto would love it if they can just spend the crypto as currency and buy every day things with it and remove the tax liability from having to convert to fiat.
15% tax capital gains, no thanks, let me spend it on food and furniture.
_people_ may believe that but I don't think the IRS does. Spending crypto that has appreciated in value on goods and services is still a taxable event for CGT purposes.
Does bartering an investment vehicle allow you to escape capital gains? If so, that seems like a loophole that should be closed. Why should you be exempt from gains on your capital investment?
It seems like MasterCard should be reporting each swap of crypto for dollars to the IRS and sending you a tax form at the end of the year. If that's not the case, expect regulatory action to correct it.
Are you sure you pay 50% in tax on the profits? A quick google suggests that 50% of the profits counts as income, which is then taxed at your income rate. 50*50 = 25% in the top bracket.
In the US long-term cap gains is 0%, 15%, or 20% - not far off from 25%.
> Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want
that’s really assuming a lot
a closed loop cryptocurrency transaction does not result in selling
mastercard may or may not be offering that capability
mastercard offering that capability makes the cryptocurrency proponents vision a reality
They're not interested in making the vision of cryptocurrency a reality any more than it enhances their bottom line.
Mastercard is offering exchange services. They will collect exchange fees on transactions, just like PayPal and other providers.
They won't even bring blockchain into this any more than necessary. They'll handle it in databases like everyone else, only engaging with the blockchain as necessary for deposits and withdrawals.
yeah sold for a candy bar and the merchant still has the cryptocurrency and pays their overhead costs in the same cryptocurrency who buy their own candy bars from a different merchant in cryotocurrency
Payment networks like mastercard integrating cryptocurrency make this more practical instead of handwaiving a gradual organic adoption idea
I am very interested in spending cryptocurrency using my MasterCard, especially and only if it does not result in a capital gains transaction that I have to report on my taxes. If I have to report each transaction to the IRS, I am not interested and will not spend it. If I do NOT have to report it, I will use it all the time
How will it compare to what Square does? Centralization always occurs at the point of the exchange, I guess. It does seem a little less criminal than what Robinhood was doing.
I wonder what kind of subtle systemic effect will twist the whole crypto thing on its head to the point people will forget what it was in the first place.
Cryptocurrency people are hoping for all sort of things... that's part of why enthusiasm can be currently quantified at a $1trn.
While I'm sure you're right for most of the current bets (bitcoin owners are long, after all), there's something to be said for blind, dumb momentum. Connecting more people & financial nodes to the network, however disintermediated, for whatever reason.
Maybe the "mastercard model" of denominating in bitcoin and clearing yourself in dollars is an early version of how bitcoin transaction costs actually get to normal. That's not unlike how stocks, bonds, forex & such are exchanged.
I know. I know. Irony. Inevitable though, I think. Pretty much all currency & currency-like stuff gets moved around through clearing houses. Direct blockchain transactions are the theoretically ultimate transaction in the same way that NYSE transactions are theoretically ultimate. Actual stock transactions generally happen within a broker, the broker's broker or whoever else is between them and the actual stock market. The logic is similar.
TLDR... People are giddy or hypocritical because they're long (or short) on bitcoin. That doesn't mean that momentum isn't momentum.
I don't get why bitcoin is worth so much.Bitcoin is called a store of value like gold, but gold has inherent uses. If the price of gold went to zero then you could still use it to make jewellery or use it for electrical conductivity. If the price of bitcoin goes to zero then it's worthless. It's also not environmentally friendly and bitcoin mining uses up 0.21% of the world's power supply. And all of this energy is used to calculate billions of hashes per second out of which all but one will be discarded. There is also increased regulatory focus from governments who see it as a threat , with India even going so far as to suggest they would ban it.
Do you typically just copy/paste the same comment on every Bitcoin article rather than think of nuanced commentary? Are you a part of ArcticBull's astroturfing campaign?
Edit: I see that you've copy/pasted it once but some other commentary on Bitcoin seems mostly genuine.
We live in the information age. Information has a lot of value, most software companies' main asset is information. Visa, Mastercard and all the banks are companies that are valued very highly because they provide the infrastructure for managing money. Bitcoin is not just the asset, it is the network and the infrastructure. It's a whole system that works semi autonomously by by aligning the incentives of all of its members. Wouldn't you say that's valuable?
I'd argue that the demand for gold jewelry would drop accordingly to the gold price falling to zero. Jewelry is a secondary form of said value store, nothing inherently useful
> If the price of gold went to zero then you could still use it to make jewellery or use it for electrical conductivity. If the price of bitcoin goes to zero then it's worthless.
Does it really matter if the bottom is 5% instead of 0%? Is that honestly something you think about when choosing an investment?
The game Paypal currently plays with Crypto is the closest thing to printing money I have ever seen:
Their users can "buy and sell Bitcoin" and pay "no fees". How does Paypal make money? "From the spread". The difference between bid and ask. And who sets the spread? Drumroll ... Paypal!
Since you cannot transfer your bitcoins out, when you sell your bitcoins, Paypal pays you whatever they like.
So far, Paypal only offers this in the United States. And do the Americans take this offer? Yes! They buy over a billion dollars worth of Bitcoin per month on Paypal. If this continues, it means that every American from toddler to senior buys $50 worth of Bitcoin per year.
Other companies in the finance industry will want the same free lunch. Run on crypto in 3..2..1..
This will continue until the first companies will start to offer you to transfer your crypto out. Then slowly the market will normalize. Now everyone has crypto. In their paypal/mastercard/bank/whatever account and/or in their own wallet.
Looks like chances for broader crypto adoption are pretty good.
That is outright scam in my view. They never have to hold bitcoin. They may as well sell paypal coin. Robinhood and Revolut do the same thing. If you can't transfer out your bitcoin, you don't have any bitcoin.
They couldn't do that. If they didn't actually have any crypto, in the event of a large scale increase in price combined with a large scale cash out, Paypal would have to eat the difference from buy to sell price. They would lose their shirt. At minimum, Paypal is buying some percentage of the crypto sales in actual crypto to act as a hedge. However, it is more likely they are closer to 1 to 1 backing since they probably believe that there will be large upward movements in the future and they believe they can make money on both the spreads and the actual bitcoin (assuming they ever care to sell it).
They could just as well hedge the "PayPal-Bitcoin" they hand out to their customers with unbacked Bitcoin futures. They don't necessarily have to buy the underlying as long as they can find some other party who's willing to engage in a bet about the future of the Bitcoin price.
Though I must admit that it's doubtful for them to find enough cash to take the other side of this bet, so most likely they have to resort to actual Bitcoin bought from liquid exchanges or OTC.
Bitcoin futures are running at about 25% per annum carry.
They absolutely can find counterparties to take that trade, but it would be much more efficient to trade in the spot markets.
The real question is if they have custody operations setup to handle the coin.
I expect they outsource these backend operations to the likes of Coinbase, Gemini, or Fidelity.
They probably won't allow customers to transfer their Bitcoin out until they move custody in house, which is no easy task.
You're giving Paypal and Robinhood too much credit. It wouldn't surprise anyone if they both consider themselves "too big to fail" and do not have sufficient crypto to cover themselves. It's easy to imagine the meetings where someone "important" says "That will never happen, end of discussion." and then it turns out they they're wrong and they get bailed out (or not).
These meetings don't exist. Occasionally fraud and negligence happens, but not this casually. People running PayPal-sized companies are neither completely stupid not completely evil. A bit yes, but not this much.
"Too big to fail" - and that's how you increase the supply of BTC without actually doing so I think.
As long as an entity (such as the government) prints money and takes the hit on the spread people will see contracts of BTC as equivalent as BTC w.r.t value. Its basically banking, but since fiat is still the prime currency of legal settlement (not BTC) no one will think its possible to "run the bank" as that entity in the event of a run will pay the difference. BTC is not actually required to settle anything by most countries laws, so actually delivery of BTC isn't guaranteed. This does undermine actual BTC especially if actual BTC is harder to spend - the pseduo-BTC would then have more utility.
In other words BTC could be the same as fiat potentially in the longer term. It will be more transparent of course since it it easier to take delivery of than say gold (or cash but less so), but as long as they don't give you that option in your product that's fine. Even cash is like this with withdrawal limits, and other laws. If fiat was only valued by the actual cash in the economy it would be worth a lot more than it is now btw.
If I buy a BTC for $30,000, then later decide to sell it for $47,000, Paypal will lose $17,000 if they didn't actually have a BTC somewhere in their vault.
This is the same idea as bucket shop operations that "trade" stocks with their clients without actually processing trades on any exchange.
When prices are rising, with new buyers available, then a bucket shop can do just fine for themselves. As soon as they have more sellers than buyers, at a price higher than they came in, the shop is the one that has to cover the difference.
If no one can transfer bitcoin out of the PayPal system then the only way for you to sell it for $47,000 is to find someone else on PayPal willing to buy it for that amount (or actually a bit more because of the spread). So PayPal don't lose anything.
Admittedly this doesn't sound right to me, but it's what the parent commenters seem to be saying.
It doesn't work like this. If paypal's customers decide to cash out as a whole, then that means there is a net sell. There won't be enough buyers in paypal to cover the sells. They would need to expose themselves to another market by buying / selling actual bitcoin to be able to float like you describe.
In most financial systems, there has to be a "banker" to make the market, i.e. they have to close the deals when the aggregate buy/sell deals end in surplus or deficits. So Paypal has to close the ending position -- at least that is my understanding.
I assume that they don’t hold the bitcoin but contract out the holding of the coins (or keys) to some 3rd party who specializes. They still make money on the spread and the buy/sell price gouge may be even larger to cover fees of whoever actually holds the crypto. Holdings may not be 1:1 still but it should be some safe amount.
Or maybe even buy more Bitcoin than they need? It seems to have worked out well for Tesla so far.
As Matt Levine pointed out yesterday, a mainstream company can make money by buying Bitcoin and then making an announcement that sounds like they're going to use it. (It doesn't matter whether that plan works out or not, as long as the price of Bitcoin goes up.)
For Paypal, getting their own customers to buy Bitcoin (that they already own) would be a way of hedging, if they're long Bitcoin to begin with.
IMO Tesla tries to get around China currency controls and lets people in China buy Teslas with bitcoin. I guess that is part of the reason why Tesla was hauled in front of the Chinese government recently. It is a good idea if it works out.
I remember seeing Revolut doing that, worse the price of buying Bitcoin was actually much higher than what you could get on other trading exchanges. What a fucking scam. At the time I didn't understand that people were buying Bitcoin only to gamble with it, and I couldn't wrap my head around buying Bitcoin on Revolut without the ability to move these to a different address.
It is a similar dynamic, but I would be more inclined to trust the ETF.
1) For the metals ETFs I know about, the underlying is held by a bank which is a separate legal vehicle to the ETF. Since the ETF and the bank are both publicly-listed firms, their full-reserve commitments would be regularly audited to a high standard.
2) Brokers participate in risky activity that is unrelated to digital asset trading. This seems like a higher risk profile than a firm that is streamlined to maintain a single ETF.
3) The broker acts as custodian for your digital assets, but not for your shares.
Imagine that you buy a digital asset through your broker and they become insolvent a week later. Assuming your contract gives you no special rights, you would sit on the books as one creditor alongside unpaid vendors and unpaid employees. Years later, you may get back cents in the dollar.
Whereas you would have full and immediate rights to any ETF you had bought through that broker on the same day. They have no influence once it has settled.
When you get paid at the end of the month do you think there is a bloke with a wheelbarrow full of gold, or salt, or even bits of paper running between banks ensuring you get your salary? You've just figured out the entire private banking sector ;)
That would be illegal. And probably it would be the SEC (ie a regulator that actually does things) who would be making sure that PayPal or Robinhood or whoever aren’t lying.
Not quite to that extreme, but both banks and paypal do the same with fiat too. They make A LOT of money on the exchange from one currency to another at rates that they determine.
Quote from Elon Musk: "If PayPal had executed the plan that I wanted to execute on, I think it would probably be the most valuable company in the world".
That's how all currency trading works. Why do you think this is unique to Bitcoin or crypto?
More than 95% of "money" in circulation was created in the private banking sector. That's the closest thing to printing money because that's actually what it is.
Paypal is just taking a cut for providing a service. Don't like it? Don't use it.
You can show up at a bank and demand your balance in central bank money aka cash.
The equivalent for Bitcoin would be that Paypal has to send your balance to you on the blockchain. But they do not do that. They will pay you in dollars. How much dollars? However much they like.
> You can show up at a bank and demand your balance in central bank money aka cash.
Of course you can. Whether you get it or not is another matter. Have you ever tried it? Do you know anyone who has tried it? Sure, for trivial amounts you can do it. But do you think you can just waltz into your bank and walk out with $50,000 in cash? Good luck.
Webull does the same thing... 1% spread in both directions I think (2% total). At least Coinbase are honest and charge a fee and don't claim to be fee-free.
I think Binance has the same thing. They have the "Binance pegged BTC" and you have to pay an additional fee to get the "real BTC" which you could put in the "real BTC wallet"
Thing is this is exactly how it works with literally every other forex ever. If you go buy CAD with your USD from your local bank, of course they make money on the spread, the exact same way.
It's important for people to read the actual press release: https://mstr.cd/3tLaPZM There's good info here which will be new info to many.
Why did they do this? It turns out that about a third of Nigerians report using or holding cryptocurrency (!). https://www.statista.com/chart/18345/crypto-currency-adoptio... Second place are Vietnam and the Phillipines. For all, the #1 reason was for remittances.
Haven't we all had it drilled into our heads by CNBC and the likes that crypto was nothing but a big speculative bubble? Woops, I guess that was a big lie.
> Users will also benefit from Wirex’s Cryptoback™ rewards program, which automatically gives customers up to 1.5% back in Bitcoin for every purchase made in-store.
Set this chart to "all" and tell me that this price movement is not a bubble. There is no earthly reason for why a "BitCoin" is worth $47,459.66 as of this post.
Cryptocurrency adoption in 3rd world countries like Nigeria, Vietnam, and the Philippines is not a good thing. It's actually really sad, because it means they cannot rely on or trust their country's currency. Therefore, they are forced to place bets in a volatile and dangerous game to keep their life savings. If Bitcoin or Ethereum or Dogecoin go bust, they will still lose everything, because there is no trust, recourse, or regulation tolerated in a decentralized system. Well, not much worse than their home country's currency, I guess.
> Set this chart to "all" and tell me that this price movement is not a bubble
It's a new asset class, of course it's going to see huge gains as it picks up adoption and of course if you zoom all the way out it'll look like a bubble. The bubble goes bust every few years and comes back stronger. That's a healthy market.
> It's actually really sad, because it means they cannot rely on or trust their country's currency.
That's a huge benefit and reason why bitcoin will become popular. It's a portable store of value outside the control of any government. It doesn't have the same issues as the US dollar for example where other countries need to be concerned about how not only their country is performing, but also the US since their reserves are in USD.
This is also why it's gaining popularity around the world. Trust in governments is rapidly decreasing and the world as a whole is destabilizing due to polarization, poverty/wealth gaps, and rising environmental concerns.
> there is no trust
That's the point. It's trustless. You don't need to worry about it.
To me these things are totally useless, paint on a canvas (when I could just look at a photo of the same thing) and a shiny piece of metal, no utility whatsoever, who cares?
Well the value doesn't come from one person's assertion of value, it's supply and demand. Apparently enough people like paint on a canvas and shiny metal for their own reasons.
That's a negative externality which doesn't pertain to how valid the current valuation is, which is the subject I was addressing.
Externalities by definition don't feature into the price, although perhaps they do only to a very small extent in the case of BTC because of political/regulation risks leading to a risk premium effect.
Sorry, but in case you don't have much intuition, let me fill you in. People value gold and artwork because it is beautiful and you can have it for yourself. Gold also has several utilitarian uses. Now compare these things to a digital token. Can I frame and admire a digital token? Can I use it for anything? Do I even understand what it is or how it works most of the time? No.
So it therefore has no value for me. Millions of people like me have the same basic intuition. Others, like you, are driven by ideology and see digital tokens as something nice and valuable that can be "kept", for ideological reasons. This value has no basis in anything physical like looks or usefulness, and has no battle-tested authority telling you it is responsible for making it useful.
Decentralization doesn't count, because as I've already said many times there is no trust or recourse in a decentralized system with random people. So you haven't given me a reason for why a "Bitcoin" should be worth $40k+. That's why I say its sad that authorities in other countries are so unreliable that people have to buy into this disreputable game to stay afloat.
Yes you can frame and admire a digital token, or rather the address holding the funds.
Gold's value has nothing to do with its utility.
I don't get your people's arguments. You keep repeating "a digital asset can't have real value" when the last 10 years have proven you wrong. You fool!
So you pay $40k+ for bitcoin just so you can frame some numbers and letters and say you paid $40k+ for those numbers and letters?
Gold's value comes from the fact that it doesn't dull or dim over time, and has many uses in the electronics and jewelry industries. If you have the resources to get gold and own it, that is a clear sign of status and value.
Can't say the same with crypto for any counts. All of crypto's value comes from speculation. Over the last 10 years, I've seen the same tired drum beat, that 'crypto is valuable because of decentralization, supply regulation, and censorship resistance' but these are so vapid and completely different from reality and what people actually need. There is no convenience, no government backing, and no trust. So the only people using these fake tokens are disreputables and hedge funds/speculators looking to exploit and get fun returns.
No, Gold value comes from the fact that we all agreed that it should have a value, and it's scarce. Same for Bitcoin.
And yes you can parade the fact that you own a bitcoin address, this is after all probably the only reason most people know about Craig S. Wright
> There is no convenience, no government backing, and no trust
convenience is in stablecoins, government backing is in CBDC, trust is anchored at the foundation of any cryptocurrency project...
Let me put it this way: as long as people will find ways to do things with Bitcoin (remittances, darkmarket, etc.) that they couldn't do with Gold or USD or whatever, then it'll have value. 40k of value? I don't know, but it will still have value.
A little bit of value. But as a decentralized utopian panacea? Nope. If I was given the choice between a Bitcoin and a bar of gold, I'd definitely take the bar of gold.
I can look at artwork on my computer for free, or print out a high resolution image that's indistinguishable for a few dollars. Yet people pay a fortune for the "real thing", even though their eye doesn't know the difference.
Tell me again how this is in any way rational or logical? It's not, you've just bought into the narrative that artwork has legitimate value but haven't bought into the narrative that BTC has legitimate value.
You are trying to push your subjective opinion of value as an assertion. Just because you derive utility from original art but not bitcoin doesn't mean there's value in the former and not the latter. Value is assigned by supply and demand, not by an authoritative top-down council composed of u/nexthash.
It may well be the case that the market's opinion of BTC's value changes and the price drops to near nothing. But then again maybe people will wake up to the fact that an original artwork is indistinguishable from a photo, and the art market collapses too :-)
> Stablecoins enjoy a one-to-one ratio. For Nigerians, this means stablecoin prices are pegged to a certain ratio with the U.S. dollar.
I'm new to stablecoins and trying to understand the situation. Is this not the same thing Brazil did with the URV [0] -- that is, replacing their ruined state currency with a temporary one pegged to the USD -- only coming from the private sector instead of the government?
> Other benefits of buying into stablecoins include: (snip) ...has no central authority which could breach payment... (snip)
How is it possible to "peg" one currency to another without a centralized issuing body? Bitcoins can be mined by anyone with enough computing power, and stability is only achieved via an engineered stalemate between miners, node operators, and exchanges. How do these "stablecoins" achieve their stability without controlling issuance of coins at the top level?
My understanding is that altcoins derive their value from their fungibility with Bitcoin; that's why when Bitcoin tanks, it brings the entire ecosystem down with it. How are these stablecoins any different? If Bitcoin's value fell by 80% tomorrow, bringing down Ethereum, LTC, and Doge, what keeps these stablecoins' value from falling down with it?
- centralized issuing authority backs the coins with dollars, here although the trust is the same as in a central authority, for people in Nigeria and Brazil, its asymmetric compared to people in the US. For Americans, a central authority is a central authority. For Nigerians, a central authority in US (or Carribean etc) is vastly different from a central authority in Nigeria. Example: USDC, USDT, PAX
- Seigniorage-style stablecoins, these coins try to algorithmically issue or reduce the total coins to keep the price stable. This seems to have never worked. Most stablecoins in this design failed.
- collateralized stablecoins - These stablecoins try to hold a certain amount of collateral in 'unstable' currency (like ETH/BAT etc) and try to maintain that collateral. If the price of the stablecoin moves away from $1, then it creates profit opportunities for people to benefit from it and help bring the price down. For example: Dai, Havven. These are experimental but seems to be working well.
Demand grows, but the bitcoin supply is limited. Price increases. Also, after each halving the bitcoin miner payout gets cut in half, so price has to increase for the network to stay alive.
> Therefore, they are forced to place bets in a volatile and dangerous game to keep their life savings
Is there any evidence that people in these countries are rushing to transfer their cash into Bitcoin? Not just a couple people that some news reporter found, but actual statistics?
Realistically, if these people have access to out-of-country transfers they're going to switch to USD, not transfer to a Bitcoin exchange and switch to digital money that they can't actually use for any transactions.
On the other hand, Bitcoin would be a very attractive vehicle for oppressive governments to embezzle funds out of their country at scale, as they control the strings to the banks and the regulations. Their only concern is not getting caught or seeing their money confiscated.
To everyone saying "my credit card pays me 2% to use it", no, your credit card charges the merchant 2.3%+ to use it, that gets bundled into the price, and they give you 2% of that as a kickback.
The merchants would be the ones choosing the latter. As you mentioned, a lot of stores are interested in accessing the broader market of people who pay with credit cards/digital payment systems, but are forced to pay the 2.3% credit card fees. Bitcoin offers them the ability to remove this transaction cost but keep the convenience of cashless digital payments, in which case the savings can then be rolled into lower costs, benefiting the customer.
This is still contingent on using a Lightning network to reduce fees on smaller day-to-day transactions, which I agree are too high with Bitcoin proper.
The original Bitcoin whitepaper actually outlines this as one of the main problems it aims to solve, and I'll let the paper do the talking:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions,and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need.A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
What is needed is an electronic payment system based on cryptographic proof instead of trust,allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.
Some merchants do pass the savings on to the user for using Bitcoin vs credit cards, and there are ways to pay with Bitcoin (lightning) that involve negligible fees.
So the merchant sets the price of a bag of chips at $2.00. I want to buy it. I could:
* Pay $2.00 with my credit card and get $.04 back = $1.96
* Pay $2.00 with cash and get $0 back = $2.00
* Pay $2.00 with btc and get $-x satoshis back because I have to pay transaction fees + fees to convert to fiat = $2.00 + some amount of fees that change daily
I'm not sure how that's different? When a merchant accepts cash, they have to pay for physical security and pickup, it's prone to theft or miscounting, etc. So cash isn't free. Accepting card payments is also not free. Merchant pays visa for convenience (to both merchant and customer); visa kicks some back to customer.
I've seen this said a lot, but in my experience whenever a merchant has different prices for cash and credit card, the cash price is always lower. So whatever the merchant is paying to Visa and/or MasterCard, it's more than it costs to handle cash.
Traditionally the discount for cash in many professions is due to avoiding tax.
i.e. a plumber will do a job for cheaper if they are paid in cash as they won't be declaring that work in their accounts - avoiding the ~20% tax that would be due otherwise.
While true, I know of many small businesses that give cash discounts because the credit card fees ruin the profit margin on small purchases. Sometimes they even lose money on transactions. For instance if you buy a scone for a $1.05, the credit card fees alone might come out to 38¢ for the merchant. This is why you often see "minimum card purchase $5" at coffee shops and small businesses.
Yes, the fee is usually fixed cost plus percentage, which makes small transactions very expensive.
The small transaction problem is vastly worse with Bitcoin, though. The catch is that the transaction fee is paid by the buyer, so that $1.05 scone costs the consumer $8.05.
$1.05 goes to the consumer
$8 transaction fee goes to the miner
Some fraction (eventually most) of that $8 transaction fee goes to the energy company supplying the miners with electricity.
Now your $1.05 scone transaction includes the cost of charging a Tesla battery 3 times over, because that's how much energy went into the transaction on the blockchain.
Absolutely true. I'm not advocating for crypto to replace credit card transactions, as that would be insanely impractical and wasteful. I wanted to draw some attention to how badly merchants are treated when they accept card payments.
Losing money to credit card transaction fees is actually a huge problem the average person does not know about. The problem is that these credit card companies charge a percentage based on each transaction which screws over the merchant in two ways. One, it is inflation resistant. Two, Visa/Mastercard do not pass savings and efficiencies onto the client, they pocket the difference.
Just as an illustration, if a merchant's profit margin on an item is 10% and the cc fees are 3%, they've lost a third of their profit on that sale.
You're correct, but it is different. There is no free way to accept payments. I personally pay with a 2% cash back card myself. I just hope people have a full picture of the costs and benefits of each approach. Crypto transaction fees are expensive but there are also a lot of hidden costs of the credit system.
I lived in Taipei for a year and almost all transactions there are cash, debit, or bank transfer. You can do a bank transfer to anyone instantly for pennies. Really puts the ACH system to shame. Some things are better than getting 2% back.
> Here in the EU, credit card transaction fees are capped at 0,3%. So no shenanigans
This isn’t true. Interchange fees are capped at that rate, but that’s only one portion of the total transactional fee charged to merchants for processing card payments.
Something I've always been confused about, maybe you know the answer -
Don't merchant's already charge the amount that causes (number of units sold) * (profit per unit) to be as high as possible? If visa suddenly dropped the transaction fee to 1%, I don't think stores would pass the 2% savings on to the customer
If free markets existed, that is how they would operate. Sellers would be small, independent, have perfect knowledge of the market and would always seek to maximise profit.
But free markets don't exist. There are many reasons why merchants might not always aim to maximise profit. They might instead seek the security of a loyal customer base, for example. In many markets, sellers ruthlessly compete on price, often at the cost of short term profit. Supermarkets in the UK is a good example. If transaction costs for supermarkets were reduced that would absolutely be seen by the customers.
I don't want mastercard supporting crypto. I want the merchants and payment providers supporting crypto so I do not have to use mastercard and their "rules". If I want to pay for porn or send a donation to wikileaks I do not want mastercard/paypal or anyone else other than the government (if it's legal I should be allowed to pay for it) deciding if that is ok.
I've read briefly about nano and its super interesting. I don't really understand how its feasible though. What is the incentive for operating a node in the network?
A cryptocurrency that would ACTUALLY be used as a currency needs a resilient network. But if operating a node yields no financial incentive, how is that network supposed to be created?
The incentive is the exact thing you're worried about: merchants get to avoid fees. If Nano ever takes off as a payment method, then you'd probably see e.g. large grocery chains operating Nano nodes to avoid fees.
It looks to me like Nano will suffer from the free-rider problem.
If Nano becomes an established currency, then a grocery chain can just rely on the existing Nano nodes to process its transactions (which will still be free), they don't need to run their own node for it.
They can publicize their brand with a node. Moreover, if they want special functionality they may have to run their own node. In general, running nodes is so cheap that is not prohibitive to wider audiences. Today there are easily more than a hundred nodes running, exchanges, services, etc. The number is bound to increase as the ecosystem grows.
Sounds great. Why not just use the nano technology to let me move around the USD in my bank account?
Why do we have to invent an all new currency for these technologies to use? There is no good reason, other than to make early adopters wealthy, which they would like very much.
What's stopping the US government from taking nano and creating a USD-backed version?
Exactly. So where is it? I've been using the internet since 1997. Banks had the chance to make it. I read here all the time "a single database would be a better solution". So where is the single database? Where is the instant money transfer? Where is the free money transfer over country borders?
My wife lived in US for a while, she is now in EU. She still has some bank account there with a few thousand dollars on it. She can't transfer it to EU (some limitation of that account), she can only get cheques, or ask for some credit card. I told her to see how to purchase crypto with that card, and then transfer the money like that. It's fucking 2021, are you serious?????
So yeah, if you expect banks to come up with a system that can compete with current gen crypto, good luck to you.
> Where is the free money transfer over country borders?
I use a major US bank. They offer $0 wire transfers to EU accounts. Wire goes out same-day.
Would much rather do that than transfer to a crypto exchange, convert to crypto (with fee), send crypto (with fee), exchange crypto on the other end (with fee), and the transfer to other bank.
Bitcoin is only good for large transactions, but there are 1000000 cryptocurrencies that solve this problem such as BCH, USDT, and LTC. Use one of them.
If there’s a problem with my transaction, I click some buttons and the card company reversed the charges.
If I lose my card, I call them up and get another one overnight without losing all my money.
Why would I give all of that up, pay exchange fees on both ends of a transaction, pay transaction fees (however small), and wait longer for my transactions to clear?
The parent comment is making a philosophical/ethical point - there is a lot of power concentrated into two private companies (Mastercard and Visa). They are the gatekeepers to being able to take payments, without them you can't have consumer income, and they make moral judgements that make it hard to operate certain kinds of (legal) businesses.
Sure, but why not use a stablecoin cryptocurrency?
Why do we need to invent an all-new alternative currency and asset class just to use these technologies? Why do I have to invest in 1 of 1000s of altcoins just to arbitrary change numbers in a shared ledger?
Because the US monetary policy and inflation, and USD not being backed by anything, and because people don't want this power in corruptable governments.
This is not even some dispited facts (that this is one of major reasons for why some people want a new currency), this thing has been discussed over and over into oblivion, since the beginning of cryptocurrencies. It is a question that has been answered millions of times at this point. You just haven't researched any of it.
I regularly invoice internationally. I can get a crypto payment through with a small transaction fee (a few cent for $20k) which clears in ~5 minutes, or I can get a payment that takes several days to clear with a larger fee. Crypto works perfectly for me!
Or you could use any of the far cheaper options for international payments (Transferwise, etc)... why do cryptocurrency enthusiasts think that all international payments need to be done via Western Union?
Taking the bigger picture, those rewards and disputes aren't free. These things get paid for by transaction fees, cardholders that carry balances, and vendors taking a loss. On the whole, prices for everything go up, but people fortunate enough to have "good" credit cards get a slight discount at the expense of those who don't.
I'm not necessarily saying this system is better or worse than some alternative, just pointing out that it's not all upside.
I don't think anyone would argue that you should stop using your credit card if it's working well for you and you're very happy with it. But of course, credit card companies are only solvent because on average they're not paying their users to use it. Miss one or two bills, or make one big purchase that you wouldn't have without the credit line, and you'll likely wipe out all the rewards you've "earned."
Most people can't put >$20,000 on their credit card and large money transfers over traditional financial institutions (wires/ACH) at best take many hours or days.
And let's not forget that bitcoin can process on average less than 7 transactions per seconds. That's incredibly slow. It can be used for anything irl as long as this fundamental problem is not fixed. Nobody will spend 10+ minutes in front of the cashier waiting for the transaction to be confirmed.
Most cryptocurrencies are plagued by the same issue. Everyone and their mother still come out with their own cryptocurrencies, but none has been proven to have any actual usefulness outside of speculation. I guess Monero and ZCash are at least really used as a transaction method because of the "black market", but, outside of anonymity, they also have the same fundamental issue that btc has.
I have a feeling that traditional cc system are slower than the time user waits for confirmation. Isn't it buffer based like disk io ? the bank has a buffer to accept any card that is legit (for small transactions) and the rare time a problem occurs they deal with it on the side ?
> I have a feeling that traditional cc system are slower than the time user waits for confirmation.
Raising this in response to Bitcoin’s limited throughput is a nonsequitur, as this is latency, not throughout. Yes, the time between initiating and settling a credit card transaction is nontrivial, but that doesn't effect the number of transactions the system can process per second. If the credit card system didn't have the throughput to handle transactions at the rate they are initiated, there's be an ever-growing queue, and there isn't.
We shouldn't forget that there are other cryptos that don't have these ridiculous fees.
Also, your credit card pays you 2% because they extract a larger fee from the merchant, who will raise prices to cover that expense. So you're not really saving money.
Hasn't Wikileaks published crypto addresses for a long time? You can send directly to them right now. I'd be very surprised if there wasn't a porn site out there taking payment directly though a Bitcoin address too.
Everyone on this thread seems to be missing the point that they’ll be working with stablecoins on Ethereum and other smart contracts chains, and not Bitcoin.
HN should have been on the cutting edge of crypto, given its “hacker” supposed ethos, but a large group of no-coiners couldn’t understand it and have posted the same tired arguments ad nauseum for years.
There are a lot of people on HN who love and support crypto but the arguments are exhausting and you get nothing but downvotes. All of my friends and family I convinced to buy and hold have been texting me how I changed their lives. It’s just so sad to see what this website did to engineers who normally have open minds but were convinced to hate crypto.
The reason it's not popular is that the early narrative wasn't "too the moon!" The narrative was that Bitcoin was the currency of the future and that we'd all be using Bitcoin for transactions.
Anyone who actually used Bitcoin at the time could see how there was no chance of it taking off as a payment mechanism. That's still true today, especially with $8+ transaction fees.
The difference is that everyone dropped the pretense of actually using bitcoin and instead went all-in on the speculation narrative. People buy it because the price goes up, and the price goes up because people buy it.
Works great until a down cycle, when everyone rushes for the exits and tells themselves they'll buy back in at a lower price.
> All of my friends and family I convinced to buy and hold have been texting me how I changed their lives.
Changed their lives how? By revolutionizing the way they pay for things with cryptocurrency? Or by getting in on an investment that went up?
Be warned that the exact opposite happens when Bitcoin goes back down. Look back at Reddit posts during previous crashes for a reminder: Suicide hotline warnings, stories about people losing half of their retirement, and so on.
If the only redeeming quality of Bitcoin is that the price goes up as more people get in on it, it's hardly different than an MLM or pyramid scheme that relies on a constant influx of new money to keep the show going.
Given what you're commenting all over this post, it's pretty clear you don't follow developments in the cryptocurrency space much.
Bitcoin is stale, there's no development or innovation happening. It has become a store of value only. The only possible solution that could change that is the Lightning network or other Layer 2 protocols.
There are plenty of other coins however that are doing super exciting innovation. Bitcoin Cash and Nano are some examples. They're actually solving problems and moving the technology forward. And they're being adopted as payment methods as a result.
It makes me incredibly sad to see how many people (especially on HN) have no idea about that, and have adopted an anti-crypto stance like it's some ideological war, constantly citing the same old tired arguments.
Can we please dispense with the ad-hominem attacks?
I've been following cryptocurrency since 2009/2010, and I've worked adjacent to the space at one point.
There are plenty of us who were enthusiastic about cryptocurrencies before the narrative moved away from distributed systems and turned into a pure financial play for everyone involved.
> There are plenty of other coins however that are doing super exciting innovation.
The real question is: Why must they be coins?
Why can't they simply develop blockchain technology that doesn't revolve around inventing an all-new currency?
The competition for innovation is fun. The competition for everyone to buy each cryptocurrency on exchanges and then pump it across social media is not.
I'll be excited again when we can stop inventing new currencies left and right and just skip straight to distributed systems for managing our existing cash. I don't want to have to invest in 20 different cryptocurrencies out of the 1000s on the market just to be able to interact with all of the different systems. I don't want to manage my payment methods like investments. And frankly, I don't think the average person cares about the underlying innovation because they just want to speculate.
> Why must they be coins? Why can't they simply develop blockchain technology that doesn't revolve around inventing an all-new currency?
To make it trustless, provide a proper incentive model, and for security.
> just skip straight to distributed systems for managing our existing cash
That doesn't work. Fiat is tied to nation states and are under direct influence by them. One example is how after Trump's term a lot of countries have been divesting away from having so much of their reserves tied to USD.
The other thing is removal of middlemen and having transparent and predictable inflation. You can't do that with fiat. There's central banks that will always be there. Even if you distribute the processing to remove Visa and the like, you will always have the central banks there.
> There are plenty of other coins however that are doing super exciting innovation. Bitcoin Cash and Nano are some examples.
You really had me where you mentioned exciting innovation. I thought you were going to go into Ethereum, the EVM, smart contracts, DeFi, etc. But then you mention BCH and Nano lol. While I guess you can say there's advancements there over Bitcoin, in the grand scheme of the ecosystem Ethereum is where all the actual innovation is happening.
Sorry for not mentioning your favourite coin, please don't be offended. The Ethereum roadmap is exciting, so is the BCH one, I just wanted to list some examples to make it clear that Bitcoin itself does not have much interesting going on.
Can I ask you something: where do you get proper info about what's happening on crypto? Is there some honest party reporting it? Because all I've seen is "this is no financial advice" financial advice disguised as news or blogging, and the bitcoin forum. I'm saying that because I really feel only a few people are really on the loop. Thanks for any input
It's tough. It's the same issue as how to get stay informed with the news. You just kind of have to dive in and you figure out what's what. I'd lend you some resources but there's a lot going on in the space so without knowing your interest it'd be hard to send you in any direction.
Overall though I think the best thing to do is follow the people that are actually getting things done or directly involved. For example Andreas Antonopoulos has been in the scene for a long time and speaks well at various depth from the tech to more abstracted views (https://aantonop.com/). However he's mostly involved in Bitcoin. On the Ethereum side there's a few different resources from Vitalik's blog (main cofounder) to the developer roundup notes, to straight up reading their forum and proposals.
If you're wondering more about the trading side then my personal favorites that don't waste your time or try to sell you stuff are Willy Woo (@woonomic), Plan B (@100trillionUSD), and Benjamin Cowen (Youtube). Will does chain analysis for bitcoin, Plan B develops macro price prediction models, and Cowen covers a handful of assets from a mathematical and risk-adjusted return perspective.
all that innovation is cool and all, but it seems a bit egotistical to be upset that people haven't heard of your awesome cool thing when a vast vast majority of people haven't heard about or use your thing
This is a HN post where people are sharing their (mostly negative) opinions on cryptocurrencies, not the comment section on a YouTube video about knitting.
Also, I have nothing to do with these awesome cool things, but thanks for giving me credit for them.
I think a lot of it is just people not wanting to admit they were wrong. It's far easier to double down. I remember almost being convinced by patio11 that bitcoin was stupid and dumping it at like $30, but thankfully didn't. Now I get a bit of a kick out seeing him come out of the woodworks when ever bitcoin or tether hits a hiccup gloating how they were right!
I've read many good arguments against cryptos here. If 80% drop happens within the next month, nobody really would be surprised. Cryptos can still easily fail. I hold Ether (just it) because what they are doing is really extraordinary but gazillion things might go wrong with it, Bitcoin, and others.
Do you think the code will fail, the consensus model, or there are no uses cases? If you have concerns about this I would love to hear them.
But if you are only afraid that the price can fall 90%, then who cares? Let it fall, there is too much hype anyway, to the point it has created great division between coiners and no-coiners. For example, the 2001 stock market crash, it cleared out projects based on fluff and the rest continued to build. I would reckon we would see a similar dynamic now, but probably with faster market cycles.
Ask yourself: What drives the price increase? Are people buying because they expect to use Bitcoin? Or because they expect the price will go up?
If it's the latter, it's a self-reinforcing cycle: The price goes up because people buy. People buy because the price goes up.
So what happens when the popular narrative switches? What happens when the price goes down for years at a time and people watch their money dwindle? Will people wait around for the price to skyrocket again? Or will they see their friends getting rich in altcoins or meme stocks or NFT trading cards and sell their BTC to get in on the next hot trend?
The price did go down for about a couple years and here we are today. I think if anything people are more likely to buy the dips and see it as a buying opportunity rather than a reason to.
So what drives the increase in price? Many reasons. Because it's going up? Sure, that's accounts for some. It's a store of value against a government that printed 22% of all dollars ever created last year? Yeah. In a world that seems increasingly chaotic and unpredictable in places that always seemed stable it is attractive because it's a global store of value that can be tapped if you ever have to flee? Sure.
I think these are just a few reasons why it's going up in value. It's quite scarce and everyone knows the rules and no one controls it. Not a government, a corporation, or a person. So yeah, it can and probably will take hits but I think in the long run it's just a thing that makes a lot of sense to more and more people as part of a well diversified portfolio.
> It's a store of value against a government that printed 22% of all dollars ever created last year?
What asset isn't a store of value? Inflation, by definition, is when the price of something inflates. Bitcoin's price is inflating in dollar terms. Someone invested in stocks and real estate is protected from US dollar inflation.
The idea that Bitcoin is the only way to protect against inflation, or even that it's a good way to protect against inflation, is largely a narrative pressed by people who want you to buy more Bitcoin. That is, they want you to inflate Bitcoin via demand-pull inflation. Ironic, isn't it?
> is attractive because it's a global store of value that can be tapped if you ever have to flee?
You really think all those people buying and holding Bitcoin in their Coinbase and Robinhood accounts are doing so because they might flee the country?
Again, the narrative that Bitcoin is a mechanism for fleeing oppressive governments is largely a myth. If someone wanted to get their money out of a country, they don't need to invest in Bitcoin long-term. They just need to transfer in, cross the border, and transfer out.
Let's be honest: Most people are speculating.
> It's quite scarce
It was literally invented out of thin air by programming. The maximum number is finite, but it's ironic to declare a resource scarce when there are thousands of altcoins online, and even multiple forks of Bitcoin.
> I think in the long run it's just a thing that makes a lot of sense to more and more people as part of a well diversified portfolio.
Price goes up because other people buy it because price goes up...
Stocks and real estate are great. You should own that too. BTC is unique in that it is protected from government and corporate mismanagement. Real estate and stocks - not so much.
There’s so many good reasons BTC should be in your portfolio that I’d call it irresponsible to not own it at this point.
I do think there are some seriously sour grapes among those that thought they were too smart for it or something and they feel they’ve missed the train. But it’s real and it’s a revolution and people will end up owning BTC indirectly through ETF’s or other aggregate investments. I don’t really care though - maybe it’s just not for everyone.
Could be wrong but I haven’t been the last 8.5 years I’ve been invested as the vision and potential of it is so obvious to me. Of course if I had a dollar for every time I’ve read it’s a fad/tulips/useless/etc (I think the new one is it’s bad for the environment lol) I’d be doing just as well.
Having more speculators actually makes it more likely that the asset is fairly valued.
Speculators are the driving force which "correct" the price of overvalued or undervalued assets. More speculators mean that assets will reach their "fair price" more quickly. In this way speculators actually reduce volatility and make it harder to manipulate the market.
Keep in mind that speculators are not necessarily in long positions, they could also be shorting Bitcoin (which would be the logical thing to do if you believe there's a bubble).
Sure, vulnerabilities and bugs can happen. They get fixed and people move on. Something much better coming out is not an existential risk for the cryptocurrency/blockchain space, quite the opposite, it's very positive.
Is it positive for Bitcoin if Ethereum proves that POS is way way superior? And if people actually start using Ether as a currency in shops, start using it with many dapps etc.? What if something much better than that comes up? Are you absolutely sure Bitcoin survives in the long-term?
I do believe one day Ethereum will overtake Bitcoin, but I think we may be a few years away from that (possibly next cycle). Reason being is that everyone's first exposure to crypto is Bitcoin. It's hard enough for them to understand that. After that they have a better foundation to start understanding Ethereum. Once you understand Ethereum and see the network effects it has and that all innovation is happening there it's pretty easy to see how it has more growth potential. The ability to stake is what I think will really steal from Bitcoin's "store of value" narrative though as it offers people interest and will also lock up circulation which will help with price stability.
> All of my friends and family I convinced to buy and hold have been texting me how I changed their lives.
Because they're enjoying life without private banks? Or because they've realised gains from the bubble? If you "understand Bitcoin" as you claim, you must realise the latter cannot go on forever.
I think the more productive sentiment would be to try and have a more in depth discussion about Ethereum instead of attacking HN ad-hominem.
So, as someone who doesn't know much about crypto aside from "it's bitcoin!", please tell me, what advantage do stablecoins/Ethereum provide that fixes the problems presented with bitcoin? I actually want to learn more.
I would be interested to know about the volatility specifically and also if these currencies are less susceptible to a 51% attack or a fork.
Stablecoins are a way to use the Ethereum network (or another blockchain) to send value that is pegged to the US dollar. There are a lot of stablecoins now (USDC, DAI, USDT) and they have various mechanisms for staying pegged to the dollar, some more effective than others.
Using stablecoins allows you the advantages of the Ethereum network (interoperability with ethereum loan platforms and other smart contracts) without having to be concerned with the price of ETH.
Stablecoins have the same level of security as their underlying blockchain. To double-spend ethereum-based stablecoins you need to 51% attack Ethereum itself.
I want to add that Ethereum gas (fees), are at the moment quite expensive.
That being said, there's work being done to lower that and competing blockchains are coming up, that support the EVM (Ethereum Virtual Machine) or at the very least supporting Solidity (which in turn compiles to EVM assembly).
There's a amazing fintech ecosystem being created in Ethereum, with decentralized exchanges, trustable oracles, DAOs, etc. It's definitely worth the look.
Not even that. they will likely implement their own private-ledger-per-country system. The press release mention only one market that is currently trading via informal SMS and WAP bank apps with little access to actual money, so why not remove the money entirely?
> Getting 1 of the 21 million bitcoins is like decentralized proof of saying "I had 48k worth of value in Feb 2021!"
Bitcoin doesn't prove anything about your USD value. Bitcoin blockchain only proves how many Bitcoin you have. Nothing about how much they're worth.
No one cares how much your 1BTC was valued at an arbitrary date in the past. The only thing that matters is how much someone else is willing to pay for it right now.
If you buy 1BTC for $48K, you don't have $48K. You have $0 and 1BTC. Someone else has your $48K.
> It locks in the value that you created forever. Otherwise governments will just keep printing money, and your value gets diluted arbitrarily.
What is inflation? Inflation is when the price of something is pushed up. You don't need to buy Bitcoin to avoid inflation. You can also buy stocks, or real estate, or gold, or businesses, or any other number of investments. Basically, do anything other than put cash under your mattress and you'll avoid currency inflation. Bitcoin isn't even close to unique in this regard. People have been investing to avoid inflation for centuries before Bitcoin came along. This idea that Bitcoin is the only way to avoid USD inflation is a deliberately misleading narrative from the people who want you to buy Bitcoin instead of other assets. Fear-mongering.
Bitcoin, however, is inflating in US dollar terms. It is inflating due to demand-pull inflation, by the textbook definition of inflation. The fixed supply of Bitcoin isn't what drives the price up. The only thing that drives the price up is demand.
> Assuming the mechanisms of protection for the blockchain holds, it should work out exactly as that.
No, blockchain has no notion of price. USD prices of BTC are purely a function of exchanges. Exchanges don't even touch the blockchain until you withdraw from the exchange.
Blockchain only protects your 1BTC. It doesn't protect your $48K value. The $48K value comes from other people buying Bitcoin. Why are they buying Bitcoin? Because they expect the price to go up. Why do they expect the price to go up? Because other people are buying Bitcoin.
Sorry to burst your bubble, but if a government wants to prevent you from using a cryptocurrency it has many tools at its disposal. Firstly, they control the ground upon which you stand. If they don't like that you are using crypto, they will simply arrest you and charge you with a newly-formed crime like 'digital tax evasion'. Secondly, if they can't find who is using crypto, they have the power to shut down the Internet or simply censor requests. No ISP has the military force to prevent a government from walking through the door and cutting the cable.
Point is, as long as you are on their turf, you will follow their rules. Unless you want to make your own rules, in which case you will have to fight the government, become the government, and realize that having no control over a currency being used in your turf can be really bad for you and your citizens. You have no control over its value to at least try keep the economy stable, and they will have nowhere to turn in event of a financial crime or scam. No courts, no recourse, no trust.
You don't seem to get it, do you? Your government decides it can't regulate crypto, so it bans it. People use crypto anyway. Government raids telecom and puts filters on Internet. People use encryption. Government shuts down Internet. People use satellite internet. Government make penalty for using crypto a life sentence, because they can. Drives around with vans detecting sat signals. You can't fight them on their turf.
Your government can ban bitcoin, but every government would to ban it otherwise you are going to just piss off your populace. They'd also never be able to spin the internet back up without bitcoin spinning right back up with it. Also, Tesla is an s&p 500 company. If they made Tesla lose 1.5B for some philosophical argument about control they would crash the market.
People often think crypto == bitcoin. I think there are 4 categories that people should think about:
1. Crypto as asset class (BTC/ ETH)
2. Crypto for transactions - usually pegged to a dollar or other fiat eg. USDC
3. Crypto as a utility/ asset backed token - filecoin etc
4. fraud.
I think mastercard visa etc will focus on #2 above and it will bring extremely powerful dynamic to these ecosystems
#2 (crypto transactions backed by traditional currency) is far and away the most useful of these categories.
Unfortunately, it doesn't offer the speculative upside of something like Bitcoin. People don't actually care if their transactions are carried across a blockchain or a database, as long as it gets done.
Bitcoin is hot specifically because it's so detached from any real-world use cases or metrics that might put bounds on its price. There's a narrative that because no one can determine an upper limit for Bitcoin price, there's infinite upside. Of course that narrative is no different than any other arbitrary asset, but the Bitcoin narrative is strong because it's been in the news so much.
There’s always lots of bluster and comments about cryptocurrency with things like this and not always much concrete information.
I think as a tech community here on HN we should try to focus on why these changes are occurring so quickly and what the repercussions are. Let’s talk constructively about the risks and opportunities more than we do about who’s buying, who’s selling, on and on.... is it a bubble.. does it have value, etc etc. Clearly it’s here to stay and clearly large chunks of our economy will soon be dealing with it.
So let’s instead talk about constructive ways to move regulation forward. Expand education and communication etc.
For instance I have a concern that we’ll leave a large percentage of people further behind as digital cryptocurrency becomes a larger part of the economic system.
I like the spirit of your comment - that's the actual hacker mindset. Way too many comments on Bitcoin/Crypto-related submissions on HN are just knee-jerk reactions that don't really contribute to a constructive conversation. When I started lurking on HN in 2010, it was a very different culture. I miss these days!
Regarding your concern around economic inequality: why do you think that people would fall further behind? I'd argue that cryptocurrencies have had a positive effect on inequality, particularly in countries like Argentina, Nigeria, Venezuela, etc. Without cryptocurrencies, people in these countries - particularly the ones who don't have assets in other countries - would have lost a lot of wealth due to the financial instability of their respective economies. As cryptocurrencies are here to stay, I'd even argue that they are currently still underpriced and hence provide many people from the lower income strata of society in 1st world countries with an opportunity to improve their financial wellbeing. This might not be true for people who don't understand technology, but then I ask myself what the current system has to offer to improve inequality for those who lag behind economically and in terms of education.
A constructive idea how we could avoid further deterioration in terms of economic inequality: countries / communities could set up cryptocurrency trusts similar to Norway's Oil investment funds that are funded from cryptocurrency that was mined from e.g. excess energy in the grid from renewables. They could then invest a certain percentage of their cryptocurrency in trustworthy DeFi platforms to further increase yield. Returns from these trusts are invested into causes that benefit the public, e.g. education, health care, etc.
Excellent points. I think like with a lot of tech, if there’s a potential to liberate people, there’s also the potential for it to work against them too. The internet helped foster open communication when it evolved, helping with the fall of the USSR and the lifting of the iron curtain... but it has evolved now in many places as a way to spread more propaganda, and track citizens movements etc.
Crypto trusts sound like a good idea. I also like how the US targeted family’s and kids for savings bonds back in the day. Get people started in the direction of understanding financial instruments, and then teach them more as they go.
Ultimate I’m in the educate, educate, educate camp. If we can lobby our collective governments to start that earlier than later, so much the better. When people can see cryptocurrency working for them rather than just the financial sectors, then it’s no longer the “enemy”.
Maybe we can have a small fund of highly divisible crypto, or even a totally separate chain that schools can use. Kids in computer science classes then have an on ramp to learning how it works.
It’s already a mystery to most. I do fear what might happen when the vast majority of people don’t understand what may become a significant part of their economy.
Agreed, at the end of the day all technology is but a tool. Technological progress also requires human progress, i.e. we have to upgrade our mental models and values as technology allows us to engage at unprecedented scale. Critical thinking and empathy seem to be the two key missing skills in the 21st century and modern society doesn't place a lot of emphasis on developing these skills. That's where I'm fully with you: the key is to educate, educate and educate. But we also need to upgrade our education system accordingly!
My strongest criticism of the cryptocurrency movement is that there are very few genuine educators. Hackers who truly believe in decentralisation and self-empowerment and are able to communicate the basic concepts in a way that kids and older people can get it. OG Whales who have made a fortune and now could invest into tools and services to make cryptocurrencies accessible to everyone. Or even seed some of the crypto funds that could help drive upward mobility for people from lower income strata. The idea behind cryptocurrencies and the values are so much more important than their price and getting rich quick. But instead of educating and sharing some of their wealth, most prominent cryptocurrency advocates just talk about the price of Bitcoin, engage in ad hominem attacks on folks who don't get it and boast with their wealth.
Imagine what all these millions and billions of wealth could achieve in terms of educating the masses and winning them over for the cause!
The original idea of Bitcoin was to have a currency that wasn’t in government control - not to keep the government and big banks away from it.
The current world of cryptocurrency gives you a choice of trusting big banks or not, and having the same economic opportunities regardless of the level of trust you are comfortable with.
> The original idea of Bitcoin was to have a currency that wasn’t in government control
I've never understood this. With an immutable ledger of all transactions, governments simply have to make it illegal to transact anonymously (or pseudonymously), watch the blockchain, and investigate any un-attributed transactions.
It would actually enhance governments' surveillance capabilities against anyone not willing to run the risk of trying to obscure their identity, which I expect would be most people.
If you can intimidate the participants, the inescapable math of the whole thing becomes a tool that can be used against those participants. You don't need to control a currency if you can control anyone who holds it.
governments simply have to make it illegal to transact anonymously
Making something illegal does not give a government control over it. Many websites/apps are illegal in many countries. Yet governments have near zero control over their citizens using those products. VPN.
Regulating Bitcoin transactions is extremely easy due to the public ledger. You simply make it illegal for exchanges to transact with coins that are known to be stolen or otherwise flagged. Then all exchanges are forced to blacklist coins on that list, as well as descendant transactions from those blacklisted coins.
Now there are two classes of addresses on the blockchain: Those that are clean, and those that are tainted with illegal activity transactions. The tainted coins are worth less than untainted coins as fewer and fewer exchanges will touch them.
Ironically, Bitcoin speculators will support this move because it reduces the supply of Bitcoin. Reducing the supply of Bitcoin increases the relative value of their clean Bitcoin.
In this hypothetical world of regulation which has made some BTC "tainted" through surveillance, it will always be in the BTC receiver's best interest to verify the coins are "clean". Only a fool (or fellow criminal) would transact with tainted coins; most people would probably not use a DEX, or else use one which verified clean coins anyway without being regulated to do so.
Hmm, i think we have different thoughts about what a DEX is. Decentralized exchange allows me to conduct exchanges anonymously. I can convert back and forth between many different coins and wallets. Although it still goes on the ledger each time it's transacted, verifying who it went to, who is came from, and how it was traded is impossible. I can use a VPN to connect to the DEX, I can push my trade through a mining firm and many other ways. Any government 'Banning Bitcoin' is just a giant advertisement for bitcoin and will only lead to that nations fall as other nations take the cue to 'Stick it' to the nation that banned it by investing.
The point is, a government can make it illegal to sell goods for crypto. As well as making it illegal to transact crypto anonymously. So unless you find some black market for all your material goods, you will be FORCED to "exit" some of your crypto into fiat at some point. It is at this point that the design of BTC in particular makes it impossible to hide this "exit", because a government can easily surveil the blockchain and keep track of "verified" coins / addresses.
Any time a transaction is spotted between a registered and unregistered address, just send a friendly police van to the address on file and seize the registered wallet. Rinse and repeat until unregistered wallets can virtually only transact between each other.
Again, I don't think you understand crypto very well. I can buy coins on a DEX and transfer them to my hard wallet. There's no 'Verifying' or 'Knowing my address'.
Again, your government banning selling goods for crypto makes it a better investment opportunity for the world.
I'm not sure what you mean about "understanding" crypto, the concepts here are dead simple, there's not much to misunderstand.
In this scenario it doesn't matter that you can transfer some coins from a DEX to your "hard wallet". If you haven't registered your hard wallet's address with the government and linked it to your identity, you will be unable to use those coins for anything other than trading with other unverified wallets.
If you want to exchange the coins in your hard wallet for any valuable or material good whatsoever, without disclosing your actual identity to the government, you'd have to find someone willing to do so illegally i.e. a black market.
And the receiver of your "dirty" bitcoin, which is verifiably dirty because the transaction came from your (unverified) wallet, would then have to solve the same problem of laundering the BTC if he wanted to use it to pay for his costs / employees / etc.
And if we're talking about a large economic power, I'm not sure how banning crypto and making its transactions more difficult would help anyone; if anything it would negatively impact that crypto since it is less usable as a medium of exchange.
It may seem outlandish that a government would even go to these lengths, but I'd argue that wielding a centralized currency is too powerful for governments to give it up without a fight.
> governments simply have to make it illegal to transact anonymously
How? Are you suggesting that every single government in the world would collude together to ban crypto?
What if, at least one of those probably western, countries chooses to make the simple decision of not being a parody of a distopian government?
Then other governments who have chosen to be a storybook parody of distopian would be unable to tell the different between these legally anonymous transactions that are in the normal country that is allowing these transaction, and between illegal transactions that are not in that country.
They couldn't simply watch the blockchain, as 1 country is defecting by not acting like an absurd example of a totalitarian government that is in no way similar to how modern day western countries act.
> You don't need to control a currency if you can control anyone who holds it.
But multiple absurd totalitarian governments that pop up overnight wouldn't be able to control everyone who owns crypto, as there would certain be countries that decide to make the simple decision of not acting like a story book parody of an evil government.
For the record, currently recommended best practice is to create a new Bitcoin address for every transaction. Although the ledger is public, using it on a regular basis would mean you have hundreds of addresses per user.
For targeted investigations, blockchain crypto is already being a hugely useful tool for 3 letter agencies. But for dragnet policies of mass de-anonymized transactions, I currently can't think of a way for this to actually work with limited resources.
Currently, anonymization is being defeated at the source by requiring registration with all major crypto exchanges. But once the coins start to circulate like cash, wallet to wallet, you would need to force registration on the wallets (in order to match identity to the addresses) - but there are many options that are either heavily security focused or free and open-source, so it would be difficult to find a single choke point to regulate.
Depends on what the future of crypto wallet adoption looks like, I suppose. Monopolization does tend to happen...
Copyright infringement was also always illegal (and still is). That doesn't mean that Napster, BitTorrent, etc. didn't massively increase access to music outside the control of the copyright system.
Perfect analogy. From 1998-2006 it was easier to get pirated music than pay for it. Once the music industry realized that the days of people paying $20 per CD that they may only listen to a few times were over, the streamers took over and now 90+% of music is listened to with permission of the centralized gate keepers.
Regulators and other parties will catch up eventually. When there is a 500% tax on homes/cars you purchase with BTC the whole "decentralization/permissionless" idea will fade away.
You're absolutely right - it's a very double-edged sword. Pure on-chain bitcoin in its current form is the perfect tool for totalitarian control - guess why the CCP is hyped about their CBDC?
I think that the question of if we end up being caught without an exit or not comes down to if privacy-preserving technology (on-chain like Monero and/or off-chain like Lightning) gets adopted by businesses and individuals enough for it to be too late to pull back once powers that be have the understanding, capabilities and intention to do so.
1. It would be prohibitively expensive for the government to track down every blockchain transaction IRL to find the identity behind the wallet (if even possible). This cost rises with adoption.
2. Different crypto currencies have different roles. If you want to avoid traceability altogether, use zCash.
1) Why would it be prohibitively expensive? In the face of severe enough penalties, most people would simply report their transactions as required, and report who they transacted with.
The number of transactions that needed to be investigated would be a small percentage of the total, and possibly traceable through means other than cracking keys.
2) Regardless of whatever zCash is, my point is that Bitcoin's immutable and complete ledger lends itself to complete surveillance. The math may be uncrackable, but the users are not, and privacy would go out the window if they're forced to transact with registered IDs.
It's prohibitively expensive precisely because being forced to transact with registered IDs is going to be less and less of a requirement moving forward. With DeFi exchanges, we'll see more transactions that stay out of state surveillance.
You're correct that BTC isn't ideal for privacy though. That's why zCash and Monero will also be important currencies.
You don't need to track down every transaction. You just need to flag the fraudulent/stolen/illegal coins on the blockchain and require exchanges to confiscate those coins as they come through the system.
Blockchain is a public ledger of every Bitcoin transaction ever. It's trivial to track these things. It's trivial to identify downstream coins from upstream illegal activity. Far easier than with traditional currency.
The exchanges will play ball because they want to continue exchanging (making money). The Bitcoin hodlers will play ball because it makes their investment more legitimate and reduces the supply of coins, increasing the value of their stash.
The exchanges are becoming decentralized. Not just exchanges but other financial services, including the ability to earn interest. There are also other coins that are less traceable than BTC. It's only going to get more difficult for governments to track crypto, not less.
Right, I view this announcement as a ploy by Mastercard to stay relevant and probably appease their investors.
One of the key selling points of bitcoin and other cryptocurrencies is removing the middleman from transactions. Arguably miners in the proof of work consensus are a middleman but not as much as the 2.5-3.5% charged by the likes of Visa and Mastercard.
The other one, as OP mentioned, is permissionless or decentralization - the freedom from the whims of governments and traditional banking systems. I don't see how Mastercard can straddle between the two without some deception.
I see where you are coming from. I see bitcoin as a tool that can be used both inside and outside of the traditional financial system. It's ultimately up to you, the bitcoin holder, to decide if you want it transacted through the bitcoin client or if you want Mastercard to be a middleman.
Unclear what this actually means. Can I pay my credit card bill using crypto? That's a taxable event and a pain in the butt to track.
Can I buy stuff from merchants using crypto, and they receive crypto? Useful, but most merchants will want fiat currency, so someone on the chain will have to convert it to dollars, which again would be a taxable event.
>Consumers can instantly convert their cryptocurrencies into traditional fiat currency, which can be spent everywhere Mastercard is accepted around the world. Currency will always enter Mastercard’s network as traditional fiat currency.
I don't get it - you're trying to avoid paying tax into the society that you're using, benefitting from?
Edit to add: Many replies are acting as if it's difficult to automatically, digitally track conversions and taxes, to then pay your taxes? It's a digital "currency" we're talking about here.
As a point of order, tax avoidance is perfectly legal and encouraged by the IRS. Tax evasion is illegal.
There are many legitimate and ethical reasons why someone would want to avoid taxes they're not obligated to pay.
To your second point about calculating and tracking these expenses, it gets messy really quickly. Certainly do-able, but messy nonetheless. Imagine having a 1099 that is dozens of pages long because it's basically your yearly credit card statement. Imagine having to pay a capital gains tax of like 5 cents on a starbucks purchase. Interestingly enough, this isn't a requirement when paying for things using foreign exchange. You don't have to track gains if you take a vacation to Europe and pay for things using Euros. So I think the goal is to have crypto transaction treated like a Forex purchase.
I think the OP is noting that it makes taxes complicated. Imagine having to track and report every time you went to Starbucks to the IRS, which you would have to if you converted crypto to dollars to buy a coffee.
So how do you protect against the actions of bad actors - who otherwise then have free reign to do whatever the fuck they want in your "country"/area that you seem to not think you'll need to defend from bad actors?
Or you want a wild west, free-for-all environment? In your own house, do you want to have control of who gets to come in or not? It's that same type of control that is inherently tied to security and safety.
> Edit to add: Many replies are acting as if it's difficult to automatically, digitally track conversions and taxes, to then pay your taxes? It's a digital "currency" we're talking about here.
As someone who has to deal with this every year, yes, even if it is "tracked automatically", it's a huge pita to manage.
Let's be a bit more charitable interpreting what they said: "a pain in the butt to track". Lots of little profit taking events to report on your tax form, yeah it's painful. But also means that you intend to pay the tax, not avoid it.
No, I don't mean sales tax. I mean converting from crypto to fiat, in the US, is treated like capital gains. So you get to pay taxes twice on the event.
> Anyone know what the "select" cryptocurrencies are?
Ethereum is pretty much where everything is happening and has been the case for a few years. On that platform there's multiple projects that are interesting and show promise like Uniswap, Aave, Synthetic, Maker, Vechain, Filecoin, etc.
The public thinks Bitcoin is the currency of hackers. Decentralized, technical, innovative and challenging the whole financial backbone. In reality... We have threads like this. Never seen so much hate for Bitcoin as on HN.
“People fear what they don't understand and hate what they can't conquer.”
Bitcoin itself may end up being worthless or being a fortune. The block-chain technology is the revolutionary part that is here to stay and will only continue to grow in the future.
Don't invest in what you don't understand is the #1 rule of investing. If you jump off the deep end without knowing what's at the bottom, you are at a high risk of losing what you put in. New technology always comes with this risk. That's kind of why most don't touch crypto - its far too technically complex for them to even comprehend the risks.
If you've followed crypto and blockchain for long enough though, you realize that the risks are high and the value is low. It's a shitty technology, and a shitty investment. The cryptoverse is filled with volatility, no real-world "thing" to tie value back to, and scams upon scams.
Blockchain is an innefficient, energy-guzzling excuse for a database. Oh but you forgot its decentralized So what? Most applications don't need decentralization - it makes them inefficient and slow. Why do you think the general trend of the world has been centralization into hubs, cities, and services? Here's a nice refuter of the blockchain hype:
blockchain is more than a distributed database. in a distributed database someone is still in charge and can make decisions unilaterally about how the data is altered.
in blockchain you have a bunch of entities that can transact with each other with zero trust and without the need of a central authority. that is the truly innovative aspect of the blockchain and what sets it apart.
No, no, no! That's the whole reason behind why it sucks... you can't trust it! You have to verify every record on that chain by yourself, and if you make a mistake in a transaction or other operation there is no court or process that can give you restitution. Its also very inefficient (massively slow) compared to a distributed database, while functionally doing the same thing. There are barely any use cases where you don't want central authority and you want distributed storage... centralized databases are always going to be more efficient and convenient. If you want to use a inefficient, crappy excuse for a database be my guest.
Bitcoin started as a fun distributed systems experiment.
It mutated into a sort of global pyramid scheme that consumes >0.5% of the world's energy consumption to perform deliberately useless calculations.
Modern bitcoin isn't even about blockchain. Most people just put money in their exchange, click the exchange button, and watch the number go up and down. Never even touches the blockchain. It's all about speculation and convincing others to become the next layer in the pyramid of hodlers.
Modern Bitcoin isn't about tech or distributed systems or challenging the financial system (with $8 transaction fees that go to mining companies and exchange fees that skim every trade). It's been captured by the financial system and pumped as a speculative investment, all so financial institutions and giant mining operations can profit off of the frenzy.
It's bizarre that in this tread, the US dollar is treated like an immaculate flawless tool for transferring value. But in every thread about economics, its agreed the US dollar lacks trusts, is being manipulated by the fed, and is the leading cause of gross wealth inequality.
What is your evidence for these claims? Bitcoin and other cryptocurrencies go through multiple price fluctuations a day. The American dollar currently underpins and backs a majority of the world's financial system [1]. Sure it isn't flawless, but its way better than something that has no backing from anything. I would prefer to use the currency issued by the world's most powerful independent state, because they are probably gonna be around for a while.
Because it’s still the best option. I know my USD tomorrow is going to be worth less than USD today. But I don’t think there is a better option for some portion of my assets, and I still trust that it will be useful to me in the future.
But I also don’t keep more than a few years worth of USD, instead I hold other equities that I believe will increase in value relative to USD. USD gives me liquidity, but not necessarily a good store of value. Other assets give me store of value, but not liquidity.
So, compare the volatility of Apple stock to Bitcoin for the last year or two. Which is more volatile, and which one has a long-term downward rate of volatility?
> the US dollar [...] is the leading cause of gross wealth inequality
I have never seen this claim made before. Do we have an explanation on why the US dollar causes inequality? Would it improve if the US changed their currency to Yuan or Euro tomorrow? Also, how will cryptocurrencies prevent gross wealth inequality?
MasterCard is in the business of payments. Millions of people now have a bunch of idle money sitting in a potential payment vehicle outside of their current network. Anything MasterCard can do to start to siphon off some of that value is good for them. This has nothing to do with ideology, philosophy or technology. And d4mn right it’s a good sign for the Bitcoin bulls.
Anybody kind here whou would explain me how is this different from Binance card https://www.binance.com/en/cards ? Of course Binance card is not available everywhere but excluding this restriction these two are the same system, right ?
The last thing I want is to help the MasterCard and Visa duopoly persist, given how many times these companies have polices others by instituting payment blocks on people like Wikileaks. I view cryptocurrency as an alternative to the current financial system and not something meant to be leveraged by these incumbents.
I'm pretty sure Mastercard did know that there are a lot of CC companies that already use crypto. And they just want to get a share of that pie.
And if they do it now, their share can still be enormous. If they just take the same percentage the use now for traditional payments, the will get a lot of exposure to crypto. And they might speculate that the whole sector will grow over the next X years. And just them onboarding, will make it more likely for this to happen.
I use a crypto backed cc since nearly 1 year. It's NOT that you are paying in crypto, you still have to convert the coins to a stable currency and the top up your card with it.
There are cards that 'make it look' like you are paying in crypto. But the do the same thing in the background.
What if we could just attach a MasterCard to a bitcoin wallet rather than a bank account and then use it to pay at any ordinary POS terminal so the conversion would be done seamlessly and the store would get ordinary money? Is this what they are going to implement?
There is not _a_ blockchain but multiple and on Bitcoin this would not grant these payment processors any power to perform 51% attacks. I think currently it is out of the power of one single attacker to perform such a feat (maybe China?) And am not sure if they would even want to if they could since they would be very invested in the cosystem by that point. Overall, I think BTC is extremely secure.
Serious question: what happens when nobody wants their HW assets to verify the blockchain? What happens when the infrastructure falls apart or the demands on the blockchain verification outpaces the number of machines available to verify? Can you buy/sell btc off of the internet? Why would we want a future with digital assets that are inherently relying upon things that can fall apart with an EMP (not trying to be a doomsayer/fearmonger)?
It was have to be a global catastrophe, and at that point there's honestly probably more important things to worry about. Nevertheless, the blockchain can be rebooted from a checkpoint. This hasn't been done before but there's no doubt it's doable and I'm sure a somebody will put forth a proposal in the coming years for this.
I am not big on cryptocurrency. Look how the price of these "currencies" fluctuate like crazy, because people buy and treat it like an investment. What is the actual current practical utility of cryptocurrency except for buying/selling illegal things online? People are so horny to get in on the next computer/iphone/etc that they forget that new ideas can fail.
There is a ton of utility in crypto. Here's one scenario I've never seen discussed but is absolutely real:
Imagine you're an abused spouse or child who needs money to escape their situation. Opening up a bank account isn't an option for a lot of people, but anyone can instantly open a crypto "account" and start stashing a nest egg away from the prying eyes of their oppressors. Crypto is the only option for this, and I've seen it successfully used like this multiple times.
The existing banking system favors those in power and those in good standing in the existing systems. If you're underage or financially dependent on an abuse spouse, it's a lot more obvious why you might want a way to store and transact money outside of that system.
Think of it this way. How many people on earth can't easily get a bank account (people under the age of 18 included)? It's a huge number that suggests massive scale in that use-case alone.
What about wealthy individuals that want to divest some of their wealth from the influence of nation states. When a country struggles that has direct impact on the currency and we're seeing that even in the US as the money supply increased 22% last year and will be up to 40% with the recent stimulus. This also isn't just and issue with the US. I think it was Belgium (?) that recently reported negative interest rates. Countries have also started divesting away from USD in their reserves since Trump was president. So this is a real concern that people/governments have that this offers a solution to.
BTW gold doesn't solve this because when you buy it it's being held by someone else, whom is tied to the country it resides in, and you're back to square one. Even if you were to buy it physically and keep it in your own safe you're still stuck with the same problems because it's not portable. Bitcoin is portable.
A store of value protected from (and even a beneficiary of) government mismanagement, central bank mismanagement, corporate mismanagement, etc.
Because we are forced to generally keep our wealth in things susceptible to political influence it’s nice to have a place to store value away from that.
My homes value can be wrecked by a variety of government or central bank policies. Same with my equities and bonds. So having a part of your wealth in BTC is frugal as a protection from these things. It is outside the scope of these influences.
> A store of value protected from (and even a beneficiary of) government mismanagement, central bank mismanagement, corporate mismanagement, etc.
Precious Gold/ Silver is way more adverse to risk than crypto and actually exists as a physical good.
> My homes value can be wrecked by a variety of government or central bank policies.
Crypto can be affected by those things also. I see the utility in certain aspects, but I don't understand the gold rush when there a lot better decentralized currencies.
Gold can be confiscated and actually has been in the past. Also, it's easy to lose. I personally feel gold has less value than a globally distributed proof of work and value store. Saying that, at what point did I say you should buy gold instead? By all means, hold both BTC and precious metals as a part of a well diversified portfolio.
Maybe there are better decentralized currencies (that's a matter of opinion) but there were better operating systems than Windows. It's about mindshare.
Honestly, just look at BTC's performance over the last 10 years. It has been the #1 asset class by far.
Don't people buy fiat currency as investments? People speculate in the FX markets all the time. How is this any different, rather than it's newer and thus more volatile due to not having found it's place.
I wonder where this puts crypto's such as Bitcoin Cash (BCH), whose main benefit is having a faster and cheaper network? Is the final card Bitcoin has to play, the fact that it has the brand awareness to hide its faults behind the MasterCard/Visa network?
So what exactly is MasterCard offering that relates to cryptocurrencies? What I gathered from the article was “it was planning to offer support for some cryptocurrencies on its network this year”
But does not seem to go into detail further than that.
No, no. KYC/AML ruins actual means of getting Bitcoin. This ploy for siphoning off money by Mastercard is perhaps the one thing in reality that is not good for Bitcoin intrinsically. No need for KYC here.
Aliens: look at this species they've come up with this weird concept of "money". Some of them have more & can obtain more resources with it. Because they can't trust each other they need a book-keeping system that uses more resources than they needed in the first place! Quite ironic.
If you could provide a better solution, a Nobel Prize is waiting for you. It is truly extraordinary what people have achieved. Especially since around 18th century (wonder why..).
Given their volatility and lack of a derivatives market to drive liquidity, I wonder what the banking capitalization requirements for crypto-currencies will be.
I can see the argument of "it's just another currency for exchange, how is this hard," but the difference today is it's super high volatility, without a rescue facility, and given bitcoin's public ledger of every bad person who has ever owned it, it is arguably less fungible than cash because MC would have to track the provenance of every block it had on its books.
Your mastercard probably won't be a bitcoin wallet either due to card chip capabilities, and I'd bet heavily they will just support it as another virtual currency and do your real bitcoin settlement asynchronously on their back end in a hypothecated and risk-managed form, and even then it will be a private ledger with their bitcoin capital levels levered way up.
IMO, the entire levered business model and capitalization requirements when applied to cryptos sets banks up for the squeeze to end all squeezes, like when countries demand delivery of their physical gold from bullion banks and it creates political instability, except next time it will be 4chan organizing to get delivery of their bitcoin. For an issuer to act as a bank maintaining a float of cryptocurrencies to facilitate settlement seems like a super interesting hard problem.
Edit: this will probably be handled by reserving the right to pay you in bonds or IoUs instead of bitcoin, just like paper gold and silver today, which reduces the usefulness of doing your BTC payments through them in the first place.
CME has derivates. As do several other exchanges. Some argue that the derivates are actually part of driving price movements these days, but it's not the consensus yet.
Interesting take, BTW - I don't see it as impossible. There's some possibility this is the greatest trojan horse ever (unless it was just inevitable just like the internet was).
Derivatives are typically leading crypto spot markets (although recently it flipped for a while) It's been that way for a few years. I'm talking Bitmex, Binance derivatives, not CME.
I am not sure who in their right mind will buy BTC at $48K a piece! There's nothing major that's has happened, yet, the bubble has inflated from $6K to $47K only because it's now harder to steal electricity in China and the rest of the world to mine bitcoins. Every week in Bulgaria we hear for a new electricity thieves who got caught and have stolen electricity for millions - often in the middle of nowhere like in small villages, farms, etc. Didn't China started to crackdown on miners last summer [0]? And, yes, all marketplaces are manipulated by the same miner cartels. I am not sure how China has allow this so far - especially when many used Bitcoin as a vehicle to export capital. So far, Bitcoin is wasting as much electricity as Argentina, but if this bubble keeps inflated so that the Chinese miners can stay in business, where are we going to end up soon?
Mining participation does not change the issuance of new bitcoin. If there was 1 miner in the entire world the issuance would be the same. Please educate yourself more about crypto in general, understanding the core concepts only takes a few minutes of research.
While you are right, I do not think truly understanding it is as easy as a few minutes of research. It was quite mind bending for me the first time I read about BTC.
Honestly, I think you really do not get it. Why would the loss of ability to mine lead to a price increase of Bitcoin? The mining efforts are driven by the price, not viceversa. I am certain you are familiar with it for a long time, but the way you put the problem kind of points out you are missing something.
This is correct, but you did not address what I was saying - why would a reduction in hashing power lead to an increase in Bitcoin price, as you were suggesting here:
" the bubble has inflated from $6K to $47K only because it's now harder to steal electricity in China and the rest of the world to mine bitcoins. "
Also, I know who Paul LeRoux is but I find I highly unlikely he is satoshi.
Why would I want to touch something laden with crime with a 10-foot pole?! And something so detrimental to climate? Bitcoin didn't, isn't, and is not gonna change anything - it's nothing but a speculation tool! Can we please stop inflating its bubble? Yes, there are meaningful cryptocurrencies, but Bitcoin holds no future - it's like sticking to VHS when there's Bluray or to a 3.5-inch floppy when there's MicroSD.
Well, I'm tired of this "you just don't get it". If they keep this argument, it means they are new to it as for years, I kept hearing it over and over again. Instead if sending to the mandatory "whitepaper", they should at least learn who Paul Le Roux is.
They’re hoping other people will buy cryptocurrency from these announcements, driving the price up. Or, more likely, they’re just hoping other people will buy cryptocurrency and not use it in these spending systems.
Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want.
Should also note that MasterCard crypto transactions almost certainly won’t be settled on the blockchain. Not with $8 Bitcoin transaction fees. They’ll just be denominated in cryptocurrency and people can deposit/withdraw in certain cryptocurrencies. MasterCard only needs to buy and sell on the blockchain as needed to provide an FX window. The actual transactions would be stored in traditional database systems (aside from customer deposits/withdrawals, just like Coinbase)
Why? Because MasterCard would get to act as an exchange and collect exchange fees. Exchange fees are a great way to charge consumers for spending their own money in 2021, when normal credit cards actually pay people 1-2% to use them. Cryptocurrency’s inefficiency is their financial upside.