Misleading Title. Visa says it will allow for Bitcoin to be converted to fiat, and the fiat can be spent using a Visa Card in the same way debit cards already work.
This is already done with the Coinbase card, Gemini card, etc
The statement is very vague in terms of who is covering the conversion.
It's such an anti-pattern for the world to adopt this approach. Sadly most people don't care nor should have to but the decentralization is effectively moot when payment processors like Visa get involved. Sadly, I'm less and less hopeful that crypto will be what the movement conveyed over last 10 years.
> Sadly most people don't care nor should have to but the decentralization […]
"Decentralization"? Bank of America Global Research just released a report today that said:
> 1. Concentrated Ownership: About 95% of Bitcoin is controlled by just 2.4% of the accounts, and distribution is heavily skewed towards the largest accounts. By comparison, the latest Fed data suggests that the top 1% of Americans control about 30.4% of all household wealth in the US.
* Francisco Blanch, with Savita Subramanian, Philip Middleton, et. al. "Bitcoin’s dirty little secrets". BofA Global Research, 17 March 2021.
Probably not even Russian oligarchs have that much control.
> About 95% of Bitcoin is controlled by just 2.4% of the accounts
This seems obvious to me. Many people have bitcoin wallets with only a little invested. In my case, I have a few wallets just to play around with. I assume all of those wallets count as "accounts" in the above, which would really drive down the amount of money the average account controls. However few people actually have wallets with large amounts of money. I could easily move far more money into my wallets, but I choose not to.
On the other hand, when we're talking about non-bitcoin wealth the numerator is much larger (everything you and me have as assets could count as wealth, not just what we've invested in a specific thing) and the denominator would be much smaller (every one of us only counts as one person, while bitcoin wallets could be created on the fly)
In other words, the above is quite the apples to oranges comparison.
To expand on this, quite a few wallet apps nowadays default to using a fresh wallet per transaction as a privacy measure, further inflating the number of wallets relative to the monetary supply.
No, you are confusing "wallet" with "address". A wallet is little more than a seed for an RNG and a log of transactions. Every new transaction starts with a source address and results in two destination addresses: the primary destination (payee) address and the address where the remainder of the source balance goes. You definitely want to maintain control of your change, so your wallet uses the seed to deterministically generate a keypair for a new address and that is where your change gets sent.
I've got no interest in digging into their methodology, but feel pretty comfortable assuming that they've grossly misrepresented all of the above as "accounts".
i dont mean to be condescending, but how could they implement privacy without centralizing? like the bitcoin card provide must hold all your assets for you for you to gain privacy, no?
Many of those Bitcoin "accounts" (addresses) are probably exchange wallets that actually hold the Bitcoin of many users.
Since Bitcoin is somewhat anonymous it's hard to actually estimate its GINI coefficient. I agree that it's probably not great, but I'm not convinced it's this bad.
> About 95% of Bitcoin is controlled by just 2.4% of the accounts
Bitcoin doesn't have accounts. It was txouts, which have addresses attached. AFAICT they're counting this by address, which is silly: most wallets use each address once. So in practice, this means an average person who uses Bitcoin regularly will have lots of small value txouts as coins get split up. There is no reliable way to associate addresses to individual people.
On top of that, there have been spam attacks in the past that created large numbers of very small value txouts.
> There is no reliable way to associate addresses to individual people.
That may be true in general, however in the US there are several large companies that manage Bitcoin wallets for consumers that are public or trying to get public. So the US regulators will likely have been able to get aggregate statistics like this for some time.
The more nexus crypto has with the traditional regulated finance system, the more ability of regulators to get opaque data from the network.
They've been scrounging for a long time now, but have had little to show for it. Years ago I'd arbitrage between a handful of exchanges, keeping fiat only on those where I'd have a chance of legal recourse - and the bitcoin only showed up just in time to execute the order. So over the years a bunch of those exchanges have gotten popped by hackers, which means those transaction histories got sold on the carding forums. Interestingly enough, the only impact that had on me was a few Wall Street outfits reaching out to buy large blocks off-exchange. How'd they get my number, ya think?
Most BTC is held by an exchange, like Coinbase, Binance, etc... so this statistic is about as meaningful as pointing out that 95% of US dollars are stored at a bank.
A lot of BTC was held by an exchange like Mt. Gox and Bitfinex, too.
With banks I can trust that I can actually get my money bank. BTC isn't decentralised, and the central actors controlling the system are far less reputable (which is saying a lot, when they're being compared to bankers).
So that metric is really bad because almost every Bitcoin wallet only uses each address once, for privacy reasons. Most of those bottom 98% of addresses probably have very small amounts and are just a small part of someones wallet.
An "address" can mean anything - a person can have a wallet with multiple addresses, or an address could belong to an exchange with holds it on behalf of multiple people.
I don't expect anything other than businesses will do what businesses do. Its just sad that mainstream media consumers will interpret this very differently from reality.
I ran across the following observation a little while ago: the volatility of one's currency should be less than the volatility of the goods purchased by that currency.
Sounds good, but does it hold true in practice? Should the average price of a dozen eggs be more volatile than $USD? I don’t think that’s the case historically.
Some goods are more volatile than others, and probably tend to be commodities (e.g., oil/WTI) rather than finished goods, but US$ (and the currencies of most developed economies) is less volatile than any good that I can think of.
The tax treatment of crypto as an asset makes it hard to avoid, right?
Otherwise, you have to note the current price of coin in USD each time you use coin to pay for something, because you owe capital gains or losses on whatever currency you liquidated to make the purchase.
Visa has incentives to play by the tax rules and make it easy for the average consumer to spend Bitcoin in dollars. Most cryptocurrency credit card companies built on top of Visa aren't willing to get their feet wet, not even in the country they are operating in.
A convincing argument would be a javascript app or a mobile or desktop app. I don't think the average person should be giving their address and personal information to a third-party.
Bitcoin disrupts central bank, not payment networks. Lightning [1] as layer 2 on top of Bitcoin adheres to trustless and p2p ideals, and is actually the competition for Visa.
I'm sorry but I just laughed like crazy reading this. The US Fed showering the wealthy with more cash than they know what to do with is the only reason Bitcoin continues to exist and anyone holds it. Bitcoin can't disrupt the Fed any more than house flippers in 2006 disrupted the mortgage underwriting industry. Bitcoin completely depends on the Fed. Holding it is a bet that the helicopter will never land.
I guess that's a little unfair as I suppose Bitcoin can help disrupt the central banks of places like Venezuela, giving the elite an easier means of fleeing a collapsing country without losing their wealth. Sort of defeats the purpose of economic collapse if it no longer even serves as a great leveler, but oh well, I guess. As long as the rich can never lose.
"I lived in Venezuela. Almost no one uses crypto or cares about crypto. The fees to send bitcoin alone represent a sizeable chunk of money to most Venezuelans."
I will cheer for the success of ETH2 as well. The reason I like Lightning better is because the engineer in me wants to freeze the base layer and do the experimental layers in isolation. Internet infra is all layered for good reason.
Ethereum is also layered. ZK Rollups are later two and not related to the Ethereum devs. It's an isolated engineering later with lots of experimentation going on with optimistic rollups, ZK Rollups, state channels etc.
The problem with Bitcoin is that it's not technically sophisticated enough to support proper L2s which results in poorly engineered solutions like Lightning and centralized solutions like Liquid.
With Bitcoin more work needs to be done on L1 for the ecosystem to support layers above it while Ethereum could freeze development forever and still support flexible, fast, and decentralized layers on top.
The OSI layering model of internet infra is largely a myth, a simplification for students. It's similar to C is called "portable assembly" despite compilers being far more complex in practice.
Layers 2 and 3 are not real - most networks today merge their functions in the same devices. (In the OSI model switches are illegal, you can only have hubs and routers).
4 and 7 are ceasing to be real - HTTP2 is both a session protocol and an application protocol, and that's before we even get into things like DoH.
I disagree. The model was supposed to be universal but it fell apart as soon as people started doing anything slightly unanticipated with it. It's simultaneously both overengineered and fragile, not providing enough insight to justify its complexity - rather like OSI itself. There's a reason their protocol suite was a failure in the real world.
That's fair and I agree that the OSI model is not useful for a precise understanding of deployed networking technology.
I do think it is useful as an architectural device or a conceptual design goal -- i.e. a model to model your models on. :)
But I also concede that part of its teaching value is that it is a failure in practice.
It was a formalization of the ad hoc (successful!) design strategies of early networking. I see echoes of it everywhere, most obviously in the Linux kernel, and I think it's valuable for that.
The usual criticism of the OSI model is that there are grey areas and dependencies, where a lower layers bleed into higher layers (e.g. L2 switching which can work a lot like routing in modern hardware), and higher layers that are tightly bound to lower layers, making the distinctions unclear.
The purist in me wants to agree, but I think the model is too useful to disregard casually.
The value comes from the abstraction, and like Newtonian physics, it is a great model -- until it isn't.
Zkrollups plus sharding will do more than that, without security or usability compromises. Rollups can handle a couple thousand tx/sec on Ethereum today and data sharding increases that by 23X initially.
Fundamentally, we're stuck with conversion and middlemen until we have real products that are priced "natively" and stably in Bitcoin.
People aren't willing to say "this load of bread costs .00004534 BTC" because tomorrow it could be significantly less or more. And conversely, that reinforces the volatility, as there's no anchoring of BTC to real-world purchasing power.
So for the foreseeable future, we're looking at a conversion model and that requires someone to backstop.
So how do we create products priced in BTC? We can't even get, for comparison, shops pricing their goods in grams of gold or silver, a more stable alternative.
I don’t fault the average person for not wanting to be their own bank. I’ve been using bitcoin for years and I’m still terrified I’m going to mess up a transaction or lose access to my wallet.
This is the biggest problem that an average person need not ever want to deal with. How do you explain to someone sorry we cannot help you because it was your responsibility to manage that wallet.
It's not really that decentralized now. The largest miner pools can be seen here[1]. All of the larger ones are from China. I would be more worried about authoritarian action over there than some by the book payment processor processing transactions in the US.
Why would a book payment processor use Bitcoin when the average Bitcoin transaction fee is about the same price as many new books? With Bitcoin, you're looking at spending about $50 if you buy a $25 book.
I meant the phrase "by the book" payment processor, not a book payment processor. I'm a lot less worried about the risk of centralization posed by visa than I am about over half of all bitcoins being mined in an authoritarian country.
The only problem with Monero (and most other privacy/decentralized related projects) is that there is a big illegal industry that desperately needs such a product and it needs it much more than any legitimate user so it has gained a Tor like reputation. The only ones who need superior privacy are those who have something to "hide", at least according to governments.
Why do we have to "need" privacy? That's completely backwards. It boggles my mind how people keep insisting on this argument. It's the government who needs an incredibly good excuse to even consider violating anyone's privacy. Authorities think they're justified in everything they do and are developing increasingly entitled attitudes towards personal information. They can't be trusted so we absolutely should lock them out and make it impossible to violate our boundaries.
Who cares if criminals use it? It doesn't matter at all. Technology doesn't choose its users. Governments wants to catch criminals? They need to send people out there to do real investigative and police work. We're not obligated to make it easy for them by making everything we do part of some public record.
Well, I mean, bitcoin isn't really decentralised... Not just because most of the circulation is held by a small number of accounts, and not just because most mining is heavily concentrated too. The real centralisation is the development of the client software. As long as that team can keep at least 51% of the network on their software, they can change the rules and control things as much as they want. Past experience has shown that trying to fork it doesn't get much traction, so the network remains basically entirely centrally controlled by the official bitcoin client's dev team...
Think of it like the currency equivalent of backwards compatibility.
It's meant to serve as a stopgap so that accepting bitcoin for a purchase doesn't require the friction/risk of only being able to use that bitcoin at other places that accept bitcoin.
If BTC could replace CC merchants in terms of their transaction volume than this would not be possible. However, because the transaction volume cannot be handled natively Visa is able to wrap the "decentralized" currency and profit by continuing to be a middleman.
Bitcoin for every day purchases is dead, it's averaging over 20 a tx these days and you need to open a LN channel which means maintaining that channel.
Bitcoin has been extremely resistant to any L1 scaling, so that's just the state of things.
I have recently started learning about nano coin... have you looked into it? It seems to be what you are talking about but perhaps it is also doomed to failure.
The problem with almost all alternative crytpo currencies is that somewhere deep down non-decentralized skeletons are burried. Either the protocol doesn't scale to more than a dozen validators, or there is some key node hosted by the devs (I think this is the issue with stellar).
Bitcoin literally wouldn't be able handle the transaction volume if individual transactions were being done in bitcoin. Even doing it this way I assume there's going to be delays and pretty big fees unless you load large amounts of bitcoin on to your card at once.
> the decentralization is effectively moot when payment processors like Visa get involved
It's a deflationary currency. If it has a future as a store of value, and I think it very well may, it would have a net effect of concentrating wealth. And with wealth comes power. Whether that power is exercised through how the blockchain processes transactions or via some other vector seems something of a side show to me.
The wealthy never wanted to abandon the gold standard. It was the populists and the bankers. The poor and the middlemen.
> The only people I see campaigning for the return of the gold standard are populists.
Many of the current crop "populists" don't really have a program that would actually help the people whose support they've gained through emotional appeals. They're mainly just trying to harness dissatisfaction with the current order to fuel personal ambition.
IIRC, the original populists actually opposed the gold standard, when it was still actually a thing, and supported silver because it was more inflationary. They understood deflationary money helps the people who already have money, and inflationary money helps the people who are in debt to them.
It's not a currency, that's a misnomer to a great degree.
Which nations are supporting it as a currency? Essentially none. If something doesn't have the currency status backing of a single major economy, it plainly can't be considered a currency. It's a store of value.
Sure, we could be pretend about it (any medium of exchange), be idealistic, and say that you don't need nations to back something for it to be considered a currency, however that's repudiated by every possible aspect of how things actually work (and will continue to) both locally within an economy and internationally in trade.
Gold also is not a currency today, it's a store of value. I don't think anyone confuses gold for being a currency and there's no reason to confuse Bitcoin as being such.
> It's not a currency, that's a misnomer to a great degree
I agree with you. The comment was made within the context of (a) Visa treating it like a currency and (b) OP referencing the original dream of Bitcoin supporting a decentralized financial system.
> converting btc to fiat to pay your visa card bill at the end of the month would be one transaction per month.
Given BTC volatility paying monthly could add a bunch of risk (or benefit) to purchases. I imagine most people would want something more stable for their purchasing.
Exchanges like Coinbase could function like your bank and checking account you use to pay the Visa bill today. Your bill for last month is $2500 or 2500 euros, you'd like to pay with a bitcoin from your account at Coinbase. Visa calculates the exchange rate at that moment and sends a debit request to Coinbase for xxx fractions of a Bitcoin to be transferred from your wallet/account to Visa's wallet. It's a way for Visa to accumulate Bitcoin for one thing.
The other way it might work is if the merchants price things in BTC. Like any other foreign currency, they take the USD from your account and pay the merchant in BTC at the current exchange rate.
so i used to go to a bank, show my ID, open an account, wait for a bunch of random restrictions on Zelle limits to pass, ACH payments to go through for many days, and other crap to settle.
Now it's the same exact routine through Coinbase. Upload my ID, wait for them to allow me to actually move amounts more than a kid's lunch money, wait for days on end to withdraw, etc etc.
And in the end some of these payments in both flows are handled by Visa. I'm missing the "wow" part of this deal.
Absolutely. Unsure how far Visa execution is but it could derail Coinbase IPO. Coinbase charges enormous amount to buy or sale (convert) my cash to digital coins. Its all digital anyways. If I could eliminate middle man and use cards I already have - including debit cards that Visa oversees, Coinbase would literally lose 99% of wallet holders. I mean only idiot would want to pay more to buy or sell digital currency. Besides Visa has much better and more sophisticated fraud and abuse detection network than Coinbase could ever imagine because only in USA they sit on everyones social security number that is already verified thru reporting burreaus.
It will be game changer - one button in my bank online profile to hold bitcoins/other wallets all branded and protected by Visa. Coinbase needs to IPO yesterday to offload stock to the last person to turn the lights off.
Great you get convenience for buying bitcoin but I thought one of the selling points of bitcoin was to keep payments and transactions anonymous. I don't want to have to provide ID just to buy/sell bitcoin, I certainly don't want the government to know about my transactions. I appreciate the privacy bitcoin transaction provide, why do people want to jeopardize anonymity for convenience?
"If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency."
Yeah but how many people are going to understand that. And then do that for every transaction. Also it’s interesting to see what happens if you don’t actually own the crypto. Now you have a taxable gain on your visa balance... and what happens on a loss say the next month is it offset? Like if Bitcoin moons in dec and crashes in Jan there is gonna be one hell of a tax Bill
This is an interesting question. You'd need to keep track of cost basis and gain, and specify whether you want to work on a FIFO or LIFO (more likely) basis.
The number of people commenting who completely misunderstand Bitcoin and crypto is astounding.
Bitcoin will never be used directly for payments, it's a value store. Immutable deflationary digital gold.
I wrote it off for years too because it was too slow and the fees were too expensive. That was the dream they had, but they couldn't realize it at the base layer. I was still walking around last year believing that's the scam they were still peddling, but once you take time to investigate you'll see it will become a major part of the world economy.
COVID helped push this over as bailouts and printing money in the US and the ECB is going to drive a massive movement of money out of the markets and fiat.
Normally you'd see momentum go to bonds when the stocks burst but the bonds situation is unsalvagable.
Also expect a ton of movement to crypto when wealth taxes get implemented to fix economies. They'll use it to hide assets, guaranteed. Form an LLC, siphon the money out that way and into crypto.
>Also expect a ton of movement to crypto when wealth taxes get implemented to fix economies. They'll use it to hide assets, guaranteed.
Money corrupts; bitcoin corrupts absolutely.
Disregarding all of bitcoin's shortcomings, a financial instrument that brings out the worst in people—greed—won't change the world for the better.
https://www.cynicusrex.com/file/cryptocultscience.html.
I used time-travel to uncover three secret messages hidden in a popular Bitcoin meme – “This meme is designed to exploit a number of weaknesses in our understanding of money, and to play on our fears. I’m going to show you how it does it, and why.”
https://brettscott.substack.com/p/bitcoin-meme-time-travel.
By which I mean to say: the greedy rich wanting to preserve or increase their wealth at all costs is what got us into this mess. Bitcoin or any other cryptocurrency pyramid scheme is going to do bugger all to improve that. No amount of wealth or technology will turn vice into virtue because: “If you have selfish, ignorant citizens, you're gonna get selfish, ignorant leaders.” —George Carlin
Prosperity boils down to good policy and governance. Thus, good people. Unfortunately, as far as I've seen, cryptocurrencies have produced some of the worst kind of people.
To add to this, crypto communities _appear_ (I’d be pleased to be wrong here if anyone has examples) to be filled with people who are absolutely opposed to any kind of economic governance, if it’s not “let the magic hand of the market decide” they’re seemingly not interested.
You have an entire world full of governments and fiat currencies. If they are so superior then there should be no problem with competition from Bitcoin.
“Simply because cancer occurs naturally doesn't mean we shouldn't treat it. In the same vain, sometimes the “free market” just screws up, requiring intervention.” —https://www.cynicusrex.com/file/cryptocultscience.html
Bitcoin and cryptocurrencies in general are pyramid schemes. They deserve no place in the economy.
If you want to challenge that belief look into governance by DAOs and some of the airdrops like UNI.
There's def crypto communities that dream of paying everyone a basic income in their currency, identifying each individual and not completing devaluing the coin are big problems though
Even if it's used for corrupt purposes, it's not really any worse than the current system. The subversiveness of cryptocurrency is a feature. Governments are as corrupt as can be. They screw up the economy and make ordinary citizens pay for it by raising taxes while refusing to touch billionaires. Maybe it'd be a good thing if they went bankrupt for once.
I think you seriously underestimate how ugly society would get if the government went bankrupt, and how quickly bitcoin would be rendered useless. Moreover, if governments are corrupt on fiat, they'll be corrupt on bitcoin as well.
Bitcoin is just an asset that has some interesting traits, that make it more attractive to some people vs. other assets. Other assets will still exist. Other monies will probably exist too - they’ll have some benefits over Bitcoin in some use cases.
I don’t see why governments wouldn’t tax Bitcoin income and transactions the same way as fiat income and transactions. Me paying someone a hundred dollar bill is even less taxable than Bitcoin.
Obviously everything will sound dystopian if you take it to the extreme.
> Even if it's used for corrupt purposes, it's not really any worse than the current system. The subversiveness of cryptocurrency is a feature. Governments are as corrupt as can be.
Disagree. In the current system it takes an enormous effort for the majority to suppress individually profitable but socially harmful activities (like bribery), but it can be done; many developed countries achieve quite low levels of corruption. Bitcoin makes that a lot harder, by design.
Why do people still claim Bitcoin is a store of value? It has none of the properties of a good store of value IMO.
- Boom/bust cycles means you’re at high risk of not being able to withdraw without losing most of your value
- There’s no regulation of reserves in other more tangible values behind the currency
- Bitcoin has no value to others not holding Bitcoin. Gold and art still has value to others not holding it. That is, I’d be willing to buy gold or art at a certain price for their practical or esthetical use, not just as an investment scheme. This puts a more solid barrier for how low the price of these assets can go.
- The future regulation of cryptocurrencies is highly uncertain. Just look at India. I have no doubt that other countries will follow. Most likely there will be regulations requiring reserves behind cryptocurrencies. There’s not much reason to think that governments will be cool with printing money with zero reserves in the long term just because they’re printed by algorithms. It’s not allowed for banks, why should cryptocurrencies be treated differently?
Bitcoin is a high-risk high-reward investment scheme. A pretty good one so far. Nothing wrong with that. It’s absolutely not a store of value.
> I’d be willing to buy gold or art at a certain price for their practical or esthetical use
For esthetical use, wouldn't an inexpensive fake gold work just as well, as long as its appearance was substantially the same? Not many people are interested in buying fake gold, of course, but I think that's a matter of wealth/status rather than aesthetics.
I think the demand for white gold and rose gold also suggests that interest in gold jewelry is largely about wealth/status. Even "gold gold" jewelry is usually mixed with lighter metals in order to intentionally change its appearance. (Of course it's also to strengthen the material, but that could be done while maintaining the approximate color if people truly liked the color.)
If you actually wanted to store value you would buy gold. You can't store value in Bitcoin because it has no inherent value. It's a distributed ledger on the internet. If I hoard 100% of the world's gold bullion, there's a good chance that people would want to buy it from me at a price similar to today's spot. If I hoard 100% of bitcoins, it loses all of its value. Moreover, if hyperinflation does occur, there's a good chance you'll face power and internet outages, which makes Bitcoin useless because you can't access it.
The reason why gold is at least acceptable (as opposed to worthless) is that you cannot create another competitor element. Meanwhile Bitcoin is effectively a highly advanced piece of paper that has numbers written on it. It can be replaced by any other highly advanced piece of paper. Heck Bitcoin could even be replaced by its own clones.
Aside from its industrial applications, it's dense, rare, chemically stable, and very easy to recognize. These are all qualities that make for a good store of value. You can't replace gold with any other element.
By this argument, you'd think we'd still be using CDs and Walkmans, instead of moving to mp3s and iPods/iPhones.
Gold will have its place as an analog store of value. But you are simply missing the point about how to evaluate a digital store of value. Think about which digital properties a digital store of value would need to have, since concepts like density and chemical stability are literally useless to evaluate a digital entity against; once you have a list of digital characteristics that define what a digital store of value would need to have, you can start to check your checklist against the properties of Bitcoin (or other cryptocurrency if you want)... I'm not saying you'll automatically be convinced, but you should at least use the right checklist to compare.
Gold has obvious aesthetic and industrial uses, but as a store of value, its utility is very low to begin with. The only use for storing gold is that it could be used as an emergency medium of exchange in the event of a global economic collapse. Meanwhile, even if you had stable internet access, by some miracle, very few people would have enough spare energy to mine for blocks for Bitcoin transactions.
Outside of this extreme case, a currency is much better store of value because it comes with the bonus of liquidity. Sure fiat currency may lose its value to inflation, and Bitcoin may rise 50x, but that's actually a benefit of fiat.
Money is really just a credit for your contributions to society that society now owes back to you. The value of your contribution to society decays over time, so it makes sense that the value of your money should do so as well. You're now incentivized to "rent out" the credit society owes back to you to someone who needs it more than you, for example, a young family buying their first house. This is in essence what a loan is.
Had your money/store of value been sitting idly, it wouldn't be able to help anyone. This is the problem with Bitcoin. Loans and investment become extremely risky. It's impossible for everyone to pay back interest successfully when there are a fixed number of Bitcoins, so instead people are incentivized to hoard them. In a broader sense, by "holding value," you're holding back societal contributions for the future when these contributions could reap benefits right now. That's not something anyone should be rewarded for.
Given that storing value is a net negative for society, there's the question of where the additional value of Bitcoin is coming from. Part of it was due to the devaluation of the dollar, but that can't explain all of it. Maybe it has some unrealized potential to become a currency outside of government control, but that's something that was rejected in the original comment I replied to. This means that the value of Bitcoin is being leeched from outside. I think that people will collectively realize this, which will cause Bitcoin to crash.
What is a tech stock's inherent value? They typically lose money and have a ton of employees. How is bitcoin different? You are investing in a technology with a group of people who are supporting it. As more people agree it is useful, the price goes up. Same thing as a stock.
Tech stocks aren't stores of value either. They're investments. No matter how speculative they are, the company is expected to return its profits back to the shareholders.
From an purchaser's perspective, Bitcoin may be indistinguishable from a meme stock, but behind the scenes it's entirely different. You can't store wealth in a company because the company requires wealth the operate.
I agree that Bitcoin is never going to be used for payments again. But I still don't know about value store. Its hard to convert back to fiat (without paying taxes) unless you're going completely P2P with cash, which likely isn't feasible for large scale transactions. Is bitcoin's value negatively affected by difficulty cashing out, or am I overthinking it?
Overthinking imo. Compared to a bar of gold, it’s a breeze.
Convertibility to fiat is kind of a low priority for a store of value. Auditability, barriers to rehypothication, and ability to self custody are probably much more important for a store of value.
But virtually no individual puts his money into bars of gold. Gold isn't a good store of value for most people, and it's not because it's inconvenient. It's just that there are much better options out there.
So being a better store of value than gold isn't hard.
> Is bitcoin's value negatively affected by difficulty cashing out
If people can't sell isn't that positive for the price? The whole 'hodl' thing is to stop people cashing out. Since crypto has no inherent value, the price is reliant on more people cashing in than out.
This is an amazingly cynical take. I mean, I wish you all the luck in the world in your attempt to get rich, but you're making a bet that the global economy is going to collapse, in part aided by a pandemic, and rather than doing anything to help, the world's wealthy are going to opt out of using their wealth to help anyone in favor of hoarding bit patterns on hard drives in their dragon caves. I don't think I want to live in a world where the rich are inventing new ways of evading taxes as their countries collapse from ecological disaster, especially when those ways of evading taxes are contributing to ecological disaster.
This seems destined to go about as well as all the Spanish and Portuguese who plundered the New World for centuries in their attempts to hoard real gold as their empire faded into the dustbin of history and mercantilism and then capitalism took over and the world realized actual wealth involved making useful things, not holding onto deflationary fixed supply assets for dear life.
I don't like where the world is heading either, but let's get real:
JP Morgan is on board, now advising their investors to join in (and the bank behind Coinbase)
Fidelity is on board
Morgan Stanley is on board
Visa, MasterCard
AMEX has been using crypto to get best possible currency exchange rates for a couple years
Coinbase has a healthy relationship with the SEC and is about to get their banking charter approved for their own direct FDIC insurance, as well as IPO soon
What is the value add? How does it store value? How do you get your money (in large volume), into or out of BTC with a transaction associated with you or your company? It's not even a good anonymous store of wealth anymore. It can't handle transaction volume at any kind of reasonable scale. It also doesn't have an order book deep enough to facilitate large transactions in the market. You'll have to figure out a deal with a sketchy OTC broker.
The value add is marginal, but people will choose something that’s a little bit better if it exists.
That value add is that it’s scarce, and its scarcity is unlikely to be tampered with. This means people don’t have to jump through hoops to keep up with inflation. That’s it.
Why is scarcity a value add? The difficulty and costs associated with getting money into and out of the ecosystem have to offset the scarcity value add. I'm still not convinced that scarcity is valuable. It surely benefits the people who were early adopters but what is the value to new investors? Not to mention how incredibly inefficient all of this is.
Scarcity simply means that someone can't print more units of the store of value, or dig it out of the ground. When someone other than you is doing something like that, your share of wealth is being whittled away. With scarcity, you can maintain your purchasing power indefinitely. You don't have to jump through hoops to find the best rates, or find the best return, etc. Your wealth is simply preserved
...assuming you can get consensus. That's harder than you think. On ethereum it might be easy because the creator is still around, but on bitcoin it's very hard. See the whole segwit2x controversy.
At least for Bitcoin, don't miners effectively control consensus? And they're less concerned with you using Bitcoin to store wealth and more concerned with recovering the cost of their single-purpose hardware. Your interests are actually less aligned with the people running than Bitcoin show than with central banks.
>At least for Bitcoin, don't miners effectively control consensus?
They completely control consensus when it comes to transaction ordering, but for other network parameters like emission rate, they don't have any control. If they decided to bump block rewards by 2x none of the blocks would be accepted by exchanges or merchants, and it would effectively be a hard fork. Segwit2x had majority miner support but failed because it couldn't get enough community support.
It sounded like they required support from the developer community but they didn't have it. Not sure if that support would be needed for a 51% attack, would it?
"Compliance measures on crypto-currency are expensive. We'll be charging a 3% compliance tax on all crypto-currency holdings, and we'll do this via any US-registered crypto-brokers charging a withholding tax unless you can prove it's double-taxation; also any failure to pay this is tax evasion and will be prosecuted as such"
you'll see some hard forks. Also this is a _great_ idea as it increases tax revenue, increases investment in US bonds and stocks, _and_ it suddenly swells the value of US Govt gold reserves.
hide assets with a publicly traceable and immutable ledger? you'd have to be a complete idiot to try that. Bitcoin is useless as a store of value if everyone can see how much you hold, where you acquired it, and how you've spent it..
but yes, there are other (actual) cryptocurrencies* that don't broadcast every detail about your transactions, which can be used for that.
*crypto- comes from the Greek kryptós, meaning “hidden.”
Rubbish. Bitcoin had a unique selling point when it was digital cash. We don't need digital gold. Real gold is fine and better. Bitcoin is purely about speculation now.
Give it up man. You’d think HNers would get it but they don’t. Most likely because they hate that they missed the bus. You’ll never convince them. We should just stop trying.
Some of the brightest minds on the internet, and some of the earliest adopters of crypto on here... it would be a mistake to dismiss the very rational critiques here because "they hate that they missed the bus".
HN isn’t wrong about everything. It was extremely bearing on Groupon in 2011. It was another thing where true believers would say that skeptics “just don’t get it”, but the HN critics had extremely cogent critiques that went without response. Google “Groupon Stock”, HN was very correct.
VERY different from the anti-Dropbox sentiment of the famous Dropbox comment.
You also have Bill Gates, Warren Buffett, Charlie Munger, Nassim Taleb, Nouriel Roubini, all claiming Bitcoin is worthless. Some of the brightest minds in finance with impeccable and long track records.
Bitcoin has had 12 years and still has no real world use cases. By contrast the internet was instantly useful. Bitcoin has a monstrous cost in energy and money to maintain the network. The token backing BTC, Tether, is founded by con artists and was just revealed to not have had the backing they claim. BTC has been subjected to the same money money printing its advocates defy in fiat.
> The token backing BTC, Tether, is founded by con artists and was just revealed to not have had the backing they claim.
USDT doesn't back BTC. It's just a stable coin people use. There are other coins tracking the dollar. Binance created their own BUSD and it seems to be as legit as it gets with frequent audits of reserves and everything. There's also USDC.
BTC is actually backed by the eletricity used to power the computers that mine it. The expensive computations guarantee its scarcity.
Those aren’t audits, those are attestations. The Gemini page says “audit”. But that isn’t what the pdfs say.
Read the accountant’s writing very carefully and you’ll see it means they merely examined management’s report and their assertion that at a specific time at 3:44 pm feb 26th they had the money.
My understanding is an attestation is the company promising something is true (not sure if there are consequences if they lie). An audit is a third party promising something is true, with definite legal consequences if they lie.
> Paxos Trust Company has engaged Withum, a nationally top-ranking auditing firm, to independently verify at specific points in time that the entire supply of Paxos Standard tokens is consistent with USD in reserve accounts at U.S. banks held and managed by Paxos.
> Withum performs month-end attestations of these accounts using standards established by the AICPA.
An independent third party verifies and attests to the fact reserves match supply every month. Looks fine to me.
Yep, I get that it looks fine to you. That’s because you don’t understand the difference. That was the whole point of my comment. You spend 5 seconds googling and say “yep, good enough for me”.
An attestation basically says that we’ve verified that your bank says you have $X in your account.
Deltec, Tether’s bank, is owned by Tether. So it’s worthless.
But attestations tell you nothing about solvency. Let’s say I need to show $1k in my bank account. So I go to a loan shark. I can now get an attestation that I have $1k. It’s true, I do...but I also owe $1k.
Indeed. I had to get an attestation of revenues for a visa. I provided my accountants with an excel. They produced a statement to the effect that “To the best of our knowledge the client’s excel sheet says what the client says it says”
For the Paxos attestations, Paxos merely needs the money in an account at specific points in time.
Avoiding USDT won’t help you. A tremendous piece of the current BTC price is fueled by USDT because its currently trades at 1:1 with the USD. This then provides the leg to every other stablecoin and fiat currency.
But if you take that away, the whole party stops. Exchanges can’t afford BTC sub $10k anymore. There is no hiding from Tether. They have co-opted the system.
From context I’m assuming OP was talking about USD backed stablecoins.
That said, DAI is an interesting case in that it is now mostly backed by centralized assets rather than ETH.
I do not believe it is within the capacity of the average user to audit such a system. It would be simple for an average person to examine a USD account balance and say “yes the money is there”. But how can anyone figure all the possible tail events that could occur from DAI’s structure?
Tether fearmongers can't see the forest for the trees. They see printed tethers and see BTC going up. But they never stop to think maybe they are just keeping up with the federal reserve currency that keeps being printed
About 70% of transactions are in USDT, and bitcoin’s price rise has followed increases in Tether tokens. It would appear the price surge has been backed by USDT because currently the bitcoin market accepts USDT as equal to USD, despite evidence USDT is not backed.
Bitcoin itself is powered by the miners, but the fiat value of bitcoin is backed by USDT. If there was doubt about the peg you’d see a run.
> bitcoin’s price rise has followed increases in Tether tokens
I understand this as price manipulation by Tether, not as evidence that BTC is backed by it.
> currently the bitcoin market accepts USDT as equal to USD, despite evidence USDT is not backed
Yeah, it's unfortunate. I don't understand why people won't use BUSD instead.
> If there was doubt about the peg you’d see a run.
Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether.
> Probably. In my opinion, people should exchange USDT for BUSD while it still has value. That way everyone will continue trading normally when all the controversy catches up to Tether.
This is sound advice for the individual but it doesn’t work for the market as a whole.
I’m arguing Tether is a sham. When too many people try to get out of a sham, it collapses.
Currently, 2/3rd of people who try to sell their BTC find USDT buyers. If Tether is revealed as a fraud suddenly the sell side will outweigh the buy side.
> ndependently verify at specific points in time that the entire supply of Paxos Standard tokens is consistent with USD in reserve accounts at U.S. banks held and managed by Paxos.
Where are all the people holding all the USDT? It seems nobody is complaining. I'm bearish on BTC price right now but can't help thinking someone should have already cracked the USDT wide open. Eventually someone (few brokers) will be left holding USDT with no buyers. I can't believe brokers are allowing people to cash out w/o guarantee the stable coins they redeem can are not cashable somewhere.
Excellent question, why haven’t tether holders lost confidence?
Part of the answer I think is that you can lock up Tether at 12+% interest. So the system encourages withdrawing tethers from the system, at unsustainable savings rates.
The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars.
The only people likely to have held USDT are also likely to be long crypto, so not surprising they wouldn’t cash out.
The better question is who are selling their BTC/ETH for Tether, and what do they do with the money after? Surely the locked in savings are part of the answer: interest rates on stablecoins are much higher than on BTC/ETH. But I don’t think it is the whole answer.
Presumably enough people don’t question the peg that it can stay afloat for now.
>The other part is that it is not easy to directly trade USDT for USD. Kraken is the only place you can do so directly, it is the only place the peg is directly tested. Apart from that to get USD you need to trade to something else, like BTC or ETH, and then sell that for dollars.
What do you mean? I trade USDC and USDT from and to Fiat using Binance, and it's a breeze. I get the funds directly on my bank account in 5 minutes or so, and I imagine the same happens on Kraken, coinbase pro, gemini/blockfi.
Interesting I was under the impression you couldn’t. Does Binance have a USDT/USD trading pair? If not, what are the mechanics of trading from USDT to fiat?
Hey, I didn't see your reply, sorry! But yes, Binance does have a USDT/USD trading pair. Then you just withdraw to your bank account (the mechanics of this vary by country).
>Part of the answer I think is that you can lock up Tether at 12+% interest. So the system encourages withdrawing tethers from the system, at unsustainable savings rates.
I'm not convinced. Were these products around a few years ago when people were sounding the alarm bells about tether?
For the 70% figure I’d have to dig a bit to fully check current volume. It’s been widely repeated in articles, they use data which check flows through exchanges.
You're talking about spot trading volume on centralized exchanges, which is a completely different metric than "transactions" (regardless of if you want to interpret that as on-chain or not).
Separately, Binance is a lot of bot-trading, and, outside of BN, USDT-heavy exchanges have questionable volume figures (wash trading and fake trades).
USDT usage has indeed gone down in favor of other stable coins, and while Binance is huge among exchanges, it's just one fraction of the BTC economy.
As I mentioned, I think it's too ambiguous to talk about "transactions" if we want to compare something measurable - if you want to restrict yourself to on-chain transaction numbers or volume, you'd have to just look at the on-chain activity - I am just assuming BTC is dwarfing USDT here, but that's just a small part of the story. On-chain activity is also meaningless for what I guess you're after, since there's no reliable way to separate self-transfers from other transactions.
If we go by what your sources allude to - trades on centralized exchanges - it'd be a matter of summing up the trading volume for each par involving either asset on any side.
Let's first look at Binance for the past 24h. I get:
BTC: 1.9 BUSD
USDT: 3.8 BUSD
Not so far off from the 70/30 number. This is not so surprising though, as USDT is a popular base-pair on Binance - but this is way different than saying that Bitcoin rests on USDT. There are other stablecoins on Binance, and if trouble or further doubts of confidence comes to Tether, liquidity will migrate fast. Indeed, it already is, gradually.
If we look at more exchanges (here 31 in total):
BTC: 7.6 BUSD
USDT: 9.6 BUSD
In either way, claiming that Binance or even the sum of all exchanges represent the whole bitcoin economy is ludicruous. Consider that USDT is almost only used for off-chain trading on exchanges, where Bitcoin is transacted in a lot of other ways.
OTC transactions (even those run by exchanges, like Coinbase) are not included here, for example. Neither are payments, on-chain transactions, or L2. Some will argue (I don't) that derivatives markets like BitMEX (margined/settled in BTC) and CME (margined/settled in USD) are reasonable to include as well, which are huge in BTC and again negligible in USDT.
As for sources - any serious exchange provide APIs for trades, and there are vendors that aggregate them. Coindesk and Coinlib acquire APIs and data from such vendors, who base them on the self-reporting of exchanges.
---
I don't think there's any published recent study that looks at this properly. It takes effort or money to get the proper data, knowledge to model it, and time to compile it. Most of the people I know with the means are having their hands full with other stuff right now ;)
I'm not here to defend Bitcoin nor respond to critiques. Just not what I'm in to. Full disclosure, I have a financial stake in Bitcoin.
My observation on all of this is that the most common themes to bear Bitcoin - can all be fixed! People are quite happy to look at the current landscape and proclaim immediate and indefinite failure. Detractors allow no room for growth.
Volatility - you could argue that Bitcoin is still so young that the market is trying to determine it's worth. I estimate that Bitcoin is significantly less volatile at some point in the future.
Real world use cases - currently I agree, I don't see a great use of it ... yet. I think we'll find something.
Energy, sure okay it uses a lot of energy. Is this less problematic is most of the energy is sourced from renewables (now or in the future)? Certainly it's also possible that the protocol is updated to be more energy efficient, or another coin reigns supreme.
I've doubted bitcoin for years, and continue to. Part of me realizes I was wrong, in the sense that I would've made money had I only bought and held - but I can't bring myself to buy something that doesn't work.
I can't use it as currency due to transaction fees and times. "Store of value" is basically the same thing as "Ponzi scheme" as far as I can tell. I would've made money, but...
> My observation on all of this is that the most common themes to bear Bitcoin - can all be fixed! People are quite happy to look at the current landscape and proclaim immediate and indefinite failure. Detractors allow no room for growth.
On the contrary, I've been watching bitcoin for what, ten years now, and if anything the practical usability has gone backwards. Sellers who trumpeted that they were accepting bitcoin payments quietly dropped it a few years later. Transaction fees rose and rose, and the governance process (such as there is) handled the resulting conflicts remarkably poorly.
Five or ten years ago I was skeptical but interested. Nowadays I see it as a de facto scam, even if it didn't start life as one.
Gold as an investment? Yes (also art, wine, baseball cards, ...). Obviously gold does have legitimate value as an industrial commodity, but IIRC the price is about twice what it "should" be based on the industrial/decorative uses.
> Certainly it's also possible that the protocol is updated to be more energy efficient, or another coin reigns supreme.
It’s essentially impossible that the protocol gets updated in any way at all. Even the most trivial of changes like trying to increase the block size went nowhere. Bitcoin has thoroughly fossilized, so I’m immediately skeptical of the intentions of Bitcoin evangelists.
Perhaps the hidden thesis in the comment you're replying to is that people vocally pile on BTC to try to keep its price down, meanwhile buying as much as they can so that they can sell when it spikes again. (Not a holder.)
I've reached the doubly-cynical conclusion: the critics are right, but it will probably keep climbing in value in the medium term. Actual on-chain transaction volume will remain dwarfed by on-exchange volume.
Tether will get clobbered in the next few years. This ought to affect the bitcoin price, but won't.
I think it will continue to increase in value for while, as it continues to plumb the depths of “people who haven’t bought in yet”, but that’s eventually going to cap out, and eventually they’re going to run out of coins to mine, and people will catch on and the value (and interest in it) will fall through the floor.
I partially agree with both of you, but I think the depths of "people who haven’t bought in yet" are larger than generally estimated: we're at an inflection point where corporate financials will start to think "well, we should own some bitcoins too" and there will be a bit of domino effect there as people try to emulate their "betters".
But I think things will crash way before we run out of coins to mine.
>I think it will continue to increase in value for while, as it continues to plumb the depths of “people who haven’t bought in yet”
How many people do you think owns Bitcoin? And how many people are there in the world?
>and eventually they’re going to run out of coins to mine
Perfect example of just how uninformed the crowd at hackernews really isn't. You haven't done zero research. If you actually looked it up, you'd know that the block-reward gets cut in half every four years. So "running out of coins to mine" won't be happening until the year 2140, and even then there's incentives for the miners to continue mining.
“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.” -Sagan
Columbus also deserved to be laughed at.
People in his time period knew the world was round and even had a pretty accurate estimate of its radius, but he (very erroneously) thought it was way smaller.
That's why he thought he landed in India.
This delusion convinced him to make the journey. Everyone who knew the world was round expected a whole lot of nothing in the direction Columbus was going.
The problem is that I don't see how Bitcoin will suddenly figure out a way to justify itself. Columbus was clearly looking for land and found it. Where are all the goal oriented Bitcoin owners?
The point stands though - projects and ideas that may deserve to be laughed given current knowledge can still be the impetus for unintentional paradigm shifts. Whether it be Columbus' voyage, or early forms of blockchain.
What sold me on Bitcoin wasn't the strength of bitcoin itself, but the weakness of gold.
Bitcoin is an incredible store of value (albeit volatile). Being able to store a huge amount of assets in an inflation resilient trust-free resource that can't be faked is incredibly useful.
The other thing that sells me on it is the institutional buy in. At this point, nough rich people are going to lose big if bitcoin doesn't succeed. So, I find it unlikely that politicians and bureaucracy will purposely limit it.
That being said, I wouldn't invest more than 20% of my portfolio into crypto. It is far too volatile to put in anymore than that.
The anti-BTC sentiment on HN puzzles me. There is no intelligent critique. The doubts that are endlessly repeated here have been addressed in detail, and are available online. Scaling and transaction throughput, energy consumption, state attacks, protocol weakness and lack of backing have all been responded to, to a sufficiently satisfactory degree.
The core issue I've seen that goes unanswered is what problem does BTC solve? The answers I've seen so far are:
1. Avoiding Venezuelan hyper-inflation - it is a use-case, but doesn't really apply to the United States for example.
2. Store of value - volatility is way too high and there are much better alternatives (Treasury bonds)
3. Evading capital controls - it is a use-case, but not really applicable to most citizens in the US, and is unlikely to be applicable in the future.
4. Settlement layer for banks - banks already have a settlement layer that works for them.
The downsides of a decentralized system vs. a centralized system are an increased cost (in energy, computation, time, money, etc.) of transaction. So what justifies the cost?
> The core issue I've seen that goes unanswered is what problem does BTC solve?
To me, it's trustless money. I don't need to trust the US gov, I don't care about who they will elect or which wars they are gonna start or which banks they are gonna bailout.
You can verify everything through code and math. If that's not valuable to you, maybe there's some other use case you're interested. If you've done your research and there's really no use case that excites you, then you can just ignore it.
It's NOT trustless money. Instead of trusting the US gov, you are trusting that this decentralized ledger will gain acceptance by the whole world. Which one is more of a leap of faith?
> you are trusting that this decentralized ledger will gain acceptance by the whole world.
Bitcoin itself is inherently trustless, that's the whole point of it. You can trust that there will never be more than 21M Bitcoins, you can trust that there will never be a double-spend, you can trust that it will run 24/7, etc.
Whether it will gain worldwide acceptance is another matter (btw, adoption is increasing at very fast pace now), as long as there's a subset of the world that accepts it, that's good enough for me.
> Bitcoin itself is inherently trustless, that's the whole point of it. You can trust that there will never be more than 21M Bitcoins, you can trust that there will never be a double-spend, you can trust that it will run 24/7, etc.
No it isn't. If the Bitcoin devs and miners agree on a change (for instance, to increase the cap), it'll happen, so you have to trust them.
They can't implement those changes uni-laterally, it would cause a hard-fork. In addition to devs and miners, you need users, network nodes and exchanges to agree to it as well.
And even if that change were to go through, there will still be people running the old chain (Ethereum Classic is still alive). So those parameters would only change if they improve the network for most stakeholders, otherwise, most people would stay on the old chain.
> They can't implement those changes uni-laterally, it would cause a hard-fork. In addition to devs and miners, you need users, network nodes and exchanges to agree to it as well.
Sure, but the devs do have the "Bitcoin" name, which would leave them well-positioned to market their changes. Bitcoin Classic may stick around, but like Etherium Classic, it may not be very healthy: https://www.coindesk.com/ethereum-classic-blockchain-subject...
Nobody owns the "Bitcoin" name, people collectively decide which chaintip to call Bitcoin and that's it. The devs own "Bitcoin Core" which is just one implementation of the network.
This is where the difference between theory and practice comes in. Who is 'people' here? Billions of people today have no idea what bitcoin is and will have no say in 'collectively' deciding which chain tip to call 'Bitcoin'. BTC is decentralized in theory, but with literally .0001% of the population owning like 99% of BTC it can't get more centralized..
For example, when the Bitcoin/Bitcoin Cash split happened, you had people dumping one for the other to manipulate the price in their favor, you had miners that decided which one they wanted to mine, exchanges that decided which one they wanted to put under BTC ticker and some people that just stayed on the sidelines waiting to see which chain would prevail.
For a brief moment, Bitcoin Cash was actually close (in price, adoption, etc), but then eventually people chose the original chain as Bitcoin and we know the rest.
>Nitpick, Cash was the “original chain” as the split happened because what became the BCH portion of the network declined to adopt a proposed update
AFAIK adopting segwit is a soft-fork (existing clients will continue to work, only miners need to update), but raising the block limit is a hard-fork (all clients need to update).
>To me, it's trustless money. I don't need to trust the US gov, I don't care about who they will elect or which wars they are gonna start or which banks they are gonna bailout.
If there is nothing to spend your Bitcoin it's worthless. If there is no US economy that is begging to exchange "worthless" dollars to Bitcoin then your Bitcoin will not amount to much. Really, when people are betting on Bitcoin or gold they assume that in the future there will be a bigger pie and thanks to their ownership stake in Bitcoin or gold they receive the same percetage portion of the bigger pie. If the pie shrinks because of a war then guess what? Your Bitcoin will be just as worthless as the dollar.
Trustless is bad. Humans need trust without it we get genocide and other bad things. Trustless is another way of expressing a desire for a fantasy world where people are not interdependent and each hacker can live in their own bubble with no obligations to society. At some point the militias you pay to kill and protect you will kill you hoping to find your treasure hoard
This is not to refute your comment, but would you have been able to foresee what problems the internet will solve when ARPANET had 15 sites in 1971? I mean if someone would have told you back then that you'd be able to stream a movie in 4K from more or less anywhere in the world, you'd probably have laughed that person out of the room. So look at ARPANET back then and look at the internet today and how much innovation has happened on top of it. And I'm sure there will be a lot more innovation on the good ol' internet for many more years to come.
In a similar way, BTC will evolve. It arguable already has. All the money flowing into cryptocurrencies and the crypto tech stack drives more and more competition (and yes - also corruption and bad behaviour) and some of it will be meaningful. Just like some tech startups were/are scams, some are kind of useless but harmless and a few changed the world. I personally don't know what problem(s) crypto will solve, but I can see that the technology summons a lot of creative energy. Creative energy that gets empowered through capital and channeled through competition will eventually produce breakthroughs somewhere. Let mankind's creativity run wild and let yourself surprise by the unexpected outcomes!
Because I expect that it will continue to significantly appreciate (it has gone up 10X or more in the last year!), I couldn't care less about its volatility. I expect that as its exponential rise slows down (like all exponential growth, it must come to an end, perhaps after a few more halving cycles), the volatility will decrease accordingly.
You're right that there are other systems to store value, but it doesn't follow that Bitcoin doesn't have value as one. It does for me, today. I've used it (together with some other systems to store value) in a very real sense to store portions of my salary and, months later, consume it, acquiring tangible assets. I couldn't care less about having to convert it to Euros first, that doesn't make it any less useful to me.
Meh, not really. At the end of the day, same as gold, bonds, stocks, fiat and real estate, I use it just to park the outputs of my production today, with what I think is a reasonable expectation that I'll be able to get it back in the future (which I use together with other similar asset types). So far, it has greatly fulfilled my expectations and I have little doubts that it'll continue to do so. I consider it very useful.
But sure, you're free call it whatever you want and continue to push your world view, and miss the point that, for me, today, it is very useful.
Yeah the cost of decentralization is so high that you really need to be gaining something from it. I’ve long said that if drugs were legal it would remove most of bitcoins usage.
Money is ultimately a reflection of power, and decentralization is merely a tool for when those power structures limit the market.
The main issue with BTC being a store of value is that it's already hyper hoarded. Look it up -- it's far, far more concentrated in a few hands than any real-world currency or any real-world asset.
Please explain to me how scaling is solved in bitcoin. The lighting network requires an on-chain transaction to create and close a channel both times. Even if the world population were static it would take months to open a channel for everybody. Companies also need multiple channels each.
LN also requires a constant observation of the LN network or malicious actors can just take more from a channel than allowed. This eventually leads to entities specialized in monitoring the chain for the average Joe. You could call those payment providers.
> Please explain to me how scaling is solved in bitcoin. The lighting network requires an on-chain transaction to create and close a channel both times.
Channel factories solve this issue by being able to create and close many channels at once.
> LN also requires a constant observation of the LN network or malicious actors can just take more from a channel than allowed.
These are called watchtowers, they never have control of your funds, they are simply watching the blockchain for counterparty actions, which if they tried to steal your money, they would end up losing all theirs, so just knowing that you might be using a watchtower is a very strong deterrent to not cheat you.
Channel factories do not work globally as far as I understand them. They only work within a group of addresses that know they won't close the channels every other hour or everybody would have to create yet another channel. It sounds very similar to a credit union.
Watchtowers are what I meant with payment processors. You need to pay them to watch the chain in case the other party tries to literally steal from you. You can call them whatever you want, it's a third-party, just like Visa.
I love how all these cryptocurrency concepts have "traditional" counterparts, btw. Or it's rather the other way around.
Exchanges could act as channel factories, for example, today they batch a bunch of withdrawals into a single transaction, there's really no reason why they couldn't simply open a channel for each person in that.
It can be a third-party or you could also run one yourself, there's nothing stopping you.
I wouldn't be surprised to see counterparts, just like email is "mail on the internet", but there are also fairly novel concepts like flash loans which are just not possible in current financial system.
These attacks also showcase the power that it gives and it will force the ecosystem to become stronger over time which arguably a good thing even though it suffers in the short term.
You are just recentralising everything Bitcoin allegedly decentralized. It's ridiculous. Just pay cash, you are decentralized, are your own bank and can buy everything.
Problem solved without Bitcoin. You won't get rich from just holding it, though, and we all know that this is really the only goal of cryptocurrency proponents.
Everything is still de-centralized and you're the only person who has control over your funds.
With cash, not only you won't get rich holding, the FED is determined to make sure it's value goes to 0. It seems like you've already made up your mind anyways.
Very true and often conveniently omitted by LN fans.
Lightning Network Whitepaper, section 3.3.4 states very clearly:
"For this reason, one should periodically monitor the blockchain to see if one’s counterparty has broadcast an invalidated Commitment Transaction, or delegate a third party to do so. A third party can be delegated by only giving the Breach Remedy transaction to this third party. They can be incentivized to watch the blockchain broadcast such a transaction in the event of counterparty maliciousness by giving these third parties some fee in the output. Since the third party is only able to take action when the counterparty is acting maliciously, this third party does not have any power to force close of the channel."
When people run out of good arguments, they give you tons of weak arguments. What you see and describe is a bullish sign for the thing they are trying to argue against.
It's somewhat pointless to argue with random strangers on the Internet who may or may not appreciate your effort at reasonable discussion. If you believe in your own arguments, put your money where your mouth is and be proven right economically and be the one who quietly owns the last laugh.
The amount of economics, philosophy, history, & engineering one must understand to grasp Bitcoin is rare. That's why they say we are lucky to make our wealth in it
I don’t think they have which is why they keep coming up again.
BTC genuinely uses a stupid amount of energy and there isn’t a terribly good reason for it since we don’t need a completely trustless financial system outside of some libertarian ideal. It would be necessary if establishing trust was impossible but it isn’t.
BTC transaction fees and throughput are still an issue. Off-chain transactions that use the main network as a settlement layer is a non-solution that undermines the whole point of BTC. Might as well just use banks as a settlement later for the lighting network for all it matters at that point.
Volatility and the fact that BTC is more of an investment vehicle than anything else matters if you want to actually use it to buy stuff.
The fact that there is no form of monetary policy means that the available currency doesn’t expand and contract with growth in economic output which makes prices unstable and naturally deflationary.
BTC is fine as a nerdy digital cash and commodity market based on its value as such but a general purpose currency it isn’t.
Okay then let's compare Bitcoin to Monero. One of those is actively used as a trustless financial system because drug dealers absolutely need it to be trustless and private. The other one is a speculative bubble that is growing faster because there is no anchor to gauge the value by so people can do whatever they want with it even if it is stupid or unsustainable.
Before you say that drug dealers ceasing to use Bitcoin is a good thing..., it really says more about the ability to regulate Bitcoin and the ability to trace people than it says anything about the users of Bitcoin suddenly deciding they are law abiding. Secondly, drug dealers are forced, absolutely forced, to use your cryptocurrency, they are the few users that absolutely cannot do without cryptocurrency, at least not over the internet. Cash is still king, but only on the street. If the most "diehard" users of the cryptocurrency move on that is a signal that it will absolutely fail for all the "softcore" users who don't really need your cryptocurrency.
That’s missing the point. You could have said the same thing about the internet. But we are not collectively making this decision based on politics, the market has decided that crypto is valuable.
Inflation was out of control and the president decided to freeze everything in some kind of desperate attempt to control it. They took away everyone's money.
People who say they don't need cryptocurrencies are way too comfortable with their banks and governments holding all the power. I don't really care how much energy it uses, I still want it to continue existing just in case my government starts getting funny ideas again.
Bitcoin "people" hail second layer scaling solutions like lightning which is basically paypal but decentralized. So why on earth would you not expect the people/companies who would participate in lightning to not just build their own scaling layer? What we are seeing is just that Visa and other competitors build a central scaling solution outside Bitcoin. Thus Bitcoin failed to decentralize anything if the vast majority of people using Bitcoin don't even interact with the block chain.
The fees are incredibly high, so high that any Venezuelan that is using Bitcoin is already rich and just wants to flee the country with their wealth.
It's not private, anyone who knows your address can track your balance, your transactions and can even send tainted Bitcoin to you, to ruin the untainted Bitcoin in your wallet.
>lack of backing have all been responded to, to a sufficiently satisfactory degree.
They haven't. The only thing I see is that people consider Bitcoin as the perfect Cryptocurrency as it is and nothing has to be changed to make it better, yet they expect the market cap to grow forever without doing anything for it, but still assume that the changes they refuse to implement will be the driving force of that value.
The fact that there are competitors to a "store of value" is exactly the problem. When you put your money into funkopops you don't want people to suddenly decide that beanie babies are in again.
Crypto is well beyond escape velocity by now. That ship has sailed. It’s a shame that here on HN, people who might be useful in making some estimations of where it might take us are all tied up arguing over whether or not it’a the right solution. People find it distasteful, and energy usage is not the only reason.
It's so funny to watch the "smart kids" from HN miss out on the biggest opportunity in the past decade to create wealth through software. The cope is immense
There are so many people commenting here about Bitcoin holders who don't even have Bitcoin.
As a person living primary on Bitcoin, I would love what VISA is doing, the volatility is not a problem for me, lightning wallets would be perfect, but I don't want to do taxation for thousands of small payments with different Bitcoin prices (especially as I'm not from US, where there is specialized software for it), so I lend USD against my Bitcoin tax-free and use that money to buy stuff. My behaviour would change if Bitcoin could be used for buying things directly tax-free (just like with any other currency).
Maybe I don't understand it correctly, but after having recently done my taxes, it seems to me you'd generate a capital gain or loss that has to be captured on IRS Form 8949 every time such a thing triggered bitcoin to be converted to USD, goods or services.
Or is it some nudge-nudge-wink-wink situation where everyone, including the IRS, ignores such a thing unless the sums involved are large.
Because of the open nature of the blockchain, the IRS knows all your exact movements, so there's no nudge-nudge-wink-wink especially if you have tied your real identity to a Bitcoin address using a centralized exchange.
Presumably, tools like cointracker (maybe even Visa themselves), etc, will take care of reporting these taxes for you, still a pita, but doable.
People will spend Bitcoin, grudgingly (remember the pizza? what a fool, never spend your Bitcoin!), thanks to Visa people will actually be able to spend it. Thanks to Visa Bitcoin will not be decentralized anymore either.
Why would you do this unless you literally had no fiat.
Bitcoin’s only killer feature for 99% of people is number go up. If people are hodling and and don’t want to sell, they won’t want to spend it either (it’s the same thing).
If people want to sell, they will just so it on exchange so that they don’t have to go through the hassle of getting fiat back on exchange.
There is literally no advantage to this except for a fuzzy feeling some people might get. Maybe that’s enough, what do I know. But this does not fit in the with digital gold narrative. Nobody walks around with a card trying to pay with fractional gold ounces.
That’s what I don’t get too. Here is France the law is similar, and I can’t imagine card holders calculating the capital gains on every transaction. Here it requires taking a snapshot of your portfolio every time because you have to know the total value of the portfolio to calculate the taxable gain.
What people do is take out a loan in USD against their bitcoin, and spend that. This is all done instantly and automatically by various wallet apps that let you spend you Bitcoin as USD.
One idea is to average out a bunch of small trades to one made up large trade with the same overall gain. I think it's very unlikely if investigated they'd say we're doing you because you declared a £10k gain when really you made a £10k gain but with slightly different details. At least in the UK. Other places may be more uptight.
The most sophisticated pyramid scheme ever, hidden in plain sight; so obvious that everyone second guesses themselves. “They all seem to be going along, I guess I must be wrong.”
I'm glad you used an adjective because the majority of children I teach would beat most cryptocurrency eschatologists in one fell swoop at a maturity contest.
The problem with using Bitcoin for payments is volatility. Bitcoin's price is volatile. Bitcoin supporters say volatility will go down "at some point". The logic is pretty silly. Bitcoin is money for the people. But when the super rich people adopt it, volatility will go down. They have more money. The Bitcoin money "tank" will be bigger. Its volatile flow will go down.
Bitcoin is digital gold, God's money. When it comes to volatility, it's up to humans to "fix" it. The fix means we all have to "buy" into it, that is, blindly believe the problem will be fixed somehow. Stop selling, keep holding. Maybe, forever. :)
It's probably not going to be fixed. Volatility is likely an inherent property due to its limited supply.
How the heck would bitcoin volatility go down when there's no fixed reason to use it? USD has value despite fiat status because it's required to pay US taxes and oil markets are priced in USD (by force and trade agreement). Bitcoin is totally unteathered from reality (and deflationary which is another story entirely).
This means Bitcoin's value is based on completely ephemeral feelings, and the size of its network -- both things that can disappear overnight. The most solid thing you can say about it is that you can use it to get around government sanctions, which is not exactly high praise.
I understand what you mean and it's true in theory, but could never happen in reality. Even if a lot of the world stops believing in Bitcoin and the price tanks, there will always be at least two people interested in trading it with each other. If those two people run one node each, they can make it happen.
Bitcoin can no longer disappear overnight. It was true in the beginning, but the network and mind-share is too big now.
> which is not exactly high praise
The market seems to value a independent and censorship proof currency differently than you, as those are two of the main features of Bitcoin and Bitcoin is seemingly receiving a lot of high praise, at least at the moment and past 7 years.
> Bitcoin can no longer disappear overnight. It was true in the beginning, but the network and mind-share is too big now.
This is what they said about the housing market in 2008. The question isn't whether bitcoin would operate at least 1 transaction, it's whether it is usable as a stable store of value or a large useful network.
> The market seems to value a independent and censorship proof currency differently than you, as those are two of the main features of Bitcoin and Bitcoin is seemingly receiving a lot of high praise, at least at the moment and past 7 years.
I meant morally, not financially. I suspect that multi-nationals are trying to become supranational entities and would be thrilled to be able to become more powerful and free from discipline from individual nations.
The argument you made was (Bitcoin's value is based on...):
- completely ephemeral feelings
- the size of its network
And that both of those can disappear overnight.
Now you're changing the argument to if Bitcoin can be used for "a stable store of value" and if it's a "large useful network".
Then no, Bitcoin is currently not stable, it's pretty easy to see if you look at the fluctuation of the price. And yes, it is a useful, large network currently live in a production environment today. Sure, it has lots of problems, but since people are using it, we can consider it useful (at least to the people using it), otherwise people wouldn't use it.
The housing market in 2008 is hardly relevant to Bitcoin, as that market is controlled by larger entities that has power to decide things, ultimately the government. Bitcoin doesn't work like that, but I'm sure you're familiar with how Bitcoin works already, otherwise why would you discuss about it here?
The second argument you made was that "You can use Bitcoin to get around government sanctions" is the most "solid thing" you can say about Bitcoin, and that it's not exactly "high praise". The market clearly disagrees with you here, but then you think that it's more about "morals" than "financials". I agree with you here, but I say it's morally a good praise to be able to get around any restriction, especially since that was one of the original goals with Bitcoin. That Bitcoin set that as a goal, and still is achieving it after many years of attempts of being taken down, shows that the value the market assigns to Bitcoin is much closer to reality than what you think is the value of Bitcoin.
Overall, you are discussing in bad faith it seems. You're not interested in learning a new perspective, you're interested in converting others into your perspective, so unfortunately this conversation is not very fruitful. Take care.
> Now you're changing the argument to if Bitcoin can be used for "a stable store of value" and if it's a "large useful network".
The point of Bitcoin is to serve those purposes. My critique is that it cannot because it is based mostly on ephemeralities.
> The housing market in 2008 is hardly relevant to Bitcoin,
The housing market collapsed because of government inaction, not action. People valued CDOs as AAA rated when the actual underlying reality was worthless. Eventually reality caught up with us.
> That Bitcoin set that as a goal, and still is achieving it after many years of attempts of being taken down
This is agreed, incredibly technically successful. I do not agree that violating democratic rules is always a good thing, but I do see it as a good thing for countries that come under the gun of US imperialism such as Iran or Venezuela. However, in general, I am not a fan as the people that will use it the most are likely to be large corporate actors to escape any kind of accountability.
Censorship resistance is the only thing I can see in Bitcoin that is not ephemera.
> This means Bitcoin's value is based on completely ephemeral feelings, and the size of its network -- both things that can disappear overnight.
Yet here we are in 2021. The ephemeral feelings to me are the memes that keep things like culture going as well as Bitcoin, and thanks to the Lindy Effect [1], everyday Bitcoin doesn't die, it grows stronger. If ever there was a time for Bitcoin to die, it would've been in its infancy days in 2009 -- yet here we are in 2021.
> This means Bitcoin's value is based on completely ephemeral feelings
How is this different from any other asset? Value always disappears when people stop believing in it. People invest in company stock because they believe the company is valuable and will grow over time. Nobody wants to hold coins that lose value constantly. Governments have to literally force people to use their currencies by force of law.
What you described is a speculative asset (and something with inherent value). I hate to trot out the tired tulip analogy, but there's a difference between an item that people need and use practically and something that they just think is great b/c they think other people believe in it.
Taleb changed his mind on this subject. :) I can see Bitcoin as a "stable" long-term Store of Value. Short-term, it's always volatile. It's not suitable as a Medium of Exchange.
If BTC does catch up, the current inequality of the world will look like an anthill in comparison to the inequality that BTC will create. I can't imagine the world letting that happen..
The truth is complete opposite. Fiat currencies have created insane amount of wealth inequality, because they benefit those who have the power to borrow cash and own assets. With bitcoin, people can maintain their purchasing power and wealth. Bitcoin isn't pegged to CPI which means that it increases in value when economic productivity increases. CPI pegged currencies move purchasing power from labor to capital.
> Bitcoin isn't pegged to CPI which means that it increases in value when economic productivity increases.
Bitcoin increases much faster than CPI, that's a sign of a bubble. The mystery is that Bitcoin survived consecutive bubbles. I can't explain it, it's what it is. The vast majority of alternative cryptocurrencies had one bubble and died after that exactly as one would expect.
>CPI pegged currencies move purchasing power from labor to capital.
This is the first time I have heard "CPI pegged currency"
I assume that you are talking about inflation. Mild inflation is actually a wealth transfer from capital to labor because inflation is in its essence a wealth tax. Labor is paid in current year salaries as long as you switch employers. You don't get paid 1930 salaries, you get paid more to compensate for the loss of purchasing power, you just have to ask for a raise or switch employers and that is the entire point of inflation. If anyone steals from you it's your boss. You know who doesn't get paid more? Capital owners, they have to invest productively and earn enough to beat inflation.
Your next job will pay more than your last so you should switch as soon as possible. If you were paid in Bitcoin then employers would have to pay you less and less Bitcoin per year because they simply cannot afford the Bitcoin since it keeps going up in value. So your best bet is to stay with your current employer until the employer fires you because they cannot afford you anymore. Ultimately you lose anyway.
Let's also talk about why high inflation is bad. Basically, at some point you have to switch jobs so frequently that you never actually end up doing any work, most of your day is spent finding a new job. Important work like food production gets neglected.
I don't mean inflation. Even if inflation was 0%, it means that money didn't change value relative to CPI. CPI tracks the value of customer goods, which depreciate in value because productivity increases. Essentially, the value of dollar is tied to the value of bread. Assets, such as stocks, real estate, gold and bitcoin maintain their value better. That's why those assets seem to go up measured in dollar value.
Those who are wealthy, don't own cash at all. They borrow cash as much as possible and buy assets that go up in value. The loan is diluted away while value is stored. Those who credited the loan (poor people and businesses who own cash) lost their earnings. Inflation is definitely not a wealth tax.
Bitcoin survives because more and more people find out that it is the best store of value, because of its absolute scarcity and other properties. Lots of people join just because the value goes up, which causes bubbles. However, the long term trend is that inferior assets (which is everything) will go down relative to bitcoin.
In a fair world this would be true. You shouldn't get reward without risk. But because the monetary system is broken, this bet is asymmetrical and you are guaranteed to get rich.
That is in theory. If BTC becomes legit one fine day, what percentage of the world owns BTC and what percentage of the world's wealth will they own? If that doesn't scare you I don't know what will..
Smallest unit of bitcoin is satoshi, which is 0.00000001 bitcoin. Everyone can earn that. And yes, you have to work to earn it, but it won't lose value like regular money. Which means that the value of their work doesn't vanish.
Currently we're in a price discovery phase, so those who take the risk can benefit more. This phase will end soon though, and the price will stabilize. Everyone still has to buy it for the market price, as no one gets it for free. Also, most of those who got in early, have sold already.
You'd be surprised as to how many early holders sold at local maximums. And at the very least, that inequality can't be permanently maintained by printing more of it to give to the wealthy.
hilariously, the people who got their coins stuck in the Mt. Gox hack back in 2014 are likely to end up with some of the biggest gains of anyone in crypto.
Bitcoin transaction costs are very high so I’m assuming all these payment processor transactions will be off-chain. Do you think that having so many off-chain transactions that are essentially converting USD reduces the perceived value of BTC or raises it?
They are in favor of not using the L1 Bitcoin blockchain for small payments. L2 solutions, both decentralized ones like the lightning network and centralized ones like Visa are still "using Bitcoin" as a currency, even though they are not using the L1 blockchain.
Instead of using Bitcoin, the transaction network, they are using their transaction network to transact bitcoins, the asset. The chain gets used primarily for settlements in this model.
If your purchasing power is calculated in bitcoin but your purchasing in some other currency, there is no real problem there. Bitcoin network can get used one per day for settlement, and the rest of the time use visa digital coins! Which they call dollars or euros, some differently named legacy meatspace fiat. Then bitcoin is free to just swim around in libertarian platonic ideal of freedom from societies obligations and rules
All trading within exchanges already happens outside the blockchain. This allows them to offer low or zero fees since transactions only cost money when users withdraw their cryptocurrencies.
It's just on-chain layer 1 transactions that are somewhat expensive. The lightning network solves this and works great, can do thousands of transactions per second and has close to 0 fees. Feels like magic to use it :)
It's magic until you realize you need to spend $15 to get off chain to buy a coffee. And then you realize you aren't ready to commit a bunch of cash to a speculative currency (or investment) so that you can buy coffee.
Also, you will need to file taxes for your coffee if your bitcoin goes up after you bought it. Fun!
You may have been downvoted for a snarky tone, but this is the first time I've seen it mentioned here - bitcoin is taxed as a commodity in the US, each exchange is a capital gain or loss.
This is the poison pill for BTC in my opinion. I have a very small amount of BTC and this is the primary reason I don't have a larger investment, don't make more of an attempt to use it as currency, etc. The central banks/governments aren't going to give up their power so easily. They may have low-key destroyed crypto by considering them commodities.
The only way crypto can win* is if a plurality of people just choose not to follow the tax laws. It has to be enough people that it becomes unenforceable.
win* in this case is defined as being a 1st order currency largely unencumbered by central banking/government authority.
>The only way crypto can win* is if a plurality of people just choose not to follow the tax laws. It has to be enough people that it becomes unenforceable.
That's impossible if you spend your Bitcoin via Visa.
Arguably, the tax filing sounds like the single worst part of it. Imagine if you really used Bitcoin for every purchase you make in a normal tax year. Suddenly how much you pay in taxes depends on the path integral of the exchange rate over the entire period. That's an absolute accounting nightmare. Now you have a huge incentive to batch all of your purchases at market low points to minimize tax burden and you're stuck trying to beat the market just to buy groceries. That isn't something I want to have to think about.
Fair enough, that’s why I wrote ”in the long run”. Also, there’s always the option of moving somewhere that doesn’t have this issue. Well, unless you’re from the US and must file taxes even when you’re not even in the country, I suppose.
Some exchanges will let you withdraw to a lightning wallet so you never have to interact with the base blockchain layer for smaller day-to-day transactions.
I would imagine most exchanges will have similar lightning withdrawal options in the future, if there's demand for it.
That doesn't solve anything, it still has to be synced with the chain so that the balance can be useful to anyone else. The average transaction is around $20 USD and has been around this much for a while. Opening and closing second layer channels is even more expensive than an average transaction.
There is no universe where 1.5KB/s in transactions makes sense. Any other cryptocurrency works better, ethereum and bitcoin cash already have more transactions than bitcoin and any other cryptocurrency works better.
I'm not an expert on lightning network, but couldn't Visa position themselves as a central hub for lightning network transactions, so that most people can open a channel to Visa and they act as the clearing house for keeping all of those channels balanced?
I'd never want to send large BTC amounts through visa, but I would trust them enough to facilitate <$100 transactions for a ~3% fee (with some potion profit and some towards tx fees).
Or heck, maybe consumers don't need an actual channel, just let me send Bitcoin out on credit and pay my monthly balance with BTC. Maybe only channels to vendors that receive payments are necessary.
Not sure how much demand exists for this, but "We are the #1 facilitator of Bitcoin transactions" would probably be great for Visa's stock price if they could achieve it.
They could and they probably will if LN keeps growing. You wouldn’t need to trust VISA at all, LN is “trustless”. They would just be a cog in the wheel, like all the other LN “nodes”.
They could, the big difference is they would just be another player on the lightning network payment channel, perhaps a very big player, but not "own the whole layer" kinda big.
It doesn't sound like you're familiar with how lightning works. It doesn't have to be "synced with the chain" except during channel opening and closing, which occur infrequently (like on the scale of weeks or months).
> ethereum and bitcoin cash already have more transactions than bitcoin
The eth blockchain is untenably huge (good luck running an ethereum full node), and ethereum fees are often higher than Bitcoin fees.
A $10 USD VPS could sync with that in under two hours. That is about $12 USD of hard drive space after 5 years.
This is about the same as downloading the five to eight largest games on steam.
> and ethereum fees are often higher than Bitcoin fees.
No they aren't. They are about the same, making them both unusable for normal transactions, but it should be obvious there are no technical limitations to making larger and/or more frequent blocks since ethereum does it already.
> It doesn't have to be "synced with the chain" except during channel opening and closing, which occur infrequently (like on the scale of weeks or months).
Which means that no one can use that balance for weeks or months and some third party has to spot people the money in the mean time. That sounds like a credit card. Know what doesn't work like that? On chain transactions.
False. This is for some sort of pruned SPV node or something. A full node takes multiple terabytes. Even the fastest implementations take days to sync, if you're lucky.
The difference is that what I linked actually backs up what I said.
Did you even read what you linked? It says "We’ve long ago depreciated the cost of the machines. The ongoing cost of running these machines is negligible."
Does that sound "untenably" large?
> Even the fastest implementations take days to sync
You realize it has been going for five years right?
> You clearly have no idea how lightning works, so why do you keep commenting as if you do? Nothing about this claim is true.
Your evidence of <<nothing at all>> is pretty weak. You basically replied to say "nuh uh". In other comments you claim that certain things don't work when other people point out there there are many examples of it working already.
How exactly does someone who gets a balance on a 3rd party lightning channel use that money on the main chain without syncing with the chain? Until they get it on the chain it isn't a bitcoin balance and to make that transaction is going to cost a significant amount.
It does. You don’t need to leave the L2 solution. Why would you when you have the possibility to transact for free? Liquidity on LN is growing by the day and as more and more people join there will be fewer and fewer reasons to settle.
Define works better. Has larger blockchains? All transactions don’t need to live in the blockchain.
> Opening and closing second layer channels is even more expensive than an average transaction.
That's true if opening/closing channels require you to go to the blockchain, but channel factories will significantly ease the burden of 2nd layers on the blockchain.
Why use an outdated planet-killing tech such as butcoin underneath your level 2 bolted on solution when you can use something modern and do it directly on-chain?
I assume this is a bad-faith question, given how much it begs the question, but: there is no known solution to the double-spend problem that achieves the same security properties as proof-of-work without consuming energy.
I don't understand how this viewpoint can persist now that we have quite a few PoS chains humming along in production: Cosmos, Tezos, Polkadot, Mina, Solana, Avalanche, Cardano, Eth2.
Edit: I suppose what you said is a fair statement; PoS security is different in that it relies on weak subjectivity. In particular, users can maintain security by syncing every X days, where X is based on the staker bonding period, and not accepting long forks beyond X. It's not equivalent to PoS security, but there's nothing really problematic about it IMO. Several years ago, one could make the case that this security model was untested, but not so much today.
Dumb out-of-the-loop question: then what's this talk of Ethereum moving to proof of stake? Whenever someone brings up that PoW is bad, people say Ethereum; whenever someone says why PoW, someone says because PoS isn't safe.
Don't want to duck your question but: the reason this is hard to get a handle on is that it's really complicated.
It's not that the premises and protocols themselves are complicated — sure, they're technically sophisticated, but they can be explained simply. The problem lies in that it is very hard to predict the economic consequences and security guarantees of the various consensus mechanisms. Frankly, if Bitcoin hadn't been working flawlessly for the past 12 years very few people would guess that it would work.
There are two problems here: The first is that a lot of ethereum talk is just that; hot air with little substance.
The second is that PoS has significantly worse security properties than PoW.
The core reason is that "changing your mind" (rolling back the blockchain) is free with PoS, except for possible loss of value of the cryptocurrency, whereas it's extremely expensive with PoW. There are all sorts of band-aids you can slap on like ignoring block reorgs of a certain depth, but then you lose properties like network partition tolerance.
We shipped ethereum proof of stake December 1st, 2020. There are over 100,000 validators in the network, securing over $6 billion worth of value. This isn't hot air with little substance.
People are paying good money for owning a serial number with no connection whatever to anything in the physical or in the virtual world. Don't be surprised if they also gladly pay a ridiculous fee to buy a coffee.
I don't think it's the same. Paying more for the same cup of coffee doesn't make Starbucks more upscale than it was before or than it is for anyone who just paid with their credit card / phone / cash.
If we’re talking about 100 or 1000 crypto-rich people buying coffee with Bitcoin to prove a point, sure.
But the tens of millions of people who buy coffee every morning have no desire to spend extra for the same product. They already have a credit card in their pocket that has no fees (or maybe negative fees if it’s cash back.). They’re going to use that card.
and yet this is trending toward precisely the scenario the hyperbitcoinization screed gleefully discussed, where anyone who didn't buy in to the scheme early on would be left impoverished once bitcoin swallowed the entire global financial system.
This take on Bitcoin -- not backed by anything in the physical or virtual world -- is misinformed. You're correct that coin isn't specifically backed by anything in the sense that you can't trade it in for a an equivalent asset like gold. But neither is the US dollar. BTC's value is backed at least by the billions that have been spent on mining architecture by companies like MARA and RIOT, large mining pools, producers of mining ASICs, etc. Huge amounts of physical and virtual infrastructure have been created to achieve the current global hash rate, and the stakeholders in that infrastructure have vested interest in the value of Bitcoin remaining high. China is transitioning to digital currency, which lends legitimacy to the technology. There is also a growing collection of institutional owners, such as MicroStrategy, Square, and Tesla's notorious $1.5B buy in.
The USD is backed by "the full faith and confidence of the US Government" since leaving the gold standard. Bitcoin is backed by collective faith and confidence in the security and utility of the underlying blockchain. As more opportunities arise to transact in Bitcoin, its value will tend to stabilize.
>Huge amounts of physical and virtual infrastructure have been created to achieve the current global hash rate, and the stakeholders in that infrastructure have vested interest in the value of Bitcoin remaining high.
Miners are in it for the money. If the money dries up they just move onto something else. Your logic could be applied to the gold rush as well. A huge industry was created, it won't let gold fall in price as if there was a huge cartel capable of doing so.
>But neither is the US dollar.
I can exchange it for things I want to buy. That's plenty of backing for the average consumer. If one day it has become worthless because I cannot buy anything with it anymore then I will declare it worthless and so will everyone else. Meanwhile with Bitcoin this logic is the same and when it does finally become worthless, people will still insist that it isn't.
The USD is backed by "the full faith and confidence of the US Government" since leaving the gold standard. Bitcoin is backed by collective faith and confidence in the security and utility of the underlying blockchain.
The utility of a country, it's people/resources/military/economy/etc, is pretty obvious. What is the utility of the blockchain outside of the value of Bitcoin itself?
You can’t ban the USD though. And I don’t see China adopting Bitcoin. They will have their own currency.
While I wish I jumped on the bandwagon. I don’t see why any nation would adopt a solution they don’t control. They are happen to consider it a commodity and tax it though.
These transactions may not be on the chain transactions. You basically buy Bitcoin from Visa, visa pays bitcoin to Merchants (which remains in Visa's wallet) and you and merchant will settle your accounts with Visa in future at which point you may have to pay a fee.
High Bitcoin transaction fees are exactly what's good for Visa. Visa most likely wants to get your Bitcoin first and settle in the merchant's currency. They then sell Bitcoin from different purchases in large on-chain transactions.
Visa can essentially make the fee of a Bitcoin-to-merchant transaction $16 and still be on par with Bitcoin's own transaction fees. Only that you can buy stuff easily.
You don't think that if the transaction settlement method cost a tenner to settle a six euro item, you could buy it with your special card that uses this settlement method for six euros? If you use bitcoin, someone somewhere is moving those funds even if you are just "using your card". You're telling the payment provider to initiate a transfer to the merchant. How did you imagine this would work otherwise?
Almost certainly Visa would be acting as a (centralized) transaction aggregater that uses the settlement-layer pattern. There's no value for Visa to provide anywhere else really, other than to use their transaction network to transact the bitcoin asset.
They would be totally decoupled, but essentially they'd take risk of the underlying prices changes. Same as now with the USD, it's just not as pronounced.
This might be a scheme to increase taxation on bitcoin revenue.
Besides being a revenue source based on volatility and scarcity, bitcoin's real value is being a tax free wealth exchange between people and generations.
Bitcoin has been following internet's, especially start-up scene's trajectory. Like internet, Bitcoin started as a technological adventure and garnered the attention of first movers. Those first movers gained a lot of wealth through bitcoin and general population got interested. The surge in interest created a bubble. We are riding that bubble.
Bank of America's research shows that we passed the monopolization stage. Report mentions "About 95% of Bitcoin is controlled by just 2.4% of the accounts, and distribution is heavily skewed towards the largest accounts." There might be a burst, and bitcoin might not survive that.
I believe, the NFT and DeFi are projects to keep the bubble going, or create some value after the burst so like internet companies, the bitcoin sector can recover.
In its current situation, I don't believe the bitcoin can recover from a burst, but I would love to hear differing opinions especially from people who understand finance.
1) Title is somewhat misleading ... They are trying to help wallet to convert to fiat to pay in fiat.
2) I think Visa is terrified of the competitive nature of crypto (not only bitcoin but any stablecoin). By essence, a trustless network for digital payment is a direct competitor to Visa.
Full disclosure. I am the CEO of carbon payment, a global payment solution leveraging stablecoins for global payments.
Not sure if this was the first year for tax returns to have it, but I was asked to document every single time I spent bitcoin to purchase something. Because you have to pay capital gains on the value above when you bought it. I wonder if this is true here but either way it's a massive pain in the ass.
This de facto duopoly for electronic payments is very concerning, but there seems to be no incentive to break it up. Why do you think that is?
Ideally people should be able to create their own banks and issue their own cards provided they talk the same open source protocol. We have all technology available that could enable this, but there needs to be a political will to make this happen. This could me nationalisation of the infrastructure of both payment processors or forcing them to open it up for 3rd parties - for example a private small bank should have no worse fees than a big whale bank. As long as these corporations can gatekeep our money (and time), we are not free.
Now that crypto is being more socially accepted, of course Visa and others will want to collect all the data on the products people are purchasing with it, just like they do with our fiat currency.
2. If everyone (read: the vocal but high profile minority) is talking about it, even though we don't understand it, there must be something to it. Everyone (read: the vocal but high profile minority) cannot be wrong.
3. There is no career downside of betting on this and it fails, since everyone else was betting on it.
4. There is a career downside to not betting on it and it is successful.
> If everyone (read: the vocal but high profile minority) is talking about it, even though we don't understand it, there must be something to it. Everyone (read: the vocal but high profile minority) cannot be wrong.
None are as stable as Bitcoin. There are some that are faster right now because no one uses them, but are likely to fail if they get any serious adoption.
Ethereum is the only sensible alternative to Bitcoin but Ethereum has major scalability issues and much less infrastructure compared to Bitcoin to alleviate those issues.
USDC uses Ethereum so it has all the scaling issues Ethereum has.
That said Ethereum would be a reasonable alternative, but in terms of stability and performance, Bitcoin is far ahead of Ethereum currently. Maybe Ethereum 2.0 with sharding and staking solves those scalability issues and at that time it will be the best choice, but right now there are too many unknowns.
Satoshi said in 2009: "The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling. If you're interested, I can go over the ways it would cope with extreme size."
"By Moore's Law, we can expect hardware speed to be 10 times faster in 5 years and 100 times faster in 10. Even if Bitcoin grows at crazy adoption rates, I think computer speeds will stay ahead of the number of transactions."[1]
Well, this is one thing that he obviously got wrong. Computer hardware speed didn't become faster by a factor of 100 in the 12 years since Bitcoin started. Just by a factor of 2, maybe.
But solutions to that problem exist. I pay small amounts regularly with my bitcoin wallet (the Wallet of Satoshi), it costs mere cents and transactions confirm in seconds. It's far superior to anything visa has to offer, because it's fraud and counterfeit proof, privacy friendly, globally universal and cheap.
I think in some respect it has. Parallelisation, we have more cores and GPU hardware than before. Its just the frequency that we haven't been able to. Besides POW is easy to parallelize.
> Then came the bitcoin core wars. Today bitcoin is a technological dead end, unable to evolve.
Yet in spite of this, “speculative store of value” remains the only real world use case of cryptocurrency, full stop. No cryptocurrency has risen above speculative store of value absolutely without exception.
N.B. “digital gold” is merely a euphemism for speculative store of value.
“Digital gold” is the Cadillac of all cryptocurrency narratives from a pure practical proven standpoint, much to the chagrin of investors loudly beating the “utility coin” drum to shamelessly drum up demand for other people to invest in their supposed utility-having coin unironically as a speculative store of value.
This is also why all Bitcoin-to-altcoin competition is zero sum, and always will be — because no one uses cryptocurrency, they just virtue signal with it to jockey for position in the sheer Keynesian beauty contest that is cryptocurrency valuation [1].
Every core developer of Bitcoin could drop dead simultaneously, and Bitcoin’s “digital gold” narrative would remain intact. All you need is what Bitcoin is today if your only goal is the safest safe haven asset.
It was wise of the Bitcoin developers to double down on the digital gold narrative due to the inherent realities of the cryptocurrency space which continue to prove themselves out as Bitcoin has risen from $300 to over $50,000 USD. Bitcoin is digital gold, and every altcoin is low-key trying to become that by calling attention to their "utility" which virtually no one has ever made any “use” of.
Which is why Bitcoin remains the #1 coin by market cap, and virtually every other cryptocurrency is down c. 70% from their all-time highs (BTC-denominated ofc, because no other metric counts).
Tether and Tether copycats command the lion’s share of stablecoin usage. While it’s true Tether isn’t a speculative store of value — custodial risk of Tether notwithstanding — it’s also an IOU, not a cryptocurrency.
Contrary to popular belief, alternative free-floating “stablecoins” aren’t actually stable: every major example of one has imploded at least once in times of high market volatility. This makes them speculative.
Unstable “stablecoins” are speculative stores of value no different from any other cryptocurrency, but with a twist: the real world usage to virtue signaling ratio equally rounds down to zero, but the profit mechanism is different. You bet on unstable stablecoins by purchasing cooperative pseudo-equities whose value is propped up by all the drum beating that goes on for the closely linked unstable stablecoin itself.
(All the examples of unstable “stablecoins” I’m familiar with have shipped such tertiary pseudo-equity coins as investor bait, which IMO explains virtually all of the buzz they seem to have — again no different from any other cryptocurrency.)
Isn’t the whole idea of decentralized digital currency systems to eliminate intermediaries, maximize privacy and reduce transaction costs? The visa network stands to lose the most, get seriously disrupted, more they are scrambling to stay relevant and frame this as a value added service.
Yea it not clear to me if Visa’s involvement is a good thing. I would want cryptocurrencies to break the Visa-MasterCard duopoly, to grant privacy from prying eyes (both companies and governments), and increase financial efficiencies by eliminating middlemen profiteers. This feels like a takeover of something with that potential that is meant to prevent that very outcome. Can someone with more expertise tell me why I’m wrong?
Lose the most? If people are moving onto Visa's Bitcoin network for some inexplicable reason then Visa is clearly winning because customers aren't fleeing into a competing startup.
From the article: "And secondly, working with Bitcoin wallets to allow the Bitcoin to be translated into a fiat currency and therefore immediately be able to be used at any of the 70 million places around the world where Visa is accepted."
What little (micro) BTC I have I would never use for normal day to day transactions. I really have a hard time imagining that any other volitile crypto currency in circulation will ever be used in such a way.
I have very little long term faith in BTC at this point. It is effectively centralized, has limited capacity, outrageous fees when the network is busy, and then there are growing concerns over environmental impact...but I'm still holding on to my stash as the growing institutional momentum over the last year or so seems like it might have a significant positive influence on price, before BTC is eventually abandoned.
It's a gamble but it wouldn't surprise me if we saw $100k at this point, might as well let it ride if you've locked in whatever you originally paid for it.
Imo, the logic of most investors is "Can I afford to lose 5% of my wealth? Heck, I can lose 10%!" So all the rich with zillions in assets invest what they can afford to lose, those 10%, and hold. If the rich top 1% owns 50% of the entire world's assets, then such is the target price of bitcoin - 5% of everything. At the moment, this everything is $100T. This gives us what, 250K per btc? Multiplied by expected inflation, say 2x.
>It's a gamble but it wouldn't surprise me if we saw $100k at this point, might as well let it ride if you've locked in whatever you originally paid for it.
I won't go into details but there is absolutely no way Bitcoin will go to $100k and stay there. Once it reaches that level the bubble will finally pop and we will get see lots of tears.
Bank of America had this[1] to say: “No good reason to own BTC unless you see prices going up. .. it is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism. As such, the main.. argument for holding Bitcoin is.. sheer price appreciation”
I haven't found a reason in favor of owning btc other than "number go up".
If everyone were honest about this then we wouldn't have to rehash the same criticism over and over again. Bitcoin is still a better gamble than a lottery ticket and I won't blame anyone for feeling that way. I just hate seeing deception and misinformation and generally scammy behavior, basically anyone who wants to turn the lottery into a negative sum bet as opposed to a zero sum bet.
Because it's still magic to retail investors, and as long as they don't see behind the curtain, they'll keep coming along in droves and inadvertently propping it up + pushing it higher.
Institutional and retail investors are just starting to pile on and there will be potentially massive gains to be had in the near to mid term before the bottom falls out.
Long term? Probably not smart.
Safe to get in now? Debatable, pretty high risk.
But if you have a bunch of coins laying around and you're willing to gamble a bit longer...
Wow, that is pretty basic economic fallacy. Whether you hold coins today or not should not impact an investment decision. If the BTC you bought 10 years ago for $100 is worth $100,000 today, and a couple of weeks from now the price collapses and is worth $100 again, you have still lost $100,000. Just the same as if you paid $100,000 for your BTC today. Only difference would be tax liability.
I think the idea is you have some amount of "worth" today, denominated in whatever you like. Maybe you have 100k USD in BTC or in cash. If you let your bitcoin ride, that's equivalent, modulo taxes, to buying bitcoin. Or, selling your bitcoin today is equivalent to choosing not to buy.
The idea is that you shouldn't think "I already have some bitcoins, may as well let them ride" but instead think "Would it be better to have bitcoins or dollars?" And then, whatever your answer and current assets are, reposition yourself so you're consistent with your beliefs.
If you have a bitcoin that you bought for 10 dollars and you hold on to it even though you believe the price will likely fall because you think you'll still be able to sell above 10 dollars, that's a fallacy in the sense that you'd probably make the most money basing your decisions only on what you think is likely to happen and not what the original cost of your assets was.
All else being equal, given that you turned $100 into $100K, you're much more likely to have $100K that you can afford to lose.
Saying that the history of your investing shouldn't impact your choices is saying that your total wealth shouldn't affect your choices.
But if I borrowed $100K against my home and it gets foreclosed and I'm homeless, that's very different from if I gambled $100 and got $100K whose loss will be no worse for me than losing the original $100.
That's exactly the fallacy I was describing. Whether or not you can afford to lose money is completely independent of how much your initial investments cost. You will tend to make more money, provided you have some ability to predict, if you do what you predict is best based on the present and the future, compared to changing your decisions based on the origins of your money.
There was an article I read on how arbitrage vs BTC was possible, despite it not being an ETF. I forget the details, it may have taken like 6 months to do the exchange for regulatory reasons.
So professionals were making money while it was >BTC, until they overdid it and the premium went away.
It seems reasonable to be patient because there's just a lot of lag in the system as it's currently set up.
If you've ever paid attention to closed-end funds, you might have noticed how they can trade substantially over or under asset value for quite a while, but not forever.
There’s no arbitrage in the strict sense but basically it’s just a straight convergence trade without a delivery mechanism. Just need funding, which is abundant today.
The article I read that called it arbitrage described it like this:
"[Hedge funds] borrow Bitcoin, deposit the coins with GBTC in exchange for shares that are more valuable than the coins they bought, and they pocket that profit by selling the marked-up shares after a six-month lockup period expires."
Unlike an ETF though, the shares can't be destroyed. And suddenly the premium went away, so probably some of the people who were counting on it to remain have quit now.
That's a very good question, one that I don't have an answer to. "A very solid choice" was a very poor choice of phrasing. I was intending to generalize the reasoning behind the recent surges in value and popularity.
My statement was more intended to be a critique on the current perception to the layman. I believe bitcoin and crypto as a whole should be looked on as a currency, rather than a get-quick-rich investment that absolutely anyone with a spare penny can leverage for their own profit.
Does that mean more energy will be used to mine Bitcoin and more carbon will be emitted in the atmosphere, killing turtles in the oceans and burning the remains of the Amazon forest?
Visa would be providing 0 value if it exposed these drawbacks of Bitcoin's transaction network to users. Making cheap, fast transactions with fraud protections is exactly what a company like Visa has to offer.
This lets you keep your funds in BTC until you the instant you want to use it. If you believe that Bitcoin is an asset that 'only goes up', wouldn't you want to keep even your spending money in BTC for as long as possible?
there is tremendous value for me in being able to barter transaction with an asset that someone can immediately sell for what they want
I've been illiquid sometimes due to some combination of card networks accepted and when I say "eh, what about Bitcoin" because I have some dust in a wallet on my phone, I'm completely serious while the merchant spirals into their ignorance and cognitive dissonance nervously laughing and regurgitating some headline they saw 7 years ago
other people just take it like "yeah sure"
its just like get over it are we exchanging equivalent value or are you mentally incapable for this century
Not directly related, but has anyone looked at Kin [1] recently. Besides btc and eth, they are the only guys with SEC clearance. And given that they are running on the Solana chain, as far as I understand, makes micro transactions possible. Also from a dev point of view, their weekly reward engine payouts is quite attractive!
I’m really interested to hear what others think of Kin?
Couldn’t agree more. I’ve tracked these guys from the start. Really solid concept behind it and the founder make a really strong commitment from the start to say that if its a currency the only thing that matters is the number of daily transactions. Which is really true if you consider the value of a currency related to the value of the network.
unfortunately they really hit a speedbump with the long ongoing SEC case, but now that it is finalized it all can really play into their advantage.
Also the fact that they have done 3 chain migrations did not do any favors, but the techs say its for the best. Would be really interested to understand why changing from Stellar to Solana is so important?
This is already done with the Coinbase card, Gemini card, etc
The statement is very vague in terms of who is covering the conversion.