Bitcoin is fiat money, too • Hacker News Board

Re: Bitcoin is fiat money, too

#321

Post by smallnamespace » Sat, Sep 23, 2017, 5:42 PM UTC

meric wrote: post #262

smallnamespace wrote: post #251

Earlier quoted context omitted.

If you believe that we should have UBI (and it seems like many here do), deflation is the exact opposite of it -- it slowly concentrates wealth with those who already have it, and all they have to do is hold the currency. Whereas inflation at least basically forces the wealthy to invest in real assets or else slowly transfer the value of the cash towards debtors.

Currency isn't wealth - wealth is real estate, stock, furniture, computers. Deflation makes it easier for wage earner savers to increase their tangible wealth. The economic data matches this - economy was a lot more equal on the gold standard until 1971, and have become a lot less equal once a policy of inflation is implemented. Are we going to act on theories that match the data or does not match the data? With defl…

> Currency isn't wealth - wealth is real estate, stock, furniture, computers. Deflation makes it easier for wage earner savers to increase their tangible wealth.

Yes, we agree on that. However, I think we need to also acknowledge that 1) a large proportion of wage earners have very few, or negative net assets, so deflation actually hurts them and 2) even though deflation helps savers, the biggest savers in the economy are actually the rich. Deflation helps savers, but the people with 80%+ of nominal assets are the already-wealthy.

In fact, the most common form of household wealth is a house, where you own a real asset and owe a nominal debt.

Under inflation, your house value grows at inflation while your debt remains constant, so this even benefits the saver. Under deflation the opposite happens.

> Are we going to act on theories that match the data or does not match the data?

You need more data. The developed world has been on the gold standard since the late 19th century through to the 1970s. During that time the US has seen:

- the Robber Baron age and the Long Depression (where the rich got much richer)

- the roaring 20s, when wealth was more distributed

- the subsequent crash and the Great Depression, where the entire world was in misery (but inequality was very high)

- WW2 and the post-war era, which saw large decreases in wealth inequality

Seems a bit silly to say that 'the gold standard was responsible for lowering wealth inequality', given the huge swings back and forth in inequality while we were on the gold standard over 100+ years.

Re: Bitcoin is fiat money, too

#322

Post by vkou » Sat, Sep 23, 2017, 5:43 PM UTC

ojr wrote: post #299

vkou wrote: post #74

Earlier quoted context omitted.

Worse apis and permissions, because there is no way to recover from bugs in your code. Unless you hard-fork.

you need permission which could take weeks, to take donations through kickstarter or send micropayments to 1000 people through paypal, losing bitcoin or ethereum is a possibility but security strategies are improving, there will be growing pains in a new financial software platform but you already know that?

You need permission to turn your BTC into USD, in order to pay for your rent and food. This could take weeks, too. The reason the regular financial system has all these high-friction components is because of AML/KYC/fraud.

If you think the interface between BTC and the real world won't eventually have to be compliant will all those onerous regulations, background checks, and business processes, you are vastly underestimating the persistence of our regulators.

Re: Bitcoin is fiat money, too

#323

Post by smallnamespace » Sat, Sep 23, 2017, 5:53 PM UTC

ric2b wrote: post #302

ryan_j_naughton wrote: post #208

Earlier quoted context omitted.

Significant inflation is obviously a bad thing. Zimbabwe or Venezuela prime examples. But being deflationary where the currency increases in value obviously causes a disincentive for spending that currency. You are encouraged to buy and hold it because it will be worth more in the future relative to the cost of goods, services, and other fist currencies. Even just minor deflation is disastrous for economies because i…

> You are encouraged to buy and hold it because it will be worth more in the future relative to the cost of goods, services, and other fist currencies. A currency being inflationary shouldn't really affect spending because lots of different investments already exist, so you can make money holding them instead of the dollar. The dollar being inflationary (or shouldn't, for rational actors) incentivizes trading it for…

> lots of different investments already exist, so you can make money holding them instead of the dollar

That's true, but someone has to end up holding the nominal assets.

Like yes, a saver can trade all their fiat currency for real assets by buying a house or stocks, but then the person who sold them those stocks would get hit by inflation. At the end of the day, if the 'real assets' in the economy are worth say $10 trillion and there is $1 trillion of currency in circulation, then whoever is holding those dollars will pay for the inflation.

Btw, the most common nominally-denominated asset is debt. Savers who hold debt (Treasuries, mortgages, etc.) get hit the most by inflation.

Re: Bitcoin is fiat money, too

#324

Post by vkou » Sat, Sep 23, 2017, 5:55 PM UTC

sonink wrote: post #190

Fundamentally, Bitcoin is software eating the Fed-Bank-Retail ecosystem. The Fed governance is replaced by code. The banking utility is replaced by miners. I think the march of bitcoin is actually a better example of how AI is taking over the world. People in AI are fascinated by AGI - but the bitcoin ecosystem is actually a real world example of how AI will take over the world. Specifically, the march of AI won't ha…

Nobody in Africa is seriously using bitcoin to do business.

None of the BTC startups, even the remittance ones, want to touch that market with a ten foot pole (Despite their slide decks shouting from the rooftops about banking the unbanked.)

Maybe it's because BTC doesn't actually solve any of their problems.

Re: Bitcoin is fiat money, too

#325

Post by saosebastiao » Sat, Sep 23, 2017, 5:57 PM UTC

ebogart wrote: post #135

Alex3917 wrote: post #127

Earlier quoted context omitted.

> embraced by libertarians who are very idealistic and have quite a shallow understanding of economics, software, and the world at large Sure, but they tend to know a lot about currency.

Anyone who thinks gold is money doesn't know very much about currency

Anything that is tradable in lieu of production is a currency. There are plenty of things far more obtuse than gold that can be and are used as currencies. Prisoners have been found to use cigarettes as currency. Hell, tide detergent can be used as a currency[0].

As something that is nearly universally traded for local fiat, gold is far more of a currency than most countries’ currencies. Only a handful of countries have currencies that are more universally accepted.

[0] http://nymag.com/news/features/tide-detergent-drugs-2013-1/

Re: Bitcoin is fiat money, too

#326

Post by candiodari » Sat, Sep 23, 2017, 6:24 PM UTC

sethev wrote: post #314

wuliwong wrote: post #309

Earlier quoted context omitted.

In the specific case of the united states, the money is controlled by the Federal Reserve which is a private bank.

Most private banks aren't established by an act of Congress and run by people appointed by the President and approved by the Senate.

No, but in order to get access to the Fed, the bank link systems and so on and so forth, they need to get government approval.

In order to be bailed out, which is a necessity, they even need contacts as high up as the president.

And even that is ignoring the long history of the government making specific laws specifically to benefit or destroy a single bank.

Nope, no government role here at all. This division simply results in privatizing the profits, nationalizing the losses in trade for having politicians name the owners.

it is if you want to be a reserve bank of course, which is why anyone wants to have a bank in the first place.

Re: Bitcoin is fiat money, too

#327

Post by anigbrowl » Sat, Sep 23, 2017, 6:24 PM UTC

mirimir wrote: post #268

musage wrote: post #253

Earlier quoted context omitted.

You have a say in it in principle. In contrast, you have in principle no say what others do with their private property. That's the difference, and it's an important one.

You can't control what miners do, sure. But you can fork code that changes the game for them. Contrary to all the noise, Bitcoin does not need commercial miners. They are parasites. Allowing them to dominate mining was a serious bug. It's users who should be mining.

I mined a little in the early days, but it kept my CPU pinned into the red and frankly all the people online patting themselves on the back on the size of their mining operation were offputting. I'm interested in cryptocurrencies because of their potential to liberate the mass of people from financial bullying by governments and corporations, not as a speculative vehicle to easy riches.

This will seem pointlessly ideological to most people, but I'm struck by the fact that the bitcoin blockchain is held up as 'proof of work.' There's no work involved besides that to understand the system initially and any code contributions made to the source tree. The actual calculation is carried out by machine. So mining is basically a game for capitalists to invest in industrial hash table production. People who learn about it later and comprehend it in full but don't have any large sums of capital to invest in mining equipment or as a speculative investment don't really derive much benefit from it.

Don't get the idea that I consider it a bad thing because of this - its mere existence speaks to the fact that we've run out of accessible natural frontiers where the curious might stumble upon a fortune, and so we are forced to invent them.

Re: Bitcoin is fiat money, too

#328

Post by dmichulke » Sat, Sep 23, 2017, 6:51 PM UTC

alexasmyths wrote: post #282

dmichulke wrote: post #184

Earlier quoted context omitted.

Did the fed dig out the gold nugget? If not, there is now more dollars chasing the same amount of goods. Yes it's still backed but less than before, i.e., devalued.

"Yes it's still backed but less than before, i.e., devalued." No. 1 Trillion in Assets = 1 Trillion in Currency. 1 Trillion + 1 dollar in Assets = 1 Trillion + 1 Dollar in currency. No dilution by the Fed. (Fractional lending notwithstanding - that's another can of worms)

You do realize that you are backing a dollar with a dollar?

But you cannot eat a dollar or play games on a dollar or drive with it. In and of itself a dollar is just a piece of paper and has an intrinsic value of say 1ct.

So adding a paper note to the economy increases the backing by 1ct and the currency by 1$. Adding an iPhone increases the assets by say 100$ (just made that up by taking 500$ cost - 400$ used materials) and leaves the currency as it is.

Hmm, now that I think of it: Are you maybe talking about accounting?

Re: Bitcoin is fiat money, too

#329

Post by api » Sat, Sep 23, 2017, 7:04 PM UTC

mirimir wrote: post #180

amb23 wrote: post #57

Earlier quoted context omitted.

"Code is governance" -- the article does support the idea of cryptocurrency as fiat money because the laws, in this case, are the code. The developers and miners, no matter their good intentions, do hold power over the currency that everyday investors do not have. No matter how egalitarian the distributed ledger set up looks on paper, we'd be remiss to think the power structures behind cryptocurrencies are so radical…

Yes, that's the distinction. With Bitcoin, a codebase prevails if it attracts enough miners, merchants and users. Those parties in aggregate have "fiat power". It's arguable that fiat power for each state similarly reflects preferences of banks, merchants and users. However, some of us doubt that money policy typically favors users. With government fiat, forking isn't really possible, without a revolution, no matter…

Forking is totally possible for states. Different factions are constantly vying for power and many revolutions are quiet shifts that occur behind the scenes. This is very true in complex democratic republics but is even still true in monarchies and dictatorships. Monarchs have power by consent of a whole hierarchy of people and they are subject to overthrow or silent sidelining.

Gold is still the closest thing to a true non-fiat money but even gold has a value based on a consensus and any monetary form of gold will typically come as some kind of coinage for convenience and quick assessment. You can't eat gold.

Money is a social construct.

You could argue that crypto currency promises a form of fiat that is more transparent, auditable, accurate, and open in general but IMHO that remains to be seen in practice. The shitshow that is most exchanges and the majority of flimsy ICOs is not encouraging. All economic systems have corruption and dumb sheep like speculation but this is ridiculous.

Re: Bitcoin is fiat money, too

#330

Post by ycombobreaker » Sat, Sep 23, 2017, 7:06 PM UTC

mirimir wrote: post #268

musage wrote: post #253

Earlier quoted context omitted.

You have a say in it in principle. In contrast, you have in principle no say what others do with their private property. That's the difference, and it's an important one.

You can't control what miners do, sure. But you can fork code that changes the game for them. Contrary to all the noise, Bitcoin does not need commercial miners. They are parasites. Allowing them to dominate mining was a serious bug. It's users who should be mining.

It's not about need. If it is profitable to mine, professional miners will exist. You can't create an incentive structure and then call it a "bug" when somebody optimizes for it.