Will Bitcoin Make a Good Investment? • Hacker News Board

Re: Will Bitcoin Make a Good Investment?

#81

Post by yyyyip » Thu, Jul 04, 2019, 9:27 PM UTC

2bitencryption wrote: post #4

Once thing I've noticed about Bitcoin is that there are many "alt-coins" that seem to deliver better on Bitcoin's promises from a technical perspective, but those coins are forever stuck in Bitcoin's shadow because BTC has that first-mover advantage. And as a currency, the first-mover advantage is HUGE, because who wants to convert their investments from a hugely popular coin to one that could disappear tomorrow? So…

Bitcoin's governance model is what makes it special. 1) The founder declared it would have a maximum of 21 million coins with a set mining schedule 2) Many/most of the people who bought into it implicitly agreed that this is the core feature of bitcoin - that it would only ever have 21 million coins 3) The founder disappeared/died/whatever 4) Now, everyone continues to agree on the 21 million coin cap. If anyone tries to change this, they are opposing the founder and the reason many people bought bitcoin. At that point bitcoin will become the most used chain that maintains the set 21 million cap

This lack of governance as well as scarcity consensus is by far the strongest mechanism to maintain a scarce supply that we have in existence. It is not totally infallible - maybe a superhuman AI could social engineer the entire bitcoin community to increase the cap. But it is the best I can imagine is possible. The network effect of more people buying into it makes that 21 million meme stronger and stronger, and satoshi being "gone" reduces the risk that he comes back and declares that he has "changed his mind". Even if he did do that the core 21 million devotees will fork the coin to a 21 million and that will be the truly scarce bitcoin.

Therefore, this is the most securely scarce asset in existence.

Re: Will Bitcoin Make a Good Investment?

#82

Post by pmiller2 » Thu, Jul 04, 2019, 9:32 PM UTC

mopsi wrote: post #71

pmiller2 wrote: post #46

Earlier quoted context omitted.

Gold has value because it’s useful, among other things. That base level of value is why people started making coins out of it in the first place. It’s properties as a physical metal make it easy to store, transport, and protect, all of which are good properties to have as a currency.

Industrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global stockpiles of gold are well known, annual production is small and predictable. This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most…

Industrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it.

I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation.

> ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now.

What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/u...

Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse.

Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...

Re: Will Bitcoin Make a Good Investment?

#83

Post by icebraining » Thu, Jul 04, 2019, 9:36 PM UTC

mdorazio wrote: post #61

sedeki wrote: post #5

Earlier quoted context omitted.

What exactly does it mean when people say that a currency is backed by a government? ”Backed” to me implies, e.g., redeemable for gold which is clearly not the case for the US dollar. Is it that the government issue bonds denominated in that currency? But that has nothing to do with the money supply per se...? Please explain.

In addition to the other responses here, the US government (through FDIC) guarantees that you won't lose your money in a bank account if something bad happens to the bank. That's a lot more important than most people give credit for.

That gives value to the banks, not to the currency. I could create my own currency and give you the exact same guarantees as the FDIC (since I can always print more), yet that wouldn't give it value, because all you get is more units of the same thing.

If you disagree, I have some $IBs to sell you, and an insured account to store them!

Re: Will Bitcoin Make a Good Investment?

#84

Post by citrablue » Thu, Jul 04, 2019, 9:36 PM UTC

ziddoap wrote: post #49

eugeniub wrote: post #8

Earlier quoted context omitted.

What first mover advantages does it have exactly? I know many people who have bought bitcoins, but absolutely zero people who use it in their day to day lives.

The first mover advantage in this case is the fact that early adopters of crypto bought BTC, because BTC was all there was. Now that those people already have BTC, they are less likely to purchase a second coin. For one, they already have money invested in the space. Secondly, BTC has shown that it has staying power - outlasting many altcoins which came after it - which further solidifies BTC as the top contender (fo…

Isn't it just as plausible that early adopters bought BTC because that's all there was, then bought altcoins as they appeared in order to diversify their crypto portfolio? It'd be interesting to find out if there are more investors in "crypto" as a strategy versus BTC specifically.

Re: Will Bitcoin Make a Good Investment?

#85

Post by xorcist » Thu, Jul 04, 2019, 9:37 PM UTC

willmadden wrote: post #63

wickoff wrote: post #36

Earlier quoted context omitted.

You've accidentally stumbled upon the Bitcoin's true strength in your own answer. > unless the group governing it decides to 'fix' those flaws, but there's another issue, I don't want you messing with how my money works... That's exactly the reason why arguably technically superior projects are worth less - they are constantly messing with how their money works. The community around Bitcoin, it's so called "immune sy…

This is inaccurate. Bitcoin could handle many, many more transactions per second than it currently does with less risk and technical complexity than has been introduced since we hit the blocksize limit in 2017. There's a lot of money making sure it does not get bigger. Instead it's being rate limited with high fees and limited throughput to force transactions onto "layer 2" systems that allow 3rd party companies (iro…

> most of the original Bitcoin community

While it's hard to define what the "original" Bitcoin community really is, you'd struggle to make up a definition under which the above is true.

Looking through the commit log, none of the developers match any known Bitcoin developers at all, neither past nor present. It's hard to know for certain of course since there are many pseudonymous developers in this space.

A large reason might be that drumming up interest in consensus breaking changes is difficult enough as it is, and interest in a completely different codebase with incompatible rules is likely to be even harder.

Re: Will Bitcoin Make a Good Investment?

#86

Post by marcosdumay » Thu, Jul 04, 2019, 9:40 PM UTC

cookingrobot wrote: post #65

thtthings wrote: post #54

Earlier quoted context omitted.

Every asset that produces an Income or has a possibility of producing income in the future is an investment. Everything else is speculation. Buying a commercial property and renting it out is an investment. Buying a house in the hope of selling it for more in the future is not investment. Same goes for Gold, Bitcoin, momentum trading in stocks in not investment. Buying a stock that does not pay dividend but is a real…

By that definition startup investors are speculators not “investors”. That seems like an overly narrow definition of the word, compared to how it’s normally used.

What startups are those that can never produce income? And why are people working on them?

Re: Will Bitcoin Make a Good Investment?

#87

Post by xorcist » Thu, Jul 04, 2019, 9:41 PM UTC

Toine wrote: post #27

zed88 wrote: post #12

Earlier quoted context omitted.

By that logic, gold should be worthless. It isn't. Bitcoin will probably never be a currency equivalent to fiat, but it surely is a store of value in the long term.

> By that logic, gold should be worthless. No, gold is not a currency (anymore). Gold is an asset. Gold is rare. Gold has real world use. Gold can be used for many things. Gold can be purchased with money to be worn or used. So no, by that logic, gold shouldn't be worthless at all. You're comparing two different things.

> No, gold is not a currency

Most people would probably disagree on that. Gold even has an ISO-4217 currency designaton, XAU.

Re: Will Bitcoin Make a Good Investment?

#88

Post by pmiller2 » Thu, Jul 04, 2019, 9:42 PM UTC

sedeki wrote: post #80

pmiller2 wrote: post #23

Earlier quoted context omitted.

It means it’s legal tender for all debts, public and private.

The Zimbabwe government forced everyone to use their currency (Zimbabwe dollar, up until 2008 iirc, pretty sure they still have problems today...). Of course forcing everyone to use this currency created artificial demand for it. However, I don't see why adding "artificial demand" is an argument against bitcoin. EDIT: But sure, if government-backed means they force people to accept the currency, then it will have val…

Having value isn’t a selling point? You’re digging yourself into a hole here.

Re: Will Bitcoin Make a Good Investment?

#89

Post by pmiller2 » Thu, Jul 04, 2019, 9:45 PM UTC

icebraining wrote: post #79

pmiller2 wrote: post #3

Not one word here about why BTC should be worth anything at all. Who cares if someone spent time and electricity to mine it? The USD is, along with every other major, government-backed currency, already an almost 100% digital currency. I don’t see any advantage there. In fact, BTC has the disadvantage of no major government backing it. If nobody is required to accept it, and I can’t do anything with it otherwise, wha…

> Not one word here about why BTC should be worth anything at all. There's no "should". Moral theories about the propriety of the value of currencies are not material. Bitcoin has value because people are willing to trade valuable stuff for it

“Should” is not a moral judgement. Substitute the word “logically,” if you want.

What can you buy with BTC besides drugs and the occasional coffee at a Silicon Valley coffee shop? How does that compare to what you can buy with USD? Call me when you can buy a house with BTC reliably.

Re: Will Bitcoin Make a Good Investment?

#90

Post by ziddoap » Thu, Jul 04, 2019, 9:50 PM UTC

citrablue wrote: post #84

ziddoap wrote: post #49

Earlier quoted context omitted.

The first mover advantage in this case is the fact that early adopters of crypto bought BTC, because BTC was all there was. Now that those people already have BTC, they are less likely to purchase a second coin. For one, they already have money invested in the space. Secondly, BTC has shown that it has staying power - outlasting many altcoins which came after it - which further solidifies BTC as the top contender (fo…

Isn't it just as plausible that early adopters bought BTC because that's all there was, then bought altcoins as they appeared in order to diversify their crypto portfolio? It'd be interesting to find out if there are more investors in "crypto" as a strategy versus BTC specifically.

I mean, of course that's plausible. If I gave the impression that it wasn't, my bad. I was just hoping to clarify to eugeniub why BTC enjoys a first mover advantage, and why first mover advantage has nothing to do with how often "people use it in their everyday lives".

Assuming a limited amount of resources to invest, someone who is already invested in X, is less likely to remove their money from that and invest into Y, unless Y is really good. All things equal, there is no reason to move from X to Y if X came first and you already invested into X.

So, the first mover advantage for BTC is the fact that new coins need not only be equal (in the eyes of the investor) to BTC, but better enough to convince that investor to move out of BTC in favor of that coin. People who are, in addition, buying other alt coins are still solidifying BTC's first mover advantage if they do not remove their investment in BTC in favor of something else.