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You don't understand money – and it's a good thing for Bitcoin

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Re: You don't understand money – and it's a good thing for Bitcoin

#21

Post by joe_the_user »

Tomte wrote: post #8

> Take the questions we mentioned above, and apply them to Bitcoin: Sure, you can easily answer cherry-picked questions about Bitcoin. But the important thing is: nobody in his day-to-day life needs to know these answers about real money, nor have they ever wondered about it. I can buy groceries just fine with my Euros, without wondering how exactly it has been created. Just as I wouldn't tailor my own paragliding ch…

> "I can buy groceries just fine with my Euros, without wondering how exactly it has been created."

If literally all you know about money is that it is a token that lets you buy stuff at the grocery store, here is trwhat you don't know - how long is that situation going to hold up.

> "Just as I wouldn't tailor my own paragliding chute, because otherwise companies could rip me off."

I wouldn't try to sew a normal parachute let alone a paragliding chute. But one thing I know about safety-critical pieces of nylon or related things is that wear and tear is visible. A moderate rip, hole, tear in material, an engine that coughs, a tire that's deformed, all this stuff is a clue that there are problems ahead.

What signs tell you when there's problem in the relationship between your tokens and the grocery store? That's where a bit more understanding of money is useful. And, as the OP say, that understanding is difficult, actually (edit: tbh, that's literally the only worthwhile point in an otherwise terrible article).

Re: You don't understand money – and it's a good thing for Bitcoin

#22

Post by mrmonkeyman »

JohnJamesRambo wrote: post #19
knocte wrote: post #16

Earlier quoted context omitted.

Or a Venezuelan.

Or German Marks when they were worthless after WWI and bundled in huge stacks. I feel like people in “developed” countries think “this couldn’t happen to me” when time has shown us time and time again it certainly can and you will be powerless to the whims of your government. Our original poster feels the same false safety in his or her Euros. They have developed amnesia to the lessons of the recent past. Bitcoin can…

I need 10 bitcoins to buy some property, how do I procure these? Credit. This contract itself will be traded, etc. And so it begins.

I fail to see how "crypto" plays any part in this credit system whatsoever. It's not the actual number that is hard to trace to its origin, it is the system itself, which can be easily recreated with crypto - to hammer the point home.

Edit: Now I think of it. It will in fact be easier to create an immensely complex system out of crypto. It is inheritantly better suited for ridiculously complex digital ruth goldberg type shenanigans. Especially with the smart contracts.

Re: You don't understand money – and it's a good thing for Bitcoin

#23

Post by Guthur »

JohnJamesRambo wrote: post #19
knocte wrote: post #16

Earlier quoted context omitted.

Or a Venezuelan.

Or German Marks when they were worthless after WWI and bundled in huge stacks. I feel like people in “developed” countries think “this couldn’t happen to me” when time has shown us time and time again it certainly can and you will be powerless to the whims of your government. Our original poster feels the same false safety in his or her Euros. They have developed amnesia to the lessons of the recent past. Bitcoin can…

I doubt the ultra rich are keeping significant portions of their wealth in money markets.

Re: You don't understand money – and it's a good thing for Bitcoin

#24

Post by not2b »

This article couldn't be more wrong-headed. The author seems to think that a fixed amount of money, or a money limited by the amount of some arbitrary commodity (like gold) is a good thing. But the gold standard was a disaster, and caused the American economy to explode every 15 to 20 years, complete with bank collapses and widespread hunger, or rampant inflation when a new gold rush occurred. A Bitcoin-based economy would have massive deflation, which would mean that nothing you could spend Bitcoin on, and keep, would be worth as much as just holding your Bitcoin, so people would be reluctant to invest in anything.

Central banks manage the money supply to be reasonably stable. Yes, bank loans create money, and the central banks regulate this process so neither inflation nor unemployment can get out of hand. This process offends libertarians who seem to think that a completely free system could work better, but it can't: you need a mechanism to keep the money supply roughly proportional to the size of an economy, and blockchain can't do that.

Re: You don't understand money – and it's a good thing for Bitcoin

#25

Post by not2b »

joe_the_user wrote: post #21
Tomte wrote: post #8

> Take the questions we mentioned above, and apply them to Bitcoin: Sure, you can easily answer cherry-picked questions about Bitcoin. But the important thing is: nobody in his day-to-day life needs to know these answers about real money, nor have they ever wondered about it. I can buy groceries just fine with my Euros, without wondering how exactly it has been created. Just as I wouldn't tailor my own paragliding ch…

> "I can buy groceries just fine with my Euros, without wondering how exactly it has been created." If literally all you know about money is that it is a token that lets you buy stuff at the grocery store, here is trwhat you don't know - how long is that situation going to hold up. > "Just as I wouldn't tailor my own paragliding chute, because otherwise companies could rip me off." I wouldn't try to sew a normal para…

The situation will hold up much longer than any cryptocurrency will hold a stable value as compared to the price of basic things like food, clothing, and shelter. If your money is subject to wild swings in value, you can't make plans. It then works more like a highly volatile stock.

Re: You don't understand money – and it's a good thing for Bitcoin

#26

Post by School-Cotton »

JohnJamesRambo wrote: post #19
knocte wrote: post #16

Earlier quoted context omitted.

Or a Venezuelan.

Or German Marks when they were worthless after WWI and bundled in huge stacks. I feel like people in “developed” countries think “this couldn’t happen to me” when time has shown us time and time again it certainly can and you will be powerless to the whims of your government. Our original poster feels the same false safety in his or her Euros. They have developed amnesia to the lessons of the recent past. Bitcoin can…

This is a good reason to buy physical gold and bury it somewhere. I'm not convinced it's a good reason to buy Bitcoin.

Re: You don't understand money – and it's a good thing for Bitcoin

#27

Post by JauntyHatAngle »

dagenix wrote: post #11

> crypto-currencies are simple and transparent. beg pardon?

I'm not saying you're wrong, but can you please state why this is a statement you find wrong?

There are so many levels to crypto, and my head is a bit too much in the crypto world that I can see a ton of reasons why this statement is correct. I can also see why it can be considered incorrect. What are the parts you take issue with?

Re: You don't understand money – and it's a good thing for Bitcoin

#28

Post by nullc »

skybrian wrote: post #14
dpc_pw wrote: post #6

Money is simple. Credit is complicated. And if Bitcoin is going to succeed lending Bitcoin will be normal and lead to similar behavior as in the gold standard.

I guess you could say that goldsmiths pretending they have more gold than they really do is kinda similar to cryptocurrency exchanges doing the same.

However-- for Bitcoin and essentially no other valuable asset before it, it's perfectly reasonable for an exchange to continuously prove that every bitcoin in your account is uniquely backed by coins that they control.

No major exchange bothers to do it right now because the market doesn't demand it and any exchange that did would hurt themselves by causing their customers to care about the risk of insolvency. If you make the customer worry about solvency they won't necessarily be placated by the protocol that proves they're (bitcoin) solvent, so you're better off not raising the issue.

It's unfortunate because this is one of the areas where Bitcoin has a significant advantage over most other valuable assets.

Re: You don't understand money – and it's a good thing for Bitcoin

#29

Post by not2b »

r32a_ wrote: post #13

Bitcoin is a multi faceted beast like nothing else. It is a cross between computer science/cryptography, governance/game theory and economics. In my opinion the economics of bitcoin is the core, which is kept in balance and managed with game theory and decentralised governance and it is created with computer science and cryptography. In order to truly understand what Bitcoin is then you need to fully grasp all these…

It is a clever hack, but it can never work as money. The money supply needs to roughly match the size of the economy. If there is too much of it, you have inflation. If there is too little of it, you have deflation, which in many ways is worse. With Bitcoin you have too little of it, because the total amount is limited, and that limit is smaller than economic growth is. That's why Bitcoin's price as compared to major currencies has soared. But people who used Bitcoin years ago to buy pizza feel really stupid because if they had held on to it, they would be much wealthier today. When it works that way, it isn't money. It's a mathematically interesting investment vehicle, perhaps.

Re: You don't understand money – and it's a good thing for Bitcoin

#30

Post by ivalm »

joe_the_user wrote: post #21
Tomte wrote: post #8

> Take the questions we mentioned above, and apply them to Bitcoin: Sure, you can easily answer cherry-picked questions about Bitcoin. But the important thing is: nobody in his day-to-day life needs to know these answers about real money, nor have they ever wondered about it. I can buy groceries just fine with my Euros, without wondering how exactly it has been created. Just as I wouldn't tailor my own paragliding ch…

> "I can buy groceries just fine with my Euros, without wondering how exactly it has been created." If literally all you know about money is that it is a token that lets you buy stuff at the grocery store, here is trwhat you don't know - how long is that situation going to hold up. > "Just as I wouldn't tailor my own paragliding chute, because otherwise companies could rip me off." I wouldn't try to sew a normal para…

> how long is that situation going to hold up.

But you don't actually need to know the internals in order to know how long it will hold up.

You can black box update your probability of fiat currency holding up every month that fiat currency doesn't crash (let's define it as "lose 50% of its value"). In fact, by this metric it's pretty clear that fiat currency probability of holding up is much better then that of most (and all major) cryptos.

If anything, a lot of what ML/data science/quantitative finance has shown us is that hand constructed explanations made by experts typically have bad predictive power and statistical estimates typically have ok predictive power. For things related to money I would trust data over any expert mechanistic explanation.

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