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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

#51

Post by keymone »

weego wrote: post #31
JohnJamesRambo wrote: post #19

Earlier quoted context omitted.

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…

So we've been ravaged by ww3 and our money is useless. How exactly do I still have Internet access and who is running all this infrastructure to allow me to trade crypto with someone? And why are cryptocurrencies, which are also a limited resource that can't be diluted, immune to inflation?

Yeah, because of course it is known that newspapers, radio and tv all disappeared after ww1 and then also after ww2.

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

#52

Post by knocte »

ivalm wrote: post #50
knocte wrote: post #48

Earlier quoted context omitted.

> A lot of why people bought cryptos is in hopes of massive deflation No. Bitcoin is not a get-rich-quick scheme, it's a not-get-poor-slowly scheme. It's mainly protection against inflation, not hope for massive deflation.

You say this, but that's not what drives volume. Most crypto volume is on exchanges, not on the chain, and that's due to speculation.

Finance in general is plagued of this too: most money movements are non-productive asset transfers (investing, buying/selling of businesses, ...; as opposed to salaries and individual end-user purchases). But you will always be able to pinpoint the baseline of bitcoin to its most useful feature: people avoiding the criminal monetary policies of their corrupted governments.

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

#53

Post by keymone »

kd5bjo wrote: post #9

All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all. There must be a central registry of them somewhere. Money as understood by economists is not physical currency (coins, notes, etc), but an emergent property of the institutional use of IOUs of various kinds, like debts and fractional reserves. These also e…

What confidence do you get out of serial numbers and existence of registry if there’s an entity that can freely print few more trillions?

Mtgox was a private enterprise that was managed by incompetent/malicious individuals, why does this always come up in bitcoin discussions? Mtgox is an example why you need to care about owning your money. People who lost money in mtgox didn’t own those money, they gave them away for a promise to have them returned.

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

#54

Post by sedeki »

ivalm wrote: post #46
sedeki wrote: post #44

Earlier quoted context omitted.

Deflation means that aggregate prices go down over time. I am not sure what it means that, as you said, people bought cryptos in the hopes that the dollar prices of bitcoins would ”””deflate”””. But sure, prices go up when demand go up - is this unusual? (Sorry if I came across as arrogant.) On whether deflation is bad for the economy. The standard example of this is the Great Depression, where massive amounts of cre…

You seemed to suggest in GP that one problem with fiat is that it may become deflationary (ie prices for goods in fiat will go down). I pointed out that Bitcoin is by construction deflationary, prices (in bitcoin) for goods go down as long as bitcoin occupies at least a fixed fraction of total exchange tokens. Simple example, if bitcoin is the only exchange token in circulation then bitcoin will become more valuable…

> then bitcoin will become more valuable as a function of time simply because the amount of "stuff" increases.

> The reason deflation is bad is because it discourages investment.

I agree that economies are naturally deflationary because people don't stop working. So what? I think printing money is bad (as opposed to the concept of "inflation" which is an effect) is bad, because it distorts market mechanisms that occurr naturally - I'm talking about (more) efficient capital allocation here.

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

#55

Post by unnouinceput »

My take from the article is that Bitcoin, as cryptocurrency, is a mechanism that can be used to replace fiat money. It will never be because of exactly the reason the article says: there will be a maximum of 21 millions Bitcoin and that's all. And since the current mechanism behind fiat money is inflation (usually you want to have a slow inflation, not a fast Venezuelan one) is what drives people to spend them and create economy - this will never be applied to Bitcoin ever. Hence you get deflation in case of Bitcoin, which drives people to amass them instead of spending and you get in the end the current purpose of Bitcoin -> art like investment.

The only way to make them a currency is, keeping them limited to 21M, is to create some sort of "bleeding" mechanism where you force the owners to spend them (spend or lose) - which will never be implemented.

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

#56

Post by kd5bjo »

knocte wrote: post #17
kd5bjo wrote: post #9

All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all. There must be a central registry of them somewhere. Money as understood by economists is not physical currency (coins, notes, etc), but an emergent property of the institutional use of IOUs of various kinds, like debts and fractional reserves. These also e…

> These also exist in the bitcoin world, and have already caused problems— How long did MtGox operate without reserves? Exchanges are not part of the bitcoin world, they are bridges to it. Longer version of the above remark: what bitcoin is truly about is financial sovereignty, or, to put it in more layman's terms, lack of counterparty risk. The bitcoins held in a bitcoin exchange are mismanaged funds, you should nev…

I’m less concerned with philosophy and how people “should” be managing their assets than I am observing what people actually choose to do. The exchanges exist, their actions affect the value of bitcoin, and the value of bitcoin affects them. Therefore, any analysis of the bitcoin ecosystem must take them into account in one way or another.

Similarly, there’s no fundamental barrier to promising to pay someone bitcoins later that you don’t currently possess. That’s the seed of a credit-based economy, and also the piece of the fiat system that makes things so complicated. It is disingenuous to make a comparison that includes this complexity on one side but not the other without giving justification.

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

#57

Post by deweller »

kd5bjo wrote: post #9

All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all. There must be a central registry of them somewhere. Money as understood by economists is not physical currency (coins, notes, etc), but an emergent property of the institutional use of IOUs of various kinds, like debts and fractional reserves. These also e…

Every greenback may be registered. But physical currency is only a small amount of the actual circulating money supply.

Due to fractional reserve banking, banks lend money they don't have. Banks are only required to have 10% of the money they loan on reserve.

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

#58

Post by kd5bjo »

deweller wrote: post #57
kd5bjo wrote: post #9

All of the author’s core questions can be answered just as well for coins and notes as they can for bitcoin— Every greenback has a unique serial number, after all. There must be a central registry of them somewhere. Money as understood by economists is not physical currency (coins, notes, etc), but an emergent property of the institutional use of IOUs of various kinds, like debts and fractional reserves. These also e…

Every greenback may be registered. But physical currency is only a small amount of the actual circulating money supply. Due to fractional reserve banking, banks lend money they don't have. Banks are only required to have 10% of the money they loan on reserve.

You loan currency to a bank in the form of deposits, they keep some of that on premises due to the reserve requirement and loan out the rest to their other customers. In exchange for letting the bank use your money, you get insurance and a tiny interest payment.

Other than it being too young and inconsequential for people to bother, what property does bitcoin have that works against this scheme? Banks have worked this way since long before modern fiat currencies were developed, and they’ve always increased the money supply without minting new coinage. Whether it’s gold bullion, federal reserve notes, or bitcoin keys in their vaults doesn’t seem to make much difference.

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

#59

Post by knocte »

kd5bjo wrote: post #56
knocte wrote: post #17

Earlier quoted context omitted.

> These also exist in the bitcoin world, and have already caused problems— How long did MtGox operate without reserves? Exchanges are not part of the bitcoin world, they are bridges to it. Longer version of the above remark: what bitcoin is truly about is financial sovereignty, or, to put it in more layman's terms, lack of counterparty risk. The bitcoins held in a bitcoin exchange are mismanaged funds, you should nev…

I’m less concerned with philosophy and how people “should” be managing their assets than I am observing what people actually choose to do. The exchanges exist, their actions affect the value of bitcoin, and the value of bitcoin affects them. Therefore, any analysis of the bitcoin ecosystem must take them into account in one way or another. Similarly, there’s no fundamental barrier to promising to pay someone bitcoins…

It's no longer "philosophy" but education and awareness. The longer bitcoin exists, the more custodial exchanges get hacked and consequentially the better knowledgeable bitcoin users we will have.

You cannot bring points against bitcoin which actually happen more in centralization-backed entities than in decentralized scenarios.

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

#60

Post by kd5bjo »

knocte wrote: post #59
kd5bjo wrote: post #56

Earlier quoted context omitted.

I’m less concerned with philosophy and how people “should” be managing their assets than I am observing what people actually choose to do. The exchanges exist, their actions affect the value of bitcoin, and the value of bitcoin affects them. Therefore, any analysis of the bitcoin ecosystem must take them into account in one way or another. Similarly, there’s no fundamental barrier to promising to pay someone bitcoins…

It's no longer "philosophy" but education and awareness. The longer bitcoin exists, the more custodial exchanges get hacked and consequentially the better knowledgeable bitcoin users we will have. You cannot bring points against bitcoin which actually happen more in centralization-backed entities than in decentralized scenarios.

There are plenty of examples of bank runs and other crises pre-regulation and pre-fiat currency, dating all the way back to the 1600s— that’s about as decentralized as you can get. If you want to argue that there’s something fundamentally different this time around, that’s fine, but I’d appreciate evidence rather than assertions.

In fact, the least problematic time in terms of bank runs appears to be the years of the highly-centralized Bretton-Woods system post-WW2 (1).

It’s also not like holding bitcoins yourself is entirely risk-free. You can accidentally expose your private key and have your money stolen or you can lose your private key and have it locked away forever. Either scenario means you no longer get to use your money, and any defense against one makes the other more likely; it’s a difficult balance to ask people to get right.

(1) https://en.m.wikipedia.org/wiki/Bretton_Woods_system

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