Bitcoin is still early

[jacoavlu]

okay I will bite:

- I have heard that L2s such as Lightning and Liquid are more centralized. Not only that, but I believe Liquid is centralized and private! Is this true? If so, how do you reconcile this with the ethos behind bitcoin?

- While its true that Bitcoin network is the most decentralized, the mining nodes are not - it is heavily centralized and consolidated amongst just a few miners.

- Similarly, whales control a sizable portion of the bitcoin in circulation - it does not ameliorate wealth inequality, but exacerbates it. The graph posted above by ND kinda makes my point: there are fewer humpbacks, but more whales, sharks, dolphins. It's sorta analogous to saying there are less billionaries but more deca and centi-millionaires. Doesn't really help the masses vis-a-vis income inequality.

liquid is certainly more centralized, its a federation model so there are definitely tradeoffs, but different than other blockchains that allow similar functionality to liquid, liquid uses bitcoin and so shares the monetary policy of bitcoin with known supply and issuance schedule. I personally have never used or felt a need to use liquid. I don't think there's a lot of activity on liquid as of now.

lightning also has tradeoffs and has some growing to do in a number of ways. but again it uses bitcoin so at least it's built upon a solid monetary foundation.

as far as centralization of miners, well that's subjective but I would disagree with your statement. graphic below of recent estimation of miner distribution. Understand also that among pools are many different participants of different scales and geographically distributed and they can choose to move pools if they like. I mine with slush who as of today reports about 18k active users and 180k active "workers" which can be one or a group of asics. I could move pools right now if I wanted.

and as far as wealth inequality in bitcoin, I think the graphic above shows an improving trend over time. Which direction is wealth distribution in the US trending? Something like the bottom 50% of people hold less than 5% of the wealth, just a few rich people own more wealth than that entire bottom 50%, and the top 10% hold something like 70% of the wealth.

and also different, in the US the ultra rich obviously can exert a lot of influence toward their own benefit. Bitcoin doesn't work this way.

[NapoleanDynamite]

You are partly correct that US will not retain its global currency hegemony forever - all empires crumble someday. It's even possible that there is a developing new world order already in progress.

BUT: we will never go back to the gold standard. It was abandoned due to its volatility, limitations it placed on govt, particularly in recessions where it hindered expansionist monetary policies. It was a short-lived experiment in world history, never to be replicated again.

"A true international gold standard existed for less than 50 years—from 1871 to 1914—in a time of world peace and prosperity that coincided with a dramatic increase in the supply of gold. The gold standard was the symptom and not the cause of this peace and prosperity."

Re: bitcoin - It would be very far-fetched to think that a new currency could arise that is not accepted by any major country to pay taxes. Without this crucial prerequisite, it is impossible for any currency to be replaced. The best bet for bitcoin going forward is a potential store of value to supersede gold potentially.

I also agree that a return to the Gold standard is highly unlikely. But I wouldn't say "never"....China and Russia have been hording gold for the past 10 years. The US may not have a say in the matter. There are scenarios that exist where this in fact occurs.

I disagree with your assertion that the "best bet for bitcoin going forward is a potential store of value". Bitcoin being used only as a store of value is one possible outcome. But it is definitely not the only outcome. I think it is highly likely at some point (I have no clue on the time frame here) that Bitcoin will not only be used as a store of value, but also a unit of account and medium of exchange. Globally this outcome actually makes the most sense. At some point it will be a forced adoption in the US and other developed countries. Technically it already acts as a SOV, UOA and MOE right now. But the only one that is significant enough right now is Store of Value. UOA and MOE are fractional parts of its market cap at this point so people ignore them.

Jaco - As for your list of FUD, you forgot "But muh Roads" - the taxes argument that Xray rehashes in the above quote.

[xraygoggles]

It's not really fud though - it's how our currencies currently operate.

To really dumb it down as to why the US dollar has value:

1) US govt has a monopoly of force.
2) US govt forces citizens to pay taxes.
3) US govt only accepts US dollar as payment.

That, in a nutshell, is why the dollar has value. How would bitcoin ever become a global currency, if no state accepts it for taxes?

[jacoavlu]

It's not really fud though - it's how our currencies currently operate.

To really dumb it down as to why the US dollar has value:

1) US govt has a monopoly of force.
2) US govt forces citizens to pay taxes.
3) US govt only accepts US dollar as payment.

That, in a nutshell, is why the dollar has value. How would bitcoin ever become a global currency, if no state accepts it for taxes?

really it just boils down to monopoly on violence. That’s how they can enforce 2 and 3

how does any currency ever fail?

[chucki]

It's not really fud though - it's how our currencies currently operate.

To really dumb it down as to why the US dollar has value:

1) US govt has a monopoly of force.
2) US govt forces citizens to pay taxes.
3) US govt only accepts US dollar as payment.

That, in a nutshell, is why the dollar has value. How would bitcoin ever become a global currency, if no state accepts it for taxes?

Bitcoin is global money. Takes the state out of the equation, to an extent. The currency (for medium of exchange and unit of account purposes) will likely remain the dollar in the USA for a long time. The dollar is the best fiat in the world but I don't think CCP or Putin want to keep playing ball with it forever (and won't have to as the USA has likely passed its apex as a hegemonic superpower). Therefore, BTC will likely replace the petrodollar as the global reserve currency. The USA may eventually not have a choice in what it accepts for global settlement, especially from the stronger independent states out of IMF control. Mind you, this is probably a long ways off.

[pitt1166]

with the global decline of democracies and rise of autocrats, what happens if more countries simply ban crypto like china recently did?

[jacoavlu]

with the global decline of democracies and rise of autocrats, what happens if more countries simply ban crypto like china recently did?

China has banned bitcoin like 15 times. There’s still a lot of bitcoin activity in China.

[Otolith]

Whats the argument that Bitcoin is better long term investment than say VTI?

[Nysoz]

I’m guessing that vti is just a fine investment. No issues for average risk and average gains.

With btc, depending on your view, has the potential for outsized gains for the risk.

So risk adjusted could be a better investment. But it really depends on your viewpoint and where you see it going.

[NapoleanDynamite]

with the global decline of democracies and rise of autocrats, what happens if more countries simply ban crypto like china recently did?

Geographic Arbitrage.

However, as I mentioned above, if the EU, Russia, China and the US all decided to regulate/"ban" its use case then it would hamper adoption/progression of BTC. The chance of all of these countries/areas agreeing upon such a thing is zero in my opinion and exceedingly remote at best.

At this point given the amount of $ and businesses that currently hold and use BTC, a US ban would be fought with lawsuits which would likely be overturned by the Supreme Court based on the first amendment of the Constitution. Bitcoin is just code/ledger. Banning it would require banning Free Speech.


Another funny thing to me is that anyone that owns VTSMX or VTSAX technically owns Bitcoin at this point. VTSMX owns approx 2% of MSTR and VTSAX owns about 2% of TSLA. Both have a large amount of Bitcoin on their balance sheets. I made the statement earlier in this thread that WCI likely owns Bitcoin and everyone pushed back on that concept. At the time it was likely true....now it is definitely true.

[NapoleanDynamite]

It's not really fud though - it's how our currencies currently operate.

To really dumb it down as to why the US dollar has value:

1) US govt has a monopoly of force.
2) US govt forces citizens to pay taxes.
3) US govt only accepts US dollar as payment.

That, in a nutshell, is why the dollar has value. How would bitcoin ever become a global currency, if no state accepts it for taxes?

There already is one state that accepts it for taxes. There will be more....gradually, then suddenly. By 2035 my bet is that the vast majority of countries accept BTC as legal tender. They are financially motivated to do so.

Sound money doesn't need to be backed by anything. It only needs to be inherently superior. From a global perspective Bitcoin is inherently superior to the dollar. There are only 330 million American Citizens vs about 8 Billion global citizens. That means about 7.5 Billion people are motivated to use a superior money (whether they know it yet or not) that is not controlled by the US govt.

[Lordosis]

Sound money needs to be accepted by the person you are doing business with. If someone offered me bitcoin as a form of payment I would not accept. Nor would I accept gold or chickens.

Depending on the person/situation I might not accept a check

[NapoleanDynamite]

Sound money needs to be accepted by the person you are doing business with. If someone offered me bitcoin as a form of payment I would not accept. Nor would I accept gold or chickens.

Depending on the person/situation I might not accept a check

Patience young grasshopper. If you live long enough, you will not only accept Bitcoin, but you will prefer it.

And I'm sure if I offered you enough gold for payment you would accept it right now. A metophorical example: you want to get paid for mowing my lawn. But I am unable/unwilling to pay you in dollars. Instead I offer to pay you with a 1 Oz gold bar. Now, you realize that accepting a 1 Oz gold bar creates a lot of extra work for you if you actually need to use the money for which you are being paid. So you decide instead of being paid 50 dollars for mowing my lawn, you should be paid 150 dollars for the extra work. But I am offering to pay you 1 Oz of gold which you know you can exchange for approx $1700. Even if you go to a pawn shop you could quickly get $500 for it with minimal extra work. I'm pretty sure you would accept the gold bar. Just sayin.

In the example of Bitcoin, if someone offered to pay me 1 Bitcoin for my surgical procedure that might normally cost them $5000, your darn straight I would find a way to accept that bitcoin.

So getting people to accept something has more to do with the terms of the agreement. I understand that negotiating terms does not make a money better. Right now it is not universally better as a MOE....but it will be.

[chucki]

Sound money doesn't need to act as a MOE. SOV alone is an adequate function.

[chucki]

There already is one state that accepts it for taxes. There will be more....gradually, then suddenly. By 2035 my bet is that the vast majority of countries accept BTC as legal tender. They are financially motivated to do so.

Sound money doesn't need to be backed by anything. It only needs to be inherently superior. From a global perspective Bitcoin is inherently superior to the dollar. There are only 330 million American Citizens vs about 8 Billion global citizens. That means about 7.5 Billion people are motivated to use a superior money (whether they know it yet or not) that is not controlled by the US govt.

Excellent point. A lot of people ask what bitcoin is backed by as an argument against it. The things that need backing are fiat currencies. At one point, most fiat including the dollar was backed by silver or gold (gold won out over time, being much harder). The dollar is no longer backed by sound money (gold) and is now supposedly backed by the "full faith and credit of the American government." Well, 7 trillion dollars magically appear in the system as the money printer goes Brrr...devaluing your hard earned dollars. Are your dollars really backed by what you thought?

We are conditioned into thinking that money needs backing. But as Napolean says, bitcoin doesn't need backing -- it is inherently superior. But if you really want to get in the weeds, it is backed by math. It is backed by an army of miners harvesting digital energy, controlled by thousands of decentralized nodes, all to enforce a fixed supply. The code is truly a thing of beauty.