[thephyber]

> 99.5% can't mine it.

Not relevant. Mining is no longer profitable for any new entrants without some incredible innovation in computing power or electricity costs. Even the miners are unlikely to make money from mining only from holding their mining gains as investments.

> 99% of the world's population can't understand it.

That's underselling the human population. I would posit 10-20% are probably mentally incapable of understanding the basics of modern finance, therefore have no chance at a new form of currency. For all of the rest, they can understand what they need to know to use it.

BitCoin's entire proposal, including the original paper, the source code, millions of different explanations, and millions of different opinions about it are available for free. It's the most anti-elitist form of currency we have come up with. The costs of fiat currencies are hidden: central banks adjusting the money supply in real time at will, transactions aren't all visible to the globe on a single ledger, etc.

I'm not even very bullish on BitCoin. But I don't find it remarkably elitist -- at least no more than previous currencies.

[charlesdm]

I understand how Bitcoin works and I understand how the technology itself is useful and valuable + has some interesting use cases.

However, with the exception of a few use cases e.g. countries with high and/or hyperinflation, what I don't understand is why the currency Bitcoin has any value at all. Frankly, if anything, it still looks more like a massive bubble to me.

Unless you already own Bitcoin, why would I ever consider paying for something through Bitcoin? Why would I ever transfer EUR or USD into Bitcoin?

Then again, maybe I'm missing something here, because gold also does not hold the value it generally trades at. I don't see how it makes sense to hold either gold or Bitcoin.

[jstanley]

If you don't already own USD, why would you ever consider paying for something in USD?

Because the person you're trying to pay only wants USD. And eventually, if you start getting paid in USD, it becomes only natural to pay others in USD.

[charlesdm]

Right. But fiat currency will never disappear in favour of Bitcoin, nor will it be replaced by Bitcoin. Taxes will also have to be paid in fiat, etc.

The comparison is akin to someone in Europe exchanging EUR to USD as an investment, because he's betting on the fx rate. But why would the average European ever need to hold USD? Not that many situations that make sense either.

[jstanley]

I hear what you're saying, but I personally think you're wrong.

I think fiat currency will disappear in favour of bitcoin (or similar), and I think it will happen within only a small number of generations.

It will happen because bitcoin (or similar) is a superior form of money.

[charlesdm]

Maybe. I don’t know. I can see fiat currencies ending up being completely digital within the next 50 years or so, in a continued effort to combat tax evasion.

But I’m pretty sure central banks (or well, the elected politicians behind them) can’t and won’t give up control of their respective currency, because they use it as a way to adjust and regulate the economy.

If you look at what is happening in the Eurozone with the ECB and the previous discussions about Eurobonds, it's a one approach fits all solution, but it doesn't work for all. What is great for Germany sucks for Greece, and that is because goals are not aligned. If you have, say, one "global" cryptocurrency, then I think there are some inherent flaws to that approach.

And if you go the full currency route, you essentially end up with a digital equivalent of fiat?

Look: honestly, I want to believe, but no one has managed to convince me with proper arguments what would drive it to that outcome. Most people that I've met are just excited because they've turned $10k into $1M (or more) and now think they're the best investors in the world.

So, why would it happen? You need to give me more than its a superior form of money. I'm not saying it's not. I just don't see how we can get there from where we are now.

[jstanley]

My theory is that Fiat currencies and their central banks are beneficial only to the state, and not to individuals. And that for any system to be viable in the long-term, it needs to benefit individuals else they won't use it.

1.) To a first approximation, central bank policy consists of creating lots more money, all the time.

That is a bad thing for anybody holding the currency (everyone). Therefore these people (everyone) are incentivised not to hold the currency, and instead to hold a currency that can not be inflated away from them. For example, bitcoin.

2.) We're heading towards a cashless society. If the manifestation of a cashless society is one based on fiat currency, that means every single transaction and all money are subject to surveillance, censorship, and even seizure. By the state and by private companies.

Anybody who doesn't want those things to happen to them (everyone) is therefore incentivised to use a currency which is not subject to those things. For example, bitcoin.

[csuwldcat]

Bitcoin is a store of value that will long-term net-increase as true monetary bubbles, like this: http://imgur.com/a/0ZoDu, pop and cause their base currencies to long-term net-decrease.

[charlesdm]

Aren't you just transferring from one asset (bubble) into another? Holding your wealth in shares of a company is a way to combat that, so is holding real estate and other assets (e.g. IP rights).

Something can't be a reliable store of value if it can drop (or increase) 50-100-200% in a day. That is, in the best case, a speculative instrument.

If I had $50m, why wouldn't I invest it in property rather than in Bitcoin?

[csuwldcat]

Property is subject to bubbles, and in almost any economic recession prices of real estate tend to fall (demand drops, and sellers/supply grows). Bitcoin is a far better asset hedge, as it possesses almost every property of commodities, like gold, without almost all of their negatives.

[charlesdm]

Property is indeed subject to bubbles, but why wouldn't / couldn't Bitcoin be?

Gold is prone to bubbles as well. Personally I'm not a gold bug and I don't really see why (in the current day and age) it still acts as a safe haven asset.

Ultimately, it has little economic use, meaning most of its value is just derived from it "being gold". Land, that I get, that makes total sense. You can't make more, and you definitely can't make more land in good locations. But gold -- that seems very artificial to me as well.

But you're right, if I had to a pick, Bitcoin probably makes more sense over gold.

[the_d00d]

Not to be a pedantic, but I guess I will be. From bitcoin.org

"Bitcoin - with capitalization, is used when describing the concept of Bitcoin, or the entire network itself. e.g. "I was learning about the Bitcoin protocol today." bitcoin - without capitalization, is used to describe bitcoins as a unit of account. e.g. "I sent ten bitcoins today."; it is also often abbreviated BTC or XBT."

[phkahler]

>> Even the miners are unlikely to make money from mining only from holding their mining gains as investments.

And that's why I've been calling it a Ponzi scheme lately. Once mining become unprofitable, or even impossible (asymptotically) people will stop mining, but the blockchain only works if people keep mining. At some point it's got to fail doesn't it?

[tromp]

> Once mining become unprofitable, or even impossible (asymptotically) people will stop mining

It's self-correcting; fewer miners means higher profitability for remaining miners...

[csuwldcat]

False - mining in Bitcoin (which is really just transaction processing) is based on a math/crypto difficulty algo, and the system automatically adjusts itself every ~two weeks to fit the load/prevalence of miners and their block-finding success rates.

[sgnelson]

If nothing else, it requires a computer and a network connection. Yes that may be just a smartphone of some type, but that's something that paper currencies do not require to use. If nothing else, that leaves what, a billionish people* out of Bitcoin?

It certainly is much more elitist than typical currencies if it requires a certain level of capital and knowledge to use.

*Scientific Wild Ass Guess on amount of people in the world lacking a device capable of dealing with bitcoins.

[Taek]

Mining is plenty profitable if you've got access to cheap electricity. I think 7 cents per kWh is low enough to run a decent operation right now, and there are places with 2 cent electricity.