[noncoml]

> its a bad _currency_

The problems that I see are:

1. There is a finite number of bitcoins, which means you can never have inflation, or in other words the bitcoin price is only going up tomorrow. So it doesn't make sense for people to spend it.

2. Mining. It costs a lot to mine a bitcoin. Imagine if the US government had to spend 1 billion worth of energy to print 1 billion dollars.

I think Bitcoin was designed to be analogous to gold. We stopped using gold as currency many years ago.

But then again, I know little about economics and finance, so don't take my word for it.

[dpc_pw]

> or in other words the bitcoin price is only going up tomorrow. So it doesn't make sense for people to spend it.

Yes. That's why I've never bought a computer - next year there will be a faster and cheaper one on the market. And that's why people regularly starved before fiat currencies were introduced. They were just hoping they can buy more food tomorrow for the same money.

People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.

Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.

[noncoml]

> Yes. That's why I've never bought a computer - next year there will be a faster and cheaper one on the market. And that's why people regularly starved before fiat currencies were introduced. They were just hoping they can buy more food tomorrow for the same money.

> People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.

> Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.

This of it like this: You have a currency that is giving a return of 3% per year. Why would someone risk their money investing in existing or new businesses/ventures?

[dpc_pw]

Because, after factoring-in the business risk, the expected return is 5%, and 5 is bigger than 3.

Or 10%, or 20%. Eventually, some business opportunities are better than sitting on a pile of cash.

[jhanschoo]

You're adopting the micro perspective to a macro problem of a finite supply of coins.

Finite supply means that on average, net coin-profit of a business is zero coins. With such poor odds, why should someone go into business? Inflation incentivizes investment since you know that on average, a business opportunity has better ROI than saving.

[dpc_pw]

If you can produce 3BTC worth of goods using 2BTC, then people will pay you 3BTC.

Your doubts are based on the assumption, that somehow "there would be not enough money", which is simply not true. During the process of producing and trading goods money are not destroyed. They are just changing hands. There is always enough money in the economy.

[parenthephobia]

> That's why I've never bought a computer - next year there will be a faster and cheaper one on the market.

Computers are practically useful. If you buy a computer now instead of waiting, it's because the the cost of not buying it later is outweighed by the utility of having it now.

The spending of Bitcoins has no inherent practical value. So long as you believe the value of Bitcoins will go up more than your local fiat currency, the rational thing is to keep the Bitcoins and spend your fiat, unless your Bitcoins are the only money you have.

[Clubber]

One of the main reasons we got off the gold standard is in fact the scarcity of it was a shackle. Imagine if, say China decided to hoard gold, how much of an influence that artificial scarcity would have on all the other economies that could only value things in gold?

The US has 75% of all the world's reserves.

http://www.usfunds.com/investor-library/frank-talk/top-10-co...

Also, there is finite value in the total amount of gold available, so at a point, there is no room for growth. If there is say 1 billion worth of gold on Earth, the value per weight of gold would go through the roof. buying everyday items would be valued in specs of gold (or 18ths of specs). It's probably really easy to lose a spec of gold.

Finally, without inflation, it doesn't make financial sense to buy anything. Why buy a truck for 1oz of gold today when I could buy two for the same amount next year?

[primrose]

> Why buy a truck for 1oz of gold today when I could buy two for the same amount next year?

Because someone needs a truck now. Deflation makes people more fiscally responsible, not less.

[Clubber]

Right, but in economies, that's a bad thing. (less spending, less demand, fewer jobs, repeat, downward spiral, economic collapse).

[noncoml]

You are both saying the same thing. You only buy a truck today if you absolutely need it.

[adventured]

> or in other words the bitcoin price is only going up tomorrow

That depends on both it remaining valuable technologically and in terms of adoption, neither of which will sustain over time. Bitcoin will die due to replacement if nothing else, the market will innovate until Bitcoin is worthless. It's AltaVista.

It makes sense for people to spend it if: 1) there is actually a bubble and the average value for Bitcoin over the coming years is lower; or 2) if Bitcoin is going to get replaced in the next 3 to 5 years and this general time frame is the highest Bitcoin will ever be.

In the best case scenario it may take a decade to reclaim whatever high Bitcoin puts in during this mania phase. That's typical of bubble pricing, even the things that have legitimate value often take many years to again reach their former high valuations. That's if it doesn't get supplanted in the meantime.

[tootie]

The political/economic climate around the time bitcoin caught on was also the Ron Paul/Austrian economics fad. They were calling the end of the USD and fiat currencies because central banks were risking hyperinflation. Lots of people were calling for a return to gold. BTC seemed even better. I think it's safe to say they were completely wrong about everything and orthodoxy won the day.

[AznHisoka]

Weird, is Austrian economics a fad? I always thought it was a legitimate, alternative model of economics that was just as valid (if not more) as Keynesian.

[sprafa]

Both the Keynesian and the Austrian models have been shown to be flawed and incomplete understandings (from what I understand of it). They can explain some things, but they break down, and in those breakdowns we had crises - keynesian thinking was abandoned after the 70s crisis, and now monetarism is being (slowly and reluctantly) abandoned after 2008.

I find that the assumptions on both models, that humans can measure and act according to their own preferences, might be one of the core issues with economics today. In fact if you keep to that idea economics is more of a religion than fact. There's very little evidence that humans act rationally in economic situations. There's accumulating evidence they don't. Economics makes more sense if you come at it from psychology from my view: humans are irrational and so are markets. Rational thinking is the exception, not the norm (might be an odd idea for the HN audience, but think about everyone else...)

[tootie]

No. Austrian economics has virtually zero support in mainstream academia or industry. You won't more than a handful of people who manage money for a living who think Austrian school is sensible. Keynesianism as Keynes wrote it is full of holes, but is the biggest contributor to modern economic thought. Good writeup on reddit a few years ago:

https://www.reddit.com/r/Economics/comments/ip2nb/know_your_...

[jeffbax]

This is a pretty shortsighted view of things. The various economic theories all have their insights and shortfalls… and there's no one theory to rule them all.

Recommended: Marginal Revolution's "Game of Theories" https://www.youtube.com/watch?v=cYNVB5iqydk&list=PL-uRhZ_p-B...

To call Austrian economics as something with zero support in mainstream academia or industry is really just revealing your own biases more than anything.

[AznHisoka]

"a handful of people who manage money for a living "

Half of those people don't even perform better than an index fund, so let's not put them in some sort of pedestal...

[ufo]

The Austrian school most certainly does not align with modern mainstream economics.

[C14L]

Bitcoin was a "first iteration" of digital currency. It has shown some problems. It started by allowing you to send money fast and cheap to other parties. That advantage is gone for Bitcoin. Transaction costs are huge now, and it can take hours for a transaction to get confirmations.

But there are many other digital currencies that try to solve those and other problems. Even currencies that implement the Distributed Ledger without the Blockchain, where no "Mining" is required for the network to function, and therefore no large energy requirements and no cost for transactions.

We are still at the beginning of the technology.

[CryptoPunk]

>>But there are many other digital currencies that try to solve those and other problems. Even currencies that implement the Distributed Ledger without the Blockchain, where no "Mining" is required for the network to function, and therefore no large energy requirements and no cost for transactions.

Most of these get rid of Proof of Work and blockchain-based distributed consensus without replacing them with any other automated and distributed method of establishing consensus.

For example, Ripple, Stellar, NEO, IOTA and EOS rely on trusted third parties to run all consensus nodes, which makes them effectively centralized, and destines them to becoming permissioned ledgers that must heed the censorship laws of any number of powerful nation-states (e.g. capital controls imposed by the Chinese government).

That makes them more similar to Venmo and PayPal than cryptocurrency.

The concept of a neutral global platform for censorship proof financial coordination is revolutionary. While Bitcoin has been effectively sabotaged with its hyper-conservative anti-adoption development roadmap, successor chains like Bitcoin Cash or most likely Ethereum could pick up the mantle and fulfil its original promise.

[lamontcg]

> 1. There is a finite number of bitcoins, which means you can never have inflation, or in other words the bitcoin price is only going up tomorrow.

It takes both supply and demand to create a price.

If demand evaporates then the price can crater even though the supply remains constant.