[leereeves]

Another way of saying "gold-like asset" or "store of value" is that Bitcoin codifies wealth inequality in an algorithm with a rigidity similar to physical assets, creating mathematical obstacles to block democratic attempts at redistribution away from an elite class of early adopters. Thus "protecting wealth" from the rest of humanity.

However profitable, useful, or entertaining one might find that as a fringe commodity, it's an atrocious basis for an economic system that would ultimately lead to depression, then war, just as money tied to the gold standard did a hundred years ago.

Money was detached from the gold standard almost everywhere in the world for excellent reasons. Recreating money with properties similar to gold would be a step backwards.

[samvher]

This is one part that I feel doesn't get talked about enough. A future where people move to bitcoin does extremely weird things to wealth distribution, where wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else. I don't see how such a dissociation between wealth and effort/value/productivity could ever do good things for a society.

I'm also confused about how people think and talk about the market cap. My sense is that the total economic value of bitcoin holders can't be much more than what they have collectively put in as dollars minus what was spent on mining, which is only a fraction of the market cap. If it's more you get a weird kind of inflation where it's not a central bank printing money, but where "value" seems to spring out of thin air just because the masses are attracted to bitcoin (with FOMO as the main reason).

I can't quite wrap my head around all of this. I've been interested in blockchain for quite a while and have been keeping up with what's going on, but many things about the cryptocurrency market just don't make fundamental sense to me. (Another example - Ether basically being the denomination for transaction prices on the Ethereum network, meaning the higher it's priced, the less useful the network is, which seems like a conflict.)

I'll keep paying attention and see if I can learn a thing or two about real world (irrational?) economics.

[Sargos]

>wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else

This isn't any different from other periods of great change in the past. A good chunk of the wealthy in the world are made up of those early to the industrial revolution, computer revolution, and internet revolution. This is just another step.

Eventually people will stop being early to Bitcoin and things will just be "normal" again until the next big change comes along.

[leereeves]

The industrial revolution, computer revolution, and internet revolution brought real value to everyone's lives. Even people who didn't own Netscape or Google stock benefit from the Internet.

Who would benefit from a Bitcoin revolution, other than early adopters?

Ransomware authors, perhaps.

[Sargos]

This comment feels eerily like what people said at the beginning of the internet. It's useless and hard and doesn't do anything we can't already do. "I already have a radio". https://www.youtube.com/watch?v=gipL_CEw-fk

If you can't understand the value of cryptocurrencies that doesn't mean they are valueless. It'll be easier and more obvious to notice as these systems mature.

[leereeves]

Also what people said about every fad that disappeared.

You didn't provide any examples of why someone might use it. And from what I see, the only hype about Bitcoin is its price.

Edit: Thank you both for the examples below. Please note that I am specifically talking about Bitcoin here. I didn't say, nor mean, that blockchain was a technology without potential, and the fact that none of the examples (as of now) show value in Bitcoin only strengthens my case, I think.

I suspect there are many cryptocurrencies to which my criticisms of Bitcoin don't apply, but those aren't the currencies under discussion in a thread about "What I Think of Bitcoin".

[samvher]

Honestly Ethereum tech does get me quite interested. The idea of being able to create custom ledgers with tokens on the chain for bookkeeping that's maintained by an independent third party seems useful, as does the idea of smart contracts (dynamically & automatically executed transactions based on pre-defined conditions).

That would put the value of Ether at the value of being able to make transactions though - and at the moment transactions are clearly way too expensive for it to be particularly useful. The only value from these high transaction prices is extreme replication (many miners confirming the transaction) but I don't think anyone cares much about that level of security.

A heavily digitized financial system can also allow micro-transactions that can enable new things, e.g. to give a random example it would become much easier to pay $0.005 for every action you take on a website which could create entirely new business opportunities.

Edit to add - One way that I can imagine this developing is that "regular" currencies start moving their currencies onto a blockchain like Ethereum. I think that would make a lot of sense from a technology perspective and it would avoid the oddities I mentioned above (about wealth being mostly related to time of currency adoption). At that point the price of Ether would really just have to go to the value of making transactions and that doesn't make it look like a buy currently (at all).

[Sargos]

I know this is a Bitcoin article as it involves people very new and ancillary to the space but most people in this ecosystem work on Ethereum as it's where most things are happening so I'll use this as my starting point. A good and respectable source is https://consensys.net/blockchain-use-cases/

Blockchains have lots of use cases that various groups find important. Most people only know about money (e.g. Bitcoin) and that's not super useful for first worlders like us but is actually a necessity for a large portion of the world from third world and oppressive countries like Venezuela, Iran, etc. Having the ability to trust mathematics rather than fallible human institutions is indeed useful for a large portion of the population.

The rest is basically realizing we are in about the 1997 era of blockchains where things are hard, the big use cases are still being built out and designed and it's generally just a playground for bleeding edge nerds. But it's growing fast and DeFi (decentralized finance) didn't even exist until summer of last year.

Some things possible today:

-Financial stuff: decentralized lending, borrowing, programmable assets, no loss lotteries, gambling, etc.

-Art stuff: NFTs (non-fungible tokens) allowing for artists to sell their artwork online (look up Beeple), games making their items digital and tradable and usable in other games (God's Unchained, Axie Infinity), sharing of real world assets (RealT, any kind of physical asset on chain such as a car or house)

-Organizations. These are called DAOs (decentralized autonomous organizations) which allow for an organization to exist and make decisions with fully secure digital voting which allows for employee owned corporations, gaming/interest groups, or even small cities or countries to run their bureaucracies in a provably neutral, safe, and transparent manner.

-Enterprise stuff. The Baseline Protocol by EY is fairly hyped among corporate types (which don't get excited easily) and allows for business workflows/ERP to scale beyond a single enterprise. Microsoft, Coca Cola, etc are building some neat stuff on top of this.

Most of this stuff is complex enough to have at least a few paragraphs each so there's no way I can do it justice or make it sound less crazy from the outside but there's a ton of innovation going on with many different possibly world changing protocols and services being developed so while it might not seem like much now it will likely be something people use without even thinking in a few decades, just like the internet itself.

[jdmoreira]

I don’t understand why you are being downvoted because in my opinion you are right. Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.

This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.

On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.

Bitcoin and gold suck at representing value. Fiat currency is much better because you can print more money to keep up with the world's total value.

[chordalkeyboard]

> Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.

This is actually completely backwards. Fiat money decreases standard of living by encouraging consumption and discouraging savings and investment.

> This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.

Yes, as opposed to a depreciating currency where people continually give you less and less value for the same amount.

> On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.

So people have to keep increasing their prices or they starve to death, how is this supposed to help the people with the least amount of money?

> Fiat currency is much better because you can print more money to keep up with the world's total value.

Thats why the poor stay poor and the rich keep getting richer. The rich own the assets, and the poor get these checks of decaying currency.