The valid reason is that Bitcoin is the best money that has ever emerged in human history. The denationalization of money is inevitable and long predicted. Check out Nobel prize winning economist Hayek's Denationalization of Money https://en.wikipedia.org/wiki/The_Denationalization_of_Money
“Stability in value is presumed to be the decisive factor for acceptance. Hayek makes the assumption that competition will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors.”
It is rather a promise of an "eventual stability". Thinking through that lens, I think USD (and other Fiat currencies) are the ones exhibiting instability.
BTC cannot be stable, even eventually. There is no way to increase the BTC supply so when productivity increases, prices of goods (expressed in BTC) will always go up. Assume that BTC is the only currency and world productivity goes up 6% each year, or 0.5% each month. Then when you go in store to buy apple, you will see price gone up by 0.5% than previous month because there is no way to increase money supply. One of the advantage of fiat currency is that you can control the money supply and try to keep prices stable. For BTC, there is no way out either way. The worse case occurs when some economic disaster strikes like subprime mortgage. In that case there is no way to fix the issue and massive uncontrolled depression will trigger and can stay for decades whether you like it or not. In other words, the same things that makes BTC as good store of value, makes it a extremely weak to guarantee stable economy.
If BTC is the only currency and everyone is transacting in BTC, then people are incentivized to hold BTC. Now that everyone is holding BTC, the value of their holdings are increasing alongside everyone else holding BTC. If you go into the store to buy items you will notice that the price in BTC terms will be decreasing b/c more BTC can't be "printed". (Each BTC is worth a lot now and continually increasing, but at a predictable rate) Each person will continue to pay with less and less BTC over time all the way until the lower unit bound, which is a satoshi (0.00000001 BTC), is reached. If we ever reach that point in our lifetime the code will need to be forked to upgrade the protocol to handle further subdivisions.
> [...] all the way until the lower unit bound, which is a satoshi (0.00000001 BTC), is reached. If we ever reach that point in our lifetime the code will need to be forked to upgrade the protocol to handle further subdivisions.
No fork necessary. We can already use millisatoshis on L2.
That is deflation and is intentionally avoided by central banks because you don't want people to hoard their money. Hoarded money sits there and does nothing while money that is in banks can be lent out, invested, and be useful.
It's only avoided b/c in traditional economies there is no way to subdivide units of a denomination. (e.g. There is no way to split a penny into thousandths) Cryptocurrencies are purely digital and do not have this limitation. The only limitations are self-imposed by the algorithms themselves.
If Bitcoins were the dominate and only currency, people would continue to buy food, clothing, luxury goods etc. b/c they need or really want those things and will be willing to trade bitcoins in exchange for those goods. Practically, Bitcoin is unlikely to be the dominate currency allowed in countries to participate in transactions without incurring significant taxes, so likely people will store wealth in Bitcoins(or other cryptocurrencies) and then convert to fiat currencies as they need to make their purchases.
Ahaha, I'm literally listening to a talk by Yanis Varoufakis right now and not 5mins ago he mentioned this as the reason non-fiat money, be it gold standard or BTC, cannot work long-term.
There is no objective measure by which Bitcoin is more stable than USD.
The idea that USD is becoming worthless due to recent monetary policy, however ill-advised, is greatly exaggerated.
The idea that Bitcoin is the only way to protect oneself against inflation is also greatly exaggerated. Investors have been buying assets and investments for a long time before Bitcoin was invented to avoid inflation. Bitcoin didn't magically change that.
That's a nonsensical statement. Use BTC to buy a car today, and then use it to buy the same value car in a year. BTC is, fundamentally, unstable at this point in time. Even when all BTC is mined and it is distributed across the globe to every human being and sentient AI and animal, it will likely continue to be highly unstable as a currency.
Compare to the, relatively, stable USD as a currency. Prices for goods and services in USD fluctuate, but typically only changing once a year or so. Your milk price doesn't, in USD, shoot up by 500% in a week.
It's all a matter of perspective. It's the entire rest of the world that's unstable and undergoing wild price fluctuations, while the value of one Bitcoin stands eternal and unchanging by virtue of it being worth one Bitcoin. /s
And many things are cheaper. Or they aren’t growing with inflation anymore. Most electronics, for instance, and many mechanical devices. Even food stuffs (some) have been more stable in price than inflation suggests they should be.
Except you can't spend it very well and would be crazy to borrow it. Imagine the disaster if there had been a large market for bitcoin loans a few years ago.
Yes, but who's actually paying the $18 transaction fees to move some Bitcoin to Visa so they can spend Bitcoin instead of cash and incur a new taxable sale with every swipe of the credit card?
Has anyone confirmed that Mastercard is even going to support Bitcoin? Previous articles suggested it was stablecoins only.
In no way is spending Bitcoin as easy as spending regular old cash.
Because every transaction on layer 2 is not settled on the blockchain, its simply their cheap and fast ledger keeping track of frequent transactions. Rarely is there settlement.
Many dont understand Bitcoin was designed this way on purpose. L1 is for infrequent important transaction settlement. If it wasnt the chain would grow to a point where it could not be decentralized because the chain would be too big for hard drives and individuals to run nodes. It would naturally expand faster than memory advancement and centralize.
Can you point me to current "layer 1" solutions that you anticipate Bitcoin replacing?
SWIFT and ACH don't seem to be it. Assuming a generous 3,000 transactions per block Bitcoin can do ~158M a year.
ACH does ~25B a year. It's harder to find numbers on SWIFT but it looks like at least 10 million per day, so ~3-4B a year.
Let's say I'm running a business. I have day-to-day transactions going through some higher layer network, but I expect some money "settled" in my account each month. That's 12 transactions a year. The US has around 30M businesses, so that's 360M settlement transactions a year. Already more than double what Bitcoin can do and we're not even talking about, say, having employees paid on the blockchain.
I wouldnt even make that classification. SWIFT and ACH are not akin to L1 Bitcoin. Theres no way tech illiterate masses are going to physically move their btc on chain. For instance 95% of retail doesnt even move their btc off exchange. Their higher level "settlement" will be different from an institutional provider or exchange settlement where L1 is really used. SWIFT and ACH is used liberally (hence the high tx) because its used in many applications (like paychecks and high value purchases). That type of usage will never come to L1 btc. And that same system of SWIFT and ACH (or similar) will support BTC. Can think 3 layers if thats helpful.
Mastercard announced that they will be supporting "crypto" not necessarily bitcoin. Bitcoin itself doesn't have the capacity to support widespread adoption as a medium of exchange.
I think I need to break down how this works. Bitcoin L1 chain is a settlement layer where transactions are pooled per tx (its not 10 tx per second or whatever people think it is). Regardless, its L2 that processes small frequent transactions. That would be providers like Visa, Mastercard, Paypal, Circle, etc. They process the transactions and keep the account, only infrequently is it settled to the actual blockchain ledger. Then you get into the lighting network. Bitcoin can absolutely scale without issue.
"Mastercard says that it's only going to support cryptocurrencies that meet a number of requirements—including stability, privacy, and compliance with money laundering laws".
So, not Bitcoin. And maybe not any existent cryptocurrency.
“Stability in value is presumed to be the decisive factor for acceptance. Hayek makes the assumption that competition will favor currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors.”
Stability is not the observed behaviour in BTC.