[fny]

Here's a question: how many people do you know that buy crypto intend to spend it? You know, use it like currency? Or are they all just HODLing in the hopes that some other buyer will come along who believes it will become a medium of exchange?

In my view, it's not a currency until people stop speculating and start using it like a currency.

So yes, it's a collectible with ridiculously high transaction costs that make it difficult for me to use as a currency.

[beambot]

Most people I know keep less than 3 months of their net worth in currency. The vast majority of their net worth is placed in real estate (largely, their primary residence), stocks, or ETFs. You can make a case about net-present value of future dividends, but the S&P dividend yield is 1.4% -- i.e. less than inflation. So quite literally, every asset they have as a store of wealth is "just HODLing in the hopes that some other buyer will come along who believes it will become (worth more)".

In this light, how is Bitcoin any different?

Note that currency has two functions: store of value (Bitcoin) and medium of exchange (Ethereum? Ripple? Carbon credits? Other?). That we can split these functions should not be surprising. Plus, our modern money system is a fairly new invention and it's clearly being disrupted. Hell, even the idea of an electronic ledger to track stock ownership was only really developed in the 1980s by Cede and the DTC -- and it still takes 2 days to fully settle.

[fny]

Primary residence has utility. Additional properties typically have a real cash flow. Stocks have price appreciation typically due to higher current and projected earnings, dividends, and buybacks, and yes they are somewhat inflation resistant since they also have limited supply. This makes for average returns of 10% plus dividends.

Bitcoin is a collectible. It is very much like gold, which has a far longer history and similarly high transaction costs. Gold, in my view, is also a collectable, and it's frequently advertised as such. (Just look at the gold coin ads and compare to BTC.)

Controversial view: fiat currencies are also a collectible. The difference being it's universally accepted tender, its government enforced, you're taxed in it, transaction costs are cheap, and insanely fast (moving money can be a pain). This is what makes fiat a proper currency. Also, while we like to make fun of central banks for money printer go brr, there's real value in the stability they provide. The Great Depression was a disaster because of the lack of monetary response, and banks of the world have learned since.

Also, there are heavy incentives for governments to drive use of their currencies, and there's a LOT of competition from governments to dethrone USD. China, for one, is trying to internationalize the renmimbi and dethrone USD in its sphere of influence. Do you really think they're going to give BTC the space to thrive?

Now, let me be clear, my view on crypto is nuanced--I'm very exited about DeFi and ETH2, but my longterm view on BTC is a bit sober.

[viklove]

> Stocks have price appreciation typically due to higher current and projected earnings

Yes, projected earnings. Speculation. Just like cryptocurrencies.

[gajotron]

In terms of numbers, your logic is slightly off because of the distortions of tax law, which means in fact, the bulk of the S&P's distributions in any given year are often buybacks. It makes the net yield of the S&P500 closer to 5% over the last decade: https://www.yardeni.com/pub/buybackdiv.pdf

People rationally buy 5% perpetual yields to cream the asset, not HODLing in the hopes some other buyer will come.

Absolutely I would make a case about the net present value of future distributions - the clearing IRR is currently around 4%, having been around 5% last year.

Similarly real estate pays rent or owners equivalent rent (the value the owner derives from living in it rather than paying market rents). Here, the market seems to clear around 2-3% net of maintenance, having previously cleared around 6% when interest rates were higher.

Bonds pay interest, albeit at this time the clearing yield level is very very low.

What is the clearing yield of bitcoin? Undefined, because it has no expected future intrinsic cashflow payable to the owner.

Bitcoin hodlers have only one possible way to collect a future cashflow, sale to another person for either fiat or goods/services.

[n4r9]

I guess one difference is that real estate and stocks are more functional. With real estate you're providing a service for yourself or someone else. With stocks you're giving a company to continue business.

[ALittleLight]

Just recently I was looking into making bets on polymarket - a prediction market that uses Ethereum and advertises zero fees. I happened to have a bit of eth from a while back but I was dismayed to find out that the transfer fee, seemingly to move any amount of eth into polymarket, was something like a flat 50 dollar equivalent. I just wanted to bet with a few hundred dollars, and having to spend 50 of that just to get started felt unfun.

[fny]

I actually think gets fixed with ETH2. I'm actually a bigger believer in DeFi than BTC.

[herbst]

Spending Bitcoin & Crypto is incredible easy in Switzerland. Our main Amazon alternative as well as the biggest food delivery network both accept crypto. You can even pay your taxes in some places.

I know only few people who own crypto as pure speculation. Most are using too (at least from time to time)

[bb88]

Given the price of bitcoin skyrocketing, why would anyone spend it on anything. If you have 1BTC, and you think it's going to go up 100x still, then why would you ever spend it?

[herbst]

If USD is only decreasing in value compared to CHF why would you not keep everything in CHF? Because you need money to live from and you likely need USD to spend.

I only partially care if it goes /2 or x100. Its still money

[bb88]

What if it goes to /100? /1000?

[herbst]

A little far fetched IMO, but meh. That could happen with any investment and bad luck.

[spookthesunset]

The problem with Bitcoin is it is a horrible currency. It’s slow and it doesn’t scale beyond a few transactions a second.

I’ve been following Bitcoin for more than seven years and absolutely nothing about it has fundamentally changed. It has always been a “currency” majority owned by dodgy shadowy characters. It’s always been slow. It’s always been unscalable (by design!). It has always been a get rich quick pyramid scheme.

It doesn’t matter what its USD value is. It’s a scam. Always was, always will be.

[rawtxapp]

I feel like beating a dead horse, but there's tons of L2 technologies at this point, lightning payment channels or rollups on eth, etc. The blockchain itself is like a settlement layer.

Our current financial system is also layered similarly btw. When you buy something with your credit card, it doesn't settle right away.

[Spivak]

But then the issue is that the settlement layer becomes an arbitrary implementation detail. The second layer is the thing that really matters. The settlement can happen in dollars or some stock in a portfolio of assets like what Libra wanted to do.

Is Bitcoin the best thing to use as an settlement layer?

[rawtxapp]

The 2nd layer always maps to the settlement layer as in you're still transacting in Bitcoin, you just don't broadcast the signed transactions to the whole network because you expect to continue your transactions.

You can use eth or any of the thousands of other crypto-currencies, Bitcoin benefits from being the most secure and also having the largest network effects due to being the earliest. When it comes to money, security is the most important thing and Bitcoin offers the most secure settlement layer.

[swensel]

If a credit card is the example of a layer 2, with dollars being the base layer, would you say that dollars don't matter then, and the only thing that matters is the layer 2?

[Spivak]

You have it backwards. With credit/bank cards the second layer is dollars that we're transact in. If financial institutions decided to settle amongst themselves with commodity stocks, government bonds or FedCoins would you even notice? It just happens that in the US dollars also make a good settlement layer.

[matheusmoreira]

There's also Monero which is everything Bitcoin was supposed to be and much more. Why bother trying to fix bitcoin when a solution already exists? There's absolutely no need for this layer 2 stuff.

[rawtxapp]

There are thousands of other cryptocurrencies that claim to have better tech than Bitcoin in terms of privacy, speed or fees.

This is the case of having a better technology doesn't matter, Bitcoin came at a very lucky time and also grew organically for many years and had arguably the fairest coin distributions (most coins nowadays are shilled very heavily by it's developers and investors). It's also the most secure and well-known.

Because of those things, it'll be very difficult if not impossible to unseat Bitcoin when it comes to store of value/currency. Bitcoin also sees development in form of lightning network. For all other use cases, I think eth covers most bases and has also developed a very large network of users and developers.

So whatever next big crypto project comes needs to be not just "better", but like at least 10x better.

[matheusmoreira]

> There are thousands of other cryptocurrencies that claim to have better tech than Bitcoin in terms of privacy, speed or fees.

Monero isn't just claiming this though. It actually delivers on its promises. It's actually private, authorities are having trouble tracing it. Criminals are already switching to Monero. Transactions are fast and the fees are low. It's mineable by ordinary CPUs, no centralized ASIC/GPU mining operations in China. Since mining is more decentralized, nobody opposes improvements to the Monero blockchain like the bitcoin and ethereum miners do.

> at least 10x better

Monero is pretty much infinitely better. If any coin is positioned to unseat bitcoin it's Monero. If there's any sanity left in this cryptocurrency market this will happen one day.

[fomine3]

Monero is pretty much infinitely better, that's why gov hates it.

[herbst]

Bitcoin: Market Cap: Fr 926,647,481,214 Volume: Fr 54,697,251,981

Ethereum: Market Cap: Fr 261,435,750,490 Volume: Fr 39,931,852,584

Its not like Bitcoin is standing up there alone. Sure still far stronger, but the times where its only bitcoin and the others is likely over.

[wolfretcrap]

Fair coin distribution is easy to solve in new coins if all the bitcoin owners get equivalent proportion of the new coin and developers/founders get nothing. But how many are brave enough to create such coin?

[BelenusMordred]

> There's absolutely no need for this layer 2 stuff

If XMR usage got big enough it would very much need layer 2 even more, the developers themselves acknowledge this and are upfront about it. These very basic computing problems that have been repeated ad nauseam for a decade now do not magically go away and are actually a lot worse for monero due to ring transactions being much heavier.

Are you really going to store a 2 TB blockchain that needs days of compute to initially confirm so you can transact with your friends privately? The first layer has insane amounts of PoW security baked in at this point, it's not for general consumption anymore.

[matheusmoreira]

> the developers themselves acknowledge this and are upfront about it

I'm sure they'll be able to solve any problem that comes up. Monero isn't plagued by miners blocking progress like bitcoin is. I believe the coin will continue to improve.

> Are you really going to store a 2 TB blockchain that needs days of compute to initially confirm so you can transact with your friends privately?

Isn't it possible to prune the blockchain on local nodes?

[tromp]

> worse for monero due to ring transactions being much heavier.

As well as all the rangeproofs that further bloat the chain size. Other confidential blockchain designs allow the removal of rangeproofs for all spent outputs (ie the vast majority).

[UncleMeat]

Do you actually need to confirm the entire history in order to publish transactions? You've already got the result of hashing everything right up at the head of the chain.

[la_fayette]

Bitcoin is an amazing invention. For me personally it is the best store of value ever, I just need to remember my private key and travel the world and cash out in every country. The fees are totally acceptable, you can use lower fees and wait a bit longer for the transaction to get into a block. Bitcoin is definitely not a scam!

[rawtxapp]

Personally, I'll start spending it when it's value stabilizes and that won't happen until it either "wins" as in becomes the global reserve currency or "loses" as in becomes worthless.

If it were to freeze at it's current price, it would only be able to power a very small economy of 1T$, that's nothing considering it's borderless and digital.

[rapsey]

So you will never spend it. What gives currencies relative stability is central banks.

It will never become a global reserve currency for the same reason gold is no longer a basis for money. It is better to inflate your way out of problems (print money to bail out key institutions) than to deflate your way out of them (great depression). Better is defined as causing less harm to individuals.

[dnautics]

> Better is defined as causing less harm to individuals

Inflation sucks for more people than deflation. It causes social strife, environmental destruction through overconsumption, a widening gap between the rich and the poor, more expensive healthcare for lower classes, stress and the need to live on the corporate treadmill, a general inability to identify worthwhile investments versus ponzi schemes because TINA, pushing more people into partial servitude to the economic system by encouraging borrowing.

It's great for the rich, though. Lowered interest rates things like financial games, leveraged trading, and corporate agglomeration become favored. And the devaluing currency pushes average joes to participate in the wall street casino, which is good for CEOs.

It's not the deflation of the great depression that was causing starvation. Remember that during the part of the great depression where people were starving (nobody was starving at the onset), the government was doing things like buying food and burying it on the premise that this would create demand and stimulate prices.

[gajotron]

You're confusing the economic effects of inflation and deflation with environments of low and high real interest rates.

I'd counter by saying that the strongest decades of median real wage growth and general GDP growth were during the high inflation 1960s and 1970s.

I'd argue that the fact nobody was starving at the beginning of the great depression means that the economic mess didn't cause the starvation is a bit of a straw man. Of course, at the beginning, people don't immediately find themselves in destitution, they draw down savings. The destitution begins when the economic disruption becomes prolonged.

I can't find any primary sources on the government policy of destroying food, but I'd conjecture the reason it was done (if it happened) was to support nominal food prices and therefore the apparent credit-worthiness of farms in a highly deflationary environment. Of course, the real problem was that there was insufficient aggregate demand to support the nominal food price, i.e. deflation combined with wage-price downward stickiness caused the market to fail to clear.

[dnautics]

> You're confusing the economic effects of inflation and deflation with environments of low and high real interest rates.

No I'm not. The one is the primary mechanism that is being used to create the other.

> Of course, the real problem...

The real problem was policymakers believing dumb shit, if we're being charitable, confusing correlation for causation.

https://www.youtube.com/watch?v=QsAnssN1cxM

[dnautics]

> the strongest decades of median real wage growth and general GDP growth were during the high inflation 1960s and 1970s.

How about 1860-1900. A deflationary era when median wealth increased ( even without taking into account that a chunk of the population was liberated from chattel slavery) and the us went from failed state to international colonial expansionist superpower

[nathias]

Inflation is a form of tax, or rather a corporate handout, it transfers value from the poor to the rich. I have no problem taking on the risk of volatility to help destroy it. It can also be mitigated with implementation of different monetary policies, inflation is not the only mechanism that can be used.

[rawtxapp]

I'm not sure that it's "better", we now have crazy high asset prices, the bubble is bigger than ever, all while the average worker's compensation has stayed relatively stable.

[pfisch]

Gold still makes up a percentage of global reserves for all major countries.

[dyslexit]

It has value as a currency on dark markets and possibly for companies paying hackers off to disable ransomware. I can't really think of why people would use it instead of fiat for something like a Tesla though.

[herbst]

Fees? People whine about high Bitcoin fees, but with your Tesla example what are those $15 Bitcoin fees against a 3% fee from a credit card provider?

Moving money in higher amounts can get expensive as fuck.

[pfisch]

Because the long term holders could try to dodge the irs.

[UncleMeat]

I know exactly one population of people who buy crypto with the intent of spending it: people who got in on the ground floor and made it so rich that now it is largely a game.

I know a few people who made $50m before they were 30. The act of spending money is now fun for them, almost independent of the outcome. Incredibly high donations to twitch streamers, denominated in BTC, tickle their fancy.

Every other person I know who owns BTC is either trying to speculate by owning a lot of it or believes that putting 5% of their investment portfolio is good for diversification. In the same way that I don't spend VTI at the store, these people don't spend BTC at the store.

[matheusmoreira]

I would pay and get paid using monero. It's everything bitcoin was supposed to be.

[paxys]

> I would pay and get paid using monero

If you agreed to work for a company for X monero a month, and the value of monero (relative to USD or your local currency) dropped by 90% a few months later, would you continue to work at the originally agreed upon rate?

And on the opposite end, if a coffee shop sold lattes for Y monero, would you be okay with continuing to pay Y if monero shot up by 1000%?

[herbst]

Just because you get paid in crypto does not mean you do not hold the money in FIAT. Whatever people think about USDT or other stable coins, its easy to move your crypto worth into USD and back.

What you could do against the fact that the USD is heavily losing on value is a different topic tho.

On the same note: You are likely getting paid in $. Your currency lost about 4% in value against the CHF in the last months. Is this something you worry about? I guess not.

[matheusmoreira]

No, I'd raise the XMR price for my services. We still need fiat in order to pay for everyday things.

[arthurcolle]

just do it relative to some low vol underlier

[Spivak]

I mean we would probably pay and get paid in any currency that was stable enough in the world market and accepted by the people we want to buy from.

[pfisch]

Now apply that logic to gold.

[dagmx]

Gold is a usable, consumable product.

Unlike Bitcoin, the value of gold in a given market has a tangible backing that isn't purely speculative.

[beambot]

It appears less than 8% of gold's annual production is for industrial use [1]. If you remove the "store of value" demand from its price, then the residual value is peanuts.

[1] https://www.statista.com/statistics/299609/gold-demand-by-in...

It's like saying, "Bitcoin has residual value because you could always sell the GPU mining equipment"

[dagmx]

Are we just glossing over the 48% listed for jewelry which is a huge market?

I'm not sure your analogy of GPU mining hardware makes sense to me. You can have Bitcoin without having GPUs. Just like you can have gold without having a mining operation.

So if Bitcoin crashes to some hypothetical value tied to consumability, you're left with nothing. Whereas gold is still something you could sell for industrial and fashion use.

I don't think there's a good analogy between cryptocurrency and gold because they're not very similar at all unless people only narrow the scope to long term holdings and ignore risk/speculation.

[pfisch]

The jewelry use is 99% tied to gold's perceived valuation and is used as a way to display opulence and wealth. It is just an extension of gold being a store of value.