[iqkznnft]

So I guess I was ahead of you. When I asked why something with no use other can facilitating transactions should have value, a friend explained to me "it's like dollar, right? To transact with it you have to obtain it, and that creates demand. Then Bitcoin is finite, and these two facts give it its value". To that I responded "so what's preventing someone from creating bitcoin2, bitcoin3, etc. Nothing, so the supply isn't really finite, and so it should have no value". And so I decided I was out, long before Litecoin came along :-)

I was quite young at the time, but I've since learned that just because something has no value, doesn't mean you can't make money trading it.

[kareemsabri]

It's interesting because even a recent a16z podcast (an "oral essay" on crypto) argued that scarcity is what made bitcoin valuable. And that "scarcity" + collective belief is what makes things valuable (they claimed the dollar and bitcoin are the same in this regard, just collective belief propping them up). They didn't seem to grasp that there are lots of scarce things nobody cares much about. Dollars are in demand because they provide utility (namely, I need it to buy things and I need to pay my taxes in it).

There's probably a third utility, which is having lots of Bitcoin means you have lots of dollars, which means people know you're rich and want to date you, be friends with you, party with you in Miami etc. But it's interesting to notice (this is a bit trite but I think not totally) that people still tally crypto wealth in dollars ("he's a crypto billionaire" doesn't mean he has billions of bitcoins) so the utility of bitcoin seems to implicitly be that it's worth lots of dollars.

[nivertech]

There are 4 types of scarcity:

1. real real-world scarcity

2. artificial real-world scarcity

3. artificial digital scarcity

4. real digital scarcity

Bitcoin's scarcity is (3).

(4) is the holy grail, but it's seemingly impossible b/c of the double-spend problem (easy copying).

Bitcoin's scarcity is artificial.

Even if it was real, since it allows forks - it's unlimited:

   21e6 * (1 + nForks)

where

   nForks → ∞

Using the twitter analogy: yes, you can only use up to 280 characters in a tweet, but you can have an unlimited number of tweets in a tweet storm ;)

Here's why artificial scarcity doesn't work:

https://twitter.com/nivertech/status/918617991754977281

https://twitter.com/nivertech/status/861547849821155328

[jl2718]

Dollars do not provide utility. The reason why you need dollars, as you’ve pointed out, is that people with guns might show up at your house if you do not pay them in dollars. Conveniently, you can also get people with guns to force others to pay you in dollars to satisfy a wage, trade, or debt. That’s not really any sort of utility, but utility is not really required for a currency.

Bitcoin was never supposed to be like a modern currency. It was an experiment to create something like gold except with the property that it can be easily transmitted and stored by individuals. The theory was that we only had fiat currencies as a proxy for gold because gold lacked these properties, and if it had them, it could be used as a universal kind of cash. I think our understanding of the dollar system was poor back then because it was the first time we questioned it. The term “fiat” that we use so much implies that value rests upon some common belief. This has been exposed as ridiculous by observing any individual or even entire nation that lost faith in their mandated currency and tried using a different system. They were annihilated. It turns out that the system is much more than a popular delusion; it’s a real visceral power structure. Then the Bitcoin value thesis became the common belief that the current system is unsustainable globally across the board, and something has to fill the gap when it fails. This was also challenged in the last boom by actual acceptance and integration with the existing system, so maybe it will be more like a slow mutual transition to something like global reserve status alongside gold, with young male nerds and Indian housewives using it as decoration. Every boom starts with some kind of systemic failure and ends with a crackdown. The next I would guess will have something to do with a major war that essentially backs Bitcoin with physical force to achieve equivalence with others. It’s not something I’d like to see, but it’s the next logical step in these cycles of escalation.

[jfengel]

* I think our understanding of the dollar system was poor back then because it was the first time we questioned it.*

Depends on who you think of as "we".

If by "we", you mean "economists", then no. This is elementary economics.

If by "we" you mean "tech bros", then yeah, maybe this was a novelty to them, along with everything else in economics past the first couple of weeks of Econ 101. So the economists watched them fast-forward the last three centuries of economic history in a decade.

It doesn't take a war to back Bitcoin. What it takes is convincing a major government to replace its currency with a blockchain version. Which is what various central banks are doing. Except it won't be Bitcoin. It'll be a "proof of stake" system, where your "stake" is your existing currency, and the central bank holding a majority.

It'll never be Bitcoin-brand crypto because the bitcoin owners don't have the guns you mentioned. They missed the very first lesson on why any currency (not just fiat currency) works. They could have asked the economists, but being tech bros, figured they knew better.

[jl2718]

FedCoin will not be POS. It already exists on the Eagle Cash system we used in Iraq and Afghanistan. It’s a bearer token signed by the treasury.

Professional economists have been and continue to be three generations behind reality in their discipline. Ask them today what gives the dollar value and they’ll sound like Do Kwon talking about UST: “well, we trade bonds to stabilize the value, and also we have all this gold to back it up in case anything goes wrong.”

You’re right that Bitcoin has no guns. The question is what happens in a regime change situation, which seems to be very likely in a certain part of the world.

[kareemsabri]

> Dollars do not provide utility [...] people with guns might show up at your house if you do not pay them in dollars

Avoiding people with guns coming to your house is a valuable utility, in my opinion. I can't comment on the other part.

[hansword]

I have to say, the way you phrase it, "making money trading something with no value", this sounds like mild fraud to me, in the sense that you expect the other party to believe there is value, while you are confident there isn't any, aka "hot potato".

[lupire]

In hot potato everyone knows the potato is worthless. The question is do traders think everyone is playing the game or are there deluded suckers who have a lesser understanding of the prospects.

This is sort of why we have "accreddi investors" law in US, so risky financial instruments are only touched by people who understand the game.