If I understand the core underlying issue (as opposed to downstream result) is a currency that lost majority of its value through volatility.
Who can look me in the eye with a straight face and say bitcoin protects against volatility? That bitcoin "protects exactly" against mismanaged economy and corrupt government?
It's become my mantra but I swear people on HN don't understand how crappy life can get, how oppressive governments can get, how many rights and things we take for granted can be taken away by thugs, and believe a super high tech complicated software stack can magically fix it. sorry if that sounds harsh, but you know what, it is also harsh to listen to hungry angry oppressed people and constantly claim "bitcoin can fix that for ya".
> Who can look me in the eye with a straight face and say bitcoin protects against volatility?
In 5y, 1 USD went from 3.44 Turkish Lira to 17.94; Sri Lankan Rupee collapsed overnight from ~200 to ~360 per USD. Argentine Peso went from 17 to 134 per USD in 5 years.
I can easily look you in the eye and say that for countries with shitty governance and poorly managed economies, Bitcoin is a far better bet than their local currencies. So far, a common alternative was USD but after it was demonstrated that even a nuclear armed country like Russia can lose its USD reserves overnight, I think a lot of countries would be looking for alternatives. Bitcoin and Gold are credibly neutral alternatives.
You are simply saying one of two things:"deflationary thing would be nice to keep your savings in" and "the USD is a strong currency". What kept people from buying gold, bitcoin or commodities or other speculative assets in those countries? The fact that they are still a bad currency, because a currency is ultimately what your state demands taxes in and wants/subsidizes for transactions to be in. A currency without a state is just a ledger with faithful devotees, and as we see with tornado cash and the continued lack of a bitcoin or Crypto economy producing basic things like food, it faith doesn't seem to be enough (which is ironic because we call traditional currencies fiat now to differentiate from Crypto, when we should call them tax-based and fiat respectively)
+1 on this, you nailed the issues exactly! Bad fiat currency is simply a proxy for bad state, bad government, bad governance. USD is safe and sound as long as USA and USG are. Would reuse tax-based and fiat-crypto - you got that right too - except for fear of all mighty confusion. :-) Money, currency, banking are confusing enough for most people already.
> USD is safe and sound as long as USA and USG are.
I agree. People living in USA or Eurozone may not see the need for BTC since they have good stable governments with well-managed currencies[1]. People outside of those pockets, however, need some option to escape from their governments' corruption and tyranny. BTC is a neutral, and hence better, option. Because if your country falls out of favor of USG, your savings just became a collateral damage when USG imposes sanctions n all.
[1] this sentence might come as a shock to some since news media constantly paints apocalyptic picture. But US and Eurozone is a really good area of the world to live in.
Yes, agreed. I understand what you mean. I grew up in "in Europe but not quite european" country. I hope at some point e.g. BTC version 23 is going be as convenient to use as is a credit card - no need to DL 300GB, wait 10 mins for transaction etc, but yes still I can hold my own keys. That will be the technical part solved. The societal part - where we place trust in yet unknown future people, removed from us in place and time, to do useful stuff for me b/c here&now I do useful stuff for third set of people - will follow. The best system that's evolved this far, Fiat - or as a grandparent wrote tax-backed money - is abused often (not by US, EU - they are the good guys; plenty others like Zimbabwe, Yugoslavia etc impoverishing millions - they are bad guys) enough that there is scope for improvement. Trust can be proxied as simple as 1-5 stars... but that may need lots of control - and so on.
> The fact that they are still a bad currency, because a currency is ultimately what your state demands taxes in and wants/subsidizes for transactions to be in.
I guess you have not lived in a third world country. I have, for multiple decades. And I have seen first hand how black market or under-the-table transactions work. There is a huge economic activity in corrupt countries which happens out of government taxation reach. Bitcoin is a perfect instrument for that. Bitcoin or USD or Gold are great options for preserving value of your savings in such countries. For ordinary transactions, Bitcoin or USD are much better since Gold is harder to exchange in exact quantities needed for the transaction.
Done that. As a store of value - USD has lower volatility than BTC => USD wins as a store of value. As a medium of exchange - USD paper notes are more convenient to work with (on balance) => USD wins as a medium of exchange. Hence - people in 3rd world countries are not silly or un-informed to prefer another country fiat currency (from a - comparatively - well enough run country), over theirs' (badly run) country fiat.
> As a store of value - USD has lower volatility than BTC => USD wins as a store of value.
Depending on your place of residence, USD may have a high tail risk if your country decides to cross USG's plans. For those places, better to have a non-USD non-EUR alternative. Only Gold and BTC come to my mind.
In 1y, 1 BTC went from USD$47,113 to USD$24,735 (365 days period). If you compare from the high point, it went from USD$67,582 to USD$24,735. Doesn't sound like a good store of value, sure it's (theoretically) better than the 500% inflation of the Turkish Lira but anything is better than that.
> [...]but after it was demonstrated that even a nuclear armed country like Russia can lose its USD reserves overnight,
That's purely due to sanctions, which can affect cryptocurrency as well due to the entire ledger being public.
> That's purely due to sanctions, which can affect cryptocurrency as well due to the entire ledger being public.
Woah boy, that's a lot to unpack. I guess you heard some news about recent sanctions to TornadoCash... and then you thought that cryptocurrency can be confiscated/frozen as what happened with Russian's USD reserves?
What has happened so far: some arrest of at least one developer, some freezing of some (centralized-)stablecoin accounts, some closure of github accounts, etc. But pure (as in, not centralized stablecoin) cryptocurrency stored in cold wallets cannot be frozen at all; and that's the whole point of cryptocurrency.
No, I was not referring to or using Tornado as example here. I was referring to US sanctions on Russia forbidding trade, therefore causing Russia to fall back on their reserves and unable to access further USD reserves.
Cryptocurrency is vulnerable to this as well because, even if you have a cold wallet and run your own node, your transactions are still public and taint every wallet that receives your coins. Vendors might not want to trade with you so that they don’t get the same treatment, exchanges might not want to risk their entire liquidity to cash your BTC out, etc.
Indeed everyone holds non-local currency too. I'd presume USD and/or EUR have taken on the role of "store of value". I lived through collapse of a state 30yrs ago, and exactly that happens: locals refuse to hold the local currency (that reflecting on the health of the state is quickly losing value), there is a vigorous fx exchange market (either white-legal, grey-tolerated, or black-illegal but existing), and locals exchange their savings from local to foreign fiat currency. No one ever used gold, not once I saw gold being used for anything. Nor any other commodity. Foreign fiat currency that is stable is much more practical and convenient. Until BTC is as convenient as a credit card, can't see it used as "means of exchange". As store of value - maybe, but foreign currency maybe again more stable less risky (on humant time horizons), so again wins for that too over BTC. Sorry for the spoiler.
How would they hold bitcoin to begin with if they need to pay for local services? How would they get paid in bitcoin, or do they need to convert their funds to bitcoin ahead of time? In such a case they could’ve easily picked USD instead.
Dollar cash is as valuable in Russia as it was before. I don’t know why countries use electronic dollar. Just use cash. Nobody can arrest it. I don’t know the precedents at least. If Germany would refuse to accept those, Chinese will accept it.
Last time I checked, it was illegal to take more than $10k out of Russia per person. Even private plane passengers were thoroughly checked for cash (something completely unheard of before). And yes, governments all around the world have, and will arrest your cash.
> Can you really say with a strait face that you think BTC's volatility is worse than literally losing your bank account with all it's content?!
Ask Luna holders for their opinion on this matter, it seems they experienced pretty much the same thing (or holders of any other crashed cryptocoin). Bitcoin itself might not be down 100%, but it also lost a serious amount of value in the last half year. Plus, there are a lot of ways to completely loose your bitcoin, be it hardware failure or scams.
So yes, I can say with a pretty straight face that Bitcoin is not a great protection against volatility, which is what the original comment claimed.
Imagine if money didn't exist at all and we invented it today. It would be such an enormous technological game changer its value would change very very rapidly as we're going from zero to a huge "market cap" very quickly.
Imagine a pool. If you fill it with a lot of water rapidly, there's going to be a lot of turbulence. Doesn't mean that in the long run, as it gets filled, it won't settle down.
The volatility argument doesn't consider the fact that it's gone from zero to something big players and states invest in in 13 years. And that frankly it was not good enough to be digital cash but it's getting there. That's bound to cause a lot of turbulence.
>the average fiat currency has a lifespan of roughly half your life expectancy (37yr irrc).
Just like our products, fiat currencies have planned obsolescence and limited lifespans, this is because permanent money is a fantasy that cannot exist in the real world. Almost nothing in the real economy is permanent, not even humans.
If you want a currency that lasts forever it will have to not only have children, it will also have to be able to die like humans.
> Who can look me in the eye with a straight face and say bitcoin protects against volatility? That bitcoin "protects exactly" against mismanaged economy and corrupt government?
You are conflating volatility and corruption
Bitcoin won't protect you against the former (and neither did the lebanese pound), but it does offer protection against the latter.
With bit coin, and other cryoto, being using as the go to way to oay ransom attacks I highly doubt bitcoin does anything other than making corruotion easier.
After the Roman empire fell common things were still priced in equivalents of the old currency everywhere even though the currency was dead. When converting BTC to anything, the common denominator it will be compared to for purposes of trade is another equivalent everyone intuitively knows the value for such as the US dollar.
You have no idea why Id think the average person living in the west right now is dealing with significantly less problems than people living in a country that is experiencing full scale economic collapse?
Really? I think it is pretty self evident that most people living in the west are dealing with much smaller problems than people living in places like Lebanon right now.
If someone is unable to see this pretty basic fact, that their lives are likely much better than the people experiencing full scale economic collapse, then I guess that privilege is stronger than I expected.
I have replied to your original comment, as it was written then.
You have now edited it, which fair enough, but therefore I think your "really? You can't imagine why I'd say this [...]" Is unwarranted and I cannot meaningfully address it anymore.
Great, so then you agree with me completely that people living in the west are dealing with significantly less problems than people who are living in an collapsing economy, which is my point.
If it were true that somehow a crypto currency could hold its own in a collapsing economy surely it would just lead to massive queues/shortages? If the economy isn't producing enough it really doesn't matter what sort of currency you use, it's gonna be bad for almost everyone. It may make some difference in terms of foreign debt.
> If it were true that somehow a crypto currency could hold its own in a collapsing economy
I am not sure why you are speaking in hypotheticals. The economy of lebanon did collapse. And if you were holding bitcoin, you'd be much better off than holding that local currency.
Economies collapse all the time, around the world. And because the coin is a global market, it is insolated from local collapse.
> it really doesn't matter what sort of currency you use
But it did matter! Just look at the current situation, in Lebanon right now. If you were holding the local currency, you'd be screwed. If you were holding a global currency, you'd be much better off.
Actually, you’d be way better off with a stack of crisp $100 US bills or silver coinage.
Good luck finding a way to convert your bitcoin into some sort of locally fungible currency while that economy is in a state of collapse and the crypto brokers are on a similar path.
Would you be? If the economy doesn't produce enough food, what food there is just goes up in price. You can say "buy from the global market" but that requires having money, a tall order for a country with a weak economy.
Assuming you could buy basics from an international market and somehow get them delivered to you at a reasonable price using said global currency, true. But how realistic is that?
Unless your crypto is with one of the many exchanges currently in the process of collapsing and blocking withdrawals... While the rich guys running the show walk away with mass profits. Yeah, definitely better.
You're basically making the same argument as 'just swap all your money for a different currency.'
It's interesting, I seem to always see these comments on behalf of people who might find crypto useful to avoid local currency issues, not people actually doing it.
> Unless your crypto is with one of the many exchanges
Bitcoin believers always say - "not your keys, not your coins". I am sure you have heard it a million times by now since you also seem to be keeping tabs on which crypto exchanges are collapsing.
Unless your crypto is with one of the many exchanges currently in the process of collapsing and blocking withdrawals... While the rich guys running the show walk away with mass profits. Yeah, definitely better.
You're basically making the same argument as 'just swap all your money for a different currency.'
> If I understand the core underlying issue (as opposed to downstream result) is
> a currency that lost majority of its value through volatility
No, that is incorrect, the Lebanese pound did not lose it’s value through volatility. It lost it’s value through debasement, a fractional reserve and outright theft by the central bank of Lebanon.
Here is an article that explains the process [1].
Successive governments used bank savings as a piggy bank beginning after the 1975-1990 civil war. Things accelerated in 2016 when the banks started paying unsustainable interest rates on savings to entice savers in a grand government-sponsored Ponzi scheme that ended in 2019 when banks could no longer pay back savers and froze accounts.
Had the savings been held in Bitcoin, on-chain, no government or central bank could have stolen the savings. 1 BTC=1 BTC on-chain and there can be no debasement, no freezing of funds, and no ponzinomics. Despite Bitcoin’s short-term volatility, as a self-custody asset, it would have been the ideal store of value for Lebanese savers. Remember, the Lebanese pound has been debased by 10x, even if you can access those funds. Bitcoin truly does fix this.
Bitcoin can't fix this because it would promote even more corruption, imagine if politicians sole goal in their political career was to get Bitcoin as soon as possible to live off their constantly growing savings? How do you get Bitcoin as fast as possible? Corruption is quick and dirty.
It's because of fractional reserve and banks and governments colluding to print money out of thin air or just spend most of it.
Volatility is a different problem: I agree btc is not the solution, we need a political solution for that.
And maybe a currency backed by real things (not necessarily precious metals, common goods would represent the economy better). Either the bank has it and I can get it anytime or it's fraud.
>It's because of fractional reserve and banks and governments colluding to print money out of thin air or just spend most of it.
Have you ever considered that the way money is currently structured requires ever more creative solutions that sound pointless and counterproductive yet are entirely necessary to keep it alive?
I think it’s people who, in good faith, still deeply believe in the theory behind Bitcoin but ignore or dismiss the decade of experiments showing it just isn’t working.
The fact that you could hold some % of your wealth in BTC (in self custody) and have insulated yourself from the failure of the Lebanese currency is evidence that it is working.
How would self-custody of BTC allowed this man to pay for his father's medical bills? As far as I'm aware the hospital did not accept bitcoin payments.
There have also been several instances in time where BTC has lost 80% of its value (and many more instances of 50%+), so it doesn't protect against the downside risk of needing money in an emergency.
> How would self-custody of BTC allowed this man to pay for his father's medical bills? As far as I'm aware the hospital did not accept bitcoin payments.
Sell your BTC for cash, in person.
> There have also been several instances in time where BTC has lost 80% of its value (and many more instances of 50%+)
Better than the 90% inflation (or withdrawal "correction") in Lebanon.
There are P2P non custodial exchanges where you can sell your BTC in person (e.g. LocalCryptos), in case you need to stop hodling for some sudden expense, like the medical bills for your dad.
Did you try to search Lebanon on localcryptos or localbitcoins? The former has no listings which transact in LBP, only one which requires Western Union (USD).
I’m not advocating for putting 100% of your money into BTC, but a chunk would help (especially in countries with less stable currencies).
The hospital might not take it directly, but he’d still retain control of it and be able to find a way to exchange it for something the hospital does take.
It might help in this situation, but it's not the best possible solution. Storing it in USD or gold is more stable. You could keep those in a vault or in a foreign bank account. Bitcoin is very volatile and, as you said, still requires exchange, which might also be very tricky in a situation like this.
I do think allocating some percentage into BTC makes sense depending on an individual's risk tolerance. But only as a speculative investment and absolutely not for emergency funds, due to the volatility.
> But only as a speculative investment and absolutely not for emergency funds, due to the volatility.
In a country with a sound financial system, 6 months of expenses in a savings account might suffice. However in a country without a sound financial system you'd want 6 months of expenses in a savings account to protect against your own job loss, and maybe 6 months of expenses in bitcoin/offshore account to protect against a local financial system collapse.
>can be useful in an emergency situation as shown here.
Clearly holding Lebanese currency in a bank may not be useful for holding emergency funds. But I do not believe that it's been shown that at point in time an asset which can drop 50% in value over two months, which is the type of acute timeline in which an emergency can occur, and requires transacting into LBP anyways in this scenario, is useful for holding emergency funds either.
A: his money would be on the blockchain where it's unable to be seized by the bank.
B: as Bitcoin is a world currency it's unlikely would face inflation to the level that the local currency has
C: if he was unable to change Bitcoin into the local currency to pay for the medical procedures, he could transact with someone like a money changer instead
This scenario is kind of the whole reason the Bitcoin exists
Once he finds a local Lebanese money changer willing to exchange LBP for bitcoin (for how large of a fee?) and sends the BTC, he now finds himself in the exact same situation as the bank - having to trust a centralized entity.
And inflation is also not so much a concern if the value of the asset itself drops 50% in two months.
Trusting a 'centralized' entity of your own choosing, rather than a limited choice of broken banks, for a short period of time for a single transaction is a big step up to having to trust a centralized bank of little of your own choosing in the midst of a banking crisis _for the entire duration of ownership of the money_.
This is Lebanon, not someplace like France. This could be a money changer with an AK at his side, a buyer with AK at his side, money and BTC changes hands and after the confirmations finish out on the BTC side they're on their way, simple as.
Well even if you had BTC and can convert it to cash somehow, where do you put that cash? How does this guy pay the hospital? Turn up with $30k in a duffle bag?
Somewhere your money has to go into the countries financial systems. Which makes sense. Money isn’t just for trade. It’s to exert soft power.
I'm just curious how many people here have been to a money changer in the middle east. I've interacted with them in Iraq and Syria. A dude will stand there with gigantic bricks of currency in a clear box on a cart, including stacks of hundreds. He could easily have 50k+ there.
It's all very safe though. There is some guy standing around the corner with an ak behind a counter, and you can be sure 7.62mm size holes end up in the head of anyone who would try to rob the people doing the exchange. On one occasion the money trader made a very obvious calculation heavily in my favor, that he likely did not intend to make. I tried to walk away quickly with the money, and 3 men chased me down. I'm quite sure if I had stolen the money instead of merely gotten "lucky" they would have chopped an arm off instead of nicely asking to reverse the transaction (which I found wise to do).
The whole thing could be extended to BTC quite easily, and it's been awhile since I've been to the ME but it wouldn't surprise me if they've already added BTC to the mixup. From a western perspective it sounds insane to hear large sums of cash could potentially be traded easily and readily in a relatively "impoverished" nation on the street but for these people it's just regular business in the cash-economy world they live in.
Soft power? Henry George argues owning land is "hard power" but ground rent is a residue, money can absorb ground rent through interest payments, making money also "hard power".
No, I mean the local centralized entity that would need to have sufficient LBP available for exchange for BTC to solve this man's problem. He needs to pay a hospital, not trade crypto with an anonymous counterparty.
That's still just a counterparty. It would be centralized if there were a third actor that mediated all transactions between two parties, e.g. a FOREX exchange or bank that processed the transaction.
That's like saying TOR is centralized because you interact with a "centralized" peer.
> as Bitcoin is a world currency it's unlikely would face inflation to the level that the local currency has
If Bitcoin drops in value substantially, that has the same effect to retail shoppers as inflation.
And with all of the bonkers things to happen in the last decade, seeing Bitcoin drop to a small fraction (like 1/10th) of its current value in the next 2-3 years seems unlikely but not entirely out of the question. And that's a pretty big downside when talking about ones' life savings or even ones' emergency fund.
But if you’re in a place where this sort of thing is necessary (keeping your money out of government or bank hands), you might be willing to take that risk. Because being able to get some money out of the country, is still far better than having no money. Imagine for a second you had to flee and claim asylum. I think it’s fair to say that this use case for crypto is undisputed.
The major problem with this is that these people have to use systems that’s full of scams and the value of their money is controlled by people in the first world with tons of cash to burn.
Probably some combination
of Bitcoin, commodities you could carry on a person (gold? jewelry?), and real-estate (relatively less likely to be taken than cash) is a good plan. But I'm not an expert.
It solves the initial problem of "how do I get my money out of the bank" because you ARE the bank (sort of). BTC doesn't directly solve the problem of liquidity, exchange to other currencies, etc. however.
> It solves the initial problem of "how do I get my money out of the bank" because you ARE the bank (sort of).
Unless you use an exchange, which a lot of people do. You don't have to, of course, but you could also keep your savings in cash - which would not only avoid the above problem, but also rid you of the need to exchange it.
Lebanon is not a country lacking people who keep savings in cash, and some of those people likely need to send it out of the country without suffering their broken banking system. Honestly I'd be surprised if it _was_ hard to trade crypto for cash in Lebanon.
Yes, Lebanese people with foreign bank accounts were probably better off. But not all USD-denominated accounts are necessarily safe (it depends on the country), and sometimes it might be hard to open an account.
Fiat already has self custody, it's called storing banknotes under your mattress (this is sometimes done in countries with poor bank records btw). The trouble is that you need to cover yourself any risks, like losing the money to robbery or fires
Which incidentally is the same problem of cryptocurrencies: you need to have good security practices to not lose money to malware or simply forgetting the password
When you choose a bank you also have risks, but a different set of risks. It's more like systemic risks, that everyone else would also be affected
I recommend Saifedean Ammous' interview with Lex Fridman.
He's got strong opinions and a somewhat dour persona, but as Lebanese-Palestinese he's lived in a very different environment than what we're used to here in the West.
If you keep an open mind and understand where he's coming from, I think he's good some insightful ideas on Bitcoin and its role in economic upheaval.
FWIW this episode turned me from a "fuck any form of crypto" stance to an appreciation of BTC the technology. All the other scam coins and Ponzi schemes can't collapse to zero soon enough.
BTC has the same problem with exchanges gambling with their customers' currencies, setting up prices that work for them, running out of Bitcoin to trade and collapse when people want to take their money out.
The Lebanese lira might as well have been a cryptocoin and the Lebanese banks might as well have been exchanges. Anyone keeping their savings in their own home wouldn't need to rob banks to get their deposit out, just like anyone who keeps their Bitcoin in their own wallet doesn't run the risk of exchanges collapsing around them.
In this specific case, perhaps yes, but in most cases where your country is collapsing you will also want to cross borders. Your cash is likely to be confiscated.
I like how people often suggest to “just” open an account in a foreign bank.
Even assuming the foreign bank would not “just” refuse you for not being a resident, or being a significant risk, or not accepting your identification, or whatever. Then your Lebanese bank would surely wire the money there without any issues, and your Lebanese employer would be happy to do so as well, and of course there are no laws stating that only liras are legal payment currency for services rendered in Lebanon.
I have a few friends who worked in China and the default is you immediately move any money out of the country as soon as you can. It's simple to bring it in, but getting it out can range from "here are 5 forms to fill out" to "sorry, we aren't processing transfers at this time".
Or you can memorize 12 words. Not saying this should be the common practice or that everyone should do it, but having the ability to store your wealth in your mind is useful.
This feels like a parody, you don't store wealth in your mind otherwise you could create it out of thin air you merely keep track of your personal share of the world's wealth.
Who can look me in the eye with a straight face and say bitcoin protects against volatility? That bitcoin "protects exactly" against mismanaged economy and corrupt government?
It's become my mantra but I swear people on HN don't understand how crappy life can get, how oppressive governments can get, how many rights and things we take for granted can be taken away by thugs, and believe a super high tech complicated software stack can magically fix it. sorry if that sounds harsh, but you know what, it is also harsh to listen to hungry angry oppressed people and constantly claim "bitcoin can fix that for ya".