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by bvk
4573 days ago
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Your analogy is inapt. What does the federal reserve produce when it prints a dollar? All that ink and paper, not to mention the increasingly-sophisticated antic-counterfeiting measures, are going into these useless bills. But that's the cost that we pay to sustain our currency. Likewise with the computing power devoted to bitcoin. You're right that bitcoin completely lacks the properties of gold that give it use outside of being a currency. But is gold's use in electronics really why it became used as a store of value? It has other properties, too: it doesn't corrode, it's quite rare, it can be easily tested for purity. Bitcoin adds to those the ability to be stored on a piece of paper, the ability to be transferred in minutes anywhere, and a difficult-to-obfuscate ledger. Of course bitcoin loses the price floor granted by its real-world applications, but that doesn't necessarily mean it's as doomed as dogecoin (the world's first internet-meme based cryptocurrency). |
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The difference between the cost of printing paper money and the cost of Bitcoin mining is that, to the best of our knowledge, paper money cannot be made significantly cheaper. However, electronic payment systems can be made significantly cheaper than the cost of Bitcoin mining. We already know how to do that from a technical point of view. The hurdles tend to be of a regulatory nature.
Those regulations have good reasons to exist, but if Bitcoin becomes sufficiently successful and practical simply as an electronic payment system, one of two things will happen: either, regulation will expand to cover Bitcoin to such an extent that Bitcoin loses advantage, or regulation will be reduced. In any case, there will be a market opportunity for non-Bitcoin systems to provide the same functionality, but cheaper.
This would then lead to Bitcoin's decline.
So if you want to argue that such a decline based on market forces will not happen, you have to have an argument that is not based on Bitcoin simply being an electronic payment system.
It seems very popular to argue that the decentralized nature of Bitcoin is what gives it a sufficient edge, and that the properties arising from its decentralized nature are impossible to replicate at a lower cost.
I'm not sure that I buy the line of argument that the decentralized nature causes a sufficient appeal. The public at large doesn't seem to care too much about that kind of thing.
Obviously, it was sufficient to spark the initial uptake of Bitcoin, which seems to have been driven by a mixture of cypherpunks, Libertarian and Austrian ideologues, and drug traders -- all three are groups that care much more about the properties that come with decentralization than the general public. And that initial spark was enough to attract broader interest, which may even be sufficient to carry Bitcoin over into long-term viability in a number of niches (similar to what happened to gold). So, if you personally have skin in the game, your investment may be safe.