Cryptocurrencies

[Guest cherzeca]

question for those on this thread who are long bitcoin (either in coin or in theory):

 

Bitt is blockchainifying the barbados fiat currency.  do you see this central bank adoption expanding to other countries? is this a plus or negative for blockchain/bitcoin adoption?

[Liberty]

If it's privately owned, how is it not centrally controlled by the owner? What are those advantages was my question.

 

The advantage is it is much, much faster as you don't need to do mining.

 

They do appear to have a custom set of validators, so you are trusting ripple to be honest about which validators they use.

 

What's the advantage over a traditional database/ledger, I mean.

 

I know it's faster than, say, Bitcoin, but if it's not decentralized, then the whole point of a "distributed trustless network" falls down. You're still having to trust an entity, just like with traditional banking, and their control of the currency means that they can change the rules/software down the line without external consensus.

[no_free_lunch]

So again, I am no expert on this.  However from what I have read, the chain IS decentralized, sort of, and still run by the individual banks so that allows them to develop trust and audit the transactions.  The banks will develop relationships and balances with other financial institutions and ramp up volume as the trust builds.  If they want to transfer to a new institution and one of the banks they do buisness with has a relationship then they can "ripple" and bridge across those relationships.  I suspect there is much more to it and I don't understand the inner workings of bank transfers other than I am told it is a slow process when going across countries.

 

There is also this.  It seems like it is slowly gaining adoption and ultimately real world evidence is what matters.

 

https://www.cnbc.com/2017/11/16/american-express-santander-team-up-with-ripple-on-blockchain-platform.html

 

[rkbabang]

question for those on this thread who are long bitcoin (either in coin or in theory):

 

Bitt is blockchainifying the barbados fiat currency.  do you see this central bank adoption expanding to other countries? is this a plus or negative for blockchain/bitcoin adoption?

 

I think it will have no effect. Rather than re-type my reasons read my posts in this discussion: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/money-mustache-why-bitcoin-is-stupid/

[Guest cherzeca]

question for those on this thread who are long bitcoin (either in coin or in theory):

 

Bitt is blockchainifying the barbados fiat currency.  do you see this central bank adoption expanding to other countries? is this a plus or negative for blockchain/bitcoin adoption?

 

I think it will have no effect. Rather than re-type my reasons read my posts in this discussion: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/money-mustache-why-bitcoin-is-stupid/

 

i think something along this line is needed for legitimacy and widescale adoption

[Liberty]

https://medium.com/@twobitidiot/i-see-you-xrp-fcf151feb96d

[Liberty]

[cmlber]

Regarding inflation: there is a pre determined max for Bitcoin (not all of them) so there is no inflation in total supply. There is some inflation in what portion is free floating already (the release of new tokens exponentially decreases to zero).

 

I understand that the #of bitcoins is fixed, but this does not answer my question. Creating these cryptotokens is like creating money, as long as those tokens have a value and there is no economic benefit created (at least for the time being) with these tokens. This makes it inflationary in the real world.

 

So the addition of these new currencies/stores of value on top of all of the currencies/stores of value already existing in the world is inflationary.  I agree.  I think any value these new currencies capture long term will come at the expense of something else, I would expect a decrease in value of fiat and precious metals.  I think gold will be reduced in value somewhat, but gold will still have value because it has a feature Bitcoin doesn't (i.e. you still have it when the electricity goes out or the internet goes down), it is the best non-digital store of value.  I would expect other metals like silver and copper to lose all value over the value they have as a commodity for industrial/commercial uses.  I think the majority of value loss will come from fiat currencies as they will be used only for transactional purposes and lose all store-of-value uses almost completely and probably lose much of their transactional value to one or more altcoins as well.

 

What is the mechanism by which 1 USD becomes worth less than 1 USD?  It can become worth less in real terms through inflation, i.e., you can purchase fewer goods with 1 USD, but 1 USD is always 1 USD.  It's not as if you can take 100 USD, and then it becomes 60 USD to "make room" for bitcoins valued at the equivalent of 40 USD. 

[rkbabang]

Regarding inflation: there is a pre determined max for Bitcoin (not all of them) so there is no inflation in total supply. There is some inflation in what portion is free floating already (the release of new tokens exponentially decreases to zero).

 

I understand that the #of bitcoins is fixed, but this does not answer my question. Creating these cryptotokens is like creating money, as long as those tokens have a value and there is no economic benefit created (at least for the time being) with these tokens. This makes it inflationary in the real world.

 

So the addition of these new currencies/stores of value on top of all of the currencies/stores of value already existing in the world is inflationary.  I agree.  I think any value these new currencies capture long term will come at the expense of something else, I would expect a decrease in value of fiat and precious metals.  I think gold will be reduced in value somewhat, but gold will still have value because it has a feature Bitcoin doesn't (i.e. you still have it when the electricity goes out or the internet goes down), it is the best non-digital store of value.  I would expect other metals like silver and copper to lose all value over the value they have as a commodity for industrial/commercial uses.  I think the majority of value loss will come from fiat currencies as they will be used only for transactional purposes and lose all store-of-value uses almost completely and probably lose much of their transactional value to one or more altcoins as well.

 

What is the mechanism by which 1 USD becomes worth less than 1 USD?  It can become worth less in real terms through inflation, i.e., you can purchase fewer goods with 1 USD, but 1 USD is always 1 USD.  It's not as if you can take 100 USD, and then it becomes 60 USD to "make room" for bitcoins valued at the equivalent of 40 USD. 

 

1 2030 USD will buy less than 1 2018 USD used to and in 2030 the Bitcoin market cap will be equal to 4-12T 2018 USDs.

[Liberty]

This is fine: https://www.cnbc.com/2018/01/04/cryptocurrency-dogecoin-now-has-a-market-value-of-more-than-1-billion.html

[sjh]

If you want to see how an implementation of the lightning network wallet could look like check out the videos in the following twitter thread. He shows how you can add a payment contact (i.e. open a payment channel) and how to send, request and receive payments. I guess it will still take a few months until the bitcoin network has fully rolled out lightning, but it's great to glimpse how it might look like for users.

 

[cmlber]

Regarding inflation: there is a pre determined max for Bitcoin (not all of them) so there is no inflation in total supply. There is some inflation in what portion is free floating already (the release of new tokens exponentially decreases to zero).

 

I understand that the #of bitcoins is fixed, but this does not answer my question. Creating these cryptotokens is like creating money, as long as those tokens have a value and there is no economic benefit created (at least for the time being) with these tokens. This makes it inflationary in the real world.

 

So the addition of these new currencies/stores of value on top of all of the currencies/stores of value already existing in the world is inflationary.  I agree.  I think any value these new currencies capture long term will come at the expense of something else, I would expect a decrease in value of fiat and precious metals.  I think gold will be reduced in value somewhat, but gold will still have value because it has a feature Bitcoin doesn't (i.e. you still have it when the electricity goes out or the internet goes down), it is the best non-digital store of value.  I would expect other metals like silver and copper to lose all value over the value they have as a commodity for industrial/commercial uses.  I think the majority of value loss will come from fiat currencies as they will be used only for transactional purposes and lose all store-of-value uses almost completely and probably lose much of their transactional value to one or more altcoins as well.

 

What is the mechanism by which 1 USD becomes worth less than 1 USD?  It can become worth less in real terms through inflation, i.e., you can purchase fewer goods with 1 USD, but 1 USD is always 1 USD.  It's not as if you can take 100 USD, and then it becomes 60 USD to "make room" for bitcoins valued at the equivalent of 40 USD. 

 

1 2030 USD will buy less than 1 2018 USD used to and in 2030 the Bitcoin market cap will be equal to 4-12T 2018 USDs.

 

Money doesn't work like that though... it doesn't lose its nominal value (money is by definition nominal).

 

I guess what you're assuming is USD gets used less frequently and therefore the money supply grows by the new amount of bitcoin but velocity declines, because USD is spent with less velocity.  That's the only mechanism I can think of by which a new money supply wouldn't be inflationary. 

[SharperDingaan]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most value to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition, and there is nothing wrong in that.

 

SD

 

 

 

 

[SnarkyPuppy]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most valuable to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition. Nothing wrong in that.

 

SD

 

Two quick thoughts on this-

 

a)  Do you disagree that the primary element of value in bitcoin is that it is completely decentralized (fundamentally inconsistent with any digital gold issued by a central bank)?  I do not see central bank issuing crypto as a risk for this specific reason - what am I missing here?

b)  Bitcoin is the opposite of anonymous and is a great tool for tracking movements of money - no?  Ross Ulbricht would probably support this statement.  All transactions are publicly and immutably stored for everyone to see - how is this anonymous in any way under the current dynamic?  Regulators should love this for AML. 

[DeepSouth]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most value to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition, and there is nothing wrong in that.

 

SD

 

 

Bitcoin does not do everything fiat does. Try paying your taxes with bitcoin and you will be posting to COBF from federal prison. I'd argue that satisfying government levies might be the most important function of a currency as it's the function that keeps you out of prison. Why is it that most bitcoin zealots always overlook this?

[no_free_lunch]

b)  Bitcoin is the opposite of anonymous and is a great tool for tracking movements of money - no?  Ross Ulbricht would probably support this statement.  All transactions are publicly and immutably stored for everyone to see - how is this anonymous in any way under the current dynamic?  Regulators should love this for AML. 

 

If I may jump in to this.  I think that this doesn't necessarily hold up, beyond a very theoretical sense.  In practice there are bitcoin apps that pool transactions together and make it effectively impossible to trace who did what. 

 

Imagine that you are going to give someone we will call A $1k.  I am going to give someone called B $2k.  There are tools that will make a single transaction such that deepsouth contributes $1k, no_free_lunch contributes $2k,  then a gets $1k and b gets $2k.  You can't really tell who gave the money to A versus who gave the money to B.  Multiply that by a dozen or more people and then do that a couple of times and you can't ever know who was really giving the money to who.  They would have to pass laws to ban transaction pooling to get around this.

[SnarkyPuppy]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most value to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition, and there is nothing wrong in that.

 

SD

 

 

Bitcoin does not do everything fiat does. Try paying your taxes with bitcoin and you will be posting to COBF from federal prison. I'd argue that satisfying government levies might be the most important function of a currency as it's the function that keeps you out of prison. Why is it that most bitcoin zealots always overlook this?

 

Can you pay taxes in gold today?

[SnarkyPuppy]

b)  Bitcoin is the opposite of anonymous and is a great tool for tracking movements of money - no?  Ross Ulbricht would probably support this statement.  All transactions are publicly and immutably stored for everyone to see - how is this anonymous in any way under the current dynamic?  Regulators should love this for AML. 

 

If I may jump in to this.  I think that this doesn't necessarily hold up, beyond a very theoretical sense.  In practice there are bitcoin apps that pool transactions together and make it effectively impossible to trace who did what. 

 

Imagine that you are going to give someone we will call A $1k.  I am going to give someone called B $2k.  There are tools that will make a single transaction such that deepsouth contributes $1k, no_free_lunch contributes $2k,  then a gets $1k and b gets $2k.  You can't really tell who gave the money to A versus who gave the money to B.  Multiply that by a dozen or more people and then do that a couple of times and you can't ever know who was really giving the money to who.  They would have to pass laws to ban transaction pooling to get around this.

 

I think you can make the same argument for USD - plenty of mechanisms including utilizing international shell companies are used for laundering money.    Criminal activity is a red herring because you can make the exact same argument for all other currencies actively accepted. 

 

I really should stop posting about bitcoin - will have so much egg on my face when this goes to $0.  I just want to reiterate that I don't think bitcoin is a >50% bet.  I just think it's a good gamble based on current prices and I think the value proposition is largely misunderstood.  :)

[DeepSouth]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most value to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition, and there is nothing wrong in that.

 

SD

 

 

Bitcoin does not do everything fiat does. Try paying your taxes with bitcoin and you will be posting to COBF from federal prison. I'd argue that satisfying government levies might be the most important function of a currency as it's the function that keeps you out of prison. Why is it that most bitcoin zealots always overlook this?

 

Can you pay taxes in gold today?

 

 

Of course not. I never said that it couldn't replace gold, I implied that it can't replace the dollar.

 

I own bitcoin because of fund flows on the bet that it becomes seen as a stable store of value.

[SharperDingaan]

Fiat is a unit of account, medium of exchange, and store of value (guaranteed by the issuing CB); a Bitcoin is exactly the same thing.

And you CAN use it to pay your taxes - as is commonly done in Estonia.

 

Crypto as a payment system runs far more effectively and efficiently on a database.

Until you do your own DD on how the technology works, no one can help you.

 

SD

 

 

[KJP]

Fiat is a unit of account, medium of exchange, and store of value (guaranteed by the issuing CB); a Bitcoin is exactly the same thing.

And you CAN use it to pay your taxes - as is commonly done in Estonia.

 

Crypto as a payment system runs far more effectively and efficiently on a database.

Until you do your own DD on how the technology works, no one can help you.

 

SD

 

I have to ask what you mean by "store of value".  Has fiat really been a good "store of value" over decades?  Even the fiats that are seen as generally stable like the dollar have not retained their value in real terms in the 20th century, e.g., look at the change in the nominal price of a gallon of milk or a subway ride in NYC.

 

EDIT:  I do note that you didn't say fiats were a "good" store of value.  So, to the extent a "store of value" is anything that allows at least some preservation of value over time, then fiats would qualify, even if they're not great at it.

[DeepSouth]

LOL @ Estonia. I don't live there. I can't pay taxes in bitcoin.

[SnarkyPuppy]

A few comments to aid in understanding cryptocurrency ...

 

1) A currency is simply a unit of account AND a payment system.

2) Every user must decide, per payment, what is MOST important to them; speed OR security (not both). If you're paying for coffee, 5-10 seconds for the machine to process your card is acceptable; 10 minutes+ for a miner to verify your token is not.

3) Every user must decide, per payment, the level of security required. If you're paying via a FI card, the FI stands behind the transaction, and fast processing via a database becomes practical. If you're paying with crypto, NOBODY stands behind the transaction, and slow processing via the miner network on a distributed ledger is a necessity. 

4) Every user must decide, per payment, the level of anonymity required. The more it matters, the more you require the total anonymity of Bitcoin. Most of us will never require that level of anonymity, and if so - only very rarely.

 

Hence it should be very clear that for the vast majority of payments, we don't need a crypto running on a distributed ledger; the existing rails of cash and FI cards are more than adequate. With no demand for your product (MR), you cannot cover your costs (MC), and must go out of business. To survive, your payment system must offer something that people will pay for - level of anonymity.

 

Bitcoin is completely functional, anonymous digital cash, that exists entirely outside of the financial system. Records are immutable, it can be exchanged into any fiat currency you want, does everything that a fiat currency does, doesn't cost anything to keep secure, and is always available, at any time, anywhere in the world. It is an incredibly valuable store of value, and it is of most value to the criminal element.

 

Nothing prevents CBs from banding together to create a competing 'Bitcoin' under a non-sovereign organization (UN, World Bank, etc.). The coin could be used to settle global trade payments, removing the need to convert into fiat currency (USD, Euro, etc) to pay bills as they come due. The coin could partially displace current sovereign gold and foreign currency holdings, as an alternative diversifying asset. However, the coin could also support a global fractional reserve banking system - which Bitcoin CANNOT.

 

Throughout history, 'good' money has always chased out 'bad' money; most would expect a global CBDC to do something similar to a Bitcoin. The result is that Bitcoin survives as a valuable niche store of value, offering total anonymity as a unique value proposition, and there is nothing wrong in that.

 

SD

 

 

Bitcoin does not do everything fiat does. Try paying your taxes with bitcoin and you will be posting to COBF from federal prison. I'd argue that satisfying government levies might be the most important function of a currency as it's the function that keeps you out of prison. Why is it that most bitcoin zealots always overlook this?

 

Can you pay taxes in gold today?

 

 

Of course not. I never said that it couldn't replace gold, I implied that it can't replace the dollar.

 

I own bitcoin because of fund flows on the bet that it becomes seen as a stable store of value.

 

Got it - we're on the same page.

[SharperDingaan]

Fiat is a unit of account, medium of exchange, and store of value (guaranteed by the issuing CB); a Bitcoin is exactly the same thing.

And you CAN use it to pay your taxes - as is commonly done in Estonia.

 

Crypto as a payment system runs far more effectively and efficiently on a database.

Until you do your own DD on how the technology works, no one can help you.

 

SD

 

 

I have to ask what you mean by "store of value".  Has fiat really been a good "store of value" over decades?  Even the fiats that are seen as generally stable like the dollar have not retained their value in real terms in the 20th century, e.g., look at the change in the nominal price of a gallon of milk or a subway ride in NYC.

 

EDIT:  I do note that you didn't say fiats were a "good" store of value.  So, to the extent a "store of value" is anything that allows at least some preservation of value over time, then fiats would qualify, even if they're not great at it.

 

Technically a $1 bill is a bearer bond issued by the central bank, backed by the full faith and credit of the sovereign. The credit being supported by the sovereign ability to charge and collect on taxes, rents, etc. The store of value is 'dynamic', rather than a 'static' asset either sitting in a vault, or in the ground.

 

SD

[KJP]

 

 

Technically a $1 bill is a bearer bond issued by the central bank, backed by the full faith and credit of the sovereign. The credit being supported by the sovereign ability to charge and collect on taxes, rents, etc. The store of value is 'dynamic', rather than a 'static' asset either sitting in a vault, or in the ground.

 

SD

 

I don't understand what point you're trying to make.   

 

I don't think it can be disputed that $1 will buy you far less milk or eggs or bacon or subway rides or movie tickets today than $1 would have bought you 100 years ago.  See, e.g., https://www.bls.gov/opub/btn/volume-2/average-food-prices-a-snapshot-of-how-much-has-changed-over-a-century.htm 

 

The link illustrates why I think USD is not a good store of value.  If you think it's a good store of value, then I suspect we're using "store of value" to mean different things.