Bitcoin and Crypto Thread

[chance vought]

Credit works when trust is high : in a tribe of 100 people where everyone knows each other and is probably related…or in a Pax Americana world mostly at peace post WW2.

Credit is more efficient than money so is preferable when trust is high - promises are easier to trade than commodities.

When trust is low, credit loses its value. Trust between governments to each other, and the people and government is reducing, and we can see it in credit money - (rising interest rates on bonds).

 

[scorpion]

Credit is more efficient than money so is preferable when trust is high - promises are easier to trade than commodities.

This is really the core truth of it, and why the idea of a "Bitcoin standard" is simply utopian thinking. Even if Bitcoin somehow became the most valued financial commodity in the world and came to underlie the future financial system as the reserve currency, it would inevitably become fractionalized, just as gold was in times past. Banks would have "Bitcoin reserves" and would issue credit money far in excess of those reserves. There is simply no future in which you uninvent the concept of credit money and fractional reserve banking, it is too powerful an idea, and allows nations who utilize it effectively to economically outcompete those who do not.

The Austrians yelling into the wind about the evils of fiat might as well be ranting about the evils of gunpowder and advocating a return to swords, bows and arrows, for all the good it will do them.

 

[Blade Runner]

The Austrians yelling into the wind about the evils of fiat might as well be ranting about the evils of gunpowder and advocating a return to swords, bows and arrows, for all the good it will do them.

Here we get at another point, money at its best is a technology, but still with tradeoffs. The USD system is a massive network and has technological components. What you don't understand about BTC is that its network and properties, all part of a larger technology and secured system, is a technological breakthrough. The reason gold is inferior to BTC in the new, digital and information or "A"I (I hate that term) world, is because it has not technological aspect or breakthrough; since it can only be local without major problems (audit, transport), it fails in the modern, global world.

I've been in the US my entire life and every year is better than the last.

Well, you don't have much to worry about then. You sure post a lot of worries, though, I've noticed.

 

[Australia Sucks]

This is really the core truth of it, and why the idea of a "Bitcoin standard" is simply utopian thinking. Even if Bitcoin somehow became the most valued financial commodity in the world and came to underlie the future financial system as the reserve currency, it would inevitably become fractionalized, just as gold was in times past. Banks would have "Bitcoin reserves" and would issue credit money far in excess of those reserves. There is simply no future in which you uninvent the concept of credit money and fractional reserve banking, it is too powerful an idea, and allows nations who utilize it effectively to economically outcompete those who do not.

The Austrians yelling into the wind about the evils of fiat might as well be ranting about the evils of gunpowder and advocating a return to swords, bows and arrows, for all the good it will do them.

What you are missing here is that even when you fractionalize a commodity money system it still acts as a barrier against excesses by governments and banks because people can ultimately always demand delivery of the the underlying commodity if they feel the counterparty (the governments or banks, etc) have become to untrustworthy/uncreditworthy. This means there is a self correcting/balancing market mechanism. If deficits, etc from a government get too out of control the dollar holders/bond holders etc will start demanding their gold back.

There are many examples of this in real life. One such example is Charles De Gaulle the former French President repatriating France's gold back from the Americans by giving them back their US dollars and asking for the gold back.

"President de Gaulle of France initiated the secret operation “Vide-Gousset” and repatriated 3,313 tonnes of gold reserves from the vaults of the Federal Reserve in New York and the Bank of England in London from 1963 until 1966. De Gaulle feared America’s deficit in its balance of payments would rupture Bretton Woods and lead to a devaluation of the dollar against gold.

All France’s dollars were converted into gold, and to avoid treachery, the metal was repatriated over the course of three years. It took 44 boat trips and 129 flights to bring home more than three thousand tonnes of gold to the Banque de France in Paris.

France’s decision turned out extremely well. As was foreseen by the French, the price of gold in dollars increased sharply, from $35 to $800 dollars an ounce, from 1968 until 1980—the dollar lost 96% of its value against gold. Countries that held on to their dollars were less fortunate."

How France Secretly Repatriated All Its Gold Before Nixon's Dollar Devaluation

President de Gaulle iverksatte den hemmelige operasjonen «Vide-Gousset» og repatrierte 3.313 tonn gull fra hvelvene til Federal Reserve og Bank of England fra 1963 til 1966. Han fryktet at USAs underskudd på betalingsbalansen ville bryte Bretton Woods og føre til en devaluering av dollaren mot gull.

www.gullerpenger.no

Under a full fiat system you do not have the same level of constraints on banks and governments as the correcting market mechanisms are much weaker.

Warren Buffett's father Howard Homan Buffett who at one point was a congressman made a speech about the importance of money redeemable in gold outlining the very point I just mentioned. i suggest you read the speech which is only 5 pages long.

https://www.fgmr.com/wp-content/uploads/2017/02/Howard-Buffett-explains-sound-money-4-May-1948.pdf

Its not a coincidence that the largest ever peacetime government budget deficits have occurred under a full fiat system compared to the much smaller peacetime deficits under a partial gold standard.

The other point is that even for someone without knowledge of economics almost everything that governments do is evil and against your interests. Just as the covid vaccine and myriad other government pushed programs are, the government forcing people to use irremediable fiat should already make people suspicious. As an individual doing the opposite of what the government wants is usually a good idea.

 

[scorpion]

What you don't understand about BTC is that its network and properties, all part of a larger technology and secured system, is a technological breakthrough.

If this is true, what makes you think it will be the last of its kind? This strikes me as an exceptionally risky bet, especially as we enter the age of artificial intelligence. There is zero reason to believe that Bitcoin, whose value you correctly state is based entirely on its network (aka its popularity) could not be replaced by a more sophisticated, secure and widely adopted future crypto.

You, chance vought and Australia Sucks all have legitimate arguments against the current system. I've never denied as much - it is clearly imperfect. But there is simply no reason to believe that Bitcoin is somehow an improvement. Or, supposing that Bitcoin actually was an improvement, there is no reason to believe that it would not be superseded by some future crypto technology (even most Bitcoin maxis will admit that as a technology Bitcoin is already showing its age compared to more modern cryptos). "But muh network" is not a good enough reason. In the face of grossly superior technologies, network effects quickly fall by the wayside as the inevitable preference cascade begins and people adopt the new technology en masse (how many people do you still see walking around with CD players, talking on landline telephones or using MySpace?).

That being the case, why would any rational person invest more than a gamblers share in Bitcoin?

 

[Australia Sucks]

there is simply no reason to believe that Bitcoin is somehow an improvement. Or, supposing that Bitcoin actually was an improvement, there is no reason to believe that it would not be superseded by some future crypto technology (even most Bitcoin maxis will admit that as a technology Bitcoin is already showing its age compared to more modern cryptos). "But muh network" is not a good enough reason.

Firstly Bitcoin is an improvement on fiat and we have already made many arguments proving the case. Its more transportable. I can send $1 billion dollars of Bitcoin to a wallet address in Venezuela in minutes. Trying doing that with fiat and see how long it takes. Its cheaper to send around the world. Try sending $1000 USD from USA to Vietnam via western union or bank wire and see how much it costs you. A lot more than sending $1000 of Bitcoin. Bitcoin is also scarcer than fiat therefore it retains its value as opposed to fiat which has an ever expanding supply. Also its harder to censor Bitcoin than fiat. During Covid in Canada the Canadian truckers who protested against covid restrictions were debanked as were people like Nigel Farage in England. hence WHY Nigel Farage is a Bitcoin proponent.

As to your second point yes "muh network" is a good enough reason. Peter Thiel who is a legendary venture capitalist and understands disruptive technologies better than 99.9% of people made a point in his book zero to one which I have read. He said that for a new revolutionary technology it has to be at least 10 times better to replace an incumbent technology. Being marginally better doesn't cut the mustard. Sure there are crypto tokens that you can argue aside from being worse on the network effect are technologically superior to Bitcoin but they do not have the same network effect and they are not 10 times better or 10 times cheaper. Not even close. Switching costs especially for a vast network are a huge barrier to entry.

Besides even if something one day does get created which is 10 times better than Bitcoin it will not replace Bitcoin overnight it will be a gradual process and Bitcoiners will have time to jump ship. Just like when Netflix was created it was only many years later that Blockbuster went bankrupt. Smart investors in blockbuster could see the writing on the wall and sold their blockbuster shares and later bought Netflix shares.

 

[Острог]

That being the case, why would any rational person invest more than a gamblers share in Bitcoin?

My greatest apprehension is the fact that an unknown person or organization owns one 20th of supply which can be dumped to crash the price. Someone has it by the balls and no one knows who that is. Buffet put it well calling it rat poison.

 

[Blade Runner]

There is zero reason to believe that Bitcoin, whose value you correctly state is based entirely on its network (aka its popularity) could not be replaced by a more sophisticated, secure and widely adopted future crypto.

Zero reason? Its value is based on its properties AND network, all of the above. Those properties are what sound money for the digital age (yes the one we are living in) is all about.

But there is simply no reason to believe that Bitcoin is somehow an improvement.

No reason? Have I been typing gibberish for all these years while you and Peter Schiff keep missing out on 30-40% CAGR?

In the face of grossly superior technologies

Where are they?

That being the case, why would any rational person invest more than a gamblers share in Bitcoin?

Are Larry Fink, Stanley Druckenmiller, Paul Tudor Jones, David Marcus, Adam Back, Fidelity Investments, Bhutan, El Salvador, the State of Texas, etc. irrational?

Again, I've given many reasons why one should, it's just funny that some of the most important investors in the world agree, it's the best performing asset, and somehow I'm not the "rational" one. That makes no sense.

 

[Blade Runner]

Someone has it by the balls and no one knows who that is.

Let them sell. People who know the value will buy and it will of course, only be a matter of time til that original seller has egg on his face.

Buffet put it well calling it rat poison.

And the rat is fiat.

 

[chance vought]

My greatest apprehension is the fact that an unknown person or organization owns one 20th of supply which can be dumped to crash the price. Someone has it by the balls and no one knows who that is. Buffet put it well calling it rat poison.

This has already happened in bitcoin's history. The infamous "Bear-Whale" in 2014. In that case it was over 30,000 btc.

I dont worry about Satoshi selling 1 million bitcoin or anyone selling - they are losing wealth in the end.
Anyone who has ever sold bitcoin is now less wealthy than they would be had they not sold.

In fact, if bitcoin is going to be adopted globally, there have to be sellers - or at least someone willing to trade for goods and sercices.

 

[Australia Sucks]

If Bitcoin becomes the primary world monetary reserve asset it will mean that the Austrian economists finally claim victory over the neo Keynesians and we will be living in a new world. Inflation is one of the biggest evils to befall civilization and unlike disease and natural disasters its entirely a man made affliction.

 

[Australia Sucks]

Peter Schiff at the Bitcoin conference, still critical of Bitcoin.