Comment by MrEldritch | Hacker News Reader

Comment by MrEldritch | Hacker News Reader

Parent Full thread

Speaking as a young person (22), I'm certainly not embracing cryptocurrencies and neither is anyone I know. Bitcoin is virtually useless as a currency[1] and, having no other compelling use-case whatsoever, cannot really be a store of value either. (Lightning network may change that, but that also amounts to totally replacing almost all of Bitcoin by building a hopefully less shitty system on top of it. Lightning being necessary means that Bitcoin as Satoshi envisioned it has failed utterly.)

Ethereum strikes me as basically a gimmick, and the constant calls for forks as some completely immutable smart contract gets irrevocably fucked up and the only option is to roll back the whole damn blockchain does not strike me as a problem that is even fixable; smart contracts just don't seem to be a good idea. It also seems terribly inefficient as a computing platform and unlikely to scale well.

I don't deny that the dream of decentralized, fast, low-transaction-cost, disruptive payment infrastructure would be groundbreaking if it could be achieved without instantly breaking due to scaling problems and wild speculation. But I'm not convinced that blockchain is even remotely the right tool to deliver it.

[1] Admittedly, not as useless as it was a couple months ago, when average transaction time would randomly spike through the roof and transaction fees were insane. But it seems like the reason that happened is not because problems were fixed, but because people moved away from Bitcoin and eased pressure on the creaking system. Bitcoin works only when people aren't trying to use it.

> Speaking as a young person (22), I'm certainly not embracing cryptocurrencies and neither is anyone I know. Bitcoin is virtually useless as a currency[1] and, having no other compelling use-case whatsoever, cannot really be a store of value either. (Lightning network may change that, but that also amounts to totally replacing almost all of Bitcoin by building a hopefully less shitty system on top of it. Lightning being necessary means that Bitcoin as Satoshi envisioned it has failed utterly.)

Speaking as a merchant selling high value hardware in a world where chargebacks and check fraud make it very hard to run a profitable online sales program... we've accepted more than $10 million in bitcoin for our products and the irreversibly means we don't need any markup for our customers to account for fraud.

It also makes international payments (US to Africa, US to China, US to Europe) almost completely seamless for any counterparty accepting crypto.

For things like cloud storage, you can set up contracts that automatically enforce penalties. No courts, no lawsuits, no backing out of a deal.

The tech is real, the use cases are real, and people are using it today to do things they couldn't do without it. It's super early, but it's going to be bigger than the internet.

>we've accepted more than $10 million in bitcoin for our products and the irreversibly means we don't need any markup for our customers to account for fraud.

I hope you realize the other side of the coin, from the consumer side, is not so great, right? What if you don't deliver the products? Maybe you're a super reputable vendor and people trust you but if you're a little guy selling stuff on ebay good luck convincing me to send you ETH. So much for the distributed currency empowering the little folks to fight against the giants.

There's a reason chargeback exists and that the balance is tipped towards the consumer instead of the vendor in general. It means that the consumer is more likely to consume. That's why even though stone-and-mortar shops could only accept cash and cheques they still use credit card that costs them more, because it's more convenient and makes it more likely for the user to consume. Reduced friction, consumer-guarantees and convenience more than justifies the Visa tax and constraints in many businesses.

In particular it's not something inherent to "fiat", Visa could unilaterally decide to never issue chargebacks for instance. They could also decide to charge the card holder for the transaction cost instead of the vendor. Do you really think that they don't do that because they never thought about it or maybe because there's a more practical reason for not doing things that way?

Why does a store of value need a compelling use-case? If you hold millions in gold it's most likely in a vault doing nothing except taking up space and storage costs alongside it's primary use case of being a store of value.

It needs to be useful for something other than just "being a store of value". Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it. There's reasons besides collective psychology that gold is worth something particular which isn't $0.

A digital asset like Bitcoin has nothing tying it down to market fundamentals at all unless there's something else to do with it. It's a disconnected number flapping about in the wind. And as we've observed, since the value people ascribe to a Bitcoin is entirely psychological, the price can do anything. I'm not storing my value in anything I can't be fairly certain will have similar or greater value in the future. A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable.

Something has to be at least a little useful for its value to be reliable. (Having a trusted organization, which you expect to be around for a long time, that promises to exchange it for something useful counts as being useful itself.)

> Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it.

In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential.

Gold used to be volatile but now is a stable store of value, it retains this because the market decides a fair price, gold can theoretically go to zero, it's just had hundreds of years to achieve a more stable price/value.

> since the value people ascribe to a Bitcoin is entirely psychological

This is totally true of gold too, it's just embedded more into society as an element that has value.

> A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable

It's cheaper and faster for me to send BTC between US/EU, volatility is an issue of course.

> Something has to be at least a little useful (or else backed up by a trusted organization) for its value to be reliable.

I'm not sure many of the 'trusted' organizations are that trustworthy, look at the 2007 crash, massively over leveraged assets with complex rules/instruments and collusion (that resulted in the UK with no one being prosecuted).

There a few ways where I see BTC having an advantage as a SoV over gold.

* Portability (transferring any amount of BTC is limited only by transaction cost).

* Scarcity (The number of BTC is capped at 21 million ever on the network, gold will still be found and mined).

* Divisible (BTC can be divided to small amounts that would make it more useful for smaller purchases where gold is not practicable).

>In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential.

Nearly 70% of the demand for gold is for jewelry, electronics, and other non-financial/SoV applications. The market value of gold is dominated by its practical and aesthetic uses.

https://www.statista.com/statistics/299609/gold-demand-by-in...

Super interesting, thanks for the link!

It looks to be dropping though: https://www.economist.com/node/16536800

>The market value of gold is dominated by its practical and aesthetic uses.

Should we really consider aesthetics here? Practical use cases within technology I can totally value.

Well, 30% of the market value of gold is from financial/SoV-type use cases! That's not insignificant. Because of the psychological consensus that gold is a decent place to store value - it's been one for several thousand years, you can reasonably assume that someone's still going to take it a few decades from now - that portion of its value fluctuates substantially depending on how interested people are in a literally solid and relatively-stable physical asset. So when people are uncertain about other investment prospects, they go to gold, because it's basically one step up from stuffing cash under your mattress insofar as gold is less subject to inflation.

Crypto is ... currently, at least, not where you go if you want something with a reliable, stable value.

And yeah, I think aesthetic value counts! It's also very much a psychological thing, and it's undeniably tied into a similar "I think this is valuable because other people will see it and think it looks valuable" loop; if gold were much cheaper, we wouldn't see as much gold jewelry. But it's also genuinely one of the better metals to make jewelry out of (doesn't corrode, ductile, nobody's allergic to it) and it's quite a pretty color. It's more fickle than industrial use, sure, but it's also much less fickle than investor speculation.

Not looking to argue with you as it seems like you have an idea stuck to your mind. But bitcoin/crypto is very useful to tax evasion, capital flight, criminal organizations, scams, speculative trading, wealth transfer, and other stuff.

Some of these are trillion dollar markets.

All of that is true to fiat, which of the above in your list is not possible with fiat?

There are plenty of people who use fiat currencies that are almost useless outside of their own nations borders, with extremely bad exchange rates. This basically binds a person to one country and hinders movement and prosperity.

Look at what the OP was saying, he was only listing negative things and attributing them all to something BTC excels at. I was saying that fiat is hardly a paragon of virtue :)

Just because there is a substitute doesn’t render cryptos useless. Further is it much more easy to send 1M in btc than smuggle them in a suitcase

Only 10% of the price of gold is "tied down" to it's real world usage. The other 90% is psychological.

So gold - 90% psychological

Bitcoin - 100% psychological

If you don't believe in psychological value, both are about as bad. I'm pretty sure no investment gold holder will be happy if gold price drops down to "tied down" value.

Actually, 70% of the price of gold is tied down to its real world usage. I was surprised too - I actually thought it was only around 10% when I made that comment.

But what I was referring to was that simply having some significant non-psychological value was key for giving people the stability and confidence to invest more value in it. In which case, the difference between 10% non-psychological value and 0% non-psychological value is something on the order of an infinity percent relative difference.

Because a store of value is better without random price fluctuations. If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck.

This is even more critical with companies, a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad. That risk profile is fairly common where a modest upside is not worth risking even a small dip.

> If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck.

You'd most likely not save for this trip in gold.

> a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad.

Also I don't know any farmers using gold as a store while waiting for harvests.

Look at some the gold fluctuations here, mainly large double digit swings:

http://onlygold.com/Info/Historical-Gold-Prices.asp

Gold is less volatile due to multiple financial instruments allowing trading/hedging on top of it, millennia of usage as store of value and that governmental institutions also back it as a store of value. Even with all that said it still took dips and swings of:

2015: -11% 2013: -27.6% 2010: 30%

Those seem volatile.

Gold is used as a hedge because it often moves opposite of other value stores. Crypto currency's move independent of any specific store of value making them effectively nearly useless as hedges.

PS: Adjusted for inflation in 1915 gold was worth $483.23 in 2015 prices, in 2018 it was actually worth $1,060. That's extreme long term price stability as in +/- 1% per year over 100 years go back say 500 or 2,000 years and it stays very stable. That long term stability relates to it's intrinsic value as an actual good, which bounds price movements.

Because a store of value is a theoretical construct that is never actually realized.

There is no such thing as a perfect store of value. Luxury goods and status objects can go out of vogue. Foods spoil. Houses need constant maintenance. Land's value can shift based on regional demand or even be destroyed by changes in climate - too much water, too little water. Currencies can fail and even personal favors fade over time.

Because otherwise the value won't be there when everyone needs to redeem it desperately.

Reply on news.ycombinator.com