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Comment by gorgoiler | Hacker News Reader

I don’t understand Bitcoin.

If I make bread and you grow potatoes, we can barter, but it’s much easier to use some intermediary to track the value that we exchanged. The intermediary facilitates this with tokens (coins, notes, cards.)

Bitcoin seems perverse. It puts all the value in the tokens themselves and at the same time I can’t even use it to buy bread or potatoes.

About the only thing I hear that you can buy with Bitcoin is USD, and even the liquidity of that seems questionable beyond a certain amount — the millions maybe but probably not billions.

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I think it should seen as more similar to gold than to money.

We don't use gold to buy goods either, but it has a value, because people believe it has. The value of Bitcoin is disputed because not everyone believes in it yet. So it's either a gold in the making or nothing, depending on whether those who believe in it will succeed at convincing the others of its merits.

Gold has a value because it can also be used for legitimate industrial applications, plus it has the other physical qualities of being attractive to look at and doesn't corrode (i.e. useful for making jewellery).

So yes, while it does have value because people believes it has value. Even if no person wanted gold for its "imagined" value, it would still have value because it's used by many actual companies in actual products (electronics etc). E.g. Every iPhone contains about 0.0012 ounces of gold.

Bitcoin has no value other than imagined by people. I.e. Greater Fool theory.

Bitcoin can be used for making transactions on the Bitcoin network, and to store information permanently on the Bitcoin blockchain. Here are examples of applications.

Industrial applications of gold as imaginary as those applications of Bitcoin are. You can use other metals as conductors, and the whole notion of a specific arrangement of molecules being called “an appliance” or “a jewellery piece” is just human imagination.

> Bitcoin can be used for making transactions on the Bitcoin network, and to store information permanently on the Bitcoin blockchain. Here are examples of applications.

Why would I want to do this on Bitcoin specifically? There are thousands of cryptocurrencies that offer this and an entire banking system that specializes in financial transactions.

>You can use other metals as conductors, and the whole notion of a specific arrangement of molecules being called “an appliance” or “a jewellery piece” is just human imagination.

The difference is that it is a form of human imagination shared by most humans. The golden appearance has a certain appeal to it. If humans want it regardless of its value on the financial markets that is a reason to agree that gold is THE store of value instead of silver or Bitcoin being THE store of value. This is a popularity contest and being able to wear and see your gold gives you a massive head start in the popularity contest.

> the whole notion of a specific arrangement of molecules being called “an appliance” or “a jewellery piece” is just human imagination.

Yes indeed! And you know what they say about too much imagination - VERY dangerous. In light of this, I am making a special one-time offer to you to improve your safety by sending me specific arrangements of molecules you may have that take the form of gold or US "dollars". Act now before it expires!

>and doesn't corrode

Actually that is what makes it attractive as a store of value. It's going to last millions of years. Bitcoin is data on HDDs and SSDs and we know that those eventually corrode or simply become obsolete.

The industrial uses are real, but the lion’s share of the price of gold is driven by our collective belief in its value rather than some utility.

And bitcoin is more easy to move around than gold, which is a benefit

It sounds like the reason is that you don’t understand money, which is generally regarded as having 3 core functions. Acting as a medium of exchange, a store of value, and a unit of account. Bitcoin does all of those things. Your issue seems to be that it’s not widely accepted enough as a medium of exchange to properly facilitate that function? The problem with that view is that it is widely accepted enough to drive some level of demand. With that demand being generated by (probably a relatively small number of) people who use it for retail payments, speculators, and black market participants.

You don't seem to understand the OP's point: Bitcoin makes minting tokens incredibly expensive due to the electricity usage.

A good currency is not consuming a huge chunk of the resources it is tracking. Electricity spent "mining" bitcoin is not somehow recoverable from the tokens. Which makes it worse then gold, which actually is.

I don’t think I really understand money, no.

What makes much more sense to me is agreeing on a central authority (or a distributed one, if we have the math to be able to do that securely) to track the exchange of things with actual value.

Bitcoin-the-tech feels like it’s partly that, but also it’s partly some side-wheeze for the initial Bitcoin folks to print their own money.

Bitcoin would make sense if the inflation (deflation?) component was removed because at least you then actually had to do something to gain Bitcoin wealth — namely buy computers and burn electricity. If you want $15,000 of Bitcoin then you buy an ASIC and pay your power bills in time.

That seems extremely wasteful. Wouldn’t a global tally of IOUs satisfy the same requirements, without having to have this centralised coin stuff?

Of the two things it represents — a global ledger, and a money printing machine — all I hear about are people focused on the latter.

Well a bank account provides all the functions of money, and to a much greater level of functionality. But the whole reason cryptocurrency exists is to avoid some of the issues you get when dealing with centralized financial institutions. If you want to decentralize that role, you need a new way of managing scarcity. Proof of work is one way to do that. Whether that’s wasteful or not would be a personal judgement, but the reasons the demand exists are pretty simple to understand.

Thanks for explaining, it’s very helpful.

People use Bitcoin to protect their wealth from inflation/debasement. It’s easier to own and protect than gold and real estate, easier to transact, etc.

Whether it’s widely used as a currency is irrelevant to whether it can be.

>Whether it’s widely used as a currency is irrelevant to whether it can be.

It's not used as a currency because of transaction fees. I still remember Steam pulling support for bitpay because people couldn't get their transactions through fast enough because the fees exceeded the value of the transaction. By the time the transaction went through the value of the Bitcoin has changed and you had to send the missing amount in a separate transaction.

You pay $5 transaction fees to pay for a $50 dollar game and then get told that you are missing $1.25. Sending the missing money costs $6.25. A refund costs $5 in transaction fees. On some days the transaction fees were well above the value of the game so you could not do a refund even if you wanted to. Paying $55 to refund a $50 transaction doesn't make sense. Paying $56.25 to transfer the missing amount doesn't make sense either. Your money is just gone and you didn't even get a game.

we invented something else than barter long time ago and that's money. Lately money isn't backed by anything else than belief and guns, Bitcoin is backed by belief and hash power that's all.

https://www.youtube.com/watch?v=YHjYt6Jm5j8

Very good, but — in good faith — it’s hard to tell if this is for or against Bitcoin!

At least gold has intrinsic value. Aerospace, electronics, it’s pretty.

For me, this skit would make a better illustrative point if the customer showed up wanting to buy tepid lemonade using dodo heads as currency.

> Very good, but — in good faith — it’s hard to tell if this is for or against Bitcoin!

Neither. It's making a point against "old man yells at cloud".

> About the only thing I hear that you can buy with Bitcoin is USD, and even the liquidity of that seems questionable beyond a certain amount — the millions maybe but probably not billions.

The order books of Bitcoin exchanges are publicly available.

Last time I checked, Bitfinex had around $100MM in liquidity at 0.1% slippage.

Bitcoin is just a token, but with scarcity controlled by cryptography rather than alchemy.

Read Debt by Graeber so you can stop believing in the myth of barter. Then think again.

i don,t think it is a myth, i do it all the time, living almost entirely without currency.

digital technology only makes barter more easy and accessible.

converting every trade into numbers and back is an outmoded method, which i think will become less used with time.

That is basically what the book is telling. You are probably not tit-for-tat bartering, but taking on debts and returning things you owe in some more vague approach. History went through multiple cycles where currency went in disuse in favor of just tracking and settling debts.

actually, i,m gifting without asking for anything in return. when i need something, it is offered or i ask.

Exactly, that is the alternative system which was the default. It has gone through a number of cycles in history and is not always thought of the same way across different cultures (which is why there is a whole book on the topic).

But it is a recurring theme in history, and most (all?) monetary systems were traded for this alternative within 1000 years. For me, in Western Europe, this was 500 years ago between roughly 1000-1500. The churches were fitted with gold roofs, and because of the lack of coinage and currency, most people lived their lives with this alternative approach, only rarely coming across money, currency, accounting and debt.

Thank you for the reference, and I look forward to understanding what you mean by myth.

Barter is literally my life. I teach other people’s children about life and Computer Science in order to buy potatoes. The children’s parents make medicine and build houses to pay for their children’s education. Is your point that barter is about goods, whereas most people provide services (time, labour?)

Or perhaps you mean that the majority of the economy in terms of wealth is engaged in the investment of capital, and we potato eaters are but a percentage of a percentage?

With barter is meant (in the context of Graeber's book) trading tit for tat, without having a currency to go between. E.g. a farmer buying a book and paying with apples.

The book says that this barter method is almost never used, and instead people tend to keep track of favors and things they owe in a more vague way. And every now and then, these debts are settled in a communal fashion. But barter is not used.

So the farmer just asks for the book and gets it. And when autumn comes, and the bookstore owner feels like having an apple, he just goes to the farmer and asks for some. But the two transactions are not really linked.

Right. I feel like that’s nit picking (your parent; not you.)

Of course I (teacher) don’t buy potatoes by teaching the farmer’s children Dijkstra.

Instead of bartering we chooses to track our debts. Using Bitcoin as a cryptographically secure distributed debt tracker sounds great.

But Bitcoin right now feels like a bunch of technology enthusiasts have blessed the world with such a debt tracker while also saying ”btw you collectively owe us $630,000,000,000 worth of stuff”.

Also, this digital debt tracker uses numbers, which most of these communal debt systems do not do. Because different people put different value to things, tracking debt in numbers is not how it is done (the book goes in a lot of detail how this works). This is what makes bitcoin a currency, a way to track debts rather than having them implicit.

I'm not sure where on the globe you are at, but where I am from, groups of friends buy rounds of beers at the bar. You do not keep track of whose turn it is to pay the round or whether someone is buying more expensive stuff, but since you are friends you make sure things are fair over time. But implicitly, not tracking numbers and accounts.

And Graeber argues that that is actually the method that predates currency. Not barter.

I fully agree on the hilariously large "primordial" debt we somehow owe the early miners.

Bitcoin does not track debt, it tracks Bitcoin assets.

I'm not sure it's relevant, although the book is fantastic.

The first few chapters show that historically money predates barter, not the other way around. And that money was born as "I owe you" notes issued by the government.

I know of only one comment [1] Graeber made about bitcoin, and it's too late to ask him now.

[1]: https://twitter.com/davidgraeber/status/990857460176089088

Thanks you expressed it much better than I did.

You can put a lot money into Van Gogh's painting, and you won't buy bread with it. Bitcoin is just easier to transfer than a painting, and you can buy a fraction of it. I don't see Bitcoin as a currency at all, but it does display certain properties of instruments to store value.

i think it is an intermediate step before direct data-assisted barter.

now that we have databases, the number values will slowly become less relevant, and direct information references will come into play.

You pointed right in the middle, but try to rationalize with someone who is a crypto advocate? I bet that it will be a completely usefulness conversation. The crypto money rely purely on USD exchange and that's why suddenly appeared so many crypto startups, because their "value" is speculative.

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