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Comment by systemvoltage | Hacker News Reader

That’s the thing. By the time the transfer takes place, BTC exchange rate is now 7% off. How convenient is the transfer mechanism when the underlying is a speculative instrument?

Until BTC exchange rate gets stable or gets pegged do the ground, it’s gonna float around in the air of extreme volatility and manipulation - pretty risky adventure to transfer large sums of money.

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This is problematic for layer 1 settlement for sure. But there are layer 2 solutions that can help with the slippage issue (lightning network being the most prevalent). With a sufficient density of multisig wallet availability, as a proxy for liquidity, transactions are near-instant.

That said, there are differences in settlement guarantees at layer 2 that might make certain use cases less optimal.

> for layer 1 settlement for sure. But there are layer 2

layers?

Sure. Layers, like the Internet is made up of protocol layers.

Bitcoin on-chain is layer one: slow, sure, and after 6 confirmations considered irreversible and immutable.

Layer 2 protocols would include the lightning network and the liquid bitcoin protocols - both systems designed for different use cases, with differing technological benefits and risks. There may be other layer 2 systems that I'm not aware of.

Some might consider the OpenBazaar marketplace protocol, the Open Timestamps (https://opentimestamps.org/) application, or the Bisq decentralized bitcoin/fiat exchange to be layer 2 applications, as they're built directly on top of bitcoin but includes protocols. But I think they're simple examples of the kinds of applications that can be built on top of the programmable trust-net that bitcoin represents.

Because bitcoin is a decentralized and permissionless technology protocol, anyone who thinks of a way to build on top of it can do so---without needing anyone else's permission.

Layer 3 might be applications built on top of layer 2, such as the censorship resistant Juggernaut chat app, built on top of the lightning network: https://www.getjuggernaut.com/. As layer 2 matures, I imagine we'll begin to see a wave of creativity unleashed globally as people create layer 3 applications.

Yea this terminology is borrowed from the OSI model for networking, with which you're likely familiar. It originally was used as just an analogy, but has increasingly just become the way the space describes (and markets) the different protocol layers of cryptocurrencies generally.

I prefer to own an asset with high volatility that gets more valuable over time than an asset with low volatility that gets less valuable over time.

You're talking about something entirely different from what the parent comment is. What you're talking about is a long-term investment.

We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.

Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.

Yeah but that disincentivizes investments.

Another way of looking at it: that incentivizes better investments.

Not really. If you can earn risk free appreciation on a currency the smart thing to do is not spend it. This incentivizes hoarding money, not making smarter investments.

Nope, you are therefore incentivized to spend that money in objects or services that will bring in more value to you than the risk-free "interest" or gains brought by the mere deflation. Ergo, smarter investments.

No, it disincentivizes investments full stop. People aren’t making dumb investments deliberately. You don’t get any new information about whether an investment is smart or not based on your currency being deflationary.

In developed countries (ex in Europe), fiat currency officially loses at least 2% of its worth each year on average (or you yourself lose 2% worth of purchasing power every year, depending on how you see it). In reality it's much more of course.

Bitcoin gains 200% of its worth each year on average.

Owning bitcoin, any investment you make that brings home more than 200% a year (+ fin. taxes - fiat inflation) when risk-adjusted is worth making.

Anything else is an objective loss, so you want to really assess what it will bring you subjectively before making it.

In other words, "given that you are basically paid by the financial system to hold bitcoin, any bitcoin you spend should be for something that you value more than what it pays", i.e a smarter investment.

They may not agree, but currency isn’t supposed to be an investment it’s supposed to be a rationing device.

People should spend or invest thoughtfully, but they should spend or invest - if people are encouraged to hoard a pile of wealth so they can live off the labour of others while contributing nothing themselves, that's bad for society. So central banks tend to aim for low but nonzero inflation (e.g. the Fed's 2% target).

One reason I dislike inflation is that I don't want my currency -- a utility object -- having opinions about my financial life. Inflationary monetary policy and its consistent 'nudge' to spend is the economic equivalent of the pop-up.

Of course, you could argue that a hard cap is equally opinionated. But I think it's a much more 'neutral' position, where it deflates because of real economic growth, and you spend it because of your own time preference.

>we have controlled inflation

We do not have controlled inflation (I'm assuming you're talking about USistan). Please remember that the fed is an independent institution which refuses to get audited.

It absolutely is controlled[0], just perhaps not controlled in a way you would personally like.

(Also, I recommend you quit it with the "USistan" stuff. It comes off as childish and detracts from the point you're making.)

[0] Maybe "strongly influenced" is a better framing when talking about the Fed.

I am beyond sick of this Libertarian lie that has somehow gone mainstream. The Federal Reserve is audited bi-annually by both a public and private commission

https://www.newyorkfed.org/aboutthefed/fedpoint/fed35.html

https://www.federalreserve.gov/faqs/about_12784.htm

In regards to your first point, inflation is targeted at ~2.5% a year. Some years do better and some do worse but on average that is the inflation rate. I challenge you to look at the inflation rates (provided below) in the first half of last century and provide a reasoned argument for why having years with +16% inflation (and years with -10% inflation) is a better system of currency than what we have now where people freak out if the deviation is over 2%. The gold standard provided a volatility that only hurt those with less money, and the argument your making is a fallacy (and is the reason I left the Libertarian party four years ago.)

https://inflationdata.com/Inflation/Inflation_Rate/Historica...

Inflation is only "controlled" for some baskets of goods.

If your basket of goods consists of salty snacks and consumer electronics, then yes, inflation is controlled.

But if your basket of goods consists of Hamptons real estate and fine art, then your inflation rate feels a lot steeper.

Investors are finding it very difficult to discover investments that don't depreciate with respect to that second basket of goods.

That's why institutions, family offices and high net worth individuals are shifting single-digit percentage allocations into Bitcoin.

I’m talking about currency not appreciating commodities, assets or investment. The US dollar, and the currencies of most western nations, is/are in fact controlled and inflate at a targeted rate.

When I think about inflation, I think about the purchasing power of money for the basket of goods I'm likely to purchase. I'm less interested in theoretical or academic concepts like the rate of growth of M2 or the velocity of money. Preserving purchasing power over time is my priority.

But the people who run the euro zone and the dollar zone have it setup for (they hope) constant mild inflation. This incentivizes a search for productive investments like ycombinator instead of hoarding treasure, which is not a productive investment

Where have you seen real estate get cheaper over time? NYC? SF? Somewhere else?

Also when it comes to setting up an economic system, high net worth individuals are the last people we should be worrying about, not the first.

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