Comment by xiphias2 | Hacker News Reader

Comment by xiphias2 | Hacker News Reader

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USDC is controlled by US, which has been playing geopolitical games with El Salvador (and other countries) already.

People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory. The president tried to get a deal with the IMF, but they couldn't agree on the terms, so he decided to give a choice to the people between a safe but inflating currency and a volatile / experimental but deflating currency.

Luckily there are enough market makers in both countries that transferring USD and recieving USD through the Bitcoin / Lightning network is cheaper and faster than using the traditional banking infrastructure.

I have a girlfriend in Colombia, and in addition to the 10% remittance fee she always has to go to the city from her village (1 hour bus ride) just to get money. I wish I could just send her money through Lightning network (she has internet + iPhone, so installing an app is not a problem).

The rest of your comment makes sense, but this sentence is disconnected from reality:

"People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory."

Are you seriously saying that 5% inflation a year, maybe a bit more worse case, is bad compared to Bitcoin just lost 40% of its value in the last 2 months? Oh no, better not use USD then and switch to Bitcoin!

Maybe we need a stable coin that is a mix of the major currencies if you are against USD in particular? It could be pegged to some ratio of Chinese, US, Euro (and UK or Japanese?) dollars? This would be quite nice and stable.

As most Bitcoin advocates would say Zoom Out. Yes Bitcoin looks volatile if you look at the past 2-3 months. However if you zoom out to 1 year Bitcoin is still up almost 300% y/y. Zoom out 2-3 years and the numbers look even better. As for USD, depending on what you want to buy inflation is 3-30% y/y - think asset price inflation.

Zoom out further and USD looks even less attractive as a store of value. In 1933 $20usd bought 1oz of gold. Today it would take $2000usd/oz of gold, netting out to a 100x decrease in purchasing power in ~90 years. Bitcoin meanwhile has grown in purchasing power by 200% per year on average since inception.

What El Salvador has done is brilliant.

Citizens can chose between a short-term stable unit of account that loses most of its value over a long time period (USD) or a short-term volatile but long term deflationary currency designed to increase purchasing power over the long-term (BTC).

Remember that no traditional bank in the world will ever again pay you sufficient interest on savings to preserve your purchasing power over time - not one. Fiat is a terrible long-term store of value.

Bitcoin gives users the option to fix this.

>As most Bitcoin advocates would say Zoom Out. Yes Bitcoin looks volatile if you look at the past 2-3 months. However if you zoom out to 1 year Bitcoin is still up almost 300% y/y.

Either you don't understand what volatility means, or you think volatility only matters when it's towards the down position. Either way, you're wrong.

Volatility in a currency is not a good thing. Even if some people are making money, other people are losing money due to the volatility. Value stability should be one of the top goals for any currency.

A currency that constantly loses value in terms of purchasing power over time is not stable.

Again, zoom out and the picture looks different.

The US Dollar loses approximately 100% of it’s value per century.

Bitcoin maintains or increases its purchasing power by many orders of magnitude per decade.

While the market rate on offer for Bitcoin at a given moment fluctuates, sometimes wildly, over a multi-year period the value always tends to go up.

This is by design as Bitcoin is the scarcest asset ever invented - giving it the property of hard money which unlike fiat is immune from debasement.

> Value stability should be one of the top goals for any currency.

Per my comment above the US dollar’s value is not stable. It falls by ~100% per century and because of the Fed’s 80 year long policy of continuous debasement the value of US dollars will never be stable over time and will always go down.

By contrast, while Bitcoin is volatile today, as it matures in its price discovery Bitcoin is likely to become more and more stable (read less volatile) in the future.

The point of a fiat is that it slowly loses value, so wealth holders can't get bigger and bigger just by holding the fiat, they are forced to invest to break even.

Bitcoin is not "fixing" anything here, a currency that deflates forever is a dumb idea.

So you consider it a feature of fiat that it is impossible for a saver to maintain their purchasing power over time unless they risk their capital on volatile assets such as stocks or real estate?

Why is is a good thing that widows, orphans, those living in poverty or on a fixed income have no way to save without having to Risk their principal?

The only ones who benefit from inflationary fiat currencies are those closest to the new spending - via the Cantillon effect - namely bankers, politicians and their friends in the military industrial complex.

> So you consider it a feature of fiat that it is impossible for a saver to maintain their purchasing power over time unless they risk their capital on volatile assets such as stocks or real estate?

Some cryptocurrencies may (in some cases, based on past performance) be good on average as long term stores of value, but even those that are good at this are extremely volatile assets, much more so than, say, blue-chip stocks. So they certainly don’t solve any problem of “you need exposure to volatile assets to not lose value of savings” that you might imagine exists.

> Why is is a good thing that widows, orphans, those living in poverty or on a fixed income have no way to save without having to Rick their principal?

People without surplus income have no way to save by definition, with or without risking their income. That people with surplus income need to participate in wealth generation to recurve additional wealth from storage of their surplus income is obviously a feature.

> Some cryptocurrencies may (in some cases, based on past performance) be good on average as long term stores of value

This is a straw man. The argument was not for some cryptocurrency.

It was for Bitcoin. Bitcoin alone has the potential to become the reserve currency of the internet.

It is the only crypto designed from the ground up to withstand attacks from nation states. Bitcoin is the scarcest asset ever created. It is the most decentralized and censorship resistant, and it is secured by the most powerful super-computer in the world.

Therefore it isn't just about past performance, but rather past performance combined with a fundamental analysis of the unique properties of Bitcoin that make it the best performing asset in the history of assets over it's lifetime.

Bitcoin is a unique snowflake. If you cannot tell the difference between Bitcoin and other cryptos you ARE missing the point.

> People without surplus income have no way to save by definition

Poor or rich, most people can find a way to save some of their income for the future. It may not be much to you but giving them the option to access a store of value that grows on average at 200% per year is a revolution for these folks who often have fewer options to grow savings.

You are cherry-picking poor people to suit your argument. Not all poor people have zero surplus income.

Some simply have too little or too insecure surplus income to escape their plight. I for one applaud giving these people more choices for a better life.

> widows, orphans, those living in poverty or on a fixed income have no way to save

This has got to be the laziest rebuttal - think of the orphans!

Those living in poverty, definitionally, have less money than the not-impoverished. A deflationary currency gives value proportional to whomever is holding it. There is no incentive to loan money, as holding this deflationary currency is risk free growth.

Certainly, the government printing fiat could direct those funds in undesirable or corrupt ways, but this is possible whether the fiat currency is deflating or inflating. A currency that is always deflating will be subject to the tyranny of wealth holders, who now have no incentive to put any of that wealth back into the economy, absent a wealth tax or something.

Fiat already has momentum, it can purchase goods and services, which can be used to create value. It can pay taxes. It does not also need to be self-compounding through deflation.

> This has got to be the laziest rebuttal - think of the orphans!

I'm sorry you felt my argument to be lazy. Allow me to elaborate. Widows and orphans is a common trope in finance that refers to the most vulnerable members of society, those without the pricing power to keep up with inflation. Typically it means those on a fixed income such as pensioners. These 'widows and orphans' are the worst hit by inflation since high earners can pressure employers for a raise or switch jobs for more pay while the idle rich can keep their assets in inflation-resistant holdings. Pensioners suffer disproportionately - that was my point.

Orphans are children and wards of the state. They are not laboring (I hope). The government could print fiat money and give it to them, and their wealth would still grow with inflation. With deflation, their 0 dollars do not increase, and it is impossible for them to find jobs when the grow up.

The modern monetary system, which is inflationary, is obviously biased towards wealth holders. This does not imply that a deflationary system would better help the poor and downtrodden. Deflation imparts wealth directly to holders of the currency, directly proportional to the quantity of currency held. Money velocity goes towards 0 as the idle rich lose all incentive to do anything but hold it and watch their purchasing power increase relative to everyone less rich.

Again, ‘widows and orphans’ is a well established term when referring to the impact of inflation. It generally refers to those on fixed incomes - i.e. those without the pricing power to fight for increases in income to combat inflation.

You seem to be stuck on the word orphans, let’s use ‘those on a fixed income’ instead.

If you can get past the word orphans, may I ask you to address the core point of my argument?

Your core argument has, from my view, morphed from "inflation hurts the poor and downtrodden" to "inflation hurts those with a fixed income".

My questions are:

Why must widows or orphans or anyone have a fixed income?

What is the problem with the government providing subsistence incomes indexed to inflation and letting wealtholders fortunes get inflated away?

How does deflation, which proportionally rewards holders of currency, help those with a fixed income more than inflationary handouts?

> What is the problem with the government providing subsistence incomes indexed to inflation ..

There is nothing wrong with the idea except it does not exist. Show me a country where governments provide subsistence income indexed to the official inflation rate, let alone the real rate of inflation. Show me a gov that allows minimum wage to increase at anything approaching inflation. Or show me a traditional bank account that will allow them to save at a rate that keeps up with inflation - It doesn’t exist.

> and letting wealtholders fortunes get inflated away?

and show me a wealtholder who’s fortune is held in cash instead of scarce assets so as to be inflated away - doesn’t exist.

> How does deflation, which proportionally rewards holders of currency, help those with a fixed income more than inflationary handouts?

Watch the bottom 70% of El Salvador’s citizens over the next decade for a real world example. They now get a decentralized savings account denominated in a currency growing at 200% y/y instead of one that is constantly being debased (USD printed 50% of all dollars ever created during the pandemic) - except for crypto no bank account will ever again pay enough interest to keep up with inflation.

> Your core argument has, from my view, morphed from "inflation hurts the poor and downtrodden" to "inflation hurts those with a fixed income".

No, my argument has always been that inflation disproportionately hurts the poor more than the rich.

You are either misinterpreting my words or intentionally being misleading. Again the ‘widows and orphans’ or those on a fixed income references were simply examples. My argument applies to those on low incomes, middle income or even high incomes.

Only those wealthy enough to live entirely off investments have the potential to suffer a little less from inflation.

I say suffer a little less because even the idle rich suffer from currency debasement - just less than this who are less well off.

It appears to me as though "magically" the wealthy always seem to manage to store their wealth in some form that isn't devalued by inflation (real-estate, ...) whereas the poorer people are, the fewer possibilities to do something similar they have (in the traditional money system). So systematically, inflation hits the poorer people more. Yes, a deflationary currency would maybe benefit the already wealthy more than the poorer, but somehow I don't need to hesitate which one (inflationary, deflationary) I'd rather choose.

I completely agree, systematically, inflation his poorer people more. This is not a prerequisite for inflationary money systems in theory, but it is the state of Earth's inflationary money systems.

A deflationary currency does not maybe benefit the already wealthy, it directly imparts "real value" proportional to held currency. If you have ideas for a deflationary system that solves this, through wealth taxes or something, I am all ears.

> somehow I don't need to hesitate which one (inflationary, deflationary) I'd rather choose

Because relative to most people, you are wealthy! How are young people supposed to find work in a deflationary system?

5% inflation a year (which is closer to 20% for people who want to own their own house) is devastating long term.

People in the US can just buy S&P stock in their 401K to defend against it, but most people in the world don't have that privilege.

I agree that volatility of bitcoin is really hard to stomach (I have been through 85% downturns and it sucked, and people have made fun of me many times, I just got used to it). But there are enough people who have so bad pension systems in the world, that they see the huge volatility of bitcoin as a better option than trusting their government.

I have been learning more about DAI. Synthetic peg to $1usd. Interesting possible uses here.

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