There only being 21 million bitcoin doesn't matter because that can be subdivided into 100M Satoshis. The whole world would have to adopt it for us to run low on it, and maybe not even then.
But the fact dogecoin is inflationary is interesting. A currency needs to be inflationary or people hoard it instead of spending it, see bitcoin for an excellent example.
After rereading the article, I now understand that you were referring to this quote in the article : "The circulation number is not enough".
You are right, the fact that it's divisible render this point moot. I thought you were saying that dividing coins somehow decreased scarcity (Yes, I've seen many people argue that, believe it or not).
Original comment below :
I find it really mind boggling that some people don't understand that dividing a pizza into 100M pieces does not give you more pizza.
Ok, thanks for clarifying. Yeah subdivision doesn't affect scarcity. The arguments the article made were weak, but there are plenty of solid arguments to be made.
The number only matters as long as it can subdivided sufficiently to buy the smallest priced thing.
You're thinking of it as a fixed sized pie and thinking dividing it doesn't make a bigger pie. But it's not fixed, the whole pie can grow as bitcoin increases in value. It's up to one trillion dollars now.
There being a cap is relevant, because it makes your currency deflationary and therefore a poor medium for exchange and a very poor medium to base an economy around (as, among other things, it increases the real value of a debt over time and discourages investment). Small amount of deflation are dangerous - but if everybody used BTC for everything the deflation would be massive and the effects severe.
> The number only matters as long as it can subdivided sufficiently to buy the smallest priced thing.
Why would I even buy the smallest priced thing with deflationary bitcoin, when I could instead hoard it and wait for it to increase in value?
I think most people who have ever used bitcoin as a medium of exchange have kicked themselves when they realized how expensive that thing they bought was at current (very high) exchange rates.
> Why would I even buy the smallest priced thing with deflationary bitcoin, ..?
Given the inflationary dollar, you probably wouldn't, but otherwise, you'd need to transact at some point.
Perpetual debt against assets is a common trope in tax avoidance. People do use/abuse this. If enough people abused it inflationary money would fail.
Deflationary money isn't bad, but the common belief says it is. One example that changed my mind was business investment.
Why would you loan money to a business if the money itself might be worth more later? Well you probably wouldn't. Instead, you'd buy a share of the business itself.
We've all live in a system of inflationary money and were educated by a system that teaches it's use. We should acknowledge our bias here and keep an open mind.
> We've all live in a system of inflationary money and were educated by a system that teaches it's use. We should acknowledge our bias here and keep an open mind.
The problem with that is that deflationary money isn't exactly a new idea. It's been tried before, it's workable, but it has problems. However, it is an idea that favors people who already have lots of money over those who don't, which has fueled background level nostalgia (and nostalgic propaganda) for the idea.
Bitcoin had some genuine innovations, but that doesn't mean all the ideas that were baked into it were good ones.
But the increase in bitcoin's price does not come from the inflation relative to it. Even if bitcoin had been as inflationary as the dollar, its dollar value would've still increased by similar amounts.
The arguments surrounding deflation aren't necessarily wrong but it's hard to gauge the actual effects of it in practice at this stage where market forces are way more impactful.
Does it not? Is there a bounded limit to the amount bit-coin can be subdivided? If 0.0000000000001 of a bitcoin is valid for purchases etc. then doesn't the limited supply become meaningless?
Yes, technically you are not increasing the size but it feels like word play.
So the point is that if bitcoin transactions can occur without a lower bound limit (and I'm still waiting for an answer as I don't know) there is an infinite supply.
The dollar point feels more like word play. In retail there is a lower bound limit for dollars and this is 0.01 dollars. Not so with Bitcoin transactions.
If 0.00001 of bitcoin etc. Is viable tender then simply put the limited supply of bitcoin might be misleading.
So I said in retail the dollar is limited. I'm aware in finance etc. there isn't a lower limit of dollars.
Again (for the third time) are you aware if fractions of bitcoin can be sent from one account to another? Or does it have to be one whole bitcoin?
Again I don't know.
I'm just thinking theoretically you could convert bitcoin into bitcoin_plus and these coins represent 0.0001 of a bitcoin. And tada you have 100 million coins in circulation etc.
> There only being 21 million bitcoin doesn't matter because that can be subdivided into 100M Satoshis
It matters a little in some hypothetical world where we're actually using crypto instead of fiat currency. If you replaced all USD cash reserves with bitcoin, a Satoshi would have the same spending power of around 1.3 present day dollars. That's a kind of course unit, especially if we want to subdivide it into transaction fees and whatnot.
"Though Dogecoin has an unlimited supply, the actual inflation rate goes down, making this coin deflationary. So, those who criticize Dogecoin for having an endless supply are wrong. They are missing the bigger picture."
In theory there is some point in which the amount minted is lower than the amount lost (through losing keys/bad transactions/etc). In that case the inflationary currency is, in practice, deflationary.
I wish all the major trading networks would switch to satoshis right now. The psychology of it, not to mention the ease of just talking about how much you have, would be much easier and would encourage people to try to spend it instead of just invest with it.
> A currency needs to be inflationary or people hoard it instead of spending it [...]
No, not at all. All you need is a sufficiently high rate of interest. The higher the rate of interest, the more you miss out on if you hoard instead of lend.
I don't think you’re including enough data in your analysis. I agree that there’s been a correlation between the inflation rate and the rate of interest for the past century, but before that there was no such correlation. It seems to be a feature of our current monetary system.
Also, the correlation between a rising rate of interest and rising prices is much better than high interest/high inflation [1]. For example, from 1990 to 2000 we had relatively little inflation but the rate of interest was 5-8%.
Well before that period the federal funds rate didn't exist, so one can't compare it to the wild swings from inflation to deflation in the 19th century.
(There are a bunch of studies for stock and property returns, or for treasuries like you linked, but that's something quite different).
Hoarding and lending is "the same" in this case.
Someone else spends your money but he has to pay it back. He can only do that if whatever he "produces" makes a profit which means someone else must buy something aka spend money. Why would someone spend money if hoarding/lending makes him buy more later?
Also if lending becomes more profitable than hoarding everyone offers to lend which obviously pushes lending returns down. So in the end there will be a balance between lending and hoarding but both will return profit so there is no reason to buy something today if you could buy it cheaper tomorrow. The effect for this is exactly the same with or without lending.
It wrecks the supply chains because it becomes financially acceptable to run out of stuff rather than buy reserves and any long term investment becomes high risk. Maintenance becomes irresponsible waste of money you'd rather wait until something breaks than pay upfront to keep it running.
Essentially it slowly slows down and destroys the economy as we know it. All while people get "rich" and think it doesn't affect them because "money can buy you anything" until something essential can no longer be bought no matter how much money you have then the whole thing collapses because the money turn worthless if the real buying power turns out to be zero.
Most people will rightfully think that the interest paid from lending will not be high enough to reduce the risk of default. The interest rates would have to be very high.
This is a huge advantage of dogecoin. The inflation is basically a wealth tax on holders that goes towards miners, achieving both encouraging spending and ensuring a well funded mining infrastructure and low transaction fees.
If that point is sufficiently far into the future then by the time you decide to spend, your money may paradoxically become worthless, because all businesses shutdown because of a lack of spending.
That's true, but , hear me out...the fact that there are people who are sufficiently equipped to realize this scenario...might compel them to spend their BTC before the BTC induced economic collapse.
That would cause the aforementioned economic collapse not to happen at all...
In such scenario the smart person is not the one who postpones gratification by storing the marshmallow, but the one who eats it now because there is no future
It's really interesting, BTC moves the analysis from balance sheets to people's psyche.
>There only being 21 million bitcoin doesn't matter because that can be subdivided into 100M Satoshis.
Correct, although also incorrect because both of these limits are arbitrary and human made and can be changed any time. Its an absurd belief that this is somehow "set in stone" its not, its written in code, code that humans can update whenever they want.
Absolutely nothing stops people form making something smaller than a satoshi. We just dont know if the majority of the miners will accept the change to the code. If not it can only be applied to a fork which the majority then will declare as "not the real bitcoin". But every time bitcoin forks, the number of "bitcoins" grow whether an individual declares the forks as not real doesn't really matter.
> A currency needs to be inflationary or people hoard it instead of spending it, see bitcoin for an excellent example.
I don't think people are going to starve to death because they know their coins will buy more food next week. But if it stops people spending on unnecessary things, is that such a bad thing?
One thing I never understood about bitcoin: doesn't it require mining a block to transact bitcoin? It seems as though even if it's infinitely divisible, once you mine the 21-millionth block all the bitcoin is rendered worthless, since you can't trade it anymore
You can keep mining forever. The only change after 21th million is that nobody gets the extra BTC reward. They'll still get all the mining fees for the block though.
I've seen this mentioned before, but what I don't know(and am genuinely asking) is, aren't the transfer fees for bitcoin really high? like, 23 bitcoin? What happens when the transfer fees are orders of magnitude more than the value being transferred?
> What happens when the transfer fees are orders of magnitude more than the value being transferred?
you're missing the demand curve. As fees increase, transaction volumes go down, until there's an equilibrium. The opposite occurs as well: if transaction volume dries up, the demand for block space will decrease and eventually the fees will drop.
And you are forgetting the whole "securing bitcoin" part.
If bitcoin was to be the dominant currency, it needs a lot of mining to secure the network, otherwise attacks would be very appealing. But a lot of mining means a high transaction fee.
Yes, Dogecoin's inflation rate decreases with time and eventually hits zero. The crypto community thinks Dogecoin embarrasses them and it's become cringey watching them react so severely to it. It's a fun thing no more risky or silly than NFTs.
How is Dogecoin better performing than Bitcoin, even on a decade timescale?
BTC was $1 in 2011, so 50,000% gain in a decade.
Definitely not better performing of all time, as before 2011 Bitcoin was also worth pennies at various points (just like DOGE). Except now BTC is worth $50k and DOGE is worth $0.30.
Since it came later you can set the Doge price in 2011 to $0 and see in fact it was an infinite gain. It needn’t be around as long to be the best performing asset of all time. The fact ones worth $50K per unit and one $0.30 per unit is irrelevant because one has astronomically more units.
Yes, an asset that didn't exist yet was indeed $0 in 2011. But I'm sure we can agree that starting your measurement from 0 is obviously a silly way to look at this, as any non-worthless asset class invented in the last decade has therefore also experienced infinite growth by that standard, tying them all for first with DOGE.
With regards to "all time", DOGE has more units but its market cap is still lower than BTC (in fact its 5th best by market cap), so I remain confused as how it is the best performing asset class of all time.
In any case, ETH is better performing by all metrics compared to DOGE. Infinite performance since 2011 and a higher market cap.
It started out as a fun joke, but we found out that when you cross a joke with a actual working cryptocurrency, you get a cryptocurrency, and it doesn't matter how ironically we used it way back when since the similar bad stuff is going to happen as with other cryptocurrencies.
This is not sound analysis, as it revolves around the mistaken notion that a currency is inflationary or deflationary depending on its supply. This is not the case, there are other variables involved. For a cryptocurrency to be inflationary or deflationary, or have a predictable price at all, it would require a governing body that is capable of adjusting its supply as needed. Since they don't have that, because the whole point of cryptocurrencies is to do away with central banks due to a strange paranoia, cryptocurrencies are neither inflationary or deflationary, but simply price unstable.
You are stating this like it's a fact and a known quantity but the reality is that it isn't.
Many countries who manage their money supply have wildly unstable currencies. Turkey for example.
On the other hand many economists belive Nobel Prize winner Milton Friedman's assertion that "Inflation is always and everywhere a monetary phenomenon" (more economists disagree with this probably, my point being that these are not settled matters)
And we have absolutely zero long term evidence of how currencies with pre determined supplies behave.
So, sure, state your case, you might be right, but don't make it out to be like this is some law of physics.
>Many countries who manage their money supply have wildly unstable currencies. Turkey for example.
This is true, Erdogan decided to take control over the money supply, which is generally the job of the central bank which is an independent branch of the government. Countries with independent central banks usually have stable currencies.
>On the other hand many economists belive Nobel Prize winner Milton Friedman's assertion that "Inflation is always and everywhere a monetary phenomenon" (more economists disagree with this probably, my point being that these are not settled matters)
What Turkey needs is reforms and financial aid for the agriculture sector not control over the money supply because "inflations" aren't caused by interest rates, they are caused by shortages in the relevant sector. If there is enough food for everyone, then food inflation will go away and it could go away despite the money printing.
Not OP, but I think you are misreading their point. They didn't say that having a governing body is a sufficient condition for having a stable currency, they said it's necessary. It might not be a settled question how monetary policy affects inflation, but cryptocurrencies effectively have no monetary policy apart from a ramp decided when they are created. That doesn't take into account lost wallet keys or number of people using it and mining it...
Ethereum is pioneering a new monetary policy with EIP 1559 (which is going live with Berlin fork this summer).
Under EIP 1559, each block will burn ETH — the amount of ETH burned increases as blocks fill up. The ETH burned can offset & exceed the ETH block issuance.
Over time, if ETH block space is full, the amount of ETH will decrease.
Which is, if I understand correctly, a kind of balancing feedback loop. People are spending -> make it deflationary. People are hoarding -> make it inflationary. It will be really interesting to see if this has any stabilizing effect in the (very) long term.
Game theoretically, you want to be the hoarder. Let others spend and you reap the rewards of a deflationary asset. In effect, people will still try to hoard as much as possible, and only spend when absolutely necessary.
That's true as long as there are hoarders and spenders as well. As soon as there are too many hoarders, inflation comes back, and there's personal incentive for everyone to spend.
There is no equilibrium at either everyone being a spender or everyone being a hoarder, thus the self-balancing nature.
And I don't think it can be. Economics is ultimately the study of people's behaviour, and that is subject to irrationality, emotions, culture, and times.
“.. the whole point of crypto currencies is to do away with central banks due to a strange paranoia..”
I agree there are a lot of people involved with Bitcoin that have trust issues (justified or unjustified... you be the judge) but this statement is a generalisation.
Currently cryptocurrencies are the only way for me to be the custodian of my money in a digital form.
If I leave money in the bank while I save up for a deposit for a home loan at the moment I get basically no interest and the bank gets to loan around 17x that money to others to buy residential property.
Meanwhile the cost of housing is increasing because those who have sufficient funds in their account are better off parking that money in the property market (with or without an accompanying loan)
Can you see why people want out of this perverse system?
No, I don't see it. I think if you think banks are to blame for high housing costs, you're not thinking very hard. Housing costs rise in some areas, because a lot of people wants to move in those areas. Building new houses takes time, which means in the short term prices will rise inevitably. Same thing applies to interest rates. Low interest rates are simply signalling that there is an oversupply of savings in the market. If you still want to save, fine, but don't expect to earn much interest. This is not some conspiracy of evil bankers, just normal market forces at play.
“Housing costs rise in some areas, because a lot of people wants to move in those areas.”
Oh silly me. Here I was thinking that it had something to do with the cheap debt available (courtesy of government, banks and my savings for a home loan deposit), negative gearing and lax foreign investment laws that incentivise individuals to purchase residential properties for investment purposes.
Like I said. I just want to be the custodian of my money in a secure digital form so that it cannot be used against me. Why is that so unacceptable?
Well, not exactly. For instance, if you see gold as money, it is inflationary because of its increasing supply, which is not decided by a governing body, but by the supply created by gold mining.
Bitcoin adjusts its supply automatically and without interference from a governing body. It is deflationary since it's supply is capped and because it's purchasing power increases continually.
No, this monetary theory is disproven by facts. The gold standard was not inflationary. And bitcoin is not deflationary. Look at the data, it's not that hard. The data says the price level is not determined by the money supply. So, back to the blackboard.
Inflation is not price level. It is increase in the money supply. An increasing price level is the result of inflation. By definition gold is inflationary since its supply continues to increase.
Next time you attempt to discuss economics with somebody I suggest you educate yourself a little bit beforehand, to at least get a grasp of the basic concepts. The Core project has published an introductory textbook [1] that you may find useful for this purpose (although any book will do, really). In particular, chapter 13 deals with inflation among other topics [2]: "Inflation is an increase in the general price level in the economy, usually measured over a year."
Before suggesting somebody read an introduction to economics to learn about inflation, please try to take a deeper look into what inflation really is:
> Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. [1]
Everybody knows that the Austrians believe an increase in the quantity of money inevitably leads to an increase in the price level. It's got nothing to do with the fact that, anywhere in the world, and regardless of what you may think causes the price level to rise, an inflation rate of 2% is understood to mean that the price level has risen by 2%, not that the money supply has risen by 2%. As an example, the money supply (M2) grew by 25% in the US in 2020, yet nobody claims that the inflation rate was 25%. And so this is what the term inflation means, like it or not: an increase in the general price level. This is pretty basic stuff. Even your own quote acknowledges that this is the modern meaning of the term.
When Austrians talk about inflation, they specifically mean an increase in the money supply. They also mean this today. You said in your original post that for a cryptocurrency to be inflationary/deflationary, it needs a governing body adjusting the supply - which is not correct using the original definition of inflation. And even if you use your definition (increasing price level), it is still just an effect of inflation (increase in money supply) that may or may not be caused by a governing body.
To be clear, that inflation means an increase in the price level is not my definition. It's the generally accepted definition. The fact that a fringe group known for their crackpot ideas and their rejection of empiricism, representing <0.00000001% of the world's population, may or may not (even that is debatable) use the term inflation differently is irrelevant. So what are you saying? That it is possible for the price level to increase or decrease at a fixed rate without a governing body managing the money supply? How would that work exactly?
Inflation definition:
"3.(economics) A decline in the value of money.
4. (economics) An increase in the quantity of money, leading to a devaluation of existing money."
Source: https://en.wiktionary.org/wiki/inflation#English
This comment implies price instability taking USD as a reference. Who cares what is the USD value of BTC? Once all coins have been mined 1 BTC will always represent the same fraction of the total supply of BTC, i.e.: 1 / 21,000,000. This is not true for any of the fiat currencies.
If we take gold as a reference then USD lost 95%+ of its purchasing power over the last century.
Source (one of so many): https://www.officialdata.org/us/inflation/1900?amount=100
As for central bank paranoia, opening a history book should help (keyword: uncontrolled inflation periods + Germany || Hungary || Yugoslavia || Greece || France || Venezuela || Iran || Turkey and I am sure I miss plenty I am not aware of). There's a good reason why the EU has removed this power from its member states to give it to a central bank uncontrolled by the political power.
If one does not want to look at history then simply looking at FY2020 and how much USD currency have been debased should help:
https://fred.stlouisfed.org/series/BOGMBASE/
Make no mistake, large corporations with billions of cash on hands start to understand that if not invested, that money is worth less and less year after year and at an unprecedented pace.
Sorry, inflation is an increase in the price level in the economy. You may argue that such an increase in the price level is caused by an increase in the quantity of money, but evidence shows that increases in the quantity of money (which, by the way, you seem to confuse with the monetary base) fail to explain changes in the price level. [1] The relationship is far more nuanced and complex.
I've given this a (small) bit of thought. With regard to the whales, it occurred to me that if one (or two, or more) of them all decided to sell at the same time and crash the price, the effect would be to disperse all those coins amongst the "non-whales".
And then the question is, well, is the coin more or less valuable when it is held by more people? It seems to me that it would be more valuable, since there would be more people using it.
So even if the immediate effect of the whales cashing out was to lower the price (to something above absolute zero, assuming there will still be buyers), the long-term effect would be more adoption, and increased value.
I'm sure there are holes somewhere in that logic, feel free to point them out.
Yes, if they do it, it may end this way.
But if they do nothing (or not a whole lot) you can never be sure if and when they are going to start to dump their "wealth". So you can't really accept Doge as a significant payment because you always have to fear that the next moment someone ist going to crash it "for teh lulz".
If they dump their coins the price will certainly be going down to 0. Is there any historical data on these wallets you're aware of? I'm curious how many people have sold off their holdings. it seems odd to me that so many holders haven't sold yet.
Because the easiest way to cause significant inflation is to increase money supply? No one really uses doge for anything else, so that seems like a very good proxy. If compared to M1 or M2 doge would actually fare much better.
Inflation is a function of supply and velocity, not simply supply. Concretely, the M2 supply is 15X higher than it was in the 1970s but inflation left each one worth 1/7th. [1]
Supply is only half the puzzle. No cryptos actually take into account supply and velocity when attempting to control inflation which is something any economist would tell you is trivially flawed.
Substantially every crypto talking head conflates supply increase with inflation, but they are not the same thing, not by a long shot.
I am not 100% convinced the PQ side applies to assets. It works well for newly produced goods/value introduced into the economy, but market can keep trading 2 assets at a 10x or 1000x velocity back and forth but there is no price difference unless asset (money) supply or demand for one changes.
Japan has been trying to create inflation for decades by monetary expansion, monetizing their debt, zero interest rates, all the tricks. It has mostly failed. It is _not_ the easiest way to cause significant inflation.
>It is _not_ the easiest way to cause significant inflation.
Or maybe they're not solely interested in causing inflation, and are concerned about other effects as well? eg. preventing hyperinflation. If all you wanted to do is cause inflation, you can do so very easily with helicopter money.
Yeah, helicopter money is pretty much the easiest way.
However, Japan makes me wonder why it is a problem in the first place. I mean, why does a problem need helicopter money as the solution? Why is no other method capable?
Consider this, if you increase the money supply and inflation doesn't happen, then there must be a deflationary force that is equal to the newly created inflation caused by increasing the money supply. This could be enough explain the ineffectiveness of low interest rates (debt must be paid back and therefore no inflation happens) but it is not enough to explain why QE didn't work because the Fed can sit on financial assets forever, if necessary.
Difficult to say as they are not 'actually' printing money tho they call it that, they are just creating bank reserves and since they are not used as money they don't generate inflation, not as measured by the cpi anyways.
This is likely attributable to savings rates being at near all-time high in the US causing velocity to fall off. If people are saving not spending, there is no additional demand for goods, which means their prices do not rise, and inflation does not materialize.
The inflation rate is a measure of price changes of a large basket of goods. In a real economy, this can be affected by a number of different (but connected) things—the expansion and contraction of credit, the velocity of money (the rate money flows through the economy), foreign debt (esp, debt in another country’s currency), and so on. The dogecoin chart only shows base supply, which is not really a complete picture of economic function.
Inflation can be increases in prices, and it is used in this way by most modern economists, except hard money economists to whom inflation is by definition the increase in money supply irrespective of prices. In this sense, inflation is what causes price increases but isn't price increases. The article is talking with this second, or original definition of inflation.
Inflation is calculated from the increase in prices. It's a measure of the drop in buying power post facto. The earlier definition is incomplete as it does not take into account velocity. For instance, if you print a $1T coin and hand it to me, then I throw it into a vault, supply went up but nothing changed with respect to prices, because velocity went down commensurately.
The earlier definition does not match observable reality.
That is only because what you are interested in IS price increases.
If what you are interested in is money supply, and you call that inflation, then it doesn't matter what you do with the money, you can store it, you can burn it, you can spend it, is all the same. It doens't matter if prices go up either, that is irrelevant under this definition of inflation.
Inflation used to mean money supply. Inflation now means price increases.
People thinking they are talking about the same thing when they use the word inflation is where the confusion is coming from.
The issue is that inflation as a function of supply alone is an incomplete model, not particularly meaningful and has been long-since debunked. Trying to resurrect an incomplete model isn't a great idea IMO.
This article states downright untrue information about bitcoin:
False: "Everyone in the crypto world believed that this virtual coin would one day change how we use money. It will free us from governments and banks’ control over our financial system. But that goal no longer exists in the crypto world."
False: "The circulation number [of bitcoin] is not enough."
False: "As of this moment, Bitcoin mining is not profitable anymore, including the Bitcoin rewards."
I think people should not think that much in terms of supply-demand for speculative phenomena. At least not in a macroeconomic sense.
The value of a coin is determined by the expectation of selling it in the future at a higher price, nothing else.
These expectations are affected by the supply level only via auction dynamics: lots of newly mined coins in a short timeframe tend to result in big sell orders and downward pressure on the price.
That's an effective but also very limited way to impact the price.
For instance the increase in supply of a non-speculative asset reduces its marginal utility: the more oil available the less useful it becomes.
But there's no theoretical limit to the price of a coin and therefore no limit to the return one can expect!
As it's all about auction dynamics, a highly inflationary speculative asset with well-timed and strategic increase in supply could very well defy any macro supply-demand logic.
> When Bitcoin started, however, profiting off Bitcoin was not the primary goal. Everyone in the crypto world believed that this virtual coin would one day change how we use money. It will free us from governments and banks’ control over our financial system. But that goal no longer exists in the crypto world.
stopped reading here. People have hoped to profit from bitcoin since the beginning.
And while there probably aren't a lot of crypto people thinking that BTC will become the medium of (common) exchange, ending government fiat control of currencies is certainly a primary concern among people in the space, and many are building "layer 2" solutions (such as Lightning) with the goal of facilitating smaller and faster transactions and using bitcoin (or other) as the settlement layer.
The price of BTC will continue to rise as long as people believe that it can become a currency or respected asset class in the future -- but only so long as that doesn't happen. Treated as a currency, if folks actually started to spend it, velocity would go up and its value would inflate away with no central authority to jump in and help.
As an asset, at some point, all the money that will go into it will go into it, and it won't grow anymore, the get-rich-quick game will be over, and people will start to sell, and the price will crater. This can even by triggered by the $30 billion dollars in new money required to pay miners each year.
LN is perfect because unless you squint it's a plausible attempt to solve some of the limitations of the underlying asset.
But here in reality, opening and closing a single LN channel for everyone on earth would take over 150 years. It would cost 1/3 of a trillion dollars in transaction fees. If you broadcast an old wallet state you'll lose your coins. If any intermediate node goes down, it'll lock up your funds. It suffers from terrible illiquidity.
The same number of channels now as 3 years ago. Usage is not growing. It's not a viable solution. It is, however, great distraction.
Check out strike app. It’s an lightning based $US denominated peer to peer payment app (ala Venmo and cash app) and lightning wallet (allows paying lightning invoices). Multiple country (eventually all, as it relies on BTC LN network for settlement). It’s as easy to use as cash app, and doesn’t even mention bitcoin at all. No sir, not 18 months. There is innovation everywhere.
That actually addresses none of my criticisms of LN though. Why would I want to pay $20-40 to open a channel to obtain the same functionality I get free of charge from my existing dollar denominated Cash App, Cash App? Not to mention when I do, I don't have to pay taxes on every transaction. This is another worse solution, except with crypto.
You didn’t check out the app! There are no lightning channel establishment costs to the user (it’s submarine swaps, server side) The behavior is identical to cash app. It’s also all USD and there are no tax implications (explicitly mentioned in the app). It literally solves all of your concerns.
It’s indistinguishable from cash app to the user. Except that it works internationally and very low fees. It’s better solution than cash app but with crypto (abstracted from the user).
Wait lol, why is Bitcoin involved at all? You literally have to deposit your cash into their un-insured custodial account, then they move it around internally. They could just move database entries around on their own servers. They just need to keep a liquidity pool on both sides for the (likely very few) international transfers that happen, and settle up on a rolling basis with a $20 wire transfer. No bitcoin necessary lol.
I mean they don't even allow anyone else to connect to their lightning nodes.
[edit] oh I get it, they don't want to register as money transmitters haha, it's just to avoid regulation.
They are not avoiding regulation at all — they are avoiding legacy money transmission networks! They are regulated because they transmit money in the US (KYC/AML etc).
It’s using the Lightning Network to replace traditional interbank networks like Swift. Or ACH (at least for outgoing payments) If you don’t see this as a valuable thing, I’m sorry.
It also allows arbitrary payments to lightning invoices denominated in USD, you can pay any user of the app, or any lightning invoices.
You don’t need to connect to lightning nodes - it is a network and if you need to route through them, it will.
Why bitcoin? Because they don’t need to maintain a liquidity pools and use swift to balance the USD pools. They can use cheap LN payments to instead of swift for settlement. Note that LN is unfairly cheap to use. An order cheaper than swift.
I don't think so. Once people realise they can buy real stuff with cryptos without being on the darknet (obligatory mention to particl), they'll see that they actually are a real. useful currency that doesn't need to be converted back to fiat.
Having been on the receiving end of a "How cute", it's extremely condescending and obviously violates HN guidelines. (the entire comment is just a "shallow dismissal")
It works as designed right now, but it's still designed for crypto nerds, not normal people. I've gotten an open balanced lightning channel using electrum but it was not easy or cheap.
Designed for crypto nerds is the wrong way to describe it.
It's designed to be a fundamental building block that can be configured and built on top of in many different ways, some of which will be ease of use for a non technical end user, though that will still take a lot of work.
It might be the case that self custody of coins is just unavoidably hard, and only those willing to go to some abnormal effort can realistically "be their own bank". But no crypto has solved this. Self custody is just intrinsically complicated and riddled with pitfalls.
How cute, people still thinking lightning network doesn’t work. Just 18 more months, my friends, then Bitcoin will crash and prove all of us HN boomers correct.
No one actively working on bitcoin actually expects it to take government control out of money. It simply isn't possible, no grass roots digital project can strip such a fundamental power from the government once it already has it. If that were ever a serious possibility the government would simply ban the project all together, or effectively take it over with its own version of government run bitcoin.
Also don't let Lightning fool you. It still doesn't work and is forever 18 months from ready. Its developed and run by a private company and is very centralized, how is that better than fiat or anywhere near what bitcoin's white paper laid out?
First, are you not thinking of Liquid instead? That is run and developed by a private company. Lightning does have some big nodes, but in general the interconnection is pretty good, as far as I can see [0]. If you want to route payments, it's not enough to just have channels going to you, but you also need to have outgoing channels to balance the flow, and you are on the hook for the closing fees, so that should help with stability.
So long as individuals want to transact on the Bitcoin network, miners will be there. There IS something to be said about all this “off chain” settlement — let’s hope Coinbase and others remain honest. For that matter, what stops individuals exchanging private keys instead? And, oh yeah, USDT...
I think Cardano (ADA) which is releasing https://roadmap.cardano.org/en/goguen/ very soon will be where the miners go, to stake vs. mine that is. ETH 2.0 has issues https://news.ycombinator.com/item?id=26936244 but ADA from get go has been a stake culture. And stake means no more wasted electricity. It's like Satoshi Nakamoto back in 2008 had this great idea, then Vitalik Buterin had a +1 idea but Charles Hoskinson is fixing this whole proof of work mistake from years ago.
I am surprised that people still think Cardano is a vaporware. The code is there, the smart contract pioneer program just launched, people are enrolled in it. The Africa deals are there. The NFT capability and NativeToken capability is there. What is vaporware about it? There are easier ways to scam people than just building those stuffs out.
And yet we laugh on flat Earthers. Look at what I found here.
> For that matter, what stops individuals exchanging private keys instead?
This could work if you were only making transactions with people you trust, at least in the short term. The main risk here is anyone with the private key could transfer the contents of the wallet. The seller could even sell the same wallet to multiple people. So you need to get the blockchain involved and transfer it to a wallet that the previous seller no longer has access to.
That source seems to be "U.S. city averages" (relative) while your source seems to be " Monetary Base by Millions of USD" (absolute). You'd have to convert it into relative values in order to compare it I guess.
How can dogecoin have 10x faster transactions than Etherum and BitCoin ? I know the method used by BitCoin with the miners. What is the method used by dogecoin to be so fast ?
A rate of increase that drops over time isn't intrinsically inflationary or deflationary. It exerts inflationary pressure, but inflation is a function of both supply and velocity. We'd have to actually measure to determine. Its increase in price means you can buy more goods with it, which means it has demonstrably been insanely deflationary.
But the fact dogecoin is inflationary is interesting. A currency needs to be inflationary or people hoard it instead of spending it, see bitcoin for an excellent example.