Not really.
Currency is supposed to be three things: a medium of exchange, a store of value, and a unit of account.
At least presently, there really isn't that much exchange you can do using Bitcoin. The best you can do is buying bitcoin, selling Bitcoin in the local currency, then spending the local currency. You are basically dealing with a bunch of extra steps to do the thing you were going to do anyway. Not a great medium of exchange.
As for being a store of value, I wouldn't want to put all my life savings into Bitcoin. Sure, it's gone up at times, but it's also gone way down at times. Imagine you wake up on Monday you got paid, and by Wednesday you can't afford groceries because the value of Bitcoin dropped too much. It's volatility is being used as a selling point, because it's being sold to investors. The same volatility makes it a poor store of value. The dollar losing 7% of its value in one year is considered a crisis, Bitcoin lost half of its value.
This heavily fluctuating value makes it extremely poor as a unit of account. If you owned a store with everything priced in bitcoin, you would have to send someone out hourly to reprice your goods. When Tesla tried to sell their vehicles using bitcoin, they had to put a time limit on the amount of time you could take to do the transaction because from the beginning of the transaction to the end of the transaction the price of Bitcoin could have changed so much as to change the price of the car. That's not a unit of account.
Besides that, the banks do provide some very useful services for individuals. If you lose your bank card, you can walk into a bank with your ID and get another one immediately. If you lose access to your Bitcoin wallet, you're out of luck by design. If somebody starts making a bunch of fraudulent transactions on your bank account, the bank itself can step in and reverse the charges. If someone manages to drain your Bitcoin account, hope you didn't need that money for anything. While I will be the first one to talk about moral hazard, the fact is that the banks are heavily insured by the government so unlike a cryptocurrency exchange, if you put your money into a bank you're basically guaranteed to get it back out.
There's also the issue of the cost of a transfer. Sure, if you are sending money back home to ethiopia, using a wire service is very expensive. Maybe the cost of a Bitcoin transfer makes sense in that sense. But if you are transferring money between people in the same country, I get unlimited instant and free of charge email transfers with my bank account. And I can go to any bank and take out these pieces of paper that you can exchange for goods or services, and not only is the transaction totally anonymous, and there are no transaction fees passing them in between people, but you can use it without any internet access and in fact without any electricity. Pretty cool stuff.
Rather than being a currency, cryptocurrencies have evolved into just a place you park your money hoping that more people will park their money there so that you can get more money for your money later, and more people stop buying in, then there is no utility in the thing that you've purchased. That's pretty much the definition of a Ponzi scheme.
You can never see what the future brings, so maybe at the end of the day I turn out to be wrong, but simply based on the facts of what we have right now, the only thing Banks might be concerned about with Bitcoin is the fact that so many people are going to lose so much money when the inevitable finally happens.
That’s pretty much the definition of a Ponzi scheme.
You don't understand.
That is exactly how the federal reserve works. Our current monetization strategy is a big Ponzi Scheme. That is why inflation happens every year.
Bitcoin completely automates the banks so they are no longer needed.
Although I can relate to what you're saying, you're mistaken. The monetary system is the opposite of a ponzi scheme because the asset doesn't go up in value, and in fact it's considered a failure by the central banks if the asset goes up in value.
But here's the thing: If the borders closed tomorrow, and all external buyers were cut out of the equation, people would still need to get paid; they'd still need to buy milk and eggs and pay their mortgages; they'd still need to pay their taxes and any fines; and right now that's all done with dollars, so there's a demand for dollars whether or not more people buy into it as an investment or not.
The reason people buy the dollar isn't because the dollar will go up, it's because you can buy a lot of stuff from either the US or around the world using dollars. For that reason alone, it specifically isn't a ponzi scheme.
Now, that doesn't mean that the current system is good. I believe that the bubbles inflated by the fed and QE infinity are the root cause of many ponzi schemes and absurd bubbles in otherwise legitimate assets because as the value of the dollar drops like a rock, people are fighting desperately to find any way to conserve their capital and help it grow and traditionally safe methods of doing that like bonds are basically a loss with negative real rates for decades. It's also inflating legitimate markets in ways that will have massively negative long-term consequences. Look at some housing markets in the US and around the world -- You're looking at dumpy single family homes in bad areas of some cities being more valuable than some professionals entire career's wages.
I think we're on the verge of a sea change in how the central banks regulate currency. Interest rates from the central bank to the front-line customer will rise for the first time in decades. I suspect bonds will become profitable to buy. Money will flow out of risk assets into safe assets for that reason alone. It's going to have a massive effect in ways we don't understand yet. I think a lot of the Internet economy is as big as it is because their actual products are loss leaders meant to advertise the stock. Things we think of as "of course the Internet has taken that over" may suddenly significantly go up in price, and brick and mortar may find itself more competitive.
The idea that banks would no longer be needed if the currency changes sort of misses a key point: Banks existed in the US for hundreds of years when it had sound money backed by gold and silver. Even if we assumed that the entire world went crypto, banks would still exist. Investments would still need a broker, some people would want a safer way to store their bitcoins than on a computer in their house, people would still need to take out loans for houses and vehicles and the like. The storage and distribution of money is almost a trivial part of the bank's purpose at this point.
My friend, with respect you have shown you do not understand how the federal reserve works. And that is normal most people don't. It comes down to your first assertion that you base the rest of your argument on.
the asset doesn’t go up in value, and in fact it’s considered a failure by the central banks if the asset goes up in value.
You have to understand the history of the federal reserve to really understand what it is today.
Originally the U.S. Dollar was backed by gold. Anyone in the entire world could own U.S Dollars and then convert it to gold with the U.S government. Because of this every country wanted to hold U.S dollars. It became the world currency that all currencies were compared to.
The official excuse for getting rid of it was volatility. That is not true at all. It's a well known lie to protect the bankers who mostly profit off it. They are not even part of the government.
Certain governments and groups started to own large amounts of us dollars and us loans that they could convert to the nations gold at any time. It became a national threat. Lets say China buys up most of the dollars, they could then go exchange it for all the gold and then they become the worlds currency.
So The president of the time said no more gold exchanges. Effectively people could buy us Depts but could not exchange it for gold. The us would print more money to pay back the interest. The gold was rounded up protected and probably given out to terrible people.
That is when inflation started to really ramp up.
So this is how it works now.
The U.S. doesn't want to point blank print money. They instead run it through the reserve. To hide the ponzi scheme but it is one.
The U.S says, we need more money. China or anyone says ok, we will give you money and you pay us back at like 5% interest.
The U.S government prints money to pay them back. Just prints it. Out of no where. This causes inflation. China or whoever then has this extra money. If they keep it in their own currency inflation caused by the U.S dollar that all currencies are compared to will eat the money up. (Remember the U.S is the worlds currency because a long time ago it exchanged for gold. Today that isn't the case its just the worlds standard)
So what do they do? They take the same printed dollars and buy more U.S debt. Causing even more inflation.
So the dollar assets do go up in value. The same dept they bought keeps building up with interest, time ect.
All that dept cannot be repaid without causing inflation. So inflation will continue forever.
Bitcoin has a limited number of mining cycles. infinite Inflation is impossible. The value of a bitcoin should only go up and not down over time as more people want it and there are fewer and fewer bitcoins to mine. That was by design.
Bitcoin is becoming the new gold standard. Just like the value of gold always goes up because it is a limited thing. Bitcoin goes up.
Right now bitcoin is much safer than the dollar. You can exchange in other coins with smaller network fees and then exchange those back to bitcoin.
I don't know what makes you think based on my post that I don't know this history of the dollar or the federal reserve.
BTW, even if we assume arguendo that crypto is the future, that doesn't mean that bitcoin is the future. In 1999, google didn't exist, apple was nearly bankrupt, facebook didn't exist, netflix was mailing people DVDs, amazon only sold books. Today, most of the top tech stocks of that time don't even exist anymore.
squashkin@wolfballs.com 2 years ago
there's plenty that can be bought with crypto and it is legal tender for example in el salvador I think
store of value fluctuations are short term in the comparison offered, if the dollar has gone down 1% annually it has gone down -10%+ in a decade while bitcoin has gone up like +1000%
losing money without refund can also be done with paper currency like if you had bills in a wallet and lost the wallet
sj_zero@lotide.fbxl.net 2 years ago
Going up is just as much a fluctuation as going down. A stable currency ideally doesn't move around a lot period, up or down. That way you can know a week from now, a month from now, a year from now "Ok, if I make 1 bitcoin a year, I can afford [x]" and it'll be roughly true. If you're having to take pay cuts in terms of bitcoin every week because the currency is rising constantly, and you're seeing the cost of things constantly go down all the time, that's going to lead to a set of problems as well.
Let's say you bought a house 10 years ago for 60,000 bitcoin, and you took out a loan for that 60,000 bitcoin. If you took out a 30 year mortgage, let's ballpark it and say you still owe 36,000 bitcoin. Well, instead of owing about $180,000USD on that $300,000USD house, you now owe 1.4 billion dollars on that house. Oh shit.