Bitcoin is simply not a currency and never will be, while other projects such as $ETH or $SOL can at least theoretically be considered as a currency - a means of payment. A very important point here is the lack of inflation with BTC, or worse deflation due to the possibility of losing coins forever. It is therefore theoretically conceivable that at some point BTC will no longer be accessible. A scenario that is unacceptable for currencies.
BTC may be secure, unique etc. but without any real use (means of payment can be ruled out) the date of death is already fixed.
BTC may be secure, unique etc. but without any real use (means of payment can be ruled out) the date of death is already fixed.
•
11
•
@Pzjs The fact that Bitcoin is a legal tender in El Salvador disproves your statement that it can never be a currency :D
But basically Bitcoin is not a currency, that is correct. However, Bitcoin can very well become money. However, it is important to note that money is not the same as currency. You can also take a look at my article on what money is and how Bitcoin can become money :)
Who says that there can be no economy under limited money? You can look at the entire history of mankind and see that societies have perished over and over again from inflation - but never from deflation. I realize that deflation would be poison in today's economy because everything is built on perpetual growth and cheap credit.
Nevertheless, hard money like Bitcoin would solve an incredible number of problems - including climate change. But that would go beyond the scope of this comment :)
But basically Bitcoin is not a currency, that is correct. However, Bitcoin can very well become money. However, it is important to note that money is not the same as currency. You can also take a look at my article on what money is and how Bitcoin can become money :)
Who says that there can be no economy under limited money? You can look at the entire history of mankind and see that societies have perished over and over again from inflation - but never from deflation. I realize that deflation would be poison in today's economy because everything is built on perpetual growth and cheap credit.
Nevertheless, hard money like Bitcoin would solve an incredible number of problems - including climate change. But that would go beyond the scope of this comment :)
•
11
•@stefan_21 "Societies have perished again and again due to inflation" :D Where did you get that from?
Inflation/deflation is a reaction to economic events that are also due to social or political factors but never the cause of anything. What you may mean is a collapse of a market due to hyper in/deflation. but that doesn't destroy a society.
This is not even about interest rates (which only work without inflation if the means of payment can propagate naturally) but about the fact that the means of payment must be able to react to fluctuations in supply and demand. If all conceivable goods were constant, then they could provide a constant means of payment.
Instead of Bitcoin, you could also trade in Picassos or Montes - impractical, of course - but the haptic equivalent of a Bitcoin - a unique collector's item that has value within a market.
Means of payment basically have no value themselves but a nominal if you go shopping with a 1oz Philharmonic you get goods worth 100 EUR and not goods worth 1oz of gold
Inflation/deflation is a reaction to economic events that are also due to social or political factors but never the cause of anything. What you may mean is a collapse of a market due to hyper in/deflation. but that doesn't destroy a society.
This is not even about interest rates (which only work without inflation if the means of payment can propagate naturally) but about the fact that the means of payment must be able to react to fluctuations in supply and demand. If all conceivable goods were constant, then they could provide a constant means of payment.
Instead of Bitcoin, you could also trade in Picassos or Montes - impractical, of course - but the haptic equivalent of a Bitcoin - a unique collector's item that has value within a market.
Means of payment basically have no value themselves but a nominal if you go shopping with a 1oz Philharmonic you get goods worth 100 EUR and not goods worth 1oz of gold
••
@stefan_21 ad El Salvador - You can also buy Ferraris in Bitcoin and I am convinced that you would also get one for the Mona Lisa.
But ultimately valued in fiat.
But ultimately valued in fiat.
••
@Pzjs Historically speaking, it is not quite true that inflation cannot destroy societies, but not entirely. Hyperinflation has repeatedly led to massive social and economic crises. One example of this would be the Roman Empire, which was driven into hyperinflation by, among other things, the constant devaluation of its currency. Or the hyperinflation in the Weimar Republic, which resulted in massive political and social instability. And even today, in countries such as Venezuela, we see how inflation leads to a loss of confidence in the currency and ultimately to chaos.
Deflation, on the other hand, is often misunderstood. It does not mean that everyone stops consuming. Markets such as the technology sector show that falling prices can actually encourage innovation and demand - for example, laptops or smartphones are relatively more powerful and cheaper today than they were a few years ago. In a system like Bitcoin, moderate deflation could have similar positive effects on the economy. But of course we don't know, because we have never used a deflationary monetary system anywhere.
The statement that means of payment have "no value" only applies to fiat money. Fiat money actually only has a nominal value, which is maintained by the compulsion to use it (e.g. for taxes). Gold, on the other hand, has a value due to its properties. This is why paper currencies were backed by gold for a long time, as gold, unlike paper, has monetary properties.
Bitcoin fulfills the criteria of good money: it is scarce, divisible, durable, easily transferable and safe from manipulation. Unlike fiat money, Bitcoin is not backed by state authority, but by free market acceptance.
Bitcoin already reacts to changes in supply and demand, but not through a manipulated money supply, but through price changes. An elastic money supply, as created by central banks, leads to uncertainty and loss of value in the long term. Bitcoin, on the other hand, remains a stable store of value due to its limitation, which creates trust - a fundamental characteristic of money.
Technological progress also ensures that goods can be produced more and more cheaply. This means that a fixed amount of money is not only sufficient, but could even lead to goods becoming cheaper over time in a Bitcoin standard - a natural and logical process.
The point that interest rates would not work without a flexible money supply is a common misconception. Interest is the price of borrowed money and can exist even in a system with a limited money supply - it would simply regulate itself through supply and demand.
Currently, interest rates are set by central banks, which is a form of planned economy. Historically, planned economies have rarely worked, as a central authority can never have all the relevant information to make an optimal decision. Bitcoin solves this problem by not requiring central control due to its decentralized nature.
Deflation, on the other hand, is often misunderstood. It does not mean that everyone stops consuming. Markets such as the technology sector show that falling prices can actually encourage innovation and demand - for example, laptops or smartphones are relatively more powerful and cheaper today than they were a few years ago. In a system like Bitcoin, moderate deflation could have similar positive effects on the economy. But of course we don't know, because we have never used a deflationary monetary system anywhere.
The statement that means of payment have "no value" only applies to fiat money. Fiat money actually only has a nominal value, which is maintained by the compulsion to use it (e.g. for taxes). Gold, on the other hand, has a value due to its properties. This is why paper currencies were backed by gold for a long time, as gold, unlike paper, has monetary properties.
Bitcoin fulfills the criteria of good money: it is scarce, divisible, durable, easily transferable and safe from manipulation. Unlike fiat money, Bitcoin is not backed by state authority, but by free market acceptance.
Bitcoin already reacts to changes in supply and demand, but not through a manipulated money supply, but through price changes. An elastic money supply, as created by central banks, leads to uncertainty and loss of value in the long term. Bitcoin, on the other hand, remains a stable store of value due to its limitation, which creates trust - a fundamental characteristic of money.
Technological progress also ensures that goods can be produced more and more cheaply. This means that a fixed amount of money is not only sufficient, but could even lead to goods becoming cheaper over time in a Bitcoin standard - a natural and logical process.
The point that interest rates would not work without a flexible money supply is a common misconception. Interest is the price of borrowed money and can exist even in a system with a limited money supply - it would simply regulate itself through supply and demand.
Currently, interest rates are set by central banks, which is a form of planned economy. Historically, planned economies have rarely worked, as a central authority can never have all the relevant information to make an optimal decision. Bitcoin solves this problem by not requiring central control due to its decentralized nature.
•
11
•@Pzjs Of course, everything is currently still valued in fiat. Should Bitcoin ever become money, goods and services would be priced in Bitcoin :)
••
@stefan_21 ad interest if there are 10 money and I lend them 10 money for 10% then they have to find 1 money somewhere to pay the costs.
But if only 10 money exist they can never pay back 1 money unless our money is e.g. 9 cows and a bull and then they give me back 9 cows, 1 bull and a calf.
Alternatively - I expand the money supply and bring 1 more money into circulation - cet par, inflation 10% and they have a fair chance to make an effort to find this 1 money.
But if only 10 money exist they can never pay back 1 money unless our money is e.g. 9 cows and a bull and then they give me back 9 cows, 1 bull and a calf.
Alternatively - I expand the money supply and bring 1 more money into circulation - cet par, inflation 10% and they have a fair chance to make an effort to find this 1 money.
••
@Pzjs If I lend them 10 money and they have to pay 1 money in interest, they can earn the extra money by creating added value in the economy. For example, by producing goods or providing services. The key point is that it is not necessary to create additional "money", it is sufficient that value is generated by the market.
In this case, the lender naturally has a higher default risk, which is why a higher market interest rate is created. To think that more money has to be created in order to make a credit transaction possible is not correct.
In this case, the lender naturally has a higher default risk, which is why a higher market interest rate is created. To think that more money has to be created in order to make a credit transaction possible is not correct.
•
22
•@stefan_21 Inflation historically or currently occurs when you either increase the money supply or reduce the goods - then you have an imbalance between the medium of exchange and the available goods. The medium of exchange is automatically revalued and you receive fewer goods for more of the medium of exchange. Again, they have a problem if they cannot expand the medium of exchange further.
The crises you are referring to are not caused by inflation or deflation but by more fundamental problems in the market, political or social upheavals, e.g. wars, environmental disasters, epidemics, etc....
Central banks try to ensure price stability by adjusting the money supply in order to cushion the above effects. Otherwise, they might have to create additional problems on top of the existing ones.
Please read for yourself what is generally understood by "planned economy", but I assume that this was meant in an exaggerated way.
The crises you are referring to are not caused by inflation or deflation but by more fundamental problems in the market, political or social upheavals, e.g. wars, environmental disasters, epidemics, etc....
Central banks try to ensure price stability by adjusting the money supply in order to cushion the above effects. Otherwise, they might have to create additional problems on top of the existing ones.
Please read for yourself what is generally understood by "planned economy", but I assume that this was meant in an exaggerated way.
••
@Pzjs First of all, I agree with you that inflation occurs when the money supply grows faster than the quantity of available goods. This imbalance causes money to lose value. However, I disagree with the statement that the medium of exchange "must be expanded further". In a system with a hard-limited money supply like Bitcoin, this is not necessary. Instead, the market adjusts via falling prices - i.e. deflation. This may sound unusual because we live in an inflationary economy, but deflation is not necessarily negative. It can encourage saving and promote a more efficient use of resources. This would also benefit our environment.
As far as the causes of crises are concerned, I agree with you that social and political upheavals such as wars or environmental disasters have a massive impact on markets. But the crucial question is how such shocks can be cushioned by a monetary system. In a fiat system, attempts are often made to compensate for the effects by expanding the money supply. However, this often leads to further problems, such as growing wealth inequality due to the Cantillon effect. A hard money system like Bitcoin would minimize such artificial interventions and leave more room for market mechanisms to self-regulate. In a deflationary system, people would be more frugal from the ground up due to lower money preference. Crises would then hit people with savings, which would cushion the effects of crises. Furthermore, expensive wars would presumably no longer be possible in a Bitcoin state, as they could not be financed.
You also talk about the task of central banks to ensure price stability. This is plausible in theory, but problematic in practice. Central banks distort the market through their interventions, as it is impossible for them to know or precisely control all the relevant variables. And for me, this is definitely a planned economy - even if it is, of course, an exaggeration.
A small group makes decisions that influence the entire market without having the necessary information. In a free market, the price of money - i.e. the interest rate - would be regulated by supply and demand, not by a central authority that often only acts reactively. History shows that central banks often cause more damage than they prevent.
As far as the causes of crises are concerned, I agree with you that social and political upheavals such as wars or environmental disasters have a massive impact on markets. But the crucial question is how such shocks can be cushioned by a monetary system. In a fiat system, attempts are often made to compensate for the effects by expanding the money supply. However, this often leads to further problems, such as growing wealth inequality due to the Cantillon effect. A hard money system like Bitcoin would minimize such artificial interventions and leave more room for market mechanisms to self-regulate. In a deflationary system, people would be more frugal from the ground up due to lower money preference. Crises would then hit people with savings, which would cushion the effects of crises. Furthermore, expensive wars would presumably no longer be possible in a Bitcoin state, as they could not be financed.
You also talk about the task of central banks to ensure price stability. This is plausible in theory, but problematic in practice. Central banks distort the market through their interventions, as it is impossible for them to know or precisely control all the relevant variables. And for me, this is definitely a planned economy - even if it is, of course, an exaggeration.
A small group makes decisions that influence the entire market without having the necessary information. In a free market, the price of money - i.e. the interest rate - would be regulated by supply and demand, not by a central authority that often only acts reactively. History shows that central banks often cause more damage than they prevent.
•
11
•@stefan_21 The unequal distribution is not a problem of the medium of exchange - they can distribute everything unequally, whether BTC, USD, works of art or commodities is irrelevant.
They currently have 280k BTC in MSTR alone while the majority don't even own a SAT. Together with Tesla and a few others, they would have enough leverage to exert massive influence on the market.
The problem with limited goods (such as BTC) is that they are hoarded so that availability can be artificially restricted or the market can be flooded. This means you are directly intervening in a market. If they withdraw a significant amount of money from a market or flood the market, the regulative is to switch to a more liquid (reaction to deflation) or more stable (reaction to inflation) currency.
Central banks reduce or accelerate the expansion of the money supply through interest rates without (usually) directly increasing or decreasing liquidity. The fixed interest rate motivates or discourages the desire to create money. If you go to your bank and want a loan, the bank creates money by expanding the balance sheet and credits it to you. As soon as you have repaid the loan, the money disappears again, the bank's balance sheet total decreases again and what remains is the interest that you were hopefully able to "find" somewhere. However, the money was not created by "the small group at the central bank" who merely set the interest rate and influenced their personal decision whether to take out the loan or not.
They currently have 280k BTC in MSTR alone while the majority don't even own a SAT. Together with Tesla and a few others, they would have enough leverage to exert massive influence on the market.
The problem with limited goods (such as BTC) is that they are hoarded so that availability can be artificially restricted or the market can be flooded. This means you are directly intervening in a market. If they withdraw a significant amount of money from a market or flood the market, the regulative is to switch to a more liquid (reaction to deflation) or more stable (reaction to inflation) currency.
Central banks reduce or accelerate the expansion of the money supply through interest rates without (usually) directly increasing or decreasing liquidity. The fixed interest rate motivates or discourages the desire to create money. If you go to your bank and want a loan, the bank creates money by expanding the balance sheet and credits it to you. As soon as you have repaid the loan, the money disappears again, the bank's balance sheet total decreases again and what remains is the interest that you were hopefully able to "find" somewhere. However, the money was not created by "the small group at the central bank" who merely set the interest rate and influenced their personal decision whether to take out the loan or not.
••