It's an efficient store of value. Here is a dilemma - you have 10 million dollars. You need somewhere to park your money. Do you follow the Chinese businessman pattern and buy real estate in Toronto? That seems complicated - picking a property, being subject to the real estate market, etc. Often these houses sit empty, since you are on the topic of wasted resources.
Do you buy gold? Gold is as useless as Bitcoin, in terms of intrinsic value, your special snowflake "industrial applications" of coating McLaren F1 engines as a heatshield and superconductivity aside.
Buy stocks? How do you pick them? A financial advisor certainly won't do it properly for you. And the fed is pumping out USD.
Of course USD is going to deflate.
So, Bitcoin suddenly doesn't seem so useless.
"is the huge energy waste"
Gold takes a lot to store, secure, and transport. BTC replaces that with mining.
"The second one is that it makes illegal activities easier, and at a larger scale. It's quite common right now for companies to be coerced pay millions of dollars to anonymous criminals, all enabled with cryptocurrencies."
Every single transaction is on the chain. At this point they are worried that Monero is insecure. There are even conspiracy theorists saying that "the man" wants blockchain currencies as the norm due to the "nowhere to hide" policy.
And yes, you can create a wallet on some hotspot, and it is "anon". But let's be honest.
"Unless equally sized positive effects would emerge"
It's a secure place to park cash that doesn't deflate by nature.
edit: If you downvote, try to explain what you disagree with.
I disagree with the 'store of value' argument. I got into a similar argument with someone on here before, and I believe it is an insufficient economic principle to justify a currency. A good currency serves as a medium of exchange or a standard of value.
Are people using bitcoin to replace USD in general? No, not really. It's not a very good medium of exchange not because of the illegal stuff but because no one knows how it works and it's messy, that's why no one buys stuff with it. They also don't know how much it's worth on average and therefore struggle to use it, bringing me to my next point...
Are people using it as a standard of value? No, if I tell you a car costs 15k USD you know what that means. If I tell you it costs 1 BTC, you have no tangible idea of how to relate that to the real world because BTC's value changes sporadically. I am sure this will stabilise as crypto matures, but i dont think people should invest this much effort into something that is just going to be used as a value measurement.
So back to the 'store of value' thing, why do I want people not to invest their money? Is wealth hoarding not a problem now, or do you believe that just by virtue of it existing as BTC, it's doing something good?
First of all, thank you for the coherent argument. Going to start with what I think your central argument is at first.
"why do I want people not to invest their money"
You don't - you absolutely don't want someone to park their money in BTC and avoid spending it. It's an economic inefficiency. It's also the nature of people to hoard wealth - that's why they buy land to "sit on" and why they buy gold. Both do not have the world OR wealth distribution. That's also why in the US, we have a property tax - to keep the wealthy from hoarding all the land without generating a profit on it (assuming they aren't living on the property.
Conclusion - we need, or at the very least have used stores of value throughout history that are not "investments" in the sense of efficient use of resources.
"What are the benefits of BTC over existing stores of value?" ("USD" in a bank account, USD (cash), gold, and property).
The ones I listed above - USD depreciates. It's trite but it's also true - you cannot hold USD without losing wealth. Gold has no intrinsic value, you have less control over the asset unless you store it in your basement (managed by third party), you cannot easily move it or transact in it.
Real estate is entirely too complicated for a non-professional to invest in. Same with land.
BTC does what cash was supposed to - you buy it, it sits there, it doesn't depreciate.
Now, you will correctly say "No, I buy BTC at $20,000 and tomorrow it's $3,000". Completely correct and true, but the bet is that as it becomes more established it will become a more reliable store of value than a nationally backed currency, kind of like currency was when it was backed by the gold standard.
Hopefully that helps you understand my viewpoint without thinking I am trying to shove my opinion down your throat, as most crypto debates go that way, and it's definitely not my intent. I don't even hold crypto, nor do I necessarily think it's "changing the world".
A single bitcoin transaction (that is, literally one) uses as much electricity as a house consumes in several weeks. The entire system uses roughly the same amount of electricity as the country of Ireland, or Denmark. For ~300k transactions per day.
No, the "huge energy waste" is so vast as to be nearly inconceivable. It cannot reasonably be compared to anything else. Even shipping literal gold around by helicopter might be more efficient.
Anyway, the BTC-enthusiast argument to that is "Well, if BTC replace banks, imagine how much money that would save."
That argument holds some ground - think of all the armored cars, shipping containers, and facilities that serve to move and store cash and gold, as well as all the labor involved in maintaining the system.
Of course, BTC is not going to replace cash/gold fully in the near future, if ever, and the cost is absurd. Nor is there a solution to this, as transaction demand will just continue driving up price.
> Anyway, the BTC-enthusiast argument to that is "Well, if BTC replace banks, imagine how much money that would save."
> That argument holds some ground - think of all the armored cars, shipping containers, and facilities that serve to move and store cash and gold, as well as all the labor involved in maintaining the system.
There are very good counterarguments to that as well.
The idea that the "banking system" functions primarily by shipping cash and gold around is nonsense. 99.9% of traditional banking nowadays happens on computer networks. The Visa network for example handles 150 million transactions per day (that is, 500x more than bitcoin) while using a tiny fraction of the electricity. When a bank in London wants to send money to a bank in New York, they don't ship a container full of gold, they send the money electronically using the SWIFT network. To the extent that cash is still physically shipped around, it's only because people still sometimes use cash to pay for things, and banks collect and distribute this cash and replace damaged bills.
And your estimate of labor is similarly flawed. To begin with, the "banking system" includes an enormous amount of services that Bitcoin doesn't provide (loans, mortgages, securities), and retail banks are part of that as well. The transactional parts of banking can be (and are being) largely replaced with mobile apps and ATMs. The other aforementioned parts of banking aren't replaced by Bitcoin, so all of that labor still needs to exist.
So the efficiency argument shouldn't be "what if BTC replaced banks", it should be "what if BTC replaced SWIFT, ACH, BACS, Visa network, etc." there is a value proposition here but it is much smaller than the one originally proposed.
The problems with ACH is that ACH takes 3 business days. If you want an "immediate" transaction, you do a wire transfer, and pay $30-60 for it, which is a hefty sum. That was one of the original "problem statements". Of course, BTC transactions are now very expensive, and that's an issue until lightning solves that.
As far as loans - the theoretical, grand idea there is that the loan market becomes global, e.g. Americans can loan to Sierra Leone, where they don't have access to a traditional, efficient banking system. Again, a pipe dream for now. Btw, there are other coins claiming to do loans based on reputation, but so far, I haven't seen them working well. And of course, there will be scammers.
>To begin with, the "banking system" includes an enormous amount of services that Bitcoin doesn't provide (loans, mortgages, securities), and retail banks are part of that as well.
This may be a lack of imagination on your part....Many companies already offer loans/mortgages using Bitcoin as collateral (at much lower interest rates than traditional banks). Not having thousands of idle bank employees sitting around in brick and mortar banks makes the financial system a lot more efficient...
I'm not sure you understood the point I was making, which is that you can't get a loan/mortgage from "bitcoin", you have to go to a separate entity that can offer you a loan/mortgage using bitcoin to mediate the transaction. A "bitcoin bank", if you will. The labor requirements are going to be similar either way.
> As the parent poster mentioned, the US’ monetary policy is awful and many believe is on the brink of major problems.
Ah yes, "the brink of major problems". That's the undying adage of USSR and later Russian news programs. "Dollar is on the brink of collapse".
> So, yeah, some new alternative financial instrument seems attractive to me.
How can one forget, that these crises are unique, are happening for the first time ever, d no one in the history in the world ever had 10 million dollars before, so they have no idea what to do with this money.
I don’t think the USSR existed during a global pandemic. In fact, I would posit that the globalized nature of our economy adds a new twist to any pandemic that has come before. I don’t think the absoluteness of your position is warranted.
As you mentioned in another reply- diversification of ones’ portfolio is important. I, and most people, would never put all their money into BTC or crypto in general. That would clearly be a bad decision. But, why _shouldn’t_ I put <10% of my portfolio in a new asset class that has growth potential? Many people put 10% of their portfolio into all kinds of crazy things.
> I don’t think the USSR existed during a global pandemic.
The USSR existed during multiple global conflicts. The USSR existed during the oil crisis in the 70s. Russia existed during multiple global conflicts. Russia existed through multiple global economic crises including the one in 2008.
And through it all the fall f the US dollar was just around the corner. Within weeks. Well, months at most.
In 1998 I was an exchange student in the US. I read an editorial in some newspaper like The NY Timesthat argued that financial crisis that would kill the dollar was inevitable within at most two-three years. And yet, here we are.
So no, I don't buy "you sould put money in bitcoin because of course USD is going to deflate and is on the brink of major problems." as an argument for storing 10 million dollars in Bitcoin.
On top of that this entire argument ignores the actual reality of how people protected their assets before Bitcoin. Let me show you how: https://dataroma.com/m/holdings.php?m=BRK
Genuinely not my intent. This topic is bound to be controversial, but it also seems to be worth discussing for the people who are willing to take a little heat for their opinions.
Ok, but intent isn't enough. You need to post in a way that isn't likely to lead to flamewars, and that responsibility grows as the topic gets more controversial.
It's an efficient store of value. Here is a dilemma - you have 10 million dollars. You need somewhere to park your money. Do you follow the Chinese businessman pattern and buy real estate in Toronto? That seems complicated - picking a property, being subject to the real estate market, etc. Often these houses sit empty, since you are on the topic of wasted resources.
Do you buy gold? Gold is as useless as Bitcoin, in terms of intrinsic value, your special snowflake "industrial applications" of coating McLaren F1 engines as a heatshield and superconductivity aside.
Buy stocks? How do you pick them? A financial advisor certainly won't do it properly for you. And the fed is pumping out USD.
Of course USD is going to deflate.
So, Bitcoin suddenly doesn't seem so useless.
"is the huge energy waste"
Gold takes a lot to store, secure, and transport. BTC replaces that with mining.
"The second one is that it makes illegal activities easier, and at a larger scale. It's quite common right now for companies to be coerced pay millions of dollars to anonymous criminals, all enabled with cryptocurrencies."
Every single transaction is on the chain. At this point they are worried that Monero is insecure. There are even conspiracy theorists saying that "the man" wants blockchain currencies as the norm due to the "nowhere to hide" policy.
And yes, you can create a wallet on some hotspot, and it is "anon". But let's be honest.
"Unless equally sized positive effects would emerge"
It's a secure place to park cash that doesn't deflate by nature.
edit: If you downvote, try to explain what you disagree with.