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0 pointsacdha8y ago0 comments

That's arguing that the past will be like the future when things are still really early. Statistically almost nobody owns or uses Bitcoin, especially when you subtract the Bitcoin proponents who do most of their transactions using something like a credit card which actually uses local currency via Visa or where Bitcoin is converted into real currency immediately by the recipient, and who thus would have very little switching converting to something else.

Ask how long either #1 or 2 would hold true if, say, a couple of large banks, Visa/Mastercard, Apple and/or Google, etc. launched a currency accessible to their existing customer bases. I'd give that a couple of days before Bitcoin would be a rounding error in the daily transaction volume.

The big long-term reason I expect that to happen is the deflation model baked into Bitcoin: every player which didn't acquire a substantial holding years ago has a huge incentive to find an alternative which doesn't mean they're putting effort into making someone else rich. Right now there's very little mainstream demand for Bitcoin but if that change it's hard to believe the finance people wouldn't be obsessed with ways to capture that revenue going to a third-party.

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ericb8y ago· 2 in thread

Coinbase has 10 million users, most of whom are there for bitcoin.

acdhaOP8y ago

How many of them are active? How many hold non-trivial balances? Most importantly, how many sales would legal merchants lose if those users jumped ship or lost interest?

Again, my point is simply that there's little holding anyone who hasn't made a huge investment specifically in Bitcoin. If you have $10 equivalent sitting in an account and CitiCoin™ launches next week with attractive terms and mainstream merchant acceptance, are you going to think twice about bailing? Alternately, if law enforcement cracks down on the money laundering, etc. and prices drop, how many people will lose interest if it won't make them rich?

A key point here: of the comparatively few merchants who accept BTC, how many do their business primarily in Bitcoin and don't quickly convert to something else? That's the only group with a significant commitment to continued use; everyone else can switch on a whim.

That's the difference between a pure fiat currency like Bitcoin and something backed by a national government. Bitcoin has no inherent value beyond voluntary group consensus, which means that a panic, messy fork, or disinterest has no natural floor on how far it can fall. In contrast, USD are backed by one of the major world economies, hundreds of millions of people need them to pay taxes, and billions of dollars are paid to government employees, contracts, benefits, etc. Again, that's not immunity from problems but it's a huge inertial weight moderating swings.

ericb8y ago

The backing and even the existence of the United States is also simply a matter of group consensus. It is turtles all the way down, my friend. We're just debating whose delusions are bigger and better.

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