Just don't forget these words by Hal and you all will be good.
"With 20 million coins, that gives each coin a value of about $10 million."
Hal was a smart guy, but he arrived at that number through faulty economic reasoning.
Well no economics was involved.. he just did the math and it's correct.
He literally said he thought the total value of the currency should be equal to the total value of all the wealth in the world.
Which is nonsense. It is not because something is being expressed in a unit, that that unit needs to expand to whatever is being measured. For example, let's say I measure the length of my furniture by comparing to the length of my thumb. Why would there then need to be as many of my thumbs as there is furniture in the world? If that sounds strange or weird, that is because it is weird and nonsensical.
Money is just an asset class on its own, which takes up a certain portion of total wealth in the world.
sauce :
https://twitter.com/DrBitcoinMD?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1165004233663496197%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.cryptopolitan.com%2Fhal-finney-bitcoin-price-prediction-10-m%2FI like bullish BTC price predictions as much as the next guy, but if we just switch off our critical thinking whenever somebody says something nice about bitcoin, we are more of a religion or cult than anything else. Which is not needed imo, as the realistic scenario for bitcoin holds plenty of upside and promise.
Well he didn’t say it will happen but he stated it as “an amusing thought experiment”. On other hand if that happens and Bitcoin becomes the standard global currency in the world then measuring bitcoin against dollar will be as useless as it’s today… 1 BTC = 1 BTC
Anyway yes it might be insane but not when you take it as an amusing thought experiment.
As an amusing thought experiment, imagine that Bitcoin is successful and becomes the dominant payment system in use throughout the world. Then the total value of the currency should be equal to the total value of all the wealth in the world. Current estimates of total worldwide household wealth that I have found range from $100 trillion to $300 trillion. With 20 million coins, that gives each coin a value of about $10 million.
... you've pulled the piece of Hal's comment out of context. The full comment was about the asymmetric upside bet. To estimate the asymmetry he needed a ballpark figure for an upside value of btc, at the time it was worthless, so to get an order of magnitude estimate Hal used total global wealth which for a ballpark order of magnitude estimate is fine.
... then he compared the upside value potential of bitcoin with the odds of bitcoin achieving monetary dominance, which he then estimated only needed to be less than 100 million to 1 for to make sense to acquire/hodl some bitcoin, which at the time were worthless remember. He was resoundingly right and the statement still stands, the asymmetric bet was worth it.
Edit; relevant portion of Hal's comment
One immediate problem with any new currency is how to value it. Even
ignoring the practical problem that virtually no one will accept it
at first, there is still a difficulty in coming up with a reasonable
argument in favor of a particular non-zero value for the coins.
As an amusing thought experiment, imagine that Bitcoin is successful and
becomes the dominant payment system in use throughout the world. Then the
total value of the currency should be equal to the total value of all
the wealth in the world. Current estimates of total worldwide household
wealth that I have found range from $100 trillion to $300 trillion. With
20 million coins, that gives each coin a value of about $10 million.
So the possibility of generating coins today with a few cents of compute
time may be quite a good bet, with a payoff of something like 100 million
to 1! Even if the odds of Bitcoin succeeding to this degree are slim,
are they really 100 million to one against? Something to think about...
Hal
His broader point about game theory was spot on, but I don't think I pulled his reasoning for arriving at the 10 million usd number out of context at all. He clearly says "if BTC becomes dominant, then it must equal the value of all the wealth in the world".
Which is faulty logic. I don't like pointing this out as Hal seemed to be a very likeable and smart person, and given his early involvement deserves to be seen as a hero of sorts. But people throw this number around as if it was some magic truth predicted by the prophet, and it's just wrong.