Quote from: tadamichi on Today at 05:50:15 PM

Quote from: sbrys on Today at 03:52:56 PM

I have a master in Economics but indeed I sometlmes wonder why we need Bitcoin.

Now you’re starting to ask the right questions.

Quote from: sbrys on Today at 03:52:56 PM

I literally have zero day to day issues with payments and Im a frequent ebayer/investor all over the world. Fast payment options virtually at no cost. Inflation is an issue of all times and you need to longterm invest to hedge against this.

It could be its different in other areas of the world but for me I dont have any issues. I see the argument a lot so it must be the case in other regions

Do you have any practical examples of current issues for you as a buyer/seller ?

We have to look further than just buyer/ seller related issues, this is about monetary system design. Current payment methods are less relevant, as we have two competing currencies in circulation, Fiat(soft money) and Bitcoin(hard money), the payment stuff comes later. If we follow Greshams law, soft money drives out hard money from circulation, as people would rather keep hold onto something more valuable, than to use it daily. In the initial phase Fiat will still be the primary payment method, this doesn’t matter for Bitcoin now.

The first practical issue is Store of Value related. The money supply from last the financial crisis(2008) since now already increased by 182%, sure this isn’t direct inflation, but debasement still has long term impacts. Now you have already correctly analysed that it is necessary to hedge against this with long term investments. But we also gotta ask ourselves is this option open to everyone and can this economical model work forever? If the answer is no, we might consider, if it would make sense to invest something that could be a fix to the current issues. They are:

Loss of purchasing power.
Fragility of the banking sector.
Fraudulent activities by central authorities.
Failing fiat system that needs more and more authoritarianism to keep alive.
Risk of censorship and confiscation.
Lowered trust in financial institutions.

Also hedging against inflation doesn’t solve the problem of inflation in the first place. The whole approach has ever been let’s debase our currency to fix all problems, yet there’s no evidence of any betterment being the result of this approach. It’s the opposite actually.

To make it even more clear, let’s just compare different forms of money with the common criteria:

Most saleable good(easiness of tradebility with a good) - this changes over time.

1. Fiat
2. Bitcoin
3. Gold

Store of value - Scarcity(Supply relative to other goods), Durability(No loss in functionality with repeated use)

1. Bitcoin (limited; durable)
2. Gold (unlimited, but scarce; durable)
3. Fiat (unlimited, increasing rapidly; not durable, as debt-based money creation makes it a weaker form of money over time, with repeated use)

Medium of Exchange -

Acceptability(Used and accepted by others)

1. Fiat(most accepted and used)
2. Bitcoin(gaining more and more popularity and usage, but less accepted)
3. Gold(accepted in special locations, probably only usable by overpaying in daily commerce currently)

Portability(Easily moveable across distances)

1.Bitcoin(extremly easy and fast, can move faster than the person itself, least costly solution for high amounts today, most secure option)
2. Fiat(Banking system is slow + costly, and even slower + costlier over long distances; No guaranteed security, because there’s always a counterparty risk(No matter if you use Credit Cards, Paypal or wire) or transportation risk/ cost when transporting physical bills; Also makes currency conversion necessary over longer distances)
3. Gold(terribly hard, expensive and dangerous to transport)

Unit of Account -

Divisibility(Easily dividable into smaller units)

1. Bitcoin(Easy, 8 decimal places)
2. Fiat(Good, 2 decimal places)
3. Gold(terrible, needs a lot of work)

Fungibility(1 unit is the same as the other)

1. Bitcoin(All units are the same, altough some people argue that the history of coins can affect its desirability for others, cant be counterfeited, can easily be verified)
2. Fiat(Bills are the same, but higher ones arent accepted everywhere, can be counterfeited, less relevant for digital fiat, but harder to verify overall)
3. Gold(theres different coins/ bars with different degrees of desirability, also its not easy to verify real gold for everyone)

The only outlook we got from central banks to repair fiat would be to introduce digital currencies, but we all know this whole construct needs more and more complexity and control to keep functioning.

This is contradicting the basic task of money: enabling a system of indirect trade. Which of these 3 currencies can potentially do it the best, where would free trade flourish the most? And thus benefit society, because we can all agree that the well-being of society is in decline everywhere, it’s just obvious. We’re discussing social reforms, without trying to get to the root of problem. Fiat robbed money it’s beneficial function for most people, otherwise the opposite trend would be true, and we would see financial well-being in societies rise, the technological progress is there. But it’s just not the case.

Bitcoin is a money that is superior in all aspects listed above, except acceptability, but this is already on an upwards trend. We have the first money that works without a middleman. Where you can’t actually change the properties listed above easily. Where transactions can’t be censored, where wealth can’t be confiscated. Which money would benefit society the most, if we put our political biases aside and look at this from a neutral economical perspective.

To me the answer is obvious.

There is no current solution by fiat economists to protect an average individual from inflation, bank failures, confiscation risks, loosing your money with absolute certainty. Bitcoin is a unique solution to whole problem, so people simply choose this, instead of going the more inefficient route to hedge into other assets that don’t have the potential to fix the system.

It is all true what you are saying but current monetary policy sometimes requires money printing so de facto creating inflation. This to fund some social investments governments are required to do to keep society afloat.

A good example are all stimulus given out during Corona. Probably also a big driver of the Bitcoin bull run.

The point I want to make is you are right Bitcoin is superior but to me its hard to decouple it from full decentralization.