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Bitcoin Is Worse Is Better (2011) (gwern.net)
49 points by simonebrunozzi 10 months ago | hide | past | favorite | 89 comments



The great irony is that the main interest in cryptocurrency is increasing fiat currency. There's some mildly interesting ideas for cryptocurrency other than a commodity, but none of them have shown any real public interest. There has yet to be a useful ICO and the majority of them are scams. Smart contracts are a hilariously bad idea. NFTs are a gold rush for fiat and memes. If cryptocurrency had any potential as a currency, bitcoin cash would have already won.

Another irony is the fundamentally terrible design of cryptocurrency seems to be why it's a gold rush to increase fiat. Generating random numbers until you find the right one as a means of verifying transactions is almost as a bad idea as a smart contract, and yet! This profound waste and inefficiency is precisely why the fiat price is going up, increasing interest, not at all increasing the desire for use.


This is a big reason why I think Dogecoin, of all cryptocurrencies, is one of the better candidates for a cryptocurrency that's actually potentially useful as a currency. Since there's no hard cap on the money supply, said supply has at least some chance of scaling with the global economy in the long term, and you won't see nearly as many crazy surges in value.

For being meme money, it seems to do a better job of being actual money than more serious contenders.


> nearly as many crazy surges in value.

This is hard to explain, like explaining air to animals or water to fish. Deflationary currencies aren't surging in value. Fiat currencies are dropping in value.

Your frame of reference is a $ is a fixed unit of measurement, like a cm or gram. This is wrong. $ value is not fixed, and intentionally designed to decrease in value at fixed rate (but in practice does not decrease in value uniformly across all parts of the economy).

What you see as surges in value of Bitcoin are more impacted by decreases in value of $s than anything else. Yes there are changes in demand to hold BTC vs. $, but that is dwarfed by expectations of future changes in the global supply of credit derived $$$s.

Credit based inflationary fiat currencies have a lot of really bad properties. But it's very hard to see those effects, because it surrounds us (like air or water for a fish) and is often confused as the measuring stick of value.

If you are still skeptical, maybe another example: Do you think gold is really 100x more valuable now than it was in 1971? Or do you think a change in ratio of $ : gold available is what causes the 'crazy surge in value'.


> Deflationary currencies aren't surging in value. Fiat currencies are dropping in value.

At about this point in 2011, 1 BTC was worth $1. Today 1 BTC is worth about $60k. Are you suggesting that BTC has been mostly consistent in value in that time and that it's the USD which has dropped in value by 60000x in 10 years?


Your reply sound like a straw man, sorry.

Bitcoin is a relatively new asset. What I think he's saying is that some of the price increases are attributable to the loss of value of 1 USD and some to geniune BTC price discovery.


GP's comment (emphasis added):

> What you see as surges in value of Bitcoin are more impacted by decreases in value of $s than anything else. Yes there are changes in demand to hold BTC vs. $, but that is dwarfed by expectations of future changes in the global supply of credit derived $$$s.

That particular word choice strongly suggests to me that GP sincerely believes that the 10× jump in BTC price is because the USD has (or will shortly) collapsed to well less than a quarter its prior value.


How is my question a strawman? They wrote this:

> What you see as surges in value of Bitcoin are more impacted by decreases in value of $s than anything else.

How can that sentence be read as anything other than saying the majority, or at least the largest and primary cause, of the increase in BTC value is the decrease in value of USD (and presumably other fiat currencies based on the rest of their comment)?

EDIT: For grins, a quick calculation on what 10% (3-10x higher than the official annual inflation numbers over that period) of inflation per year over 10 years does to the USD: $1 (2011) -> $2.60 (2021). That is, a 2.6x change in value over a decade.

BTC has increased in value by 60,000x. Even going with this very high estimate for inflation, we still have about 23,000x change in value to find an explanation for. I'd suggest looking at its deflationary nature.


> Deflationary currencies aren't surging in value. Fiat currencies are dropping in value.

My comment has nothing to do with fiat currencies. Look at the gold/BTC or silver/BTC exchange rates. Or the exchange rates between BTC and the overwhelmingly vast majority of goods and services. Bitcoin's buying power has grown much quicker - by several orders of magnitude - than fiat's has decreased.


> Smart contracts are a hilariously bad idea

How exactly?


I didn't write the comment... but I would probably second this. I suppose in general smart contracts "replace" escrow companies. There are escrows for tiny things like buying random stuff in Alibaba. There are escrows for large things - like buying a house/property.

I would say that in general it seems weird to handle either of those cases with a smart contract. For example. Let's say I am on Alibaba as a seller. The escrow unlock is probably based on arrival of an item - which is tied to freight companies or possibly a fedex tracking number. This "seems" like it's totally amenable to a smart contract. But where things break is fraud. Let's say an alibaba seller starts shipping empty boxes so that the funds are released.

Now one could say that a smart contract as well as an escrow company would make the same mistake. But it's still not the same. If that seller repeatedly sends empty boxes - it will quickly catch up to them with an escrow company. At some point the escrow company will stop believing the company and start trusting the pictures of empty boxes arriving. Not so with a smart contract. It would mean un-ending fraud. Now you could back things up by saying there could be a company that the smart contract is tied to, not specifically fedex tracking. But then what is that? It's an escrow company.

For houses - if anyone has been involved in a real estate transaction I would say you are probably familiar with the notion that there are 15 days to attempt getting your loan. Some contracts can be 45 or even 90 days (or years for complex business/government escrows). There are also situations where the seller decides to not cause grief because of some other issues or mistakes. Again a smart contract is not going to understand this shit. It's very peoply.

Again, not the OP on this, but just some perspectives. Maybe someone else has a great use case on people betting on weather outcomes - but what great societal use is that?


Providing a few examples of places where smart contracts do not replace existing solutions does not mean smart contracts are "a hilariously bad idea." Someone more creative than you will come up with a good application for them. Your lack of imagination is not a good enough argument to call something useless...


Maybe so, but “someone will come up with a good application for them” sure makes them sound like a solution in search of a problem.


Two quick examples of the use of Bitcoin smart contracts:

1. https://suredbits.com/discreet-log-contracts-part-1-what-is-...

2. https://atomic.finance


What is wrong with that? There are lots of new technologies that don't solve some specific problem. They were just created in the name of science or curiosity or even just for fun. Real world , "useful" applications may not come for decades.


Nothing is wrong with that, but if it's true, then that doesn't do much to refute the notion that there aren't any good uses for smart contracts.

If the best argument in favor of them is "well, they're not really good for much right now, but someday somebody might figure out a good use for them," then it's hard to see why people are so excited.

(Though, maybe it's not so hard to see why people are excited if the folks who are excited are all crypto fans who want to build hype to drive the prices up....)


I didn't say I'm the authority of what is useless in the entire world though. I added my perspective and agreed - hence the "just some perspective".


> For houses - if anyone has been involved in a real estate transaction I would say you are probably familiar with the notion that there are 15 days to attempt getting your loan.

For land transactions in the US (not houses yet), check out Fabrica (disclaimer: former co-founder). We/they have built something incredibly hard to plug into the existing legal structure in the US, but essentially you can transact on land properties in minutes, as opposed to days.

[0] https://www.fabrica.land/


https://en.wikipedia.org/wiki/The_DAO_(organization) serves as an illustrative example.


So one hack and we write off a whole set of revolutionary ideas and projects? Have you looked into all the other big projects that are providing useful services to people? Maker, compound, aave, uniswap comes to mind.


For me, the most illustrative aspect of the Dao was the hard fork that happened afterwards. For all the talk of smart contracts, the mess was eventually fixed by a small cadre of miners and Ethereum developers who agreed to a hard fork.


But that's just it: It's not a hack. The DAO was functioning exactly as intended.


> In June 2016, users exploited a vulnerability in The DAO code to enable them to siphon off one-third of The DAO's funds to a subsidiary account. On 20 July 2016 01:20:40 PM +UTC at Block 1920000, the Ethereum community decided to hard-fork the Ethereum blockchain to restore virtually all funds to the original contract.[11] This was controversial, and led to a fork in Ethereum, where the original unforked blockchain was maintained as Ethereum Classic, thus breaking Ethereum into two separate active blockchains, each with its own cryptocurrency.

Is this what you're referring to? The vulnerability has been patched, so I'm not sure what your argument here is. Are you saying we should never use code because code can have flaws?


I'm saying "smart contracts" nearly immediately wound up breaking the "code is law" principle it claimed to be built on. It didn't survive its first big challenge.


I think the more important lesson from the DAO hack was the fork itself, and that by organizing it, Vitalik and friends saved their own wallets (after hilariously asking exchanges to stop trading). If the people holding the reigns can get what they want by applying the right amount of influence, it's not any better than what we already have, and is probably not a great vehicle for realizing the utility of self-executing financial or legal agreements.


Decentralized exchanges and smart wallets are useful applications of smart contracts. A smart wallet could include multisig functionality, estate management functionality, etc. For example, a friend has a wallet that will automatically be released to heirs one year after his attorney releases it. Of course he is able to cancel the transfer at any time, if he's alive. Is that a perfect system? I dont know. But it does sound useful.

It's definitely true that many ridiculous and farfetched bad applications of smart contracts have been attempted or proposed. None of these have any bearing on the utility of smart contracts.


I think there are some edge cases where you might want them, but for most situations they seem like they make things worse?

When you do have a contract that a computer can execute, the value of having that contract executed on a machine owned by a 3rd party seems pretty low. At the same time, contracts frequently have undefined behavior and, when they do, courts step in to work out what to do. The option to stop or roll back a contract is usually a feature, not a bug.


The great irony is that the main interest in cryptocurrency is increasing fiat currency.

I have no interest in acquiring more fiat, above and beyond what's needed to pay living expenses.

Using Strike, I can pay someone in USD (or any other fiat) using bitcoin with no capital gains taxes: https://jimmymow.medium.com/announcing-strike-by-zap-4f578c7...


This is the best short description I've found for bitcoin:

    Bitcoin is a non-sovereign, hard-capped supply, global,
    immutable, decentralized digital store of value. It’s an
    insurance policy against monetary and fiscal policy
    irresponsibility from central banks and governments
    globally.

    — @Travis_Kling


> Smart contracts are a hilariously bad idea.

Care to explain?


Bitcoin cash will win given a long horizon.


The whole Unix "worse is better" thing seems to me like a specific instance of a more general principle. You see it in network effects and first mover advantage in business, but I saw it in other industries I worked in as well. When I was a military officer, it was drilled into us to move as soon as we developed 80% of a plan, in part because you can make up the rest as you're going but also because just striking first is itself a tremendous advantage. Being faster than the enemy is often better than being better than the enemy. In finance, we were pushed to trade on imperfect strategies because any edge whatsoever disappears almost instantly as soon as you use it and you have to assume someone else is going to figure out whatever you figured out.

I don't think you can generalize to just first mover always win, especially since Unix wasn't the first mover. More that any plan, scheme, product, whatever that can actually work needs to be put into operation as soon as it can work. It's no guarantee you won't lose anyway, but you can win for a very long time until you don't. Unix may be supplanted at some point and Bitcoin too, but Tom from MySpace at least made a few hundred million when he likely makes nothing if he launches after Facebook.


I wouldn't use "Worse is Better" as a stand-in for first-mover advantage, since (as you say) there are times when the benefit of speed more than pays for the increase risk of unknowns.

I'd reserve Worse is Better for cases where (a) that speed advantage was gained by specifically choosing to ignore/hack-around a known problem, and (b) that problem/hack becomes worse due to the inertia of this approach.

The classic example is C, which has spread far and wide, as a foundation for almost all of the modern computing house-of-cards. Yet this adoption has come with memory management problems (and their associated security exploits), a foot-gun approach to macros, etc. when such issues are literally non-existent in contemporary languages like Lisp, Scheme, ML, Prolog, etc.

A military example might be the trench warfare of WW1: a quick way to avoid machine gun fire, which froze armies in place for years.

A financial example might be loan sharks.

In Bitcoin's case, the hack of trusting the longest chain and incentivising hashcash to reduce spam/overtaking has resulted in today's energy-hungry monstrosity.


> The whole Unix "worse is better" thing seems to me like a specific instance of a more general principle.

That was the contention of the original article, if I recall it correctly.


Let it be said that this author certainly puts a lot of journalistic (and typesetting, and annotating, and linking) effort into the work -- something that I love to see and we don't see often enough. Not surprisingly, the author is also a Wikipedia admin and I see the page uses a lot of wiki-style formatting tricks. Quite cool.


gwern stands out by having both a curious mind and the dedication to actually research and document the struggle for answers.

I wish our interests could have continued down the same path because for me, distraction is the real mind killer.


Gwern is a gem. I generally agree with most of what he writes, but even if I didn't, I would still take his opinion into serious account.


Gwern is great. One of a small number of people I support on patreon. Really high quality authorship on a huge range of topics, from drugs to cartoons to AI research.


I still think Bitcoin is very much flawed. As far as I can tell, it's basically a bubble-like commodity which people buy to enrich themselves through speculation right now. That's not really sustainable. It probably will continue to climb for a good while, since there are still many people who haven't heard of it. But then what?

Another question arises: what is it good for? It certainly isn't empancipating or empowering ordinary people.


Bitcoin is good for cross-border payments and hedging inflation. See how Bitcoin has been used in Venezuela:

https://www.coindesk.com/bitcoin-adoption-venezuela-research


What's the solution to 'Bitcoin sellers generally demand USD or EUR' though?

Unless Venezuelans are mining their own at massive scale, I'm not sure how they actually hedged inflation via crypto, since they likely had some ability to buy an intermediary currency anyway.


> Another question arises: what is it good for? It certainly isn't empancipating or empowering ordinary people

Here's a detailed thread[0] with global examples of empowerment of ordinary people. One example from the thread:

" 7/ Democracy movements and opposition leaders in Russia, Nigeria, Belarus, and elsewhere have used Bitcoin to receive donations and continue their human rights work while their traditional bank accounts have been frozen or suspended:

https://t.co/HSeP5g6TiV "

[0] https://twitter.com/gladstein/status/1377040725414580224?s=1...


This is probably also true of less noble causes such as hate movements, money laundering, hitmen, human trafficking, drug trade, etc.


Tor is used for both as well.


One man’s opposition leader is another man’s terrorist.


Another question arises: what is it good for? It certainly isn't empancipating or empowering ordinary people.

I'm part of the bitcoin community on Clubhouse of just regular people who've benefited greatly from bitcoin.

I'm personally investing in bitcoin due to the uncertain future of USD. It's simple: the dollar is loosing buying its buying power and bitcoin is gaining buying power. USD, gold, bonds, etc. are trending towards zero when graphed against bitcoin.

I'm old enough to remember when a person could save in USD and get a return higher than the inflation rate and be able to retire comfortably.

I remember seeing people who thought they could retire comfortably in 2008 until the economy blewup and we had senior citizens competing with high school kids for jobs bagging groceries.

You can read about how financialized our economy has become and how bitcoin solves this problem: "Bitcoin is the Great Definancialization" — https://unchained-capital.com/blog/bitcoin-is-the-great-defi...

Bitcoin has averaged over 200% a year for the past 10 years--and that was before billions of institutional money began flowing in.


Another question arises: what is it good for? It certainly isn't empancipating or empowering ordinary people.

Apparently, it saved the bacon of some Venezuelans.


They standardized international shipping to everyone's benefit. I wonder what is keeping them from standardizing international transaction of government issued money?

It seems that bitcoin was useful in this particular instance only because of the failure of multiple other systems. Fixing those failure would seem like the easier option indeed.


They standardized international shipping to everyone's benefit. I wonder what is keeping them from standardizing international transaction of government issued money?

That's one way you can think of the next generation of blockchain. Think of it as a "container" for transactions. Lots of transactions in 2021 are still frightfully primitive. The whole recent GME/Robinhood debacle is actually an example. The only reason why online trading companies need such large amounts of liquidity, is that it takes days for the transactions to fully settle!

Blockchain will transition from a weird, new, shiny doohickey, to a way to facilitate transactions. Just like the Internet did.


Nah, I’m much more hopeful of a good old fashion international treaties, perhaps a UN issued mandate, and perhaps an ISO standard to save the day. That’s really what happened when they standardized containers (and to a greater extent international mail delivery in 1874). There was no new technology, just agreed upon standards that governments signed up on.


Overthrowing a government doesn't sound like an easy option to me.


In 2021, you don't overthrow an organization. You crawl up inside it, and offer to do its bureaucratic skut-work. Make yourself useful and indispensable. Then you bring in more and more of your friends and start putting in rules and strictures as a trap. You get key, powerful people out of the way by springing those traps. Eventually, it's an entirely different set of people who are just wearing the branding and regalia of the old organization like a skin suit.

Another alternative: You come up with a new way to do X which is 10X better. Then, you get the classic S-shaped adoption curve.

Another alternative: You expand the context of your operations, so that those governments just become little annoyances and quaint dusty backwaters inside a larger world.


Whoa! You must have misunderstood me dramatically. One does not need to overthrow a government to issue international standards. That certainly wasn’t the case October 1874 when they standardized international mail, nor was it needed in April 1951 when they standardized shipping containers for the global trade network.

My question was simply: What is keeping banks and governments around the world from standardizing money transfer between nations, like they did so well 150 years ago with mail? And my statement: Perhaps it is easier to settle on a standard way of transferring money between nation states then to rely on bitcoin to save some people from hyperinflation + predatory money transfer solutions.


Isn't SWIFT such a standard? It's quite common to use it for bank transfers in Europe.


A hedge against instability of local currencies. (E.g. Venezuela)

But really only if it would be difficult to obtain and safely keep USD.


Wouldn't a basked of currencies like XDR be more sensible than something as instable as bitcoin? If you don't like USD, then say a mix of CHF, EUR, GBP, USD, Yen and Yuan


It may be a better unit, but I'd imagine most Venezuelan bitcoin users would have trouble obtaining XDR and/or transferring that ownership stake across borders. I would also worry that FX accounts could be subject to government seizure.


> something as instable as bitcoin?

Bitcoin isn't unstable. It has a fixed supply of 21M. It is the other currencies to which it is compared that are unstable. Bitcoin allows you to measure fiat currency instability.


It's astounding how these nocoiners refuse to understand Bitcoin is the ONLY asset that is always worth exactly 1 BTC.

The rest of the world's unstable goods like gold, fiat currency, real estate, stocks, cars, and even groceries are always fluctuating in BTC value but BTC stays perfectly level.


Isn't that a feature of literally every currency? Has 1 USD ever not been worth exactly 1 USD?


GP is being sarcastic. The idea that a currency is stable because it always has the same value with respect to itself (1BTC is always 1BTC) even though literally every other good or service price is fluctuating wildly is a fundamentally absurdist position to take, and what GGP seems to be suggesting (and others have on here and other places, earnestly, before, not sarcastically or ironically about BTC). It's irrelevant that you can always trade 1 USD for 1 USD or 1 BTC for 1 BTC if the prices for goods are so unstable that every purchase or sale becomes a risk ("Wait, did the pizza price drop by 10,000x? Crap, that delivery guy can retire on his tip now and I'm broke!").


Ok, yeah, thank you. At this point I can't tell sarcasm from satire from honesty.

Edit: I now again have no idea if they are or not. Looking at their comment history it doesn't appear they are.


Yeah. Me neither. A definite problem in these discussions, especially text only. You can't tell who is being earnest, who is being a contrarian, and who is being sarcastic.


I'm thinking they may be being sarcastic again, but they sure are committed.


Sorry for yanking your chain.

I tried to be absurd enough in my initial post to make it clear. When that failed, my reaction was to add more absurdity. It's not the first time this has failed. I should have known better when imitating a group that defies parody, like crypto aherents.


I am incredibly relieved.


> Has 1 USD ever not been worth exactly 1 USD

Not really. If you own 1 fiat dollar today and I double the money supply tomorrow, I have just halved the value of your fiat dollar over time. Your share of the money supply has been diluted[1]. 1 nominal FD tomorrow is worth 0.5FD in real terms all else held constant.

Of course this thought experiment is trivial and oversimplified because the real question is about purchasing power. But consider that majority of USD in existence were "printed"[2] last year. Consider that the global fiat monetary base expanded by ~50% last year.

"Since 1933, the U.S. dollar has lost 92 percent of its domestic purchasing power. Even at its “moderate” 1994 inflation rate of 2.7 percent, the dollar will lose another half of its purchasing power by 2022."

https://www.google.com/amp/s/fee.org/articles/central-banks-...

[1]: https://cryptovoices.com/basemoney

[2]: https://www.lynalden.com/money-printing/


But that's not what the statement was - that it's always 1 to 1, which it always is. If you have a $1 bill from 1973 it still can be exchange for a 2021 $1 bill. If you look at today and tomorrow, sure, the value will change, but bitcoin has also gained and (occasionally lost) buying power. The statement is doubly useless as you could also say that "1 oz of Gold has always been worth 1 oz of gold." so it's not just currencies, it's also commodities that this rule is going to apply to.


> If you have a $1 bill from 1973 it still can be exchange for a 2021 $1 bill.

Nominally.

How do you grok the practice of coin-clipping? You hand in one gold coin which is then clipped and you are given a coin with a smaller percentage of gold in it. 1 solidus is still nominally worth 1 solidus. But it's really worth 0.x a solidus. Does this debasement matter? The coin has the same name but it's not the same coin.

> bitcoin has also gained and (occasionally lost) buying power.

Over the long term, Bitcoin can only gain and has only gained purchasing power, algorithmically.

Unlike with fiat, your proportional share, based on your stack of coins, of the total value in the economy has not changed. This assumes a Bitcoin Standard where bitcoin is the world currency. (Some of us already live on a Bitcoin Standard preemptively.)

With fiat, your share has been debased. 1 usd is not equal to 1 usd over time. With Bitcoin, your ruler is always accurate. 1 satoshi = 1 satoshi over time unto eternity. Fiat cannot make that claim.

That's what we mean when we say 1 btc = 1 btc.

> "1 oz of Gold has always been worth 1 oz of gold."

Now you see why gold was the world's hardest money. It's chemical stability guaranteed this statement. Hardly any other commodities behave this way. Unless you have examples?


> How do you grok the practice of coin-clipping? You hand in one gold coin which is then clipped and you are given a coin with a smaller percentage of gold in it. 1 solidus is still nominally worth 1 solidus. But it's really worth 0.x a solidus. Does this debasement matter? The coin has the same name but it's not the same coin.

That's not how modern money is reckoned. It's a neat aside, but it has nothing to do with a modern currency.

> Over the long term, Bitcoin can only gain and has only gained purchasing power, algorithmically.

True. As of this moment it's gained before. Day to day it's an entirely different matter.

> Unlike with fiat, your proportional share, based on your stack of coins, of the total value in the economy has not changed. This assumes a Bitcoin Standard where bitcoin is the world currency. (Some of us already live on a Bitcoin Standard preemptively.)

Bitcoins are being generated. It's a planned inflation - how do you reckon that with the share not changing? You have less porportions of the total Bitcoin supply. Unless wealth is created from nothing with every bitcoin generated you've lost a proportion of the wealth. It only works right now because it's being measured against things, if it ever became the determining standard, you'd be experiencing inflation with it.

> With fiat, your share has been debased. 1 usd is not equal to 1 usd over time. With Bitcoin, your ruler is always accurate. 1 satoshi = 1 satoshi over time unto eternity. Fiat cannot make that claim.

Again, this is a nonsense argument. You either have to accept that the 1973 $1 bill is still worth a dollar (relative to the dollar) or you have to admit that a 2010 Bitcoin is not worth the same as a 2021 bitcoin.

> Now you see why gold was the world's hardest money. It's chemical stability guaranteed this statement. Hardly any other commodities behave this way. Unless you have examples?

Silver. Sheep, salt. 1 measure of any commodity has always equaled itself.

Bitcoin is just a commodity right now. That's it. If it becomes the standard currency it'll experience deflation as the supply grows just like any other currency.


Lol. Okay. You win. You are right about everything. Thanks for your time.


M3 money supply in 2004 was 6.41T

M3 money supply in 2009 was 8.48T

M3 money supply in 2014 was 11.67T

M3 money supply in 2019 was 15.32T

So 60% of money in existence in 2019 was created in the previous 15 years

Are you imply that means that the purchasing power of the dollar has dropped 70% then, and a dohicky that cost $1 in 2004 would cost $2.40 in 2019 in line with M3 increase?

The cost of bread in 2004 was 97c, and was $1.36 in 2019 - increasing at 2.3% per year. [0]

A pound of chicken went from $1.03 to $1.45 - 2.3% per year [2]

A gallon of milk dropped from $3.23 to $3.19 in that time period [1]

Official inflation figures for 2004-2019 are $1.35, about 2% per year, and that includes the time period of the 2008 crash.

Rental price for an acre of cropland across the US in 2004 was $76.5, in 2019 it was $140, increase of 4.1% per year [4]

Rental price for a primary residence has increased 3.05% per year [5]

In that time GDP has increased by about 3.8% per year [3]

Median wages have increased by about 2.6% per year [6]

That period included the massive money printing of 2008 crash, none of it says hyperinflation, despite the federal reserve "printing" $3.9T between 2009 and 2014.

[0] https://www.statista.com/statistics/236635/retail-price-of-w...

[1] https://www.statista.com/statistics/236854/retail-price-of-m...

[2] https://www.statista.com/statistics/236834/retail-price-of-f...

[3] https://countryeconomy.com/gdp/usa?year=2019

[4] https://quickstats.nass.usda.gov/results/58B27A06-F574-315B-...

[5] https://www.in2013dollars.com/Rent-of-primary-residence/pric...

[6] https://www.ssa.gov/OACT/COLA/central.html


> That period included the massive money printing of 2008 crash, none of it says hyperinflation, despite the federal reserve "printing" $3.9T between 2009 and 2014.

[chuckle] Now do assets as well. Do healthcare and school fees and energy for good measure.

> […] dohicky […]

Also see Jeff Booth's "The Price of Tomorrow" for a discussion on the deflationary effects of technology.

Also consider velocity of money and if it slows as governments and commercial banks print.

Also, M3 contains illiquid assets. Perhaps, better to think in terms of base money? https://cryptovoices.com/basemoney

For fun, the history of McDonald's menu prices.

> Official inflation figures for 2004-2019 are $1.35, about 2% per year, and that includes the time period of the 2008 crash

Inflation is perhaps a vector.[0]

> Median wages have increased by about 2.6% per year

US centric but consider also https://wtfhappenedin1971.com/

[0]: https://www.lynalden.com/fiscal-and-monetary-policy/


> Now do assets as well

That's not a cost you need to live. You need to pay for food, housing, healthcare, energy. You don't need stocks in amazon.

> [chuckle] Now do assets as well. Do healthcare and school fees and energy for good measure.

Total healthcare spending in the US[0] in 2004 was $6094 per capita. In 2019 it was $11072 -- 4.1% per year increase. By comparison in 1989 it was $2440 per capita, so for 1989-2004 it was 6.3% per year.

Electricity increased 2.75% per year from 2004 to 2019 [1]

Average retail electricity price for industrial consumers in 2005 was 5.73c/kWh, in 2019 it was 6.83c/kWh, 1.3% per year [2]

A gallon of gas in 2004 was $1.85 in 2004, it's $2.60 in 2019, an increase of 2.3% per year [3]

I see little to show that inflation is any different to the official inflation figures. I do see evidence that the wealthiest part of the US is becoming even more wealthy

Cost per pupil increased 2.6% per year [4]

What's your point? Despite M0 goign from 600b to 3500b from 2004-2019 (average 12.5% per year), there was no effect on the cost of things people pay for, which broadly stayed in the 0-5% per year range, as it did before 2004.

[0] https://data.oecd.org/healthres/health-spending.htm

[1] https://www.statista.com/statistics/190680/us-industrial-con...

[2] https://www.statista.com/statistics/190680/us-industrial-con...

[3] https://www.statista.com/statistics/204740/retail-price-of-g...

[4] https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...


> That's not a cost you need to live [...] there was no effect on the cost of things people pay for, which broadly stayed in the 0-5% per year range, as it did before 2004.

I'm sure you're absolutely correct about everything. Thank you for your time.


Yes, but because it's centralized, there can be more USD printed and that's how destabilization works.

Let me give you an example. Chuck E. Cheese tokens are hardly worth anything. They're a terrible store of value. Why is this? Because Mr. Cheese can direct more to be minted at any time in an attempt to quantitatively ease the Chuck E. Cheese economy.

One day, Chuck E. Cheese will go out of business for good, and no more of his tokens will be minted. At that point the value will stabilize and, relative to depreciating assets like USD, stocks, bonds, or other things that aren't types of coin, it'll actually skyrocket. Limited supply equals stable or increasing value, forever.


If the USD was really unstable because of printing, its value compared with the NZD (which hasn't had such printing) would have collapsed.

Before covid it was 1.6 NZ to the US, now it's about 1.4 - so a loss of about 10%. If you had 1600 NZD in 2019 and bought USD, kept it under the matress, and sold it, you'd have lost NZD200.

That's not great, but it's a similar range of NZD vs AUD, NZD vs CHF, CHF vs USD, etc.

Now if you had 1600BTC in 2019 and bought USD, well that's tricky -- when in 2019?

In Jan 2019 it was about 3500, by May 2019 it was about 5000 USD to the BTC, in June it was about 10,000, it fluctuated by about 20% over summer, dropped back to 7,000 in December. It stayed in that whole 7k-14k range until November 2020 when it ballooned upto about 60k over the next few months.

In the last couple of years, gold has gone from about 1200 to 1700, 40% change in the last 2 years. Silver about 30%. Other currencies that haven't had printing about 20% fluctuation. Rice about 20%, Wheat about 40%, Soy about 50% - those comodities do fluctuate a fair bit over long time though.

Bitcoin has increased around 1,000%. That's so far out from EVERYTHING ELSE that it isn't currencies shifting, it's crypto.


But every USD will be the same price as every other regardless if they are devalued, that was your initial point. Same with Chuck E. Cheese. Same with Bitcoin. In fact, Bitcoin, which is largely treated as a commodity, could be greatly reduced in price if a lot of the currently unmoving coins flooded the market causing them to lose value. They'd still be worth 1 BTC of course, but that has no value in itself.


It's the law of supply and expand.

Any object is worth approximately (all the world's wealth) / (number of that object in existence). This guarantees Bitcoin will always have value since supply is limited to 21 million.

It's also why my cheese tokens become sound money if Chuck E. Cheese goes bankrupt and is no longer operating, but they're junk right now while they can still be used to play arcade games.

It's also why I'm forking a new version of Bitcoin with the supply limited to 21 thousand. It's also got stable value and currently isn't trading for much but I'm holding it with the expectation that the value of every other asset in existence will rapidly depreciate soon.


Objects are only worth what people would pay for them - rarity is only one factor. Bitcoin forks are even less compelling as anyone can make them at any time - there is an infinite number of them. So the actual supply isn't 21,000 of your bitcoin, it's all the possibly forked version of bitcoins. Some of those may gain popularity, but I have no idea why you think yours would be.


Sarcasm


You could say that in this case, but just below is someone arguing that Bitcoin is special because of some nature it has that nothing else does when it comes to 1 BTC == 1 BTC.


In the last 5 days bitcoin has fluctuated (by my quick math) 7% compared to both CAD and USD dollars. That seems to indicate to me that's its instability, not the currency of either nation.


I can't speak for Bitcoin's price, but the network's value is a global distributed ledger of transactions (debt) that has proven to be fault tolerant over many years. I think the store of value stuff is a bit of a bubble, and it relies on hodlers keeping the price up over time


> but the network's value is a global distributed ledger of transactions (debt) that has proven to be fault tolerant over many years.

This strikes me as both true, and difficult to put any real value against. It's an existence proof more than practical use cases. Intuitively the value of that alone is both non-zero, and a lot less that BTC "valuation" - but where in between?


I think cryptocurrency is now the only way to pay for Pornhub. We can probably expect payment providers to cancel more and more in the future.



> (2) Hardly anybody actually understands money. Money just doesn't work like that, I was told fervently and often. Gold couldn't work as money until it was already shiny or useful for electronics or something else besides money, they told me. .... Even though I had rebutted these arguments in my study of the origins of money, which I humbly suggest should be should be required reading for anybody debating the economics of Bitcoin.

Curiously, still continues to this day.


Flimsy counter-argument.


GPU go Brrrrr




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