It's not a failure because Bitcoin tanked (relatively), it's a failure because Bitcoin tanking was and will always be a significant risk. People who got rich from Bitcoin weren't savvy, they won the lottery. It's not a sound investment decision based on outcome. Investments are sound based on probability and risk beforehand.
El Salvador gambled which is stupid. Whether they won or lost at the lottery is inconsequential to its stupidity.
It's worse than a lottery for some. It rewarded incorrect thinking on how the financial industry works.
Speculative spikes can happen for a lot of reasons, but that Bitcoin would replace all currencies (as early advocates would have had you believe) was not one of those reasons.
>> but that Bitcoin would replace all currencies (as early advocates would have had you believe) was not one of those reasons.
Bitcoin was not bought because people believed it will replace all currencies. They bought bitcoin to get rich fast and cash out BEFORE the expected crash.
This is pretty amusing to me, as somebody who did buy into the early hype - now over a decade ago. I actually got really excited about bitcoin, even mining way back when. It seemed like the possibilities were endless!
That excitement disappeared pretty quickly once I came to the (in hindsight, obvious) realization that its only valid use cases were illicit transactions and speculation. I donated whatever I had and moved well away from it (certainly a poor financial decision in retrospect, but I still believe it was the right choice personally).
The shine has been off BTC for a long time. Even though some (if not most) of the early adopters were as you describe, I suspect that almost all of the more recent comers have only joined the party for the get rich quick scheme.
«its only valid use cases were illicit transactions and speculation»
Crytocurrencies have many valid use cases. For one, they are the only system that allows sending money truly anywhere in the world, to anyone, anytime, and near-instantly. No other system accomplishes this. My most poignant example was being able to send money to a then-homeless unbanked friend, on a sunday, and he even converted it to cash in hands within 1 hour as he was near a bitcoin ATM. In such an emergency, no other system would have worked. We briefly considered Western Union but he was banned from them due to previous financial issues. So the permissionless aspect of Bitcoin was another benefit.
It's a little puzzling that you were an early adopter, and yet did not appreciate the qualities. Perhaps you think crypto isn't useful to you personally, therefore it has no use cases for anyone else.
The “only valid use cases” of privacy is not to hide illegal or criminal activity.
Crypto currency is a wasteful, destructive, expensive and innefficient technology that has few benefits except facilitating crimes like tax evasion, money laundering, financing terrorism and purchasing drugs.
It's absolutely relevant. You replied with one way a government can violate your rights and the importance of mitigating that violation. I replied with another way a government can violate your rights and the importance of mitigating that violation.
As an early Bitcoin adopter, I wouldn't say so. I have never seen anyone among the people I knew in the Bitcoin community in the last 12 years who believed it would "make tradfi obsolete".
For example, I expect Bitcoin to likely remain an alternative system, used only for a minority of transactions. And this view didn't conflict with my desire to buy in when I did.
Yeah, that was happening too, but I was getting an earful of terrible economic viewpoints in the earlier days.
I guess they could have all been lying to puff up their investments, but then I guess I'm left with thinking those particular people were stupid and liars.
When I saw the announcement of the release of the Bitcoin 0.3 client back on Slashdot in 2010, both the whitepaper and the comments (and who was making them) cemented my view as it being more of the "an-cap gold-buggery" that the site was rampant with. Basically the same people making the same arguments that they had over the Liberty Dollar a year previously following the arrest of its founders, and before that any time money came up as a topic i.e. fiat bad, gold good - which carried straight into fiat bad, gold good, Bitcoin best of all...
those people (where I was) also loudly predicted (and lost real-money bets) on the trading floor that Obama was definitely coming for our guns and that mass shootings were all false flag operations to justify seizure of personal firearms. The Venn diagram of gun nuts and gold bug - hard money types at many places I frequent was basically a circle.
The bet being made by El Salvador is to get the immense benefits of being an early adopter at the cost of short term volatility and risk of bitcoin failing.
Regardless of your opinion on this, you have to at least wait till the proposition plays out before passing judgement. You have to see if they can withstand the short term volatility and whether bitcoin succeeds or not.
Calling the experiment failure before the results is silly to say the least.
> The bet being made by El Salvador is to get the immense benefits of being an early adopter at the cost of short term volatility and risk of bitcoin failing.
Salvadoran here.
It's hard to see the benefits if there is no transparency on the process.
If we could even have a dashboard and an official website were we could have access to audited reports about the results of this bet, and see how its value varies over time. Then I might agree.
Maybe just a graph like the one found Norway's Sovereign Fund website
In reality we just don't. Public information is limited or contradictory. The few public information available includes a tweet about the president buying bitcoin from his phone while not wearing clothes.
As far as I know, the trust that holds El Salvador bitcoin doesn't have a public website. And the state wallet's website doesn't publish an address or phone number.
The only time I've seen their address is a receipt from a veterinary hospital run by the same state company operating the wallet, in which every procedure costs only US $0.25 because they are subsidized by "bitcoin profits"
El Salvadors adoption could have definitely been handled in a more transparent and self sovereign manner. I really wasn't big fan of forcing companies to accept it..
But then again, you never get everything you want. I guess the best we could do is praise them for the good and provide feedback when they miss the mark..
No, I specifically called it a failure regardless of results, because results of surviving a base jump without a parachute doesn't affect the merit of the decision to jump.
Here’s a proposition:
- Gold got dethroned from its 5k year rule as the global store of value because of globalisation & speed of commerce. FDR ban & dollar being taken off the gold standard sealed its fate.
- Gold is replaced by the fiat currency of the global economic & military hegemon.
- Central banking & MMT is deeply corrupt & dysfunctional to the core.
- Digital alternatives were attempted but failed because of the double spend problem which in turn required private centralisation
- Satoshi invented bitcoin which solves double spend problem. Through the invention of Proof of Work and the use of supply limit, Satoshi puts bitcoin up as a contender for global store of value.
- A decade later, Bitcoin is in the zeitgeist. 100s billion in market cap. Best investors in the world are hedging for/against bitcoin (Paul Tudor Jones). Countries are banning/integrating bitcoin.
- Basically the bet is on.
Now we have a game theoretic situation where the early adopters take the most risk but are going to reap the most benefits.
To call this a "base jump without parachute" is asinine and completely unwarranted. There is a clear bet going on with the smartest people in the world on both sides.
Some believe the “rulers” of the current system will never allow this to happen therefore we will get CBDC’s instead. Others believe, the collapse of the current debt passed system is inevitable therefore bitcoin is a lifeboat.
Either way, china isn’t using the same technology invented by satoshi (without the PoS & decentralisation) for no reason. The US isn’t thinking about thinking about creating a FedCoin for no reason. India isn’t building one for no reason.
The race is on. Its a bet. There is risks on both side but its definitely not a one sided thing to say the least.
Also those are not just the 2 bets btw. El Salvador still supports the dollar.
There are those who envision a world full of privacy coins, CBDC's, bitcoin, company coins etc..
In this world, bitcoin will be the ruler of rulers. As in, Bitcoin will reward disciplined countries and punish undisciplined countries. Just like gold did in the past.
Its utility as a decentralised banking system for those who have no access to banking in poorer regions of the world is a clear benefit and has achieved what it wanted for the country.
> It's not a failure because Bitcoin tanked (relatively), it's a failure because Bitcoin tanking was and will always be a significant risk.
A lot of the risk can be hedged by custodians, so I don't agree.
The reason it should fail for transactions is because Bitcoin sucks for transactions. Few people will prefer slow, irreversible and expensive transactions.
A system with a middleman capable of reversing transactions enables fraud. See also: the folks behind Flipper Zero being permanently robbed of more than a million USD thanks to PayPal's whims (as the latest of a long list of high-profile cases of PayPal taking vendors' money and running).
I agree with you on the El Salvador part, but not on the investment part.
> Investments are sound based on probability and risk beforehand.
Investing in bitcoin had a limited downside (lose 100%), but a very high upside (reaches it's initial goals). For me, the potential gains outweighed the low probability.
I consider myself very lucky that I made some money (wasn't crazy to put all my money in there). But for me, when it would have gone to 0, I still feel it was worth the risk.
But of course, with such a high risk high reward investment, only invest a small % of your total money.
What you've stated here is your experience, now if you try to extrapolate the thinking/investment model you've used to large number of people - there is very limited upside and very high downside.
No it stays the same if you have an investment portfolio and only invest max 5% in high risk assets.
Assume you invest 1% of your portfolio in Bitcoin. What is your downside? 1%. Not that high, is it?
What is your upside? Maybe x100, so double your entire portfolio.
Right now, you came late to the game, so don't expect a x100. The risk is probably still the same, but the upside way lower. But when Bitcoin was still young, the upside was definitely worth the risk. And it didn't even live up to its original intent. Imagine the price if it did!
You could consider lottery tickets as an OTM option expiring in a week with those payoffs, I suppose. If you spread 1% of your portfolio over a year and buy lottery tickets every week, you're effectively losing 1% per year with a very small chance of becoming very rich.
There are probably better places to put your 1% on. ;-)
Your argument is that once it's high risk, it's gambling. Sorry but that is just not the case. It's a ratio. If you don't understand this, then I agree that you should stay away from anything that involves risk management.
Let's say we play a game where you throw a coin 3 times in the air. If it's not 3 times head, I'll pay you $1. If it's 3 times head, you pay me $10.
Your chance of winning is pretty high, while my chance is low. Yet, I would love to play this game.
> This is exactly what the people who currently hold bitcoin are suggesting to those who don't.
I never suggested this, as you could see a few replies up:
> Right now, you came late to the game, so don't expect a x100. The risk is probably still the same, but the upside way lower. But when Bitcoin was still young, the upside was definitely worth the risk.
Nevermind, this conversation is clearly going nowhere.
The reward/risk ratio of lottery tickets is very well known. And it's obviously not in your favor. So it's basically a no brainer not to invest in them.
Things like startups for example also have a very high risk rate, but also potential high payouts. There it actually makes sense since the ratio is way better.
Yeah, but that payout ratio - millions to one! Bitcoin will never pay out at that level - I don't know if it ever did.
I find it interesting you're arguing that an unknown ratio is preferable to a known one. Bitcoin has a known current cost, but entirely unknown chances and payouts over an unknown duration. There's little reason to assume that Bitcoin will make another massive jump other than optimism that there will be a new wave of true believer bag holders. I know the lottery is going to be drawn each week and I know the cost and the odds, as well as the minimum payout, and the current payout is updated as we get closer to the drawing.
So don't invest it in that lottery. Invest it in my lottery! I'll sell you as many tickets as you want, I pay out a trillion to one if you win, and I'll keep the risk rate totally unknown to you.
Boy do I have the investment for you! Give me your life savings, and I'll give you 50% equity in my Evil Empire. I plan on taking over the planet by 2028. What an upside! Only risk is losing 100%—that's practically nothing in comparison!
Or I guess you could buy lottery tickets. Probably a slightly less insane way to "invest" your money.
> Have you seen the dollar’s buying power recently?
Yeah, its up like 100% over Bitcoin and like +30% over Euro, Yen, and GBP? In fact, holding Cash/USD has been basically one of the best performing things in my entire portfolio this year (after oil/energy)
USD is hugely up vs Yen and Euro. You buy anything from overseas recently? USD is hugely strong. USD is up vs the stock market, vs the bond market, vs the overseas bond market, vs overseas stocks.
USD is also up vs Bitcoin.
EDIT: Feel free to look at gold, silver, and other 'inflation hedges' while you're at it. The main thing going up is commodities (oil and food), which is certainly important. But there's more to the world than those two things.
Inflation is basically the exact definition of the change in USD's value relative to goods & services.
Unless you are arguing we currently don't have any inflation, which would be a tough sell :)
Also this last CPI report oil & gas pulled inflation down whereas just about everything else pulled it up. Food is hot, but a lot of other things are as well including non-commodity service based industries.
That all depends on the timeframe you’re looking at. The Bitcoin I bought (not nearly enough of) at under $80 is doing a lot better than any cash I still have from around then.
A year or two from now Bitcoin very well might be back above it’s all time high.
When people are complaining about the declining purchasing power of USD, they are mostly talking about since November 2021, because that's when inflation started to really kick in.
Its ironically, also when BTC really began to collapse from its $60,000 high. So it really demonstrates how much the BTC was benefiting from low-interest rate / inflationary policies.
The 8% figure doesn’t match real life. My electric bill doubled, my natural gas bill doubled, my municipal bill doubled, my groceries doubled.Everything that makes up the vast majority of my expenditures had doubled.
You could be the guy where it's only raining above his house, but the people you are having this conversation with also live in the world and disagree with your figures as much as the statistics do.
Ignoring the fact that you’re implying a 100% USD inflation over the past year, you’d only have 25% of the purchasing power if you “invested” in BTC per the GPs example.
Yes. And eggs are the highest increase on that list, at 38%—still a far cry from 100%. Comparatively, fresh fruits are down 0.8%, and fresh veggies up only 0.8%.
IIRC the giant flats of Costco eggs went up to 3-4x their former price over the last year or so. Still a great deal, they're just not "holy shit that's practically free!" like before.
Weird. Eggs by the dozen (along with onions, one of the most volatile staples at the grocery store) are up only like 75% for me. Admittedly that's a lot and more than I had expected when I went and checked but I'm still seeing very different numbers.
I'm not sure other eggs are up as much as those large-flat Costco ones (60 eggs? Something like that). I have a feeling they were losing money on them before, they were so cheap.
Meanwhile pork and chicken are roughly the same as they've always been where I am, at least ignoring sale pricing.
Hell, I got 3.5 pounds of steak tips for $20 about a month ago.
My food costs have absolutely gone up, but it's MUCH closer to the "10 percent" figures quoted as inflation than anything close to what you have said. Where do you live and shop?
> I got 3.5 pounds of steak tips for $20 about a month ago.
A lot of cattle was recently liquidated (made into meat products, this year) as grazing fields have been drying up and, due to climate change, meat pipelines have had to start making MAJOR changes.
I want to clarify this was a specific prepackaged product that likely needed to be clearance because it wasn't popular. General purpose steak tips are NOT $6 a pound at my local hannaford. However, they aren't much more expensive than they are historically, which is why I'm looking for more info from the parent poster, who claims essentially 100% increase in product prices, while my personal experience on a wide array of items is closer to 10% on a sporadic list of things. I think they are experiencing some rather extreme local price situations.
So of the two items you cherry-picked to support an assertion that groceries have more than doubled, one is up...around 30-35%. In fact, there doesn't appear to be a single food item in this list that has doubled in the past year. Eggs are the closest.
But that's not the whole story. Prices are not primarily set by wholesale costs for many goods.
I think cereal has only gone up 30%, although there have been other events that influenced Kellogs pricing (notice how the Poptarts boxes have changed slightly) and then there has been the opportunity to steal away some extra profit - https://www.wxyz.com/news/now-cereal-prices-are-on-the-rise-... (search for "Mills").
People are unable to distinguish "prices have gone up from money printing" from "prices have gone up due to the pandemic and the war between Russia and Ukraine". Neither bitcoin nor gold can hedge against the latter.
Which is mostly driven by putting trillions of dollars into the economy. The Fed had 1 trillion on it's books during the 07 recession. It has 8 trillion on it's books now. That's a major problem.
It is a failure because BTC has pivoted away from the Bitcoin whitepaper (p2p ecash), limited its blocksize and has taken the path of this strange "digital store of value" (lol). BTC's activity rose gradually up to 2017, and then topped off at 1MB and even dropped. [1]
If Bitcoin's momentum hadn't been dissolved, it wouldn't require people to be forced by State to accept it.
Growth continued on second layers: Bitcoin's tx count on the Lightning Network has doubled over the last year. Forks of Bitcoin who attempted to scale by increasing the blocksize all failed and are practically dead (Bitcoin SV, Bitcoin Gold, Bitcoin Cash, eCash, Bitcoin ABC, ...).
> lightning isn't on the bitcoin chain until it gets synchronized.
That is literally the purpose of building second layers. We don't need to keep on-chain records of every microtransaction and coffee purchase in an immutable, ever-growing blockchain synchronized across thousands of nodes across the globe.
> If I give you a bitcoin address, you can't send anything to me with the lightning network.
You can call it whatever you want, someone still has to sync with the main chain, where all the utility is. You can get together with your friend and give each other IOUs all day every day, it doesn't somehow change the fact that bitcoin's throughput is severely crippled to be the speed of a dialup modem.
Have you ever stopped to think that other cryptocurrencies don't have second layers because people don't want them and their chains don't need them? Why go through all this when there is no reason to have a crippled chain in the first place?
Using regular cryptocurrencies is incredibly simple and elegant. It's only when people started to believe propaganda about disk space and cpu time (that never made sense with the most basic examination) that somehow something that worked amazingly well is now a complete mess.
> Using regular cryptocurrencies is incredibly simple and elegant. It's only when people started to believe propaganda about disk space and cpu time (that never made sense with the most basic examination) that somehow something that worked amazingly well is now a complete mess.
Bitcoin SV did not care about these things and is dead because of it. Its blocks are ~200MB spammed with mostly non-payment related data. Its blockchain has grown to over 6 TB, the global number of nodes verifying the chain is down to 20 and it has been delisted by many exchanges and block explorers.
Bitcoin and Lightning in comparison have ~25,000 nodes.
Your example is bizarre since it is a nonsense fork made by a scammer. Even so it does actually work and keeps running even though all the people that sold you a second layer said throughput above a 56k modem was impossible. The spam could easily be prevented by a minimum fee. Even $0.10 per transaction would be $120,000 an hour paid by spammer and going to miners.
Someone needs to explain to me how the Lightning Network actually works, because I find it super sus. How do people make money off transactions as miners if BTC transactions are so cheap ?
People must lock BTC in the "channels" from them to each of the peers they ever want to transact with, in the amount of what they will spend with them in the future. This should produce approximately 10billion*10billion channels in total (so 1^20 whateverellion channels for all humans). Then magic internet machine will solve this Traveler Salesman problem for each transaction.
After people realised that this is a crap idea, they have reinvented banks, who take people's BTC and give them IOUs instead. Then only banks have to deal with the "channels" and "locked" tokens in a centralised way, lessening the overall complexity.
People have realized this a long time ago. The expected configuration is a node-based network like the internet. Messages (money) hop from "router" to "router" until they reach their final destinations through the shortest paths. The "bank" would still be your bitcoin wallet, while your lightning allocation would be like a credit account with every vendor simultaneously. The nodes are routers. The amount you put "at-risk" in lighting only needs to be a minimum amount you need to transact for the day/week/month - and it is not really "at-risk" since there are strong protections built-in.
The general story is that not all transactions are equal. A payment from your cousin for a poker debt doesn't need the fury of a million computers protecting it. Similarly if you have an ongoing relationship with a vendor, and many other examples. In real-life there are vastly differing trust-profiles between transactions. It's ok to trade some security for some efficiency sometimes. It doesn't make sense to treat them all the same.
So user gets a credit at the Not-A-Bank router-node for the full amount of what he intends to spend. Tell me, how exactly does this differ from a bank? Except with less oversight?
Are you asking how do lighting STAKERS make money if lightning transactions are so cheap? Right now they don't, people are doing it to bootstrap the network. But in the future, they will be able to make it on volume. Staking is nearly costless. There were 369 billion purchase transactions for goods and services worldwide in 2018 [1]. At a penny per, that's a lot of scratch.
This rests on the amazing assumption that Bitcoin will replace all currency everywhere somehow.
This is why I can’t get Bitcoiners - their assumptions are always over the top “we will take 100% of gold’s value” “nations will dissolve because of Bitcoin” or something of that order.
Compare that to ETH - people will build decentralised applications and ETH will be the currency in those applications. Stakers get a fee.
Since we're on a tech inclined site, you'll be happy to hear that an RPi4 can process 256MB blocks in well less than two minutes. Current 32MB size limit on BCH in 8 seconds. Check for yourself.
Bitcoin Cash (the og big block chain) is alive and kicking, and getting stable updates (both features and performance), and also has optional (affordable) coin shuffle). Lightning Network is a security and usability nightmare, and its total liquidity is in the low thousands of BTC (lol).
Since LN's inception, liquidity and transaction count on the LN have roughly doubled with every year.
In comparison, BCH has lost 80% of its transaction volume in the last year alone. Its blocksize is now 100KB on average and it now processes fewer transactions than LN. It also regularly hard-forks, either because of leadership cults (Ver, Wright, Sechet, ...) or because of scheduled hard-forks every 6 months which kick off all users who haven't updated. It's the opposite of stable and the market apparently does not share its determination in sacrificing decentralization for adoption.
It isn't lucky to hold through multiple multi-year 80% drawdowns, it's called doing research and having a conviction. I didn't sell at 60k, I'm not selling now, because I have a strong conviction. You call this lucky, but it isn't. If you have a conviction and a span longer than four years you could get "lucky" too.
But if you didn't sell at 60k you're not lucky at all. If you're still sitting there, hodling the ball, you're one of the suckers who paid the lunch for those who did get lucky.
Your 'convictions' will not help you predict where a herd of cows will move or stampede. And that's all BTC is. Whatever a crew of people believe it will be worth. Other currencies are integrated into the economy, which gives them a baseline value from which valuation isn't going to go to far away from.
Moreover, the entire philosophy of holding BTC as some store of value destroys the notion of BTC as a viable currency.
For most of 2018-2020 it was between $4k and $10k.
If someone's looking to sell high, what's to stop them from selling at $20k, which was an all time high in December 2020? Why not wait for $80k instead of selling at $60k?
It's easy to see these opportunities in hindsight, but you can never be sure where the peak is.
money has a time-value, the opportunity loss of investing it in other instruments. The longer you wait for a peak, the more that peak has to be for it to be worth it. When the value you would have had you invested elsewhere reaches your expected peak, you can officially say your strategy failed.
I think even if they say it's safe, it wont make it so: there is fundamentaly no special value in bitcoin compared to the Thai Baht and nobody's rushing to buy those.
The policy only ever made a little sense. What El Salvador desperately wants is a currency it can inflate to pay for the stuff it can not afford. In this regard, it is no different than any other country.
What it had was a currency it does not print (US dollar) and for which there is an ongoing international shortage.
What El Salvador got with Bitcoin was yet another currency it does not print and for which there is currently an international surplus.
The thing the article does not mention, and the only reason the policy made any sense, is that ~50% of Salvadorans live abroad. So there is a substantial remittance market in El Salvador relative to GDP. Allowing remittances to flow through bitcoin cuts out companies like Western Union who scoop from the top.
Even so, this scheme only makes a little sense. A better approach might have been for the government to have set up a USD-based remittance program of its own.
> Even so, this scheme only makes a little sense. A better approach might have been for the government to have set up a USD-based remittance program of its own.
This is just not true. Crypto as foreign remittance has been proven and is working quite well in Argentina.
What you really don't want as a layperson in Latin America, is for really any third party -- but especially government third parties, to have control of your money in any capacity during remittance.
> > Even so, this scheme only makes a little sense. A better approach might have been for the government to have set up a USD-based remittance program of its own.
I agree with that. For example linking the U.S. banking system via ACH/Fedglobal with the El Salvador one as Panama and Mexico have done to bring down transactions costs.
> This is just not true. Crypto as foreign remittance has been proven and is working quite well in Argentina.
But El Salvador is not Argentina though. El Salvador had never been affected by unstable currencies or unfavorable exchange rates set by their governments.
Bitcoin on the other hand, has been the first experience for Salvadorans, of having a currency that loses 50% of its value.
I'm just judging from their accents in Youtube videos, but part of the Salvadoran bitcoin wallet developers were from South American countries, so it seems to me that they were trying to solve a problem that existed in their countries, but not in El Salvador.
> But El Salvador is not Argentina though. El Salvador had never been affected by unstable currencies or unfavorable exchange rates set by their governments.
You're conflating two things. Inflation has little do with how well a remittance system functions. You wouldn't say that Western Union's system functions better or worse because of the currency it is denominated in.
> so it seems to me that they were trying to solve a problem that existed in their countries, but not in El Salvador.
> Western Union's system functions better or worse because of the currency it is denominated in.
When funds are sent on the same currency there is no exchange rate markup on the Western Union transaction, so it's cheaper.
> El Salvador doesn't have a great history of fiduciary responsibility either.
The judicial system was able to sentence former ex-president. In Saca's case all his assets and companies were seized by the National Commission of Property Administration. Unfortunately Funes was able to leave before being sentenced, and obtained nationality in another country to prevent extradition.
Not really. Argentina is explicitly all about using crypto to get access to US Dollars. And they're all going through intermediaries, some who don't even control their own wallets and are just using available crypto exchanges. So that's a lot of 3rd parties, just not the Argentinian government.
> Argentina is explicitly all about using crypto to get access to US Dollars.
Kind of. It is very complex and I could write an essay, but to put it short, if you receive let's say a SWIFT transfer in USD, EUR, whatever, it will be forcibly converted to ARS (local currency) at an unfair rate: if you tried to buy back USD with the ARS you received, you could only get half of the original amount. It's almost like a 50% tax on any international wire.
Anyway people use crypto for much more than bypassing that. Some are interested in holding crypto, some are interested in holding stable coins, some to arbitrage, and so on. To be clear crypto is not used in day to day transactions (buying coffee) in any shape or form.
> And they're all going through intermediaries
I'm not sure what you mean by this? People here use both Binance/CeXes and hardware wallets the same way it's used in any other country. And unlike other countries, here (because there was already a massive black market for physical US bills) you can very easily trade face to face relatively large amounts (1k-100k USD) of US bills for USDT/USDC. Which is cool because it's the true decentralized way to on-ramp/off-ramp crypto.
Not daily, but since crypto (mostly stables) is a much safer value storage than the local currency, I've seen plenty of people selling say USDT for ARS once or twice a month and living off of that. In major cities you can likely find someone willing to buy in every neighborhood.
The fiscal aspect of it is just magical though. Everyone and their cousin either becomes an expert in tax law, or blatantly and unknowingly breaks it every day with no major consequences. So many, many, many people live outside the law that enforcing it equally would mean instant violent riots and protests.
That's a depressing statement about Argentina and Bitcoin. I would be much more interested if Bitcoin were useful for legal transactions in countries with stable currencies and banking.
Bitcoin enthusiasts can be so anti-government that they seem to think ever government will turn into a basket case like Argentina. Perhaps every government gets into trouble eventually. But you could wait a couple lifetimes for it in some countries.
True, but that’s a completely separate concern. Frankly that’s likely going to happen anyway. El Salvadorians suddenly trusting the government with large amounts of their cash isn’t going to make that government any more fiscally competent. Better not to go down with them.
Sure, whatever. I didn't mean you specifically. My point is merely that crypto enthusiasts and radical individiaulists often praise the concept of the government not being able to inflate their money with printing. Which, yeah, has downsides. But there's also downsides to your government going broke. Like your society falling apart, which increases the cost of local goods, and then bam, suddenly you've got inflation anyway even if the value of the coin remains the same on an FX level.
About 1.50 USD bitcoin fee transfer[1][2], no fees for deposits or withdrawals on FTX for both BTC and USD (for > 0.01BTC, around 200 USD)[3]. And 0.07% taker, 0.02% maker fees for trades [4]
I just tried it myself and it says they will charge $60 to send $1000 to the US.
Also, they add this disclaimer:
2 In addition to the transfer fee, Western Union also makes money from currency exchange. When choosing a money transmitter, carefully compare both transfer fees and exchange rates. Fees, foreign exchange rates and taxes may vary by brand, channel, and location based on a number of factors. Fees and rates subject to change without notice.
Xoom (Paypal) says $8 to send $200 so 4%. Percentage goes down as the transaction increases in size. At $1,000 it's $16.
The bigger problem is KYC laws. Kind of hard to satisfy them as an illegal immigrant. Suspect that they're getting screwed by the additional middle man willing to break the KYC laws.
I principly agree on all criticisms, especially the seemingly reckless investment.
However, the presupposed lack of adoption of Bitcoin as a means of payment is not supported by the source bar chart. The numbers are actually pretty impressive compared to card: ~25% of businesses accept card and 20% accept Bitcoin as payment. That is impressive adoption after 1 year by any standard in a country that primarily uses cash.
The businesses in question are not required to accept cards. However, they are legally required to accept Bitcoin. Given that, it is pretty low.
From the article:
> But Bukele wanted more. Making bitcoins legal tender meant a payee had to accept them. As the 2021 legislation stated, “every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service”.
> 20% of business accepting bitcoin is just crazy high. Living in Germany it seems that 20% of business don't even accept regular credit cards yet.
The numbers may be be higher in places that cater to bitcoin tourists, like beach hotels and restaurants, but for day to day locals the transactions is lower.
During peak bitcoin usage I asked a few cashiers how many transactions have been in bitcoin, and the answer was none in normal stores, and 1-3 in the largest supermarket in the fanciest part of San Salvador.
Even the largest bank in El Salvador, only processed 7500 bitcoin transactions on their payment gateway from october 2021 to december 2021. That would be like 80 por day.
"más de 7,500 transacciones [..] en el 2021 [...]n pago con bitcoin." [1]
Ja that is crazy... one wonder if they pick a different time (read long term market-regime) if the results would be any different for better or worse.
The best alternative payment system I have seen myself is M-Pesa in Kenya [0]
It's THE payment system in Kenya everything runs of it in terms of commence for the "ordinary man". It has a somewhat unique starting point, since Kenya (Africa) (I'm from there myself), was not "modern enough" for the everyday man to make use of traditional banking services. But even the "low tech man" had a cellphone.
I hope to see more examples like this in the future, and I'm sure many a BigCorp is doing just that, I do wish the next-gen version of these services will be more community-driven and less bigcorp. Oh gosh I almost described the original vision of bitcoin :)
This is a great point most people from the US and Europe can't understand.
Much like Africa, all of SE Asia went directly to cell service and skipped all landlines because they were so far behind. The same goes for banking in these parts of the world and India.
The people there will skip over the traditional banking system which is massively undeserving the population and adopt a digitally native banking system. The masses will go with the flow and accept the CBDC, but many already understand the implications and limitations.
Prediction: El Salvador will look genius in the next Bitcoin cycle. Other emerging market central banks will proceed to copy their model creating the next cycle’s peak. Once they stop buying, the market will crash again creating either a global depression or a bailout of the btc economy by USG, causing a repeat of the bank bailout that spawned btc in the first place.
I admire your optimism, but I can't get on board. It would be naive to deny the growth of cryptocurrencies over the last few years, but it seems like the people who were meant to make money have since cashed out, that everything's peaked and turned a corner and the general public have turned against it (due in no small part to a few many shitcoins, rugpulls, scams, BAYC, and a couple of defunct exchanges). I'm sure crypto will live on in some form, but it won't explode again like it did before. I don't know who is left to fuel the next bubble.
People talk about crypto cycles like they talk about metal cycles and I'm not sure how to distinguish the two (and that's why I'm not invested in either).
I mean on some level if you're doing this kind of trading then yeah BTC/ETH/etc trading is similar to trading real currencies.
I think the difference is that the real currencies have a well-known utility at the moment - they're a means of exchange for goods and services. If you're selling EUR to someone, the chances are they're using that EUR to pay for these in the eurozone. If you're buying USD, you're also likely to need that to buy USD-denominated things.
If you're a forex trader, you're trying to make money from people's need to use these currencies.
If you're doing that for crypto, you're doing that but for people who are just also buying and selling crypto - not actual goods or services.
well if you extend the analogy between crypto coins and FX, a long-only strategy makes as little sense in crypto as FX. Why would I hold dollars or yen long-term, instead of investing in assets which are productive like equites or bonds.
So you're buying into trust of that government. With BTC you're buying into trust of the technology and other network participants. Is it really so different? I don't trust governments so much - my local currency is currently facing 25% YoY inflation. I bought Bitcoin.
I wouldn't say trust. But an entire nation is required to accept it so there is a market for it. Plus with interest rates nations are paying you to hold it.
I don't do Forex trading so I'm not particularly defending it. The currency I hold is the one that has utility to me. It's the one I'm paid in, the one I pay taxes in. I don't particularly want it jumping up or down 100s of %. I want it to be stable.
If bitcoin is more stable than your local currency go for it, (although if inflation is 'only' 25% it still doesn't seem to meet that bar). But that says more about your currency than the bitcoin and it still doesn't make it an investment. Your case would seem to be better served by holding USD though.
My first post pointed out it wasn't a very good investment. You seem to be buying it as a store of value, but it isn't very good at that either. So all were left with is a distrust of government. But the cure is worse than the disease.
It's much simpler. People want $ for £ for education tourism etc. Successful forex traders are just middlemen for these txns. The make sure that you can always sell $ even if there is no one to buy them at that exact moment.
Well, and isn't it the same for BTC then? In the city where I live, there's tons of Bitcoin ATMs everywhere - and people using them, pretty clearly to go around their everyday business, as if it was a bank ATM.
These people I see around here need to go to a BTC ATM to have cash for the coffee stand right next to it. What's so different? The scale, OK, but anything else? Actually, people are buying land/houses and cars with BTC here, also the largest local web shop (a large EU seller too) - the local Amazon let's say - accepts it, and they claim it's used for a small but not insignificant chunk of the sales.
So most of those places instantly convert the btc into usd. Prices themselves are listed in USD and you have to pay some markup for USD conversion too. It's sell pressure on btc so bad in any case
> it seems like the people who were meant to make money have since cashed out, that everything's peaked and turned a corner and the general public have turned against it
Every 4 years it looks like that. And yet the next greed fueled ascension comes around like a clock. Each next one smaller than the last one.
Next one will come around 2025 but this time it's going to be just few hundred percent.
Eh there might be another bump. But as long as it's a space for scammers, pump-and-dump schemes, shitcoins and bullshitters it's just not for me. A pretty ridiculous amount of money has been sunk into making cryptocurrencies look like a big thing, instead of actually solving the problems that prevented people from actually using them. That makes me think that deep down the cryptocurrency people aren't that serious about their projects becoming actual currencies, and that they simply see them as a way to get rich quick by selling something they know to be ultimately worthless. Quite a few people have gotten rich (hello, Do Kwon!) so there's a chance it could work for those founders. But as a potential end-user, nahh no thanks I've seen enough
The "space" for a cryptocurrency is a Venn Diagram solely occupied by one circle: Bitcoin. We're seeing a culling of these shitcoin also-rans, which took the money from the late-coming naive while enriching the early wave of speculators, like any other common pyramid scheme.
Amazing. When the crypto world get bored of minting apes and such maybe they'll try to actually bother to try making bitcoin into something that can be used day-by-day. I don't think they will though. I think it'll remain only a speculative asset whose price jumps erratically to-and-fro until people get bored and move on to the next shiny thing.
My Coworker said this exact thing to me in 2019, that now was the time to buy because not many were talking about crypto and many had written it off, but that it worked in 4 year spikes. Wish I had listened to him then haha.
Best times to buy bitcoin was in 2011, 2015, 2019, 2022 ... roughly every 4 years. Exactly at the time HN thinks bitcoin is dead and burried.
And best times to sell (if you needed to sell) was in 2013, 2017, 2021 ... so I think the next time will be around 2025.
Every cycle swings less (in term of percentage change) so the next one will be just few hundred percent (troth to peak) and following ones even smaller till bitcoin will become yet another random walk asset like stocks.
If a snarky YouTuber doing the “this one time at bandcamp” voice is the best argument, I dunno what to tell you. To borrow his condescending tone, he is making the argument “you think line go down, but line go up!” the latter half of which is the title of Dan Olsen’s high-profile video of the cryptocurrency boom.
Unless it becomes practical to pay for something with cryptocurrencies (which for me should be the primary use case of any currency) they basically seem used by people who want to time buys and sells according to the current boom/bust or pump/dump cycle.
For millions of people, crypto-currencies are the most convenient way to buy lots of things. I've been buying things regularly with cryptocurrencies since 2011. Domain names, video games, hosting, consumer electronics, clothing, airfare, etc.
2017 marked a pivotal point where Bitcoin specifically abandoned catering to the brick and mortar and e-commerce use cases, and started focusing on large scale financial services. It was a frustrating development for sure, but people all over the world are using various smaller cryptocurrencies to buy groceries every day.
Cryptocurrencies might not be useful for you specifically, and that's fine. Maybe you're not one of the various under-served target demographics. Complaining about that though is a bit like complaining that Yen is useless because you live in the US and none of the businesses you frequent accept Japanese currency. It's undeniably a trillion dollar global economy that provides a massive amount of value to millions.
Well that's kind of a bad comparison, since Yen isn't my local currency and yet it has been useful to me when I was visiting Japan. I could buy it for a reasonable price in my current country, in basically any airport or bureau de change around the world. I could easily withdraw Yen from an ATM when in Japan, could buy things anywhere in the country with Yen and then switch back the couple-thousand I couldn't spend at Duty Free when I returned home.
Hearing that crypto may not be for me is quite surprising. It is advertised to me all over the place and the various stereotypical "cryptobros" seem curiously keen on people like me buying into the ecosystem, and appear to be very generously interested in helping me go "to the moon" etc. I've no idea how you're doing those things with crypto. I guess you have to go pretty far out of your way to buy, for example, airfare with a cryptocurrency or make otherwise really inconvenient trade-offs. I guess you might be semi-forced to use it due to, for example, living in a country with a currency which is more unpredictable than BTC then I think that's more of an black mark against the local currency than it is a feather in BTC's cap...
> I guess you have to go pretty far out of your way to buy, for example, airfare with a cryptocurrency or make otherwise really inconvenient trade-offs.
Eh, not that hard really. Expedia started accepting Bitcoin in 2014.
> "cryptobros" seem curiously keen on people like me buying into the ecosystem, and appear to be very generously interested in helping me go "to the moon" etc
Yeah fuck those people. I've been in the space since 2009 and I've never once recommended to any friends or family to invest in cryptocurrencies, and in my experience, the vast majority of people in the space are the same way. The "get rich quick" types who treat all of life like one big MLM have always been reviled, but none of that is unique to cryptocurrencies. Shady hucksters and con men have always existed, and always will.
They invested US$100 million (and currently that's around US$50 million). The next bond payment (2023 note that they are trying to buy back now) is due in January and that alone is US$800 million. So, their investment should yield really high returns for it to even make a decent dent into the first bond.
From all the fanfare around them, I was sure they had to invest more. But after looking up the numbers, this looks like a publicity stunt more than any serious investment. Also 20% adoption when it's mandatory to support it, is quite interesting too.
> They invested US$100 million (and currently that's around US$50 million).
We are a small country, for comparison the largest public hospital budget is about US$60 million per year.
> The next bond payment (2023 note that they are trying to buy back now)
There are two bonds which they are buying. The 2023 one at 91 cents per dollar, and the 2025 one at 51 cents per dollar.
> this looks like a publicity stunt more than any serious investment.
El Salvador has a very good PR team. So many announcements have their own publicitiy students. Teven produce different material targeting different foreign countries. It's always interesting to see what each to see what PR message each country gets.
For example: Targeting those who didn't agree on vaccine mandates in English Speaking Countries (Australia/Canada/UK):
If El Salvador looks like a genius and their poorest citizens come around and get on board, the next crash will cause a humanitarian crisis: the poorest of the world will literally have given money to the rich who were able to get out of the market fast enough.
Let's be clear about this, unless El Salvador is in a debt crisis. They won't own any crypto by the next BTC cycle because they'll have gone bankrupt, sold off any crypto assets they've got, taken significant bailout money from places like the IMF. They don't have the luxury of sitting on BTC and riding the wave, they are bankrupt. They have $100m of BTC and they need to pay $800m by Jan 2023. And their debt is trading at something like 30 cents on the dollar because no one believes they can pay.
This was implemented poorly (and bitcoin was a poor choice), but it's not crazy to want a currency that is decoupled from the US government. Especially in Central America where the US government has a pretty shady track record.
That's the thing. No-one wondered why they might want Crypto, the question was always "Why Bitcoin"?
There are many deep subtle questions about Economics, even with stablecoins but the choice of Bitcoin was way off base, the only possible reason to use it was because it was the only one most people had heard of.
Bitcoin is totally nonsensical for low-value high volume transactions and by the time the money gets paid to the seller for already bought goods, they could be making a loss. At least inflation in normal currency is only (usually) a few percent per year.
> No-one wondered why they might want Crypto, the question was always "Why Bitcoin"?
That question has an obvious answer: because it's the oldest and biggest cryptocurrency. Not letting perfect be the enemy of adequate (let alone good) is a perfectly reasonable choice.
This isn't a problem though, countries issue their own currencies all the time. The problem is when you need to run a trade deficit, you need to buy more stuff than you sell internationally. It drives down the value of your currency. But crypto doesn't solve that. And borrowing against the national debt to buy risky crypto assets (which is what El Salvador did) makes that problem worse, not better. They will default on this debt.
I like it for the criminal options it facilitates. I don’t personally agree with being unable to import affordable medicine (non-domestic brand generics which weren’t produced in an FDA-approved facility) from India/Turkey/etc and I use bitcoin to facilitate buying the medicines I need from pharmacies which don’t require doctors prescriptions. It saves me a boatload of money and helps me greatly in managing my health. Or to get around the current widespread pharmaceutical shortages which continue since Hurricane Maria destroyed a lot of pharmaceutical production infrastructure in Puerto Rico (e.g. bacteriostatic water).
I also am largely okay with people using it for personal quantities of controlled substances, even though I do not use it for that personally. Sometimes these are for legitimate medicinal purposes as well (for example, schedule 2 TRT and HRT drugs)
What is more likely is that you would wake up in a world where Bitcoin may not exist, but is completely dominated by crypto nonetheless. Within a generation or two, I predict that all asset ownership will be crypto-backed. Property. Automobiles. Artwork. Securities. And of course, currency. Fiat itself will become a cryptocurrency once more millennials are in charge.
I reserve judgement as to whether or not this will be a net benefit for society. I suspect not, but our present ignorance is far too great to make such a prediction - I just think it's gonna happen whether we want it to or not, so get used to the idea of crypto-everything.
Crypto in the form of CBDCs will very likely be a loss. One head honcho at the Bank of International Settlements was quite clear that they want to fully control how people spend money. And at that point it’s not really your money anymore anyways …
I mean, it is not that hard to imagine, right? A car title becomes an NFT. Whoever owns the NFT owns the car. Same with a house. Or a horse. I'm not a crypto expert, but that is a relatively trivial use case for NFTs.
As for how this scales? I have no idea. I'm just speculating that it's gonna happen somehow. I mean, hell, look at this post - a nation adopted Bitcoin. You think that's the last time a government will experiment with crypto? China is already developing their own fiat cryptocurrency. You think it's just gonna stop?
I don't necessarily want this to happen, nor am I advocating for it. It's just a prediction, so I'm now sure how to answer your questions.
Well, no crypto expert ever predicted this. The idea of NFT's has pretty much been discounted by everyone in the crypto community for a decade, until they randomly became a fad in 2021. So I wouldn't say it's very easy to imagine.
Smart contracts backing more real world assets has a slightly higher chance of becoming a thing, but even with those the value isn't super clear. The whole idea of tracking ownership is that it's backed by authority to enforce it, and the whole idea of cryptocurrency is that it works without authority.
If you think NFT you think about that vague thing that has no bearing on the real world. Bitcoin is the magic technology that manages to be scarce and be manifest in the real world despite being fully digital and networked. Ethereum managed to one-up Bitcoin with the smart contracts of which the DAI stablecoin which anchors itself to the real world currency without relying on authority.
NFT's basically are the exact opposite of the sort of thing cryptocurrency offers as value to the real world.
Ok, lets go with your example. Car title. Or a house title.
Just where exactly the title itself is stored? I would assume it's a at least moderately long plaintext file, describing property and conditions. Maybe some authenticity attributes, like digital signatures of multiple parties. Where do you think is this artifact located? Inside the NFT?
Plaintext doesn't take up all that much space relatively-speaking; it'd be entirely feasible to store all the data on an automotive title (for example) directly on-chain.
Also, there's no reason why the property and conditions have to be stored together; they could readily exist as separate artifacts sharing some ID or reference.
First - that's a big if. Only super bare and short, zero formatting plaintext, will fit inside NFT (as they exist today). I highly doubt people would want to work with such data, degrading their UX dramatically.
Second - do you realise that title contains private information which will be forever exposed on-chain?
Third - ok, even you admit that not everything will fit on-chain. Then who will store the rest of the data? Centralised entity? Which will have its internal security, bookkeeping, staff and so on?
Why do we need NFTs then, if all the work will be done by a centralised entity anyway?
Fourth - in the hypothetical case when we have titles and NFTs linked to them, there are several interesting questions - what happens when owner of the NFT forgets his private keys? What happen if the owner dies? What happens when the court judges declare that the ownership is incorrect? How are marriages handled, where today multiple people can own the same property?
That ain't an "if" at all. The actual identifying information on, say, a vehicle title or land deed takes up maybe a couple hundred bytes at most (if not far less), whereas most NFT-capable blockchains allow transaction metadata on the scale of multiple kilobytes.
> Second - do you realise that title contains private information which will be forever exposed on-chain?
Nearly (if not entirely) all of the actually-private data (namely: the owner's PII) is redundant under a title-as-NFT system, since ownership is asserted by wallet/token custody rather than being baked into the document.
Besides, encryption is a thing that exists.
> Third - ok, even you admit that not everything will fit on-chain.
I admit no such thing. What I actually said is that you can break up large data into smaller chunks such that it can fit on-chain even if it somehow blows out the chain's transaction metadata ceiling.
Regardless:
> Then who will store the rest of the data?
Have you heard of IPFS?
> Fourth - in the hypothetical case when we have titles and NFTs linked to them, there are several interesting questions - what happens when owner of the NFT forgets his private keys? What happen if the owner dies? What happens when the court judges declare that the ownership is incorrect? How are marriages handled, where today multiple people can own the same property?
All of these things can be (and, in the case of lost keys, have been) addressed with smart contracts; the blockchain can programmatically define conditions under which the NFT can be transferred, e.g. with consent from multiple parties. Such programs can also represent multi-person ownership; in a world where blockchain computation can handle the governance of large organizations, something like a marriage or an estate is a readily solvable problem.
You are using word "smart contract" like it's some magic spell. You can't make a contract with external inputs, from outside the blockchain. Or more precisely, you can't make a reliable "sc" with such inputs. And no, those people claiming to "solve" oracle problem didn't solve anything.
You can't have "smart contracts" applied to the real world without centralised entities controlling them. Therefore they are mostly redundant and unnecessary.
Regarding the size of the title - I admit I don't know much about that area, but I know enough to doubt your claim that majority or even any titles can be reduced under the kilobyte. Splitting info into multiple tokens will only make things even worse.
Also this doesn't address the issue that UX of centralised entity working with such system will be atrocious. You postulate that there will be no centralised entity, but imho that's pure fiction.
And lastly - IPFS will never be adopted for anything important because it doesn't have safety guarantees. Not even with those services promising guarantees for some regular payment. Because subscription can run out, that service may close or anything else can happen, IPFS still can't guarantee file safety. That's a nice toy, but nothing more in the current implementation.
The rats flee a burning building and move into the next rat's nest. Its nice to know what the current grift is. Although, it would be refreshing to see dumb money and hype thrown in a new direction.
Seriously, though: having globally accessible, indelible and irrefutable shared ledgers containing balances which cannot be forged, whose operation cannot be stopped by any malicious, busy-body bureaucrat? This is a God-send. It is already the gold-standard for international payments for me, a small computer consultant.
Think of all the poor slobs in Russia who've been steam-rolled by these sanctions, and can no longer sell their software or get paid for their little Apps. Whatever you might think about Russia -- "group punishment" is not cool; these are people like you and me who cannot now feed their families. To them, Bitcoin (and other even more capable cryptocurrencies now in development) is the difference between life and death.
So, it might be worthwhile to ... reflect, if we find ourself agreeing with the obese head banker at BIS or weird Klaus Schwab, when they say they want to control all aspects of personal commerce. They can pound sand -- I'm going to continue to work to move cryptocurrency technology forward.
It's clearly better when instead of bankster elites we would be controlled by some shady scammers sitting in the non-extradition offshore. Truly a revolution in finance.
There are (and always will be) people who see no good in the Internet. I played a small part in its growth in the early 90s and even I have pangs of regret over what it has become. AND there was a lot of grift and lawlessness in the early Internet -- that is what paid the bills at first.
However, at the time I was able to articulate all the ways moving X, Y and Z to the Internet would make things better -- for hours on end -- and I would 'win' those arguments. OTOH, all my crypto crazed associates have trouble doing that same thing today. For years, the argument ended up being "I got in early and now my 'investment' is worth X amount." It has been an end justifies the means proposition.
In the end, the Internet was judged by its exponential growth and adoption. There was a mad rush of, arguably, useful activity going on... for years. Everything I wished for and pushed for back in the day has come true -- monkey paw curse and all. Bitcoin's use has actually gone down afaict, the market value of it is the only metric people care about.
> However, at the time I was able to articulate all the ways moving X, Y and Z to the Internet would make things better -- for hours on end -- and I would 'win' those arguments. OTOH, all my crypto crazed associates have trouble doing that same thing today.
I find that most crypto-crazed enthusiasts don't have the foggiest idea about how it works, beyond some broad vague ideas. People who can articulate its benefits exist, but they tend to get drowned out. Many of them are building companies instead of bothering to prosthelytize or argue on forums.
> In the end, the Internet was judged by its exponential growth and adoption. There was a mad rush of, arguably, useful activity going on... for years. Everything I wished for and pushed for back in the day has come true -- monkey paw curse and all. Bitcoin's use has actually gone down afaict, the market value of it is the only metric people care about.
Very very well put. Bitcoin’s use as measured by total transactions has gone down. However, the total amount of cryptocurrency transactions across all chains is still growing exponentially.
Rationally, I understand what you're saying, speaking as someone who was intrigued by Bitcoin in 2012 and possibly made a little money off it while I was interested in it.
Humanistically, I gotta say, perceptions matter. I left crypto because it just started "tasting gross", regardless of the technological interest I had. Clearly, I wasn't in a minority with that.
I hear you, but these excellent YouTube recommendations and Google App stories tuned so precisely to my interests wouldn't even be remotely as good unless I permitted myself to be data-surveilled. I can't tell you how much I've learned via these (whether informational or entertaining). (Note: I pay for YouTube, because it is an excellent service.)
What I don't like about this article is it is almost entirely focused on price. If bitcoin would have went up, it would have been a wise move according to the premise of the article. I think a longer timescale is needed.
I'd like to see an analysis of the situation, assuming that the value goes neither up or down, but simply holds a constant value in an inflation indexed manner. Would it still be a bad idea in that situation?
> I'd like to see an analysis of the situation, assuming that the value goes neither up or down, but simply holds a constant value in an inflation indexed manner. Would it still be a bad idea in that situation?
Without this type of analysis, the entire discussion is based on the current price and nothing else. Therefore if the price was up significantly we would have to conclude he was a genius. For now, we can conclude that he is not. However, if we are being intellectually honest, our opinion needs to be a function of the current price.
> simply holds a constant value in an inflation indexed manner
Gold and currencies backed by gold come very close to this, with historical evidence to back it up. The purchasing power of gold -- that is, its convertibility to goods and services you might wish to consume -- have remained remarkably stable over time.
Countries stopped issuing currencies backed by gold for a few different reasons, but its ability to hold constant value over time wasn't one of them.
Yes, true. Some economists suggest that the adherence to the gold standard prolonged the great depression. I suppose in some sense the entire economy is a kind of game where the goal (should be at least) to maximize the benefit to all participants. Having a stably valued token (fiat currency, crypto, gold backed, etc.) is a decision variable, not the objective function.
After so many cycles, Bitcoin has become one of the most respectable pyramid schemes available to the general public (only behind real estate speculation maybe).
I think we'll see another even worse cycle unfortunately within the next 10 years.
Not only can you live in a house, literally every economic activity requires land on top of which you set up your capital and perform your labor. It's not the same thing at all as Bitcoin.
Yes, it's not called "imaginary estate", but even practical things can be speculated.
I'm sure I would pay $500 per month for internet or drinking water for instance, but in general this type of rent-seeking behavior is not good for the economy.
My theory behind this is there are many BTC holders with cap gains (or assets acquired through illegal methods) that can't easily cash out, and El Salvador's BTC support was a grab at capturing tourist revenue through state sponsored money laundering.
Through that lens, it would be interesting to see if there was any anomaly in GDP, luxury goods sold, real estate sales, or tourism in the country.
Many people buy Bitcoin to "hodl", not to use, giving it some gold-like characteristic.
If there was some crypto without any incentives of hodling long term, I'm sure the adoption would be higher. People don't spend Bitcoin the same way they don't spend gold in daily life: to own it as a long-term value reserve.
My best guess at why the average person is hesitant to use bitcoin as a primary currency is: where do I go when it goes wrong? If the system holding my money is hacked, or I get scammed in some way, where is my legal recourse? Legal recourse is typically something provided by a state. But state regulation nullifies a lot of what bitcoin advocates claim is the advantage of cryptocurrency. I'm not up to scratch on the details in El Salvador, so curious to know whether they have solved this issue.
That's not the whole story. When Bitcoin started it was used more as a currency than it is now. Firstly by evangelists who tried to establish a BTC economy, and secondly in the illicit economy.
Bitcoin miners and devs took the project in a specific direction a few years later, optimizing it for use as digital gold, while making it much harder and more expensive to use as a currency.
100% agree. The early days of Silk Road showed the true value of Bitcoin. It was a great untraceable currency. Perfect for buying drugs (no moral judgement, just saying what happened). Then, around 2016, CNBC “discovered” crypto and so much investor money and mania jumped in. Now it’s just a value store for dreamers. The fact that the word HODL exists kinda proves that point.
Not just dreamers, it’s an identity. Someone else on this topic is calling themselves a “hodler”. Not just an investor. But a “hodler”, a “True Believer” I suppose.
Your investment is there to make you money, not to provide you with an identity.
Yes, my understanding of bitcoin is that it is not untraceable at all since the transactions can be followed back to their source, but it was widely perceived as such by dark markets for a number of years. I guess maybe if you mined it yourself (no longer really feasible for an individual?) or somehow purchased it with cash it might be.
El S. is in a pretty strange place because they don't have their own currency. They have no control over their economy in that regard, so adopting a separate currency which frees them from singular dollar dependence is quite useful.
Bitcoin seems to be intended as a decentralised payment system that bypasses any third party institutions. My gut feeling is that: in order for a state to provide legal recourse, bitcoin addresses need to be linked to a centralised personal/business identity that can be tracked down and sued or prosecuted if necessary. For Bitcoin to feel safe for the normal person, it would have to introduce centralisation and third parties. My gut may be wrong, of course.
Yeah, I think most people find consumer protection regulations very reassuring. It's natural that they're reluctant to transition to a system that does not (and arguably cannot) have any.
Thank you for the info, I didn't know about Chivo. This may well be the government's attempt to address the issue of legal recourse. Interesting though that it still was barely used, at least partly because of security issues:
> Though around half of the Salvadorans surveyed have downloaded Chivo to date, with 40% of those downloads happening in September 2021, around 61% of those have abandoned it after withdrawing the $30 dollar sign-up incentive, the National Bureau of Economic Research found. Only 1.6% of all remittances were received in bitcoins via digital wallets in February 2022, according to El Salvador’s Central Bank.
> Chivo download numbers have been negligible in 2022, suggesting that the push has run out of steam. Some of those who have stuck with the application are using it for transactions unrelated to Bitcoin. The median active user does not send or receive a single Bitcoin payment a month nor make any Chivo ATM withdrawals, the survey found.
We the hodlers believe that Bitcoin can be hacked only by hacking cryptografic hash-functions, which will lead to collapse all the banks, all passwords on all websites, maybe some data structures like hash-maps.
> or I get scammed in some way, where is my legal recourse?
How will you get scammed if you have a backup which you promise to yourself to not even introduce to computer with online? Also nobody recommends you to hold all your wealth in crypto. Some metals work not bad also, my favorite example is copper.
> But state regulation nullifies a lot of what bitcoin advocates claim is the advantage of cryptocurrency.
Let me guess, you have not read / have to reread the bitcoin.org/bitcoin.pdf whitepaper?
I'm not talking about the hash function being hacked, I'm talking about websites like Coinbase that provide wallet and exchange services being hacked. Banks of course are also vulnerable to social engineering etc but there is more regulation and consumer protection for when that happens.
And by "scammed" I mean someone providing a fraudulent or faulty service or product. In the UK we have "Section 75" which protects consumers who pay via credit card or paypal: https://www.citizensadvice.org.uk/consumer/somethings-gone-w... . Is such protection possible with bitcoin?
> I'm not talking about the hash function being hacked, I'm talking about websites like Coinbase that provide wallet and exchange services being hacked.
What part of Bitcoin whitepaper tells you have to rely on third-parties? I'm not a trader, I'm a hodler, I even do not have a Coinbase account.
Of course if third-parties get lost you lose everything you have believed they will guard for you.
upd after reading responses
Sorry guys I forgot that average person needs to be an idiot. My bad, usually I consider an opposite.
Remember that the comment started with "My best guess at why the average person is hesitant to use bitcoin".
The "average person" needs something roughly equivalent to a current bank or credit card in terms of simplicity. Currently, that basically means using third-parties like Coinbase, not reading the Bitcoin whitepaper, managing their own hardware wallets and encryption keys, thinking through backups and disaster recovery scenarios, and being dilligent about maintaining opsec.
Because they are more trustworthy than my own ability to not screw up. I lose/break things all the time. I didn't want a fragile token or backup costing me 5 figures.
> upd after reading responses
> Sorry guys I forgot that average person needs to be an idiot. My bad, usually I consider an opposite.
Right. Wanting simplicity and low risk around basic daily purchases and transactions means that someone's an idiot. You seem like a lovely person. Thanks for representing the crypto/BTC community so well.
"Don't worry, you can manage your wallet completely yourself without any 3rd parties" is in absolutely stark opposition to "adoption will grow and grow." If the only people that use BTC are hobbyists who are willing to go through the trouble to find a way to safely manage their own wallet then BTC will never see widespread use.
I mean, if being secure requires an average person having an airgapped computer holding the wallet keys, it's not going to see much adoption. Also you can't really use it as a currency if you do that.
If you're not keeping a substantial "float" in the currency, you have to buy more every time you want to use it. So you've just inserted an extra, riskier step into your ecommerce or international wire transfer.
Within El Salvador, the policy behaves like dollarisation with all its advantages and disadvantages, with an extra disadvantage that the currency has fallen by a third against the dollar.
> If there was some crypto without any incentives of hodling long term, I'm sure the adoption would be higher
Interestingly, that is also the analysis that most central banks make. Their monetary policy sets a positive target inflation rate for this exact goal.
However, that monetary policy is often a large part of why people use Bitcoin.
I have a hard time with left leaning economics if only because they revile "consumerism" but their policy prescriptions, in practice, make it impossible to do anything but consume.
The demonization of "hoarding" is basically an endorsement of consumption. Of course, they then regulate your consumption.
You could see how people resent the micromanaging of their lives.
"If there was some crypto without any incentives of hodling long term, "
The opposite.
Cryptos that are anchored to USD have no appeal. They're less useful than USD, and, there's no 'get rich quick' aspect. So what's the point.
The Ponzi Mania is what drives people into BTC and to talk about it incessantly on the Internet etc.. Without the mania, it's not going to spread.
An institutionalized crypto, like one by the government, and which had some kind of stability (i.e. central banked) would probably get critical mass and therefore have some utility.
El Salvador leader is basically criminally derelict, he should be jailed.
The use of "stablecoins" is for crypto arbitrage. Exchanging to USD via traditional means is just too slow to take any risks.
There was an early alt-coin, http://freico.in/, which had a demurrage fee for holding, which was intended to incentivize spending over saving. A terrible idea if you ask me.
Long-term saving is the biggest selling-point for Bitcoin. If the value of savings went down by design, it would have never got to where it is.
There's about 150B in stablecoins[1]. You can argue that some of that is fake, not backed. But even if 75% of that were fake it's still a huge amount of money. So it's clear that cryptos that are anchored to USD do have appeal.
The appeal however is not from people wanting to use them to buy their coffe. The appeal is DeFi.
$150B is a small amount of money that is otherwise just sitting there. Nobody is using it for anything and it's not growing.
It's generally a riskless thing thing to put your money in so it's not surprising that a few funds have gone big on it. They will fold the bet eventually.
There's Tether and USDC, plus a handful of others.
The critical thing at the moment is to be "sophisticated" enough to make the right choice.
In US law, an investor has to prove they have means (money to spare) to do risky things. They are "sophisticated" investors and can afford losses. (This word is used in the law)
The rest don't get to play. So the rest don't know the rules and don't understand contract law.
If you read a contract it defines the rules. Most people don't want to or don't know to do this and, right now, the government isn't stopping them from making these decisions about investment in crypto.
Many people talk about crypto without acknowledging the fundamental nature of investments, because the don't invest (i.e. not "sophisticated"). They want something like their bank. Somebody to make sure they don't mess up and take care of them if things go sour.
If that person is you, leave your opinions aside and keep your money in bonds and mutual funds
> If there was some crypto without any incentives of hodling long term
There are some that strongly discourage speculation by having a purely linear emission, which after n years still has a yearly supply inflation of 1/n and takes a whole century to get down to 1%. Offering the same rewards to later generations helps avoid concentration of wealth that most cryptocurrencies, especially premined ones, suffer from.
This last cycle, many people bought Bitcoin to use as collateral for loans, which was a novel and even smarter use of it. Use your money to make money.
I asked a group of visiting college students from El Salvador about the situation with the Chivo wallet. They all uniformly believed the U.S. had put sanctions against the country's official exchange, making it hard to send money between the two countries. I could not find any evidence that such sanctions had actually occurred, but they all believed it was true. I wonder how they got this idea, how common it is, and whether it's had any effect.
tl;dr: you can have big positive impact but 'fail' financially.
The inverse is also true: you can have little impact but attain big wealth/success.
Moreover, due to competitive pressures this lack of correlation happens is quite common. If impact requires a mix of skill+luck+timing and success requires skill+luck+timing, then impact+success is (mathematically speaking) exponentially harder.
If he had invested in a corrupt opaque investment that by design lost $50M into the pocket of a wealthy supporter, everyone would've shrugged and said "business as usual".
How should we rank stupidity versus corruption? My point is that we are outraged at this guy's transparently stupid act, but I opine that we would be less outraged (or not even notice) if he was corrupt to the same extent that he is stupid. Neither is a virtue but as we stand in judgement then maybe our standards should be challenged.
He is corrupt. El Salvador is half a dictatorship, and the reason it went on this bitcoin venture is because its beardo bro dictator hangs out with bitcoin people and unilaterally decided to do it.
In what multiverse is achieving 20% adoption among customers and sellers in only a year a "failure"? Also, no shit the IMF is going to rattle off dire-sounding warnings; the IMF has a vested interest in keeping countries like El Salvador dependent on the legacy financial system.
It's way too early to declare El Salvador's Bitcoin experiment a failure (or, for that matter, a success). Adopting a new currency (let alone an entire alternative financial system) doesn't happen overnight.
I value the insight of many that post here, so I would like to ask: isn't there any valuable application for blockchain tech? I realize BTC is imperfect, but blockchain itself is just a technology.
Being pretty young, everyone I know is involved in crypto in one way or another. I'm personally waiting on the sidelines, but there should be some beneficial middle ground between going all-in and completely discarding the tech.
Well, money is the biggest use-case of it all. If you don't care about inflation (solved via decentralization), then there's the use-case of verifyably programmable money (ethereum)
Another one that I find fascinating is immutability, things like https://opentimestamps.org/ (uses bitcoin's blockchain), it allows you to proof that X piece of information existed prior to time Y.
I know of 2 different paths of assumptions you need to verify that proof:
1. Somewhat trusting bitcoin block's timestamps and the immutability that proof of work provides to the chain of blocks
2. Having a higher bound estimate of your attacker's ability to generate proof of work, and then sum all the available proof of work (it is sequentially chained in the blockchain from the block's proof, till the latest block produced), and compute how much time the attacker needed to spend to fake that proof of work, and that's your proof of the minimum time that must have passed since X was conceived
Estonia uses a blockchain to act as an immutable way to store timestamped hashes of government data for security and verification purposes - they started building this a year before the Bitcoin whitepaper was released in fact. That's the only valuable use for blockchains I've seen.
While I'm certainly not on the Bitcoin train but I would argue it's too early to say it's a failure from an investment standpoint, and there's too little evidence to say it's a failure from a policy standpoint. I would presume the goal was to become less dependent on foreign currency/other nations, which seems successfull
FIAT has proven time and time again to fail. Dollar world trade is unfair and benefits the USA unfairly.
I would prefer a neutral crypto currency to be the new world reserve instead of a competing currency like the YUAN. Government should not have the power to print money out of thin air.
The technology of blockchains is improving, for the example lightning network should make it very well possible. Just like with the invention of 'real' money there is a lot of failure in the crypto space.
The subject of money and currencies is a much more complex issue. A government giving its "printing power" or in the case of Elsalvador, no longer wanting to be the victim of the printing power of the USA, is a very good thing.
El Salvador gambled which is stupid. Whether they won or lost at the lottery is inconsequential to its stupidity.