“Bitcoin Killed The King”
There is an article circulating today that inspired me to write a response. Link at the bottom. These thoughts aren’t a well crafted argument, just a stream of consciousness. They are literally the notes I wrote as I read the article.
If we truly care about first principles, start by recognizing the difference between a currency and an investment. The properties needed for a successful currency do not lend themselves to being a successful investment. Almost nothing else in this article matters if you don’t get that right, but I’ll indulge anyway…
- The creation of a new technology is not an argument in favor of using it as money.
- Money is not a belief, the value of money is a belief. Subtle difference.
- Kings did not invent gold even though they used it to mint coins.
- Gold has outlived every empire that has minted coins with it, so how can you argue its value is derived from the authority of those empires?
- If Bitcoin “killed” (past tense) the king, why was China able to ban it?
- Market cap of a company can not be compared to market cap of a crypto currency. Nobody would buy an entire currency for its market cap, but someone might buy an entire company for its market cap.
- Currencies are NOT shares. Holding a share gives you an ownership stake in a business with the potential to earn revenue and profits from customers. Holding currencies do not. Holding Bitcoin does not.
- We might want the price of a share to “drive up” but we shouldn’t want the price of a currency to “drive up”
- If you acknowledge that Bitcoin likely will not succeed as a means of exchange, then stop calling it money. Storing value over time is not the only property of money.
- Wash trading is an excellent argument in favor of centralized regulation. Curious how that will be addressed without negatively affecting its de-centralized properties.
- Again, if you acknowledge Bitcoin is not a good medium of exchange, why would the US dollar be threatened by it?
- It is absolutely not an advantage for small countries to give up control over their currency. You stated this like fact, when it’s not. Look at Greece in the Euro, constantly in trouble. El Salvador has not so far shown any benefits from the adoption of Bitcoin.
- Eliminating Bitcoin completely (probably) isn’t anyone’s goal, setting that as the bar is a straw man.
- Gold is one of the best conductors and relatively inert. Saying it has few industrial properties is silly. It’s not used more because it’s too expensive, not because it isn’t useful.
- You are confusing value and price. Value comes from utility. Sometimes the market gives a price to something that has no value. You need to first demonstrate value, then second demonstrate it is priced fairly. Two separate arguments.
- Social proof is definitely a strong motivator, not always for good things.
- The original value of Bitcoin came from a desire to use it as a medium of exchange, which you acknowledged it will not become.
- I have less comments to make about the technical parts of the article. I will just note that being technically functional isn’t enough for something to have better properties that make money good, or have better properties that make investments good, or have better properties that make a service good.
- Proof of stake is not “much” of an improvement, but that’s a different argument.
- I agree that crypto has become a pseudo-religion for many.
- Bandwagon effects are great for Ponzi schemes…
- “If” more merchants accept Bitcoin as payment… Will they also price their goods in Bitcoin? Because if not, why use it?
- You should expand upon the likelihood of those negative scale effects.