0 sats \ 12 replies \ @kr 21 May 2023 \ parent \ on: ∞/21M > $ × ∞ bitcoin
yes, i understand that part… but the equation you described doesn’t work.
let’s assume there are 21 million homes in the world, each worth 1 BTC.
for simplicity, let’s say this economy has no other assets… only homes and bitcoin.
since there are 21 million homes (each worth 1 btc) and 21 million bitcoin, the wealth of this fictional economy is 42 million btc. after all, the homes may be “worth” one bitcoin, but they are not a bitcoin in and of themselves… the bitcoin and homes both exist separately.
the money in this economy is only worth 50% of the economy’s wealth, the rest of it is stored in homes.
in reality, the percent of a nation’s wealth stored in money is far below 50%, probably closer to 10% as an estimate.
In this example, I own a house and you own a Bitcoin. If you buy the house you are giving me your Bitcoin and I give you the house.
Value has exchanged hands but there is there is still the same amount of value in the economy.
Saying something is "worth" something doesn't mean more value has been created because to realise that value you must exchange it for something of equal value.
Unfortunately, this is part of the fiat mindset. If you go to the bank and get a loan in dollars to buy a house, there are now more dollars in the economy. But adding more dollars to the economy doesn't add real value. Hence, why things actually get more expensive in dollar terms.
Another view is to say that getting a loan is borrowing from your future. You're taking the value now and promising to pay it back by working to earn those dollars and return them to the bank. This works on paper, but in reality it's still inflationary because by taking those dollars now, you're actually increasing demand for the houses driving their prices up.
In short, real value cannot be created out of thin air. When there are more dollars, the value is being extracted from somewhere.
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In this example, I own a house and you own a Bitcoin. If you buy the house you are giving me your Bitcoin and I give you the house.
Value has exchanged hands but there is there is still the same amount of value in the economy.
Ok so if 1 BTC is being traded for 1 home, the BTC in the economy represents half of the economy’s wealth… right?
are you saying no value can ever exist if it is not represented by bitcoin?
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If we refer back to the base equation it becomes simple.
∞ / 21M
Everything / ₿
All Assets + Money + Energy / ₿
If it is not ₿itcoin, the only place it belongs is on the left. Part of ∞.
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in the example above, homes are part of the denominator, not the numerator. i believe the same is true for all other assets too.
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If there are 21 million homes of equal value in a world with no other assets, then there is no need for a medium of exchange, money.
One home is simply traded for another.
We do not live in this world. People need food, water, energy and many other essentials to sustain life and promote the advance of civilisation and homes are very illiquid.
There are more than 21 million homes in the world, therefore when ₿itcoin becomes the dominant medium of exchange the average home will be far less than ₿1.
What a nice thought for the future.
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this misses the central point of my argument.
money will only ever be used to store a small percentage of the world’s wealth at any given time.
just like the world’s wealth ($500t or so) is 10-100x higher than the number of actual dollars in existence, the world’s wealth on a bitcoin standard will be 10x higher than the total value of the actual bitcoin in existence.
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The world's wealth, as you've defined as homes, cars, stocks, bonds, etc, intrinsically has no value until they change hands.
My home is worth a certain dollar value, but until I choose to sell it, that value is known as "unrealised profit".
Unrealised. Not yet real.
If nobody is willing to buy it, it is not worth anything. Something is worth only what someone willingly paid for it.
The dollars I accept for it come from somewhere, the other side of the equation.
Home = $x or Home = ₿x
Tesla stock is currently US $180.14. If you had some and wanted to sell, that is the amount in dollars you would get.
The stock itself has no value until it is sold.
Then the buyer takes on the unrealised potential of this asset (unrealised profit/loss).
It is good to buy low and sell high, to generate a profit, but that profit has to come from somewhere.
Right now it comes from a supply/demand fiat monetary system, where supply is added now and essential borrowed from one's future, plus interest.
This is an addition to the amount of currency in a closed finite system. Plus the addition of interest.
Every dollar is birthed into existence with the burden of interest. To pay back that interest more dollars must be created. Inflation toward infinity. Hence, price go up.
Supply and demand causes prices of everything to fluctuate, increasing dollars in circulation which are backed by nothing drives prices higher and higher over time.
₿itcoin fixes this system by fixing the supply side of the supply/demand equation.
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intrinsically has no value until they change hands
that’s not how valuations work.
if i start a company, and raise $1 million at a $10 million valuation, the company is valued at $10 million… even though I only received $1 million from investors.
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That remaining $9 million is unrealised potential until you sell that company for $10 million.
I just got my house valued at $70k more than what I bought it 3 years ago. Do I possess that $70k plus original value now?
That $10 million company's valuation will likely drop if another company comes out which solves the problem better. Investors will lose money, if they sell their unrealised potential loss.
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the valuation is still $10 million… that is exactly how all assets are valued.
exhibit a, you just said your house was “valued” $70k higher.
nobody operates under the assumption that all their assets are worth zero until they magically become valuable when they are sold.
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You cannot simultaneously have a $10 million company AND the $10 million in liquid capital.
If I only have a dollar and purchase an apple at a market value of $1, I no longer have a dollar, I just have one apple.
My apple is valued at $1.
BUT... seasonal rains produce high yield, apple harvest reaches record high. There's an influx of apples on the market and due to this supply shock my apple is now valued at $0.25.
I have not yet lost 75% of what I paid for my apple. I still have an apple.
I can hold my apple, cold storage, and wait until the market price recovers and sell my apple, which is not a dollar, it is still an apple, for a dollar.
If that isn't straight forward enough I guess we just agree to disagree.
Appreciate the debate.✌️
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i never said i would have $10 million in liquid capital, i said the valuation is $10 million.
i just hope nobody on SN is under the illusion that one bitcoin will one day be equal to 1/21,000,000th of the world’s wealth.
that kind of math is off by 1-2 orders of magnitude.