I know some of you will dislike this, but here's hoping some of you would take a read and correct me even.
Can't learn more without different conversations imo!
I am South African, so I am forced to use the South African rand, while not the worst currency in Africa, in global terms it's pretty much confetti, the fact that I can acquire a currency and store my labour in a value that is globally recognised and has liquidity all over the world is far superior for me. 85% of the world is in the same boat as me, so i can't see why they wouldn't make the switch.
The price of bitcoin doesn't matter, that's for traders and speculators to decide, what matters is I can acquire a unit of measurement that I know I cannot be diluted from, if I have 1 bitcoin its always 1 of 21 million.
Fiat currencies are forced upon us, we don't get to choose and with those mandates you immediately get liquidity, bitcoin doesn't have that, its an opt in network and because of that you will always see a repricing as new users come in and out with different sizes of monetary energy
It's great that bitcoin doesn't have a floor, like anything when something drops in the relative value we can find out where value or effort is needed. if acquiring bitcoin is more profitable than capital goes into storage, when it's not capital can flow out into sectors that need it
You can say gold is a global network but never have we had an opt in digital financial network with its own native asset. We can overlay fiat models, we can overlay the internet adoption models, we can overlay commodity models, but no one knows when we get to a point where the medium of exchange competes with fiat.
It could be 10 trillion could be 100 trillion, at this point pontificating on medium of exchange to me is premature. We have money for medium of exchange in fiat, I will spend my fiat as long as I have it.
We have a better money in bitcoin where I can save and when I need to tap into it I will. I don't disagree on your points in the time frame of today, and sure my assumptions may be biased as I consider the fact that apolitical money is something the world needs. An economy where we all know the rules and we all are forced to abide by them will always have value, maybe it doesn't become world reserve currency, personally I don't much care if it does,
What I care about is being able to opt-out, and this is what it does for me.
I will spend 1 sat only to give you an answer: LEARN MORE ABOUT BITCOIN. You still don't know nothing.
Start here:
https:/bitcoin.page
https://lightning.how
I will send 1 sat back to you if you can let me know just how can bitcoin value not be volatile?
Fiat will always exists, I have listed a history of Germany's fiat and their rebasement, replacement as an example.
So long the FX market exist, bitcoin has inelastic supply and no central gov to manage market expectation, bitcoin will always be volatile, especially when leveraged play like mining going big and more financial tools like loan building on it.
I am not a big fan of his work. I have read the bitcoin standard.
I believe he presented the history of money and the importance of Bitcoin relatively well. But his work really is meant to convince you of bitcoin, it doesn't address the fundamental problems of bitcoin.
Finite supply and inelastic supply makes it extremely violate by nature. if not more in the future.
There's a lot to economics, like Milton Friedman and monetarist.
He is the one who sort of kickstart the thinking on all modern economist focus on the money supply.
I would highly recommend getting more in depth knowledge in economics before reading his book, just so you don't get sold in his story but reading his argument and coming to the same conclusion.
Although it seems probably correct on the surface, I mean, you are talking about your experience with your own view, I denote a single failure in the reasoning and this is: your observation of money as something social when money is a technology. So, I'm bringing some highlights of your content:
Central banks have mechanics to halt any sell off and reestablish faith in the model, which may or may not work.
It seems ok to talk about faith in fiat economics but with bitcoin, you don't need faith nor trust. The only evidence you need is asking some particular questions such as:
is it working as supposed to do?
Did someone hijack the network?
Is the difficult adjustment working?
..among others questions. Remember, bitcoin before money, is software.
Bitcoin being a lot less inflationary and limited supply does not automatically become a better money than fiat.
Of course, the limited supply is only one feature and to talk about money properties, take into consideration what Bojapati's article "Bullish Case for Bitcoin" describes: durable, portable, verifiable, divisible, scarce, censorship-resistant, established history among others.
It has no innate method to reduce volatility, there is very little potential to be used for international trading with bitcoin as the currency, unless with special terms and conditions that may very difficult to execute.
I've been able to tip you through Lightning Network and I'm imaging you're not someone from LATAM. So, technically, I paid for your content creation services and therefore, it works.
Small conclusion
Your learned bitcoin with an economist view, now turn your knowledge and learn as software. After all, money is technology.
Money is a tool/technology. It enables better way to do medium of exchange (to enable trades) and store of value. We went from seashell, to credit system with paper notes and digital.
There are faith in fiat currency, but that does not mean bitcoin doesn't require faith.
The health of a fiat currency all comes down to government/central banks calming investors that they have things under control, the economy, and national security.
(Ironically Bitcoiners often boast about central bank failure, when their power over the economy is mostly through indirect market forces. This actually enhance the idea that central banks are the ones controlling the market)
Bitcoin requires another type of faith, since at its core, BTC is a ledger system and a commodity, and its latter properties entirely depends on how much the market valuate it.
The current BTC form compete against fiat mostly through it being more scarce and open/efficiency. However scarcity does not demand higher value, how much the market place value on it matters a lot more.
Without high default privacy leading to low censorship resistant, its value proposal is becoming more on number goes up/ponzi side.
At the end, the volatility is its biggest flaw, it almost demands owning another coin along side BTC that is purely for transaction, so that individuals/companies/nation state can have the stability to facilitate the economy.
FX rate is socially/speculative driven, there will never be any technology that can stabilize it.
There are faith in fiat currency, but that does not mean bitcoin doesn't require faith.
I can check the code, the consensus taken along with all the PR made in Github in order to verify every step, change, addition or removal. So, no need of faith here, trustless is the keyword here. That's why I like it.
At the end, the volatility is its biggest flaw
Volatility is a feature in this context because is a consequence of having a completely inflexible and constantly decreasing supply growth; as a matter of fact, most criticism of volatility comes from short term analysis and most people complaining about it are over-invested1 but in the long run, don't matter. Besides, long-term speaking, there is no such thing as stability, we're paying currently the price of have some stables currencies.
Footnotes
I'm not saying you are, just noting that most cases, people buy sats with loans or mortgage and when they lose, it's not their fault, it's bitcoin. ↩
Definitely you can confirm the mechanics behind is working, however for a monetary premium product like bitcoin/gold/oil, the volatility makes or breaks its use as a currency.
And this really is the key.
Volatility can kill currency, it kills the raison d'etre for a currency as a tool to facilitate trade and enable economy growth.
It only works if you treat it as an investment asset, however bitcoin maximalist would tell you bitcoin wins out to be the sole money towards the end.
Volatility gets viewed as being bad because you may end up with less purchasing power.
But on the bitcoin standard, volatility also means cycles of greater purchasing power, which isn't bad.
So someone with an income stream (whether in bitcoin or fiat) and savings (in bitcoin), they can easily weather normal volatility on the downside. And if they do earn in bitcoin, are they going to convert to fiat only to spend in fiat? Of course not, they are going to prefer to spend in bitcoin. Whether the merchant, who then is also earning in bitcoin, keeps that in bitcoin, that's will depend. Over time, as a circular economy expands, the reasons for the merchant to cash out bitcoin revenues into fiat diminish.
But bitcoin isn't changing, ... at least not to lessen exchange rate risk. And its footprint is broadening, over time. So whether it makes a great currency doesn't matter. It gets used as one, by some not insignificant percent of the population. And over time, doing that reduces its purchasing power volatility, at least on the downside.
Unable to plan around volatility really is the killing blow here.
For some manufacturing industry, deposit, and payment could be split into several payments, it isn't rare that final balance are paid an entire year later.
That sort of kills any JIT manufacturing method as well. I honestly cannot see any way around it.
I defo agree with you on that it is perfectly ok if someone can live off a balance between liquid income stream and savings in bitcoin, I think the volatility will never get solved and meaning it can never really be ideal unless the person is already relatively well off.
You can still have dollar denominated (or some other unit that has purchasing power stability) but use bitcoin as the payment method.
Especially true for remittances, cross-border payments, etc.
And there are many things you are overlooking.
Consider why Emirates just announced they are going to accept bitcoin for payment. Why? Probably a number of reasons, but not the least of which is that they are paying several percent of revenues to the merchant payment processor. They may even have ambition to add bitcoin to their corporate treasury -- so this provides a flow of bitcoin in which they have access to at zero additional cost (versus buying through a broker or OTC).
And then there's the P2P angle I think you are missing. Lightning address makes bitcoin the simplest payment method that exists. If I want to send some funds to you, all I need to know is your Lightning address. You will see a notification that you received some sats (for an amount under one U.S. penny). I paid that from my LN-enabled wallet outside of SN. You can withdraw from SN to any Lighting Address too. Now imagine your e-mail provider adds an LN wallet, or social media like Twitter adds it, ... whatever. You think I'm going to ask you for your PayPal address to send you fiat? No, .. LN is the greatest payment rail, international or domestic, to exist.
And that's just a tiny fraction of the things you aren't considering.
Bitcoin's footprint is expanding. That may accelerate. Volatility be damned.
I am quite into the LN ecosystem, I stack sats with SmileS, zebedees, streaming sats to podcasters etc.
I agree that bitcoin greatest strength, is its payment network. I believe it is simply the most secure and open.
But as for its potential to be good, sound money, this I am not very convinced. I am especially concern if adoption leads to even more volatility with all different financial tools used related to it.
Since the currency stock inflation is now under 2%, further adoption will, by definition, see the bitcoin exchange rate volatility continue.
The Bitcoin protocol doesn't get changes to protect "different financial tools". So these tools will need to be designed to be compatible with exchange rate volatility.
Fiat is not compatible with bitcoin adoption. Not just for the reasons you are probably thinking either. How many people who are spending bitcoin are reporting gains when spending? How many people who are earning KYC-free bitcoin (e.g., gains on speculation, interest income, and freelancers) are reporting that income? Right now that's roughly equivalent to a rounding error of gov't revenues. But what happens when that becomes more common? Bitcoin isn't changing. That means fiat will change.
Eventually, after hyperbitcoinisation has completed, then bitcoin's purchasing power volatility will pretty much track productivity growth in the economy, and thus be much less volatile.
Since the currency stock inflation is now under 2%, further adoption will, by definition, see the bitcoin exchange rate volatility continue.
The Bitcoin protocol doesn't get changes to protect "different financial tools". So these tools will need to be designed to be compatible with exchange rate volatility.
Fiat is not compatible with bitcoin adoption. Not just for the reasons you are probably thinking either. How many people who are spending bitcoin are reporting gains when spending? How many people who are earning bitcoin (e.g., freelancers) are reporting that income? Right now that's roughly equivalent to a rounding error of gov't revenues. But what happens when that becomes more common? Bitcoin isn't changing. That means fiat will change.
Eventually, after hyperbitcoinisation has completed, then bitcoin's purchasing power volatility will pretty much track productivity growth in the economy, and thus be much less volatile.
Small conclusion
Footnotes