The Paradox of Bitcoin Adoption \ stacker news ~bitcoin

1588 sats \ 81 comments \ @didiplaywell 24 May bitcoin

There is an unsolved paradox in the path of bitcoin full adoption: it will be stable enough to be massively adopted only when it gets stable enough to get massively adopted, since the mass of the population (that makes for the full adoption) can not afford the unavoidable volatility caused by the move itself towards adoption, thus hindering itself by the same action of trying to adopt it. This couples with the fact that even a stablecoin based in bitcoin do not allows for a computable transition: fiat can be indefinitely multiplied, causing bitcoin to be virtually eternally unstable in fiat if the State wants to.

I have my solution to this paradox and will be posting it later, but for now I'm interested in your thoughts about this

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486 sats \ 6 replies \ @Undisciplined 25 May

I'll be curious to hear your answer, but I think this is pretty straightforward. There will always be margins along which adoption makes sense and that's the path along which adoption will proceed.

Eventually, adoption will be wide enough that those margins will cover everyone.

This is the logic of "gradually, then suddenly".

79 sats \ 5 replies \ @didiplaywell OP 25 May

Thank you for your views. My answer is no secret, but I don't want to "intoxicate" ideas with it (yet), I want to hear them wild and fresh.

I have thought of the same at some instance, but the thing is again that at no point bitcoin stops being conditioned by the adoption process. Since by "full adoption" we understand "massive adoption", and since fiat will not gladly let it by, adoption will come from the people and against fiat. That implies that at no point that "gradually" can transition to a "suddenly" without unbearable volatility for the masses, again limiting bitcoin back to the margins, full adoption being nearly a mathematical impossibility, for it causes its own demise (in this context).

21 sats \ 4 replies \ @Undisciplined 25 May

I guess we'll see, but I don't think that's entirely right.

Yes, fiat won't depart peacefully.

However, every new use case creates a new dimension for adoption to proceed along (extensive margin) and each use case continues attracting people (intensive margin).

There's a positive feedback cycle, since network effects apply here, so new adoption makes bitcoin attractive to even more people, which encourages yet more use cases.

I expect that there will eventually be mad dashes out of fiat as each currency collapses.

21 sats \ 0 replies \ @didiplaywell OP 25 May

I understand the adoption process you describe, but remember that the catch here is that bitcoin also haves a negative feedback that surpasses the positive feedback when it tries to rise above sustainable margins for the masses. It's not lineal feedback but elliptic feedback, hence the paradox.

21 sats \ 2 replies \ @Bell_curve 25 May

Slow process

10 sats \ 0 replies \ @didiplaywell OP 25 May

Try to materially imagine the actual point of transition. Remember that fiat forces are at play at all times at whim, where the second part of my argument applies. Slow process can make for marginal adoption, but not full adoption.

10 sats \ 0 replies \ @Undisciplined 25 May

Yep, until it isn’t.

80 sats \ 2 replies \ @cryotosensei 25 May

I think BTC adoption will accelerate only when people get their salaries in sats. When you receive sats only, you won’t mind spending them and think of ways to replace sats. Right now, many Bitcoiners regard sats as a speculative asset, not as the peer-to-peer financial tool it was originally conceived to be

21 sats \ 1 reply \ @didiplaywell OP 25 May

With all respect my sensei, if we start by the assumption that salaries are being paid in sats already, your argument reads as "bitcoin will be adopted once it's adopted".

20 sats \ 0 replies \ @cryotosensei 25 May

Lol! You got me.

And in my mind, I guess I made a distinction between institutional adoption and common-man-on-the-street adoption.

35 sats \ 3 replies \ @DarthCoin 25 May

https://darth-coin.github.io/general/natural-law-bitcoin-en.html

@remindme in 3 years

0 sats \ 2 replies \ @didiplaywell OP 25 May

Those are nice words and I agree. But it's no plan, it's a moral wish that can't be used but repeated by word. And people will be like "yes, you are right, and I agree... but, oh, I can't afford a 50% dip in price, sorry".

20 sats \ 1 reply \ @DarthCoin 26 May

Those that are only looking to BTC price are just morons, fiat maxis that will never make it. Bitcoin is about freedom, not about "how much I will earn"... And that's why we will never have hyperbitcoinization.

0 sats \ 0 replies \ @didiplaywell OP 26 May

If you have a family to feed, bewaring from a 50% dip on your income can't be under any circumstance be called "to be a moron". There's nothing like "fiat maxis" on average, for on average people do not even understands fiat. No one who seeks keeping value worries about "how much will I earn". An example is Argentina, where everyone saves in dollars simply because it's stable and saves value, no one sees it as a means to earn anything, just not losing.

21 sats \ 3 replies \ @DiracDelta 25 May

I solved the paradox as well and recently made a post on the subject.

I hope you have also come to the correct answer, then maybe there can be two of us. #550257

0 sats \ 2 replies \ @didiplaywell OP 25 May

Respectfully, your assumption ignores how inflation operates. There is no "singularity" regarding fiat "going to zero". There is no limit whatsoever. It can go on and on indefinitely. In Argentina, and I'm giving you a hard, documented number, fiat has decreased in value, since it's inception, by 1/10.000.000.000.000.000 over a span of 100 years, and counting!

30 sats \ 1 reply \ @DiracDelta 25 May

Downzapped. With no respect, you do not understand bitcoin, bitcoinization, fiat, this paradox, and so on.

0 sats \ 0 replies \ @didiplaywell OP 25 May

35 sats \ 1 reply \ @om 25 May

virtually eternally unstable in fiat

That's ok, what matters is the stability of the amount of lunches you can buy for a coin.

0 sats \ 0 replies \ @didiplaywell OP 25 May

I'm sure everyone has their own vision of how far bitcoin will get and what's enough and what's not. Regardless of personal valuation, here I'm strictly addressing the paradox that arises when the case of full adoption is proposed, even if hypothetically.

5 sats \ 6 replies \ @kruw 25 May

"Stability" is overrated. People will adopt Bitcoin because it goes straight up in value and makes them rich.

0 sats \ 0 replies \ @DiracDelta 25 May

Ok, consooomer, enjoy your hedonism and meaningless existence.

0 sats \ 4 replies \ @didiplaywell OP 25 May

Absolutely no one from the masses can afford a single 5% dip of bitcoin it being the main asset used to manage income. You will say then "they will use it for saving", then, back again to the margins.

30 sats \ 3 replies \ @DiracDelta 25 May

This is extremely retarded. Here is an easy way to disprove it: imagine a poor person -- they know someone who is 2x poorer than them. Person 2x poorer than them is not dead.

Why is every bitcoiner fucking retarded??? Because fiat is still coursing through their veins and all their neurons, they can't help it!

10 sats \ 1 reply \ @south_korea_ln 25 May

Here is an easy way to disprove it: imagine a poor person -- they know someone who is 2x poorer than them. Person 2x poorer than them is not dead.

This does not disprove anything. Sounds like a strawman fallacy. The survival of a poorer individual does not negate the potential hardship caused by a 5% dip in a volatile asset when used as the primary financial tool.

But what do I know, I am retarded.

31 sats \ 0 replies \ @hueso 25 May

Have you ever been in Argentina? There's a 5% dip here every single week (and, unlike bitcoin, it never rebounds back)

0 sats \ 0 replies \ @didiplaywell OP 25 May

30 sats \ 9 replies \ @Satosora 25 May

What nonsense did I just read?

10 sats \ 8 replies \ @didiplaywell OP 25 May

Without sarcasm, I'm genuinely interested in why do you consider it nonsense. That answer is actually useful for me, please express yourself.

0 sats \ 7 replies \ @Satosora 25 May

I dont understand the paradox. What is the circular reasoning here? Bitcoin will only be as valuable as people think it is.

10 sats \ 6 replies \ @didiplaywell OP 25 May

Yes, I'm not arguing against that. I'm just talking about adoption, never saying that bitcoin will not have value.

0 sats \ 5 replies \ @Satosora 25 May

"fiat can be indefinitely multiplied, causing bitcoin to be virtually eternally unstable in fiat if the State wants to." ? Isnt this saying bitcoin wont have value?

10 sats \ 4 replies \ @didiplaywell OP 25 May

No. Bitcoin is volatile today, yet it has value. What I'm saying is that that condition will remain true, as it is now.

30 sats \ 3 replies \ @Satosora 25 May

I dont understand. As it increases in value, I believe the volatility will decrease. As more people adopt it, it will only become stronger.

10 sats \ 2 replies \ @didiplaywell OP 25 May

Remember that that assumption implies:

First, that the fiat monetary base will stop augmenting, in which case, fiat currency will stop devaluing and thus become as robust as bitcoin, hindering its adoption, so back again to the paradox.
Second, that bitcoin will gradually replace fiat for exchanges (otherwise, if liquidated en masse -possible because the fiat counterpart will still exist- can still suffer extreme volatility at any point regardless of value) so that fiat stops being a liquidable counterpart, a deprecation process that yet again implies extreme volatility, which while already damaging by itself, will add for sure the hands of the state to the matter.

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10 sats \ 7 replies \ @freetx 25 May

Its already less volatile than it was. See random screen grab of 5 weeks from 2013 vs 5 weeks from 2024.

Increases in trading volume (and the sophistication of those traders), will lead to further and further declines in volatility.

Most professional traders utilize balanced portfolios (eg. simple example of 90% BTC / 10% Fiat). Such trading structures automatically lead to less volatility since gains are constantly sold and likewise dips are bought during the monthly rebalancing.

0 sats \ 6 replies \ @didiplaywell OP 25 May

This is simply not true. Bitcoin was rock solid in 2018 for almost the complete year, and then all of a sudden it fell by 50% on 2019:

This will be the reality of bitcoin forever as long as it remains being a liquidable asset and not a currency. That's specially true in your last argument: "since gains are constantly sold and likewise dips are bought" implies that fiat backs bitcoin, thus bitcoin will remain an asset and never can be adopted massively as a currency. By "massively" I mean the user-base and the volume (of bitcoin, not of USD).

10 sats \ 5 replies \ @freetx 25 May

Nah. Download the daily (or even monthly) data and run some analysis on it. Volatility has decreased.

Here is 30 days daily price of Bitcoin 10 years ago and over most recent month.

Volatility is down across all metrics.

0 sats \ 4 replies \ @didiplaywell OP 25 May

Your correlations will not be correct as long as you keep comparing cherry-picked convenient points. Use the exact same criteria of that sheet to compare the periods of Sep-Nov-2018 with Sep-Nov-2022 and your conclusion should be that even after 4 years of continued adoption volatility did nothing but to worsen unbearably.

Further, let's be conservative and take only M1 (we should take M3). M1 is currently at 18.000.000.000.000. Bitcoin market cap is currently at 1.362.490.742.418 , which is more than 10 times less. Remember, this is only M1, immediate liquidity. This means that bitcoin still haves room for anywhere between more than a 1000% of volatility all along the path of replacing that M1 right now, not taking into account how much it will increase in the future.

10 sats \ 3 replies \ @freetx 25 May

compare the periods of Sep-Nov-2018 with Sep-Nov-2022

Still less volatile comparing those two 90 day time-frames.

0 sats \ 2 replies \ @didiplaywell OP 25 May

Your results say that those periods where AS volatile, even after 4 years and increased adoption, proving my point. If we keep this method of cherry-picking, lets consider only Sep-Oct-2018 to Sep-Nov-2022 and the result is a decrease in stability.

And let's not forget the 1000% instability range still at the gates if adoption progresses, hence entering the paradox territory yet again. If you agree that bitcoin is poised for a 10x increase in the next years, you can't at the same time think that it will be increasingly less volatile, that's an oxymoron

10 sats \ 1 reply \ @freetx 25 May

An Average Daily Volatility of 1.002 vs 1.006 is 3x less volatile.

0 sats \ 0 replies \ @didiplaywell OP 25 May

I agree, yet it's a variation within so small margins that for practical purposes there is no difference. And yet once again, comparing Sep-Oct-2018 to Sep-Nov-2022 will show a decrease in stability. No conclusion over the nature of the problem can be made by cherry-picking and sticking to purism over pragmatism. If I augment your salary from 1000,0001 to a 1000,0003 , and then from 1000,0003 to 1000,0030 , and I tell you that you have experimented an augmentation rate of 10x (yourwelcome) I'm quite sure that the argument you are using now will suddenly stop having any significance to you.

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21 sats \ 1 reply \ @SpaceHodler 25 May

Volatility is not an issue if you're earning more than you're spending. You just stack what you can afford be underwater on for the next 4 years.

Those who think they don't have the luxury of being able to stack, can still reduce their expenses and start the upward spiral.

0 sats \ 0 replies \ @didiplaywell OP 25 May

stack what you can afford be underwater -> keeping bitcoin on the margins

The paradox of the transition remains

0 sats \ 3 replies \ @rleed 26 May

Bitcoin is already stable. It's fiat that goes up and down.

0 sats \ 2 replies \ @didiplaywell OP 26 May

I understand what you mean. I agree that bitcoin goes up because fiat goes down. For any practical purposes, bitcoin is volatile.

0 sats \ 1 reply \ @rleed 26 May

I know I'm playing a game of point of view. But isn't that the point? Bitcoin will NEVER be stable in fiat terms. Bitcoin adoption is the process of shifting perspective. You need to stand on the solid ground and watch the fiat ship get tossed up and down on the waves of the sea instead of gripping the taffrail of the sinking ship and watching the land go up and down.

0 sats \ 0 replies \ @didiplaywell OP 26 May

I understand, but the problem is: what's that new point of reference in the case of bitcoin? it's fixed, ok, where is it located? You must not forget about "The Calculation Problem": I agree that we can consider bitcoin fixed, ok ... now... what's the value in bitcoin of something? bitcoin is fixed, ok... what's the price in bitcoin? the calculation problem can only be solved by the market, thus by migration via exchange process, thus we are back to the paradox.

0 sats \ 23 replies \ @kingzing131 26 May

Any securities, commodities and assets can be a trading pair, so volatility will always exist even if fiat is gone completely.

Bitcoin supply side volatility is built in with the hard cap and halvening.

But it's not impossible to it becoming more stablised if the properties become more appreciated and accepted as gold.

The bigger risk imo, is early nations that adopt Bitcoin enmass, is most vulnerable to speculative attack. Before you say but it's no good for any one, this has already happened in 1997 Asia financial crisis.

0 sats \ 22 replies \ @didiplaywell OP 26 May

I agree completely, the thing is that bitcoin now is treated as an asset, but adoption implies that it starts being treated as what it's intended for: being a currency. No base currency is volatile against itself, for 1 USD = 1 USD, but only prices measured in that unit are considered to be volatile (even if it's the fault of the mismanagement of the currency itself). The same is pretended for bitcoin when we refer to "mass adoption". There is nothing like a "mass adoption of a specific asset", for we can't pretend that every person in the economic web haves to buy a house to use it as currency for every exchange. Gold became an "asset" when the gold standard was abandoned, prior to that gold was the currency in itself, and currency units were determined as fractions of gold units. Nixon did so much damage...

0 sats \ 21 replies \ @kingzing131 26 May

the stability against itself doesn't mean much since it is a medium of exchange.

It is what the exchange value that matters.

It will be one bad currency if it made everything else volatile. Volatility is not necessarily better than depreciation, all depending on the rate in each.

As a tool, the more predictability, the better you can hedge/build around it.

0 sats \ 20 replies \ @didiplaywell OP 26 May

Stability against itself means the most important thing: that it's a currency. Bitcoin volatility means that's not a currency, and the fact that the problem worsens the more we try to make it a currency is what the paradox is about.

0 sats \ 19 replies \ @kingzing131 27 May

I am a bit confused. 1usd is 1usd. 1 Zimbabwe dollar is 1 Zimbabwe dollar.

That don't matter.

Volatility is it against everything else.

As long as it's on the market and demanded, it will have an exchange rate/trading pair.

0 sats \ 18 replies \ @didiplaywell OP 27 May

It's the opposite. It's the thing that matters the most, as long as the purpose of bitcoin is to be a currency.

1 usd is 1 usd as long as it's a unit of account. When it stops having that property, 1 usd will be equal to anything else judged as a better parameter. The example is any country where the national currency is broken. In Argentina, NO-ONE measures prices in ARS (Peso), but 1 ARS = X USD , because the unit of account is the USD, not the ARS . No one cares that 1 ARS = 1 ARS, because it's not a unit of account anymore.

Volatility is against anything else, but it fixes one of both elements to judge how the other moves. The one fixed, is the currency. You do not measure the value of the USD in houses. You measure the value of a house in USD. When you buy a house, you don't ask yourself how many houses you will need, you ask yourself how many USD you will need. When you sell a house, you don't ask yourself how many houses you will get, you ask yourself how many USD you will get. From the pair, only one of the elements is the clear parameter, and that's the unit of account, i.e. , the currency. As far as bitcoin is not a unit of account, thus 1 BTC = X USD, it will not be a currency. Only when it gets there, 1 BTC = 1BTC .

0 sats \ 17 replies \ @kingzing131 27 May

That's a lot of concepts mixed up, and not quite right.

For all intent of purposes here, 1 X = 1 X is always the case, because that is pairing X with X.

If your point about "1BTC = X USD" exist, thus it isn't a unit of account, thus not a currency, and so "1BTC =/= 1BTC". Well, then vice versa, a equal sign implies both way conversion. USD is not a currency because 1USD = X BTC"?

If you think it is cheeky then: Why is HKD a currency, if it is pegged to USD? Or Simply look at the FX market, where it is all trading pairs

Your argument is more on: People treating BTC as the sole local currency, and therefore it wouldn't be considered as volatile, because everyone think of BTC as what they will get.

This is wrong.

Volatility do not become stabilized by it being unit of account. Volatility will always exist because the exchange value of any currency doesn't come from daily trade, it is from FX trading and central banks.

People do think about what they can do with that "money" when trading, and that means the money has to be stable to be good unit of measurement. We do that with fiat to bitcoin. Argentina do that with ARS to USD.

0 sats \ 16 replies \ @didiplaywell OP 28 May

I can only repeat again what I said, because you did not disproved my point, only forked the discussion to something different: here we are discussing the paradox in the process bitcoin of becoming a unit of account, not how exchanges work. You can use anything for exchanges, yes, that's obvious. That's not in discussion. What's in discussion is how to arrive to bitcoin being a unit of account. That's the key concept absent in your observations. Of course I know that 1 X = 1 X, you are missing the point right then and there on why the expression 1 BTC = 1 BTC is used: it's an euphemism of bitcoin becoming a unit of account. For as long as from the trading pair the part fixed for reference is not bitcoin but USD, USD is the unit of account, not BTC. Yes, again, I know you can invert the equation, but that's not what's done in practice, you can't deny that that's how the market works: in real life, you take one side as parameter.

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0 sats \ 4 replies \ @IamSINGLE 25 May

For me, there's no paradox. Why don't we make it clear that Bitcoin isn't alone it has the advantage of sats? Even one Bitcoin has 100Million sats. So, It's like 100MX21M

Correct me if I'm wrong

0 sats \ 3 replies \ @didiplaywell OP 25 May

I'm sorry, I don't understand your point, could you please expand? To your affirmation, yes, the max nominal amount of sats is exactly 100MX21M

0 sats \ 2 replies \ @IamSINGLE 25 May

I mean If we just start thinking the way that Sats also have value just like Bitcoin yhe problem of scalability is solved. We can adopt Sats and through LN it's very easy to use it on a daily basis for daily needs.

0 sats \ 1 reply \ @didiplaywell OP 25 May

I can't expand in detail now into the path you opened, but to summarize, usability itself is not what the paradox is about. Further, not only I consider bitcoin 100% usable right now, I use it myself for my day-to-day life.

0 sats \ 0 replies \ @IamSINGLE 25 May

Yes, I wanted to say that Bitcoin is already spend able foe day to day life

0 sats \ 0 replies \ @JosephCruzVald2 25 May freebie

: it will be stable enough to be massively adopted only when it gets stable enough to get massively adopted, since the mass of the population (that makes for the full adoption) can not afford the unavoidable volatility caused by the move itself towards adoption, thus hindering itself by the same action of trying to adopt it. This couples with the fact that even a stablecoin based in bitcoin do not allows for a computable transition: fiat can be indefinitely multiplied, causing bitcoin to be virtually eternally unstable in fiat if the State wants to.