Beyond Bitcoin: Truly Decentralized Banking
This is really confused. Nothing has intrinsic value, but certain things have objectively-measurable properties that make them more suitable to be used as money.<p>Scarcity, fungibility, divisibility and portability are some of these properties. Mass adoption is another (because money effectively has &quot;network effects&quot;), but if a society widely uses a particular form of money when a better substitute is available, they will very likely switch at some point (see: dollarization).<p>Bitcoin and gold are both superior to fiat in terms of scarcity. (The author is correct that the gold supply grew massively at certain points in history, but there&#x27;s very little chance of this happening again any time soon. That said, there&#x27;s still a lot of Au in the earth&#x27;s crust left to dig up and with modern mining techniques the global stocks grow at about 1.5% a year). Anyone with a lot of usd (or rmb or euros or whatever) puts it somewhere less prone to inflation (stocks, bonds, real estate). This means there&#x27;s always a lot of fiat currency looking for a home - though people at the bottom don&#x27;t see this over-abundance of money, it is visible in things like the crazy prices for premium real estate, the crazy size of tech acquisitions (everyone else is investing their money in FB&#x2F;AMZN&#x2F;GOOG&#x2F;AAPL, so those guys have huge cash hoards with little opportunities to put them to use - so they buy many startups).<p>On top of that, bitcoin is highly divisible and very portable (it&#x27;s easier to send btc around the world than gold or usd). A couple of years ago I saw nothing that could stop it long term. I&#x27;ve since become convinced that its weird supply formula makes the price inherently, permanently volatile. Longterm, the finite supply limit will incentivise everyone to hoard, causing the price to skyrocket - but if everyone hoards the amount traded will become so low that even a small amount leaving the hoards (as hoarders suddenly spend some of their overpriced btc) then causes a big price drop. This bouncing up and down incentivises people to stay away.<p>Gold, on the other hand, has ties to economic reality - if the price increases gold miners can mine more, and vice versa. This natural adjustment in supply dampens price swings. Unfortunately gold needs to be kept in a vault and can&#x27;t be transferred easily (that said, for non-technical users, securing one&#x27;s bitcoins appears equally difficult).<p>If someone made a cryptocurrency with a gold-like supply rate, that would have real world domination potential. Maybe some startup founder with the connections to pull this off is reading this - if so, take a look here for more theory: <a href="https:&#x2F;&#x2F;keithweinereconomics.com&#x2F;2013&#x2F;12&#x2F;28&#x2F;the-theory-of-interest-and-prices-in-paper-currency&#x2F;" rel="nofollow">https:&#x2F;&#x2F;keithweinereconomics.com&#x2F;2013&#x2F;12&#x2F;28&#x2F;the-theory-of-in...</a> (his argument is more complicated than those you may have encountered in libertarian&#x2F;goldbug circles. It&#x27;s not simply that the scarcity of gold means it will be more valuable long-term - it&#x27;s the arbitrages that modulate the supply and thereby make it suitable as a store of value).<p>Writing this comment has gotten me thinking, so here&#x27;s a few other thoughts on how this will pan out. I&#x27;ve read many different thinkers who write about such topics, and spent much time evaluating and integrating, so hopefully some stray reader will find this of value.<p>The other thing I&#x27;ve come to realise is that economics is one aspect of human society. It has a kind of permanent, fixed reality, despite being based on human decisions and actions, because the incentives humans face are universal and eternal (everyone needs to save, everyone needs to trade, even in a socialist dictatorship semi-regular economic activity continues on the black market). But the ideas that spread in a culture also count. If most people believe that the usd is money, and bitcoin and gold are for weirdos, then the usd can remain money for a long, long time. I thought that over time people would see the bitcoin price constantly rising (though unstably), and realise that they needed to buy in. (First the risk-takers and early adopters, then the more adventurous asset managers investing 0.5% of their funds, then the early majority, and so on). But with the recent price spike, I saw that though many people suddenly wanted to pile in, they had no understanding and little interest of bitcoin&#x27;s fundamentals. They buy now and hope to sell before the next crash. Maybe some entrants will become long-term holders and help drive the price up - but not many. The btc market cap is around $50bn - tiny in the world of finance. If&#x2F;when it approaches $1tn, things will get interesting. Our current world economic order (BW2) is a hacky fix from the 70s on an agreement made in the 40s. It suited the great powers of the time and was based on certain assumptions. Now the assumptions are proving wrong and the balance of power is shifting.<p>I don&#x27;t believe in the mass automation&#x2F;sustainable energy&#x2F;basic income future most of the tech crowd is looking forwards too. I foresee two likely futures - one, a return to 19th century great power politics, as Putin hopes for - definitely not a utopia, but hopefully a world where at least some countries realise that freedom is the path to prosperity and advancement. The other, a darker world, where dictatorships (both in socialistic and nationalistic flavours) become dominant on every continent. In both scenarios the usd is likely to lose its status as the global reserve currency, but in neither scenario is bitcoin guaranteed to be the replacement.