GoSeigen wrote:Hornblower wrote:Of course you could argue that the miners are simply speculating that the price will rise in the future because others will buy bitcoin, so it's worth the work involved....but at least there's a link with real world work. Unlike fiat where central bankers can create trillions at the stroke of a keyboard with no work whatsoever.
No it's not unlike fiat in the way suggested. The question is whether there is
useful work done. Central and commercial banks are only supposed to create money proportionately to useful work being done in the economy, in which case there is no loss of value in the currency.
"Work" done by bitcoin miners is mostly useless and actually damaging to the economy in that it burns scarce fuel, contributes to environmental problems and diverts useful resources away from other more productive activities.
Bitcoin has only lasted so long because it was aided by the availability of interest-free capital which allowed its losses to be hidden for an extended period. Rising yields are now exposing the fantasy for what it is. (Yes I'm arguing that it is
absence of inflation which favours bitcoin and similar scams).
GS
This argument rests on your definition of "Useful work", but this is an entirely subjective thing that will be different for different people at different times.
..."and diverts useful resources away from other more productive activities."
Spoken like a true central planner
Surely the only thing that can decide what is a 'productive activity' is the market?
Are you taking the position, right now with inflation going nuts in multiple countries around the world, after interest rates have been artificially held at 300 year lows whilst we witnessed rampant asset inflation for a decade, with the US having
printed 40% of all US dollars that have ever existed in the space of just 2 years, with the estimated total US gov unfunded liabilities at 2 or even 300 TRILLION, that central & commercial banks have been & are being prudent?
Is that your argument? If so, I don't know what to tell you. Are you perhaps taking this position because you can't bare to concede that bitcoin might have a purpose?
"Bitcoin has only lasted so long because it was aided by the availability of interest-free capital which allowed its losses to be hidden for an extended period. Rising yields are now exposing the fantasy for what it is. (Yes I'm arguing that it is
absence of inflation which favours bitcoin and similar scams)."
I've been pondering this paragraph & for the life of me I can't make heads or tails of it.
Firstly, Bitcoin hasn't 'lasted'....it's been growing exponentially for 13 years in hashing power, price, users, transaction volumes (especially since the layer 2 solutions like Lightning that allow instant transactions are now growing like crazy). For the first few years the token was worth practically nothing, it was mined by hobbyists interested in exploring the technology.
Secondly, I don't know what you mean by 'allowed its losses to be hidden'. What losses? Are you arguing that bitcoin
mining is only profitable in a low interest rate environment? Again, you may be showing your lack of understanding of the network. The mining hashing rate could drop dramatically & it would make no difference at all to the functioning of the network. It dynamically adjusts to the amount of mining going on. It doesn't need ever increasing amounts of mining... the hashrate has simply been growing furiously for years as the miners believe bitcoin will be worth more in the future. If we are in a higher interest rate environment, so it's more expensive to raise money to buy the miners, then the hashrate growth may slow or decline....so what? Makes no difference, bitcoin is already the most secure network in history.
'fantasy'...'scams'... again, entirely subjective opinions that you hold. Other people disagree.
I wouldn't put a bet on bitcoin failing anytime soon.
H