A friend of mine lives in Argentina. He pays his living expenses in Bitcoin to other Argentinians. They are very happy to take it, even without legal tender laws because it doesn't rapidly regularly devalue like the Argentinian currency.
That would be true if the only way to create a failed currency was to print it to death. But we've observed cryptocurrencies with mining caps collapse to $0 in the same way as a fiat currency.
That it does, but I understand that Bitcoin's deflationary by default nature has also been criticized.
Bitcoin also adds new failure cases such as irreparably losing money through address typos and lost/failed hard drives, not to mention the numerous & exciting failures in DeFi.
The argument in the first article isn’t compelling: we have direct evidence of Bitcoin miners exploiting the diminishing profitability of coal plants to buy them on the cheap and reopen them solely for mining. Similarly for any non-renewable source: the traditional demand slump for each will encourage miners to pick up the slack, rather than investing in renewables.
And even this is, on its face, a ridiculous end goal: we should be building renewable sources of power to replace our societies’ needs, not to supplant them with cryptocurrency.
A lot of renewable energy is wasted because it is produced at the wrong time or/and at the wrong place. Bitcoin pays a base price for such excess energy. Anywhere. Anytime.
This again isn't compelling: it's not clear how the solution to "wasted" (read: lost opportunity) renewables is to actually waste them by cracking hashes.
(It also undermines the original point of the article: what incentive do bitcoin miners have to make renewables more available, if they can just pack up their rigs and move to wherever energy is cheapest? Mining incentivizes short-span access, not the kind of massive distribution grids that we actually need to make renewable energy sustainable and reliable.)
What's valuable is purely subjective. That's what makes markets work. Its also why planning economies from the top down doesn't work. What seems like wasted energy or capital to you is very useful to another person. Many people (myself included) believe that a decentralized, digital, hard money that is tied to the real world through energy is extremely important. So to those people its not a waste of energy, far from it.
"What's valuable is purely subjective" is the kind of basal argument that nobody finds convincing. It's also a far cry from a justification for wasting energy, unless you plan to take an excursion into the lands of moral relativism.
Here is my opinion: it is entirely possible, common even, for people to be just plain wrong about the things that they value. That doesn't mean they don't value them; it means that their underlying justification is predicated on transient conditions (like artificial scarcity) or is otherwise underdeveloped w/r/t to their motivations. Bitcoin epitomizes this.
I guess the argument would be that it has a greater impact on the profitability of intermittent energy sources as it can stabilize the grid by soaking up cheap off-peak power. Not sure if I buy it either.
In absolute terms the number of good people working on bitcoin went up since 2012.
Doesn't matter too much that there are so much more jerk investors now.
> things are as good as they’ve even been on the monetary front.
European central bank just announced they miscalculated how bad the inflation really is currently and that they expect it to get worse. The FED is pretty much in the same situation, no?
They just answered they plan to raise interest rates. Inflation isn't out of control, it's been high for like 6 months after 18 months of no inflation or deflation.
The IShares Gold Trust, symbol IAU, holds physical gold and has an annual expense ratio of only 0.25%. In return for that, the problems you listed are solved.
> The value of the US Dollar deceases exponentially in comparison to gold.
I don't give a fly fig about the value of gold on its own (and, consequently, as a benchmark for anything else.) I mean, except when I am considering gold as a potential investment vehicle.
Now, if you were to say that the value of the dollar loses value roughly exponentially, with a low and gradually changing exponent, compared to, say, the basket of services used to define the CPI or any other broad price measure, I’d say fine, that’s great. Low volatility is stable, and that's what I want in money. (Escalating value with higher volatility is acceptable in an investment vehicle, but currency should not be a primary investment vehicle; what is good in one is not good for the other, in either direction.)
The value of US Dollars deceases exponentially in comparison to any finite good, no?
Furthermore, most people's salaries don't increase as fast as the value of dollars deceases. That means for the average person it's likely that you are paid less every year.
> Furthermore, most people's salaries don't increase as fast as the value of dollars deceases.
Yes, they do. Real (that is inflation-adjusted) median hourly wages have overall pretty much been even since the 1970s; dropping a little bit through the 1980s and early 1990s and rebounding slowly since.
Individually, people generally move up in relation to the median over their career, so with the median generally flat (and recently tending to be slightly positive), they tend to get higher real wages over time.
(Now, wages haven't kept up with productivity, and that's a real problem, but it's different than the one you are inventing.)
OK, let me be more precise: I do not care about small amounts of steady, predictable inflation. (I care more about the monetary authorities having room to maneuver to prevent deflation, which is far more damaging than inflation.)
What tends to happen, though, is that people have borrowed money to buy things, and now dollars are more expensive to pay back those loans. Some of those who have borrowed are now underwater - they owe more than the value in dollars of the asset that they bought with the loan. Some of those will sell their assets (or the bank will do it for them). Now you have higher-than-normal selling, so the price goes down. Now more people are underwater, so it keeps going.
And some of those "people" are businesses, and some of them fail because of this. Now some people don't have jobs. Prices are lower, but that doesn't help you if you have no income.
This isn't just theory. Look at several of the financial panics in the 1800s, and you'll see this in action. When it happens, it's very destructive. It wipes out lots of people.
So, a slow, steady, predictable deflation might be a good thing - if it could be and remain stable. But there are lots of examples of it not being stable...
The core idea that I wanted to discuss is: If money is easy to debase then it will get debased a lot in the long term. That leads to inefficiencies in the market, and in particular to less sustainable behaviour of people and less sustainable societies.
Bitcoin is just an example for an attempt to create hard money.
> If money is easy to debase then it will get debased a lot in the long term.
What happens to money in the long term doesn't matter much, what happens in the short term does. Investment vehicles short-term fluctuation matters less, but their long-term performance matters more.
> That leads to inefficiencies in the market, and in particular to less sustainable behaviour of people and less sustainable societies.
I see no reason to believe that the long-term smooth decline in the value of money does that at all compared to achievable alternative behaviors of money. In fact, one of the reasons money is typically managed with a goal of low-but-positive inflation with low volatility is that there is quite a lot of experience suggesting the opposite.
Economies need a human-in-the-loop to adjust the settings every once in a while. That's what monetary policy does - it changes the money supply and interest rates as a response to what happens in the economy. Thinking that you can lock that policy in place once and let it run forever is naive - it just doesn't work in practice. This is why we don't have the gold standard anymore - it was a system so bad that it eventually broke and we had to move away from it. That's where all the talk about sound money ends - money has to be "unsound" in order to work in the real world.
