I get that anything is worth whatever someone is willing to pay for it. That’s besides the point. My point is, beyond speculation, what do crypto coins represent?
I also understand that the value of the US dollar is being questioned almost as much without the backing of gold.
But what I really want to know is what is at the foundation level of Bitcoin that people are buying into?
I have a basic understanding of the blockchain, etc. I sold 1BTC in 2017 for $1200 when I thought that was as high as it would go. At this point, at over $100kUSD and rising steadily, what is the $ limit and what is that limit based upon? I thought it was based on the value of mining to check transactions but this seems… not worth $100k to me.
I’ve been thinking, the only tangible value I personally see in Bitcoin, because it’s not really being used as legitimate currency, is for criminals. By now, there must be trillions of dollars in BTC acquired by criminals holding corporations hostage. When you’ve got people like Trump involved (either explicitly or by way of manipulation) with an executive order to establish a crypto czar, this suggests to me that he’s creating pathways for bad actors to more effectively gain more wealth. These are the people who are most excited in Bitcoin, beyond speculation.
I mean, there’s little to nothing on the up and up with crypto, right? It’s a scam. Right?
Please, factual answers only. I’m looking for someone to dispel my speculation with genuine economics of the matter.
At its core, it represents an irreversible proof of digital existance. Blockchain is the only technology that can do this, and it makes it more valuable than you’d think.
Bitcoin itself has first mover advantage, and that keeps it on top. It’s hard to point to any particular feature of bitcoin that warrants this first place position, aside from pure decentralization of holdings.
The irreversibility of blockchain transactions is very underrated to most of us, but think about it… no bank or government, even with military involvement, can reverse a transaction or seize assets. For most of us in nations with sophisticated financial infrastructure and govt, this doesn’t sound like a big deal, but for the majority of the world, this is a huge deal.
It also represents freedom from fiat. Since the beginning of currency govts have used it as a means to extract wealth from the populace. Printing, confiscating, and controlling as it pleases them. We’ve historically used gold to hedge against this, and there’s even instances in history where govts have devalued and confiscated gold as a means of supporting itself. Bitcoin brings all the freedom of gold, with all the benefits of the digital world.
Awesome. I appreciate this perspective.
Can you dig a bit deeper into the benefits for normal people that an irreversible transaction offers? To me, this seems like a detriment. Like, if I sell something on eBay and it turns out to be broken or fraudulent, PayPal can reverse the charges for me. Actually, I have a real world example of buying sneakers online that never arrived and had my credit card reverse the charges for me.
So PayPal or your bank are third parties that you have to trust will act honourably.
You can still do that with cryptocurrency and use third parties or dapps with escrow style protection features but you can also do direct transfers, without any third party involvement and no protection, like giving cash to someone requires no third party approval and there are no protections.
It’s not a benefit in the example that you provide. It’s a benefit to the seller for sure. For that type of transaction it benefits you with lower prices due to retailers not having fraudulent sales result in chargebacks. This is the reason you’ll see it adopted by merchants (not Bitcoin, but stablecoins on Solana or Eth L2s).
The benefits on the consumer side are around freedom of money - no seizures, no bank runs, no fraudulent cc charges (but added key management risk), no inflation (eh, but added volatility rn), instantaneous worldwide transfers (that’s where you see the remittance market buying in). Also new decentralized financial markets which bring better yield rates than banks.
It’s a little more gray on the consumer side and I would expect services built on top to add insurance, escrow, and custody (exchanges and banks) type features.
The other place it’s making waves is with larger amounts of money. Hedge funds, venture capital, and higher net worth individuals. It makes moving capital around much easier.
So in that realm we see growth with it making its way into traditional markets - like stocks and commodities. Instantaneous settlement in this world is huge. Stock transactions can take anywhere from a day to 3 days in the tradfi system. On-chain we make atomic, irreversible, censorship resistant transactions instantly.
You can already see companies launching stock backed tokens on chains now. Just a couple weeks ago StockX went live on Solana. Anyone can buy US stocks, anonymously, with no onboarding requirements. This disrupts global capital markets.
So in summary, the benefits down at the consumer level focus more around access to new, secure products for earning yield and availability of alternative inflation-free assets with instant availability.
Also, privacy. This world really re-enables us as consumers to have some financial privacy. That’s another whole rabbit hole tho and my thumbs are tired.
I guess it’s more useful as a store of wealth than a currency. Like gold it can be transferred irreversibly between owners, except now the transfer and storage costs are significantly reduced and it’s available to the general public as an option. The key benefit is the use of the internet as a transfer medium, you no longer have to rely on a third party to facilitate the exchange, which for most large transactions means paying someone to transport it and store it (lawyers, guards, banks).
It does allow for easy exchange for all users, including criminals, but generally using it for crime is a terrible idea, as every member of the network can see all transactions. Bitcoin is more of a notice board about what addresses have what amounts, and if you can prove to the people that post on the notice board that you control an address, you’re allowed to spend the contents and update everyone of where you sent it.
People came up with an idea for how to do chargebacks, it’s called an escrow service, a third party that holds the money until all parties have had a chance to raise a dispute and confirm they are happy. This is the same as how PayPal works, trust based on reputation of the escrow provider, and the escrow provider is payed a fee. It’s just that now with bitcoin, you also have the option to complete the transaction online without an escrow provider, the same as you would in person with cash.