Thread by @AlexandraErin

#cryptocrash?

Oh no, my artisanal collection of inefficiently solved math problems is now worthless! Why did I think trading away real money for fake money was a good idea?

Wait, I never did that. Never mind. I'm good!

Something legally recognized as tender for all debts public and private.

Now, I could buy a hamburger with a chicken if I could convince someone to take it in trade, and I could pay my debt with Pokemon cards if the lender agreed, but that's barter.

https://twitter.com/hivematters/status/1417464646760546306

Check again, friend. The robust and reliable US dollar will get you a LOT more bitcoins today than it would yesterday, if those are your favorite flavor of beanie baby.

https://twitter.com/hivematters/status/1417465452230545412

And frankly, "printed out of thin air" is a great thing. The environmental cost of the US government spending the "value" of a bitcoin into existence, as USD, is far, far lower than the environmental cost of "mining" one bitcoin.

When someone asks me a question that I believe to be of general interest or that I suspect other people will ask, I quote tweet the response so that I only have to answer it once.

Yes, I agree that modern money is very environmentally friendly.

https://twitter.com/hivematters/status/1417465724197654529

Oh, it appears my learned correspondent has opted to absent himself from the discourse. Not before declaring that Bitcoin is "sound money", which... it isn't. It sounds like money, but it's not sound money. What it is, is sub-fiat money.

Sound money is, very roughly, money that is a stand-in for something specific that is valued, like the dollar bill as a gold coupon. A "pound sterling banknote" being a note from a bank for one pound of sterling. This was the transition from metal money to paper money.

And fiat money is money that's valuable because an authority says "This is money." The modern US dollar is backed by the full faith and credit of the United States government, which... okay, I don't trust them for much, but "money MEANS something" is like their whole deal.

Now, which of those does Bitcoin sound like? Its backers say its "sound money" because much like a promissory note for gold, the Bitcoin represents a lot of expensive effort someone went through to extract value.

But the gold actually exists. You can trade a sound note for it.

The energy-inefficient math problems that "back" a Bitcoin aren't worth anything. You can't trade the Bitcoin in at a reserve bank to get the processing power back, if the processing power is what you need. So the Bitcoin isn't backed! Not by anything of value, not by fiat.

Fiat money is a great concept. Very useful, and it's been very successful, and we've really only traced the edges of how it can be used. But the key is that money, as a universal means of exchange, works best when it's on a centralized standard.

If every US state had its own currency, but some were in regional collectives with mutual recognition pacts, and then some large cities also had their own, and then we also had to deal with company scrip... doing business would be a nightmare.

But that's the reality of cryptocurrency! Currency is currency because it's current; it flows. The more different branches and forks of crypto there is, the less current it becomes.

And you know, I think the rise of cryptocurrency is a casualty of the way our financial politics has completely demonized inflation as a concept, made it out to be a universally bad thing to be feared and avoided at all costs.

Because Bitcoin was designed to be deflationary: there's only ever going to be a set finite amount of it, and getting more of that limited supply becomes harder and more expensive (in energy and real money) over time.

Because Bitcoin becomes harder to acquire over time, then the same amount of demand results in a higher price over time, which makes it appear to be an appreciating asset.

But as its only use is something you can trade for money, its value is ephemeral.

The more Bitcoin is used, the more widely it's adopted and the more coins are mined and then traded around, the harder Bitcoin becomes to use. The computer time and energy needed to process each transaction goes up the more "successful" Bitcoin is as a pseudo-currency.

That means there's going to be a point where Bitcoin is no longer worth it, and I don't mean "the market price has gone down" because that's cyclical. There's a wall in the future past which no one will find it worth using.

"Well at that point we'll all just sell out and move to another fork."

I am trying to think of a "Sell to who, FUCKING AQUAMAN?" reply for this and there's not even a fictional character who fits the bill.

Bitcoin is an interesting thought experiment but as a "currency" it was essentially designed to fail. Will some people get rich along the way? Sure. By convincing other people that it's the future and selling them Bitcoins... for actual money.

Yeah, basically, you have to make up a fictional character who eats 10,000 Bitcoins a day to have someone who would buy Bitcoin once it goes over the deflationary cliff.

https://twitter.com/CrookedKnight/status/1417475081442320388

And maybe you think you're a savvy speculator who can ride the money train right up to the edge of the cliff and then get off it, but so does everybody else in your subreddit and they're all chanting "Hold the line!" with you and calling anyone who cashes out a cuck for whales.

...just realized there's a sick joke at the heart of the crypto scam: they say it's "sound" because it's "backed" by the proof-of-work of "mining" the math problems.

As if our society actually intrinsically recognizes the value of labor.

Okay, I would pay real money to watch Brewster's Bitcoins. Man is given ten billion dollars in cryptocurrency and will inherit a larger fortune in USD if he can spend it all with nothing to show for it by the deadline.

https://twitter.com/bnprime/status/1417477614034243586

The publicity around the new "crypto billionaire" drives the price up and increases adoption and activity in such a way that the more he spends, the more value in crypto he has, and it looks like he's going to lose.

And on the last day, he meets with his accountant and his eccentric great-uncle's lawyer and the accountant reads off the contents of his cryptowallet, one minute before deadline, and then gets a phone alert and reports the value of the wallet is now zero dollars and zero cents.