HJ/OPR/Tar/anyone else that follows crypto
What is the general view in the cypto world and it's role in the future. Is the consensus view that it's a non-fiat asset that's part of everyone's portfolio, or is it that it will be the actual main currency?
A currency that doesn't suffer inflation sounds great for the individual holder, but it would be impossible and devastating as a general economic principle. How would business expansion work with a deflationary currency? Gov stimulus mitigated some of the pain of covid; if we were on a gold standard, or if bitcoin was the main currency, the economic damage would have been significantly deeper and longer. How does the crypto world deal with those kinds of questions? And what about the risk of large government interference. Could China destabilise the crypto world by mining with their supercomputers?
Just trying to get my head around the whole thing
- So, there's a lot to unpack here.
Your questions are jumping the gun by a couple of decades, as Raoul mentioned bitcoin is still a relatively tiny entity. Its market cap is less than Apple's cash reserves. It's very difficult to predict the future, and you're asking questions about a world that could only exist in a very long time when lots of things had changed enormously. If any of the things you mentioned happen, a lot would already be different. Many of the assumptions you hold to be true would be almost by definition incorrect.
The typical (but not uniform) view on bitcoin now, is that it's a super inflation hedge and a gold-like store of value, so yes a non-fiat asset that should be in everyone's portfolio. Also, for the more sophisticated, it's possible to hold and get a yield from it. It's also seen as an asymmetric bet, where the downside is limited, but the upside is not. Given the massive money printing going on in the fiat world, you can see why so much money is flowing into inflation hedges, like gold or bitcoin. Bitcoin is thought to have a higher potential though, for a number of reasons, so a lot of people believe that the next 3 to 5 years bitcoin takes a percentage of golds share in the world. Once you go past this point there is no consensus view, it's too hard to predict.
There are bitcoin idealists that think bitcoin will transform the world into a utopia, but I would imagine every new technology has a class of uber fanboys. I don't think it's worth paying too much attention to them.
"A currency that doesn't suffer inflation sounds great for the individual holder, but it would be impossible and devastating as a general economic principle."
This is not necessarily true. The argument against this is that deflation has typically come along unannounced, and wreaked havoc in a system with participants unused to and unready for it. If it's a known feature of a system participants can plan accordingly. In any case, it's a pretty academic point. It's a bridge that may or may not be crossed in many years. If bitcoin was about to become the worlds reserve asset and the only feature that was stopping it was the lack of inflation, well there a lot of other cryptocurrencies out there.
"How does the crypto world deal with those kinds of questions? "
Like in everything else, most people in crypto are concerned with short term, small problems, and gradually scaling that to something bigger.
"Will bitcoin be the main currency of the world?"
It seems pretty unlikely, given the number of possible suitors.
"And what about the risk of large government interference. Could China destabilise the crypto world by mining with their supercomputers?"
It's a very difficult system to attack. If China decided to start mining all they would do is wreck a few mining businesses. What they could do is ban mining in China, that would definitely hurt btc in the short term, but it would just encourage mining outside of China.
Generally, though I don't think these questions are the right questions to be asking. When Mark Zuckerburg was building Facebook, he wasn't thinking about Russian bots or spreading conspiracy theories, or anyone of the myriad of long term affects no-one could have foreseen; and I don't think he would have had any particular insight into them either. He was trying to solve the problem in front of him. Asking people what they think will happen in an incredibly complicated system in twenty years where many of the variables will have changed, some in which we don't even realise are possible to change is unlikely to get you any useful information.
One thing that will definitely come from all this is a healthy competition between currencies, you can already see that now with the Central banks rushing to release their own digital currencies. The IMF had a day's worth of seminars on this that are worth listening to.
There's a pretty good video here which will give you the shorthand market-friendly consensus view on bitcoin (which is obv pretty biased towards btc)
If you want more detail the CEO of MicroStrategy gave a long account of why he chose to buy BTC as a reserve asset for his company:
It's a pretty interesting interview, the interviewer can hardly get a word in edgeways.
Bitcoin gets all the press, but most of the technological advances are happening on Etherium. Right now there is basically a functioning de-centralised financial system operating on the Etherium blockchain, that operates without banks. There's crowdsourced liquidity, and decentralised exchanges, amongst other stuff. There is a very good primer here:
cryptotesters.com/blog/what-is-decentralized-finance
I've been using this system for six months and it truly is amazing. It's super new and janky, but the concepts are pretty incredible. I've no doubt a lot of the projects around now will end up failing, but the ideas behind it are very powerful. The whole scene is a hotbed of innovation.
Right now you can take bitcoin, wrap it so it becomes a token that can exist on Etherium network, and then provide liquidity to a decentralised exchange in return for a pretty high yield. Super risky at present, but in years to come when it will hopefully mature into a safe and user-friendly space. There are services that will take your assets and move them around looking for the best yield, all done using open-source protocols and in a permissionless and non-custodial fashion with super low fees. Compare this to Irish banking!
Lastly, I'm more of an enthusiast than an expert, there are better place to get information than from me.
What is the general view in the cypto world and it's role in the future. Is the consensus view that it's a non-fiat asset that's part of everyone's portfolio, or is it that it will be the actual main currency?
A currency that doesn't suffer inflation sounds great for the individual holder, but it would be impossible and devastating as a general economic principle. How would business expansion work with a deflationary currency? Gov stimulus mitigated some of the pain of covid; if we were on a gold standard, or if bitcoin was the main currency, the economic damage would have been significantly deeper and longer. How does the crypto world deal with those kinds of questions? And what about the risk of large government interference. Could China destabilise the crypto world by mining with their supercomputers?
Just trying to get my head around the whole thing
- So, there's a lot to unpack here.
Your questions are jumping the gun by a couple of decades, as Raoul mentioned bitcoin is still a relatively tiny entity. Its market cap is less than Apple's cash reserves. It's very difficult to predict the future, and you're asking questions about a world that could only exist in a very long time when lots of things had changed enormously. If any of the things you mentioned happen, a lot would already be different. Many of the assumptions you hold to be true would be almost by definition incorrect.
The typical (but not uniform) view on bitcoin now, is that it's a super inflation hedge and a gold-like store of value, so yes a non-fiat asset that should be in everyone's portfolio. Also, for the more sophisticated, it's possible to hold and get a yield from it. It's also seen as an asymmetric bet, where the downside is limited, but the upside is not. Given the massive money printing going on in the fiat world, you can see why so much money is flowing into inflation hedges, like gold or bitcoin. Bitcoin is thought to have a higher potential though, for a number of reasons, so a lot of people believe that the next 3 to 5 years bitcoin takes a percentage of golds share in the world. Once you go past this point there is no consensus view, it's too hard to predict.
There are bitcoin idealists that think bitcoin will transform the world into a utopia, but I would imagine every new technology has a class of uber fanboys. I don't think it's worth paying too much attention to them.
"A currency that doesn't suffer inflation sounds great for the individual holder, but it would be impossible and devastating as a general economic principle."
This is not necessarily true. The argument against this is that deflation has typically come along unannounced, and wreaked havoc in a system with participants unused to and unready for it. If it's a known feature of a system participants can plan accordingly. In any case, it's a pretty academic point. It's a bridge that may or may not be crossed in many years. If bitcoin was about to become the worlds reserve asset and the only feature that was stopping it was the lack of inflation, well there a lot of other cryptocurrencies out there.
"How does the crypto world deal with those kinds of questions? "
Like in everything else, most people in crypto are concerned with short term, small problems, and gradually scaling that to something bigger.
"Will bitcoin be the main currency of the world?"
It seems pretty unlikely, given the number of possible suitors.
"And what about the risk of large government interference. Could China destabilise the crypto world by mining with their supercomputers?"
It's a very difficult system to attack. If China decided to start mining all they would do is wreck a few mining businesses. What they could do is ban mining in China, that would definitely hurt btc in the short term, but it would just encourage mining outside of China.
Generally, though I don't think these questions are the right questions to be asking. When Mark Zuckerburg was building Facebook, he wasn't thinking about Russian bots or spreading conspiracy theories, or anyone of the myriad of long term affects no-one could have foreseen; and I don't think he would have had any particular insight into them either. He was trying to solve the problem in front of him. Asking people what they think will happen in an incredibly complicated system in twenty years where many of the variables will have changed, some in which we don't even realise are possible to change is unlikely to get you any useful information.
One thing that will definitely come from all this is a healthy competition between currencies, you can already see that now with the Central banks rushing to release their own digital currencies. The IMF had a day's worth of seminars on this that are worth listening to.
There's a pretty good video here which will give you the shorthand market-friendly consensus view on bitcoin (which is obv pretty biased towards btc)
If you want more detail the CEO of MicroStrategy gave a long account of why he chose to buy BTC as a reserve asset for his company:
It's a pretty interesting interview, the interviewer can hardly get a word in edgeways.
Bitcoin gets all the press, but most of the technological advances are happening on Etherium. Right now there is basically a functioning de-centralised financial system operating on the Etherium blockchain, that operates without banks. There's crowdsourced liquidity, and decentralised exchanges, amongst other stuff. There is a very good primer here:
cryptotesters.com/blog/what-is-decentralized-finance
I've been using this system for six months and it truly is amazing. It's super new and janky, but the concepts are pretty incredible. I've no doubt a lot of the projects around now will end up failing, but the ideas behind it are very powerful. The whole scene is a hotbed of innovation.
Right now you can take bitcoin, wrap it so it becomes a token that can exist on Etherium network, and then provide liquidity to a decentralised exchange in return for a pretty high yield. Super risky at present, but in years to come when it will hopefully mature into a safe and user-friendly space. There are services that will take your assets and move them around looking for the best yield, all done using open-source protocols and in a permissionless and non-custodial fashion with super low fees. Compare this to Irish banking!
Lastly, I'm more of an enthusiast than an expert, there are better place to get information than from me.
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