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Jason Ansley | Fractional COO | Leadership Coach 1y ago

Learning question about #bitcoin

If the goal is for #btc to not just be sold (store of value) but to be spent (currency, or stated better imho, medium of exchange of value)

This means we have to shift from converting BTC > USD (fiat)… to 1 BTC = 1 BTC

Meaning we have to stop measuring things in fiat values and instead measure (aka price) in satoshis (sats)

This is a huge mindshift and one that I think will take time for many, let along the masses.

It would sort of be like traveling to a country whose prices are denominated in EUR but I transact in USD…my brain struggles to convert or compare the cost in EUR vs USD

(Bear with me I’m getting to my question, but the ground work I laid is important (if I’m understanding things correctly)

So then…if we continue to measure products and services in both fiat and sats,

Q1. will we not just inflate Bitcoin despite its deflationary nature?

Example (using an arbitrary price choice) :

An apple is $2 or 10k sats

If BTC is at $100k USD (fiat value)

And it goes up to $200k, which in essence means the $2 Apple now costs $4;

Q2. would not the sats also have to double to 20k for an Apple? (And therefore pricing things in BTC is also inflationary?

The exception to this would be in the parties transacting truly think only in sats and eliminate any comparison/conversion to fiat

But that is a major #economics mind shift because “what is the value of something (especially in sats)? Like how are thing actually priced in the world beside me just saying “I think this is worth $X”

Ok…I’m starting to ramble so I will stop.

Merely trying to close the loop in my head on how setting prices in sats will also not be inflationary.

(In the equities market price is set essentially by liquidity. The more liquid an underlying is, the tighter the price spread is…that may be part of my answer…the more people that transact in sats; the more efficient pricing becomes…but I don’t think that addresses all of my question)

[apology for rambling…trying to succinctly communicate my thoughts to help attain an answer]

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Discussion

Den Yellek 1y ago

There is one part missing from this.

It is not just store of value and medium of exchange. There is also the third function of money - a "unit of account".

ChapterIt is not likely that bitcoin is widely used as a unit of account for some time I til massive adoption is reach and price stabilise. Chapter 9 of The Bitcoin Standard highlight this challenge.

"On the one hand, Bitcoin's strict scarcity makes it a very attractive choice for a store of value, and an ever‐growing number of holders could tolerate the volatility for long periods of time if it is heavily skewed to the upside, as has been the case so far. On the other hand, the persistence of volatility in bitcoin's value will prevent it from playing the role of a unit of account, at least until it has grown to many multiples of its current value and in the percentage of people worldwide who hold and accept it."

Joe Bloggs 1y ago

The Reality.

Before Money, Barter was the exchange of things but was rated in Human Empathy.

Money removed that Human Empathy part of the exchange, because it was not perfect Information that recorded exactly the Human Empathy part of exchange.

That was Commodity Money. Since the 1970's Fiat Currency money became globally used, that further removed that Human Empathy exchange.

People game system's, so that opened Pandora's Box, you can have everything at no cost. If you can game the system with no cost, you have the perfect environment for fast breeding Psychopaths to win. Empathy holds others back.

Politicians from Vanity to Psychopaths can promise everything and deliver nothing. Psychopathic lawyers become heads of Government's, Councils, Mayor's and big Institutions and Non-Government Organisations etc et cetera.

The nett result of the loss of exchanging Pure Human Empathy is living life backward to those who cherish the exchange of Human Empathy.

As such, Gender Attacked, Family Attacked, Childhood Attacked, Religion Attacked, Property Attacked, Opinion Attacked, Home Attacked, Privacy Attacked, Health Attacked, Nature Attacked, Survival Attacked, Climate Attacked etc et cetera.

Bitcoin goes right back to what I said at the start and further, it's the exchange of Pure Human Empathy before people even thought to write about how a God could do this better.

If you don't think that chasing Fiat Currency is the Religion of living backwards, then my friends, your minds have gone.

Joe Bloggs 1y ago

The Reality.

Before Money, Barter was the exchange of things but was rated in Human Empathy.

Money removed that Human Empathy part of the exchange, because it was not perfect Information that recorded exactly the Human Empathy part of exchange.

That was Commodity Money. Since the 1970's Fiat Currency money became globally used, that further removed that Human Empathy exchange.

The nett result of the loss of exchanging Pure Human Empathy is living life backward to those who cherish the exchange of Human Empathy.

Bitcoin goes right back to what I said at the start and further, it's the exchange of Pure Human Empathy before people even thought to write about how a God could do this better.

If you don't think that chasing Fiat Currency is the Religion of living backwards, then my friends, your minds have gone.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

I’m not questioning the philosophy of Bitcoin…I’m asking a math question (more or less).

How does Bitcoin not inflate when used as a medium of exchange (beyond there will never be more than 21M tokens…)?

Joe Bloggs 1y ago

Because there is only so much Pure Human Empathy to be exchanged and Satoshi's can cope with that. However, if the number of decimal places need increasing, beyond Satoshi's to Finney's or beyond, then that's an easy fix within Bitcoin at it's Core

EMoney 1y ago

I didn’t know that regarding decimal places. TY

Joe Bloggs 1y ago

For reference Andreas Antonopoulos has covered this, it's worth watching his stuff. With the understanding that a lot of his output was growing with Bitcoin and in his words, paraphrasing, 'in a kids playground in the wild west. Which is apt because back in 2013 he was speaking to chairs and tumbleweeds.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Thanks for the replies.

I’m not understanding or otherwise connecting the dots on this idea of “pure human empathy” as it pertains to price and value; or even barter.

Perhaps it’s becasue empathy is something I have to work hard at…but I don’t make many or any emotional purchases nor adjust price per se based upon the way I feel towards a customer…

So what is meant by and what evidence is there if “pure human empathy” as it pertains to price and value or a product or service (and therefore medium of exchange)?

Joe Bloggs 1y ago

I have done a few lengthy notes on this, they are in numbered title order. So far I have done 7, from 00 to 06. I will continue to expand upon this, in order.

So this one I feel will make you start to see the meaning.

nostr:nevent1qqsq0vqxamw7wy8v4ahrkwnrlmm7lfamrkgrmhpmhrupvy7usaa37xcpz4mhxue69uhhyetvv9ujumrwv96jumn9wshsygpr8cgwrj8fajsyrqa7s6mdxynx4l7uxazhqyzr5fey5wsaghpmhqpsgqqqqqqsqjfyn2

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Thanks for this!

Have you thought about putting these into a Nostr article such as on Habla or via YakiHonne?

Joe Bloggs 1y ago

I have not used them, I will have to have a look, thanks for the heads-up.

Here's a table that explains the Empathy breakdown of a Barter exchange.

I've just posted another note, 07 Title: Barter: Empathy and the Magic Wrapping that Money Cannot Buy. It's got a pretty good analogy in there, if I say so myself 😃 and you may find it interesting.

Joe Bloggs 1y ago

Didn't attach, weird.

Den Yellek 1y ago

Inflation is caused by an increase in the money supply. With bitcoin the money supply is fixed.

In your example you have kept satoshi to apple conversion the same. In reality the price of everything will drop over time when measured in bitcoin.

charliesurf 1y ago

price of goods inflate... money devaluates

plebiANON 1y ago

You have a key fundamental flaw in your reasoning. If Bitcoin goes from $100k to $200k the price of the apple in sats will be cut in half. Unless the seller of the apple leaves the price of his apple the same in sats. However, because prices fall to the marginal cost of production, that apple seller will rapidly be starved out of the market by all other apple sellers who adjusted their prices downward accordingly. I could price my house at 8 Bitcoin forever, but no one would buy my house when the price of Bitcoin went up. They’d find a different home seller that repriced their home accordingly.

Bottom line, priced in sats, the cost of items go down because we become better at producing them and there is a finite supply (21 million) of the money that everything will be priced in.

samuel 1y ago

My suspicion is that most don’t understand negative interest rates:

A Porsche costs 2 #BTC this year, will cost 1 #BTC next year, and 0.5 #BTC the following year. So logically I would just wait 2 years buy a newer Porsche and have 1.5 #BTC left over.

Of course it might be 0.25 #BTC the following year so I might just wait.

So if I borrow 1 #BTC at -50% interest rate I could wait 2 years but the Porsche for 0.5 #BTC pay the bank back 0.25 #BTC , and put 0.25 #BTC in my pocket.

#BTC #HODL #bitcoinstr

plebiANON 1y ago

This is why I think lending will largely go away, and most everything will be equity investing. I know you used an extreme number to illustrate your point, but the negative rate would trend toward the inverse of productivity minus storage costs. Something like -2 or 3%. Just give me the equity upside to part with my sats.

BoomTown 1y ago

I disagree. Because (modern) equity requires governance control. Most modern “entrepreneurs” are cucked by their equity investors. Public and private and venture equity…they all control the entrepreneur.

A good entrepreneur worth a damn won’t part with the equity. Which means most entrepreneurs will seek debt funding (priority claims) vs. giving up control and upside of their ventures.

plebiANON 1y ago

Equity and debt instruments are going to look completely different on a fixed money supply. Almost all projects were financed with equity in the past. It was this fact that was the impetus for the formation of the federal reserve. To force people to fund with debt instead. The old system of capital investment will return when the money can’t be printed into existence.

BoomTown 1y ago

I don’t think that is accurate. A lot of rich people who had gold reserves collateralized their gold for bank loans which were in turn invested in “guaranteed” priority debt claims on projects … which also included yields on projects.

Debt (priority) claims are very attractive for numerous reason on a sound money standard.

samuel 1y ago

It is exciting times we live in because only time will tell how this really pans out. #BTC is a much harder asset than gold. Keep in mind they’re digging 54,000,000 ounces of gold / year out of the Earth and if the price of gold goes up, that number goes up, but it doesn’t matter how high the price of bitcoin goes #BTC will only be 450 tokens / day. And that number will be reduced by two in about 3 1/2 years.

#HODL #BTC #bitcoinstr

plebiANON 1y ago

But that wasn’t the general trend. Society was moving to equity investments as capital. Also, more importantly, that bank was fractionally reserving their gold deposits. They created some portion of the loan out of thin air. There eventually will be no dollars to create out of thin air.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

This is essentially what happened (and happens) in deflationary environments.

Example being WW1. People were hoarding cash because it would buy more later. Of course back then the USD was backed by Gold.

freeborn | ἐλεύθερος | 8r0gwg 1y ago

because 'inflation' means monetary debasement, not 'prices went up' -- prices going up is a consequence of inflation.

freeborn | ἐλεύθερος | 8r0gwg 1y ago

If you want a deeper dive into this question, check out

- Murray Rothbard, [The Mystery of Banking](https://mises.org/library/book/mystery-banking); or

- Ludwig von Mises, [The Theory of Money and Credit](https://mises.org/library/book/theory-money-and-credit)

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Ok…adding these to my list!

Jason Ansley | Fractional COO | Leadership Coach 1y ago

So “prices going up” retains a correlation to inflation but inflation is not the causation of increased prices? Debasement (or otherwise people agreeing XYZ widget is worth more)?

freeborn | ἐλεύθερος | 8r0gwg 1y ago

Think of it this way: every new dollar printed makes existing dollars less valuable (inflation), so eventually it takes more dollars to buy the same stuff as before (increased prices).

Another major aspect of inflation is artificial credit expansion by the fractional reserve banking system--which increases massively when the Fed lowers interest rate targets.

There's a great video series by Mike Maloney on YouTube called The Hidden Secrets of Money (just skip the one on Hedera hashgraph). 🤙

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Added this to my watch list too.

Have to balance consuming (even if it is for learning) vs creating.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Re: “eventually it takes more dollars to buy the same stuff as before”

That is the heart of my question and OP…

If price in dollars goes up; why wouldn’t I as a business owner just also raise the number of Sats required to purchase said “Apple” (thing)?

(As I continued to type I think I unlocked the answer)

A business owner could do this and some might, but savvy customers will choose other suppliers because the two currencies (fiat and BTC) are moving counter to one another.

Therefore if the store owner raises sats required alongside fiat price; they are doing themselves a disservice as they will ultimately lose market share, or the customer will just pay in fiat while (potentially) getting the Apple for free in fiat terms becasue BTC price has increased asymmetrically to the decline of fiat value

freeborn | ἐλεύθερος | 8r0gwg 1y ago

good point!

Jake Woodhouse 1y ago

Great question. Keep asking these! It’s what helps with conviction over the long-term

The key is to study money some more…

How I think through this:

- money solves the double coincidence of wants problem

- many things can be used as money, most things are very bad at money

- a good money is: Divisible / Durable / Fungible / Portable / Scarce / Verifiable

- good money has 3 functions: store-of-value / medium-of-exchange / unit-of-account

- people will use money in different scenarios for 1 of the last 3 functions

What you’re thinking through, it’s important to identify which function you’re fulfilling

As Bitcoin increases its market cap, driven by value moving into BTC, and purchasing power increasing, as supply is outstripped by demand, the SOV function is altering (hence we see its exchange rate alter)

Whilst, you can price things in whatever you want. Chairs. People. Coal. Grain. Gold. USD. Eur. BTC. Etc. Long-term I believe everything will be priced in BTC, which is UOA function. The supply of all those UOA moneys I just mentioned can change, but BTC will change the least (think stock-to-flow ratio), hence makes a good UOA

Point being everything is in flux the whole time. Modern fiat has lulled us into the false sense that prices can be constant

In short - I try my hardest to measure my net wealth in BTC terms (ie SOV) but on a daily basis pricing things in BTC remains hard

Lastly BTC will only have 21 million, this is like a truthful measuring stick of value, unlike anything we’ve ever seen. Just because you price in SATS, this doesn’t change that fact

Hard to explain in one note!

🙏🏻

Hope that makes sense

Jake Woodhouse 1y ago

Q1 -. The Apple that used to cost 10k sats, if btc doubles in purchasing power, will now cost 5k sats (whatever the usd price will depend on usd inflation)

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Thank you for this well laid out explanation!

I appreciate it.

The loop is almost closed 😎

Neal 1y ago

in the simplest of exchange value "energy time is money". price discovery in Sats will emerge through human trade exchange actions over time. 1 (one) second of human / energy time will gain increasing Sats values. prices in Sats will be based on what value the buyer is willing to offer and what the seller is willing to accept.

Stu 1y ago

Thinking of things priced in sats really helps. I almost always convert prices to sats. I have a widget on my phone that tells me the sats : fiat conversion.

Plus most people on Nostr can relate to things priced in sats, and it gets away from the USD bias for an international user base.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

What app / widget you using for the sats to fiat conversion?

Stu 1y ago

It took me a moment to find it, because it's actually a "crypto" widget.

https://github.com/hwki/SimpleBitcoinWidget

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Uggg I’m on iOS

I’ll have to see if there is a similar app

Stu 1y ago

iOS. 🤢😅

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Don’t hate me cause I’m hip to be square 🤣

Stu 1y ago

It's fine, kind of. My wife is an Apple fan. She thinks I'm weird with privacy tech.

Jason Ansley | Fractional COO | Leadership Coach 1y ago

Yea entire family, both sides, is Apple. It makes it’s easy for grandkid to FaceTime grandparents.

I used to be PC.

Honestly when I was an IT Director for a school and did a Total Cost of Ownership study and priced out new computer labs…

It was so obvious Apple was the way.

I used to go through a $1500 laptop every 1.5-2 years.

I get 6-7 years from my MBP and resell for a few hundred bucks at that point still

Jason Ansley | Fractional COO | Leadership Coach 1y ago

I found one for iOS https://apps.apple.com/us/app/satoshi-converter/id1576704429