What important element has been taken away?
Will watch the video when I get better signal.
Discussion
Metaphor of how we got fiat currency:
You check your coat (gold) into the coat check (bank) and get a paper ticket (note or bill).
The coat (gold) is the real thing of value, and the ticket (note) is just a stand-in for it.
If all the coat check (bank) requires to give you back your coat (gold) is the ticket (note), you can transfer the ticket to someone in order to transfer the coat.
Imagine the coat check (bank) starts issuing more tickets than they have coats.
This is inflation.
This allows them to transfer more coats worth of value than they actually possess, but if the people all came and demanded their coats there wouldn't be enough.
To resolve this in a free market, the coat check (bank) would be seized by authorities and the directors made to provide the coats (gold) they had promised - out of first coat check (bank) property and if that's not enough out of their personal property.
Instead, the authorities were cut in on the deal and allow the coat check to operate without providing any coats (gold) at all.
This is fiat currency.
The fiat mindset shuffles currency around without any underlying money. We have claims for money, which in ancient times were actually redeemable for money, but now we are so psyoped we call these defaulted paper claims "money".
Bitcoin gives us a decentralized coat check with more sensible rules. But where are the coats?
“Bitcoin gives us a decentralized coat check with more sensible rules.”
I see it as:
Your coat (sats) no longer needs coat checkers (banks) because they can stay in your own closet (private keys).
But it appears you agree Fiat mindset, enabled and enforced by rulers, has led to the zombie plane appearing to stay aloft.
Bitcoin mindset is an attempt to see if rules, not rulers, can build a new aircraft entirely.
As for the missing coats (fruits of our labor), time will tell if Bitcoin mindset can do better.
Sats & bitcoins are tickets, not coats.
The difference is that coats have a trade value because they have a use value, while the tickets have trade value only.
Bitcoiners try to reverse this and say Bitcoin makes a perfect money because it has only trade value - but this is backwards. This makes it a currency and makes it completely ineligible to be considered money.
When I asked what important element has been taken away, is your answer *the coats*?
Reviewing your response, you gave a metaphor for how we got fiat currency and ended with a question - but where are the coats?
Yes - the coats - the real asset - the gold - the cold, hard cash
We have tickets but no coats, currency but no money
(How can cash be cold and hard?)
Trying to steel-man your position - Bitcoin is still fiat, and it’s what fiat tickets and Bitcoin tickets can be exchanged for that is the real thing of value.
Am I close to the meat of your claim?
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If so, I would agree with that.
But Bitcoin is a communication network, the token/ticket (unit of account), the transmission of the token, the ledger, the bank vault, the bank security guards, and more (more and more overtime since it’s software that can be improved with BIPs).
These together, bundled in code that individuals can choose to run on their own devices, are immensely valuable.
Very close, but not dead-on
Who creates the tickets?
Why should any of us care to accept these tickets from the creator in exchange for coats or anything else?
If we want to trade these tickets around, how do we know how much they're worth against various real things?
If I can take the ticket into a department store and trade it for a coat, in the short term and for me it is just as good as if the ticket creator gave me the coat. A coat is a coat (at least in this metaphor) & a troy ounce of 99.9% gold is a troy ounce of 99.9% gold. But what will the department store do with the ticket except make their way back to the coat check and demand a coat? If for some reason these tickets are widely accepted and there begins to be some doubt about whether they will be widely accepted in the future, perhaps because people increasingly understand the coat check has no coats, people will dump the tickets while they're still good for anything they can get their hands on.
This panic, which Mises called the flight to real values, I believe will happen to both fiat currency and Bitcoin because there is no real stable asset. For now both of these accounting units exchange for various real goods.
This is based on the idea of bitcoin being a liability, a promise for some other item of value akin to a paper promise for gold. Bitcoin doesnt need a backing, it doesnt require reserve assets, it is the backing, its not a security or liability to anyone, it is the commodity itself. Now, of course you believe in regression, so you could argue bitcoin has no value of its own, but I dont think you could argue that it is a security.
If it is a commodity, what is the industrial demand?
What can you do with this stuff?
Where does the stuff come from? What is it made of? What processes lead to it being economically recoverable?
Also, to me a commodity is a uniform material. Bitcoin being immaterial is not a commodity. Is there a definition you can give that includes Bitcoin as well ordinary commodities like oil and salt?
Does your definition exclude fiat currencies?
Does your definition exclude other cryptocurrencies?
Having been created as opposed to found, the initial distribution is produced through a subsidy on recording transactions to the blockchain. Admittedly this isnt ideal, but of the ways to manage the initial distribution without a central authority this is probably the most honest, and provides a security budget for bootstrapping the network until fees alone can fund mining.
It is a ledger system, in that I agree, bitcoins are comprised of the record of transactions that created them, the UTXOs. However, there is an important distinction between this and traditional ledgers in that the total supply and record of transactions is continuously verified by anyone with a node.
Since there is no central issuer, no trusted counterparty, there is a provably scarce supply, and the asset itself can be held in self custody, I would argue its not possible for it to be a security.
As to defining a commodity, I think, and its not a crystalized definition:
-scarce
-uniform
-primary product
-no central issuance/control
-can be used in trade.
Fiat fails in all but the last; cryptos fail in their inability to resist a central issuance/control and scarcity; physical commodities like oil and gold pass for obvious reasons; bitcoin passes all of these too. I dont think I have ever seen a single perfect definition of a commodity, maybe you have one to cite, but classifications that categorically reject things because they dont manifest in the physical world seem logical prior to bitcoin, but with the advent of true digital scarcity its maybe worth revisiting.
Are UTXOs really uniform? Don't they each have a unique and traceable history?
I'm not so sure that fiat fails to meet your definition, or at least that it does a worse job than Bitcoin. Only so many dollars (or Federal reserve notes) have been created to date - this is scarcity. The notes are not uniform but the accounting unit is, and Bitcoin hardware wallets are not uniform. I'm not sure why a commodity cannot have a central issuer, or why the dollar (which is created out of thin air by many banks) should not qualify but Bitcoin (which is created out of thin air by many computers) should.
Moreover I am willing to bet I could find other cryptocurrency that meets these criteria at least as well as Bitcoin. Zero-knowledge-proof privacy coins seem rather more uniform, for example.
As I said, my definition of commodity is uniform material; this is with uniformity being judged by the market so grade A eggs may be seen as a different uniform material than grade B.
Most definitions of commodity say something along the lines of raw material, which I think is slightly inaccurate as gasoline and crude oil are both considered commodities but one is made from the other. I think being material is a key part of what it means for something to be a commodity, which Bitcoiners would have no idea of questioning but for their rejection of fiat currency and embrace of a digital immaterial token.
UTXOs today are as uniform as gold was before the minted coin, before which the gold could have been better traced to origin by its melt and form. Coinjoins and payjoins strip identifiable information out and can provide uniform outputs. Upgrades to the network will bring cross input signature aggregation, allowing these functions to be performed in a very decentralized manner.
You could say that the total supply of fiat is limited at any single moment, but I would argue this does not constitute scarce.
-Scarce would imply a marginal cost of production that fiat does not have, more can be created by political means.
-your definition of scarcity here would imply that nothing is *not* scarce, a jpeg may only have been copied to a million harddrives, but could be copied to 10 million more at essentially zero marginal cost.
Bitcoin on the other hand cannot be created without the marginal cost of production, determined by your computing power (linked to physical cost by your price of electricity) and the total computing power of the network. Further, even taking your arguement at face value, fiat still fails in its centralized issuance and control.
I would be highly skeptical that you could find a crypto that offers these points in better spades than bitcoin. Monero for instance could be said to be more private, but your privacy set, the total number of transactions yours is hidden behind, is limited compared to bitcoin. You would be better off using a coinjoin, a payjoin, or even liquid, compared to using cryptos that lack the economic activity to properly hide amongst the crowd. Further, any additional feature set you find in a crypto will sacrifice a more fundamental feature that bitcoin has, like decentralization, monero would not be able to maintain any sense of decentralization if there transaction volume did go up, because their scaling solution is allowing bigger blocks.