You're only right in the technical sense that nothing is physically taken from you. Its just stolen purchasing power. The thing people actually want
Discussion
Bitcoin miners are stealing your purchasing power every 10 minutes.
We know. But we also know how much and when it stops.
In fact we know it so well that we literally use the terminal value as a meme.
What's Montero's?
.6 units every block.
we also know and make memes about it.
pro tip
when there is consent, it isn't theft.
Sure and terminal amount at t=infinity?
OK I agree theft is the wrong word. You're just getting poor forever
That's just poor economic understanding.
did everybody get poor under a gold standard?
a hard cap is not a requirement for strong money. no economist in the history of the world has EVER argued that it is a good idea.
You are right that no economist has in the past. Because the perfectly scarce alternative didn't exist. Now you are competing.
What's happened to the less good stores of value so far
oh I absolutely think that they might use Bitcoin as an SOV.
just like people use Manhattan real estate as an SOV.
That's great, but it's not money.
No its just the minimum requirement.
and with a hard cap it won't grow beyond that.
nobody uses finite, valuable real estate as money.
No its not the supply inelasticity that prevents real estate from being used as money. I know you know the characteristics of money
there are other reasons also sure
Ok so your argument can't be bitcoins limited supply prevents it from being money because its like real estate.
So the only good argument I've heard from monero is fungibility. Maybe
Cause I'm not sure if layer 2/3/4 solutions create enough fungibilty.
Whereas monero has to be adopted by people even though its going to have a lower purchasing power compared to bitcoin forever.
Which implies a weaker security in terms of energy used.
we already see people not using Bitcoin to transact. bitcoiners are stingy because generational wealth.
this is directly because of the capped supply.
also since there's no supply inflation, only people that *spend it* pay for the security budget.
this further incentivizes hodling.
so whether we say it's like real estate or not, because of the capped supply, people are not going to use it as money. it is in the incentives.
Its Gresham's law. Bad money drives out good.
You don't spend bitcoin cause you have other options. But that's a market inefficiency.
Eventually supplies don't accept other forms of money.
But that's also where a more efficient market cab be made because spending would have to be more valuable than your money.
Instead of the current inefficient use of capital
it isn't "market inefficiency." it's the way people are.
there have always been other MOEs that people have used.
which is yet *another problem with the hard cap. it creates the need for an inflationary L2 for transactions so that they don't have to spend their UTXOs.
suppliers have their own needs. they don't want to spend their UTXOs either.
a hard cap incentivizes *literally everyone* to actually transact on another layer.
and eventually Saylor says " here use this e-cash from my bank"
or the Fed says "here use this CBDC, we'll start you out with $1,000 when you download your wallet."
and in 10 years you're back in inflationary fiat banking, backed by Bitcoin UTXOs.
1 if you're going to argue its just how people are then why would the current system be broken at all. Sov real estate and gold, moe dollar.
2 layer 2 are not inflationary. Lightning does not create more bitcoin. People can choose to create paper on top of any system.
3 its not the hard cap that incentivises higher layers its block size, latency and risk. In bitcoin you can trade security for speed by using lightning but not risk rehypothication
Ecash has more custody risk but adds privacy.
There will also be debt built on top eventually.
The point is that it can always fall back to layer 1 which garuntees security and hard cap.
Unless you believe .7 monero in 2min blocks is the perfect amount humans will ever need forever for all use cases, you will need a layer 2 too
we aren't talking about technical reasons that drive the creation of a L2, we're talking about macroeconomic conditions that do.
LN solves some of the technical problems but obv doesn't address the macroeconomic ones, if anything it makes them worse. because now the network is divided up and there's friction moving between on chain and LN.
so a hard capped underlying layer means there WILL be a liquid secondary layer. All other ways of transacting are not going to just magically disappear. people will want Bitcoin, but once they get it they don't want to spend it. they want to spend something else.
and it's obvious, we already see it happening.
after all, this is a primary reason the gold standard was abandoned.
I don't know if 0.6 units every 2 minutes is the sweet spot or not. but it's definitely better than 0 and better than an increase as % of circulating supply.
If your argument that the roughly 3% inflation gold necessitated a second layer because it was too scarce means both bitcoin and monero needs a layer 2
I think you're wrong in every part of it.
You seem to be pretty indiscriminate in your terminology so lets clarity what you mean
When you say the friction between lightning and base and it exaserbates macro economic issues what specifically do you mean?
Also what is a liquid layer.
What is the liquidity you're referring to?
"liquidity" refers to how quickly money can move to where there is demand for it. That's all.
The lack of liquidity under a gold standard was a primary reason why there was demand side deflation and severe liquidity shocks, creating the famous deflationary spirals.
if you divide up the money supply between different layers (and there's friction moving between them) that reduces the liquidity in any one place.
so a "liquid layer" is one where money can easily flow to where it is needed without friction.
The Assholes Who Run the World leveraged those liquidity problems to get off the gold standard and take complete control of the money supply.
but that doesn't mean that those problems are completely dismissible.
a hard cap is a knee jerk reaction to their fiat insanity. it is not good monetary policy.
So here s the problem you just contradicted yourself in the first 2 lines.
If you define liquidity as the speed at which money can move and you argue that deflationary shocks (I'm assuimg you mean great depression) was caused by the slow movement of gold that can't be.
At that point the dollar certificate was 40-55% backed by gold and moved across the monetary system at the speed of telecommunications.
Usually the argument about liquidity is about the flexibility of the money supply.
People argue that golds supply growth wasn't elastic enough.
when the banks run out of money that is also money not being able to move where its needed.
we can call that "flexibility" if you prefer.
The point is if you have zero supply inflation, liquidity shocks are magnified.
there's no decentralized way to solve the problem, the best we can do is pick a small stable number to cushion liquidity shocks.
but you're right. "how quickly" isn't the most important characteristic.
OK let me try to steelman your argument.
Company a has liabilities due soon and must be financed. It usually does so by taking loans from a bank which is repaid by the proceeds from the final good they produce.
There's a extrinsic shock that suddenly made company b unable to repay their loan to the same bank.
Because of this the bank is unable to finance company a at the same rate.
In a elastic money supply a government can increase the ms to increase the amount of currency units to reduce the cost of capital and stabilize prices so that company a can finish their production and the damages of company b failing is minimized.
If you want to avoid a gov as money supply creator a bank could also just increase their own currency units
Essentially you moved the risks of failure out of bank a into the currency in both cases.
Sound right?
That's certainly a thing that could happen.
not sure what you mean "risks of failure out of bank A into the currency in both cases"
I don't think it quite addresses the point that we're talking about, the entire system and how it's going to avoid liquidity shocks, demand shortages and deflationary contractions on a hard money.
but for the sake of the discussion we can go with this 👍
Cause if you can't make money to lower the price of capital either company a has to pay a higher rate and or the bank has to realize the losses from company b failing.
The price suppression from money supply changing means that the currency now has more units than before compared to a underlying collateral so its more likely to fail or if its fiat the purchasing power of the currency gets debased.
Well isn't this what you're referring to in terms of a liquidity shock? When company a is unable to finance its production due to the money destroyed? Deflationary contraction is just this situation rippling through an economy right?
What do you mean by demand shortage? Demand of what?
gotcha.
I think this example is specific to liquidity shortages and solvency. it doesn't quite describe a deflationary contraction, although this scenario would ripple out throughout the economy in the case of a deflationary contraction.
there's just more different assets, institutions and examples to bring up to describe "deflationary contraction" more completely.
maybe another way we could clarify what I mean and tie it back to the Lightning Network
suppose your bank has illiquid assets (bonds or real estate something) that it could sell at a loss to cover their liquidity crunch. so they're technically solvent but they have a liquidity problem. so the network is divided and the friction causes a liquidity problem.
(not saying that onchain versus LN is this bad, just saying it's *like this)
"demand shock"
I just mean the other side of the equation from "liquidity crunch." demand goes down, reducing liquidity. the pattern could begin with negative demand because of a crop failure or a pandemic or whatever.
OK for your collateral example I think you're misunderstanding the real issue of liquidity.
In our current system there's 2 main issues.
1 collateral rehypothecation, there's more claims on the collateral say mortgages cause bonds have more issues. There's more claims on the dereivarive instruments from the mortgage than the value of the underlying real estate.
2. The value of the underlying is fundamentally a stream of future dollar's. Which is all debt.
The problem isn't that illiquidity is some artificial aberration from the market. Where the price of the distresset asset is wrong.
Its that given the increased risks in the market caused by the shock your assets are actually worth less. The market would clear just fine if prices could adjust.
The reason we can't is that market clearing Price of all the debt based assets would be 0, or very close.
So in your example they actually aren't solvent system wide because as liquidations happen all the leverage which is more than the assets that got liquidated would cascade.
In my example company c can't get a loan and fails because company a couldn't pay their debts.
Your interpretation is that this is a market failure but what it really is that these companies are really actually insolvent at the new cost of capital. They're supposed to fail.
Demand of what would fall?
Demand of. capital increases during liquidity shocks. Demand of real goods and services also unaffected in first order effects.
I literally don't known what you mean
also correct that the lack of liquidity under gold probably means that Monero isn't inflationary enough to be a base money without an L2.
but I never expect to see that happen. (in my lifetime anyway)
So you're not expecting things to actually ever change? Are you just blackpilled?
when the internet started to get traction in the '90s, we all thought it was going to usher in a new Renaissance. decentralized trustless information! freedom!
instead we got mobile phones and social media. 30 years later and we're still trying to free the internet. (a decentralized trustless protocol that anybody can participate in)
Bitcoin is just like this.
everything's moving in the right direction, but it's going to take much longer than anybody thinks.
The revolution didn't start with Bitcoin and it's not going to end with it either.
Right cause we stopped using the internet in the last 30 years and we've moved on
you missed the point
we 99% use it in a 3rd party permissioned way
Yes were you hoping technology would get rid of stupid lazy people?
It's always a minority that cares enough about anything to deeply understand it.
The internet made it easier for people who want to self host things to be able to do so compared to before. It also shakes up the previous set of winners so that they lose to a new set of winners.
In relation to bitcoin its that the new money let's people who care about self sovereign money have a better shot than before. Its also going to shake up who the winners are.
Most people will do neither.
But overall they are better off than before
If inflation is always bad and makes you poorer then bitcoin should have started with 21,000,000 coins as to not make you poorer?
You could make the argument that all the bitcoins already exist just not released in this point in time. So all the economic calculations are based on the 21 million. The unreleased bitcoin don't make your current amount a smaller ratio of the known total.
Whereas all other systems without a finite supply means your total ratio falls over time.
except that unmined, unreleased Bitcoin doesn't "already exist" in any meaningful way.
you could say it's priced in, sure. but how would that not also apply to Monero's tail emission?
Because the terminal supply of monero is infinity. So the value would be 0
"terminal supply" is a mathematical abstraction which doesn't have any bearing on the real world.
The supply of Monero is never infinite. at any point in time it is algorithmically determined.
It absolutely has bearing in the real world. Its how you make economic decisions on your sov.
The expected loss of purchasing power from increasing supply is a major component of it
lol no, sorry but that's not really credible.
I'm not saying that it plays zero role in economic calculation, but in our discussion its a blip.
today Monero is inflating slower than Bitcoin is. and it will continue that way until the next having. nobody is looking at that and making their primary economic calculation about that.
an algorithmically determined inflation rate of 0.6% and decreasing every block is a blip.
The only people who are fretting about it are Bitcoin maxis who want to use "21 million only" as a purity test and fail to realize it's bad monetary policy.
In about 17 years it will be on 21coins. Inflation yes, but not really a concern I would say, in a practical way.
Just remeber how compounding works. 2% means you double the supply every 36 years (technically cloaset to 35)
All else being equal you've essentially lost 50% of your purchasing power in your working lifetime
I understand why inflation is bad and how it affects purchasing power. What I am saying is all inflation is not equal. The Fed printing money to devalue your savings is not the same as a protocol that allows a small amount of inflation to pay miners to secure the network which benefits the entire network. Amount of inflation and what that inflation pays for matters. And if that inflation is agreed on and known it is not the same as unknown amounts and unknown periods with no benefit to the network overall (ppl using USD). So my point is it’s not all the same thing. Like a sip of wine is not the same as drinking a barrel of wine.
Sure if your whole argument is its better than fiat. Yes
My argument is more why would people choose it when it makes them poorer than the alternative.
Because supply is only have the equation of value the other half is demand. If bitcoin demand goes to zero so does value doesn’t matter if terminal supply is fixed.
That's the same for all goods and services.
The point is given a demand for money and the choices available. Even if you had a random distribution. You would end up with all the value in bitcoin as the value of monero gets inflated away
The demand for both is not equal hence bitcoin is currently doing down in value (even with fixed supply) and Monero is going up in value (with tail emissions). And gold value is going up with inflation from mining. These things are not static. The market determines the value.
Are you looking at like the last 5 min?
There's a clear trend in the prices over the last 10 or so years and its not in moneros favor.
I'm talking about the large arc of time type of movement where the noise smooths out.
Bitcoin has a 7% gain on Monero over 5 years. Not that impressive.
See for yourself
Over 10?
Point is returns are diminishing if you expect Bitcoin to perform over the next 10 years as it did in its first 10 years you’re gonna have a bad time.
Don’t get me wrong I love Bitcoin I’m just not blind to its flaws
Fiat returns?
What other returns are there? What do you pay your bills with?
When bitcoin goes up in fiat
PURCHASING POWER!!! YEY!!
when anything else goes up
FIAT RETURNS!!! BAD!!
😂
Then I disagree I expect the fiat returns of the next 20 years to be much higher than the first 20
Take me to your hopium dealer 😮💨💨
That would be great if true but I wouldn’t bank on it.
You expect fiscal conservatism from world governments? With the us at over 100% debt to GDP? Japan over 250?
And with multipolarity and at least continued economic warfare?
I don't see how you can believe Fiat printing won't be exponential
No I just don’t expect bitcoin to go up 129,000,000% in the next 20 years 😂 or Bitcoin to be the sole beneficiary of said printing.
hopium quit smoking it
It won't be the sole beneficiary just the largest.
Let me weaken the argument a bit. I believe the diminishing Fiat returns will be false. There will be too much printing for that to be the case.
Though I do have a greater than 30% or odds that the dollar as it is dies in the next 20 years so 129m% returns may be tame
I see your 129m% and raise you 100 gazillion %
gotta run, good chat ❤
It's not stolen purchasing power if the network scales to more powerful participants. The U.S. Dollar shows us this on the global money supply. Massive monetary expansion with very little natural inflation (prices are down compared to the total).
Most of the pain and stolen purchasing power comes through institutions not raising wages appropriately, exploiting labor markets need to work; not the money printing.