Did Nakamoto know?
I almost wonder if Satoshi Nakamoto knew exactly what he was doing when he bootstrapped the Bitcoin network. Just like none of the experts understand "impermanent losses", so to do none of the crypto investors/bulls out there realize that deflationary economics are provably inferior to inflationary economics.
Here we have an interview with Mexico's 3rd richest person, Jose Rodriguez, making various talking points about Bitcoin and why it is a superior asset. At the 24 second mark...
21M supply! 21M supply!!! 21M Supply!!!!!11! omg!
Everyone foolishly latches on to the 21M hard cap like it's the be-all end-all best thing about Bitcoin. It's not. In fact, the supply cap for Bitcoin is going to turn into a huge negative going forward. It's not a good thing. It's trash, or rather, it's not trash, but it is totally neutral, which is trash compared to what everyone thinks it is.
We are entering an era where Bitcoin serves the corporations, central banks, and governments of the world perfectly. The deflationary nature is perfect for them to constantly buy up the supply and own it forever, using it as leverage for debt. The corporations and governments buying BTC today are never going to sell and they don't have to. There isn't going to be any left for anyone else, and they will continue flagrantly manipulating the price for as long as they are able with zero repercussions as this is an unregulated market that regulates itself by design.
The slow centralized development (or lack thereof) for Bitcoin (Blockstream) is also the perfect controlling mechanic for the big dawgs. The fact that security is so high and transaction fees are so atronomical (assuming worldwide adoption) points to further centralization of everything, and makes it so only custodians (banks/exchanges) can actually control the keys and still remain profitable.
So what's good about Bitcoin?
Well, first and foremost, it was first. That counts for a lot. This is a niche asset that no one is even attempting to compete with. What's the niche?
Security.
The "key" to Bitcoin has nothing to do with the supply cap and everything to do with who controls it. It is hard to control and it has very high security. That's why it's good. Not because of a hard cap, but because all the corporations, banks, and governments trying to control it will be rendered inept, and they will all come to agreement that this is a superior arangement compared to what they had before (dozens of fiat currencies built on waning trust). Again, this points to centralization (dozens of fiat currencies being consolidated into one Bitcoin network).
However, the hard cap does somewhat come into play as a form of security. Allocating inflation is an attack vector. By only allocating inflation to security Bitcoin completely plugs this potential flaw. That doesn't make it superior to other networks, it makes it safer than other networks, because again the key to Bitcoin is security and robust resistance to attack. It doesn't matter how often Bitcoin gets stomped on. It's going to perservere no matter what.
This is to say that obviously other networks will come along and take more risks, and guess what? With greater risk comes???? Yes, greater reward. It is all but guaranteed that many of these networks will rise up and flip Bitcoin's market cap sooner or later. It is inevitable. Does that mean we shouldn't invest in Bitcoin? Of course not... Bitcoin will still be more secure, and when the cryptosphere comes under attack it will ascend back to the top spot as the ultimate anchor of the network of networks.
But that's the thing about anchors isn't it? They are safe, but they are also boring during the downtime. Imagine being on a yacht on a nice sunny calm day and being obessed with how cool the anchor was. Your friends would think you were crazy. Look at those super fun "perfectly safe" wave-runners over there! Let's get this party started!
But as soon as the storm comes, guess who didn't get swept away? Yep, everyone who was holding onto the anchor. Bitcoin is the extremely conservative option that maintains dependability given a harsh environment. Absent a harsh environment many will become bored and branch out and try new things. This is why everyone should hold at least a little Bitcoin. Espcially now while we can actually afford the transaction fees.
I'm starting to believe that Satoshi Nakamoto created an inferior asset ON PURPOSE. Yes, that's right. Bitcoin is inferior. Just look at the halving event.
Why is the BTC halving event so clunky? Slashing inflation in half every four years? That is such an embarrassingly clunky option that creates totally unnecessary volatily and instability. It would have been just as easy to lower inflation a little bit every time the difficulty changed (~2 weeks) or even after every block. This would be a superior smooth transition and Bitcoin would not encounter such crazy volatility every four years. Smooth sailing.
It's almost as if Satoshi made it clunky and inferior on purpose. He created the volatility and the supply shocks built in on purpose just to generate awareness and tap into our primal greedy instincts. Everyone wants to get rich quick which as little effort as possible. Seeing people get so lucky and make so much money in such a short period of time gets a lot of attention.
In the same vein, Bitcoin having very low inflation allocated 100% to network security is the SAFEST option. Bitcoin doesn't have to worry about inflation being allocated to bad actors or to people who are going to spend it foolishly without bringing value to the network (just look at Hive and all the crazy downvote scenarios). By eliminating inflation, Bitcoin eliminates risk, but that also eliminates reward. That is totally fine, this ship absolutely needs an anchor. Bitcoin is it.
Bitcoin can not scale
I don't care what anyone says, the only way for Bitcoin to scale is to become massively more centralized. Lightning Network Bitcoin is basically just another coin they are calling Bitcoin. The security vectors introduced by Lightning basically make it not Bitcoin. Might as well just use another chain entirely, because that's what the LN is. Same would go for smart-contract networks and whatever else. Stop trying to upgrade the anchor into a spaceship; it's not going to happen. Bitcoin has a very niche purpose, and it serves that purpose well.
To recap:
Things that make Bitcoin inferior to up & comers:
- Deflationary hard cap & economics
- Halving event every four years (volatility)
- Centralized snail-paced development
- High security that comes at extreme cost
Nakamoto genius?
At this point it's almost as if Nakamoto knew this was going to happen and leaned into the outcomes we are seeing today. The very institutions Bitcoin was supposed to break are simply capitulating and buying out the network. By all accounts, it seems like that's going to work out for them quite well in the long term. No one can stop them from buying, and the inflation of the network is so small now (rounds to zero) that once they buy all the Bitcoin they'll simply own and control it forever.
It's only a matter of time. Imagine the price of one BTC at $20M and this is easy to imagine. They can print USD to infinity. At a certain point, all the small fish will sell out and be permanently priced out of the market.
But again, Bitcoin is a totally inferior asset compared to what some of these other networks could become in the future. The key is distrubution. Whoever has the best distribution of tokens is going to have the best kind of decentralization possible. You can't get that kind of distribution with a deflationary asset. It is known. People are going to horde it; they already are.
It seems like such a trojan horse for the entire financial system. Just when they think they have it all figured out Bitcoin starts dropping on the market cap and they'll have to start all over again. Superior distributions and tokens that can actually maintain stability and act as a unit of account are going to take over. That means hyper-inflationary assets are the future. Such irony.
We've all seen how this plays out. Expect the unexpected. We've seen Doge get into the top ten, much to the dismay of the entire ecosystem. We've seen how exponential value can be created at the drop of a dime. Reality doesn't care about theory. Just because Bitcoin is the most secure network of all time doesn't mean it's going to stay number one on a speculative market cap. In fact, that's exactly why it won't be number one going forward. No one actually cares about security until that security fails. Many of these network's security won't fail, even though they have less than Bitcoin. In a very real sense Bitcoin has too much security and sacrificed too much in the name of safety, but at the same time that's exactly what this ecosystem needed.
Market watch
Bitcoin is clearly messing with me. We are so close to breaking back to the upside and reversing this potential "bear market". Of course in hindsight all anyone will see is 10 days of correction and all these silly notions of a bear market will all but dissapear.
Conclusion
This is not a competitive space, and Nakamoto was one of the few entities that had the foresight to build accordingly. What they created was the safest asset possible. They must have known that not-as-safe assets would rush in to fill the void and create more value on top of everything else.
The future of currency is hyperinflation, but not hyperinflation controlled by a central authority, but tokens minted and spent by the underlying community itself. The future of currency is defi and printing a lot of money that helps expand the network. Bitcoin isn't that, and that's fine. I starting to think that Satoshi realized that the whole time. They didn't create an environment, but rather just one creature within that environment that can support thousands of animals in a completely sustainable manner.
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Bullshit.
BTC can scale immediately - zero or near zero fees, up until this point the network has been artificially hobbled.
Do you think a block size upgrade would reduce fees?
hm yeah, the people in charge of btc dont want it to scale
and that isnt going to change.
I tell people this all the time, during the gold standard, Banks and coperations didn’t sell their gold, it’s as if people are forgetting what fiat RESERVE actually does. Now, Bitcoin has more options to be put to work with, yes native Bitcoin on decentralized Crosschain AMM, I know you know about Thorchain already. No bank or cooperation or individuals have to give away custody of their Bitcoin to earn from holding it. This is even more reason to hold Bitcoin!
Wouldn’t this be a disaster?
Hmmn very interesting...am I seeing what you’re seeing? Hive much uh!
Amazing read
Agreed 100% that it is a reason to hold. Not other way around
Exactly my thoughts.
Well, You may have your own opinion and views towards the creation of Bitcoin. Personally, I believe that satoshi had learned from the last market crash and it was really made for the hedge against inflation. Why 21 Million? The only satoshi could give the answer to this exact number but the motto seems obvious that there a need for an asset for the store of value. If you love money printing then I don't think I have anything to say otherwise, Yes Satoshi is a genius and Bitcoin is a superior asset.
Talking about security at an extreme cost, I think you should read how much government spends to store gold? The expense spent by banks for their security and ATM is just a few examples of them.
Slow-paced development? Really? If you think so please submit your proposal and try to do the same thing in the bank you are using right now.
And, Bitcoin can't scale is the funniest thing I have ever heard. For your sake of information, Bitcoin Lighting network is not using a entirely different chain. The final transactions is recorded after the channel is closed in the Main Blockchain so considering it as different Bitcoin is insane.
If you think Bitcoin is faulty and an inferior asset class, You can start your own own Blockchain project with the features you like. What is stopping you?
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Great analysis.
However you don't really explain why inflationary money is better and I think that argument is based on an assumption of overall economic growth which is in turn dependent on population growth. These assumptions don't hold.
We are now very clearly facing a demographic death spiral of far more deaths than births, declining population and a top heavy reverse population pyramids.
This is the case in almost every first and second world economy.
95% of the world's productive capacity is dying off.
It is impossible to have real economic growth with constant decline in the number of productive people in the economy. Governments have been covering this up with money printing and debt. It is unsustainable.
Bitcoin as a deflationary currency is perfectly suited to a world in massive demographic and economic decline. In a system with fewer people, less money is needed to make things work and thus inflationary currencies just cause runaway price inflation.
It is OK to have inflation in something starting off from small like a new cryptocurrency, but once mass adoption is reached there should be no more money created because there are no more people being created to use it.
The flaw in your argument is that it assumes that productivity remains the same which is incorrect. Take agriculture for example: in the past society needed to have the majority of the population working on food production but now only a small fraction is required (with a much higher output).
The problem with a currency that has a static supply is that it motivates hording instead of it being put to use to promote economic activity. A superior currency would be one that has a supply that is flexible. As far as a know nobody has designed a currency that can do that.
In a world dominated by a currency with a finite supply the prices of goods and services would be under a permanent downward pressure (since the circulating supply is capped the effective demand cannot grow). It would be like living in a world under a constant economic recession.
Why would anyone invest their Bitcoin in producing goods and services that have declining prices if they can just hoard and see their wealth appreciate over time?
Both a deflationary and an inflationary currency are just as bad in totally opposite ways.
You seem to be assuming that productivity will keep rising when populations are rapidly falling and the workforce shrinking and aging.
A lot of people think that population decline is OK because productivity will keep rising. But the opposite is true.
Declining populations lead to declining skill sets and productivity. There is a short lag (which is what we are experiencing now) but soon we will have both population and productivity decline.
Its really quite simple when you think about it. The vast majority of people only have the ability and motivation to learn new skills and technology when they are young. As the number of young people continues to decline there is less and less innovation and whole skill sets start to be lost.
It is no coincidence that the country producing by far the most innovation per capita is the only advanced economy with high fertility and a growing younger cohort. To put this in context, this small country has consistently produced far more innovation and productivity improving tech than the whole of the EU. In the last 5 months alone its high tech startups have raised over $10 billion. This is an order of magnitude more than EU startups in the same period.
Population decline caused by low fertility has leads to skill loss and productivity decline consistently throughout history. From Tasmania's pre-history to the Greek Dark Ages to the fall of Rome and the European dark ages.
When populations and productivity are declining there is no downward pressure on prices because of a fixed supply of money. There is stable prices and sound money that allows productive investment.
Bitcoin is perfectly suited to such a world and may just have the ability to bring us out of this demographic death spiral.
There are strong arguments that this demographic death spiral is at least partially caused by central bank money printing.
See https://econimica.blogspot.com/2021/02/global-depopulation-two-paths-one.html
I am going to need citations of studies that prove this statement.
In the mean time I have couple of objections:
The claim that fertility rates lead to decline in populations in the past is questionable at best. Only in modern times humanity has introduced effective birth control methods.
Population declines in the past are more likely linked to the destruction of individual civilizations due to war, famine caused by extended draught and epidemics or to the exhaustion in the available supply of slave labor (which was the bedrock of the economy of ancient mediterranean civilizations).
The article that you cited shows a lot of correlations but we all know that correlations do not equal causation.
Another objection that I have is that you equate productivity to skills of the workforce (which is part of it) but the higher economic outputs that we have seen in the last two centuries have more to do with innovations in technology.
You are right in asserting that I assume that productivity will continue to increase...the pace of technological improvements keeps accelerating on a global scale and shows no signs of stopping any time soon (barring a black swan event).
I'll do a full post about this with the sources and will link it here when ready.
If the Bitcoin network just decided to double the amount of Bitcoin in everyone's wallet, would it matter? On a very real level inflation doesn't matter. What matters is who controls the inflation and how many buyers are lined up to support a given price.
The advantage of hyperinflationary assets is that they can maintain unit-of-account status while also generating exponential growth. The growth doesn't come in the form of an increasing token value, as price is offset by exponential yield and new money. It is in this way that crypto can become a store of value, a medium of exchange, and a unit-of-account all at the same time. Bitcoin can't do that. It will never be a unit-of-account due to deflation.
Yes it would matter. It would destroy it.
Whatever percentage you think that is, triple it for the 3rd world economies.
I think that Bitcoin is just version 1.0, and this is almost by definition, less that any 2.0 version that comes out. Satoshi may have been a genius, but, there is no way he/they could account for everything on the first try.
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Satoshi was an engineer not an economist.
The genius of his invention was that it was decentralised digital money that couldn't be double spent. The other aspects (the halving, the cap on coins etc) are all arbitary and can be changed.
In the genesis block he included the headline in the Times newspaper of the day: "Chancellor on brink of second bailout for banks"
It turns out that the Chancellor of the Exchequer had asked the Bank of England if there was a way to avoid the bailouts - could the BoE handle the payment system if the banks failed. It turns out the BoE couldn't - so the banks were bailed out mainly because they process all the transactions that make modern commerce work.
However, if you have a decentralised payment system that doesn't double spend, then you don't need to bail out banks.
My feeling is that central banks like the BoE or the Fed will issue their own digital coins based on bitcoin's technology, but without any of it's deflationary flaws. The payment system will then migrate to these digital coins controlled by the central banks - which means that if the commercial banks fail it will no longer matter, the payment system will continue to work and there won't be any need for bailouts ever again.
Bitcoin definitely won't hold that top spot forever due to its limitations, but it will serve that anchor role for a long long time, preserving its dominance in the short-mid term
The guy doing the interview, Jose Rodriguez @josepimpo used to post ion #HIVE. Hope he comes back.
Respectfully this is extremely false. Inflation is theft. We don’t need the same fiat garbage rules in our space.
We’ll Agree to disagree on some of this
But I respect you and the point ur making 🤟
So nobody’s talking about lightening network? I use it 8 times a day to tip podcasts on podcasting 2.0
It works great. Inflation is the worst idea. Inflation in bitcoin would kill it. It was built on sound money and core holders would dump.
This was an interesting lecture. My main issue is that you need very low fees to use it in daily life, and i don't see how these can be achieved, even with Lightning network. How can you buy a can on Coke with BTC when the fees are 1-2% of the item you buy?
1-2%? Really? You should check it carefully. The lighting network fee is really cheaper and it is like 1 satoshi. If 1 satoshi is 1-2% of an coke then you should use cash I think.
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you pay for the price on the shelf, right? so it is the same price. is the shop paying the fees to the bank for using the bussiness bank account.
The price on the shelf is the cash price. Many times the electronic (credit and debit) card price matches the cash price, but there are times when a percentage of the price is added to the cash price as a processing fee for using the cards. These fees are charged by the providers of the electronic card services (American Express, Visa, MasterCard, Discover, etc.).
I've seen this detail pop up more often in recent years.
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I agree exactly that:
V.B. once said/wrote, Bitcoin does one thing and one thing very well, a secure store of value, resistant to attack.
VB also said/wrote:
Ethereum does one thing very well, facilitates smart contracts and commercial interactions.
He then said, a cryptocurrency can't be the most secure and the most useful. It can eith be the most secure, or the most useful. It can't do both equally well. You have to give up security for utility, or utility for security.
Bitcoin is all about security, not utility. You are right that deflationary tokenomics, is both a feature and a flaw.
As for the future of DeFi, it is clear to me that the typical DeFi yield farm project demonstrates incredible utility, but horrible security. They are hugely illustrative of my above points. And your point below.
The next thing, which we are only now coming to grips with is the Proof of Work is the most decentralized system we have, and that in addition to sacrificing security for Proof of Stake and its many variations, we are giving up on decentralization. We are embracing degrees of centralization, in exchange for faster transaction times, and lower transaction fees.
As you wrote many times during and after the Justin Sun takeover, we embraced DPOS and saw its flaws as features, until those flaws were used against us. We surrendered the security of POW for the benefits of DPOS and the wonderful economy we could build upon it. But we must recognize those features come at a price, security for utility.
For this is similar to Larry Page and Sergey Brin. One of the wanted to download the internet and they did. They still do^^
He exactly knew what he was doing.
Hola edicted,
Gracias por destinar correctamente el 100% de las recompensas de está publicación a HivePower.
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WHAT IS THIS SOME KIND OF SCAM? I could see this kind of comments on may posts. What is the reason for it?
It's a notification that you set up the post rewards to hivepower. If users don't want to receive it only write STOP. It's optional for everyone.
Great analysis.
Satoshi Nakamoto is a common name .. but none of them invented Bitcoin ! in fact the Blockchain and Bitcoin are the result of long term working group starting in the 90s .. and like TOR once was a CIA-project also the blockchain had a very evil offspring .. a team around Alan Greenspan .. later they gave up the project and it went wild ... whoever picked it up then .. it surely was no "Satoshi Nakamoto" !!
If we are considering it as an asset, I don't think BTC is inferior as a store of wealth. The deflationary tokenomics means it will go up in price as the years go on due to the lower supply.
However if we are trying to consider BTC as an actual currency we use in daily life, I agree with you about the disadvantages.
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You didn´t explain why non-inflation is bad, other than "The deflationary nature is perfect for them to constantly buy up the supply and own it forever, using it as leverage for debt".
What´s preventing anybody to buy Bitcoin too? In fact, what if currently >50% of the BTCs out there are in fact NOT owned by "them" but but by nobodies including you and me? Or who knows, maybe it is even 90%. It is a free market (unlike with Fiat). If "they" would buy up all the supply, wouldn´t then the price go up so massively that "they" would make all the nobodies rich? What´s so bad with that?
What next?
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It seems the debate on Satoshi is not ending anytime soon. There is still a bright future ahead of us with bitcoin. This is why I always put my coins on a trusted application like https://atomicwallet.io/, where users are offered the best security.
I gave up on understanding Satoshi's mind a long time ago, haha!
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