Answers to Common and/or Interesting Responses to “The Cryptocurrency Singularity”
Below, I address interesting and/or common responses to my previous post The Cryptocurrency Singularity.
I didn’t consistently dive into discussions with these individuals and I may have misinterpreted their responses. Therefore, my representation of their concerns may be inaccurate. As readers, please take this into account.
You’re using Gresham’s Law incorrectly
Being aware of this as I wrote the article, I mentioned that I was loosening the definition. Since they are different currencies and do not have the same face value, I felt I needed to loosen the definition because the effect seems to apply to different currencies anyway.
In the end, my thesis is not affected by whether it not Gresham’s Law is at work. People will move their wealth to a form that degrades less slowly, as long as it is not difficult to move out of it. If you’re aware of another law that fits this description better, please let me know — it would minimize reader distractions.
Cryptocurrencies are not wealth, and we would be stupid to see it that way
- https://medium.com/@ferencattilazoltan/you-speak-of-bitcoi-n-but-not-of-the-anticipated-tiering-of-the-system-1f48705724cb
- HackerNews. Search for “deflation”.
The inflation vs. deflation debate is an interesting one. Like I mentioned in the article, I do not feel I know the answer about which side is right. Alan Watts has the most convincing argument I’ve seen for keeping inflation the way it is.
But again, I do not think it matters because who will do the “keeping”? Will this group have the ability to control the situation?
I don’t think so. Most people don’t give a frack. They will transfer their wealth (or money, or currency, or units of economic energy, or whatever you want to call it) to something that degrades less over time as long as the friction when exchanging is acceptable.
We need to have our sights set on what’s beyond the inflation vs. deflation debate. We should not lose sight of what’s beyond the tipping point because it certainly sounds like the singularity, if it does happen, is going to cause suffering.
If we assume that this will occur, how can we structure our systems to create the least amount of suffering possible?
Bitcoin can’t scale to meet the world’s demands
Although there’s a lot of hard work directed at scaling, there is little debate about whether or not a single blockchain will be the blockchain for all transactions, including buying cups of coffee.
I’m assuming that the scaling issues will be solved whether it be sidechains, tree chains, riding on Moore’s law, multiple cryptocurrencies connected through an internet of ledgers, or all of the above.
If bitcoin reaches the stability of major currencies against the US Dollar, I’m fairly certain there will be more activity around finding scaling solutions.
Cryptocurrencies will never become stable enough because they have no intrinsic value
- HackerNews, search for BenoitEssiambre
At the core, there is a debate about whether or not bitcoin has intrinsic value, and whether or not intrinsic value is relative to the one doing the valuing (i.e. does intrinsic value exist if no humans were there to value it; if someone valued the properties that bitcoin provided, does that give it intrinsic value?).
We’ll see whether or not bitcoin can become stable enough against major currencies like the US Dollar. I’m not aware other asset classes like bitcoin existing before, therefore I’m left with nothing else but opinions on this matter.
Even if a cryptocurrency had no “intrinsic value”, as long as it was more stable than a person’s currency, they would store their wealth in their cryptocurrency of choice.
Nobody accepts bitcoin today, so how would we get there?
Can you imagine a service that converts all your bitcoin on the fly as you need to spend it on businesses that do not accept bitcoin? You don’t need to. They already exist.
That is not to say that I use these services. I don’t. Because bitcoin is too volatile, I do not want to get stuck between a rock and a hard place when it’s time to pay for bills. When it’s time to pay my bills and bitcoin has has gone down 15% in the last two days, I can’t say I’d part with those gladly.
Even if establishments did not accept bitcoin, as long as bitcoin was stable enough for a person, that person would use services like these to convert their cryptocurrency of choice to the inflationary currency as they spend it.
Volatility isn’t relevant to whether bitcoin goes up in value over time or not
- HackerNews. See conversation with fpgaminer
fpgaminer was right to be confused because I didn’t make myself clear. Perhaps I should not have mentioned that bitcoins have gone up, on average, 150% percent per year since it was created. This is a distraction to the reader.
Even if bitcoin did not appreciate in value at all, as long as my main currency did, I would shift my money to the other form.
Can the same be said for gold?
Although you can follow that link to see my answer, I will paste it here for those that do not want to visit a different page:
Swapping it needs to be as easy as the devalued coin on your left hand and the mostly silver coin on your right.
Gold does not seem to have this property, at least when interfacing with fiat currencies that have become mostly digital. If you wanted to do this, you would need to go through an intermediary that gives you a certificate, with which they promise to give you the gold.
I didn’t mention it in the response, but another reason is that governments could easily shut down or block their citizens from using companies like these, and that would trip up the movement from their inflationary currency to gold tokens.
Getting to The Bottom of the Concerns
Do you have further concerns, or follow up questions to my responses? I’d like to, as much as possible, give ample time to understand what you mean. I’m afraid neither Medium’s comments section section or Twitter’s mentions are not great for this. I turned on receiving direct messages (DM’s) from anyone on Twitter — let’s give that a try.
