With bitcoin down over 60% in dollar terms for the year we thought it might be helpful to look at eight separate lenses through which you can value the network
reality proves me wrong so far, but I disagree on BTC.
The points in relation to your sequence:
1. I doubt that the 10x better utility argument depends on open or closed ecosystems, but still have to think further about it.
2. Tons of networks out there with to utility. A network needs a utility (in stocks it’s RoC) to prove it‘s value. Visa still processes 100x more payments per time.
3. Gresham in this context is circlar reasoning. You want to define the value of BTC with a theory that already works on the basis of value. I would argue Munger like on Gresham „Bad behavior drives out good behavior.“ A lot of BTC is used by crooks, Mafia, Russia, North Korea to launder money. Those are not the guys that built the railway system. For sure not the people I want in my ecosystem.
4. I see this as a flaw of BTC. I prefer the often mentioned „seamless network of deserved trust“ that acts like a two-factor-authentication. However I can imagine use cases in rogue states that would make it useful over the mentioned flaw. Imagine you have an accident or lose your mind. The password would be gone. If you shared it beforehand with a trusted person you are still again in the trust territory that you wanted to avoid. Think Alzheimers: No currency for old men….,-) Apropos lost bitcoins: I hear N.N.Taleb whispering „Absorbing barrier“…..there it is….
5. More or less agreed.
6. You want to tell me the early miners didn’t profit due to mining a largely unknown asset? Ask Nakamoto or those unholy Winklevoss bros.
7. Always the same scarcity argument that drives human behavior for ages. Please pick up the next stone of in your vicinity and regard it for an hour. Then tell me if it‘s unique and what you’re willing to pay for it.
8. Proof of work was used by „Nakamoto“ to create kind of a bookvalue with manufacturing costs. Many things are difficult to make but still are worthless.
I saw in your letters that you know and value Anthony Deden.
It’s exactly his Meta thinking and thought concepts that I adopted, modified and still use today.
This framework allows you to get a grap on value without the necessity of numbers.
Let’s go through it. By the way, you need all conditions fulfilled, not just a few.
Scarcity:
Each BTC is unique. Agreed. But everyone could himself construct a Cryptocurrency with superior attributes to BTC, many do….
Endurance:
More or less, yes….no costs to endurance as long as people keep up the network.
Independence:
You need secure internet access which can be quite a hurdle in tumultuous times.
Two arguments that I use myself:
Utility:
No value without utility.
As for payments processing VISA or Mastercard are by magnitudes more powerful than BTC.
Transparency:
Compared to other currencies you need a disproportionate amount of knowledge to use it correctly.
Nothing for aging Moms and Pops….
I know few assets that have such a history of fraud as the BTC environment recently displayed, which is exactly due to this understandability issue.
I value your work and I‘m open for further exchange. I don’t want to be proven right but to stand on the right side of that trade. If you can change my mind, I’ll adopt BTC…
Dear Six Bravo,
reality proves me wrong so far, but I disagree on BTC.
The points in relation to your sequence:
1. I doubt that the 10x better utility argument depends on open or closed ecosystems, but still have to think further about it.
2. Tons of networks out there with to utility. A network needs a utility (in stocks it’s RoC) to prove it‘s value. Visa still processes 100x more payments per time.
3. Gresham in this context is circlar reasoning. You want to define the value of BTC with a theory that already works on the basis of value. I would argue Munger like on Gresham „Bad behavior drives out good behavior.“ A lot of BTC is used by crooks, Mafia, Russia, North Korea to launder money. Those are not the guys that built the railway system. For sure not the people I want in my ecosystem.
4. I see this as a flaw of BTC. I prefer the often mentioned „seamless network of deserved trust“ that acts like a two-factor-authentication. However I can imagine use cases in rogue states that would make it useful over the mentioned flaw. Imagine you have an accident or lose your mind. The password would be gone. If you shared it beforehand with a trusted person you are still again in the trust territory that you wanted to avoid. Think Alzheimers: No currency for old men….,-) Apropos lost bitcoins: I hear N.N.Taleb whispering „Absorbing barrier“…..there it is….
5. More or less agreed.
6. You want to tell me the early miners didn’t profit due to mining a largely unknown asset? Ask Nakamoto or those unholy Winklevoss bros.
7. Always the same scarcity argument that drives human behavior for ages. Please pick up the next stone of in your vicinity and regard it for an hour. Then tell me if it‘s unique and what you’re willing to pay for it.
8. Proof of work was used by „Nakamoto“ to create kind of a bookvalue with manufacturing costs. Many things are difficult to make but still are worthless.
I saw in your letters that you know and value Anthony Deden.
It’s exactly his Meta thinking and thought concepts that I adopted, modified and still use today.
This framework allows you to get a grap on value without the necessity of numbers.
Let’s go through it. By the way, you need all conditions fulfilled, not just a few.
Scarcity:
Each BTC is unique. Agreed. But everyone could himself construct a Cryptocurrency with superior attributes to BTC, many do….
Endurance:
More or less, yes….no costs to endurance as long as people keep up the network.
Independence:
You need secure internet access which can be quite a hurdle in tumultuous times.
Two arguments that I use myself:
Utility:
No value without utility.
As for payments processing VISA or Mastercard are by magnitudes more powerful than BTC.
Transparency:
Compared to other currencies you need a disproportionate amount of knowledge to use it correctly.
Nothing for aging Moms and Pops….
I know few assets that have such a history of fraud as the BTC environment recently displayed, which is exactly due to this understandability issue.
I value your work and I‘m open for further exchange. I don’t want to be proven right but to stand on the right side of that trade. If you can change my mind, I’ll adopt BTC…
Keep up your good work.
All the best…..
"the bitcoin standard" book is also a great reference.