On the contrary.  A store of value needs much more trust than a currency, because the holding times are much shorter for a currency, and the possibilities to exchange it are much larger with a currency.

It is much less risky to be paid in an asset as a currency and spend that currency on several goods and services, than to store your retirement in that asset if trust in the asset is limited, because the currency, you keep it for a few weeks.  The retirement, you keep it for 30 years.  

I wouldn't mind be paid in bitcoin if I could spend my bitcoin when going to the supermarket, and buying petrol and so on.  I wouldn't care about the long-term evolution of bitcoin.  Hey, during one month, it won't change too much, right ?  However, I have no idea about in 20 years.

I don't mind getting paid in fiat either.  Actually, today, I need fiat to be able to buy my groceries !  So if I would be paid in bitcoin, I'd convert them to fiat to do my shopping.  Because with that fiat, I can buy stuff all over the place.  With bitcoin, not (yet).

Using a currency is much less risky than using a store of value in the long run.

Why ?   Look at some paintings of some or other famous painter who is dead, so his paintings are collectibles like bitcoin.  Now, if bitcoin remains a funny curiosity within a certain circle of technology adepts, slowly growing at about the rate of inflation of bitcoin, why wouldn't it be possible ?   Maybe we are already on the top of the adoption curve of "funny curiosities".  Personally I don't think so, and I don't hope so, but it is a possibility.

Rembrandt paintings are worth a lot of money, but I think, less than the current market cap of bitcoin.  So should we expect bitcoin, as a technological curiosity if it never grows out of that status, to be so much more worth than the collection of Rembrandt paintings ?

Maybe bitcoin, as a curiosity, already came to maturity ?

Just to illustrate that it is perfectly well possible that bitcoin stays at about $400 too.  It would then be a reliable store of value for those few people interested in this kind of stuff, just like collectors of Rembrandt paintings are.  They are expensive too, but don't go to the moon either.

Absurd.

No one will accept a currency that has not first and foremost established itself as a store of value.

This is the very reason why you see merchants currently dumping BTC to fiat. They do not trust it to hold value. This sort of merchant adoption is certainly not what will drive the price of Bitcoin.

Currencies are unusual in that the greater is its market cap, the more useful they are. (...) A more expensive currency is ipso facto more marketable (more liquid), thus making it a superior medium of exchange. The more bitcoin hoarding there is, the better it is as a medium of exchange.

how will hoarding add value?

if everyone sat on their coins the pump and dumpers will dictate the price

spending adds value

No, that is what brg444 was claiming here https://bitcointalk.org/index.php?topic=873102.msg9652987#msg9652987

Namely that bitcoin would first be a store of value before becoming a currency.  By definition, people interested in "store of value" are investors, and we know that most people now are speculators.

My claim is that the real fundamental of bitcoin is as a currency, to buy stuff with.  What you are talking about, too !


Indeed.  Merchant adoption.

However, things will be the other way around: bitcoins will then be $100 000.- BECAUSE you are wanting your salary in bitcoin, because you want to store your bitcoins you earned to spend them directly to buy stuff, and that the guy you're buying from is also using his coins to buy his supplies from and so on.  And then the coins get their value from P x Q = M x V.
From the demand for holding currency to be able to buy stuff with.

Merchant adoption.

And that will then be the true fundamental which will make bitcoin have $100 000.- and after several years like that, you will not hesitate putting your life savings in bitcoin for your retirement, because you know that bitcoin, as long as it is used as a currency, will keep more or less that value.  It can then also become a reliable store of value.

But that will not happen 5 years from now.

The stock market has fundamentals which are based upon the cash flow generated by real enterprises.  You cannot compare the stock market which is based upon expected discounted cash flow with the speculative value of collectables such as gold or bitcoin and of which the value in case of "store of value" only resides in the long-term trust one has in its acceptance of value, which, in my opinion, can only grow over a long period.

In as much as bitcoin is a currency, though, the monetary formula will give its price as a function of its use as a currency.  It is the way gold got its value historically: as a currency.

Sure, but to develop that trust, will take a *long* time.  If an asset has grown wildly from $10 to $100 000.- in a few years time, you take it normally that this is a high volatility, and that the opposite motion will be potentially just as quick.  You don't consider that as a store of value for the long term.

We've seen that last year, people have bought at $1200.- and end up a year later around $400.-  Do you think that after that example, people would buy in with a lot of money at $100 000.- ?
So what would convince anyone that if the price rose in 5 years time to $100 000.- that it can stay there for 20 years ?  Only by observing it for 20 years before engaging in it with serious money ! Which by itself will mean it cannot stay there !  And btw, all hodlers of today would try to cash in at such a price !

Again, this is different from the speculative market which is high risk, high gain which is the main driving force of the bitcoin price right now, but which only makes sense when the price is low of course !

This is why I think that bitcoin as a store of value at high prices is not possible in the near future.  If bitcoin would stay for 10 years at $400.- (and slightly rising to compensate for dollar devaluation) then people would start considering it as a store of value around that price. 

Bitcoin at $100 000.- because as store of value is imo not sustainable in the near future.

It is sustainable by (gigantic) merchant adoption on the other hand.

Bitcoin is currently inflationary.
The base is being inflated at ~10% per year--much faster than any self-respecting fiat currency.

Re. "upside":  BTCeanie BTCabies, like BTCitcoin, also have an upper limit.  Unlike BTCitcoin, that limit has already been reached [no more authentic BTCeanie BTCabies are being produced].  Thus, BTCeanie BTCabies are truly deflationary [authentic BTCeanie BTCabies can be destroyed, but not created]. 

Invest in & hoard BTCeanie BTCabies FTW!

No, almost nobody is holding coins right now just to keep the value and to get that value back 20 years from now with the certainty that the value will more or less be held.

Almost everybody holding coins right now is hoping for a significant value increase.  If the reason for holding coins is value *increase* and not *value holding*, then the scheme will fail of course once the hope for value *increase* will stop - that is what I wanted to illustrate.

If you buy at $300, you can hope for $10 000.  But in order to sustain $10 000, something must change.  You cannot buy at $10 000, with the same incentives as buying at $300.  The hope to buy at $10 000, and to reach $3 000 000 is much lower I would think, than to buy at $300 and hoping for $10 000.  Moreover, the influx of value needed at $10 000 to support the money supply inflation is much larger than at $ 300.

If the buying and holding incentive is the huge increase in value, we are exactly on the same incentives as a Ponzi: it will fail at a certain point, because at a certain point, to sustain the price, the influx of value needed is too high, and the prospect of still higher prices becomes essentially nihil.  At that point the price will plummet, and all people having bought at $50 000 will panic-sell.

The only store of value has buying incentives without any expectation of significant increase in value.  If you buy gold, you are not hoping on a factor 30 of value increase in a few years.  You hope that it will keep its value (which means, higher price as compared to a devaluating fiat).  You may hope for slight increase, and you are not afraid of a small decrease.

Almost nobody is holding bitcoin to KEEP its value in my opinion.  If you would know that your coins will have doubled in price 10 years from now, you wouldn't hold your coins.  You're hoping for the moon.  But if you count on other people hoping for even more moon to get yours, it's going to crash, because that's exactly the drive of a ponzi.

If bitcoin were held as a store of value, then everybody should be happy if the price is almost constant, or would rise slowly to compensate for Dollar inflation.  Most hodlers don't hold bitcoin for that.

So they are NOT doing it right now.

If you would know that your coins will have doubled in price 10 years from now, you wouldn't hold your coins.

The guy is showing himself:

But you know that that can't last.  That's like a Ponzi.  Why would the "latecomers" enter bitcoin at high prices ?  You buy a coin at $400 because you hope for $10 000.-.  But why would you buy a $10 000.- coin ?  Hoping for $ 100 000.- ?  Ok who's going to buy $ 100 000.- coins ?  Hoping for $10 000 000.- ?   No.  So the guy won't buy the $ 100 000.- coins for his retirement.  Meaning the guy buying at $ 10 000.- won't find a buyer at $ 100 000.-.   ...

Something is a store of value if you take it that it will KEEP its value more or less, not that you speculate that it will significantly increase if that is the only drive.  Because that will obviously come to an and one day, like a Ponzi.

I think we discussed this already, but store of value needs long-term trust.  Gold has a 5000 year record.  State bonds have century-level trust.  How do you think people will build up trust in bitcoin as a long-term stable store of value ?  Who would dare to buy $10,000.- coins to set aside for his retirement 30 years later ? 


Bitcoin is now inflationary like a real 3rd world country fiat: 10% a year nominally, but in fact much more as a lot of coins are in fact out of circulation for the moment.  It will take about 8 years before the inflationary nature of bitcoin will be of the order of the nominal Dollar and Euro price inflation.

People will not hoard huge amounts of value for a long time with such an uncertain future and in such an inflationary environment as compared to things like state bonds and gold.  The only reason to hoard coins is that one is speculating for "the moon" (low probability - high return). 

Monetary assets like gold historically first became currency, and only later, through the currency aspect for a long time and build-up trust, also a store of value.  I would like to see any reasoning that could indicate conservative pension funds wanting to invest a lot in bitcoin for a store of value over 20 years or so... 

I don't see why, honestly.  Merchant adoption doesn't care much about the actual price (usually converted from the actual exchange rate).  I would think that the actual fundamental of bitcoin in merchant adoption is probably less than $100.- at the moment.  But that doesn't stop adoption as a means of payment.  

It could be that merchant adoption doesn't work out.  And then, *in any case* bitcoin is over in the long run.  Nobody's gonna hold coins with which you can't buy anything ever.  And most hodlers do so with speculative hopes of "the moon", not as a "stable" store of value without much hope of just getting out what they put in.  The real share of the gold market is also small for the moment.

Bitcoin will live (and rise to the moon), or fall into oblivion with merchant adoption.

Is it wrong that I hoard BTC? I collect and receive tips for 25 cents and hoard it as if it will be worth $500+ in 5 years. Everytime I see someone say 10 bits, I am thinking $10 dollars in the future

That's very important.  Apple's worth 700 billion, because there is real fundamental value there.    The market cap of Apple is real: if all the apple shares are sold over one year's time, there will probably be enough takers and the market cap will hold, because it has fundamentals.

Bitcoin's market cap isn't really 5 billion.  There's only a very small liquidity that is actually exchanged.  If half of the coins were sold next year, the price would plummet.  If you are holding 1 million coins, you cannot really make $350 million.  By the time you've sold half of them, the price would probably be something like $100.- or less.

That is because for the moment, the fundamentals of bitcoin (merchant adoption, and share of the gold market for instance) cannot even sustain the current market cap if bitcoin were totally liquid (if all coins were regularly exchanged).

I would guess that the highest fundamental at this moment is the black market share treated in bitcoin.

Bitcoin is as of now still a hugely speculative asset, speculative in the sense of people counting on a strong price increase in the future.  That's why many hold their coins: expecting it to be worth several $1000.- or even much more.
However, I have a hard time believing such a price is sustainable if the fundamentals don't follow.  There could be a (manipulated) surge, but I can't believe that most coins could be exchanged at such a high price - it would automatically lead to a price crash afterwards when holders would want to cash in (that is, if the coins became liquid).

So in order to have a high sustained coin price, the fundamentals must rise.  Merchant adoption is the way.  Bitcoin is way below apple, because what is actually bought with bitcoin is way below what Apple brings on the market.
I don't think that will come overnight.

poor Blockstream investors.  $21M down the drain on a hair brain idea of separating the currency unit from the blockchain.

that is how you know we are not in a bubble.

Citation needed, this is just conjecture

my position is clear, dont make the protocol change.

just because the impact is belittled in the whitepaper calling it a mere security upgrade, doesn't make your argument. it's not a mere security upgrade, its a huge change to the protocol that alters the incentive system that secures Bitcoin. it may be a mere change to a developers who've go to dev, but it's has economic impacts you repeatedly undermine.  

 FTFU
"the addition of SPV verification to Bitcoin script can be seen as merely a security upgrade as a way to final separate the value on the block chain from BTC the asset to reduce the trust required in the system."

yes they are.  and that's b/c they have some regulation in place that alot of ppl seem to value.  not everyone is an anarcho-capitalist.

otoh, what assurances to ppl have with federated servers?  they could disappear in a moment and no one would have any recourse.  

the 1:1 spvp is vaporware at the moment.  and MM is theoretical at best.  NMC is not a valid example of success.

another article on the Currency Wars.  Bitcoin wants to be in the middle of this.  ultimately, fiat currency will be consumed by the soundest of monies; Bitcoin.  forget SC's and intra-protocol speculation that will enrich Blockstream at the expense of Bitcoin as Money:

WSJ's Mattich: The Currency War is On

http://www.newsmax.com/Finance/Mattich-currency-war-China/2014/11/23/id/609158/

there's the FUD again.  

go ahead and use federated servers if you want.  as long as they don't change source code.

but they aren't going to succeed anyways b/c of centralization and insecurity.  AND the fact that ppl will hold BTC until the last moment before using the server for whatever function or asset it offers. and then they will withdraw immediately.  that's b/c of the opportunity cost of losing out on BTC appreciation over time.  b/c of that reduced liquidity of the server asset, it won't be valued.  

so Blockstream, don't expect to make any money off federated servers.

You've already pointed out how to do it, the example you cited doesn't affect the mining incentives and thus has no impact on Bitcoin as is. 

Once sidechains with a federated peg are in use, the addition of SPV verification to Bitcoin script can be seen as merely a security upgrade to reduce the trust required in the system. Existing sidechains could simply migrate their coins to the new verification system. This approach also opens additional security options: the DMMS provided by mining is not very secure for small systems, while the trust of the federation is riskier for large systems. A sidechain could adaptively use both 530 of these approaches in parallel, or even switch based on apparent hashrate.