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Author Topic: Why does Bitcoin subsidize saving?  (Read 8315 times)
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September 01, 2012, 02:15:01 AM
 #81

@Coincomm, Will you STFU already ?

@People, stop reply to one line brainfart.
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September 01, 2012, 03:41:40 AM
 #82

Define "equitable distribution."
Well, if we want to just play a game: if the money supply is M and then everyone's money doubles to M*2, then inflation has had absolutely no effect other than forcing everyone to update pricing.
If governments said "there will be X dollars created for each citizen" and paid out government employees in new money each year up to the amount of the increase in population (and the rest was brought in by taxes--and FRB was outlawed), then inflation would have virtually no effect on pricing or saving. Or hell, even if the government just created the money period, even if they create inflation, the new money goes to the bottom/middle of the chain (gov't employees and contractors), rather than supporting the trickle down reagonomics that has worked oh so well, we'd actually have something closer to keynesian economics I think. When the lower rungs get money, they spend it (or invest via saving) and the upper rungs benefit by being the employers and producers, when the upper rungs get money, they get million dollar bonuses and such.

I don't deny that there are leeches and there are producers in a society, and producers absolutely should be rewarded, but they will be rewarded without having the economic system simply slap them in the face with free money, as the current system provides and is the reality of why everyone on these boards thinks inflation is a terrible idea. Also because of the FDIC, and now the bank bailouts, and every other attempt that governments have made to intervene, the bankers are well aware that they can do whatever-the-fuck-they-please with this government given gift of creating money and they have no real risk. The middle class takes the risk by being forced to invest all of their money at the behest of bankers or render it effectively worthless in 10 or 15 years.

What a proper system should do is keep a relatively stable value of money so that the middle class can hedge their bets with both non-invested savings as well as invested savings, looking to achieve the "steady state" where overproduction and consumption is NOT encouraged because of the dwindling value of the currency. Because of how sick and twisted things have gotten, the bankers ARE the producers. Just look at all the megacorps that exist nowadays. Producing and banking are one in the same. Controlled by the same people. This is a terrible thing for society.

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Holding Bitcoins doesn't guarantee profit.  It is a risky act that helps to stabilize the currency, promote trade, and increase the value of the economy.  The "profit" gained by doing so (or loss perhaps) can be considered the interest earned by the original resources used to purchase the Bitcoins to begin with, invested in the Bitcoin economy as a whole.
Investing would do a hell of a lot more to stabilize a currency than holding money. Money needs to circulate to be useful. I fail to see how holding money promotes trade; this is the exact opposite of what any bit of common sense would suggest. And it doesn't increase the value of the economy, it artificially increases the market cap on the exchange. This is not the same thing. And this was incredibly evident when all it took was maybe 100k BTC to take the price from $32 to $10. You mention the word interest again as if something useful was done, but nothing was. Again this is the same mechanism that banks use with FRB. Doing nothing to get something. That you think this is any different is the typical bitcoiner mentality and it is wrong. The only risk you take by holding BTC is that people get sick of this game, not any real investment risk. It is a stock, but no corporation that produces anything is behind this stock. Stocks don't do anything useful after they have purchased equity in a company (except perhaps give you voting power, but that is irrelevant here), and bitcoin doesn't even have that.

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People become slaves to debt by being born into poverty.  Bitcoin doesn't cause this, and has no obligation to prevent it.  It is, in fact, encouraged by the "democratic" per capita demurrage schemes you are promoting, which subsidize the creation of consumers at the expense of savers.
People are born into poverty because we haven't figured out how to stop those with the gold to stop stealing our productivity from us. For all the advancements we've made, we are still only one step away from a feudalist society, and those in power want to keep it that way. Just like those with lots of bitcoins have no issues with earning non-productive interest, because they'd rather be the ones with gold than the ones actually fixing the problem. Your third sentence is a total strawman, so I won't even bother with it.

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You are free to start an altchain at any time.  You are not a slave to Bitcoin.
I am well aware of this. If I were an honest person, which I try to be, it would behoove me to explain to people why bitcoin is not the answer and to shoot down those that unintentionally or intentionally try to promote a system that is dishonest, which I believe it to be. Can you fault me for that, even if you disagree? I am the one wasting time with absolutely no potential beneficial repercussions for myself here. I don't want any more slaves.

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September 01, 2012, 04:10:54 AM
 #83

People are born into poverty because we haven't figured out how to stop those with the gold to stop stealing our productivity from us.

wtf?

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September 01, 2012, 04:16:21 AM
 #84

Doing nothing to get something.

Are you really arguing for labor theory of value?

Doing nothing is quite productive sometimes.  Thanks to decades of Keynesian mal-investment, now is one of them.  Your problem seems to be that you are looking at the price of Bitcoins going up and you see the Bitcoin economy "doing nothing" and you mistakenly assume that this is somehow a fraud.  When, in reality, Bitcoin is going up in value because doing nothing is actually more productive than what most fiat currency economies are doing right now.

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September 01, 2012, 04:58:53 AM
 #85

People are born into poverty because we haven't figured out how to stop those with the gold to stop stealing our productivity from us.

wtf?
wtf wtf? Why are you here if you think that there isn't something wrong with fiat? What is it that you think is wrong with it? Do the trace amounts of cocaine on bills bother you immensely? Can you manage to form complete sentences without help?

When, in reality, Bitcoin is going up in value because doing nothing is actually more productive than what most fiat currency economies are doing right now.
An atrociously asinine argument. But I'd expect nothing less from someone who will quote one sentence and attack that instead of comprehending the bigger picture. You don't get it, won't get it, refuse to get it because it's not in your best interest and doesn't fit the little picture of the world that you've painted for yourself.

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September 01, 2012, 05:26:54 AM
 #86

People are born into poverty because we haven't figured out how to stop those with the gold to stop stealing our productivity from us.

wtf?
wtf wtf? Why are you here if you think that there isn't something wrong with fiat? What is it that you think is wrong with it? Do the trace amounts of cocaine on bills bother you immensely? Can you manage to form complete sentences without help?


Gold is not a fiat currency. Wink

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September 01, 2012, 07:18:00 AM
 #87

... Also because of the FDIC, and now the bank bailouts, and every other attempt that governments have made to intervene, the bankers are well aware that they can do whatever-the-fuck-they-please with this government given gift of creating money and they have no real risk.

Ok, so your issue is with 1) crony-capitalism...

And:

...Just like those with lots of bitcoins have no issues with earning non-productive interest, because they'd rather be the ones with gold than the ones actually fixing the problem. ...it would behoove me to explain to people why bitcoin is not the answer and to shoot down those that unintentionally or intentionally try to promote a system that is dishonest, which I believe it to be.

2) what you assert is not an equitable initial-distribution mechanism in bitcoin.

Fair enough. I think damn near everyone on here agrees with you on #1, and #2 is an interesting discussion point (ie; what *would* be a fair initial distro mechanism?).


I personally disagree with your other points about the societal benefits of a demurrage currency system. As you point out, the goal of a currency is to allow a steady state to emerge within which people make rational capital allocation decisions based on business dynamics. I assert that with a currency system that truly offers perfect information (eg; bitcoin (and note that no other money system ever proposed has credibly offered perfect information)), people don't have to speculate about the supply of money anymore, so those dynamics merely become the backdrop on which economic activity happens, not a fundamental input; ie, people simply decide to invest based on whether they think they can put capital and labor together to yield more than the sum of their parts. What's happening to the money supply being fully well known, the only effect should be on price (which everyone is subject to on both sides of the equation).


I am the one wasting time with absolutely no potential beneficial repercussions for myself here.

Keep it up. Good discussion.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
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September 01, 2012, 07:37:49 AM
 #88

Listen, Etlase2, I have similar concerns.  And I have expressed them here, over and over again, from my very first post.  But your proposed solutions are laughable.  Would it be better if early adopters invested instead of saved?  Probably.  Will Bitcoin fail if they don't?  Perhaps.  Does this mean we should re-distribute Bitcoins on a per capita basis?  LOL... no.

The thing to consider, is that the Bitcoin economy could easily end up being worse off if a bunch of incompetent early adopters were to take your advice, for instance, to invest, and end up giving half a million Bitcoins to a ponzi scammer, in a botched attempt at "investing".  So, why not let the market work, instead?  Why not allow those who are competent investors to see a rising price as a signal to invest, and let everyone else just hoard in the mean time?  That's called rational self-interest.  That's called specialization.  That's called an 'economy', for christ's sake.

I mean, in your economic understanding, do you have absolutely no concept of failure?  Is there no consideration for the fact that doing things, even doing beneficial things with the absolute best intentions, could end up making us worse off?  When I asked whether you were promoting the labor theory of value, did you even consider the relevance of the question to your arguments?

Regardless, these are the facts:

  • Bitcoin rewards early adopters, because it needs to attract users.
  • Bitcoin subsidizes mining, which is consumption, because it needs protection.
  • The total Bitcoin supply is limited, because it needs to have economic value.
  • This supply currently inflates at 30%+ per year, and therefore does not even remotely subsidize savings.
  • Despite everything, the Bitcoin economy is still growing.

If you want to argue any of these, go right ahead.  That would at least be a discussion grounded in reality.  But I think, by now, we all understand the reasons for all of them, and they have been discussed to death.

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September 01, 2012, 08:00:33 AM
 #89

Ok, so your issue is with 1) crony-capitalism...
It goes much deeper than that. We are where we are today because of the history of gold, a history spread out over at least 5,000 years that bitcoin has tried to emulate in about 4. Acquiring vast sums of money should not be about luck, but it was the case with gold and is the case with bitcoin. But--this is only one side of the issue. Gold gains great power not because of what you can buy with it, but what you can do by NOT spending it. I think most people would agree that the wealthy (or a combined group of the not so wealthy) lending money to invest in new business and infrastructure is a good thing because both sides benefit.

But when gold is withheld and made artificially scarce, those without gold become paupers. This is when the gold-bearers can swoop in and take back the productivity of years of labor essentially because of deflation. The paupers can't afford to keep their durable goods because they need to buy food. They can't pass on wealth to their children, so their children have to go through the same insanity. Combined with the ingenious idea of Rothschild FRB, this effect can be maximized. Combined with central banking and it is government-mandated theft.

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2) what you assert is not an equitable initial-distribution mechanism in bitcoin.
Again, that's only part of it and honestly it is the part that bothers me less.

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Fair enough. I think damn near everyone on here agrees with you on #1, and #2 is an interesting discussion point (ie; what *would* be a fair initial distro mechanism?).
While I've avoided mentioning it because I don't want to sound like I'm advertising, the link in my sig explains how a cryptocurrency could be created that solves the economic issues I have with bitcoin, gold, and modern fiat. It isn't about the initial distribution, it is about the ability of the people to create money at cost (or below cost in the case of the wealthy causing undue deflation). But it's also much more than that, though I haven't delved into what I see as being the economic result of such a currency. But it's freedom, in a word. Feel free to post questions in that thread though and you can be sure I'll give a long-winded response.

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I personally disagree with your other points about the societal benefits of a demurrage currency system. As you point out, the goal of a currency is to allow a steady state to emerge within which people make rational capital allocation decisions based on business dynamics. I assert that with a currency system that truly offers perfect information (eg; bitcoin (and note that no other money system ever proposed has credibly offered perfect information)), people don't have to speculate about the supply of money anymore, so those dynamics merely become the backdrop on which economic activity happens, not a fundamental input; ie, people simply decide to invest based on whether they think they can put capital and labor together to yield more than the sum of their parts. What's happening to the money supply being fully well known, the only effect should be on price (which everyone is subject to on both sides of the equation).
I'm only playing devil's advocate for demurrage. It isn't my idea, and I have hotly debated it with jtimon and the others behind it in the past because I don't think it will be a successful idea and I think they're wasting their time.

I agree that a currency offering perfect information is a huge, unbelievable boon, but it can't overcome the faults of the other economic properties of bitcoin. And, if you ask my biased opinion, I would say that Decrits would have a significantly better chance of being the currency that people will use for trade. And there is no reason it couldn't facilitate the storage of wealth, either. You just aren't going to earn interest for doing so in a steady state economy (though you will in an expanding one), but nor will you lose value. Since it would have all the same valuable properties of a cryptocurrency, new people to the cryptocurrency market may fear being left holding the bag for bitcoin and avoid it altogether. Pure speculation though, of course.

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September 01, 2012, 08:04:58 AM
 #90

But when gold is withheld and made artificially scarce, those without gold become paupers.

Here's the gigantic hole in your theory:

Rich people gotta eat, too. (hint: you can't eat gold)

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September 01, 2012, 08:17:06 AM
 #91

The thing to consider, is that the Bitcoin economy could easily end up being worse off if a bunch of incompetent early adopters were to take your advice, for instance, to invest, and end up giving half a million Bitcoins to a ponzi scammer, in a botched attempt at "investing".  So, why not let the market work, instead?  Why not allow those who are competent investors to see a rising price as a signal to invest, and let everyone else just hoard in the mean time?  That's called rational self-interest.  That's called specialization.  That's called an 'economy', for christ's sake.
The point has never been that early adopters should all run out now and invest immediately. The point is that there will rarely ever be a profitable opportunity for them to do so. Unless the money cartel starts churning, gets everyone hooked on bitcoins at low interest, then eventually calls in all the loans without recirculating the money. This is a far worse case and one that I think is guaranteed to happen if bitcoin insinuates itself into the world economy. There will be a new wall street and it will be just as effective as the old wall street, except that perhaps there will be new ownership. JP Morgan was a master at manipulating the economy before the advent of the central banking system in the US. Then he simply manipulated the government into central banking because it's a lot easier to keep the people happy if they can still put food on the table while their productivity is stolen.

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When I asked whether you were promoting the labor theory of value, did you even consider the relevance of the question to your arguments?
I've been accused of being a labor theory of value proponent before and discussed it to death then, I don't feel like getting into it. Nor discussing the taint that Marx added to it. The LTV still requires an exchange of which there is none when discussing the point of a currency that accrues interest for doing nothing, so I also don't see how it even applies to the statement you quoted.

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Despite everything, the Bitcoin economy is still growing.
I don't particularly disagree or dispute any of the other points as they stand now (read: not the case in the future), but the Bitcoin economy is growing primarily on speculation. Without the massive hills and valleys, Bitcoin could have easily grown much faster and much harder. Instead, a large portion of the actual growth has been ways to separate bitcoin from it's volatility--e.g. BitPay.

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September 01, 2012, 08:41:58 AM
 #92

If bitcoin fails due to the actions of speculators then it was meant to fail.

It was designed to attract such people. Personally,bitcoin got me interested and getting interested in the economics of how the world turns has opened my eyes. I was completely ignorant beforehand. Now I see that if you do not understand money you do not understand the world around you.

The alternative coin suggested here would not have done that for me.
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September 01, 2012, 08:57:17 AM
 #93

...but the Bitcoin economy is growing primarily on speculation. Without the massive hills and valleys, Bitcoin could have easily grown much faster and much harder. Instead, a large portion of the actual growth has been ways to separate bitcoin from it's volatility--e.g. BitPay.
What about BTC over email, the Android wallet and the multiple card systems in development?

Those are some pretty big new services after just 3-4 years of Bitcoins lifetime. If we say Bitcoin has only been really known 2-3 years,
I'm not even sure Google added that many new features in their first 2 years!


Also BTC does not inherently increase in value over time - BTC ONLY become worth more if the economy is growing. So if a large number of people do nothing with their BTC and there are no new adopters the value would start to drop.

Maybe 10% of the people holding BTC can enjoy the free ride to some extent, but they still need to eat at some point which will chisel away at their fortune.

If any more than that in a stable BTC economy try to live from BTC deflation, the BTC economy would likely shrink as a result of their lack of productivity and hence the BTC value would drop.

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September 01, 2012, 09:09:02 AM
 #94

It's true that perfect money isn't deflationary, but it also isn't inflationary, it just is.

Money is just information. Who owes what to whom.

Ideally it would be invisible. Just like a designer would tell you the best tools are those that are "not in the way", that are invisible.

A giant computer network that's tracking all production, all consumption, all economic activity, would surely be dystopian but it could tell us exactly how much more we'd have to work in that factory before we're finally eligible for this nice Porsche car. This would be the invisible money I mean.

Something like Ripple comes close to this, especially when using "hours of unskilled labor" as the base accounting unit. People essentially print their money themselves here, and the interesting thing is you don't need to centrally control the money supply because everybody knows and agrees on how much hours a day has and what it's worth for them. Also, an hour today is still an hour in 20 years.

Of course concepts like this are inherently trust- and reputation-based though. So one (or more) cryptoanarchist came and didn't like a money being attached to identities that way, so they created Bitcoin which almost necessarily has to be modeled after a commodity with limited supply in order to allow for reasonable privacy, which is also the feature which made it almost instantly available world-wide.

So every approach to money has advantages and drawbacks. The perfect money can't exist. Thus I believe the future of money is parallel systems anyhow. If there's a problem that bitcoins become too scarce and unevenly distributed, people will substitute part of their economic activity with a Ripple-like system.

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September 02, 2012, 10:23:29 AM
 #95

Isn't currency better spent than saved and hoarded?

It depends what you want that currency to be used for.

Store of value or a facilitator of trade?

The two ideals are indelibly mutually exclusive.
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September 02, 2012, 11:05:01 AM
 #96

Isn't currency better spent than saved and hoarded?

It depends what you want that currency to be used for.

Store of value or a facilitator of trade?

The two ideals are indelibly mutually exclusive.

Um.... No.

Gold is both, and performs each service admirably.

Gold can be saved indefinitely without losing value, and is a hell of a lot easier to transport than the number of chickens it can buy.

Bitcoin improves on both: It can be stored indefinitely without losing value, and all things being equal, will probably increase in value; and it is infinitely easier to transport than even the amount of gold it can buy.

Trade is maximized when the cost of trade is minimized. Bitcoin takes that cost down as much as possible.

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September 02, 2012, 09:19:51 PM
 #97



Explain to me how non-productive capital pursues innovation or accelerates the rate of growth in the economy. Or are we just going to say that capital sitting in a wallet accruing deflationary interest at little to no risk is productive again? Innovative, even?



Guns don't kill people. People kill people.

Money doesn't invest, innovate, or produce.  People invest, innovate, and produce.

Savings provide capital to those who earn it.  Banks provide capital to those who beg for it.

Investment is a boon to an economy.  Malinvestment is a burden.

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September 02, 2012, 11:51:46 PM
 #98

Isn't currency better spent than saved and hoarded?

It depends what you want that currency to be used for.

Store of value or a facilitator of trade?

The two ideals are indelibly mutually exclusive.

Um.... No.

Gold is both, and performs each service admirably.

Gold can be saved indefinitely without losing value, and is a hell of a lot easier to transport than the number of chickens it can buy.

Bitcoin improves on both: It can be stored indefinitely without losing value, and all things being equal, will probably increase in value; and it is infinitely easier to transport than even the amount of gold it can buy.

Trade is maximized when the cost of trade is minimized. Bitcoin takes that cost down as much as possible.

So you'll wait around for an hour each time you want to buy a coffee, will you? Why don't you use gold backed currency now? Or do you? Who buys lots of chicken every day? As a facilitator of trade, practicality is paramount.

The cost of a $ is far less than the cost of a btc, for everyday purchases, and the only way to make bitcoins work as effectively as fiat in this regard, is to remove one of the very things that make btc/gold what they are.
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September 03, 2012, 12:34:27 AM
 #99

So you'll wait around for an hour each time you want to buy a coffee, will you? Why don't you use gold backed currency now? Or do you? Who buys lots of chicken every day? As a facilitator of trade, practicality is paramount.

Bitcoin is a horrible currency for in-person transactions, unless you're willing to accept 0-confirmation transactions. The main reason I don't use a metal or metal-backed currency right now is the same reason I don't spend a lot of Bitcoins: because none of the people I do business with in everyday life don't accept it. When McDonalds starts accepting silver for their burgers, I'll be on that like white on rice. As to the chickens, I was making (an apparently failed) reference to barter. Gold beats barter, and for internet business, Bitcoins blow gold out of the water. (Ever try to email a gold coin?)

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September 03, 2012, 02:00:13 AM
 #100

So you'll wait around for an hour each time you want to buy a coffee, will you? Why don't you use gold backed currency now? Or do you? Who buys lots of chicken every day? As a facilitator of trade, practicality is paramount.

Bitcoin is a horrible currency for in-person transactions, unless you're willing to accept 0-confirmation transactions. The main reason I don't use a metal or metal-backed currency right now is the same reason I don't spend a lot of Bitcoins: because none of the people I do business with in everyday life don't accept it. When McDonalds starts accepting silver for their burgers, I'll be on that like white on rice. As to the chickens, I was making (an apparently failed) reference to barter. Gold beats barter, and for internet business, Bitcoins blow gold out of the water. (Ever try to email a gold coin?)

If you can make that distinction, you can make the next. You may be satisfied with "ending up" with gold or bitcoins to finalize a trade, but what of the interim? What if someone doesn't have gold or a bitcoin to give you today, but they will tomorrow, and you want to get your thing off your hands in the mean time? Money is the answer. It is an IOU; a credit; an "I'll pay you with something of value tomorrow, but here's a token which represents that today". Fiat banks and money deal in the facility of time lagged trade, not the goods or services themselves.

Gold and bitcoins are the items of value that are traded. They have inherent value due to scarcity or usage or whatever. Fiat is much cheaper to deal with, regarding volatility, because it has no value except as a trade token. It's only use is to represent giving something of value to someone else, but not yet getting a return on it. If you try to use gold or btc as a facilitator of trade, you will be paying not only it's value as a trade token, but also its varying value as a scarce commodity. Fiat, which is worthless in every other way, will always be cheaper than anything of inherent value.

If McDonalds accept both fiat and silver for a burger, are you telling me that you'd seriously trade appreciating silver than any spare depreciating fiat you have? I don't think so. If you want to use PMs in a trade, that's all well and good, but you no longer have a need to facilitate trade, and no need for a currency either. You're simply bartering. Fiat money satisfies a need which bartering simply cannot.

The only people who are seriously going to use BTC "only" are those for whom fiat is otherwise unacceptable or draws unwanted attention...for whom the cost of BTC is outweighed by its benefits.

So when I said:

Isn't currency better spent than saved and hoarded?

It depends what you want that currency to be used for.

Store of value or a facilitator of trade?

The two ideals are indelibly mutually exclusive.

I was referring to "store of value" as "settle immediately", and "facilitator of trade" as "settle at a later date". The two ideals are mutually exclusive, because you cannot both settle now and at a later date also.
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