Maybe -- that entirely depends on whether BTC actually has value and that hinges on, as you put it, "maintaining constant salience" which is the real issue.
Okay, this helps. So "will BTC be able to (i) maintain constant salience, and (ii) be countercyclical in the long term, and if it does what value will it have?" seems like the object level issue; definitely makes things clearer than some abstract notion of replacing gold.
Ah I think I've been misunderstanding you. I was thinking in terms of the probability distribution over BTC's long-term value, but I think you're referring to about my probability distribution over the probability that BTC will get to the $34k (or more precisely, my probability distribution over what probability estimate I would have on the topic if I knew more and was wiser). Is that closer to correct?
Quantum computers actually will not kill bitcoin. It'll take a significant coordination, but it'll survive:
https://bitcoinmagazine.com/6021/bitcoin-is-not-quantum-safe-and-how-we-can-fix/
Now, P = NP will kill bitcoin. But I rate that risk as being much lower than scifi gold mining techniques.
Thanks, I think this might actually be the argument I was looking for.
Whether the Bitcoin markets are efficient enough to worry about this is an open question
Right, so now the question is one of, does this idea of adverse selection actually apply?
I suppose one reformulation of the point made in the article is: if I believe X will happen with probability 5%, then I do not necessarily want to bet on X at 4.99% and bet against X at 5.01%, because it could be that my confidence is low enough that the very fact that someone wants to bet for or against me will shift my estimation of X in either direction... (read more)
Indeed, I am aware. Though now a black swan supply event of that kind is rare, since we've already explored all the low-hanging fruit on earth, hence why exotic stuff like space mining, nanotech mining or nuclear transmutation may need to be involved. But I suppose something similar to this oil event: http://www.nextenergynews.com/news1/next-energy-news2.13s.html could also happen right here on our own planet.
Right, I agree, my 5% $34000 is only slightly Pascalian. I'm only using the Pascal reference because it is the best representative example I know of the general class of such scenarios (note that other "Pascalian" scenarios of this type are fairly common in the investment world; every startup crank loves throwing out the whole "if you think there's only a 0.1% chance I'm right, you'll get an EV of $100b 0.001 = $100m" line). If you know of a better name for the category, please share. I also used the Drake Equation as an analogy elsewhere in that r/buttcoin thread; perhaps that might be a better fit.
In the West the predominant store-of-value right now is financial securities (stocks and bonds).
Mostly, yes. But gold still has a $7t market cap. But this does open up an interesting argument: that gold is on the whole dying as a store of value and it's being propped up almost entirely by tradition; in this case central bank gold holdings will probably decline 90%+ over the next century. In this scenario, BTC has no chance to replace gold because there's no new interest in gold anyway.
However, I would still argue that there is diversification value in BTC if it simultaneously manages to (i) have value increase proportionately to economic growth in the... (read more)
And what exactly is the reference class that you put Bitcoin into?
Roughly speaking, assets which have received a major amount of public attention and whose store-of-value functionality is the dominant factor in their price. Gold, silver, land and internet domain names are the only others I can think of that vaguely fit there.
So your argument is that gold has a very very large network effect? Reasonable I suppose, but technology has disrupted similarly entrenched things over the past two decades, so you have to add a lot of fundamental uncertainty.
Another big advantage of gold is anonymity which Bitcoin will not be able to replicate either.
It's quite possible to be anonymous with BTC;... (read more)
So a wager is about a positive outcome, but there is a standard knockdown argument saying that the wager argument is incorrect precisely because of the possibility of negative outcomes, ie. G' sending you to hell for worshipping G, if it turns out the G' and not G is real. A mugging is about avoiding a negative outcome, but my proposed argument shows how not cooperating with the mugging can also avoid a negative outcome. Bitcoin is actually a third category: investing in BTC has a probability of a very positive outcome, but it is not the case that either (i) investing in BTC has a probability of a very negative outcome... (read more)
I had a rather fun debate with people from the always cynical r/buttcoin reddit community, discussing my estimation of the expected value of Bitcoin in the future, which was predicated on what I estimated as a 5% probability that it will displace part of gold due to its superior properties in the store-of-value realm:
http://np.reddit.com/r/Buttcoin/comments/30tqud/ceo_of_ethereum_spreading_quality_fud_can_we_get/
Note that I am certainly not a Bitcoin maximalist or ideologue; I've become quite a bit more skeptical lately and am actually much closer to the "currency meh, blockchain cool" perspective that is becoming pretty mainstream in the parts of the broader IT and finance community that I've spent the most time interacting with. Here I ended up articulating... (read 798 more words →)
The superrational strategy is indeed to switch to B with some probability approaching 0.5 (or, if the system allows it, vote for A with 51% of one's capital and for B with 49% of it).
I'm referring to bitcoin specifically, as I was specifically trying to determine whether or not it's a good idea to hold BTC right now. I'm obviously more bullish than 5% on "future blockchain technology that replaces it" (such as Ethereum or others)"; if I wasn't I would not be a full-time member of the industry :)
But then, the question becomes: if you're bullish in blockchain tech, but not bitcoin, then why not invest exclusively in the other blockchain tech and not bitcoin?