02-10-2023, 02:59 PM
Why The End of Bitcoin is Inevitable
<!-- SC_OFF --><div class="md"><p><strong><em>Note:</em></strong> <em>I posted this article a few days ago but it was criticized, so I have rewritten and shortened it to be less ambiguous and more to the point.</em></p> <p>All economies strive towards optimal allocation and efficient use of scarce resources. These goals are best achieved by the market. The market can provide the most rational answer to the three main questions of economics: what to produce, how to produce it, and who to produce it for. However, sometimes market anomalies occur that deviate from the said goals. This results in shortages, inflation, speculative bubbles, and manias. In the last decade, one such anomaly appeared. It is popularity known as cryptocurrencies. The first and most famous is bitcoin. Bitcoin is a peer-to-peer network of computers that produces and exchanges virtual tokens. (bitcoins, abbreviation: BTC; sign: ₿) New tokens are created by computers participating in a kind of computing competition that uses astonishing amounts of electricity, and which is metaphorically called ‘mining’.</p> <p>The technical details of Bitcoin’s functioning are irrelevant because in order to describe the anomaly, all we need is the fact that the mined bitcoins cannot provide benefit to anyone. Which is pretty absurd given that the only reason an item is traded on the market is because at least someone can receive benefit from it. Moreover, the amount of benefit received, is the only possible way an items can be evaluated with other items. Which basically means that people invest in bitcoin blindly. Let’s now take a look at a few items to see how they provide benefit so you can better understand the bitcoin anomaly.</p> <p>Gold provides benefit to people that use electronics, jewelry, luxury items, ornamental objects, aerospace technology, then those that do tooth reparations and dental repairs, those treated for rheumatoid arthritis, etc. Shares provide benefit to those that receive buybacks, dividends, liquidation value, and other ways of returning capital to shareholders. Fiat currency units provide benefit to debtors who use them for reducing their liabilities towards banks, given these units are issued as bank loans. Bonds provide benefit to those that receive interest and face value at maturity. Casino chips to those that cash them out at a casino. PayPal balance to those that withdraw it to their bank accounts. While goods provide benefit to those that consume them.</p> <p>On the other hand, there is no individual on Earth to whome bitcoin can provide benefit. Namely, receiving the mined or purchased bitcoins just means that the network attributes an amount to an address. That amount is then read by some wallet application. There is literally no way anyone can benefit from the thing on which the amount was attributed. The thing cannot be touched, seen, smelled, drunk, eaten, worn, driven. There is no legal entity like a casino or PayPal company that is liable to cash it out on demand to fiat currency. Unlike fiat currency units, the thing is not issued as liabilities (loans) so there are no debtors to benefit for reducing and settling those liabilities. That is why the address holders just transfer the amounts among each other. And that’s all there is to it.</p> <p>And now comes the crux of the anomaly. For network members to get bitcoins, they have to give up something that provides benefit. Those who get them through mining, give up electricity. Electricity provides benefit to those who use it for lighting, heating, cooling, powering household appliances, electronic devices, small and large machines, public transport systems, etc. Currently, it takes 86,000 to 286,000 kilowatt hours (kWh) of energy to mine a single bitcoin. That’s the same amount of energy an average U.S. household consumes in 8 to 25 years. Those who get bitcoin on the market, currently have to give up around 20,000 US dollars. The dollar also provids benefit to people. As we already said, the units of fiat currencies, that is, the amounts on banknotes or bank accounts, are issued as loans. Which means that they count liabilities of the debtors towards the banks. By using these units, which means by paying their loans, the debtors reduce, and ultimately, settle these liabilities, thereby saving their property from bank foreclosures. Thus, these units are very beneficial to millions of debtors every day.</p> <p>From the above it follows that the demand for bitcoin is some kind of bizarre market anomaly where members of the Bitcoin network give up huge amounts of items that provide benefit to a lot of people, only to hold tokens that provide benefit to no one. This is therefore not some ordinary market anomaly, but an unseen market craze. At the peak of Holland’s tulip bulb mania in the 1630s, some individuals traded houses for tulip bulbs. But tulips could at least provide benefit to people through aesthetic beauty and sensuous smells. Whereas bitcoin provides benefit to no one, and yet, people get rid of huge amounts of scarce resources and benefit providing items, to hold it.</p> <p>In the long run it is impossible this investment craze could be sustained. It completely goes against optimal allocation and efficient use of scarce resources. Not only that, but it also goes against the very reason for which market exists. Every item, except of course bitcoin and crypto tokens, is first produced, then it changes hands in the market, and finally it provides benefit to people. However bitcoin, once produced, goes to the market and its only purpose is to change hands. Imagine a bond that never matures and pays nothing. A stock whose company has zero assets and zero liabilities. Dollar units that cannot be used for paying a bank loan which created them, or in the past, a gold certificate that never could be redeemed for gold. A casino chip, and a PayPal balance that their issuers never cash out. A pizza that never could be eaten. Or a picture that never could be seen. These would then be items that benefit no one, just like bitcoin. As such, people would not give even a dime for them. Nor would these items come on the market in the first place as no one would offer something that no human being can benefit from. Yet bitcoin, is not only put on the market, but individuals even get rid of enormous amounts of scarce resources to get it. This is indeed a bizarre and never seen market anomaly.</p> <p>People will eventually spot the anomaly and stop wasting scarce resources and other beneficial items on useless tokens. This will reduce the Bitcoin network to enthusiasts, who will probably still be blinded by terms like ‘immutability’, ‘scarcity’, or ‘store of value’. Until they finally realize that pairing bitcoin with such terms is ridiculous. ‘Value’, for e.g., is ‘stored’ in the ability of an item to provide benefit to people. The higher the total benefit the more ‘value’ an item ‘stores’. Saying that Bitcoin is a store of value is denial of reality given that nobody can receive benefit from bitcoin. ‘Immutability’ of information about bitcoin’s quantity is meaningles. There is no purpose or reason to protect information on quantity of nonbeneficial item. Such items are all around us and exist in abundance. What would be the purpose of managing them through data? ‘Scarcity’ of bitcoin is an oxymoron. Scarcity is the gap between limited resources and theoretically limitless wants. As there are no wants that bitcoins can satisfy, there is no such thing as ‘scarcity of bitcoin’. This is just a rhetorical phrase with no real-world meaning. The same is true when ‘immutability’ and ‘store of value’ are paired with ‘bitcoin’. When the enthusiasts realize that, we will witness the final end of Bitcoin.</p> <p><strong>Source:</strong> <a href="https://btcend.wordpress.com/">https://btcend.wordpress.com/</a></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Prodiction"> /u/Prodiction </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/10yk65j/why_the_end_of_bitcoin_is_inevitable/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/10yk65j/why_the_end_of_bitcoin_is_inevitable/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p><strong><em>Note:</em></strong> <em>I posted this article a few days ago but it was criticized, so I have rewritten and shortened it to be less ambiguous and more to the point.</em></p> <p>All economies strive towards optimal allocation and efficient use of scarce resources. These goals are best achieved by the market. The market can provide the most rational answer to the three main questions of economics: what to produce, how to produce it, and who to produce it for. However, sometimes market anomalies occur that deviate from the said goals. This results in shortages, inflation, speculative bubbles, and manias. In the last decade, one such anomaly appeared. It is popularity known as cryptocurrencies. The first and most famous is bitcoin. Bitcoin is a peer-to-peer network of computers that produces and exchanges virtual tokens. (bitcoins, abbreviation: BTC; sign: ₿) New tokens are created by computers participating in a kind of computing competition that uses astonishing amounts of electricity, and which is metaphorically called ‘mining’.</p> <p>The technical details of Bitcoin’s functioning are irrelevant because in order to describe the anomaly, all we need is the fact that the mined bitcoins cannot provide benefit to anyone. Which is pretty absurd given that the only reason an item is traded on the market is because at least someone can receive benefit from it. Moreover, the amount of benefit received, is the only possible way an items can be evaluated with other items. Which basically means that people invest in bitcoin blindly. Let’s now take a look at a few items to see how they provide benefit so you can better understand the bitcoin anomaly.</p> <p>Gold provides benefit to people that use electronics, jewelry, luxury items, ornamental objects, aerospace technology, then those that do tooth reparations and dental repairs, those treated for rheumatoid arthritis, etc. Shares provide benefit to those that receive buybacks, dividends, liquidation value, and other ways of returning capital to shareholders. Fiat currency units provide benefit to debtors who use them for reducing their liabilities towards banks, given these units are issued as bank loans. Bonds provide benefit to those that receive interest and face value at maturity. Casino chips to those that cash them out at a casino. PayPal balance to those that withdraw it to their bank accounts. While goods provide benefit to those that consume them.</p> <p>On the other hand, there is no individual on Earth to whome bitcoin can provide benefit. Namely, receiving the mined or purchased bitcoins just means that the network attributes an amount to an address. That amount is then read by some wallet application. There is literally no way anyone can benefit from the thing on which the amount was attributed. The thing cannot be touched, seen, smelled, drunk, eaten, worn, driven. There is no legal entity like a casino or PayPal company that is liable to cash it out on demand to fiat currency. Unlike fiat currency units, the thing is not issued as liabilities (loans) so there are no debtors to benefit for reducing and settling those liabilities. That is why the address holders just transfer the amounts among each other. And that’s all there is to it.</p> <p>And now comes the crux of the anomaly. For network members to get bitcoins, they have to give up something that provides benefit. Those who get them through mining, give up electricity. Electricity provides benefit to those who use it for lighting, heating, cooling, powering household appliances, electronic devices, small and large machines, public transport systems, etc. Currently, it takes 86,000 to 286,000 kilowatt hours (kWh) of energy to mine a single bitcoin. That’s the same amount of energy an average U.S. household consumes in 8 to 25 years. Those who get bitcoin on the market, currently have to give up around 20,000 US dollars. The dollar also provids benefit to people. As we already said, the units of fiat currencies, that is, the amounts on banknotes or bank accounts, are issued as loans. Which means that they count liabilities of the debtors towards the banks. By using these units, which means by paying their loans, the debtors reduce, and ultimately, settle these liabilities, thereby saving their property from bank foreclosures. Thus, these units are very beneficial to millions of debtors every day.</p> <p>From the above it follows that the demand for bitcoin is some kind of bizarre market anomaly where members of the Bitcoin network give up huge amounts of items that provide benefit to a lot of people, only to hold tokens that provide benefit to no one. This is therefore not some ordinary market anomaly, but an unseen market craze. At the peak of Holland’s tulip bulb mania in the 1630s, some individuals traded houses for tulip bulbs. But tulips could at least provide benefit to people through aesthetic beauty and sensuous smells. Whereas bitcoin provides benefit to no one, and yet, people get rid of huge amounts of scarce resources and benefit providing items, to hold it.</p> <p>In the long run it is impossible this investment craze could be sustained. It completely goes against optimal allocation and efficient use of scarce resources. Not only that, but it also goes against the very reason for which market exists. Every item, except of course bitcoin and crypto tokens, is first produced, then it changes hands in the market, and finally it provides benefit to people. However bitcoin, once produced, goes to the market and its only purpose is to change hands. Imagine a bond that never matures and pays nothing. A stock whose company has zero assets and zero liabilities. Dollar units that cannot be used for paying a bank loan which created them, or in the past, a gold certificate that never could be redeemed for gold. A casino chip, and a PayPal balance that their issuers never cash out. A pizza that never could be eaten. Or a picture that never could be seen. These would then be items that benefit no one, just like bitcoin. As such, people would not give even a dime for them. Nor would these items come on the market in the first place as no one would offer something that no human being can benefit from. Yet bitcoin, is not only put on the market, but individuals even get rid of enormous amounts of scarce resources to get it. This is indeed a bizarre and never seen market anomaly.</p> <p>People will eventually spot the anomaly and stop wasting scarce resources and other beneficial items on useless tokens. This will reduce the Bitcoin network to enthusiasts, who will probably still be blinded by terms like ‘immutability’, ‘scarcity’, or ‘store of value’. Until they finally realize that pairing bitcoin with such terms is ridiculous. ‘Value’, for e.g., is ‘stored’ in the ability of an item to provide benefit to people. The higher the total benefit the more ‘value’ an item ‘stores’. Saying that Bitcoin is a store of value is denial of reality given that nobody can receive benefit from bitcoin. ‘Immutability’ of information about bitcoin’s quantity is meaningles. There is no purpose or reason to protect information on quantity of nonbeneficial item. Such items are all around us and exist in abundance. What would be the purpose of managing them through data? ‘Scarcity’ of bitcoin is an oxymoron. Scarcity is the gap between limited resources and theoretically limitless wants. As there are no wants that bitcoins can satisfy, there is no such thing as ‘scarcity of bitcoin’. This is just a rhetorical phrase with no real-world meaning. The same is true when ‘immutability’ and ‘store of value’ are paired with ‘bitcoin’. When the enthusiasts realize that, we will witness the final end of Bitcoin.</p> <p><strong>Source:</strong> <a href="https://btcend.wordpress.com/">https://btcend.wordpress.com/</a></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Prodiction"> /u/Prodiction </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/10yk65j/why_the_end_of_bitcoin_is_inevitable/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/10yk65j/why_the_end_of_bitcoin_is_inevitable/">[comments]</a></span>