Nick Szabo  🔑

This doesn't account for variation in demand, which is what produces Bitcoin's volatility. It will very likely decline, eventually even below the volatility of fiat, but it will never be zero. There is no such thing as a ruler in economics, and can't be.

FRBNY has gold vaults beneath it. All dollar-based derivative assets can be forensically traced to the gold as an anchor of value. But removing the gold would have no effect on the derivatives. If bitcoin evolves to sound money, it’ll eventually just be the gold in the basement.

No.

Derivates can’t be built near-infinitely upon bitcoin and eventually detached from the underlying btc market value?

We keep gold in the basement because it's a pain to lug around or send over the internet. Bitcoin is easy to carry and send, so why bother with bitcoin IOUs?

Also, precious metals were expensive to validate without trusting a mint to reliably coin it, a trust that was often abused, as was the trust in IOUs & other derivatives. Validation of Bitcoin is very inexpensive, and universal when receiving money on the Bitcoin main chain.

I’m not comparing btc to gold beyond noting the USD is/was a derivative of gold. Derivatives aren’t created for efficiency, trust, ease of transfer, or any practical reasons at all. They’re created out of profit incentive. Any sound money/hard asset will generate derivatives.

Surely if somebody is making a profit off them, and it's a free market, somebody on the other side of the deal is getting value they are willing to pay for. What is this value>?