I'm suspicious of Bitcoin as a store of value. Some seem to think that because there is a fixed amount of Bitcoin it will automatically rise in price as demand confronts scarcity, but that assumes there will continued demand. Elon Musk says Dogecoin is better because it has some inflation built in, encouraging people to spend instead of hoard, but adds "I'm not saying that it's the ideal system for a currency"

"Elon Musk - SpaceX, Mars, Tesla Autopilot, Self-Driving, Robotics, and AI", Lex Fridman Podcast #252".

Clip from a discussion about money starting minute 48:41

https://youtu.be/DxREm3s1scA?t=2923

Lex: You mentioned that Doge is the people's coin.

Elon: Yeah.

Lex: And you said that you were literally going, SpaceX may consider literally putting a Dogecoin on the moon. Is this something you're still considering, Mars perhaps, do you think there's some chance, we've talked about political systems on Mars, that a Dogecoin is the official currency of Mars, it's the coin of the future?

Elon: Well, I think Mars itself will need to have a different currency because you can't synchronize due to speed of light, or not easily.

Lex: So it must be complete standalone from earth?

Elon: Mars is, at closest approach, it's four light minutes away roughly, and then add for this approach, it's roughly 20 light minutes away, maybe a little more. So you can't really have something synchronizing if you've got a 20 minute speed of light issue, if it's got a one minute blockchain. It's not gonna synchronize properly. I don't know if Mars would have a cryptocurrency as a thing, but probably, seems likely. But it would be so kind of localized thing on Mars.

Lex: And you let the people decide.

Elon: Yeah, absolutely. The future of Mars should be up to the Martians. I mean, I think the cryptocurrency thing is an interesting approach to reducing the error in the database that is called money. I think I have a pretty deep understanding of what money actually is on a practical day-to-day basis, because of PayPal. We really got in deep there. And right now the money system, actually for practical purposes is really a bunch of heterogeneous mainframes running a old COBOL.

Lex: Okay, you mean literally

Elon: Literally. That is literally what's happening in batch mode. Okay.

Lex: In batch mode.

Elon: Yeah. Pity the poor bastards who have to maintain that code. Okay. That's pain.

Lex: Not even Fortran?

Elon: COBOL, yep. That's COBOL. And they still, the banks are still buying mainframes, in 2021, and running engine COBOL code. The federal reserve is like probably even older than what the banks have, and they have an old COBOL mainframe. And so the government effectively has editing privileges on the money database. And they use those editing privileges to make more money whenever they want. And this increases the error in the database that is money. So I think money should really be viewed through the lens of information theory. You're kind of like an internet connection. Like what's the bandwidth, total bit rate, what is the latency jitter, packet drop, errors in the network communication. Just think of money like that basically. I think that's probably what I really think of it. And then say what system, from an information theory standpoint, allows an economy to function the best. Crypto is an attempt to reduce the error in money that is contributed by governments diluting the money supply as basically a pernicious form of taxation. So both policy in terms of with inflation, and actual like technological, COBOL, cryptocurrency takes us into the 21st century in terms of the actual systems that allow you to do the transaction, to store wealth, all those kinds of things.

Like I said, just think - In theory - of money as information, people often will think of money as having power in and of itself. It does not. Money is information, and it does not have power in and of itself. Applying the physics tools of thinking about things in the limit is helpful. If you are stranded on a tropical island and you have a trillion dollars, it's useless. Because there's no resource allocation. Money is a database of resource allocation, but there's no resources to allocate except yourself. So money's useless. If you're stranded on a desert island with no food, all the Bitcoin in the world will not stop you from starving.

Lex: Yeah.

Elon: Just think of money as a database for resource allocation across time and space. And then what system, in what form should that database, or data system, what would be most effective? There is a fundamental issue with, say Bitcoin, in its current form in that it's, the transaction volume is very limited. And the latency, the latency, for a properly confirmed transaction is too long, much longer than you'd like. It's actually not great from transaction volume standpoint or latency standpoint. So it is perhaps useful as, to solve an aspect of the money database problem, which is the sort of store of wealth or an accounting of relative obligations, I suppose. But it is not useful as a currency, as a day-to-day currency.

Lex: But people have proposed different technological solutions.

Elon: Like Lightning and the Layer 2 technologies on top of that. I mean, it's all, it seems to be all kind of a trade-off, but the point is, it's kind of brilliant to say, to just think about information, think about what kind of database, what kind of infrastructure enables the exchange of - Yeah, let's say like you're operating an economy, and you need to have some thing that allows for the efficient, to have efficient value ratios between products and services. So you've got this massive number of products and services, and need to, you can't just barter. Because that would be extremely unwieldy. So you need something that gives you a ratio of exchange between goods and services. And then, something that allows you to shift obligations across time, like debt, debt and equity shift obligations across time. Then what does the best job of that? Part of the reason why I think there's some merit to Dogecoin, even though, it was obviously created as a joke, is that it actually does have a much higher transaction volume capability than Bitcoin. The costs of doing a transaction, the Dogecoin fee is very low. Like right now, if you wanna do a Bitcoin transaction, the price of doing that transaction is very high, so you could not use it effectively for most things. And nor could it even scale to a high volume. And when Bitcoin was started, I guess around 2008 or something like that, the internet connections were much worse than they are today, like order of magnitude. I mean, they were way, way worse in 2008. So like having a small block size or whatever it is, and a long synchronization time made sense in 2008, but, 2021, or fast forward 10 years, it's like, comically low. And I think there's some value to having a linear increase in the amount of currency that is generated. So, because some amount of the currency, if a currency is too deflationary or like, or should say if, if a currency is expected to increase in value over time, there's reluctance to spend it. Because you're like, "Oh, if I, I'll just hold it and not spend it because its scarcity is increasing with time, so if I spend it now, then I will regret spending it. So I will just, you know, hoard all it." But if there's some dilution of the currency occurring over time, that's more of an incentive to use that as a currency. So Dogecoin just somewhat randomly has just a fixed a number of sort of coins or hash strings that are generated every year. So there's some inflation, but it's not a percentage at base. It's a fixed number, so the percentage of inflation will necessarily decline over time. I'm not saying that it's like the ideal system for a currency, but I think it actually is just fundamentally better than anything else I've seen, just by accident.