Notice how almost all news of Bitcoin now are about its price. Bitcoin used to be exciting in both technical and economical aspects, but has now become just a store of value entirely driven by speculation.
Other technically superior cryptocurrencies (e.g. Monero, Ethereum) have replaced most of its usecases, boasting much faster and cheaper transactions and real anonymity in the case of Monero. Bitcoin takes more than an hour even at absurd transaction fees of multiple dollars, and is actually pseudonymous, meaning if you can associate an address with a real person, it becomes relatively easy to trace all their transactions unless they were careful to cover their tracks.
It may or may not continue to increase in value long-term, but it has little uses outside of being worth a lot of money.
> boasting much faster and cheaper transactions and real anonymity
Cost me over $4 to send Monero transactions last month. Cost me about $3 to send a Bitcoin transaction this morning. The average and median transaction fees between the two networks have been pretty close for a while
I like Monero but it has some way to go - it needs a light client, multisig completed, and hasn't really had to confront any scaling issues yet (already at 30GB+ blockchain with 4-5k transactions per day).
At the same time the other cryptos are progressing rapidly on the one huge advantage Monero has - Ethereum has added zk-SNARKs and there are all sorts of proposals and developments on Bitcoin now that malleability has been addressed and the new opcodes added
edit: also re: Bitcoin News - most of what I read is about the ongoing Segwit2x saga, but it's a bit difficult to avoid the price when it is on such a tear
I see hundreds of my friends sending money free with Venmo each month. I know nobody having any slightest interest in Bitcoin or the likes. Once in a while, somebody would ask me if it makes sense for them to invest some cash into Bitcoin as they've heard about some crazy growth, but when I explain to them some, they all decide it's too risky, and those who are the anarchist type stick to gold.
I don't tell them these opinions - I explain to them what Bitcoin is and how it works and what's needed to keep it operational. Nobody likes China's involvement - especially the anarchist types. Bitcoin is full of pseudo-anarchists and people living in denial because Bitcoin is their last hope of having a decent living.
Venmo is great for small payments, and makes way more sense than bitcoin for that use case.
Bitcoin's use-case is not microtransactions or payments among friends. It is providing secure and trustworthy payments when no trusted third party exists, independent of governments, companies, etc.
I am amazed how many people use Venmo. I'm one of the first adopters, I've never actually used it except to donate the penny I was given when I opened my account, but I see such a diverse crowd using it today daily - it's beyond my most optimistic expectations for it or a similar service! So, PayPal did a great decision to acquire them as Venmo doesn't have the notoriety of PayPal proper!
Given that it's risky, you could (should) have told them to just invest a tiny amount, like 1% of their savings. That's what I told some folks, and now their investment is up 10× so their 1% investment turned into 10% and their are really happy about it.
I strongly believe so. Given its only utility as a low-class investment too and illicit trade payment method, how can it be moral? The substantial environmental toll and funding Chinese enterprises is not a positive thing either. I'd be happy if you prove me wrong.
1. Owning bitcoin doesn't encourage illicit trade. Cash is used for illicit trade, but it's not immoral to own cash.
2. Owning bitcoin incurs only the environmental toll for the initial transfer into your wallet. If the $0.50 of electricity used to validate your initial transfer bothers you, buy some carbon emissions to offset that. But you probably waste much more electricity leaving Halo on pause for 10 minutes while you grab a snack.
3. If you think Chinese enterprises are immoral (which I would love to hear your reasoning on if true), then don't buy bitcoin from a Chinese enterprise. They don't have a monopoly on the currency.
Also, what do you mean by "low-class investment"? Do you mean high risk? The definition of investment is: "a thing that is worth buying because it may be profitable or useful in the future."
Given the track record of Bitcoin, I would say that so far it has proven to be a very good investment for any who have bought it so far. It's hard to argue with history.
Or maybe you are claiming to have knowledge about why the years-long trend of bitcoin growth will cease soon? Has something fundamentally changed about it recently?
transactions with fiat is fine, good luck storing all of your wealth in fiat (specially with worldwide QE, fiat is more pumped than anything can be) : http://www.fiatfate.com/
My 401(k) and the fund I spent less than 10 minutes selecting gives me roughly 15% annual growth. Just last month alone it was about 5%. Greed hurts and kills. I'm happy with this return, and I'd instead invest my time in building something tangible than sitting on a stash of Bitcoin and waiting for the day to sell to come, which would never be. It's just very degrading from a psychological point of view - not selling bitcoins does nobody good, including the owner whose psyche is getting severely affected. On forums, I see people living in misery just to invest every penny in cryptos in hopes of a better life, which possibly would never materialize. With stocks and selecting the right companies to you invest in, and having a modest growth that doesn't activate greed that emphatically, the positive outcome for the world as a whole is evident.
A guy living in a basement in China, Ukraine, or Russia is not sophisticated enough to make such investments. Bitcoin is the amateur investment dream, but, unfortunately, there is unscrupulous money behind it, too. When there's a supply of avid supporters living in denial and who invest any penny in it at any price, there's an opportunity to make money out of somebody else's stupidity.
People in those countries have access to equities markets. It's a little more awkward to trade in Russia, but there absolutely are online brokerages that service the country. China actively encourages private citizens to invest in stock funds.
A) XMR Tx set to low priority will usually ship in next block (within 2 mins) with 5 ring size at fee of 30cent. Not sure what you were doing.
B) ZKSnarks will never deprecate XMR, they bring the caveats of trusted being required, inability to audit coin supply and inherently DO NOT provide fungibility.
It’s no wonder xmr price is in the doldrums. Even the smart guys on HN are misinformed about it.
>Cost me over $4 to send Monero transactions last month
Correct me if I'm wrong, but why couldn't you just decrease the fees you used? Monero has an adaptive blocksize, and transactions won't really get dropped if you used very low fees (unless you are very unlucky)
The mining dynamics are very different than Bitcoin in a way that it adjusts the blocksize to keep TX costs low. This isn't scalable but looks like they are working on it. (Search for 'hyc' on reddit and monero forums). I still haven't completely understood all of it, but here's[1] an explanation.
> Cost me over $4 to send Monero transactions last month. Cost me about $3 to send a Bitcoin transaction this morning. The average and median transaction fees between the two networks have been pretty close for a while
I might be wrong, but isnt the fee based on how much of the currency that you're sending?
Like, how much were you sending for each currency? If the amounts werent similar, the fees might not be accurate for similar amounts
The fees have nothing to do with how much money you’re sending, you could send $1 or $1,000,000 and it would cost the same thing. The fees are based on how large the transaction is (in terms of kilobytes, that is, not amount). Some transactions have more inputs/outputs than others (and thus take up more space in terms of kilobytes than others) but that’s not a function of the amount being sent.
As someone who has no stake in any of these, it seems to me that Ethereum has a big PR problem no matter how technically superior it is: it's inextricably tied to the story about the DAO, where those who played the game by the rules had their Ethereum redistributed by the developers because said developers didn't like the outcome. (I know that this isn't a neutral phrasing, but it's the perception I'm talking about...). Once it's shown that some group is willing and able to change the rules to avoid losing, trusting that they won't do it again seems naive.
People who believe that ethereum is technically superior have not studied cryptocurrencies in depth. Ethereum made a lot of reckless design decisions, trading long term stability and security for advantages that only exist over bitcoin in the short term. Their short block time is a sloppy choice. Their focus on gpu mining is a boneheaded mistake. Their scripting system is embarrassing. Proof of stake is nonviable. Multiple clients invites large scale network forks like the spurious dragon update disaster. Their code is garbage and won't scale.
Thanks for leaving your opinion but I think I'm not alone when I say that I prefer more elaborate feedback. You're saying that a lot of things are bad, but not really why. "Sloppy choice", "boneheaded mistake", "emberrassing", "nonviable", "code is garbage and won't scale" but neither of these things have any reasoning behind them (maybe you do, but you didn't take the time to actually write it down) which makes your comment relatively useless.
What do you think is better than Ethereum then? We already know by now Bitcoin is garbage. They have refused to do any innovation out of pride, and instead of just a tiny bit of compromise the devs pander to their ego and attack others instead. Directly causing this upcoming 51% attack on the chain (2X).
It is useless as a global currency now, and any more complicated smart contracts built on top of it need trust in a third party, eventually, if it's ever built.
All it has left for it is brand recognition and large transactions as a settlement network.
The current price increase is obviously because people need to be in Bitcoin before this upcoming attack. Because if there is a back and forth fight over the hash power, you won't know who is the winner immediately.
Cardano was founded by the same people who originally founded Ethereum, and they also maintain Ethereum Classic. Their team has leading computer scientists and cryptographers on board, such as Phil Wadler. It addresses all the shortcomings of Bitcoin and Ethereum and is based on scientific research instead of hacking.
> Their focus on gpu mining is a boneheaded mistake
Better to leave random warehouses in China to control the entire pool? How does supporting asics matter in the least other than making it less accessible?
If any government wanted to take down a CPU or GPU based cryptocurrency, they could accomplish a 51% attack in no time. Gathering or manufacturing ASICs would be a longer, harder, more obvious process.
I'm not convinced that's true. The government can get ASICs produced more easily than they can produce quality GPUs. GPU procurement at the scale necessary seems like it would be very hard.
A government would need to produce ASICs, but would only need to commandeer GPUs. There are massive GPU farms used by various industries, including ones available for rent (aws, etc.)
For the lack of a better word, you seem salty. You make a lot of allegations that arent supported by any evidence. Everybody can design a perfect system, few can make the tradeoffs to build something that works.
> (e.g. Monero, Ethereum) have replaced most of its usecases
I use Bitcoin from time to time to order food and buy other stuff online (sometimes through gift cards bought with Bitcoin). It's tough enough to find sites that accept Bitcoin, but I don't think I've ever seen one that accepted Monero or Ethereum. Maybe Litecoin a few years back. I admit that I haven't searched, but I would have expected a correlation with Bitcoin-accepting sites.
So if it's not buying stuff, what use cases do you have in mind?
I think you're confusing the present state of cryptocurrency as being its conclusion. Yes, Bitcoin was the first mover, and Bitcoin has the most buy-in. But cryptocurrency in general does not have global buy-in as a way to buy and sell stuff.
A) Barriers to initially acquiring crypto coins remain a bit high. B) Expense of transactions remains way too high, C) Transactions are way too slow, and D) For Bitcoin in particular, the hoarders make it politically difficult for Bitcoin to move to an algorithm that can produce faster transactions and therefore serve as a better means of payment.
All the major blockchains in the cryptocurrency ecosystem, right now, are too slow and expensive to be of much use as a currency to the global economy. It stands to reason that if one of them, unburdened with Bitcoin-holder demands for ever-increasing scarcity, solves that problem (Proof of Stake?), then Bitcoin will be supplanted by a cryptocurrency that improves the currency experience. Several are in the process of fixing that, while Bitcoin is not.
No cryptocurrency's competition is Bitcoin. The competition is old school means of payment. If your currency becomes closer than Bitcoin to being as useful as traditional money, your currency will have an advantage over Bitcoin.
Imagine you sell a phone on Craigslist, for crypto. You and the buyer can either deal with a $10 fee and 30 minutes to an hour of sitting in a Starbucks to complete your transaction, or you can give up, swap cash for goods, and walk away. Which one do you choose? Time is expensive, too.
Yes. I've transacted quite a bit in person for Bitcoin, and I'm fine with an unconfirmed transaction as long as the value is less than $500 or so and I can see it in the transaction pool.
The way I see it, an unconfirmed Bitcoin transaction is still more trustworthy than a confirmed debit card transaction. At least with Bitcoin, I'm 100% sure the person has the money in the first place, and that once the transaction clears (in ~10 minutes), they can't reverse it later and stick me with the loss.
Ideally Monero would replace Bitcoin when buying things. Monero is more like cash than Bitcoin is. Unlike Bitcoin, paying with Monero doesn't immediately give away your balance and transaction history. Monero would also be better suited because it has lower fees that will get even lower as the dynamic block size increases. And because of the dynamic blocksize, you won't have to wait forever to confirm that you sent payment for a cup of coffee or whatever.
If you're interested in adopting Monero, but still need to be able to pay in Bitcoin occasionally, you can use a service like www.XMR.to
Monero has potential, but I have found DASH to be the currency that has the biggest potential to replace Bitcoin when buying things. It has high throughput, privateSend, instaSend, decentralized governance, treasury system, they are focusing on UX, and I find some of the 'leaders' very talented (like Ryan Taylor).
Monero's scalability is even harder to solve than Bitcoin's I think. Perfect coin should be private and scalable. There isn't one yet, expect maybe Byteball's blackbytes.
None of the cryptos that exist today can even function as an effective "buying stuff" currency because they are all deflationary, not just in exchange rates and short term speculation but in how they all mine at fixed / declining rates to finite limits.
If its going to be worth more tomorrow, you probably don't want to trade it for something today.
The use case for bitcoin is the same use case that makes up 95% of the price of gold - its predictably scarce. Thats its value.
> can even function as an effective "buying stuff" currency because they are all deflationary
Yes. Exactly how US dollars cannot function as effective "buying an iPhone" currency since they are deflationary: In a year, the same amount of dollars will get me a better iPhone, or more iPhones of the same quality.
This super-simplified deflation argument is mostly bullshit, no matter how often it's repeated in economics textbooks. People have needs, and they are fine with fulfilling some needs later, but others they want fulfilled immediately.
First of all, not all existing cryptos are deflationary. Off the top of my head, Dogecoin is the best-known example of an inflationary crypto. There are about 110,000,000,000 Doge in circulation at the moment, and that number will increase at a rate of a little over 5,000,000,000 per year ad infinitum.
Secondly, the inherent deflationary nature of Bitcoin has not yet come to pass. Coins are currently being mined at a rate of 4% per year, halving about every 18 months. Once the inflation rate for Bitcoin goes negative, only then will we be dealing with a truly deflationary currency. It only seems deflationary now because the demand for Bitcoin is drastically outpacing the rate at which it's being inflated.
Finally, the inability of the state to inflate Bitcoin at will is the point. If you want to keep your capital in a state-controlled inflationary currency no one is going to stop you. What I and others in the Bitcoin community believe will happen is that "bad money will drive out good". People will spend their dollars and hoard their Bitcoin, as they will understand that dollars will be worth less and Bitcoin more in the future. The only way to stop that from happening will be a drastic reduction in the number of dollars in circulation... which again, is kind of the whole point for many of us.
> The use case for bitcoin is the same use case that makes up 95% of the price of gold - its predictably scarce. Thats its value.
That's one use case, yes. It's not the only use case.
Capital being held in "state-controlled inflationary currency" would be unusual. Capital would usually be composed of real-estate, stocks, ETFs, bonds, gold, commodities, maybe an art collection. Arguably US treasury bonds are not that different from holding actual USD, I concede that. But a share of Apple is a share of Apple. It doesn't matter if you quote it in USD, EUR, BTC or gold nuggets: its intrinsic value is the same.
In fact the richest people I know are all negative USD, and very positive everything else (especially real-estate), because they borrow USD to invest. The poorest are also negative USD, and holding only liabilities with little assets. It's only the ones in the middle that are positive USD. Basically not rich enough to buy real-estate (or not interested), but certainly not poor either.
May I ask you a question: would you borrow Bitcoins to, say, buy a plot of land in the middle of Arizona, plant vines and start making wine? This is why as far as I am concerned I don't see Bitcoins as any sort of competition to USD, EUR, JPY, etc. It's just yet another asset that may or may not prove to be a good investment in the long run. I hold some, just in case.
>>None of the cryptos that exist today can even function as an effective "buying stuff" currency because they are all deflationary, not just in exchange rates and short term speculation but in how they all mine at fixed / declining rates to finite limits.
Note that Bitcoin's tx volume hasn't been able to increase since the blockchain reached its 1 MB limit. Otherwise it would have seen continued growth like Ethereum.
I mostly use Bitcoin to buy things that I either don't want on my credit card bill or from merchants that I don't feel comfortable trusting with my credit card information.
For me, that's generally things like gift cards, VPN and VPS rentals, etc. It also seems to be gaining significant traction on porn sites, both for memberships and for per-artifact transactions. I expect that it will continue to be useful in the case of memberships in particular because you can't set up a recurring payment in Bitcoin, which protects the purchaser from being unexpectedly charged later.
> I don't think I've ever seen one that accepted Monero or Ethereum. Maybe Litecoin a few years back.
I agree here. Although I've seen a few, they're all very much amateur sites run by other crypto nerds, so they don't really count.
That said, I don't think that matters so much anymore. Sites like shapeshift.io have made it nearly effortless to move between cryptos, so if you want to hold and transact with friends using Monero and buy things using Bitcoin, there's much less friction than there was a year ago.
> So if it's not buying stuff, what use cases do you have in mind?
In my view, here are the main use cases for Bitcoin:
1) As a currency/"digital cash". There are definitely use cases (see above) where Bitcoin is a superior currency. There are also instances where people cannot transact using the "normal" financial system, and Bitcoin gives them the ability to purchase things online. Examples include minors and citizens of states without great access to the world financial network.
2) To evade state control. I've personally got a friend in Venezuela that I occasionally send some Bitcoin to help with family matters. Their currency is literally worth less than WoW gold at this point, and the state controls the dollar:bolivare exchange rate. I'm able to send him $50 in Bitcoin and he's able to exchange it for food and medicine, or for bolivares at a rate many times better than the "official" rate. Likewise, it seems that the Chinese are using Bitcoin (and other cryptos) to evade capital controls and get their assets out of China.
3) As an investment. The long-term deflationary nature of Bitcoin means that it's an excellent place to keep "disposable savings" - so long as you believe in the future of the currency.
4) Complex but bulletproof financial planning. My cold wallet is set up using m-of-n. There are several private keys out there to it: I have one at home in my safe, one in my head, one on a Yubikey on my keychain, my wife has one, my attorney has one, my parents have one. Three of those six keys are required to sign a transaction for it to be valid. That means that no one individual, other than me, with access to those funds can spend them on their own. If I die unexpectedly, my wife can spend them. If we both die unexpectedly, my parents can spend them. If somehow I, my wife, and my parents all die unexpectedly in very short order, the funds can still be recovered by the executor of my estate. This sort of arrangement cannot be made in the traditional financial system without exposure to litigation risk.
Another place it would make sense is in a corporation with strong spending controls. A wallet where the CEO, CFO, and CSO all must sign off on a transaction is totally possible. That wallet is then 100% guaranteed not to ever be spendable by anyone outside of official channels. There is also a public record of who signed each transaction and when for audit purposes
5) Asset verification. Do you know, for sure, how much gold is in Fort Knox? Of course not, we must simply trust that the US government isn't lying when they state the size of their reserves. With Bitcoin, if an organization has 20,000 BTC sitting in a wallet, they can sign a message to that effect with the private key that corresponds to it. That signature can then be verified by anyone, and we can be confident that they do in fact control the coins at that address.
just FYI, HN doesn’t allow deleting or editing posts after a very short window. maybe you know this, and I doubt you’ll face consequences for this confession of “evading state control,” but seems like a worthwhile caveat in context.
As far as I know my sending money to my friend is not illegal under US law, but it is illegal for my friend to use it. That's what I meant by "evading state control" - those of Venezuela, not the US. I'm not terribly concerned about the Venezuelans coming for me :)
Bitcoin's value is given by the trust people put in it. Just like with the fiat currencies as a matter of fact, because I don't know of any of them to be backed by anything else than trust.
Of course, the US dollar has the whole US economy and the biggest army in the world as its plus, but it also has its minuses: the US treasury can and does print as many as it wants, in the detriment of ALL USD holders.
Bitcoin's pluses when comparing it to other crypto currencies are:
- the first to market advantage
- almost 9 years of virtually 0 hacks of the protocol or concept
- no sudden moves
- the whole ecosystem that formed around it
- etc.
Let's not forget - ETH is less than 3 years old, Ripple is centralized, Litecoin, zCash, Monero and most of the others are bitcoin forks.
>Bitcoin's value is given by the trust people put in it. Just like with the fiat currencies as a matter of fact
Except fiat currencies also have that fiat behind them that gives them value. If you want to do business with the US government, you do it in USD. If you are one of the millions employed by the US government, you are paid in USD. If you manipulate USD, you have to answer to the US government. Those things add tremendous value and they are something that Bitcoin does not have.
With Bitcoin you only have trust in value of Bitcoin. Fiat currency is given added value by having trust in the power, reach, and stability of the nation that issued it.
> With Bitcoin you only have trust in value of Bitcoin.
More specifically, you have trust in the continued trust that others have in it. It's a self-fulfilling prophesy: as long as people continue to trust it, it continues to be valuable, but as soon as people start to doubt that others will continue to trust it, it's instantly worthless. There's no real value backing it up. This makes it very vulnerable to hype and hysteria.
The USD, in effect, does not. It's a reason I'm somewhat bearish on it.
In the 70s we made a number of agreements with a variety of Mideastern nations. We gave them what seemed like the world and asked that simply require payments of oil to be transacted on the dollar, and that they invest their excess revenues into US securities. In fewer words, the petro dollar.
And those agreements, for the most part, persist to this very day. A US dollar guarantees you access to oil. And so long as oil is the most in demand commodity in the world, the US dollar will remain the most in demand currency in the world - guaranteeing access to the goods and services of any country.
This is why the US dollar is the world reserve currency, or the money most countries keep under their bed in case of a rainy day. However, if this changes (renewables, Saudi Arabia deciding to switch allegiance to Russia/China, etc) what happens? We've a lot of debt that's only increasing and it's unclear to me how tall the USD would stand without its crutch.
Every currency that's backed by an actual government. Whatever else happens, you can always pay your taxes with it. It is the currency of the economy the currency is native to. As long as that economy is running, you can use that currency to purchase goods in that economy, and the currency has value. People doubting whether enough people will start using it in the future is irrelevant, because enough people are already using it in the present. A country will have to work really hard to sabotage its currency, and that's extremely rare (though it has happened in Zimbabwe and Weimar Germany).
Bitcoin, by comparison, isn't used for everyday transactions by a lot of people (though there are some). There's no real economy it's native to (unless you count Silk-Road-style markets), and there's no guarantee that you'll be able to use it there in the future.
So you have to have trust that others will have continued trust in the currencies or values that your example currency is pegged to.
Ultimately it seems that any material you treat as a store of value, rather than as a commodity or material that is valuable to you for its own properties, includes this trust that others will value it. If others do not value it, it is not a store of value, its usefulness to you is reduced to its own intrinsic properties rather than the value others place on it.
It might not be just the trust in value. BTC started at less than 1$ in value. The trust built over the last almost 9 years.
It might be trust that you can't double spend BTCs, trust in the issuing algorithm, trust that you can only lose your bitcoins if you do something stupid with your wallet, etc.
Of course, we can't compare right now bitcoin's ecosystem with the ecosystem of the fiat currency, but who knows what will happen in the future if more and more people and businesses choose to adopt it.
The nation backing of fiat also is its downfall. Look at our monetary base [1] for an example. The US adjusted monetary base in in 1984 was about $183 billion. In the 24 years to 2008 it increased at a roughly linear rate to $874 billion. Just from 2008 to 2015 it increased to more than $4 trillion.
The Fed themselves wrote an article [2] expressing some concern about the "nontraditional monetary policy" that instigated this sharp change in the monetary base. In their closing words, "Recent increases in the monetary base are far greater than any previously in American history (even adjusted for the size of the economy), surely a "noble experiment" in policymaking. Will these policies be successful without accelerating inflation? The epitaph to this curious case of monetary base expansion is yet to be written."
And really I think that final line quite succinctly sums up the state of modern economics. We've entered into an age of currency growing, inflation chasing, debt drive economics. And it's been working great for the briefest glimpse of time that we've been carrying out this experiment. Does that mean we've finally 'solved' economics, or does an epitaph that looks back somewhat less fondly on our decisions await? I don't know, but I do think the inherent stability of the fundamentals of bitcoin (e.g. - everything except the exchange rate) and the lack of trust it requires makes it a nice balance to our fiat experiments.
It's funny how monetary base expansions are STILL used as arguments against fiat money. People like you were predicting doom because of it since 2010. Nothing happened. Except economies recovering, which was the design goal. The FED will also start to reduce its expansion soon, and catastrophe is still not anywhere to be seen. You were simply wrong, get over it.
I think it’s a bit of a stretch to attribute much of USD’s value to business deals with the US government. That must be a tiny effect. I’d say most of the value comes from the fact that US workers have to pay taxes in USD even if they earned income in some other currency or asset.
If you define that so broadly, then sure. I got the impression that sgl was referring to directly doing deals with the US government where the US government pays in USD, which I suspect is a much less significant phenomenon.
No, not "dealing" with the US government: actually compelled by force of law to render a portion of your assets. I don't mean this to sound as ominous as it does, but rather as stabilizing a force as Bitcoin can never be.
> Litecoin, zCash, Monero and most of the others are bitcoin forks.
Nope. All of these are derivatives of Bitcoin, but none of them are forks. A fork, by definition, shares a genesis block with the parent currency. This is in contrast to a "client fork", where the Bitcoin codebase was modified to create a new blockchain with or without changes in protocol.
Most forks of Bitcoin have been intentional, and the "lesser" chain has died on purpose. Off the top of my head, existing forks are:
BitcoinXT: created in late 2014, it allowed 8MB blocks instead of the 1MB limit for Bitcoin. As of mid-2016, it died due to lack of miner support.
Bitcoin Classic: created in early 2016, it allowed 2MB blocks. It was effectively dead as of early 2017.
Bitcoin Cash (a/k/a BCash, BCH): created in August 2017. It eschewed SegWit, and increased block size to 8MB. It's not dead yet and seems to have a base level of support both in terms of miners and in terms of price. I expect that it will die eventually... but who knows. It is by far the best-supported Bitcoin fork, and there are many who believe that it's the "real Bitcoin" in the sense that it conforms more closely to the original whitepaper.
There are a couple of other forks planned in the near future as well.
Bitcoin's value is given by the trust people put in it.
Currency speculators don't give a damn about trust. They're not in it for the long term value that derives from the usefulness of Bitcoin, and that's the only thing you need trust for. They'll cash out when the price gets to a point where they're happy with their return. At that point either new speculators will get on board and keep the price high or the price will fall back to real value of Bitcoin.
Neither really changes the usefulness of Bitcoin or it's long term value as a currency.
And let's not understate the value of the dollar that goes beyond economic fluctuations and military might: it's legal tender for paying your taxes if you're a US citizen. That's not to say I suggest investing in treasuries, but strictly as a comparison with Bitcoin.
No this isn't correct. The government imbues value in their fiat currency by insisting you pay your taxes in it. You may think bitcoin is the best thing ever for many reasons. But if you live in the USA you gotta get USD to pay your taxes or they are going to put you in jail.
We see this globally with the huge effort the USA puts into keeping oil priced / settled in USD. It matters.
USD has a store of value because if I hold USD I know the US govt is going to make people hand over a portion of their labour in taxes which keeps USD demand up.
I keep thinking about investing again, but I have a rule about investments. If I can't come up with a reasonable story to explain why supply and demand are the way they are. I don't invest. I can explain the supply side part... but the demand here baffles me. The best explanation I can come up with is "this thing is rising in price like a rocket, maybe I'll make some money"
That's not a good reason to invest in my opinion. Good gamble though.
At this point, the demand for bitcoin is driven primarily by its value; anyone acquiring it with the intent to use it in transactions is being foolish. Almost certainly they would be better off holding the BTC and processing the transaction with another currency.
Without making any judgement on whether it is a useful transactional "currency," I hear this sort of thing a lot, but I don't understand it. Surely either BTC is a good transaction mechanism or it isn't and the rampant increase in value is largely irrelevant.
You could convert USD to BTC and buy something while maintaining exactly the same held balance, no?
You're holding two currencies, one loses about 2.5% of its value a year, the other gains about 1500% (some huge factor) of its value in that same period.
Which one do you purchase the coffee with? The one that's losing value as you hold it, or the one that's going gangbusters?
I'd absolutely, without hesitation, dump the volatile one. If it can appreciate by 15 times in a year, then, clearly it can fall to a 15th of its value just the same.
I need to know that I can pay my mortgage and buy food at the end of the week, so stability is paramount.
This is known as Gresham's Law: Good money drives out bad money. Smart people will trade away their bad money and hold onto their good money when they can.
If you buy something with $100 instead of buying it with bitcoin, that's $100 less you could've put into bitcoin. Or thinking about it another way, if you spend bitcoin and feel like you have less than you'd like to hold, you can simply buy more.
>but has now become just a store of value entirely driven by speculation.
and that's why its going to survive. Its a bit like the fine art market. Why are the wealthy buying $20m dollar paintings? Because in 5 years it goes to auction for $25m.
Now whether "survive" means anything more than being the preferred currency of illegal dealings and ransomware is the big question. I suspect bitcoin has found its market niche and will stay here as-is. Fiat currency will be as strong as ever and the social and political aspects of cryptocurrency have pretty much failed outside of these tiny use cases.
I see it a bit like the Commodore 64 from the 80s. It wasn't the best home computer, but it was cheap and passable and lasted far longer than anyone should have rightfully assumed. "Good" tech doesn't always win, say the way the Amiga never took off like the C64 did. Sometimes we get stuck with "bad" tech for a while.
It's shopworn but good tech doesn't always win. Bitcoin has a big(ish) network of users and a proven codebase.
The decentralized nature of blockchains means that they're hard for individual corporations to control and profit from. That hampers adoption of new closed cryptocurrencies (not Monero or Ethereum though) but can serve as a powerful public utility.
This is an interesting line of thought: bitcoin has no intrinsic value--its price represents a supply and demand equillibrium for a (1) money, that is (2) pseudonymous, and (3) not a government currency.
If other CCs can offer 2, 3 equally well, the price premium must be due to something different about 1--how well it performs the functions of money. Is it a better Store of Value? How much better of a Medium of Exchange is it, and is it worth the premium?
As far as I can tell from my napkin analysis, I would guess that bitcoin appears to be in a pretty speculative bubble. This is assuming Ethereum, and other CCs, are equally capable of fulfilling the functions of bitcoin.
> This is an interesting line of thought: bitcoin has no intrinsic value--its price represents a supply and demand equillibrium for a (1) money, that is (2) pseudonymous, and (3) not a government currency.
I agree with this completely, but think there are a few other factors that will matter in the future but have not yet become widely used. The relative importance of all of these factors has changed over time and will continue to change in the future.
> As far as I can tell from my napkin analysis, I would guess that bitcoin appears to be in a pretty speculative bubble.
Again, I agree. Every time the price of Bitcoin has gone up a great deal in a short time, it's been a bubble caused by speculation or by a new wave of people joining for the first time. Every time that's happened, the bubble has burst. Every time the bubble has burst, it's bottomed out at a level significantly higher than the previous baseline, and every time it's bottomed out it the price has stabilized and ultimately recovered.
If you want to day trade, now is probably a great time to get in - assuming we're still on the way up. If you're wanting to hold long-term, then the safest time to buy will be as soon as the price stabilizes after the next pop. As for me... I buy on a regular basis without regard to the price. I'm something of a "true believer" though, and don't expect to ever sell my entire holdings again.
Personally I think that the value of (1) Money is extremely dependent on proven track record and the network size. Since the value of (2) and (3) are dependent on (1) I think this has outsize importance. Though as programmers I think we tend to underestimate this value.
Not to say Bitcoin isn't in a speculative bubble, who knows?
Aside: I don't know if it's fair to call bitcoin pseudonymous. Tumblers mean that one can effectively obscure their transactions if that's their goal, pseudo-pseudonymous if you will.
Yeah, imagine using Netscape in 2017 and not Chrome - that's pretty much how I look at Bitcoin.
The anarchists say how important Bitcoin is, yet, all they care is its fiat exchange ratio as all they care about - cash out their stash in fiat just right before it starts dropping in a get-rich-quick pipe dream.
It's not only anarchists that fear government control over private life (mass surveillance, the erosion of privacy and contract rights, economic centralization through regulatory barriers to entry and gatekeeping, etc are valid concerns that many have).
>but it has little uses outside of being worth a lot of money.
Absolutely, yet being a store of wealth is a use case in itself. Technically bitcoin is eclipsed by Ethereum (capability wise) and Monero (privacy wise)
There are DApp currencies which have better scaling solutions in place already vs Ethereum. I think you are heavily discounting the first mover advantage.
I think a lot of the price movement is speculation, but a lot of it is new institutional investors investing in bitcoin. Ask most people who are new investors in BTC if they've heard of ETH, I bet it isn't as large of a proportion as you'd think. People are betting on the future of BTC being greater than it is currently, not about its current value.
>>There are DApp currencies which have better scaling solutions in place already vs Ethereum.
Like what?
The only competitors to Ethereum are totally unviable as decentralized systems and sustained solely on hype and misinformation. They are also either not released or have less than 1% of the tx volume of Ethereum.
Ethereum also has a very aggressive and well developed scaling roadmap.
It's definitely due to network effects. Bitcoin Is the most popular cryptocurrency. Ask the average person about cryptocurrency and they will immediately think bitcoin. The technical subtleties between different cryptocurrencies aren't well known to the average non-technical crypto investor.
> (..), but [bitcoin] it has little uses outside of being worth a lot of money.
I keep reading this and sounds false to me. Why do you ignore the illegal drugs market? Lots of people uses bitcoin daily to buy and sell substances. You might have a moral opinion about that fact, but it remains true. You might think it's a small, or temporary market, but I disagree based on the history of humans and drugs use.
While I don't fully disagree that speculation might be the main drive of the price, let's not forget that the are some real, big, uses of bitcoin.
> Notice how almost all news of Bitcoin now are about its price. Bitcoin used to be exciting in both technical and economical aspects, but has now become just a store of value entirely driven by speculation.
Citation needed.
>Other technically superior cryptocurrencies (e.g. Monero, Ethereum) have replaced most of its usecases, boasting much faster and cheaper transactions and real anonymity in the case of Monero.
Citation needed.
> it has little uses outside of being worth a lot of money.
I consider myself pretty tech-savvy, but I'm still completely lost as to whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge that will continue climbing.
I probably should've taken the time to mine some back when my friends were doing it and tried convincing me too. Ah well.
(Queue heated comments from both sides. Discussing bitcoin is like bringing up religion AND politics at the dinner table at the same time)
There's no pyramid scheme. It's a hyped asset, to say the least, but there's no pyramid. Like a hyped startup, it doesn't do much yet, but it is promising, so people buy it. It may be "worth" much or zero in the end, it all depends on the final outcomes.
It's also the easiest/cheapest/most open asset to trade (depending on where you trade).
In the long term, Bitcoin can be seen as a safe heaven in case of economic chaos, like gold, but way easier to buy and hold. It can also be seen as an interesting economic experiment: what if currency wasn't managed by a government? Or you can give trading a try for a few $$ as a gamble (with more chances of success than in a casino).
It's also a useful currency in some cases: I'm a "digital nomad" which my bank can't seem to understand. Getting my Debit Card to work online from a foreign country, with an ever changing phone number (they insist on using SMS as a 2FA), sounds like an obstacle to them, but not to BTC.
I think most of the people putting larger checks into Bitcoin are betting that it will become a store of value asset.
Going from memory, a recent Bloomberg article called Bitcoin: "Gold for millennials".
Or, similarly, Peter Thiel said recently [1]: "it's like a reserve form of money, it's like gold, and it's just a store of value. You don't need to use it to make payments."
Agreed, I was just trying to say that currently, one of the most popular investment theses for Bitcoin is "Gold for millennials", not "anonymous paypal" or "decentralised stripe".
A post [1] shared a couple of days ago made a thesis that BTC price needs to grow for it to become a viable "store of value." Maybe this is what we are seeing.
"Market cap size is critical for adoption of a store of value. It needs to be large enough to “fit” even very large amounts of fiat, ideally without affecting the market. Gold market cap is estimated at 7 trillion USD, which means that even the richest people can move all their assets into gold and not move the market. (At least one at a time. All of them at once will move the market big time).
Bitcoin market cap of about 70B USD is not large enough for even one of the richest people on the planet. This implies that if the market cap does not grow, Bitcoin is likely to fail as store of value."
Ultimately that's true of any non-backed currency (and those too I suppose) isn't it, it's just the bet looks far safer for a country/region wide fiat currency.
I wonder if much of the medium term success of Bitcoin has been because the money put in couldn't be laundered readily in any other way, so whilst Bitcoin is a relatively high risk the alternative was just to dump the money without a way to use it?
Most currencies suffer from inflation: it's more interesting to buy now than later because your wealth will go down with time.
BTC with its fixed supply works the opposite direction, devoid of inflation: you'd rather keep your BTC as a store of value that will increase, than spend it on goods you can still buy later for fewer BTC.
Technically yes, you are treating it as a property rather than currency. Such a property is subject to positive and negative externalities (notably, inflation/deflation), and (where applicable) it is subject to taxation on transference (eg: inheritance tax, gift tax, etc).
From a purely economic perspective, cash is just another liquid asset. The distance from currency to store of value is quite short.
Physical assets are generally regarded as stores of value, however, in modern times, currency stability has resulted in currency supplanting durable goods as the primary store of value.
Even holding it in a bank for low interest is investing. Using it as a store of value would be keeping it in your wallet or in a safe (as you would do with gold, for example).
Not really....not at these rates anyways. There isn’t much difference between putting your money in the bank or under your mattress, well, except for convenience and safety issues.
Yes, it is. If you keep the money physically it yields exactly zero and nobody is using it. If you lend the money (to a bank or someone else) you get some interest (or not, in some countries interest rates are negative) AND there is someone else who can use that money. Bank deposits are fundamentally different from “hoarding” gold or bitcoins.
Sure, but the banks don’t thank us much for the pleasure. Money, gold, bitcoins aren’t themselves stores of value, merely IOUs. To really store value (I.e. production), you need things like grain silos.
I think I do not understand. If I possess a certain amount of currency, is it not my property?
And why would it matter what's the "intended" usage of it? Who determines intent? Might every holder of the asset/currency/property (whatever one calls it) have different intentions for it?
In some ways we all are but I think we are forgetting the most important aspect. Using it for payments. That utility use case is more important because at some point the price will go down
But if you use it as a currency you exchange money for bitcoin as soon as possible and use it when required. Money is always increasing so you try to earn more.
Gold without millenia of collective psychology to give it staying power as a store of value once more useful, cheaper, and faster to transact cryptocurrencies get any uptake.
That’s why I got into bitcoin. It has far more potential as a global vault for store of value than a currency. I don’t expect it to ever function as efficient currency and don’t think that it really needs to given other crypto currency developments.
It's like a pyramid scheme in that so long as people keep buying in on the hope of a profit you'll keep making more and more. As soon as people say "hang on this is a con" and convert to another currency then this factor of the supposed value of Bitcoin could deflate to zero. It's not formalised like a pyramid or MLM scheme but it has some of the same structure.
It is a bit of a fraud to claim bitcoin can ever replace fiat currencies, though. Its deflationary, has a fixed coin limit, is incredibly centralized, and its tx rate is awful and costs a ton to move any of it around the chain.
The only value in bitcoin is in how much it exchanges for at this point, and that is definitionally a pyramid scheme, because current buy-ins need more adoption to drive the price up so they profit off their investment.
3% of all addresses control 97% of all coins. 0.01% of all addresses control 21% of all coins. And bitcoins mint rate is slowing every four years and almost 80% of all bitcoin that will ever exist already exists.
Its absolutely a pyramid scheme. Early adopters were incentivized with large quantities of limited coins to persuade them to mine and participate when the value was low. Those really early wallets (circa 09-12) amassed over half of all bitcoin ever and are now worth extreme fortunes. Those fortunes are based on demand for BTC, demand for the tiny amounts actually left circulating.
The real question is how much of that old money is actually dead - lost wallets and lost passwords - and how much is just waiting to cash out for absolute fortunes. All it would take is one early wallet carrying thousands of BTC to liquidate to cause a panic.
What you said still falls quite short of a literal pyramid scheme, which has a pretty specific definition. There is no central organization to recruit new members. People that buy bitcoin receive a real, usable product. Every person holding bitcoin profits when the price goes up. This is all in stark contrast to a true pyramid.
The way specific ICOs are structured, I could see an argument for some kind of pyramid; but "bitcoin is a pyramid scheme" is easily proved false.
Well, there are two components to a pyramid scheme: 1. returns to early investors are generated by contributions from new investors. 2. Each new investor attempts to recruit two or more new investors.
The "profits" for existing investors are paid with money from new investors. So it checks the first requirement to be a pyramid scheme. Now, this isn't explicit, but people still understand that the more BTC investors, the higher the price.
And BTC investors go online and evangelize. They talk about how BTC is a full-proof investment that can only go up-up-UP. Even this thread is full of them. So that checks the second requirement to be a pyramid scheme.
Point 2 has nothing to do with Bitcoin. Yes, there are bitcoin holders that evangelize the currency, but there are plenty that don't.
You are not analogizing correctly - just because you can find a similarity or two between two things doesn't mean one is a metaphor for the other. See Hume's response to the Watchmaker Analogy[1] for more.
No. Apple stock returns profits to investors. While it's possible to also profit on speculation of future profits, that's not the sole, or even primary reason for investing in it. The primary reason for buying Apple stock is for a share of profits.
> but there are plenty that don't.
Bull. The BTC community as a whole, are evangelists and will point out the multitude of reasons why the price of BTC will trend toward infinity. It's no surprise that, as the financial institutions get more invested into BTC, Bloomberg, et. al. report more on how the price keeps going up! Because the only way to make money on BTC is to find someone willing to pay more than you did for one.
Apple could literally pay a $50/share dividend. BTC could never do that.
I'm not saying a pyramid scheme is a metaphor for BTC, I'm saying it is an instance of pyramid scheme in action. It's just a more modern evolution. The creators were smarter and covered their asses: making it a brand, not a company, hiding their identities, making it pseudo-anonymous.
> returns to early investors are generated by contributions from new investors.
This is literally true about Apple stock. If I bought $10 of Apple stock 10 years ago I sell it for $84 today, my $74 return is generated by the contributions of new investors.
Yes, I would also have $104 of dividends paid out, but literally 40% of my "profit" comes from contributions of new investors. So does that make Apple stock a pyramid scheme? NO!
Your profit came from an increase in the profits of the company. The company chose to reinvest some of those profits instead of paying it to you, which further increases profits, thus increasing the inherent value of the stock.
That's the difference. Apple generates revenue, BTC does not. If every BTC generated money, then this wouldn't be an issue. But since BTC can't generate money, the only way to profit from it is to get someone else to pay more than you did for it when there's no fundamental reason to do so.
Plus, it can't last forever, like gold can. It has no use like corn does. You literally just buy bits in a distributed database, tell people how it's will be worth infinity dollars because there's only 21 million of them, then sell them for more than you paid. And repeat until you have infinity dollars or the bits are worth less than you paid for them.
There are many more components to a pyramid scheme, you've purposefully left out the ones that clearly don't apply to bitcoin and gone with a definition that is too broad to fit.
Further, your first component leaves out the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors, instead of investing them. This is clearly impossible with a distributed ledger. Returns (and losses) to all investors, new or old, are equally distributed.
Your second part is clearly much too broad, in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit.
Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.
> literally the only way to earn a profit is to get someone else to buy it for more than you paid.
Don't you mean figuratively? An individual who bought $10 of bitcoin a year ago would have made a profit without bringing anybody else to Bitcoin. In a pyramid scheme, the ONLY way to make money is to bring others in.
Actually, I looked up the literal definition of a pyramid scheme before posting, to ensure I hit all the points.
> Returns (and losses) to all investors, new or old, are equally distributed.
No, old investors can profit while new investors lose money. Or, the new investors paid the old ones. Original BTC investors got them for free, the next generation paid pennies for them, the next paid dollars, then hundreds, and the current generation is paying thousands each.
So should the price collapse, the old generation still stands to make massive profits, at the expense of current investors.
> Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.
Apple earns a profit, of which a share is provided to owners. That's why it's a good investment.
BTC is a purely speculative investment and literally the only way to earn a profit is to get someone else to buy it for more than you paid. It will never pay you a dividend, it will never generate any revenue.
Why were you throwing the term around before you knew what it was? Again, you left out MANY aspects of pyramid schemes--the ones hardest to twist into fitting bitcoin.
And you glossed right over this: the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors.
>So should the price collapse, the old generation still stands to make massive profits, at the expense of current investors.
Nope, the old generation suffers the same losses as the new if the price crashes. A pyramid scheme is just that, a scheme with a central organization controlling the flow of income. That is impossible with a distributed ledger.
The last part of your answer is a rant about Apple vs Bitcoin, I think you missed my only point: in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit. "Evangelizing" by itself is not proof of a pyramid scheme.
I suggest you continue to look it up and learn what a pyramid scheme is. It's different than speculation, it is different than a Ponzi scheme.
I knew what it was, but looking it up helped ensure my argument was complete. I know what a Volvo P1800 is, but if I saw one on the street, I'd still compare it to a picture on my phone to be certain.
> And you glossed right over this: the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors.
I did not, but here:
Any person who currently own BTC, and publicly state that it will continue to rise in price indefinitely are bad actors intent on defrauding the public. This applies doubly to individuals with technical or financial backgrounds that claim their are an authority on the subject.
There. You may not agree, but you can't continue to argue that I'm ignoring this point.
> in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit. "Evangelizing" by itself is not proof of a pyramid scheme.
When evangelizing crosses into market manipulation, then it is.
I feel that people are making claims about the price of BTC can rise, for the purpose of attracting more investors and increasing the price. Thus, attempting to profit from each member they recruit. The margin can be small per recruit, as the audience is literally worldwide.
I do feel that there are evangelists that are primarily motivated by political principals. But I also think nearly every investor is motivated, in some part, by greed.
You still skipped over both points. There is no central org which redistributes income. This alone disqualifies it as a pyramid.
Market manipulation is not specific enough to qualify as a pyramid. Pyramids have a central org that promises rewards for recruiting; it's not an abstract idea like "make comments on the internet and maybe someone will believe you."
You also left out many qualifying factors, again because they plainly don't fit Bitcoin or your argument.
If you'd like to deride Bitcoin, you'd do better to call it a generic term like "scam." It weakens your argument to call it something specific like a pyramid scheme, which actually has a real definition.
Have you bought some BTC, I made a killing on it, it's free money, get some now because after the fork you'll be able to bank at least 20% of your initial sum, ...
The peons in pyramid schemese usually aren't committing fraud, they don't realise that they're in a scheme, they're not lying, they are really convinced that they found the money tree and if only people buy in it will bear fruit forever.
Forks are a corner case. As long as someone is willing to pay for the minority coin, why not sell it: the fact that someone is willing to pay for it makes it valuable.
"The peons in Theranos didn't commit fraud, they didn't realise they were in a scheme, they were not lying, they were really convinced that they found the money tree and if only people buy in it will bear fruit forever".
You can't call every company that has failed a pyramid scheme.
You can't call every company that seeks funds through VC or IPO a pyramid scheme, yet they know that they'll only get rich if others buy in.
More specifically, a pyramid scheme requires that you recruit others to make money. If you bought $10 of bitcoin 5 years ago and never told another soul or recruited another person, then you'd make a profit. The same cannot be said for a pyramid scheme.
Founders throw 1k$ in the pot, investors 100M$, the public 1B$, yet the founder has benefited a lot, by being there first.
If people start thinking "he's a con", the company's value will drop to 0. Bankruptcy.
Is the whole stock market a pyramid scheme?
A market isn't a pyramid scheme just because you didn't enter it at the beginning (that's also true for real estate).
The alternative would be a market where you'd benefit more if you enter last, which means there would be no incentive for anybody to enter first and create the market. That's why the alternative doesn't exist and markets do reward the first mover.
I could buy a bitcoin and hope to sell it later. Or I could buy the S&P 500: a market cap weighted set of pieces of companies that will conduct business and grow by the time I have to sell them, and some will give dividends. Which seems better to you?
Determining that one thing is better than another thing (by however means you determine it, I think both are good for different reasons and have money in each) does not mean the less good thing must therefore be a scam, and definitely not a pyramid scheme, which has a specific definition that bitcoin doesn't fit.
Yes, bitcoin benefits from having more people participating in it, but so does Facebook, so does Twitter, so does Youtube, so does the Internet, so does the US dollar, so does the stock market, etc etc etc. That doesn't make these all pyramid schemes.
Historically speaking, if you bought bitcoin at any point and time and held on to it for 2 years it would outperform an S&P 500 index. We can argue about how long that trend would continue, but those who have chosen to invest at least something in bitcoin have made a good investment so far.
Yes, it is a high risk investment, and yes you could lose 99% of your investment. If you don't have a tolerance for that kind of risk, then bitcoin shouldn't make up much (if any) of your portfolio.
For the next few months you would be better off dividing the assets based on your risk profile. Based on current market trends the s&p may go down in the short term so bitcoin may allow you to spread that risk
Bitcoin changes the world: a permissionless decentralized financial ledger reduces payment friction hence boosts trade, gives access to the unbanked/underbanked, helps people escape inflation, etc.
Investment used to mean putting up capital to create or own something that, with some work, would return a stream of income. Farmland produces food with the work of farming. A factory produces goods with lots of people working. A mine produces iron or copper with lots of machines and effort. With the financialization of the economy, lots of people are increasing their "wealth" by speculation and skimming a percentage on transactions. When people start believing that speculation is the only form of investing, society is in for a hard fall at some point.
In FX trading people are putting up capital to create exchange ratios, which is information. Right now people are putting up capital to determine how much coin issued by a central bank with a "deflationary" bias written in code and run and administered by a collective (i.e., Bitcoin) is worth vis-à-vis USD. Something is most definitely being created.
You talk about a “final outcome” as if at some point we will all collectively say “great. We are done with Bitcoin and it is from now on and forever what it currently is.” That’s not going to happen. It may hit a period of more stability than it has now, but I highly doubt there will be a final outcome.
It does plenty already. I live almost exclusively on Bitcoin. I only get income in Bitcoin, I pay with Bitcoin whenever possible, and I have a Bitcoin-funded debit card for when that's not possible.
I do understand... maybe I wasn't clear enough: it will do more in the future! but it's not Facebook scale yet. Coinbase has 10M users, not 100M, not 1B.
I do bet on BTC to change the world... so I pay in BTC when I can too!
Just wanted to echo your sentiment about banking on the go. I’m sad to say that the world is still not very friendly to borderless people. We have to jump through hoops and pay unnecessary fees just to do basic of tasks. Somehow a vast majority of people I deal with have a hard time grasping that you can work on the go or from home and that the cookie cutter 9-5 lifestyle is not the only lifestyle out there.
The big risk for banks is that they need to know who you are and to a certain extent how to reach you if there ever was an investigation into your activities.
That being said, is there a way for a bank to always contact you? A bank designed for digital nomads would be a very interesting proposition for me given I'm in banking and am looking to discover new models.
Yes, I think KYC is a problem with digital nomadism. All things administrative become a huge burden when you're travelling full-time, rent a furnished house in a tourist location without utility bills, etc.
Some banks are already trying to address such needs, like Monese (which I'm also using).
I probably should've taken the time to mine some back when my friends were doing it and tried convincing me too. Ah well.
The thing I keep telling myself is if I'd mined even 1000 bitcoins (which was viable at the time I first learnt about it) I'd have totally sold out at $10.. there is zero chance I would have made it to $1000 :-D
It doesn't have to be all or nothing. The proper strategy would be to sell a percentage at $10.
In fact, if you started in 2011 with 1000 BTC and every year you sold 50% then today you'd have (by my rough calculations):
8 BTC (worth about $50k)
$160k USD
Of course it's not the millions you'd have if you just held each time, but for many that is a life changing amount of money and you would have obtained it in a responsible manner that doesn't just rely on the value of Bitcoin shooting to the moon.
Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason I don't expect that cryptocurrencies will completely disappear any time soon.
However the value of bitcoin is mainly driven by speculation at this point, a currency that's so volatile is very difficult to use if you're a business. At best you accept it at the current exchange rate and you immediately convert it to fiat. Anything else is very risky.
But that might be temporary, eventually the exchange rate might stabilize, at which point speculation could be vastly reduced and it would work better as a currency. That's kind of a chicken-and-egg problem though, in order for the exchange rate to stabilize you must attach a real world value to the currency by buying and selling things, paying taxes etc... But that won't happen as long as the exchange rate is so volatile.
I'm also very much unconvinced that a deflationary currency can work at all in the long run or that bitcoin will end up fixing the problems its proponents say it will, but that's up for debate.
> However the value of bitcoin is mainly driven by speculation at this point, a currency that's so volatile is very difficult to use if you're a business. At best you accept it at the current exchange rate and you immediately convert it to fiat. Anything else is very risky.
Note that any business that already deals in multiple currencies (say, having offices in two countries) already runs an equivalent risk. And many use their currencies to make a bit more money on the forex market.
Sure, but that's why most international trade deals in Dollars, Euros or some other reasonably stable currency. The EUR/USD change rate does not typically vary by orders of magnitude within a few years, the Bitcoin/USD exchange rate does. The risk is wildly different.
> a currency that's so volatile is very difficult to use if you're a business
This is not an issue. There is a bunch of automated software in the developed world to mitigate the risk. In the third world, there are buildings full of cheap/slave labour that perform the same function manually.
Please do enlighten me then, what do other cryptocurrencies offer?
I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together.
>Please do enlighten me then, what do other cryptocurrencies offer?
Other cryptocurrencies can provide:
- Private, near untracable ways of doing payments
- Efficient, near 0-cost ways of transfering funds.
>I also think my first sentence applies to bitcoin and ethereum which together have a bigger market cap than all the other cryptocurrencies added together.
"Cryptocurrencies have a niche use, mainly to buy things on the black market but also for small peer-to-peer international payments when other options are not practical. For this reason, I don't expect that cryptocurrencies will completely disappear anytime soon."
If you want to talk about Bitcoin and Ethereum, say Bitcoin and Ethereum, and not "Cryptocurrencies".
Bitcoin is not anonymous. Bitcoin has high transaction cost.
Ethereum is not anonymous. Ethereum has a comparable high transaction cost.
These facts mean buying on the black market, and small international payments are not ideal to do with these cryptocurrencies.
Using the blockchain, a technology that's shown to have trouble handling single digit numbers of transactions per second, to scale for billion of accounts? That's interesting.
I wish people in this entire thread weren't allergic to providing citations and references though.
There's nothing about blockchain's that prevents them from scaling beyond single digit transactions per second - you're referring to the design decision Bitcoin has made to opt for a smaller blockchain in order to ensure distribution and decentralization.
A settlement blockchain between financial organizations doesn't have the same design parameters, and could conceivably run larger blocks, shorter block times, or not store block history at all but rather reach consensus on state (which is what Ripple does)
My view is that its egotistic to pretend to know whats going to happen. even the financial experts dont know.
So i just put 1% of my net worth into it, set a price alert for $20,000 and try not to check the price (or read any stories on it) If i ever get the alert, great. if not, no big deal.
This is my strategy. It's a very volatile, high-risk investment, but one I'll hate myself for missing out on should it take off. So I've bet what I'm willing to lose on it (<1% for me) and told myself I won't read any news on it so I won't invest more or get scared into selling.
Back in 2002-2005, I knew a whole lot of "tech-savvy" people with top-notch pedigree, who never believed FB/Youtube/Twitter etc would scale as no one had ever built a "many-to-many", pseudo real-time network at that kind of scale before (both technically/financially). Let alone a bunch of 20 year olds.
I was quite convinced by their arguments.
Where I was wrong was believing technical arguments mattered.
Pretty much. They'll tell you a hundred reasons why any single idea you have could never work, for technical or other reasons. I say this as a developer, and I've been guilty of this before.
For me Bitcoin is neither pyramid nor something which will last forever. I think it is a great experiment in human psychology/nature and in this sense, it's outcome is not destroyable and the facts about people it brought up will be known and usable (for various applications) forever.
It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin. If everyone suddenly lost trust in bitcoin you would lose everything, because technically, it has zero real value.
That's why all the "bitcoin enthusiasts" keep hyping it up. They know that once the mania stops, people who didn't cash out will be left holding the bag.
Currently, it's nothing more than a speculative asset. You might as well invest in high-yield risky stocks.
> It's a pyramid scheme in a sense that you depend on others to keep buying the bitcoin.
Please don't use the expression "pyramid scheme" lightly, because there are actual pyramid schemes out there, and we want the expression to keep its power so we can warn people against them.
Bitcoin may be in a bubble, but it's definitely not a pyramid scheme.
It does not have "zero real value" - it definitely competes well against established money transfer services like Western Union. You can send $1000 to your mom in Japan for a $5. That is a good enough value for money transfers that Bitcoin won't ever go completely to $0 value while Western Union can charge $20 for the same service.
And that is at current bitcoin price. Since the fee is paid in bitcoin, if the price drops down to $100/bitcoin then you can send $1000 for pennies.
It crashed multiple times this year with a lot of people crying 'told you so' and 'it's all over'. But that didn't happen. There might be a big, longer period, crash coming, but since China dropped out, it seems to be pretty stable (including altcoins). I still wouldn't call it investment, but it's safer than most gambles. But sure, never put money you cannot miss as it is a gamble.
It's a virtual currency with a limited supply, but with a constantly growing interest(demand). This interest is not primarily driven by bitcoin's inherent qualities but more through:
1. Using bitcoin to acquire other cryptocurrencies
2. Promises of future profits
3. Getting "free money" by having bitcoin (Bitcoin cash, bitcoin gold)
The first one might actually be healthy, while 2 and 3 are most close to a pyramid scheme / "tulip mania" style scenario.
One thing is for sure. No one knows what exactly is going to happen.
(i am somewhat familiar with the tech but don't follow the business side of bitcoin) what I find weird is the forks. A major selling point of bitcoin is that there will ever be only 21 Mio coins. You know, unless there is a hard fork and now there are suddenly twice as many coins. Presumably one of the resulting coins' value will drop but you are still creating value out of thin air, something that the crypto people hate about fist currency run by a central bank.
I also don't really know what to think about it. I am sure blockchain tech will be hugely successful in the banking and government sector and maybe (a comment I read yesterday) once it is proven to work the central banks will issue blockchain based currency. But bitcoin as a store of value? I don't know...
The forked currencies are just the same as altcoins, you can't sell 1 Bitcoin Cash for $7000. The fact that people are willing to accept money for them doesn't change the value of one Bitcoin.
You can, it's confusing but there is Bitcoin, Bitcoin Cash, Bitcoin Gold, and soon to be another one Bitcoin Segwit2x or some such.
Each of these other "versions" of bitcoin were created by a fork. As far as I know, when a fork happens you get an equal number of "new coin" as you have original coin. Seemingly creating value out of nothing.
Ah I missed the different name. Thanks for the clarification. I was thinking of comments I've seen before where people say that if you have 100 bitcoins you'll have a hard time converting them to (e.g.) $700k cash.
My understanding is that most exchanges won't allow you to move more than $10k/day or so out of your account. So, if you use three separate exchanges, it might take you a month to liquidate the entire stake.
Bitcoin Cash was born out of necessity to save Bitcoin from disaster when it was hijacked by corporate interests (funded by AXA/Mastercard).
Both sides of the SegWit fork (SegWit1X vs. 2X) ~Nov. 16) are intentionally crippling transaction speeds/costs to move transactions off the blockchain and into the pockets of said corporate interests.
The true spirit and potential of Bitcoin lives on through Bitcoin Cash.
That could be entirely true (and I believe there are several alts that are technically superior to BTC), however if a friend asks me for Bitcoin, I am not going to tell him to install a BCH wallet, send him BCH, and tell him not to worry about it because it's Bitcoin in spirit and it's going to be great.
The forked currencies behave very oddly. When bitcoin forked, the bitcoin price didn't change but the new coins had a non-zero value (something like 10-20% of btc, if I remember). So some extra value was created out of thin air. It makes little sense!
> I am sure blockchain tech will be hugely successful in the banking and government sector
Are you? Why? So far, no bitcoin/blockchain advocates have been able to explain to me a single non-illegal use case that isn't better served by a traditional, centralized database.
A single large Postgres instance could handle all the global transaction volume of bitcoin, and it would be faster and orders of magnitude more energy efficient, too.
(Cue bitcoin people telling me about how it's 'trustless', and I should just trust the miners, devs and exchanges and hurry up and buy some)
> a single non-illegal use case that isn't better served by a traditional, centralized database
You know how PayPal blocked payments to Wikileaks? (Back when it wasn't yet obviously evil.) That's what traditional, centralized databases can do for you. Note that donations to Wikileaks weren't illegal, governments were just efficient in pressuring PayPal into enforcing rules that didn't even exist officially.
Also, traditional, centralized banks simply do not currently offer me the possibility of near-instantaneous money transfers. (This varies depending on where you live.) Bitcoin does.
There are a lot of things wrong with Bitcoin, the fees are much too high, and yes, its proof-of-work scheme is terribly wasteful. But the view that it doesn't offer anything useful is a bit one-dimensional.
So that seems...much worse than "legacy" banking solutions.
Here in the UK, I can send an extremely fast (matter of minutes) "faster payment" to any UK account for free, and a pretty-darn-quick (matter of hours) SWIFT transfer to any European account for a very low flat fee.
Having a globally ordered, immutable, common ledger is a really useful thing in banking. Particularly in the inter-bank space where a vast quantity of data is shoveled around and everyone keeps partial, flawed copies.
Any given piece of data is, usually, required to be private to a small number of parties but is, usually, all required to be available to some parties i.e. regulators.
Doing all that is absurdly costly and error-prone. And that's when you're doing it well. Do it badly and the costs are eye-watering (ask, well, anyone).
Some of the ideas and techniques, particularly the cryptographic ones, used in the blockchains have opened the banking folks eyes to what could be possible. And this is a very active area of interest.
But it's not the bitcoin blockchain, per se, that's particularly interesting. For example, the trustless piece is largely a pointless waste in the problem I outlined above. We know all the participants and can safely move keys etc around. In the same vein, proof of work is unnecessary, we can identify block creators and easily use external remedies if they play silly buggers (no-one is suggesting we get rid of all our lawyers).
Now, you could argue that, if using the relevant techniques, you could keep all of that in a big, central DB and you'd be right. But it's not "big, central"-ness that's key. It's the "globally ordered, immutable, common"-ness. Along with selective privacy. Postgres doesn't give us what we want any more than Bitcoin does. The real change has been that we know relational DBs really well but we're learning about the possibility of the crypto and block chain tools. It's as much a mental shift as a technical one.
One final, minor point. A central DB, though possible, would be quite painful in practice. Although not fundamental, having a distributed ledger is actually quite handy. Although it would mean that we wouldn't completely do away with reconciliation hell, it wouldn't surprise me if something like a gold copy plus validated replicas approach or similar became popular. And again, some of the crypto techniques make this sort of thing much more tenable.
> But it's not the bitcoin blockchain, per se, that's particularly interesting. For example, the trustless piece is largely a pointless waste in the problem I outlined above. We know all the participants and can safely move keys etc around. In the same vein, proof of work is unnecessary, we can identify block creators and easily use external remedies if they play silly buggers (no-one is suggesting we get rid of all our lawyers).
Yep, you could basically accomplish the same thing with Git and some rules for how to model a ledger and consensus. In that sense, there's nothing particularly new about the concept of an immutable distributed history. Now there's simply an implementation that cuts the banks out of the loop and lights a fire under them to offer better service.
> Yep, you could basically accomplish the same thing with Git
Not entirely sure that "Git and a bit" is likely to be sufficient but, yes, there are some intersections. The idea isn't new at all.
The belief that practical solutions for a common ledger that meet strict privacy and confidentiality requirements is relatively new.
> Now there's simply an implementation that cuts the banks out of the loop
Not sure what you mean here. If you're talking about Bitcoin as a product then I don't think the banks are that concerned. It's starting to be interesting as an extra option for portfolio diversification but that's about it. If anything, the well publicised schoolboy errors have been net positive for the banks.
As I said, where it has generated most interest as a technology is in inter-bank. There are 3rd parties appearing in this space but that's been encouraged (and often funded) by the banks. It's a space with a lots of cost and operational risk but very little actual value.
Maersk uses it to fight corruption in container ownership claims. It used to be a piece of paper, that cost more than the actual container to transport because whoever held it could pick the container up at the port.
These days it's run on block chain making it virtually impossible to claim a container that isn't yours.
A similar use case could be used for almost any sort of ownership record in the public sector, like landownership.
I think with some sort of blockchain technologies, it would be harder for central banks to do things like what happened in Argentina, Greece or Zimbabwe.
That's a very broad claim. What "things" are you referring to and how would blockchain technology have prevented them?
Very simply put the Greek financial crisis was mainly due to poor bookkeeping by the Greek institutions (that's being kind), rampant tax evasion and foreign governments (especially within the EU) not wanting to keep footing the bill. I'm not sure how a clever use of SHA-256 would solve these systemic, cultural and diplomatic issues.
Especially since tax evasion would be significantly easier in a bitcoin world where you can launder and hide money extremely easily. No need for a hidden account in some tax heaven, just generate a new RX address and you're good to go, receive all the bribes and "off the record" payments you want.
I think he meant the fact that banks were locked down by the Central Bank and Greek people couldn't withdraw cash they legally owned (yet foreigners, with foreign cards etc could).
Re tax evasion, perhaps for small amounts, but not meaningful sums. That money still has to show up somewhere in the banking system, at some point, if a counterparty accepts it. You could make the same argument about diamonds or gold ingots (though those are obviously less convenient to move around)
I'm not a libertarian, but I do believe it's good there are ways to hold relatively liquid assets outside of the traditional banking system. Greece is a great example.
Each system has their flaws, but Bitcoin is not worthless. The question is more, how much is it actually worth? I don't think anyone really knows at this point.
But the more you think about it: easy money policies might help keep the economy afloat, but at a significant price. Cash is losing value fast (perhaps not due to traditional inflation, but because assets just increase so much in value). I don't really believe this is going away anytime soon -- there is just too much money in the world looking for yield, and rates will be kept low.
Let's say you were a wealthy person with $5m in 2008. If you had the guts to put that into an S&P fund and borrow another $10m through portfolio margin (= $15m), you'd be worth around $50m today (excluding taxes, interest expenses, etc etc).
The only extra thing blockchain based cryptocurrencies provide is decentalized ordering of transactions. David Chaum tried what you suggest and his currency was shut down by the government quite fast and easily (and people lost their money as their tokens were worth nothing after the incident).
Imagine you don't want a single person to control everything in your country (dictator), and you don't want a single person to control your currency.
Against dictators, we have democracy.
Against a centrally controlled currency, there's not much but crypto currencies. They're actually democratic, the majority wins.
Also, I don't want to be the one who will handle security for the single server with a Postgres database that has 100B$ in it. Do you? Do you want to be on call when the RAID array crashes or the datacenter goes dark?
I do believe there will be alternatives to proof of work, but a single database server isn't one of them.
Bitcoin resists pithy statements about who has the power. Be skeptical of anyone trying to dumb it down to "it's the miners" or "it's the nodes". It's a complicated system of checks and balances, by design, and the fact that all of this was thought through in depth and then proven in practice is the reason we're having this thread today.
This essay does a decent job of summarizing the checks and balances:
Majority of participants in the network. I run a full node, I don't mine, but my voice counts. Of course I don't like the weight of huge mining farms, and I hope there will be viable alternatives to proof of work, to make BTC more democratic.
In the meantime, not a single country controls BTC, and even heavy weight miners can't decide unilaterally...
Only miners really matter, if you only have a full node you don't have control over the network, just the ability to verify it. You will have to follow wherever the miners lead you.
The following is just my understanding, correct me if I'm wrong:
People don't connect directly to miners. They connect to nodes (8000+) which forward to miners. Nodes can declare an order is valid or invalid and they can blacklist bad-behaving miners. They can refuse nodes/miners that signal a change they don't agree with.
So I think full nodes are VERY important in the network and their voice counts. That's why I'm running one.
I'm more interested in your dismissal of the fact that it can be used to do illegal activity. Do you plan to go the rest of your life without ever breaking a law? And as a sibling poster noted, there can be financial chokeholds even on activities that they didn't bother to make illegal, like donating to Wikileaks.
(I don't think you responded to the point that Wikileaks is a non-illegal use case for BTC.)
>Ok, you're right: Transferring money to unsavory-but-legal groups is a use-case for bitcoin. You could also mail a check.
That’s vulnerable to the same financial blockade techniques as for credit cards and forces you to put your name on the donation. (Not to say bitcoin guarantees anonymity but it’s not immediately detectable.)
> Are you? Why? So far, no bitcoin/blockchain advocates have been able to explain to me a single non-illegal use case that isn't better served by a traditional, centralized database.
I agree if you change "isn't" to "couldn't be".
Consider if I'm a small company and want to process cards. So I try to sign up for a payment provider. Except, oops, I'm outside the US where terms tends to be stricter. And, oops, I'm in a legal field (in my jurisdiction) but one that the payment provider considers risky or morally suspect, such as, say gambling, or adult products, or prostitution, or even just travel.
A lot of companies find themselves spending ages sorting out payments because of this. I've worked with startups (in travel, in one case) that spent weeks getting approvals from one provider before suddenly getting "no" - in the end it took four attempts and several months in case; we developed the whole platform faster than we could get approval from a payment provider. That's unusual, but it happens, and in general having dealt with payment processors in various companies over a period of nearly 20 years: it's been nothing but pain and misery most of the time.
That's not a problem of the "traditional centralized database" directly, but indirectly because the centralized database allows for centralized gatekeepers of transactions: Your payment provider may or may not care about the nature of your business, but if the card association does, or the issuing banks does, or the bank handling the merchant account does, it doesn't matter.
This, to me, is the biggest potential value of crypto-currencies: The rising importance of card payments over cash have been one of the largest un-democratic power-grabs of our time by handing power to those controlling the approvals process.
Some previous developments, like PayPal, had the potential to change this, but quickly ended up as steeped in problems as the card providers.
I understand why: They're taking significant risk, and they're managing that risk. I'm not suggesting some sinister cabal trying to control morality through payments; merely that these companies first interest is to protect their share holders investment, not the public interest.
But crypto-currencies has the potential to give us "digital cash", of sorts, in that while it's not exactly the same (it's much easier to track for starters), it is much closer to cash than cards in terms of inability to control its use. We can track it after the fact like we can with cards, but we can't easily stop people from making payments or taking payments.
That has value. Whether that's enough to sustain Bitcoins current momentum is another matter.
Bitcoin IS a central bank. It is an "alternative" central bank with a "deflationary" bias written in code and run and administered by a collective. Is that a good thing? Probably, from the perspective of providing competition to other central banks. Also, that's Bitcoin's core value proposition. Everything else (e.g., transaction speed) is secondary. Bitcoin will be a store of value as long as people believe its rules for creating Bitcoin are sound.
Best advice I have heard is to learn about the blockchain and look at something like Ethereum. If buying Bitcoins feels to risky, don't invest, but blockchain technologies will certainly have a role to play in the future.
You can’t expect to reason about this without some background in economics. Instead of telling you what I think (because to you I’m indistinguishable from all the other people responding with random guesses), I’m going to suggest that you read some introductory texts about economics and finance and you can probably form some reasonable opinions yourself.
"whether Bitcoin is basically a pyramid scheme set to crash massively, or something huge that will continue climbing" --- you can say the same thing about regular money
Sure it does. The USD has surged in value in the past few years. It's gone up like 20% against most other major world currencies in the past five years.
Bitcoin isn't a pyramid scheme. It just does not have any value. Fools and their money are easily parted. (The comments on this site have as much or more value.)
The Fractional reserve system is(), (Dollar, Pound, Euro, etc.) They require a constant recreation of debt to keep going.
It is very much like a decentralized global pyramid scheme, unfortunately there's no concise resource to explain it all clearly - primarily because there's no VC money pumped into anti-crypto assets that are structured and incentivized like a pyramid scheme, e.g. the most popular blockchains such as Bitcoin and Ethereum's Ether. The issue is the unreasonable amount of wealth transfer that would occur if and as society adopts the crypto-assets more and more, and as bad actors manipulate society to take part - whether through lobbying or bribing politicians or worse; there essentially can be a wealth transfer of 40% plus for people having done nothing except trying to perpetuate this system.
It's scary to see so much faith in bitcoin given it's horrendously wasteful proof-of-work scheme to avoid double spending.
There are better alternatives that minimize latency nearly a hundred-fold and avoid proof-of-work altogether. Example: Algorand (https://people.csail.mit.edu/nickolai/papers/gilad-algorand-...) Even if this new cryptocurrency is "just" a proof of concept there are many others like it that are much less wasteful than bitocin, and this should make people think twice before piling their faith on an important but ultimately flawed first attempt at a usable cryptocurrency.
Thanks for the link, I hadn't heard about Algorand. I don't claim to be really knowledgeable but I found an article on Coinbase that raises the question of whether Algorand needs (or should have?) incentives, so it looks like there's some debate as to whether Algorand is really viable?
I keep being told that Bitcoin will eventually adopt something less wasteful, but given how rocky recent evolutions of the protocol have been, I don't see why I should believe that, versus an altcoin supplanting it.
People seem to like Bitcoin as a gold alternative precisely because it doesn't evolve. But I don't see how that jives with the fact that its energy consumption is completely unsustainable.
Wasteful by what standard? Right now each day it consumes ~$1m worth of electricity in order to protect ~$1.5 billion of new payments. Economically, this "electricity safety fee" works out to less than a tenth of a percent.
Wasteful as in we can do better. Did you see the link in my comment? One of the authors of that paper is actually a Turing award winner.
Ultimately we've reached a point where there are more efficient alternatives to having hundreds of people computing billions of hashes to reach consensus. To put this in perspective imagine a group of people sorting by randomly permuting and checking if it works, while stubbornly refusing to adopt near linear algorithms.
Really interesting paper! +1 on trying to solve this problem, I was just trying to put the size of the problem in perspective (the house isn't really burning down).
I suspect people underestimate the game theoretic consequences of stake systems like Algorand as compared to PoW. (For example, the dynamics of contentious forks may look quite different.) I don't know which is better! But those types of consequences are likely much larger (for better or worse) than the electricity savings.
I don't know much about bitcoin i'll admit. And I was surpised the other day to read some comments where the poster was saying that the transaction price is somewhere in between 5$ - 20$. Isn't that like... a LOT? I thought the idea of Bitcoins was how easy it would be to make transactions but with a price like that I can image most smaller transactions are discouraged. Also, after the initial hype I haven't really seen much of an implementation of payments in Bitcoins.
So... other than the hype, what's driving the price up if I guess the price is going up way faster than the implementation?
Lightning networks will allow common people to transact and will semi-centralize the blockchain across a couple partners, kinda like banks. Over time and for the people that don't really need to be on chain, these banks will start taking over the transactions between each other and just broadcasting signatures from their bitcoin keys to match deposits vs obligations so that people can be assured that they have what they say they have. If you need to move $100k, you can always do it on the real blockchain, or from your bank to the real blockchain, but the chain is going to turn into the banking system.
Originally I thought there could only be one cryptocurrency, and that is at least for now looking to be incorrect. But I don't really know how all this plays out. There is a huge market incentive to get in on a coin early, but if there are infinite crytpocurrencies then they all get devalued. Probably the winners of the current system will use their money to push for regulations to stop new currencies from coming out. So Bitcoin, Etherium, etc will get entrenched. Then I'd guess maybe 3 to 10 currencies survive in the long run, provided they don't get regulated out of existence in the first place.
> There is a huge market incentive to get in on a coin early, but if there are infinite crytpocurrencies then they all get devalued.
I don't think that's true that an unlimited number of cryptocurrencies existing will devalue others. It might affect public perception (confusion and skepticism for some, thus those people don't participate at all) and affect the value a bit, but not significantly.
Just like I could collect all my toenail clippings, give it a fancy name (like NailCoin), and try passing it off as currency won't even make a blip in any other currency anywhere, all these coins that fail to get any traction are not going to be able to affect the rest of cryptocurrencies.
Every time bitcoin is proven to be bad at something, people start saying "actually, it's not even going to be used for x, it's going to be used for y".
The high transaction fees are symptomatic a large problem that not only has divided the community, its literally forked the currency. There are several proposed solutions, but unless a majority of all bitcoin users agree to implement it, it won't happen.
I think the behaviour of Bitcoin price (not the technology) reflects some social phenomenon rather than the real economy. And it is precisely why it is interesting.
Yeah, it's pretty much what happened 500 years ago when people were selling everything they owned (including houses) to buy tulip bulbs[0].
Maybe it's not that bad yet, but it's looking to get that way.
Spoiler alert: It ended really badly, but the people who got out early enough did make a lot of money.
Plot twist: I did invest in bitcoins back when they were hovering around 2k and sold them for a small profit (~10%). Yep, I wish I invested more and held on, but it's so easy to think this way after the fact.
The comparison between bitcoin and tulips is pretty common, JPM CEO, Jamie Dimon, said "bitcoin is a fraud worse than tulips," then his bank apparently bought bitcoin [???], or at least did on behalf of clients.
There have been a number of threads on HN though about the comparison. The tulip bubble is apparently not as interesting as its reputation leads us to believe
>"the tulip price crashed, not because it was irrationally high, but because of an external shock." [1]
There's a reason society eventually settled on gold instead of tulips or pinecones. Good monies have certain attributes. Bitcoin's direct technological antecedent was called bitgold, and it was created by Nick Szabo who is a scholar of the origins of money (e.g. http://nakamotoinstitute.org/shelling-out/)
I bought in slightly after you but sold later (in at ~$2.5k, out at ~$4.4k or so for 1 BTC). It's so easy to get caught up in it and think "man, if I had just bought 10x as much and sold now, I'd have so much more!"
I also sold right before that dip to $3k for several weeks, I could have just as easily have lost half my gains.
Tulips aren't finite in number nor can they be transferred on a decentralised ledger.
Anyone can grow tulips and grow fake tulips that may look like tulips but are cheaper quicker to buy / make. You can't fake Bitcoin nor can you grow it indefinitely in your garden.
People who make the tulip comparison simply don't understand the revolutionary aspect of the technology. It's like calling the internet tulip mania back in the mid 90's. Blockchain technology will change the world. Bitcoin's value will boom and bust for many years to come. Where will it end up in USD terms? Nobody knows... but the technology itself will become as indispensable as the internet.
What are "fake tulips"? There are many types of flower, but I've never heard any described as fake tulips. And why grow fake tulips when you can grow real ones?
And why is a decentralised ledger even relevant to tulips? They're not bits of code, they're real things you own irrespective of whether other people know you own it.
Also, you need to distinguish between the blockchain technology and the value of bitcoins. Blockchain does not depend on bitcoin. Bitcoin can fail while blockchain continues to change the world.
The real value of bitcoin at this moment comes from trust that the hype will continue. It might. Or it might not.
It is a textbook example of a speculative bubble. Shiller's book Irrational Exuberance is a great exposition on the topic. Almost every criterion he cites is satisfied: dramatic price increases, "new era" stories, mass media coverage, and stories of overnight millionaires. The only thing missing is lowered lending standards.
This doesn't mean the price will go down though, it is notoriously difficult to predict when a bubble will pop and hazardous to bet against financially.
It's currently hard to say how much of price increase has been driven by general public converting their USD/EUR/JPY into BTC versus current asset owners just trading with one another (or between their wallets) at ever-increasing prices.
The Twitter account @bitfinexed suggests the price increase is driven entirely by wash trading, and Bitcoin exchanges or brokers are not exactly the paragon of transparency as far as inflows/outflows.
I keep seeing my non-it friends boasting on FB how much they profited with Bitcoin this week. I am afraid this bubble will get way much bigger before it bursts.
Then wait till the shoeshine boys give you stock tips
Not one of the wealthiest people who is mimicked by wealthy friends and wannabies! The point of the quote is when the lowest economic class is buying, something monumental already happened for them to even know it was happening and there is nobody else to sell to.
Paris Hilton and the people that paid her are the opposite of that. I think you misinterpreted the quote.
Well, depending on when you buy/bought, you should've taken out what you put in. I never bought over the $3k pricepoint and we had multiple drops < 3k < 2k this year at which times I bought and then sold my input after it doubled. I lost nothing. It will drop again now to < 3k probably this year, just buy then.
As soon as the internet marketing types (who have no technical background nor skill) are shilling getting rich info products around BTC, it's time to get out, or at least stop actively buying.
I'm afraid that like the housing bubble, it'll get "too big to burst" and require intervention to keep those who have previously invested afloat while keeping down those outside the bubble.
I'd certainly be very impressed if cryptocurrencies reached the point where they could affect the economy that much in the near future. The current market capitalization of all cryptos comes out to under $200 billion [1], while the US housing market was nearly $30 trillion as of last December [2]. So it would have to grow 150x somehow.
Isn't "intervention" the problem Bitcoin was designed to solve?
Maybe if people are looking for long term security and insurance against risk they shouldn't buy into anarcho-capitalist fun bucks... or at least not more than they can afford to lose.
I have the feeling that it will go up to something close to 10k and then after a period of horizontal value, the money is going to go to something useful, like Ethereum. So better to wait and sell after that.
There are many factors. November stands to be the most eventful month in Bitcoin's history. Educate yourself on the moving parts before making any big decisions.
The biggest factor for me is that the miners are pissed off that both SegWit chains are meant to cannibalize the core tenets of Bitcoin with the goal of privatizing fees. This post explains it way better than I ever could:
Of course! More seriously, I'm moving coins to Coinbase very soon as they're going to allow users to sell the new B2X coins the day after the split. I expect to make a 4 figure profit, but I'm not sure whether it'll be low 4 figures or high 4 figures.
You do realize that if you have a market entirely filled with sellers and no buyers the price is zero right? Who do you predict is going to be buying 2X
To me an asset that moves 15% in a day, and which no-one knows what it's truly worth, isn't great as a store of value.
I'm not going to speculate about where bitcoin will be trading when it becomes a stable, useful asset, but in order to justify a market cap anywhere near this high it will eventually need to generate actual utility for its users. Can someone explain where that will come from? Cheap currency conversion and easy money transfer?
Gold, art and wine all have a utility value that's way below their "store of value" value. Bitcoin is just a more convenient store with an equally insignificant utility value. Whether Bitcoin can persist while offering so little value I don't know, just saying these valuations are not unheard of in the asset world.
Just look at what people pay for mediocre Van Gogh paintings I wouldn't hang in my toilet..
It's hard to objectively value things. But bitcoin is a clear outlier because it's only value is that people think it's going to go up in value. It's more like beanie babies than a Van Gogh.
Wine price is generally determined by the genuine demand for the wine. Art less so, but still people actually want to hang the art somewhere. Some people speculate with art, but it's not a huge percentage of the value.
Gold is the closest, but it's still a mile apart. First, there is genuine demand for gold for decorative purposes. But there is a large demand for gold as a store of value.
There are two key difference between bitcoin and gold. Gold has a very long track history of reliable demand. All of history it has been valuable. It is seen as a safe bet. But the bigger difference is that gold isn't purchased on the expectations of massive growth. Gold isn't supposed to MOOOOOON. It's just supposed to be steady. Sometimes gold is over priced, but demand is steadish.
Bitcoin only has any value (beyond the negligible trading value) because a bunch of baghodlers think bitcoin will be work tens of thousands of dollars eventually. Why do they think that? Because it's gone up a lot in the past? There is no "there there." If people start to wonder if bitcoin will ever go up, it will crash.
Wine prices, gold price and art prices are all driven by genuine demand for them. Why would something have a price if there wasn't genuine demand for them?
What do you base the idea on that only some of the price of art is based on speculation?
I don't think Bitcoin is an outlier at all. And if you don't believe Bitcoin is an outlier, as many people are starting to do now, you can understand why its price is going up so fast.
Gold prices don't do anything because they're "supposed" to do anything. Gold moons whenever the market decides it wants gold to moon, just like Bitcoin, just like wine and just like art.
I'm so tired of people trying to validate and prop up cryptocurrency with horrible comments and logic. Hanging a mediocre Van Gogh above your toilet? Unbelievable.
"NVT Ratio (Network Value to Transactions Ratio) is similar to the PE Ratio used in equity markets."
The NVT is currently high, but not out of control like it was in 2014. This is the best dataset I've seen for working out if the network is actually being used in a way that matches the valuation, and I think will become invaluable when the CME Bitcoin Futures market opens.
It may be some time until $100M of daily churn doesn't result in a 15% price swing. The market capitalization of BTC would need to increase considerably to accommodate such a scenario.
And it looks like we are quickly approaching such a scenario.
The rich (and super-rich) have a lot of resources to move markets and BTC is currently especially susceptible to this.
Indeed. I guess volatility like this isn't a dealbreaker for other asset types so it shouldn't be here. Just seems odd that we call it a "currency" when these things happen routinely.
Perhaps the biggest derivatives house on the planet announcing that they are going address the specific concern makes it more useful? Because your exact rebuttal won't exist anymore.
the engagement on these posts is insane relative to everything else on here. Seems without heavy moderation Hn would be Crypto-News.
Everyone is afraid to say what they think. The core concept of BTC is fundamentally flawed and unbelievably naive. The value is rising based on hype and speculation alone, no value is being generated in-fact it's being consumed to 'mine' and transact the coins. Those claiming they're spending their BTC on regular purchases are either not being honest or beyond stupid.
Considering that 2017 has been an unprecedented, huge year for all things crypto (whether for very good innovation reasons, or for frothy fraudulent ones), Hacker News barely talks about it at all. Conspicuously avoids it, in fact.
are you intentionally leaving out additional uses or are you unaware?
Also do you know how commodities work? Commodities don't decrease in price when something is not functioning well and easily accessible, and right now there are $205,000,000 worth of the was-trading bitcoin supply that are stuck off the market.
There’s no way I’d take this level of risk for a significant sum, but just to play with Bitcoin, and see my own transaction in the blockchain, I bought £100 in September that’s now worth £200.
It’s of course tempting to imagine doubling my entire savings in just two months, but so too could they have halved, or worse.
Imagine a world where you can buy without a merchant, bet without a bookie, get insurance without an underwriter, access finance and loans without a bank, trade without an exchange, purchase commodities without a broker, have law without lawyers, courts and judges, create assets without an issuer, secure escrow without an agent, have internet without an ISP, verify records without a notary, establish reputation and credit without a credit agency, and create identity without a government.
To all the naysayers in this thread, I suggest you watch "Banking on Bitcoin" on Netflix, which is a great introduction to Bitcoin. It might change your thinking.
Also check out Andreas Antonopoulos' videos on YouTube, which are easy to digest and very informative. Here's the place to start: https://www.youtube.com/watch?v=l1si5ZWLgy0
Naysayers? Does that mean you are a yes sayer? Bitcoin is a question?
Seems more like an overpriced valueless commodity controlled in majority by Chinese miners who have ASIC rigs only a couple companies in the world can produce. So its basically centralized even if the protocol isn't.
How much stake do you have in Bitcoin? (Technical people can understand what Bitcoin is and yet despise the blatant canvasing by owners of Bitcoin.) I find the blatant tarlipping to be offensive. Just admit when you have the asset if you are going to try to get people to part with their hard earned money for what amounts to a global ponzi scheme.
Please refrain from personal attacks that don't add to the conversation (even if you would like to shill for Bitcoin.) It is in bad taste and against HN rules.
The technology that spawned Bitcoin, and the technology that is being developed in its wake is the really exciting part of all of this.
So long as some catastrophic event doesn't completely tarnish the masses opinion on crypto's I think we are in for a wild ride (wild ride either way I suppose). Traditional banks, asset managers and transaction facilitators need to watch themselves.
I get the feeling that younger generations (<35-40) are hungry to separate themselves from traditional banking systems, and the group that pulls off (almost) instant free transactions in a distributed ledger are going to cause a real financial revolution.
Do these people that hold bitcoin or say that they've "made amazing returns" actual cash out at any point? Or are they holding a few bitcoins like everyone else? Isn't that how a bubble forms?
If I got into it, I would get a return I thought was nice (100-200%) and then cash out.
I didn't buy long enough ago to be rich from my investment, but I just choose a percentage of my portfolio that I'm comfortable holding in Bitcoin. If that's 10% and Bitcoin increases in value, then I sell until I'm down to 10% again.
This means that over time I've sold a lot of my bitcoin and moved it to lower risk investments, but the dollar value of my bitcoin holdings has increased over time as well.
It has utility for ransomware. Even a niche utility can bootstrap an ecosystem. Add layers and layers of speculation above that kernel and it is a feedback loop.
As long as speculators refuse to sell, people need to spend more and more for ransoms (or equivalently ransomware writers have to demand less denominated by bitcoin), driving up the price as long as those destroyed through ransomware outstrips those created by mining.
I sold my Bitcoin a couple weeks before Floyd Mayweather's fight with Conner McGregor. I used all the money to bet on Floyd to win the fight, which he did.
When I went to put the money back into BTC, I found out that I would have made the same amount just by leaving in BTC for the 3 weeks I was out of the market.
It's the normalisation effect kicking in now that more traditional financial instruments are tacking advantage of Bitcoin and the growing acceptance with regulators and government officials (see UK's report on cyber crime and cryptocurrencies as well as Europol's, see CTFs announced, etc).
HN is like a huge echo chamber and a bitcoin basher. Every single time the same arguments (bitcoin is a currency or store of value), the same questions (should I invest?) and the same reasons for talking oneself out of going into it. Even when bitcoin gets to a half a million value people will still be saying oh it’ll crash any time now, bitcoin is useless, can’t trust bitcoin because it’s not backed by US economy or the government. And you know what, keep living in your bubble because those that capitalize on the shift won’t have to say I told you so. I wholeheartedly agree on many arguments against bitcoin but we have to agree that we are seeing something unprecedented happen and nobody really knows what they are talking about 100%.
What I don't like about the current cryptocurrency climate is that Bitcoin, garbage ICO-s, and BitConnet-like piramid schemes completely distract people's attention from the serious cryptocurrencies that genuinely try to develop a decentralized trustless and efficient payment network, like DASH.
I am betting against the current trend, and holding mostly DASH (and BAT, POWR, RLC and some similar currencies) with practical potential to be used for more than just a store of value like Bitcoin.
Bitcoin has its place and strength, it is the digital gold, but too much bitcoin dominance in the cryptocurrency industry is against innovation and progress.
I just got a call from someone trying to peddle a Bitcoin trading site. Didn't catch the name of the site, but he was very persistent, was reading from a manuscript and didn't know that the maximum supply of Bitcoin would be 21M, when I asked him.
I think it's time to get out, if you own any coin, to be honest.
While we were talking (for maybe 30 minutes - normally I wouldn't do that, but this was interesting like a train wreck kind of interesting), I could hear cheering in the background, when the price reached an all time high. This is super weird, man...
Is this good or bad for BTC as a currency? On one hand, I can see how being more valuable makes it more likely to be supported by retailers / banks / etc, but on the other hand I can't imagine spending BTC on anything when prices keep skyrocketing... at which point I feel like it ceases to be a currency (BTC in particular, not crypto in general).
If BTC ever reaches a period of stability in price, I say that getting there the faster the better. Then people can actually start using it as a currency. So I vote this is good for BTC.
I believe once you can start using your cryptocurrency as collateral for a loan, this space is going to go into the trillion(s).
check out Salt Lending. I know many waiting for it to open so they can get a 100k loan and put it back into crypto. This project has been fully licensed and regulated, and owned by the founder of shapeshift (erik vorhees)
honestly, this seems like a grey area and I have no idea! but the concept of this platform is amazing, and has already been approved. They are taking SALT deposits currently (just opened a few days ago) so they are ramping up for full operation soon. I would suggest to hit up their reddit...i'm gonna do the same :-)
I recall being downvoted when I replied to someone asking if it was too late to invest in Bitcoin when it was at $4000. In my reply I quoted Roger Ver by saying that it was never too late to invest in Bitcoin. I also decided to walk the talk and buy some at $4000 with money I could afford to lose. Glad I did.
That's crazy thinking though. It's only "never too late" if it never stops going up. Just because it went up from $4k doesn't mean that you won. Unless you sell now and walk away.
Point is, it's impossible to know if you're leaving money on the table.
Bitcoin is a high risk investment. If you buy some today it could go to $1 next month (although as it's years of track record continues to grow this becomes less and less likely).
Make bitcoin 1% of your portfolio. If you lose all of it, it's not really a big deal. If one year from now it has grown to 10% of your portfolio, you'll be more comfortable with it and you can sell half and maintain it as 5% knowing that if you ever lose that you are still ahead.
This is a long term investment for me so I don't plan on trying to time the market or cash out early. I fully expect to see Bitcoin rise above $10,000 in 1 year.
The purpose of talking about the price, is that it is being used as a proxy mechanism to determine if Bitcoin is "crossing the chasm" from the technology oriented early adopters, to the much wider, non tech, early majority.
Then the bandwagon effect will (presumably) kick in and Bitcoin will become truly entrenched.
Dumb question. If I buy a bitcoin today would it be assumed the associated bitcoin cash coin had already been spent or is there a chance I ended up with both?
Or am I completely misunderstanding? When it formed each coin holder got a new coin in the fork?
Today you get only 1 bitcoin. No bitcoin cash or gold or whatever forks that may exist.
Think of this way, there is a ledger - bitcoin which shows I own 1 bitcoin on 1st August 2017. Someone copied the ledger. Now there are two ledgers both with name bitcoin. It is confusing - so one is called bitcoin cash.
Going forward, the transactions for bitcoin is recorded in the bitcoin ledger while for bitcoin cash in that ledger.
I can spend both bitcoin and cash as my ownership is reflected in both the ledgers.
But if you buy from me today, your ownership reflection will start now. So only on one of the ledgers.
In November someone will create a new copy - the Segwit 2x. So if you own the bitcoin till then you get 1 bitcoin Segwit 2x too, while retaining the ownership from original bitcoin ledger.
The volumes you can check using any of the block explorers freely available as for what they are used for, it's a transactional system so all records are transactions.
The myth that cryptos are used for illegal and criminal activity is dying down in Europe with Europol and BoE both releasing studies showing criminals prefer to use fiat rather than cryptocurrencies.
Just randomly clicking through blocks won't give you that much insights. You'll need at least a rather comprehensive list of address together with information what they are used for. Some of the block explorers provide such information to some extend, but I don't think any of them is comprehensive enough to be able to answer something like how many coins were spend in April 2017 to pay for food delivery services.
It's not too late. I wouldn't place a huge buy at $7000 right now, but it doesn't hurt to set up a monthly buy of $50-200 on Coinbase and take advantage of some dollar cost averaging.
Other technically superior cryptocurrencies (e.g. Monero, Ethereum) have replaced most of its usecases, boasting much faster and cheaper transactions and real anonymity in the case of Monero. Bitcoin takes more than an hour even at absurd transaction fees of multiple dollars, and is actually pseudonymous, meaning if you can associate an address with a real person, it becomes relatively easy to trace all their transactions unless they were careful to cover their tracks.
It may or may not continue to increase in value long-term, but it has little uses outside of being worth a lot of money.