Economy Bitcoin Doubters, Come Eat Your Crow

[Gandhi]

There have been many cryptocurrencies that have popped up in Bitcoins' 7 year history and only one has managed to break the $1bil market cap(Ethereum, different tech with different utilization). Bitcoin certainly isn't perfect but it's a living technology and is given periodic updates called forks which strengthen security and can even add features.

Many of the myriad of cryptocurrencies were merely pump n dump schemes- the exact same kind you see in penny stocks.

Some graphs/charts for you guys to look at: https://coinmarketcap.com/

Sure but none of,this gets to why Bitcoin is a shitty investment vehicle and what could happen if it's value gets artificially inflated once supply limits kick in. It has a limited but real use right now but that is it.

 

[Paladin]

Even late comer miners like me are in decent profit.

If I was you I would cash out now , they buy during the next crash

 

[xcvbn]

Ok I did not know if he was talking about creating bit coins or hard, thanks. Adding supply from nothing - i.e. the same as printing money, means more bitcoins chasing the same basket of goods, which is inflationary. Why would that make it a better investment, quite the opposite.

Again the value will be based on the basket of goods,available in bitcoins compared to other currencies. This just takes away some of bitcoins deflationary advantage to the favor of those with big PCs.

Supply isn't added from nothing. Work is performed and energy is spent to earn(mine) the coins. That alone gives it value, similar to gold backed currency. Printing money is more similar to having hamsters spin a wheel that produces 1 nano watt of power in 15 years- and kills 10,000 hamsters in the process.

Bitcoin value is certainly based on supply and demand, as well as usability. In its infancy it was worthless($0.05-0.25/btc I think was it's bottom) because there were few users and much fewer uses. Now it's accepted at hundreds, perhaps thousands of businesses. There are even bitcoin ATMs in malls all over the world.

As for people mining with big PCs....


This video is from two years ago. There are much, much larger farms out there now. Also keep in mind that as the number of blocks are mined, the difficulty rises exponentially. The current date for mining all 21,000,000 Bitcoins is May 7th, 2140, this is up from the 3-year old projected date of October 8th, 2140- a whopping 5 months quicker after 3 years of massive Bitcoin growth. People with these mining farms aren't at an advantage for anything other than making it near impossible for people to make a profit mining from their office PC. It's like how industrial technology and rising gold scarcity made panning for gold obsolete and a waste of time.

The one concern about these massive bitcoin mining farms is that if they grouped together they could organize what's called a 51% attack which is essentially monopolizing bitcoin. Problem is the only real benefit to doing that would be to kill bitcoin which obviously is the opposite of the miners' best interest. A 51% attack can also be achieved by one entity owning or controlling at least 51% of the supply, which would cost $6.5bil at its current value. But you need to factor in supply&demand and that makes the cost to own 51% of Bitcoins god knows how much.

 

[xcvbn]

Yes you can't inflate away the value of a Bitcoin by printing more money (which is what the Fed is doing, the creation of debt is little more than an accounting entry). But it's value is still intrinsically tied to,whatever basket of goods/services can be purchased with it, which drives purchases and sales of any currency over the long term, the rest is zero sum speculation.

You also can't use it as a collateral with the fed to make new loans, but then we are back to an argument over the best structure of the monetary banking system, which absent the libertarian wet dream about impending financial collapse, is not about the merit of Bitcoin as an investment or medium of exchange.

Don't think of Bitcoin as a replacement for fiat currency. It simply exists as the incentive for a computer to perform difficult tasks to create and maintain a blockchain. In this sense bitcoin is much more of a commodity like oil than it is a currency, but it's far easier to send someone 1 BTC than 1 barrel of crude oil. Same goes for Ethereum, however, its premise is built on this idea of smart contracts* which are executed(paid for) using Ether- the Bitcoin equivalent reward for discovering blocks.


*The 1994 definition of a smart contract(no, blockchains and smart contracts aren't new ideas)* is a computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement, minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs.

*Today's definition* Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. Smart contracts usually also have a user interface and often emulate the logic of contractual clauses. Proponents of smart contracts claim that many kinds of contractual clauses may thus be made partially or fully self-executing, self-enforcing, or both. Smart contracts aim to provide security superior to traditional contract law and to reduce other transaction costs associated with contracting.

 

[Cubo de Sangre]

If the investment strategy is...

Not what I was commenting on. No worries though. As far as strategy, this is a whole new playing field so plenty of opportunity for the smart and the brave.

Don't think of Bitcoin as a replacement for fiat currency. It simply exists as the incentive for a computer to perform difficult tasks to create and maintain a blockchain. In this sense bitcoin is much more of a commodity like oil than it is a currency, but it's far easier to send someone 1 BTC than 1 barrel of crude oil.

Seems to me it's an attempt at fiat currency ("mining" notwithstanding) with enough speculation, uncertainty, and opposition from established players to make it sound like a commodity. I guess in the loosest sense it is, but then the fiat view must enjoy the same latitude. Looks like a whole new beast, thanks in large part due to its liquidity without oversight. A tax-free investment that's used as a medium of exchange.

 

[Prutfis]

BC is a niche currency and will remain as such. To many caveats with it.

Sure wish I had got involved early on. I love the concept and getting rich off it would have been amazing.

Couldn´t that be said for many things? ***pops Van Dammes TimeCop in the VHS***

 

[xcvbn]

Seems to me it's an attempt at fiat currency ("mining" notwithstanding) with enough speculation, uncertainty, and opposition from established players to make it sound like a commodity. I guess in the loosest sense it is, but then the fiat view must enjoy the same latitude. Looks like a whole new beast, thanks in large part due to its liquidity without oversight. A tax-free investment that's used as a medium of exchange.

It certainly could become a mainstream alternative to currency in one capacity or another. I'm looking at you Western Union and your exorbitant wire fees which amount to tens of billions in fees per year. If Bitcoin and/or Ethereum were adopted just in that area, they'd make Western Union and all other wire services obsolete, effectively destroying a multi-billion dollar industry. Scary to few, welcoming to hundreds of millions who wire money annually. I think this is part of why big banks are invested in the technology themselves. Maybe it's to destroy it, maybe it's to profit off of it. Likely it's to maintain some level of control while being the ones to earn the lion's share of transaction fees through processing the majority of crypto transactions. Sounds gross but fortunately transaction fees only get smaller and smaller the more it's used.

I just don't see fiat and the banks going anywhere anytime soon so long as Bitcoin and Ethereum remain volatile(10%+ swings on a given day is fairly common). Someone's gotta give out loans with currency that has a solid backbone.

 

[Greoric]

It spiked up at one point and stopped a long time ago. You are silly if you think we are eating crow. It isn't a good investment (and actually shouldn't be seen as one because it's a currency but many of it's user's don't understand that either) and depends on the hype of others to think it works. and dump their money into it.

You've just described every currency in existance... minus Au and Ag.

 

[Greoric]

Its value comes from its usage on the black market online.

It's here to stay.

Well crypto is, but not necessarily Bitcoin. The next evolution in that space will be to link tangibles to the currency... then government backed central banks are really fucked.

 

[Fedorable]

does crow taste bad?

 

[freakyfarley]

Can someone tell me WTF bitcoin IS exactly and what it's used for? I remember when it came out and it seemed like this weird virtually currency that I didn't completely understand.

It's used to buy nukes on the darkweb without the feds EVER finding out

 

[freakyfarley]

does crow taste bad?

That's where the expression comes from partly, I think

 

[jefferz]

Should a currency be seen as a form of investment? How useful is Bitcoin to companies selling goods when the value changes so frequently? Unless it hits a stable area, it had little use as a currency.

You could explain the security of the block chain but our first interaction was you empty posting. I don't think security changes the reasons I don't think it fulfills its purpose as a currency. It could stay around a long time but in its current form, I has little use as a currency and it isn't an investment. There is no real intrinsic value behind it. It does a shitty job at doing either thing

I made a killing on Canadian money I'd exchanged in the 2000's and held onto.

 

[Gandhi]

Supply isn't added from nothing. Work is performed and energy is spent to earn(mine) the coins. That alone gives it value, similar to gold backed currency. Printing money is more similar to having hamsters spin a wheel that produces 1 nano watt of power in 15 years- and kills 10,000 hamsters in the process.

Bitcoin value is certainly based on supply and demand, as well as usability. In its infancy it was worthless($0.05-0.25/btc I think was it's bottom) because there were few users and much fewer uses. Now it's accepted at hundreds, perhaps thousands of businesses. There are even bitcoin ATMs in malls all over the world.

As for people mining with big PCs....


This video is from two years ago. There are much, much larger farms out there now. Also keep in mind that as the number of blocks are mined, the difficulty rises exponentially. The current date for mining all 21,000,000 Bitcoins is May 7th, 2140, this is up from the 3-year old projected date of October 8th, 2140- a whopping 5 months quicker after 3 years of massive Bitcoin growth. People with these mining farms aren't at an advantage for anything other than making it near impossible for people to make a profit mining from their office PC. It's like how industrial technology and rising gold scarcity made panning for gold obsolete and a waste of time.

The one concern about these massive bitcoin mining farms is that if they grouped together they could organize what's called a 51% attack which is essentially monopolizing bitcoin. Problem is the only real benefit to doing that would be to kill bitcoin which obviously is the opposite of the miners' best interest. A 51% attack can also be achieved by one entity owning or controlling at least 51% of the supply, which would cost $6.5bil at its current value. But you need to factor in supply&demand and that makes the cost to own 51% of Bitcoins god knows how much.

Work expanded and energy created is worthless as far as value goes absent the creation of some product or service from that effort. In this case the energy is creating an extra bitcoin, which intrinsically has no value. It is the same as saying fiat currency has value because it takes effort to chop down trees, make paper and ink, print, etc. Except, again, money does not get value from the effort into making it but from either a hard commodity that backs it up, or more generally in modern economies, from the expected goods and services that the money can be used to purchase.

Don't have time to watch videos right now, but if I am missing something about how creating an extra bit coin does anything to create a usable service or product, please let me know, otherwise it's no different than printing money, which on its own does not create value, it's the spending of the money to use up slack in the economy that does that.

 

[Gandhi]

Don't think of Bitcoin as a replacement for fiat currency. It simply exists as the incentive for a computer to perform difficult tasks to create and maintain a blockchain. In this sense bitcoin is much more of a commodity like oil than it is a currency, but it's far easier to send someone 1 BTC than 1 barrel of crude oil. Same goes for Ethereum, however, its premise is built on this idea of smart contracts* which are executed(paid for) using Ether- the Bitcoin equivalent reward for discovering blocks.


*The 1994 definition of a smart contract(no, blockchains and smart contracts aren't new ideas)* is a computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement, minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs.

*Today's definition* Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. Smart contracts usually also have a user interface and often emulate the logic of contractual clauses. Proponents of smart contracts claim that many kinds of contractual clauses may thus be made partially or fully self-executing, self-enforcing, or both. Smart contracts aim to provide security superior to traditional contract law and to reduce other transaction costs associated with contracting.

Well I already agree it has its place, and could even grow in use. But it's not a commodity, as you can't burn a bitcoin, make into a sweater, etc. unless it's flying right by me, a bitcoin represents energy already spent, not a claim on future computing energy, and as such has zero underlying value (unlike gold or oil).

 

[Gandhi]

Not what I was commenting on. No worries though. As far as strategy, this is a whole new playing field so plenty of opportunity for the smart and the brave.




Seems to me it's an attempt at fiat currency ("mining" notwithstanding) with enough speculation, uncertainty, and opposition from established players to make it sound like a commodity. I guess in the loosest sense it is, but then the fiat view must enjoy the same latitude. Looks like a whole new beast, thanks in large part due to its liquidity without oversight. A tax-free investment that's used as a medium of exchange.

Well that can be hard to guess at some times.

Anyway nothing smart and brave about investments that have no relation to value creation and depend entirely on guessing market timing. The dumb and the guillable would be a better description. That goes for anyone who has an investment strategy based around currencies or even commodities. Hedges are not good investments for generating a return over the long term, it's all speculation.

It's not fiat though, as it's not put in existence through law (i.e. fiat). And don't see how it's a commodity, no underlying value (again if I am missing something here feel free to explain). It's an alternative currency and will have its place.

 

[Gandhi]

I made a killing on Canadian money I'd exchanged in the 2000's and held onto.

I made a killing tranferrkng all my savings into US dollars at the right time. I knew stocks would go up over time, the currency fluctuations are pure luck though.

 

[HuMz]

The problem with technology is that it evolves quickly and can be hacked. It is just a matter of time. The next great thing will be invented and BC value will go to zero or at least the price of the energy spent on it.
If BC is proven to be insecure then it will be worthless.

For normal people, BC is not practical at all, too complicated to understand (require a few days even for IT people to wrap their mind around the technology) and the fact that you can't revert transactions is not good. Trade is about negotiation not about contracts set in stone.

On the economic side, the amount being limited will have the same problem as the gold standard. Money supply does not follow economic output.
It is also correlated to a computer grid. Gold for example is physical. Even without energy it has value.

It is a nice experience though. I won money with it but I try to stay neutral.

TL;DR It will be worthless someday soon.

 

[Unsurprised Diaz]

Nah, I'll wait for the next big pyramid scheme, thank you

 

[Long Dark Blues]

Should a currency be seen as a form of investment? How useful is Bitcoin to companies selling goods when the value changes so frequently? Unless it hits a stable area, it had little use as a currency.

You could explain the security of the block chain but our first interaction was you empty posting. I don't think security changes the reasons I don't think it fulfills its purpose as a currency. It could stay around a long time but in its current form, I has little use as a currency and it isn't an investment. There is no real intrinsic value behind it. It does a shitty job at doing either thing

Why not? If that currency is backed by or made out of something tangible. Numismatics, man. I hold in my hand this very second a 1964 quarter with a face value of $0.25, but an intrinsic value of $2.88.