Are bitcoins nonsense?

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knightrider
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Are bitcoins nonsense?

Post by knightrider »

I don't invest in bitcoins because of these two adages I follow:

1) I don't invest in what I don't understand
2) Complex investments generally only benefit those making the rules

Some people say bitcoins are not complex. I have a Masters in engineering and I can't understand them. Plus how much of the general population can explain what "bit" and "crypto" really mean?
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timboktoo
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Re: Are bitcoins nonsense?

Post by timboktoo »

There are several posts on Bitcoin in the archives which may or may not be of interest to you:

https://www.google.com/search?sitesearc ... &q=bitcoin

- Tim
casun
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Re: Are bitcoins nonsense?

Post by casun »

bitcoins are real things that have meaning, but that doesn't necessarily mean you should own them or "invest" in them.
cliffrlp
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Re: Are bitcoins nonsense?

Post by cliffrlp »

I consider it a gamble. I'd rather play around with some crypto vs Vegas and the tech behind some of the alt coins are really impressive. Not anything I consider as part of my net worth or of any importance, just a few dollars to mess around with. Also, watching your crypto portfolio lose half it's value or more in a few hours can really toughen you up if it ends up happening to your taxable account. Almost like a mental workout for me not to SELL SELL SELL when it seems like it can't do anything but go further down.

Other cool ones to look into are LTC, ETH, XRP & GNT. Enjoy :D
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FIREchief
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Re: Are bitcoins nonsense?

Post by FIREchief »

A US dollar (or US treasury issue - just another form of paper IOU) is backed by the full faith and credit of the US government. I have no idea what is backing the "value" of a bitcoin.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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unclescrooge
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Re: Are bitcoins nonsense?

Post by unclescrooge »

knightrider wrote:I don't invest in bitcoins because of these two adages I follow:

1) I don't invest in what I don't understand
2) Complex investments generally only benefit those making the rules

Some people say bitcoins are not complex. I have a Masters in engineering and I can't understand them. Plus how much of the general population can explain what "bit" and "crypto" really mean?
I have a masters in computer science, and another one in finance, and I barely understand it.

I see how block chain is the future, but I'm staying away from it as an investment. You don't have to invest in everything.
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Nate79
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Re: Are bitcoins nonsense?

Post by Nate79 »

Yes, I believe it is nonsense. I do not believe that bitcoin solves a meaningful problem and the fact that it is not govt backed means it could be eliminated with the stroke of a pen.
acanthurus
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Re: Are bitcoins nonsense?

Post by acanthurus »

I use mine to buy tulips.
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OZAR
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Re: Are bitcoins nonsense?

Post by OZAR »

....as the open ledger(block chain) becomes larger and larger it will become even more complex to mind these bit coins- making it take longer and less efficient. Mining will be left to the big players...

And what will happen when all the bit coins are mined? Higher fees ? Replacing the middle man from brokers etc to that of the big miners......????

I think some advances need to be made to the open Ledger, but I do think bit coin is nonsense.

It's being propagated by the hackers.
inbox788
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Re: Are bitcoins nonsense?

Post by inbox788 »

I'm starting to believe there is something to them. Ultimately their value is based on the users who believe and have faith in them, and there are some groups that value them. I think of it as an abstract form of gold, diamonds, cocaine, or marijuana. People ask what is the intrinsic value of the dollar or of gold. There is also an extrinsic value that's even more abstract.

https://seekingalpha.com/article/335863 ... ue-of-gold
https://news.ycombinator.com/item?id=7097719
http://www.zerohedge.com/contributed/20 ... -us-dollar

And even if it's not nonsense, who really understands the dollar index or the value of gold and can guarantee to make money on it?

Irregardless, the proliferation of cryptocurrencies sure does seem like it's in some sort of bubble.
Tylenol Jones
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Re: Are bitcoins nonsense?

Post by Tylenol Jones »

Bitcoin is a fine technology. Actually a significant breakthrough - kinda working - implementation of a set of challenging computer science problems. The original financial motivation behind it is also fine - Bitcoin is supposed to be a "stable" currency with clearly defined inflation rate. What is happening to it now is that it's attracting tons of speculators who are making it swing widely due to its current low market capitalization. They are doing us a favor by risking their money to support this currency for the long term survival and price setting - the same way the stock market speculators are doing us a favor wrt setting the price so that we can enjoy our index investing. Speculation is gambling in my opinion and as such I'm not gambling with Bitcoin. However, I do believe that it will survive in the long term and become a "stable" currency with a clear inflation rate as it is designed to be. At that time it will be something like gold today with additional features of easier storage, transactions, etc. So, in the long term it might become interesting to you as a replacement for your gold in your portfolio, if you have gold in your portfolio, and if you don't have gold in your portfolio then Bitcoin will probably not be relevant to you long term either (unless you just want to use it for transfer convenience or "anonymous" payments).
sawhorse
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Re: Are bitcoins nonsense?

Post by sawhorse »

My husband mined a small amount of Bitcoin using his computer back in the day. He's hanging onto them and happy to see where it goes. If it goes to nothing, he's okay with it. The cost was almost nothing since he already had the equipment. It's more for curiosity.

He's totally averse to investing more in it now though. If you have some "play" money, go ahead and buy a small amount if you're curious. But don't treat it as a serious investment.
chinto
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Re: Are bitcoins nonsense?

Post by chinto »

It is nonsense, it is just a combination of fetish and tech porn.

Let us review it in terms of reality. Money serves 3 classic functions:

01) A store of value (stable of modest, predictable changes over time) - the massive fluctuations in bitcoins makes this a non starter.
02) A medium of exchange - maybe kind of. It is valid only where accepted, so I'll give bitcoins partial credit
03) A unit of value - once again the fluctuations in bitcoins makes this a non-starter.
*3!4!/5!
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Re: Are bitcoins nonsense?

Post by *3!4!/5! »

How is a bitcoin created?
timmy
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Re: Are bitcoins nonsense?

Post by timmy »

Podcast https://tim.blog/2017/06/04/nick-szabo/ (The podcast is not censored. If you have sensitive ears, pass.)

From the website
Nick Szabo (@NickSzabo4) is a polymath. The breadth and depth of his interests and knowledge are truly astounding.

He’s a computer scientist, legal scholar, and cryptographer best known for his pioneering research in digital contracts and cryptocurrency.

The phrase and concept of “smart contracts” were developed by Nick with the goal of bringing what he calls the “highly evolved” practices of contract law and practice for the design of electronic commerce protocols between strangers on the Internet. Nick also designed Bit Gold, which many consider the precursor to Bitcoin.

This wide-ranging conversation is co-hosted by Naval Ravikant, a mutual friend and one of the most successful investors in Silicon Valley, who also happens to be one of Nick’s biggest admirers.

We cover a lot, including:

What is Bitcoin, what are cryptocurrencies, and what problem do they solve?
What is “social scalability?”
What is Ethereum and what makes it unique? Strengths and weaknesses?
How will smart contracts actually get adopted or go mainstream?
What are ICOs (Initial Coin Offerings)?
Blockchain governance — is there any existential risk?
“Wet” versus “dry” code
Pascal’s scams
Quantum thought
What fields will you be working on in the future?
Last edited by timmy on Wed Jul 26, 2017 2:39 am, edited 2 times in total.
timmy
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Re: Are bitcoins nonsense?

Post by timmy »

I don't own any.

I assume it'll be like purchasing stuff online. At one time, it seemed pointless. Later, it seemed purposeful but risky ... Then it became the norm. My guess is this topic will be the same. If it becomes a real thing in our lives, it will happen over time. And we will adapt accordingly.
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FIREchief
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Re: Are bitcoins nonsense?

Post by FIREchief »

timmy wrote:I don't own any.

I assume it'll be like purchasing stuff online. At one time, it seemed pointless. Later, it seemed purposeful but risky ...
I missed both of those phases. "Purchasing stuff online" was attractive to me from day one. I haven't had the same reaction to this "bitcoin nonsense."
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
m3110w
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Re: Are bitcoins nonsense?

Post by m3110w »

A few years ago I used some "play money" (just a few % of my total assets) to purchase some bitcoin and other crypto-currencies. The portfolio has increased in value 32x (3,200%). The crypto-currencies are liquid so I can cash out at any time. I own about 15 different crypto-currencies.

Because I just used play money it could all crash down to zero and I wouldn't loose any sleep. I'm now cashing out some of it for things I normally wouldn't splurge on.

IMHO, blockchain technology (which is the foundation of crypto-currencies) is going to deeply and radically transform many, many business activities. "Trust the math, not people." Goodbye expensive, inefficient, greedy, corruptible middlemen. I'm bullish.

Cheers,
Last edited by m3110w on Wed Jul 26, 2017 3:35 am, edited 1 time in total.
I'm sure there's a good explanation.
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FIREchief
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Re: Are bitcoins nonsense?

Post by FIREchief »

m3110w wrote:A few years ago I used some "play money" (just a few % of my total assets)
If you consider "just a few % of my total assets" to be "play money," you're likely not in the majority here. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
m3110w
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Re: Are bitcoins nonsense?

Post by m3110w »

Hello FireChief,

Not sure I understand, please explain. In my case a "few %" translates to about 2%. That''s my definition of "play money" but I'd like to hear your take.

Thanks.
I'm sure there's a good explanation.
lazydavid
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Re: Are bitcoins nonsense?

Post by lazydavid »

*3!4!/5! wrote:How is a bitcoin created?
Bitcoins are the "solution" to increasingly difficult math problems. When a miner finds a solution to one of these problems and validate this result against the blockchain, they are rewarded with a cache of bitcoin. In the early days, you got a lot of bitcoin for solving relatively easy problems. However, as time goes on, fewer and fewer bitcoin are awarded for problems that take longer and longer to solve. This exponential increase in computational cost per bitcoin was intended to counteract the continuous increases in horsepower.
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FIREchief
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Re: Are bitcoins nonsense?

Post by FIREchief »

m3110w wrote:Hello FireChief,

Not sure I understand, please explain. In my case a "few %" translates to about 2%. That''s my definition of "play money" but I'd like to hear your take.

Thanks.
Sure. 2% is real money, not "play money." I would feel the same about 1%, or 0.1%, etc. Many of us have worked for every dollar we've ever stuck in our wallet/brokerage account. For us, there is absolutely no such thing as "play money." It's all real money, that should be invested in non-nonsense investments.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
*3!4!/5!
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Re: Are bitcoins nonsense?

Post by *3!4!/5! »

lazydavid wrote:
*3!4!/5! wrote:How is a bitcoin created?
Bitcoins are the "solution" to increasingly difficult math problems. When a miner finds a solution to one of these problems and validate this result against the blockchain, they are rewarded with a cache of bitcoin. In the early days, you got a lot of bitcoin for solving relatively easy problems. However, as time goes on, fewer and fewer bitcoin are awarded for problems that take longer and longer to solve. This exponential increase in computational cost per bitcoin was intended to counteract the continuous increases in horsepower.
What kinds of problems?
Are these instances of NP-complete problems, for example?
What happens if you get your computer to solve a particular problem, and someone else scoops you on that particular problem? How do people avoid this duplication?
Do the problem solutions have some practical use, or get used for something?

I find it hard to understand how the value could fluctuate so much, when you have a reasonable idea how much computing effort is needed.
Valuethinker
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Re: Are bitcoins nonsense?

Post by Valuethinker »

Tylenol Jones wrote:Bitcoin is a fine technology. Actually a significant breakthrough - kinda working - implementation of a set of challenging computer science problems. The original financial motivation behind it is also fine - Bitcoin is supposed to be a "stable" currency with clearly defined inflation rate. What is happening to it now is that it's attracting tons of speculators who are making it swing widely due to its current low market capitalization. They are doing us a favor by risking their money to support this currency for the long term survival and price setting - the same way the stock market speculators are doing us a favor wrt setting the price so that we can enjoy our index investing. Speculation is gambling in my opinion and as such I'm not gambling with Bitcoin. However, I do believe that it will survive in the long term and become a "stable" currency with a clear inflation rate as it is designed to be. At that time it will be something like gold today with additional features of easier storage, transactions, etc. So, in the long term it might become interesting to you as a replacement for your gold in your portfolio, if you have gold in your portfolio, and if you don't have gold in your portfolio then Bitcoin will probably not be relevant to you long term either (unless you just want to use it for transfer convenience or "anonymous" payments).
The speculation was (nearly) inevitable.

Nature of such markets. You create a "money" that has no external sense of value. A USD can be paid settle US taxes.

And real interest rates are negative, so that makes holding such assets easier.

The transactions advantages of bitcoin per se are payment for illegal goods & services (remembering what is "legal" varies by country), and bypassing exchange controls in countries that have them (or other government controls on financial transactions).

http://www.coppolacomment.com/2017/07/a ... rding.html

gives an explanation of why speculative bubbles are almost inevitable.

The problem with eventual stability is then there will be no incentive to be a bitcoin exchange? I.e. when mining gets so expensive that no one can get rewards from it?
Valuethinker
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Re: Are bitcoins nonsense?

Post by Valuethinker »

*3!4!/5! wrote:
lazydavid wrote:
*3!4!/5! wrote:How is a bitcoin created?
Bitcoins are the "solution" to increasingly difficult math problems. When a miner finds a solution to one of these problems and validate this result against the blockchain, they are rewarded with a cache of bitcoin. In the early days, you got a lot of bitcoin for solving relatively easy problems. However, as time goes on, fewer and fewer bitcoin are awarded for problems that take longer and longer to solve. This exponential increase in computational cost per bitcoin was intended to counteract the continuous increases in horsepower.
What kinds of problems?
Are these instances of NP-complete problems, for example?
What happens if you get your computer to solve a particular problem, and someone else scoops you on that particular problem? How do people avoid this duplication?
My understanding is that there is a risk around duplication, arising from the propagation through the internet of each new coin to the distributed ledger. But it's a very small risk.
Do the problem solutions have some practical use, or get used for something?

I find it hard to understand how the value could fluctuate so much, when you have a reasonable idea how much computing effort is needed.
Consider drinking water. Essential to life.

Out of your tap it is virtually free. Thousands of a cent per litre. (most of your water bill is fixed costs).

At your corner store, in bottles, it costs more than gasoline.

In an expensive restaurant it costs $50/ gallon plus.

To get it to troops deployed in the Iraqi desert, including fuel costs, probably costs more than that.

The production cost of water is incredibly low, but within 3 miles of your house (100 yards of mine) there are at least 3 different prices, X, 100x, 1000x.

The point being that in a market system, price is not just based on cost of production, but on demand.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

FIREchief wrote:
m3110w wrote:Hello FireChief,

Not sure I understand, please explain. In my case a "few %" translates to about 2%. That''s my definition of "play money" but I'd like to hear your take.

Thanks.
Sure. 2% is real money, not "play money." I would feel the same about 1%, or 0.1%, etc. Many of us have worked for every dollar we've ever stuck in our wallet/brokerage account. For us, there is absolutely no such thing as "play money." It's all real money, that should be invested in non-nonsense investments.
2% lost, compounded over 35 years at say 6% return on your "core" portfolio, is quite a chunk of change.

With "play" money, as someone pointed out here, most people are probably not assuming they can lose 100%. But they can.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

inbox788 wrote:I'm starting to believe there is something to them. Ultimately their value is based on the users who believe and have faith in them, and there are some groups that value them. I think of it as an abstract form of gold, diamonds, cocaine, or marijuana. People ask what is the intrinsic value of the dollar or of gold. There is also an extrinsic value that's even more abstract.

https://seekingalpha.com/article/335863 ... ue-of-gold
https://news.ycombinator.com/item?id=7097719
http://www.zerohedge.com/contributed/20 ... -us-dollar

And even if it's not nonsense, who really understands the dollar index or the value of gold and can guarantee to make money on it?

Irregardless, the proliferation of cryptocurrencies sure does seem like it's in some sort of bubble.
I am going to say "germanium" and the reference passes most people by ;-).

https://www.fantasticfiction.com/b/jame ... flight.htm

OK cocaine and marijuana make lousy money. Because their consumption provides immediate rewards (and like all good addictive substances, great immediate rewards). You are always at risk that you, or someone close to you, has a high discount rate (time preference) ;-). And they spoil ;-).

Gold and diamonds.

Diamonds have little intrinsic value. Their value was the result of one of the world's most perfect cartels (the De Beers/ Oppenheimer one) which functioned very well for a century or so. Plus some of the original Madison Avenue advertising to create a perception of value/ scarcity.

Those trying to get money out of Europe in the 1930s (see the Alan Furst novels) often used the Antwerp Diamond merchants. So diamonds do have value as portable means to get round exchange controls/ flee persecution and death.

Gold? I struggle with this one. Every civilization that had gold used it as an ornamental metal (consider the plains tribes of "barbarians", the Scythians, who made fantastic objet d'art). Western Civilization is odd in sticking it in vaults and calling it "money". But we have done so at least since the Greeks and Romans, so it has value. And like diamonds, it can be useful in getting around restrictions on paper money.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

m3110w wrote:A few years ago I used some "play money" (just a few % of my total assets) to purchase some bitcoin and other crypto-currencies. The portfolio has increased in value 32x (3,200%). The crypto-currencies are liquid so I can cash out at any time. I own about 15 different crypto-currencies.

Because I just used play money it could all crash down to zero and I wouldn't loose any sleep. I'm now cashing out some of it for things I normally wouldn't splurge on.

IMHO, blockchain technology (which is the foundation of crypto-currencies) is going to deeply and radically transform many, many business activities. "Trust the math, not people." Goodbye expensive, inefficient, greedy, corruptible middlemen. I'm bullish.

Cheers,
My view, having been in your position in the dot com era.

Take half off the table. It's not money until you turn it into cash and/or reinvest it in a diversified portfolio.

BTW I evolved this advice from having failed to do it ;-).
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Re: Are bitcoins nonsense?

Post by Valuethinker »

FIREchief wrote:
timmy wrote:I don't own any.

I assume it'll be like purchasing stuff online. At one time, it seemed pointless. Later, it seemed purposeful but risky ...
I missed both of those phases. "Purchasing stuff online" was attractive to me from day one. I haven't had the same reaction to this "bitcoin nonsense."
It's wrong to call it nonsense, because the transactional uses are quite real. Places that have exchange controls, for example-- it can be a way around. Or in "dark web" type transactions: ransomeware, drugs etc (I don't encourage those, but note that it has its uses for that).

The technology underlying has massive potential applications. Everything from significantly reducing the costs and errors of stock trading, through reducing welfare and tax fraud.

It is not money though. It's another type of high risk asset.
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Tamarind
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Re: Are bitcoins nonsense?

Post by Tamarind »

Not nonsense, but also not a sound investment. We don't typically advise people to play with forex here and that goes double for a currency with no sovereign backing. I find the design of it fascinating, though, and hope that enough of the security issues get resolved to make it more useful in future. Blockchain design also has interesting non-exchange possibilities.

If you're interested in mining, consider using your GPU to contribute to folding@home or another socially productive citizen science campaign.

Edited to fix phone autocorrect typo.
Last edited by Tamarind on Wed Jul 26, 2017 6:07 am, edited 1 time in total.
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Re: Are bitcoins nonsense?

Post by Robert T »

.

Initial Coin Offerings (ICOs) https://www.bloomberg.com/news/articles ... ncy-riches
Loosely akin to IPOs, ICOs have raised millions from investors hoping to get in early on the next bitcoin or ether, and their unchecked growth over the past year is such that they’ve drawn comparisons to the first ill-fated dot-com boom.
...deal-maker has since backed a clutch of cryptocoin sales that’ve raised millions -- sometimes in seconds -- often without a single product.
Sounds similar to dotcom era ...
.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

chinto wrote:It is nonsense, it is just a combination of fetish and tech porn.

Let us review it in terms of reality. Money serves 3 classic functions:

01) A store of value (stable of modest, predictable changes over time) - the massive fluctuations in bitcoins makes this a non starter.
02) A medium of exchange - maybe kind of. It is valid only where accepted, so I'll give bitcoins partial credit
03) A unit of value - once again the fluctuations in bitcoins makes this a non-starter.
Yes it can serve as 2. Places with exchange controls or "dark web" type transactions (I am not opining on the morality of either, though most of us would think the former is not evil, and the latter is quite evil).

Bitcoin is the (first?) very public instantiation of a new technology with a lot of potential applications (basically anything that is a transaction).

It's also got a niche role as a means of exchange.

I agree it doesn't work well (or at all, really) for 1 or 3. There are other crypto currencies emerging that might do better.

Right now the planet holds US Dollars as 1 & 3 (other than home currencies)*. As we inevitably move from a unipolar superpower world to a more multilateral one (call it China First! or India First! or Nigeria First! ;-) ) the USD may play a reduced role (in the manner in which the GBP was the dollar of the 19th century, but after 1913 slowly ceded that role to the dollar and other currencies-- ie a gradual phasing) and cybercurrencies may have a part to play.

It may be cybercurrencies are going after the seigneurage pool. The potential they offer is to cut into the transaction costs (and the underlying error prone and expensive back office processes) that financial intermediaries charge.

* seigneurage. There are trillions of USD that are held outside the USA, or on deposit in the USA by foreign countries and companies and individuals, rather than converting into their home currency. Estimates are the US government benefits to the order of $50-60bn pa from seigneurage.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

Robert T wrote:.

Initial Coin Offerings (ICOs) https://www.bloomberg.com/news/articles ... ncy-riches
Loosely akin to IPOs, ICOs have raised millions from investors hoping to get in early on the next bitcoin or ether, and their unchecked growth over the past year is such that they’ve drawn comparisons to the first ill-fated dot-com boom.
...deal-maker has since backed a clutch of cryptocoin sales that’ve raised millions -- sometimes in seconds -- often without a single product.
Sounds similar to dotcom era ...
.
Actually it also reminds me of 1929.

Then it was utility trusts, that bought utilities, and used leverage to enhance their attractiveness. A bank called Goldman Sachs nearly failed after it was heavily involved in the promotion of these.

As far as I know these cybercurrency funds are not leveraged. So that's more like 1999 than 1929. But pools of money to buy into pools of money, thus driving up the price of the latter money, making the pools more valuable and making it easier for them to raise more money ....

Yes this feels very bubblish.

http://www.coppolacomment.com/2017/07/a ... rding.html underlines the mechanism.
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Re: Are bitcoins nonsense?

Post by Valuethinker »

Tamarind wrote:Not nonsense, but also not a sound investment. We don't typically advise people to play with forex here and that goes double for a currency with no sovereign backing. I find the design of it fascinating, though, and hope that enough of the security issues get resolved to make it more useful in future. Blockchain design also has interesting non-exchange possibilities.

If you're interested in mining, consider using your GPU to contribute to folding@home or another socially productive citizen science campaign.

Edited to fix phone autocorrect typo.
Bless you for finding a socially useful purpose in the nonsense that is now Bitcoin mining.

Basically what Bitcoin is now doing is polluting the planet. It's economical to mine it in places with "free" electric power, such as the heavily subsidized coal generated electricity in China.

A grand and glorious waste of time and money.
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Re: Are bitcoins nonsense?

Post by engineer1969 »

I was thinking the makers of crypto-currencies are trying to establish money systems which are out of the hands of government manipulation and truly market driven. That being said, I have no idea who holds the reigns at that point.
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Re: Are bitcoins nonsense?

Post by nisiprius »

"Is bitcoin nonsense?" is a meaningless question.

In my opinion:
  • The technology behind bitcoin and other cryptocurrencies is not "nonsense." It works. It's not a perpetual motion machine (or "overunity device," which is what enthusiasts call them--do a YouTube search on "overunity" for videos of impressive machines running).
  • Some of the actual products, including bitcoin itself, are not nonsense. They work, perhaps with problems, just like the earliest automobiles or personal computers. I haven't personally done it myself, but I believe it when people say yes, you can start with dollars, buy bitcoin, send the bitcoin to someone else, and have them successfully sell the bitcoin for dollars, and it routinely works--just like a Model T Ford routinely starts when cranked.
  • Because of wild volatility in the value of cryptocurrencies, as of 2017 they are not ready to replace credit cards as an everyday way to buy plumbing supplies over the Internet, let alone pay your state taxes. Internet merchants who accept it are making a fashion statement, trying to identify with a demographic they want to reach.
  • An unmistakable aura of scam, fraud, and criminal activity surrounds cryptocurrency, and some of the enthusiasm for it has a connection to some political ideologies. It's reasonable to take this into consideration. Even if there are parts of the cryptocurrency world that are honest business, it may be hard to tell what part you are in.
  • I have no way to know for sure whether the founders of cryptocurrency systems, including bitcoin, are honest and sincere, or whether they are intentionally hoping to profit from a Ponzi-like scheme in which "cryptocurrency" aspect is the plausible story concealing the true nature (just as "arbitraging international postal reply coupons" was the plausible story concealing the true nature of the original Ponzi scheme).
  • I have no way to know for sure whether the systems are bulletproof in terms of security, theft, or fraud, or whether there's a credible possibility of people losing important money to people exploiting flaws in the system.
  • In the absence of a web of regulations surrounding them, and formal and legally required safety nets for users, I have no way to judge the possibility of accidentally losing important money through technical failure like the recent Coinbase "flash crash."
  • It is prudent to be cautious even about using bitcoin for transactions. Even if there are reliable exchanges, the one you are using may not be one of them. Before the collapse Mt. Gox had just as good a reputation as Coinbase does now.
  • Even though there are sure to be people hitting jackpots speculating in cryptocurrency, i.e. buying it because they think it will go up, there are sure to be losers too--(often the same people, like the friend of mine who came back from a weekend in Atlantic City saying she'd won at the casino, until it emerged that she had indeed won--on Saturday, but had lost on Sunday, and had lost more on Sunday than she had won on Saturday*).
  • A big danger, when there is "buzz" about something new, is that even when the technology is just as exciting as people think, and even when it is completely sound and is the foundation of companies that grow up to become giants like Microsoft, there are going to be a hundred scam artists spinning false stories that claim to connect their scam with the promising technology. The right to collect tolls on the Brooklyn Bridge is worth a fortune, but does the man selling them to you really own them?
  • The reason why startups are so intriguing is precisely because in the early stage they all look the same--they are all people telling stories, and it's hard to know which are the visionaries selling a dream that could come true, and which are con artists selling a scam.
So, as of 2017, personally? I'm reading about cryptocurrencies because I think they're interesting. I think they'll touch my life in some humble way within the next ten years. I haven't yet used cryptocurrencies for a transaction and have no interest in trying. I wouldn't touch the Winklevoss ETF, ticker symbol COIN, with a ten-foot pole even if it comes back from the dead. It's all just something interesting that happens to be outside my life.

*In her mind, Sunday didn't count, because she didn't follow her system on Sunday.
Last edited by nisiprius on Wed Jul 26, 2017 8:06 am, edited 3 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
LRDave
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Re: Are bitcoins nonsense?

Post by LRDave »

You've got to have something to pay ransomware with.....
bberris
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Re: Are bitcoins nonsense?

Post by bberris »

LRDave wrote:You've got to have something to pay ransomware with.....
I know you're kidding but there is a grain of truth to it. Ransom is a kind of tax (you don't want to pay, you have to pay), and taxes drive money.
lazydavid
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Re: Are bitcoins nonsense?

Post by lazydavid »

*3!4!/5! wrote:What kinds of problems?
Are these instances of NP-complete problems, for example?
What happens if you get your computer to solve a particular problem, and someone else scoops you on that particular problem? How do people avoid this duplication?
Do the problem solutions have some practical use, or get used for something?

I find it hard to understand how the value could fluctuate so much, when you have a reasonable idea how much computing effort is needed.
The problems are calculating ECDSA public/private key pairs. You can find the details here. I believe Elliptic Curve problems are NP-complete, but admittedly I am not a cryptographer.

Though it is theoretically possible that someone else could solve the same problem as you within the time it takes to confirm your solution against the ledger, it's highly unlikely. If it does happen, the first one committed to the ledger wins. It's actually far more likely for malware to steal your computed solution off your machine and submit before you do, or transpose your wallet address for theirs on the fly when you collect the reward, than it is for someone to independently find the same keypair at around the same time you do.

To my knowledge, there is no practical application for the public/private key pairs other than claiming the associated bitcoins.
Valuethinker
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Re: Are bitcoins nonsense?

Post by Valuethinker »

bberris wrote:
LRDave wrote:You've got to have something to pay ransomware with.....
I know you're kidding but there is a grain of truth to it. Ransom is a kind of tax (you don't want to pay, you have to pay), and taxes drive money.
If we define "tax" to include "protection racket" then yes ;-).

Reputedly the Mafia takes 20% out of every construction contract in Sicily, and the Camorra and the N'Dragheta (sp?) the same on the mainland. Also to stay in business as a shop or restaurant you pay protection money.

Ethically and legally that is different from what a government provides Granted, very corrupt or ineffective governments take the money and do not provide the services.
Quickfoot
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Re: Are bitcoins nonsense?

Post by Quickfoot »

FIREchief wrote:A US dollar (or US treasury issue - just another form of paper IOU) is backed by the full faith and credit of the US government. I have no idea what is backing the "value" of a bitcoin.
The backing of the US Government only has weight because other countries and people say it does, the same is true for bitcoin. Bitcoin has value because other people want it, so long as that's the case it will have value. Whether people will continue to want bitcoin OR will continue to want US dollars is always a gamble.

Personally I understand and choose not to invest in bitcoin because there is too much fluctuation with too little return and too much risk governments will just outlaw it (which has happened in several large countries) because it competes with government currency, the government likes competition unless it is competition with the government.
Valuethinker
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Re: Are bitcoins nonsense?

Post by Valuethinker »

engineer1969 wrote:I was thinking the makers of crypto-currencies are trying to establish money systems which are out of the hands of government manipulation and truly market driven. That being said, I have no idea who holds the reigns at that point.
That is certainly how they became known, as vehicles to do just that.

However:

- does money have any value if governments don't recognize it? Because at the end of the day, we all buy goods and services from governments. Such niceties as law & order, national defence, border control. And the way we pay for those is something called "taxes".

- there is an extent to which the provision of a currency is a public good. The benefits of the US dollar are not fully appropriated by the Federal Reserve nor the US Treasury. Who pays for those aspects of public good such as reliability, anti-counterfeit, universal recognition, ability to settle debts with a government or bank, if it is not the government?

- at various times in history banks issued their own currencies. And that worked. But there were periodic runs on banks, panics, frauds, collapses-- financial instability. Eventually governments abrogated that right to issue currency to themselves. Probably because in a more complex and just larger global economy, the problem of trust couldn't be solved easily?

In the end, one of the things that worries me about crypto-currencies is this libertarian element that makes them love it. Because I don't think that's a practical way to organize the world. Does technology change make it more practical? Not that I can see.

For all the talk about central bank "manipulation" of the currencies, I am struck by how little power, in a world of freely floating and convertible currencies (mostly) and the USD in particular (huge amounts trading outside the USA), Central Banks actually have. They really are just beating their boats against very strong currents.

For example the Bank of Japan targeted inflation rate of 2%. But it hasn't managed to achieve it. Japan remains stubbornly stuck in a slump.

The Swiss Central Bank tried to hold the CHF/ EUR rate to 1.20, preventing CHF appreciation any further. But they failed.

Bank of England and Federal Reserve have built up huge balance sheets by Quantitative Easing, but to little apparent effect (other than to annoy retirees who have money on deposit).

European Central Bank has been unable to prevent recurrent Eurozone crises over Greece.
bberris
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Re: Are bitcoins nonsense?

Post by bberris »

Quickfoot wrote:
FIREchief wrote:A US dollar (or US treasury issue - just another form of paper IOU) is backed by the full faith and credit of the US government. I have no idea what is backing the "value" of a bitcoin.
The backing of the US Government only has weight because other countries and people say it does, the same is true for bitcoin. Bitcoin has value because other people want it, so long as that's the case it will have value. Whether people will continue to want bitcoin OR will continue to want US dollars is always a gamble.

...
That is the "belief" factor. It's true but the reasoning is circular. Where does belief come from? The risk of failing faith is much higher with bitcoin than with the US dollar because you can't pay taxes with it.
Quickfoot
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Re: Are bitcoins nonsense?

Post by Quickfoot »

I agree, I just think it's important for people to remember US government bonds and currency are not riskless or even particularly low risk as some people like to claim, they just have different risk that isn't likely to be highly correlated to other assets such as equities.

All it would take to devastate the value of bitcoin is for the EU or the US to forbid converting bitcoin to Euros or Dollars which is reasonably likely, especially if adoption increases. Other countries have already forbid the conversion or exchange of bitcoin and it had significant impact on bitcoin value.
Strayshot
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Location: New Mexico

Re: Are bitcoins nonsense?

Post by Strayshot »

The first post could have been a "yes" and ended there.

Bitcoin is a niche product primarily needed to facilitate large criminal transactions where cash is unwieldy outside of the reach of any regulatory body. The "exchange rate" will never stabilize and doesn't really need to as the criminals are worried less about the actual cost to facilitate the transaction via bitcoin and more about simply making the transaction. For an everyday honest person looking to facilitate a transaction, cryptocurrency adds no value.

The only reason I appreciate cryptocurrency and the criminals that support it is that is is a driving force in smaller and more efficient semiconductor fab in the GPU market and I like my games but don't like my computer to be a space heater.
ponyboy
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Re: Are bitcoins nonsense?

Post by ponyboy »

If you want to know the ins and outs of bitcoin then watch or listen to this podcast...Joe rogan experience $581 - andreas antonopoulos. Its from 2014.

https://www.youtube.com/watch?v=5wwbzwUXfgc
Markov
Posts: 32
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Re: Are bitcoins nonsense?

Post by Markov »

FIREchief wrote:A US dollar (or US treasury issue - just another form of paper IOU) is backed by the full faith and credit of the US government. I have no idea what is backing the "value" of a bitcoin.
+1

Bitcoins are reported as 1 Bitcoin = x dollars. So without equating a Bitcoin to the dollar, no one can tell you what a Bitcoin is worth or what it's true 'value' is. In other words, if Bitcoins are going to replace the dollar because the U.S. is going to implode, well, if that happens then Bitcoins are not going to have any value at all because there will not be any dollar to equate it's value. It's circular logic.
LRDave
Posts: 47
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Re: Are bitcoins nonsense?

Post by LRDave »

bberris wrote:
LRDave wrote:You've got to have something to pay ransomware with.....
I know you're kidding but there is a grain of truth to it. Ransom is a kind of tax (you don't want to pay, you have to pay), and taxes drive money.
I was not particularly kidding. The currency of the realm of ransomware is generally bitcoin.
Topic Author
knightrider
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Re: Are bitcoins nonsense?

Post by knightrider »

Valuethinker wrote: It may be cybercurrencies are going after the seigneurage pool. The potential they offer is to cut into the transaction costs (and the underlying error prone and expensive back office processes) that financial intermediaries charge.
The irony is that it takes Phds in Computer Science along-with complex supercomputers to manage bitcoins. This infrastructure is expensive . So bitcoins just replaces normal transaction costs with a new kind of expense.
DetroitRick
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Location: SE Michigan

Re: Are bitcoins nonsense?

Post by DetroitRick »

Far from nonsense, but a concept still in comparative infancy. It's future potential doesn't need to be judged just by its present state.

While it is certainly not as anonymous as cash (assuming folks using either alternative know what they are doing), it can serve some valuable purposes - facilitate fast payments across national borders (with very low costs) 365 days per year 24 hours/day, facilitate micro payments (think paying a few cents to read an article), give people with currency controls and radically unstable currencies an alternative to local currency (which is a VERY big deal in some parts of this world), and even function as a convenient day-to-day payment tool.

Fears related to criminal usage of crypto currencies are grossly exaggerated. Far more crime has been facilitated with conventional cash over human history. After all, money laundering is not rocket science, and cash can be highly anonymous. While all these crypto-currencies are somewhat (but not completely) anonymous, transactions points between buyer and seller are a totally different story. Plenty of criminals and tax evaders have used conventional dollars, so maybe I should avoid those too?

Possibly, for many of us, these crypto-currencies may just have another place alongside our conventional currency. Or maybe the block chain technology that underlies this is where the real value lies for other ledger-based applications. I don't know yet where this trend is going, but it's definitely got some potential and is something I will continue to watch closely. Actually I find it fascinating. I'd like to see the volatility decrease, though, before I use to any great extent. And I don't plan on using them as an investment tool - for the exact same reasons I don't dabble in fx trading (plus having a greater fear of hacking, at least now, with these cyrpto-currencies). But as a payment tool, I'll give it a definite "maybe".
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