Bitcoin Talk

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Bitcoin Talk

Post by Enganerd »

I just wanted to start a thread because there is interesting discussion regarding btc in the facebook libra thread (viewtopic.php?p=4605431#p4605431) but prudent correctly directed the thread posts to remain on topic with the OP. Disclaimer I am not a btc proponent and this is not related to the recent upward rally of btc, but I do find it interesting if you can get past the extreme takes on both sides. The [conjecture --admin LadyGeek] implying it will solve all of societies issues (ironically while making early speculators/minors ridiculously wealthy) and the "oh it is just a tulip bubble the USD has been fine for me" are not serious takes on the tech and potential. Here are some quotes from the thread mentioned above that I find interesting and would love to see the discussion continue in this more nuanced logical manner.
TomCat96 wrote: Thu Jun 20, 2019 5:02 am
Plz wrote: Wed Jun 19, 2019 11:43 pm I’ve always been confused with crypto currencies - maybe someone can help me understand.

Gold has value because it is rare and is an actual thing. It’s worth what someone is willing to pay for it, but it can also be used for other things. Intuitively I get this. It’s rarity and I supposeuses give it an intrinsic value.

The dollar used to be backed by gold but now it is not. However, it has value because the US government accepts tax payments in dollars. It has value because of this, as well as it gives you access to US goods, services, and capital markets. I understand that there academically could be inflation a la Zimbabwe, but the dollar is supported.

Crypto currencies have nothing collateralizing it. It’s worth what someone is willing to pay for it. My question is, beyond speculation and laundering money, WHY would someone prefer a bitcoin to a dollar?

There are literally hundreds (thousands?) of crypto currencies out there. Even if they’re worth $1, it’s value creation out of nowhere. It’s only worth something because someone is willing to pay for it. This seems circular and confuses me. At least with national currencies, governments assign value through tax collection.

Perhaps oversimplifying, crypto currencies seem like printing money to me. For free. Value from nothing. Sure, FB, JPM, etc lend credibility to their own crypto currencies...but what gives them the right to print money like this?

Not to mention...on what basis will the libra be tied to the basket of currencies? Just because they want it to be? Will FB allow redemption of libra without any stops? Could this create a “run” or cash flow issue?

I’m sure I got lost somewhere along the way. It couldn’t be this big if my understanding of it was accurate, right? No facetiousness, can someone please explain it to me?

Either way, let’s make boglecoin. What’s the downside?

I would say your understanding of what gives something value is too narrow, which is why the value of cryptocurrencies is eluding you. FIrst of all, don't dismiss demand due to speculation. Dismissing speculative demand because of a bias that it's not a good and proper demand is going to block your insight. Let's expand the definition of speculative demand for a second to shares of companies for which the Liabilities exceed Assets. By definition, as a shareholder, you own nothing. You as a shareholder own Equity, which is of course the difference between the Assets and Liabilities. If the Equity of a company is zero, or even negative, should the stock sell for zero? Clearly not. Stocks with negative equity do not sell for zero, under the speculation that they could return to positive value, and quickly. There are other reasons as well, but I don't want to get into that.

Let's look at your arguments alone. If the reason for the value of the US dollar is that the United States accepts dollars as payment in taxes, or if gold has value because someone is willing to pay something for it, then it is not any intrinsic factor which gives to these items, but rather structural factors--the acceptance by other parties which gives value to it.

In the same way if Bitcoin and its ilk were to gain legitimacy and acceptance because other institutions begin to accept it, then it should acquire value the same way.

What about competing cryptocurrencies? Let's go with what you said before. What's the difference between a dollar, and a piece of paper written on it that says 1$ Lord of the Exchequer, TomCat96 $1. Well for one, no one is going to accept my piece of paper for any system of transactions. What about the regular dollar? A dollar is not worth a dollar because of its fine art, or the piece of paper it's printed on, but because of the institutions and aggregate of people who are willing to accept it.

The value of a cryptocurrency then is similar. Bitcoin has a substantial advantage over your proposed boglecoin. Bitcoin was first. It has a logo, a large collection of developers committed to improving the technology (they are working on lightning network atm), a globally decentralized blockchain, global recognition of the name, a substantially large network of actors willing to accept it relative to your proposed boglecoin, and a market cap of 164B. What would it take for your boglecoin to get there?

It's not the intrinsic quality of bitcoin that makes it superior to your boglecoin, just as it's not the instrinsic value of the fine paper used by the US govt which makes the US dollar worth more than my idiot dollar. The value is the in network. That's something that your boglecoin doesn't have yet. But it's a real asset.

What makes the facebook platform valuable? Is it the intrinsic technology of allowing people to share cat pictures socially, or is it rather that billions of people already use it, the latter being a competitive advantage not easily replicated.

Let's talk about bitcoin as currency, or cryptocurrency as currencies. I think the people on this site get far too hung up on that.

This is how I believe they approach the analysis. Currency? That's like coin, bills, money. They have 40, 50, 60, 70 years of a preconception of what "currency" is. That bitcoin claims to be currency immediately invokes whether or not bitcoin fits in that preconception, that bucket, of what bitcoin is. If bitcoin fails to fit into that bucket, it's no good. It fails as a currency.

That conception is too narrow. It is stunted by its own biases.

Ether (ETH) for instance may not be a currency at all. Sure it's tradable. But so is gasoline. So are units of computing power or anything else standardized. ETH is a distributed computing platform. It might have intrinsic value in its ability to purchase computational cycles on a world computer. If you try to stuff ETH into a preconception of what a currency is, a preconception you learned at an early stage in your life and dismiss it because it fails to fit a narrow preconception, you block your own insight. ETH is clearly something different. What about proof of stake? If you collect enough ETH, you can actually obtain more ETH? Yes it's true. In lieu of mining, one might actually be able to obtain more ETH by owning ETH. Decred or DCR currently has a hybrid mining/proof of stake algorithm.

Think about what that means: there are local maxima of increasing marginal utility built intrinsically into the currency itself? That's not like any currency I've ever heard of.

The list goes on. What about a stablecoin? There's a few of them now, but we'll talk about Tether. Controversies aside, it turns out it's pretty costly to convert from cryptocurrencies to fiat currency. It causes taxable events, imposes major liabilities on exchanges which might let you perform those events, etc. At the same time cryptos are pretty damn volatile. There must be a way of trading into fiat without incurring the penalties of trading into fiat. Enter stable coins.
TomCat96 did a great job explaining crypto potential in this post. Here is how Plz later responded:
Plz wrote: Fri Jun 21, 2019 3:15 am This is really helpful, thank you for taking the time to help me understand. From what you wrote, this is what I think you’re saying: the value of crypto currencies come from speculation as well as network effects (including the ubiquity/ease of redemption, too).

May I follow up with a few more questions?

1) would you say the value in crypto currencies depends on circular logic? It’s valuable because there’s demand for it and there’s demand for it because it’s valuable? Where I get stuck is that with a crypto currency, there’s nothing that “protects” that circle. With dollars, the government is in there. With gold, well...there’s the actual gold itself. Even with magic cards, there’s trademarks, the game itself, and the paper it’s printed on.

2) if it indeed is circular, does it have some sort of “protection?” If yes, what? If no, why doesn’t this fact decimate it?

3) would you say creating a crypto currency is similar to printing money? For me, this seems like something that should be done very carefully and only by governments. Should anyone (not literally) be able to make their own crypto currency? And if it’s not like printing money, why not?
I like how Plz identified the circular logic of btc and why that is a concern. And this circular logic also makes me skeptical. Although I am not sure that gold escapes this same criticism just because it is a physical material. Gold is obviously priced at a higher valuation than it's industrial utility would warrant. As for jewelry/decoration is it really inherently more aesthetically appealing than other metals or is it the psychological effect of people associating it with value? On the btc side there are definitely math and tech enthusiasts that love it just because it works. It was a tech created to solve a problem https://en.wikipedia.org/wiki/Byzantine_fault and despite the crazy valuations it appears to remain effective. I am neither a math,tech, nor cryptography enthusiast but personally I find btc more interesting than gold. Which will hold more value going forward I have no idea but I am just saying I am not convinced that the circular logic of btc is fatal because it might be part of all means of exchange.

I hope others will continue to weigh in because it is honestly somewhat rare to find nuanced discussion of the potential for and measured skepticism of crypto.
cableguy
Posts: 167
Joined: Thu May 09, 2019 3:34 pm

Re: Bitcoin Talk

Post by cableguy »

I bought $5k of GBTC to get in on the crypto craze and it plummeted minutes after I purchased and it has never reached my purchase price since then! LOL. I know it was a crazy thing to do but I couldn't watch the run up anymore without being in the game. I still have it. Its crawling back. Buying something like that is very much out of character for me but I just had to do it. I still own it....and I'll own until they either shut the doors or I die and my kids can deal with it. I think there is a huge future in cryptos.....just not sure of timing, right investment(s), etc. Its way to early and wild west concerning that whole space. Facebook's recent crypto moves are validating the space.
User avatar
arcticpineapplecorp.
Posts: 6412
Joined: Tue Mar 06, 2012 9:22 pm

Re: Bitcoin Talk

Post by arcticpineapplecorp. »

i'm no gold bug (I own none) nor any cryptocurrency.

that being said, while gold (like any asset) is only worth what someone is willing to pay for it, it does have some utility, in that it is a metal that has conductive properties (i'm no scientist or engineer). Other metals may be cheaper/better conductors but I believe gold has much "higher corrosion resistance" which is why it's commonly used in electronic devices (source: https://www.google.com/search?client=fi ... +conductor)

bitcoin has no such utility unless it's going to replace payment systems currently in place. It could do this if it is more secure (it's clearly not despite all the praise of the blockchain, because of all the stealing of coin, etc) and/or if it was a quicker transaction than credit cards (it's not at present). Perhaps it will replace places like western union and be less costly over time (maybe it's less now?) here's more on fees, variable and other for coinbase: https://support.coinbase.com/customer/e ... isclosures

I like the notion of something backing something else, either through collateral or it can be exchanged for something else. For instance, even though we have a national debt that's close or equal to our GDP if all the loans were called in we would have two ways of paying back:
1. taxes could be raised
2. U.S. assets could be sold off or leased to those holding our debt

companies own assets (supplies, factories, materials) that can be sold off to others who will extract the value of those items.

conch shells were once used as currency. beads too (Manhattan anyone?). but most people don't use them to trade anymore.

the thing that's funny is that bitcoin is really at this point a currency that is exchanged for and by one's local currency. In other words, I can't buy whatever I want right now with bitcoin. So I am taking U.S. dollars to buy bitcoin, that I have to convert back into U.S. dollars to buy my (fill in the blank). That makes no sense to me. I haven't been convinced of how this currency will change my life from a consumer standpoint. So pretty much people buy it on the greater fool theory. Even John McAfee (of McAfee antivirus software) predicts bitcoin will be worth $1 million by the end of 2020 (or else he'll do something none of us really want to see): https://www.google.com/search?client=fi ... on+bitcoin

but we all know how well predictions turn out, right?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
User avatar
JoMoney
Posts: 9844
Joined: Tue Jul 23, 2013 5:31 am

Re: Bitcoin Talk

Post by JoMoney »

As for jewelry/decoration is it really inherently more aesthetically appealing than other metals
Nope, gold is gaudy.... and it's yellow, ew. :P
Silver, titanium, even aluminium, or stainless steel are all much better looking :D
... would you say creating a crypto currency is similar to printing money? For me, this seems like something that should be done very carefully and only by governments. Should anyone (not literally) be able to make their own crypto currency? And if it’s not like printing money, why not?
I pointed out in the other thread that there is a careful distinction between creating money , and printing currency. Most "money" is already electronic, and just about any bank can create money. When someone gets a loan, the bank creates that money and it's backed by the credit worthiness of the borrower.

There are many ironies and paradoxes to be found in the ideals of some of the crypto advocates. They tout the openness of it that can't be controlled by governments, but governments (or at least the better ones) operate at the will of the people, and the crypto-coins will also operate at the will of the people. Crypto-coin is built on a rules based algorithm, rules create a game where some will find dominant strategies that some others will find socially unacceptable (like ways to steal), the rules also become tyrannical when the dominant actors have control of the resources and by there position can oppress others from changing their relative position. What we've already seen happen in crypto-coin world is that some groups will "fork" the coin into a new one with new rules... some will stay on the old system, some will move to the new rules, and others will go out and start a new crypto-coin from scratch... and the more Balkanization that occurs, the more painful any of the coins will be to actually use as money.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
Watty
Posts: 20880
Joined: Wed Oct 10, 2007 3:55 pm

Re: Bitcoin Talk

Post by Watty »

I may be a bit of a simpleton but as far as I can see there are several reasons to be interested in Cryptocurrency;

1) As a speculation on the value of the cryptocurrencies vs the dollar.

2) As a stable store of value but they are far from stable.

3) As a good means of exchange, but we are not there yet. If it ever does develop into an superior means of exchange it will need to be easy to convert your dollars into cryptocurrency at a more or less stable exchange rate.

4) As a way to get around government laws/restrictions. In most parts of the world that would be for things like drugs or cyber ransom but in countries with strong currency controls that might be used for being able to get money out of the country.

5) Safety. With all the problems with lost keys and stolen money they are far from safe yet.

6) For micro currency exchanges. For example on a news web site they might charge you $0.02 to read an article and that would be worth it to you and the website could have a good business doing that.

None of that really exists yet for me except for the speculation so I do not own any.
User avatar
corn18
Posts: 1777
Joined: Fri May 22, 2015 6:24 am

Re: Bitcoin Talk

Post by corn18 »

#4 is the big use for BTC.
Don't do something, just stand there!
Jags4186
Posts: 5193
Joined: Wed Jun 18, 2014 7:12 pm

Re: Bitcoin Talk

Post by Jags4186 »

The most unique thing about gold is that it became universally valued by nearly all cultures independently. It’s value is ingrained in the human psyche. While the logical side of me has no desire to own gold I still get a grin on my face when I get to, as Warren Buffet likes to say, “fondle” gold.
User avatar
arcticpineapplecorp.
Posts: 6412
Joined: Tue Mar 06, 2012 9:22 pm

Re: Bitcoin Talk

Post by arcticpineapplecorp. »

just opened a snapple that I bought with U.S. Dollars (albeit borrowed from citibank until next month when it's due back) and read this:
"Real Fact" #86

Until the nineteenth century, solid blocks of tea were used as money in Siberia.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
User avatar
Forester
Posts: 1599
Joined: Sat Jan 19, 2019 2:50 pm
Location: UK

Re: Bitcoin Talk

Post by Forester »

My thought is that Bitcoin has a future as a speculative asset. The price could bounce around from $1k to $30k and the lottery ticket potential of this will sustain interest. So unlike Peter Schiff I don't think Bitcoin will go to zero - it has a "brand name" and kind of exists as a massive decentralised roulette wheel.
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Re: Bitcoin Talk

Post by Enganerd »

JoMoney wrote: Sat Jun 22, 2019 11:05 am
As for jewelry/decoration is it really inherently more aesthetically appealing than other metals
Nope, gold is gaudy.... and it's yellow, ew. :P
Silver, titanium, even aluminium, or stainless steel are all much better looking :D
I'm with you there :sharebeer
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Re: Bitcoin Talk

Post by Enganerd »

Watty wrote: Sat Jun 22, 2019 11:31 am I may be a bit of a simpleton but as far as I can see there are several reasons to be interested in Cryptocurrency;

1) As a speculation on the value of the cryptocurrencies vs the dollar.

2) As a stable store of value but they are far from stable.

3) As a good means of exchange, but we are not there yet. If it ever does develop into an superior means of exchange it will need to be easy to convert your dollars into cryptocurrency at a more or less stable exchange rate.

4) As a way to get around government laws/restrictions. In most parts of the world that would be for things like drugs or cyber ransom but in countries with strong currency controls that might be used for being able to get money out of the country.

5) Safety. With all the problems with lost keys and stolen money they are far from safe yet.

6) For micro currency exchanges. For example on a news web site they might charge you $0.02 to read an article and that would be worth it to you and the website could have a good business doing that.

None of that really exists yet for me except for the speculation so I do not own any.
corn18 wrote: Sat Jun 22, 2019 11:38 am #4 is the big use for BTC.

In response to #4 advocates like to point out how small the percentage of the population that actually lives in a country with a fair government operating at the will of the people. It will take a bit of intentional effort to see things from the perspective of the "unbanked" or the large populations that don't have the democratic western government systems. Then of course some argue further that even the U.S. has problems with the our financial system. There are rent seekers and such that use the financial system to socialize losses and while retaining the gains.

I can see logic in some arguments but others are plainly arguing in bad faith. I don't believe low predictable inflation is an intentional means of shifting wealth from working class to the investing elites. I also don't think a deflationary currency like bitcoin could be sustainable. It just seems necessary to have risk tied to reward in some manner in order to encourage productive use of capital. How many here would be funding people attempting productive tasks (investing) if they had risk free returns simply from holding their btc?
TomCat96
Posts: 1040
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin Talk

Post by TomCat96 »

Enganerd wrote: Sat Jun 22, 2019 9:54 am I just wanted to start a thread because there is interesting discussion regarding btc in the facebook libra thread (viewtopic.php?p=4605431#p4605431) but prudent correctly directed the thread posts to remain on topic with the OP. Disclaimer I am not a btc proponent and this is not related to the recent upward rally of btc, but I do find it interesting if you can get past the extreme takes on both sides. The [conjecture --admin LadyGeek] implying it will solve all of societies issues (ironically while making early speculators/minors ridiculously wealthy) and the "oh it is just a tulip bubble the USD has been fine for me" are not serious takes on the tech and potential. Here are some quotes from the thread mentioned above that I find interesting and would love to see the discussion continue in this more nuanced logical manner.
TomCat96 wrote: Thu Jun 20, 2019 5:02 am
Plz wrote: Wed Jun 19, 2019 11:43 pm I’ve always been confused with crypto currencies - maybe someone can help me understand.

Gold has value because it is rare and is an actual thing. It’s worth what someone is willing to pay for it, but it can also be used for other things. Intuitively I get this. It’s rarity and I supposeuses give it an intrinsic value.

The dollar used to be backed by gold but now it is not. However, it has value because the US government accepts tax payments in dollars. It has value because of this, as well as it gives you access to US goods, services, and capital markets. I understand that there academically could be inflation a la Zimbabwe, but the dollar is supported.

Crypto currencies have nothing collateralizing it. It’s worth what someone is willing to pay for it. My question is, beyond speculation and laundering money, WHY would someone prefer a bitcoin to a dollar?

There are literally hundreds (thousands?) of crypto currencies out there. Even if they’re worth $1, it’s value creation out of nowhere. It’s only worth something because someone is willing to pay for it. This seems circular and confuses me. At least with national currencies, governments assign value through tax collection.

Perhaps oversimplifying, crypto currencies seem like printing money to me. For free. Value from nothing. Sure, FB, JPM, etc lend credibility to their own crypto currencies...but what gives them the right to print money like this?

Not to mention...on what basis will the libra be tied to the basket of currencies? Just because they want it to be? Will FB allow redemption of libra without any stops? Could this create a “run” or cash flow issue?

I’m sure I got lost somewhere along the way. It couldn’t be this big if my understanding of it was accurate, right? No facetiousness, can someone please explain it to me?

Either way, let’s make boglecoin. What’s the downside?

I would say your understanding of what gives something value is too narrow, which is why the value of cryptocurrencies is eluding you. FIrst of all, don't dismiss demand due to speculation. Dismissing speculative demand because of a bias that it's not a good and proper demand is going to block your insight. Let's expand the definition of speculative demand for a second to shares of companies for which the Liabilities exceed Assets. By definition, as a shareholder, you own nothing. You as a shareholder own Equity, which is of course the difference between the Assets and Liabilities. If the Equity of a company is zero, or even negative, should the stock sell for zero? Clearly not. Stocks with negative equity do not sell for zero, under the speculation that they could return to positive value, and quickly. There are other reasons as well, but I don't want to get into that.

Let's look at your arguments alone. If the reason for the value of the US dollar is that the United States accepts dollars as payment in taxes, or if gold has value because someone is willing to pay something for it, then it is not any intrinsic factor which gives to these items, but rather structural factors--the acceptance by other parties which gives value to it.

In the same way if Bitcoin and its ilk were to gain legitimacy and acceptance because other institutions begin to accept it, then it should acquire value the same way.

What about competing cryptocurrencies? Let's go with what you said before. What's the difference between a dollar, and a piece of paper written on it that says 1$ Lord of the Exchequer, TomCat96 $1. Well for one, no one is going to accept my piece of paper for any system of transactions. What about the regular dollar? A dollar is not worth a dollar because of its fine art, or the piece of paper it's printed on, but because of the institutions and aggregate of people who are willing to accept it.

The value of a cryptocurrency then is similar. Bitcoin has a substantial advantage over your proposed boglecoin. Bitcoin was first. It has a logo, a large collection of developers committed to improving the technology (they are working on lightning network atm), a globally decentralized blockchain, global recognition of the name, a substantially large network of actors willing to accept it relative to your proposed boglecoin, and a market cap of 164B. What would it take for your boglecoin to get there?

It's not the intrinsic quality of bitcoin that makes it superior to your boglecoin, just as it's not the instrinsic value of the fine paper used by the US govt which makes the US dollar worth more than my idiot dollar. The value is the in network. That's something that your boglecoin doesn't have yet. But it's a real asset.

What makes the facebook platform valuable? Is it the intrinsic technology of allowing people to share cat pictures socially, or is it rather that billions of people already use it, the latter being a competitive advantage not easily replicated.

Let's talk about bitcoin as currency, or cryptocurrency as currencies. I think the people on this site get far too hung up on that.

This is how I believe they approach the analysis. Currency? That's like coin, bills, money. They have 40, 50, 60, 70 years of a preconception of what "currency" is. That bitcoin claims to be currency immediately invokes whether or not bitcoin fits in that preconception, that bucket, of what bitcoin is. If bitcoin fails to fit into that bucket, it's no good. It fails as a currency.

That conception is too narrow. It is stunted by its own biases.

Ether (ETH) for instance may not be a currency at all. Sure it's tradable. But so is gasoline. So are units of computing power or anything else standardized. ETH is a distributed computing platform. It might have intrinsic value in its ability to purchase computational cycles on a world computer. If you try to stuff ETH into a preconception of what a currency is, a preconception you learned at an early stage in your life and dismiss it because it fails to fit a narrow preconception, you block your own insight. ETH is clearly something different. What about proof of stake? If you collect enough ETH, you can actually obtain more ETH? Yes it's true. In lieu of mining, one might actually be able to obtain more ETH by owning ETH. Decred or DCR currently has a hybrid mining/proof of stake algorithm.

Think about what that means: there are local maxima of increasing marginal utility built intrinsically into the currency itself? That's not like any currency I've ever heard of.

The list goes on. What about a stablecoin? There's a few of them now, but we'll talk about Tether. Controversies aside, it turns out it's pretty costly to convert from cryptocurrencies to fiat currency. It causes taxable events, imposes major liabilities on exchanges which might let you perform those events, etc. At the same time cryptos are pretty damn volatile. There must be a way of trading into fiat without incurring the penalties of trading into fiat. Enter stable coins.
TomCat96 did a great job explaining crypto potential in this post. Here is how Plz later responded:
Plz wrote: Fri Jun 21, 2019 3:15 am This is really helpful, thank you for taking the time to help me understand. From what you wrote, this is what I think you’re saying: the value of crypto currencies come from speculation as well as network effects (including the ubiquity/ease of redemption, too).

May I follow up with a few more questions?

1) would you say the value in crypto currencies depends on circular logic? It’s valuable because there’s demand for it and there’s demand for it because it’s valuable? Where I get stuck is that with a crypto currency, there’s nothing that “protects” that circle. With dollars, the government is in there. With gold, well...there’s the actual gold itself. Even with magic cards, there’s trademarks, the game itself, and the paper it’s printed on.

2) if it indeed is circular, does it have some sort of “protection?” If yes, what? If no, why doesn’t this fact decimate it?

3) would you say creating a crypto currency is similar to printing money? For me, this seems like something that should be done very carefully and only by governments. Should anyone (not literally) be able to make their own crypto currency? And if it’s not like printing money, why not?
I like how Plz identified the circular logic of btc and why that is a concern. And this circular logic also makes me skeptical. Although I am not sure that gold escapes this same criticism just because it is a physical material. Gold is obviously priced at a higher valuation than it's industrial utility would warrant. As for jewelry/decoration is it really inherently more aesthetically appealing than other metals or is it the psychological effect of people associating it with value? On the btc side there are definitely math and tech enthusiasts that love it just because it works. It was a tech created to solve a problem https://en.wikipedia.org/wiki/Byzantine_fault and despite the crazy valuations it appears to remain effective. I am neither a math,tech, nor cryptography enthusiast but personally I find btc more interesting than gold. Which will hold more value going forward I have no idea but I am just saying I am not convinced that the circular logic of btc is fatal because it might be part of all means of exchange.

I hope others will continue to weigh in because it is honestly somewhat rare to find nuanced discussion of the potential for and measured skepticism of crypto.
I wrote a very long follow up post to Plz, answering 3 questions which unfortunately got deleted as offtopic. I did not save a copy of the post.

Unfortunately I do not have time to repeat the entire substantive post, but I can quickly summarize my answer to the three questions.

1. It seems circular. But network effects are circular in logic. Consider the same circular logic question when it comes to facebook, or any other platform whose value grows as more people enter into it. A social network of one is theoretically worthless. How can something worthless gain traction? The value snowballs over time.

2. Yes it has plenty of protection. Since we covered network of users, let's look at 2 other major factors at how Bitcoin is "entrenched".
a) Network of developers working to improve bitcoin b) Miners. You need developers to maintain the network, to improve the network. You need miners to protect your network.

Bitcoin: 1 block per 10 minutes, 6 blocks power hour. Currently Block Reward: 12.5BTC per new block mined. Currently financial inventive to miners for each block mined alone: ~$125,000 every 10 minutes.(136k right now) Such a large financial reward has incentivized miners to allocate massive computing power to mining BTC. What does mining do? It protects the network. How?

Mining makes it financially/practically/ computationally infeasible for a single entity to take over the network. How would they take over the network? Answer: 51% attack. If any user entity is able to obtain 51% of the computational hash power of the network, they can control the blockchain. Why is that bad? It allows double spending. It will quickly ruin faith in your currency.

Again, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot. In this case, based on today's market value bitcoin is offering 19.62 MIllion USD per day of financial incentive to miners, not counting transaction costs. What do you offer boglecoin? The entrenchment of BTC is very real with those numbers. For that reason, merely replicating the bitcoin codebase does NOT produce a product on equal standing with bitcoin.

3. Is crypto like printing money? In the case of bitcoin no. It too closely resembles fair exchange for value. In the case of other coins you have to mine? Generally No. Fair exchange for value.

In the case of coins with a significant pre-mine. Possibly.

In the case of stablecoins? examples. Tether, USDC, Libra. Quick answer: possibly.

All stablecoins use blockchain. Ignore that. Unlike bitcoin, their blockchains are controlled by a central authority. That means they control their stablecoins. In theory it shouldnt be like printing money because the stable coins are backed by something. In reality, it is possible for the stablecoins to appear like printing money from thin air because the central authority controls the blockchain. In the case of tether, they closed themselves to audit, ceased accepting redemptions, and more. Rumor was they were creating tether out of thin air and using it to inflate crypto prices.

See this excellent post by Hawkeye in the other thread.
HawkeyePierce wrote: Tue Apr 09, 2019 10:32 pm Cryptocurrency prices are *massively* manipulated. The ongoing Tether scam is used to pump-and-dump in the hope of duping unsuspecting retail investors.

For those not familiar with it, Tether is a service that claims to provide a fiat-backed "stablecoin" where 1 coin is always worth 1 US dollar (or whatever real currency they pick). The largest is the USDT coin (US dollar Tethers). Tether claims they have 100% reserve but has never proven it and fired their auditor. Crypto traders use it to hold pseudodollars while skirting US law.

Since Tether has never offered proof of their reserves, they can mine more USDT whenever they want. The largest exchange using Tether is Bitfinex—they share common owners. Bitfinex takes newly-mined Tethers and lets people buy USDT using Bitcoin or Ethereum. At that point Tether has exchanged a worthless USDT coin for BTC or ETH and also driven up the price.

Bitfinex lost their banking licenses long ago. There are tons of stories on Twitter and Reddit of people trying to redeem their USDT tokens for real dollars and finding that withdrawals are impossible. There's no reason to believe they have real USD in a bank account to back USDT, but as long as crypto prices kept climbing they were able to pull off their scam because people were keeping their crypto and didn't want fiat currency.

These exchanges also allow market manipulation tactics like tape painting and wash trading. Some will literally let you fill your own orders. Add all this up and you have a recipe for huge price manipulation. Bitfinex and Tether drive up the price, watch unsuspecting investors pile in as they see another run starting, then dump their BTC and ETH.

(There's another aspect of this scam that enables wide-scale money laundering since these exchanges don't have any KYC policies or anti-money laundering controls, but that's a whole other topic)

https://hackernoon.com/the-curious-tale ... 0031eead87
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Re: Bitcoin Talk

Post by Enganerd »

TomCat96 wrote: Sat Jun 22, 2019 3:18 pm I wrote a very long follow up post to Plz, answering 3 questions which unfortunately got deleted as offtopic. I did not save a copy of the post.

Unfortunately I do not have time to repeat the entire substantive post, but I can quickly summarize my answer to the three questions.

1. It seems circular. But network effects are circular in logic. Consider the same circular logic question when it comes to facebook, or any other platform whose value grows as more people enter into it. A social network of one is theoretically worthless. How can something worthless gain traction? The value snowballs over time.

2. Yes it has plenty of protection. Since we covered network of users, let's look at 2 other major factors at how Bitcoin is "entrenched".
a) Network of developers working to improve bitcoin b) Miners. You need developers to maintain the network, to improve the network. You need miners to protect your network.

Bitcoin: 1 block per 10 minutes, 6 blocks power hour. Currently Block Reward: 12.5BTC per new block mined. Currently financial inventive to miners for each block mined alone: ~$125,000 every 10 minutes.(136k right now) Such a large financial reward has incentivized miners to allocate massive computing power to mining BTC. What does mining do? It protects the network. How?

Mining makes it financially/practically/ computationally infeasible for a single entity to take over the network. How would they take over the network? Answer: 51% attack. If any user entity is able to obtain 51% of the computational hash power of the network, they can control the blockchain. Why is that bad? It allows double spending. It will quickly ruin faith in your currency.

Again, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot. In this case, based on today's market value bitcoin is offering 19.62 MIllion USD per day of financial incentive to miners, not counting transaction costs. What do you offer boglecoin? The entrenchment of BTC is very real with those numbers. For that reason, merely replicating the bitcoin codebase does NOT produce a product on equal standing with bitcoin.

3. Is crypto like printing money? In the case of bitcoin no. It too closely resembles fair exchange for value. In the case of other coins you have to mine? Generally No. Fair exchange for value.

In the case of coins with a significant pre-mine. Possibly.

In the case of stablecoins? examples. Tether, USDC, Libra. Quick answer: possibly.

All stablecoins use blockchain. Ignore that. Unlike bitcoin, their blockchains are controlled by a central authority. That means they control their stablecoins. In theory it shouldnt be like printing money because the stable coins are backed by something. In reality, it is possible for the stablecoins to appear like printing money from thin air because the central authority controls the blockchain. In the case of tether, they closed themselves to audit, ceased accepting redemptions, and more. Rumor was they were creating tether out of thin air and using it to inflate crypto prices.
Sorry to hear your more thorough reply was deleted. I am not tech savvy but maybe it is possible for moderators to recover deleted posts and we can ask prudent to repost it in this thread.

Regardless I appreciate your input, you clearly explain the network effect and the advantages btc has because it has grown immensely and has been around for over 10 years now. Some say each year it remains relevant, without a failure in function, it is earning more respect and exposure. And also you have not to my knowledge made in predictions/claims about btc or the problems with the fiat nature of USD that seem plainly in bad faith to influence people. A pet peeve of mine with most pro btc advocates, is that they seem to make emotional/narrative cases for the greatness of btc and/or evils of centralized fiat currency. These cases, if you analyze critically are either untrue, greatly exaggerated, or baseless predictions. Couple that sensationalism with the fact that if you take them for their word, they hold plenty of btc, so they obviously have incentive to persuade others to buy, makes it hard to read their content.
User avatar
Sandtrap
Posts: 11850
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Bitcoin Talk

Post by Sandtrap »

What is the measurable correlation between Bitcoin/Crypto-Currency; the market, the economy, inflation, interest rates, and the strength of the dollar (USA)??
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
LadyGeek
Site Admin
Posts: 67130
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Bitcoin Talk

Post by LadyGeek »

This is a "no politics" forum. I removed an off-topic comment. As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
Additionally, this is an investing forum. Please focus on the investing aspects that can be applied directly to you as an investor, i.e. it is "actionable".

Those who have followed this forum for a few years will recall the numerous contentious discussions we've had answering the question "Should I hold gold as an investment?". Bitcoin seems to have replaced gold from that perspective. Please state your concerns in a civil, factual manner. Conjecture on economic, political, or tax policy (of any country) is off-topic.

Update: I removed an additional post. Also off-topic is conspiracy theory.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
LadyGeek
Site Admin
Posts: 67130
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Bitcoin Talk

Post by LadyGeek »

TomCat96 wrote: Sat Jun 22, 2019 3:18 pm I wrote a very long follow up post to Plz, answering 3 questions which unfortunately got deleted as offtopic. I did not save a copy of the post.
Enganerd wrote: Sun Jun 23, 2019 7:04 am Sorry to hear your more thorough reply was deleted. I am not tech savvy but maybe it is possible for moderators to recover deleted posts and we can ask prudent to repost it in this thread.
Yes, moderators can recover the deleted posts. There's no need to ask prudent, as I PM'd the post to TomCat96.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
TomCat96
Posts: 1040
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin Talk

Post by TomCat96 »

Sandtrap wrote: Sun Jun 23, 2019 7:27 am What is the measurable correlation between Bitcoin/Crypto-Currency; the market, the economy, inflation, interest rates, and the strength of the dollar (USA)??
Between Bitcoin/Cryptocurrency and the market, the economy, and everything? Completely unknown.
In fact, a few investigations have shown bitcoin and cryptocurrency prices to he heavily manipulated.
https://modernconsensus.com/cryptocurre ... twise-sec/

Between Bitcoin(btc) and Other Cryptocurrencies? "Bitcoin Dominance" as I believe it is known is the ratio of the market cap of bitcoin to the entire market cap of the crypto market. Many "cryptoheads" think of their cryptos not in terms of fiat currency (they may hail from different parts of the globe), but rather in terms of btc. Based on my observations, btc seems to act as a safe haven. As volatile as bitcoin is, it is less volatile and considered "safer" than altcoins--falling less when times are bad.

Between bitcoin and inflation? Unknown. However, the [(removed) --admin LadyGeek] slant of bitcoin believes an argument is to be had in that bitcoin's halving of the block reward will eventually slow down the growth of the supply of new bitcoin below the inflation rate. They believe this is an argument that bitcoin will rise in terms of fiat.

At the next halving, bitcoin's inflation rate will drop to about 1.7%
It will continue to drop from there.

This slant of thinking is not a new thing. In fact, it was literally written into bitcoin. The Genesis Block, the first block of the bitcoin blockchain, mined by Satoshi Nakamoto contained the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", which is considered a remark on western banking systems.
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Re: Bitcoin Talk

Post by Enganerd »

Enganerd wrote: Sat Jun 22, 2019 2:07 pm In response to #4 advocates like to point out how small the percentage of the population that actually lives in a country with a fair government operating at the will of the people. It will take a bit of intentional effort to see things from the perspective of the "unbanked" or the large populations that don't have the democratic western government systems. Then of course some argue further that even the U.S. has problems with the our financial system. There are rent seekers and such that use the financial system to socialize losses and while retaining the gains.

I can see logic in some arguments but others are plainly arguing in bad faith. I don't believe low predictable inflation is an intentional means of shifting wealth from working class to the investing elites. I also don't think a deflationary currency like bitcoin could be sustainable. It just seems necessary to have risk tied to reward in some manner in order to encourage productive use of capital. How many here would be funding people attempting productive tasks (investing) if they had risk free returns simply from holding their btc?

Here is an article from the Chief Strategy Officer of Human Rights Foundation (don't know anything specific about this foundation but it appears to be an genuine organization) that helps explain some potential that might be new to some bogleheads.

https://medium.com/@alexgladstein/a-hum ... 0e6760ee80

His opinion on moderate inflation still strikes me as extreme but he makes logical points about decentralized currency having real benefits to large portions of the global population. Here is a quote from the article in which he highlights the humanitarian potential of bitcoin. Basically with bitcoin you can give aid directly to a person in need anywhere in the country if they have the knowledge (free to learn online) and internet access.

"The greatest potential that Bitcoin has is to help the most vulnerable on this planet, those without bank accounts, identities, or access to the financial system. Now, with just a phone and an internet connection, anyone can receive bitcoin from anyone else in the world, in minutes, for a small fee, with no possibility of censorship or seizure, without needing to ask permission from anyone, and without needing to prove an identity."
User avatar
Sandtrap
Posts: 11850
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Bitcoin Talk

Post by Sandtrap »

Enganerd wrote: Tue Jun 25, 2019 7:14 pm
Enganerd wrote: Sat Jun 22, 2019 2:07 pm In response to #4 advocates like to point out how small the percentage of the population that actually lives in a country with a fair government operating at the will of the people. It will take a bit of intentional effort to see things from the perspective of the "unbanked" or the large populations that don't have the democratic western government systems. Then of course some argue further that even the U.S. has problems with the our financial system. There are rent seekers and such that use the financial system to socialize losses and while retaining the gains.

I can see logic in some arguments but others are plainly arguing in bad faith. I don't believe low predictable inflation is an intentional means of shifting wealth from working class to the investing elites. I also don't think a deflationary currency like bitcoin could be sustainable. It just seems necessary to have risk tied to reward in some manner in order to encourage productive use of capital. How many here would be funding people attempting productive tasks (investing) if they had risk free returns simply from holding their btc?

Here is an article from the Chief Strategy Officer of Human Rights Foundation (don't know anything specific about this foundation but it appears to be an genuine organization) that helps explain some potential that might be new to some bogleheads.

https://medium.com/@alexgladstein/a-hum ... 0e6760ee80

His opinion on moderate inflation still strikes me as extreme but he makes logical points about decentralized currency having real benefits to large portions of the global population. Here is a quote from the article in which he highlights the humanitarian potential of bitcoin. Basically with bitcoin you can give aid directly to a person in need anywhere in the country if they have the knowledge (free to learn online) and internet access.

"The greatest potential that Bitcoin has is to help the most vulnerable on this planet, those without bank accounts, identities, or access to the financial system. Now, with just a phone and an internet connection, anyone can receive bitcoin from anyone else in the world, in minutes, for a small fee, with no possibility of censorship or seizure, without needing to ask permission from anyone, and without needing to prove an identity."
A thought.
Doesn't the very nature of this open the doors to predatorial behavior without accountability and transparency?
Much like the "payday loan" and "pawn shop loan" industry preys on it's customers who have nowhere else to turn?
People that are the most vulnerable and with the least means?

j
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
HomerJ
Posts: 15308
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bitcoin Talk

Post by HomerJ »

TomCat96 wrote: Sat Jun 22, 2019 3:18 pmAgain, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot.

Does it?

AOL and MySpace were first too.

So was the Netscape browser.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
TomCat96
Posts: 1040
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin Talk

Post by TomCat96 »

HomerJ wrote: Tue Jun 25, 2019 7:31 pm
TomCat96 wrote: Sat Jun 22, 2019 3:18 pmAgain, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot.

Does it?

AOL and MySpace were first too.

So was the Netscape browser.

Is that a counter argument to say that being first doesn't count in business?

I'll make it more concrete. 12.5btc per block, 1 block per 10 mins, 6 blocks an hour, 24 hours a day. $12448.79 per btc at this moment. The bitcoin network is paying a lower bound of $22,407,822 per day to maintain it's network to the miners. (I did not count collected transaction fees)

That is what being first means in this case. That is the difference between a boglehead making a random coin, and bitcoin at this moment. That is part of bitcoin's current entrenchment at this exact moment. That is what I meant about being first.
Topic Author
Enganerd
Posts: 206
Joined: Wed Apr 15, 2015 8:22 pm

Re: Bitcoin Talk

Post by Enganerd »

Sandtrap wrote: Tue Jun 25, 2019 7:23 pm
Enganerd wrote: Tue Jun 25, 2019 7:14 pm
Enganerd wrote: Sat Jun 22, 2019 2:07 pm In response to #4 advocates like to point out how small the percentage of the population that actually lives in a country with a fair government operating at the will of the people. It will take a bit of intentional effort to see things from the perspective of the "unbanked" or the large populations that don't have the democratic western government systems. Then of course some argue further that even the U.S. has problems with the our financial system. There are rent seekers and such that use the financial system to socialize losses and while retaining the gains.

I can see logic in some arguments but others are plainly arguing in bad faith. I don't believe low predictable inflation is an intentional means of shifting wealth from working class to the investing elites. I also don't think a deflationary currency like bitcoin could be sustainable. It just seems necessary to have risk tied to reward in some manner in order to encourage productive use of capital. How many here would be funding people attempting productive tasks (investing) if they had risk free returns simply from holding their btc?

Here is an article from the Chief Strategy Officer of Human Rights Foundation (don't know anything specific about this foundation but it appears to be an genuine organization) that helps explain some potential that might be new to some bogleheads.

https://medium.com/@alexgladstein/a-hum ... 0e6760ee80

His opinion on moderate inflation still strikes me as extreme but he makes logical points about decentralized currency having real benefits to large portions of the global population. Here is a quote from the article in which he highlights the humanitarian potential of bitcoin. Basically with bitcoin you can give aid directly to a person in need anywhere in the country if they have the knowledge (free to learn online) and internet access.

"The greatest potential that Bitcoin has is to help the most vulnerable on this planet, those without bank accounts, identities, or access to the financial system. Now, with just a phone and an internet connection, anyone can receive bitcoin from anyone else in the world, in minutes, for a small fee, with no possibility of censorship or seizure, without needing to ask permission from anyone, and without needing to prove an identity."
A thought.
Doesn't the very nature of this open the doors to predatorial behavior without accountability and transparency?
Much like the "payday loan" and "pawn shop loan" industry preys on it's customers who have nowhere else to turn?
People that are the most vulnerable and with the least means?

j
I agree to a degree. I tend to see both sides of issues to a crippling degree and therefore usually do not hold strong opinions. If I wanted to make an anti-btc argument from the perspective of a U.S. citizen I would site examples in history of the vulnerable with the least means being taken advantage of by professional hucksters and the regulation that followed and how effective it was in decreasing specific scams. If I wanted to make a pro bictcoin case I would provide examples of the centralizing of power lead to a power imbalance which lead to abuse of those not in power. For example imagine a government that has direct control of the financial system. They would have power over the markets, media and etc. The common citizen would have little power and would likely be massively ill informed. Because it any media company producing content that is not pro-state might have financial issues.

I have heard Gladstein talk about how using crypto to give directly to those in need in Africa helps side step bad actors in corrupt regions. Often time aid is stolen or used as political leverage. With bitcoin they can give directly to anyone with knowledge (free to learn online) and internet access. However, I am not sure how protected those people would be when they exchange their btc into currency to buy necessities.
User avatar
HomerJ
Posts: 15308
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bitcoin Talk

Post by HomerJ »

TomCat96 wrote: Wed Jun 26, 2019 4:59 am
HomerJ wrote: Tue Jun 25, 2019 7:31 pm
TomCat96 wrote: Sat Jun 22, 2019 3:18 pmAgain, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot.

Does it?

AOL and MySpace were first too.

So was the Netscape browser.

Is that a counter argument to say that being first doesn't count in business?

I'll make it more concrete. 12.5btc per block, 1 block per 10 mins, 6 blocks an hour, 24 hours a day. $12448.79 per btc at this moment. The bitcoin network is paying a lower bound of $22,407,822 per day to maintain it's network to the miners. (I did not count collected transaction fees)

That is what being first means in this case. That is the difference between a boglehead making a random coin, and bitcoin at this moment. That is part of bitcoin's current entrenchment at this exact moment. That is what I meant about being first.
There was a point in time where MySpace was making/spending millions too, and Facebook had two users.

Bitcoin doesn't work to buy a cup of coffee. Bitcoin has a branding bonus by being first AND a branding problem by being plagued by scams and criminals.

If a new blockchain coin comes along that can actually be used to buy a cup of coffee, AND has some protection against being scammed, bitcoin may drop in value.

I don't know what's going to happen. Being first is indeed useful. But it doesn't mean you're guaranteed to win.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
TomCat96
Posts: 1040
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin Talk

Post by TomCat96 »

HomerJ wrote: Wed Jun 26, 2019 12:16 pm
TomCat96 wrote: Wed Jun 26, 2019 4:59 am
HomerJ wrote: Tue Jun 25, 2019 7:31 pm
TomCat96 wrote: Sat Jun 22, 2019 3:18 pmAgain, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot.

Does it?

AOL and MySpace were first too.

So was the Netscape browser.

Is that a counter argument to say that being first doesn't count in business?

I'll make it more concrete. 12.5btc per block, 1 block per 10 mins, 6 blocks an hour, 24 hours a day. $12448.79 per btc at this moment. The bitcoin network is paying a lower bound of $22,407,822 per day to maintain it's network to the miners. (I did not count collected transaction fees)

That is what being first means in this case. That is the difference between a boglehead making a random coin, and bitcoin at this moment. That is part of bitcoin's current entrenchment at this exact moment. That is what I meant about being first.
There was a point in time where MySpace was making/spending millions too, and Facebook had two users.

Bitcoin doesn't work to buy a cup of coffee. Bitcoin has a branding bonus by being first AND a branding problem by being plagued by scams and criminals.

If a new blockchain coin comes along that can actually be used to buy a cup of coffee, AND has some protection against being scammed, bitcoin may drop in value.

I don't know what's going to happen. Being first is indeed useful. But it doesn't mean you're guaranteed to win.

I agree. None of what I wrote has any bearing on the actual merits of bitcoin itself, which is still debatable.

At least in the other thread however, there seems to be this idea that bitcoin should fail because anyone can create their own cryptocurrency. At this point, given Bitcoin's network effects, which appears to be substantial at 22M/day, bitcoin's competition from other currencies is no longer a sufficient reason as to why bitcoin will fail.

On coinmarketcap, there are about 2200 cryptocurrencies. These altcoins, which do have a more colorful name I wont repeat here, compete more with themselves than bitcoin. Everyone's had the idea they could create their own cryptocurrency and jump onto the bandwagon. Far from being boglehead conjecture, many many have gone and tried to do it. If I tried to create Tomcat-coin today, the biggest hurdle would be outcompeting other junk coins rather than being accorded equal standing with bitcoin.

Admittedly, this was not always the case: Litecoin being a clone of bitcoin, and dogecoin in particular, which has been the only persistent high market cap jokecoin remaining. The persistence of dogecoin is itself an interesting phenomena that has been debated within the crypto community. I haven't explored the technical merits or the developer community of the joke currency, dogecoin, but people say it's the most supportive and least toxic community within the cryptosphere.

Nor is any of this to say that Bitcoin won't be superceded by another currency which comes along. It's not impossible, but they have to defeat the degree of entrenchment bitcoin already has.

I still maintain that the biggest threat to bitcoin is not other cryptocurrencies, but it's lack of scalability. Look at crypto for the past 15 months. What did the market do?

It's not as if bitcoin crashed and another cryptocurrency ascended to its throne. No, the entire set of 2200 crashed mightily. I don't know of a single currency that flourished during that time. It's not really other cryptocurrencies that are going to threaten bitcoin. It's the inherent limitations in the tech itself which remains the biggest hurdle.
fsh71
Posts: 91
Joined: Mon Jun 04, 2018 3:03 pm

Re: Bitcoin Talk

Post by fsh71 »

arcticpineapplecorp. wrote: Sat Jun 22, 2019 10:40 am i'm no gold bug (I own none) nor any cryptocurrency.

that being said, while gold (like any asset) is only worth what someone is willing to pay for it, it does have some utility, in that it is a metal that has conductive properties (i'm no scientist or engineer). Other metals may be cheaper/better conductors but I believe gold has much "higher corrosion resistance" which is why it's commonly used in electronic devices (source: https://www.google.com/search?client=fi ... +conductor)

bitcoin has no such utility unless it's going to replace payment systems currently in place. It could do this if it is more secure (it's clearly not despite all the praise of the blockchain, because of all the stealing of coin, etc) and/or if it was a quicker transaction than credit cards (it's not at present). Perhaps it will replace places like western union and be less costly over time (maybe it's less now?) here's more on fees, variable and other for coinbase: https://support.coinbase.com/customer/e ... isclosures

I like the notion of something backing something else, either through collateral or it can be exchanged for something else. For instance, even though we have a national debt that's close or equal to our GDP if all the loans were called in we would have two ways of paying back:
1. taxes could be raised
2. U.S. assets could be sold off or leased to those holding our debt

companies own assets (supplies, factories, materials) that can be sold off to others who will extract the value of those items.

conch shells were once used as currency. beads too (Manhattan anyone?). but most people don't use them to trade anymore.

the thing that's funny is that bitcoin is really at this point a currency that is exchanged for and by one's local currency. In other words, I can't buy whatever I want right now with bitcoin. So I am taking U.S. dollars to buy bitcoin, that I have to convert back into U.S. dollars to buy my (fill in the blank). That makes no sense to me. I haven't been convinced of how this currency will change my life from a consumer standpoint. So pretty much people buy it on the greater fool theory. Even John McAfee (of McAfee antivirus software) predicts bitcoin will be worth $1 million by the end of 2020 (or else he'll do something none of us really want to see): https://www.google.com/search?client=fi ... on+bitcoin

but we all know how well predictions turn out, right?

I read an interesting thought experiment posed by none other than the creator of bitcoin himself, Satoshi Nakamoto, back in 2010.

It goes like this (quoting Satoshi):
As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
- boring grey in colour
- not a good conductor of electricity
- not particularly strong, but not ductile or easily malleable either
- not useful for any practical or ornamental purpose

and one special, magical property:
- can be transported over a communications channel

If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.

Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it.

I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something.

(I'm using the word scarce here to only mean limited potential supply)
Source: https://bitcointalk.org/index.php?topic ... 5#msg11405

It's hard to argue, in my opinion, that the above hypothetical metal would not have value given it's two redeeming properties of transmissiblity & scarcity. I think this is the value proposition for bitcoin as a commodity.
Gufomel
Posts: 556
Joined: Sat Feb 14, 2015 9:52 pm

Re: Bitcoin Talk

Post by Gufomel »

There was a drop from $14k to $12k in a matter of seconds about an hour ago. Supposedly one person sold 8,000 bitcoin for about $100,000,000.

Stable hold of value 😁
User avatar
arcticpineapplecorp.
Posts: 6412
Joined: Tue Mar 06, 2012 9:22 pm

Re: Bitcoin Talk

Post by arcticpineapplecorp. »

fsh71 wrote: Wed Jun 26, 2019 3:25 pm
arcticpineapplecorp. wrote: Sat Jun 22, 2019 10:40 am i'm no gold bug (I own none) nor any cryptocurrency.

that being said, while gold (like any asset) is only worth what someone is willing to pay for it, it does have some utility, in that it is a metal that has conductive properties (i'm no scientist or engineer). Other metals may be cheaper/better conductors but I believe gold has much "higher corrosion resistance" which is why it's commonly used in electronic devices (source: https://www.google.com/search?client=fi ... +conductor)

bitcoin has no such utility unless it's going to replace payment systems currently in place. It could do this if it is more secure (it's clearly not despite all the praise of the blockchain, because of all the stealing of coin, etc) and/or if it was a quicker transaction than credit cards (it's not at present). Perhaps it will replace places like western union and be less costly over time (maybe it's less now?) here's more on fees, variable and other for coinbase: https://support.coinbase.com/customer/e ... isclosures

I like the notion of something backing something else, either through collateral or it can be exchanged for something else. For instance, even though we have a national debt that's close or equal to our GDP if all the loans were called in we would have two ways of paying back:
1. taxes could be raised
2. U.S. assets could be sold off or leased to those holding our debt

companies own assets (supplies, factories, materials) that can be sold off to others who will extract the value of those items.

conch shells were once used as currency. beads too (Manhattan anyone?). but most people don't use them to trade anymore.

the thing that's funny is that bitcoin is really at this point a currency that is exchanged for and by one's local currency. In other words, I can't buy whatever I want right now with bitcoin. So I am taking U.S. dollars to buy bitcoin, that I have to convert back into U.S. dollars to buy my (fill in the blank). That makes no sense to me. I haven't been convinced of how this currency will change my life from a consumer standpoint. So pretty much people buy it on the greater fool theory. Even John McAfee (of McAfee antivirus software) predicts bitcoin will be worth $1 million by the end of 2020 (or else he'll do something none of us really want to see): https://www.google.com/search?client=fi ... on+bitcoin

but we all know how well predictions turn out, right?

I read an interesting thought experiment posed by none other than the creator of bitcoin himself, Satoshi Nakamoto, back in 2010.

It goes like this (quoting Satoshi):
As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
- boring grey in colour
- not a good conductor of electricity
- not particularly strong, but not ductile or easily malleable either
- not useful for any practical or ornamental purpose

and one special, magical property:
- can be transported over a communications channel

If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.

Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it.

I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something.

(I'm using the word scarce here to only mean limited potential supply)
Source: https://bitcointalk.org/index.php?topic ... 5#msg11405

It's hard to argue, in my opinion, that the above hypothetical metal would not have value given it's two redeeming properties of transmissiblity & scarcity. I think this is the value proposition for bitcoin as a commodity.
but the two parts you mention aren't a certainty:
1. if the electric grid goes down (terrorist wise or other) or internet connection/satelite transmission disrupted (?) then there may be difficulties transmitting money (yes I know cellular is wireless, but eventually even cel phones requires a charge, perhaps gas generator could be helpful here...requires prepper mentality, why not just stockpile food, water, guns and ammo and toilet paper?).

2. the number of bitcoins now stands at 21 million I believe (once all are mined). But there have been numerous articles (and I actually learned about this at bogleheads) that explains that that amount of bitcoins can be further broken up if enough parties agree. So there goes the scarcity if it can keep getting broken down into more smaller parts.

just some thoughts.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
fsh71
Posts: 91
Joined: Mon Jun 04, 2018 3:03 pm

Re: Bitcoin Talk

Post by fsh71 »

arcticpineapplecorp. wrote: Wed Jun 26, 2019 4:52 pm
but the two parts you mention aren't a certainty:
1. if the electric grid goes down (terrorist wise or other) or internet connection/satelite transmission disrupted (?) then there may be difficulties transmitting money (yes I know cellular is wireless, but eventually even cel phones requires a charge, perhaps gas generator could be helpful here...requires prepper mentality, why not just stockpile food, water, guns and ammo and toilet paper?).

2. the number of bitcoins now stands at 21 million I believe (once all are mined). But there have been numerous articles (and I actually learned about this at bogleheads) that explains that that amount of bitcoins can be further broken up if enough parties agree. So there goes the scarcity if it can keep getting broken down into more smaller parts.

just some thoughts.
To your points:

1. Sure, I would never argue that there aren't hypothetical externalities that could negatively impact bitcoin's transmissiblity. It is a robust and anti-fragile system, however, and can be segmented / completely brought down for a period of time, and will recover through blockchain reorganizations. None of this means it's transmissibility doesn't have economic value, however. Does the internet not have economic value because it could theoretically be brought down?

2. Yes, bitcoin is a protocol based on consensus, so if a majority of the economy decided to increase the supply, this could happen. Literally any change to the protocol can be made if a majority of the economy agrees. This would, however, require a majority of the stakeholders to agree to act against their own financial interests and dilute their own share of the pie. If we want to allow hypotheticals that require a majority of an incentivized population to act against their own economic interests, you can "poke holes" in all manner of economic theory.

I'd argue given the above that an increase in the supply of bitcoin is far less likely than, say, asteroid mining coming online and massively inflating the supply of gold and other precious metals.
User avatar
hagridshut
Posts: 261
Joined: Tue Apr 10, 2012 6:54 pm

Re: Bitcoin Talk

Post by hagridshut »

I have studied Bitcoin, and I decided not to invest any resources in it, or any other cryptocurrency.

My reasons are as follows:

(1) Practically useless as actual money. Bitcoin is supposed to be an alternative to fiat currency like USD or Euro. However, Bitcoin does not work well as an actual currency: the government will not accept Bitcoin for tax payments. None of the products or services I buy (food, insurance, fuel, and so on) are easily purchased with Bitcoin. I can't walk into a food store and buy my weekly groceries with Bitcoin.

(2) Unrepresentative of anything beyond computer network. USD and other currencies represent faith that a nation and its various systems (chiefly government and economy) are functioning. Shares of stock represent ownership in businesses. Bonds represent claims to future payment of principal and interest from entities in the economy. Bitcoin doesn't seem to represent anything productive.

(3) Security. Bitcoin exchanges are often targets for hacking and theft. With banks and brokerages, there are records and audit trails. Theft of assets can often be reversed. Stolen Bitcoins are pretty much gone for good. Lost Bitcoins due to forgotten, misplaced, or destroyed key records, are gone for good.

10 years after Bitcoin first became available, I don't see any signs that it has matured into a useful platform for commerce, or that it represents anything productive in society. If Bitcoin is to succeed in the long run, it has to be superior and easier to use than whatever it replaces. I don't see that happening, when all the young people around me happily adopt fiat currency-based payment systems like Venmo.
First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio
TropikThunder
Posts: 2587
Joined: Sun Apr 03, 2016 5:41 pm

Re: Bitcoin Talk

Post by TropikThunder »

arcticpineapplecorp. wrote: Wed Jun 26, 2019 4:52 pm but the two parts you mention aren't a certainty:
1. if the electric grid goes down (terrorist wise or other) or internet connection/satelite transmission disrupted (?) then there may be difficulties transmitting money (yes I know cellular is wireless, but eventually even cel phones requires a charge, perhaps gas generator could be helpful here...requires prepper mentality, why not just stockpile food, water, guns and ammo and toilet paper?).
If the electric grid is down, ok maybe you can find a way to keep your phone charged, but what's powering the cell phone sites? Are Verizon and AT&T going to put generators at the base of each cell tower?
User avatar
JoMoney
Posts: 9844
Joined: Tue Jul 23, 2013 5:31 am

Re: Bitcoin Talk

Post by JoMoney »

TropikThunder wrote: Thu Jun 27, 2019 11:23 pm
arcticpineapplecorp. wrote: Wed Jun 26, 2019 4:52 pm but the two parts you mention aren't a certainty:
1. if the electric grid goes down (terrorist wise or other) or internet connection/satelite transmission disrupted (?) then there may be difficulties transmitting money (yes I know cellular is wireless, but eventually even cel phones requires a charge, perhaps gas generator could be helpful here...requires prepper mentality, why not just stockpile food, water, guns and ammo and toilet paper?).
If the electric grid is down, ok maybe you can find a way to keep your phone charged, but what's powering the cell phone sites? Are Verizon and AT&T going to put generators at the base of each cell tower?
FWIW, many of them do.
https://qz.com/21909/hurricane-sandy-an ... k-service/
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
TropikThunder
Posts: 2587
Joined: Sun Apr 03, 2016 5:41 pm

Re: Bitcoin Talk

Post by TropikThunder »

JoMoney wrote: Fri Jun 28, 2019 12:03 am
TropikThunder wrote: Thu Jun 27, 2019 11:23 pm
arcticpineapplecorp. wrote: Wed Jun 26, 2019 4:52 pm but the two parts you mention aren't a certainty:
1. if the electric grid goes down (terrorist wise or other) or internet connection/satelite transmission disrupted (?) then there may be difficulties transmitting money (yes I know cellular is wireless, but eventually even cel phones requires a charge, perhaps gas generator could be helpful here...requires prepper mentality, why not just stockpile food, water, guns and ammo and toilet paper?).
If the electric grid is down, ok maybe you can find a way to keep your phone charged, but what's powering the cell phone sites? Are Verizon and AT&T going to put generators at the base of each cell tower?
FWIW, many of them do.
https://qz.com/21909/hurricane-sandy-an ... k-service/
Fair point. After Katrina, the FCC tried to mandate that cell phone carriers have at least eight hour power backup systems but the industry sued to overturn the regs and it looks voluntary now. I would be surprised it that’s the case in the types of countries at risk of collapse but I admit I have not looked.
Plz
Posts: 116
Joined: Tue Oct 09, 2018 10:26 pm

Re: Bitcoin Talk

Post by Plz »

TomCat96 wrote: Sat Jun 22, 2019 3:18 pm
Enganerd wrote: Sat Jun 22, 2019 9:54 am I just wanted to start a thread because there is interesting discussion regarding btc in the facebook libra thread (viewtopic.php?p=4605431#p4605431) but prudent correctly directed the thread posts to remain on topic with the OP. Disclaimer I am not a btc proponent and this is not related to the recent upward rally of btc, but I do find it interesting if you can get past the extreme takes on both sides. The [conjecture --admin LadyGeek] implying it will solve all of societies issues (ironically while making early speculators/minors ridiculously wealthy) and the "oh it is just a tulip bubble the USD has been fine for me" are not serious takes on the tech and potential. Here are some quotes from the thread mentioned above that I find interesting and would love to see the discussion continue in this more nuanced logical manner.
TomCat96 wrote: Thu Jun 20, 2019 5:02 am
Plz wrote: Wed Jun 19, 2019 11:43 pm I’ve always been confused with crypto currencies - maybe someone can help me understand.

Gold has value because it is rare and is an actual thing. It’s worth what someone is willing to pay for it, but it can also be used for other things. Intuitively I get this. It’s rarity and I supposeuses give it an intrinsic value.

The dollar used to be backed by gold but now it is not. However, it has value because the US government accepts tax payments in dollars. It has value because of this, as well as it gives you access to US goods, services, and capital markets. I understand that there academically could be inflation a la Zimbabwe, but the dollar is supported.

Crypto currencies have nothing collateralizing it. It’s worth what someone is willing to pay for it. My question is, beyond speculation and laundering money, WHY would someone prefer a bitcoin to a dollar?

There are literally hundreds (thousands?) of crypto currencies out there. Even if they’re worth $1, it’s value creation out of nowhere. It’s only worth something because someone is willing to pay for it. This seems circular and confuses me. At least with national currencies, governments assign value through tax collection.

Perhaps oversimplifying, crypto currencies seem like printing money to me. For free. Value from nothing. Sure, FB, JPM, etc lend credibility to their own crypto currencies...but what gives them the right to print money like this?

Not to mention...on what basis will the libra be tied to the basket of currencies? Just because they want it to be? Will FB allow redemption of libra without any stops? Could this create a “run” or cash flow issue?

I’m sure I got lost somewhere along the way. It couldn’t be this big if my understanding of it was accurate, right? No facetiousness, can someone please explain it to me?

Either way, let’s make boglecoin. What’s the downside?

I would say your understanding of what gives something value is too narrow, which is why the value of cryptocurrencies is eluding you. FIrst of all, don't dismiss demand due to speculation. Dismissing speculative demand because of a bias that it's not a good and proper demand is going to block your insight. Let's expand the definition of speculative demand for a second to shares of companies for which the Liabilities exceed Assets. By definition, as a shareholder, you own nothing. You as a shareholder own Equity, which is of course the difference between the Assets and Liabilities. If the Equity of a company is zero, or even negative, should the stock sell for zero? Clearly not. Stocks with negative equity do not sell for zero, under the speculation that they could return to positive value, and quickly. There are other reasons as well, but I don't want to get into that.

Let's look at your arguments alone. If the reason for the value of the US dollar is that the United States accepts dollars as payment in taxes, or if gold has value because someone is willing to pay something for it, then it is not any intrinsic factor which gives to these items, but rather structural factors--the acceptance by other parties which gives value to it.

In the same way if Bitcoin and its ilk were to gain legitimacy and acceptance because other institutions begin to accept it, then it should acquire value the same way.

What about competing cryptocurrencies? Let's go with what you said before. What's the difference between a dollar, and a piece of paper written on it that says 1$ Lord of the Exchequer, TomCat96 $1. Well for one, no one is going to accept my piece of paper for any system of transactions. What about the regular dollar? A dollar is not worth a dollar because of its fine art, or the piece of paper it's printed on, but because of the institutions and aggregate of people who are willing to accept it.

The value of a cryptocurrency then is similar. Bitcoin has a substantial advantage over your proposed boglecoin. Bitcoin was first. It has a logo, a large collection of developers committed to improving the technology (they are working on lightning network atm), a globally decentralized blockchain, global recognition of the name, a substantially large network of actors willing to accept it relative to your proposed boglecoin, and a market cap of 164B. What would it take for your boglecoin to get there?

It's not the intrinsic quality of bitcoin that makes it superior to your boglecoin, just as it's not the instrinsic value of the fine paper used by the US govt which makes the US dollar worth more than my idiot dollar. The value is the in network. That's something that your boglecoin doesn't have yet. But it's a real asset.

What makes the facebook platform valuable? Is it the intrinsic technology of allowing people to share cat pictures socially, or is it rather that billions of people already use it, the latter being a competitive advantage not easily replicated.

Let's talk about bitcoin as currency, or cryptocurrency as currencies. I think the people on this site get far too hung up on that.

This is how I believe they approach the analysis. Currency? That's like coin, bills, money. They have 40, 50, 60, 70 years of a preconception of what "currency" is. That bitcoin claims to be currency immediately invokes whether or not bitcoin fits in that preconception, that bucket, of what bitcoin is. If bitcoin fails to fit into that bucket, it's no good. It fails as a currency.

That conception is too narrow. It is stunted by its own biases.

Ether (ETH) for instance may not be a currency at all. Sure it's tradable. But so is gasoline. So are units of computing power or anything else standardized. ETH is a distributed computing platform. It might have intrinsic value in its ability to purchase computational cycles on a world computer. If you try to stuff ETH into a preconception of what a currency is, a preconception you learned at an early stage in your life and dismiss it because it fails to fit a narrow preconception, you block your own insight. ETH is clearly something different. What about proof of stake? If you collect enough ETH, you can actually obtain more ETH? Yes it's true. In lieu of mining, one might actually be able to obtain more ETH by owning ETH. Decred or DCR currently has a hybrid mining/proof of stake algorithm.

Think about what that means: there are local maxima of increasing marginal utility built intrinsically into the currency itself? That's not like any currency I've ever heard of.

The list goes on. What about a stablecoin? There's a few of them now, but we'll talk about Tether. Controversies aside, it turns out it's pretty costly to convert from cryptocurrencies to fiat currency. It causes taxable events, imposes major liabilities on exchanges which might let you perform those events, etc. At the same time cryptos are pretty damn volatile. There must be a way of trading into fiat without incurring the penalties of trading into fiat. Enter stable coins.
TomCat96 did a great job explaining crypto potential in this post. Here is how Plz later responded:
Plz wrote: Fri Jun 21, 2019 3:15 am This is really helpful, thank you for taking the time to help me understand. From what you wrote, this is what I think you’re saying: the value of crypto currencies come from speculation as well as network effects (including the ubiquity/ease of redemption, too).

May I follow up with a few more questions?

1) would you say the value in crypto currencies depends on circular logic? It’s valuable because there’s demand for it and there’s demand for it because it’s valuable? Where I get stuck is that with a crypto currency, there’s nothing that “protects” that circle. With dollars, the government is in there. With gold, well...there’s the actual gold itself. Even with magic cards, there’s trademarks, the game itself, and the paper it’s printed on.

2) if it indeed is circular, does it have some sort of “protection?” If yes, what? If no, why doesn’t this fact decimate it?

3) would you say creating a crypto currency is similar to printing money? For me, this seems like something that should be done very carefully and only by governments. Should anyone (not literally) be able to make their own crypto currency? And if it’s not like printing money, why not?
I like how Plz identified the circular logic of btc and why that is a concern. And this circular logic also makes me skeptical. Although I am not sure that gold escapes this same criticism just because it is a physical material. Gold is obviously priced at a higher valuation than it's industrial utility would warrant. As for jewelry/decoration is it really inherently more aesthetically appealing than other metals or is it the psychological effect of people associating it with value? On the btc side there are definitely math and tech enthusiasts that love it just because it works. It was a tech created to solve a problem https://en.wikipedia.org/wiki/Byzantine_fault and despite the crazy valuations it appears to remain effective. I am neither a math,tech, nor cryptography enthusiast but personally I find btc more interesting than gold. Which will hold more value going forward I have no idea but I am just saying I am not convinced that the circular logic of btc is fatal because it might be part of all means of exchange.

I hope others will continue to weigh in because it is honestly somewhat rare to find nuanced discussion of the potential for and measured skepticism of crypto.
I wrote a very long follow up post to Plz, answering 3 questions which unfortunately got deleted as offtopic. I did not save a copy of the post.

Unfortunately I do not have time to repeat the entire substantive post, but I can quickly summarize my answer to the three questions.

1. It seems circular. But network effects are circular in logic. Consider the same circular logic question when it comes to facebook, or any other platform whose value grows as more people enter into it. A social network of one is theoretically worthless. How can something worthless gain traction? The value snowballs over time.

2. Yes it has plenty of protection. Since we covered network of users, let's look at 2 other major factors at how Bitcoin is "entrenched".
a) Network of developers working to improve bitcoin b) Miners. You need developers to maintain the network, to improve the network. You need miners to protect your network.

Bitcoin: 1 block per 10 minutes, 6 blocks power hour. Currently Block Reward: 12.5BTC per new block mined. Currently financial inventive to miners for each block mined alone: ~$125,000 every 10 minutes.(136k right now) Such a large financial reward has incentivized miners to allocate massive computing power to mining BTC. What does mining do? It protects the network. How?

Mining makes it financially/practically/ computationally infeasible for a single entity to take over the network. How would they take over the network? Answer: 51% attack. If any user entity is able to obtain 51% of the computational hash power of the network, they can control the blockchain. Why is that bad? It allows double spending. It will quickly ruin faith in your currency.

Again, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot. In this case, based on today's market value bitcoin is offering 19.62 MIllion USD per day of financial incentive to miners, not counting transaction costs. What do you offer boglecoin? The entrenchment of BTC is very real with those numbers. For that reason, merely replicating the bitcoin codebase does NOT produce a product on equal standing with bitcoin.

3. Is crypto like printing money? In the case of bitcoin no. It too closely resembles fair exchange for value. In the case of other coins you have to mine? Generally No. Fair exchange for value.

In the case of coins with a significant pre-mine. Possibly.

In the case of stablecoins? examples. Tether, USDC, Libra. Quick answer: possibly.

All stablecoins use blockchain. Ignore that. Unlike bitcoin, their blockchains are controlled by a central authority. That means they control their stablecoins. In theory it shouldnt be like printing money because the stable coins are backed by something. In reality, it is possible for the stablecoins to appear like printing money from thin air because the central authority controls the blockchain. In the case of tether, they closed themselves to audit, ceased accepting redemptions, and more. Rumor was they were creating tether out of thin air and using it to inflate crypto prices.

See this excellent post by Hawkeye in the other thread.
HawkeyePierce wrote: Tue Apr 09, 2019 10:32 pm Cryptocurrency prices are *massively* manipulated. The ongoing Tether scam is used to pump-and-dump in the hope of duping unsuspecting retail investors.

For those not familiar with it, Tether is a service that claims to provide a fiat-backed "stablecoin" where 1 coin is always worth 1 US dollar (or whatever real currency they pick). The largest is the USDT coin (US dollar Tethers). Tether claims they have 100% reserve but has never proven it and fired their auditor. Crypto traders use it to hold pseudodollars while skirting US law.

Since Tether has never offered proof of their reserves, they can mine more USDT whenever they want. The largest exchange using Tether is Bitfinex—they share common owners. Bitfinex takes newly-mined Tethers and lets people buy USDT using Bitcoin or Ethereum. At that point Tether has exchanged a worthless USDT coin for BTC or ETH and also driven up the price.

Bitfinex lost their banking licenses long ago. There are tons of stories on Twitter and Reddit of people trying to redeem their USDT tokens for real dollars and finding that withdrawals are impossible. There's no reason to believe they have real USD in a bank account to back USDT, but as long as crypto prices kept climbing they were able to pull off their scam because people were keeping their crypto and didn't want fiat currency.

These exchanges also allow market manipulation tactics like tape painting and wash trading. Some will literally let you fill your own orders. Add all this up and you have a recipe for huge price manipulation. Bitfinex and Tether drive up the price, watch unsuspecting investors pile in as they see another run starting, then dump their BTC and ETH.

(There's another aspect of this scam that enables wide-scale money laundering since these exchanges don't have any KYC policies or anti-money laundering controls, but that's a whole other topic)

https://hackernoon.com/the-curious-tale ... 0031eead87
I really enjoy our dialogue and hope it can continue. I am learning a lot and appreciate your responses.

@enganerd - thanks for creating this thread so we can continue. I had missed it for a few days but happy I found it now.

@ladygeek - if possible, can you retrieve tomcat’s previously deleted post and put it in this thread? If not, could you PM it to me?

Back to @tomcat96:

1) I think this means we agree that it is circular, and that circular things need strong protections to maintain/stabilize value. For example, governments are hard to overthrow + Facebook has its IP and brand, whereas Ponzi schemes are destroyed if there’s a run.

2) bitcoin’s protections are its developers and miners. Who are the developers and can they be trusted? How are they incentivized? What happens when miners run out of things to mine (the number of bitcoins is finite right?)? I’m still not sure that these things protect the value of bitcoin, but perhaps they protect the infrastructure of bitcoin? How would you respond to bitcoin wallets getting hacked and the possibility for price manipulation on exchanges?

3) I’m not sure I follow you on the fair exchange of value. Before bitcoin existed, there was no value. Now that it does exist, its value rose from less than $1 to up to $20k down to whatever it’s worth today. Isn’t this something from nothing? The difference with Facebook is it has its IP and brand, as well as quantifiable ad revenue, etc. Bitcoin has developers and miners?
Prahasaurus
Posts: 253
Joined: Fri Mar 29, 2019 1:02 am

Re: Bitcoin Talk

Post by Prahasaurus »

The other huge advantage of Bitcoin over Boglecoin, and most other cryptocurrencies, is that BTC has stood the test of time. Everyone has tried to hack Bitcoin, ban Bitcoin (governments), even destroy Bitcoin. Without success! Bitcoin has survived, and clearly prospered. That gives Bitcoin a huge amount of technical credibility. And related to this, there is a massive community of developers and start ups working on Bitcoin related projects.

Ten years is an incredibly long time in this space. It doesn't mean something can't happen in the future, obviously. There are no guarantees. But so far, BTC is rock solid. Its network and first mover advantages are very real.

I believe it's going to one day be part of many investors' portfolios, similar to gold, especially as an inflation hedge. The next generation of Bogleheads will view BTC very differently from what I see posted here now. The value of BTC will stabilize at a much higher price point than we see today (although there will always be volatility, similar to commodity pricing). The discussions here will focus more on percent allocation, correlation, risk/reward, etc. Not on whether its a scam or not... This process may take another 5-10 years or so. And it will be a wild ride, with many more ups and downs to come.

Should inflation become an issue again in most developed economies (granted, not so likely now, but things can change quickly), then this would be another huge driver of Bitcoin.

Alternatively, Bitcoin may completely fail and go to zero for a number of reasons, most of which have already been highlighted here. I don't really see any middle ground. It's all or nothing for Bitcoin. Should be fun to watch it play out!
Asset Allocation: 50% cash (USD), 30% VT, 20% Bitcoin
columbia
Posts: 2986
Joined: Tue Aug 27, 2013 5:30 am

Re: Bitcoin Talk

Post by columbia »

Prahasaurus wrote: Fri Jun 28, 2019 3:05 am The other huge advantage of Bitcoin over Boglecoin, and most other cryptocurrencies, is that BTC has stood the test of time. Everyone has tried to hack Bitcoin, ban Bitcoin (governments), even destroy Bitcoin. Without success! Bitcoin has survived, and clearly prospered. That gives Bitcoin a huge amount of technical credibility. And related to this, there is a massive community of developers and start ups working on Bitcoin related projects.

Ten years is an incredibly long time in this space. It doesn't mean something can't happen in the future, obviously. There are no guarantees. But so far, BTC is rock solid. Its network and first mover advantages are very real.

I believe it's going to one day be part of many investors' portfolios, similar to gold, especially as an inflation hedge. The next generation of Bogleheads will view BTC very differently from what I see posted here now. The value of BTC will stabilize at a much higher price point than we see today (although there will always be volatility, similar to commodity pricing). The discussions here will focus more on percent allocation, correlation, risk/reward, etc. Not on whether its a scam or not... This process may take another 5-10 years or so. And it will be a wild ride, with many more ups and downs to come.

Should inflation become an issue again in most developed economies (granted, not so likely now, but things can change quickly), then this would be another huge driver of Bitcoin.

Alternatively, Bitcoin may completely fail and go to zero for a number of reasons, most of which have already been highlighted here. I don't really see any middle ground. It's all or nothing for Bitcoin. Should be fun to watch it play out!
What do you mean by “hack” in relation to Bitcoin?

This happened...


How Mueller used Bitcoin to catch Russia
https://www.google.com/amp/s/amp.cnn.co ... index.html

Not so anonymous, after all.
RobLyons
Posts: 805
Joined: Tue Oct 31, 2017 12:55 pm

Re: Bitcoin Talk

Post by RobLyons »

My concern with crypto, besides the fact it's all speculation, is who can get my money back if someone steals it? There is literally zero firms or agencies, to the best of my knowledge, that will help track down my lost or stolen bitcoin without significant fees.


So I'm out
"Great parenting sets the foundation for a better world"
Prahasaurus
Posts: 253
Joined: Fri Mar 29, 2019 1:02 am

Re: Bitcoin Talk

Post by Prahasaurus »

columbia wrote: Fri Jun 28, 2019 5:37 am
Prahasaurus wrote: Fri Jun 28, 2019 3:05 am The other huge advantage of Bitcoin over Boglecoin, and most other cryptocurrencies, is that BTC has stood the test of time. Everyone has tried to hack Bitcoin, ban Bitcoin (governments), even destroy Bitcoin. Without success! Bitcoin has survived, and clearly prospered. That gives Bitcoin a huge amount of technical credibility. And related to this, there is a massive community of developers and start ups working on Bitcoin related projects.

Ten years is an incredibly long time in this space. It doesn't mean something can't happen in the future, obviously. There are no guarantees. But so far, BTC is rock solid. Its network and first mover advantages are very real.

I believe it's going to one day be part of many investors' portfolios, similar to gold, especially as an inflation hedge. The next generation of Bogleheads will view BTC very differently from what I see posted here now. The value of BTC will stabilize at a much higher price point than we see today (although there will always be volatility, similar to commodity pricing). The discussions here will focus more on percent allocation, correlation, risk/reward, etc. Not on whether its a scam or not... This process may take another 5-10 years or so. And it will be a wild ride, with many more ups and downs to come.

Should inflation become an issue again in most developed economies (granted, not so likely now, but things can change quickly), then this would be another huge driver of Bitcoin.

Alternatively, Bitcoin may completely fail and go to zero for a number of reasons, most of which have already been highlighted here. I don't really see any middle ground. It's all or nothing for Bitcoin. Should be fun to watch it play out!
What do you mean by “hack” in relation to Bitcoin?

This happened...


How Mueller used Bitcoin to catch Russia
https://www.google.com/amp/s/amp.cnn.co ... index.html

Not so anonymous, after all.
That article refers to hackers being paid in Bitcoin. What does that have to do with the algorithm being hacked?

Also, just to be clear, the vast majority of criminal activity takes place in dollars (or some other local currency), not Bitcoin.

If Bitcoin could be hacked, the value would drop to zero almost instantly. Because your money would not be safe.

As to being anonymous, I never claimed you would be. With their open ledger, quite the opposite.
Asset Allocation: 50% cash (USD), 30% VT, 20% Bitcoin
pqwerty
Posts: 85
Joined: Mon Jul 13, 2015 5:54 pm
Location: Michigan

Re: Bitcoin Talk

Post by pqwerty »

Prahasaurus wrote: Fri Jun 28, 2019 7:36 am
columbia wrote: Fri Jun 28, 2019 5:37 am
Prahasaurus wrote: Fri Jun 28, 2019 3:05 am The other huge advantage of Bitcoin over Boglecoin, and most other cryptocurrencies, is that BTC has stood the test of time. Everyone has tried to hack Bitcoin, ban Bitcoin (governments), even destroy Bitcoin. Without success! Bitcoin has survived, and clearly prospered. That gives Bitcoin a huge amount of technical credibility. And related to this, there is a massive community of developers and start ups working on Bitcoin related projects.

Ten years is an incredibly long time in this space. It doesn't mean something can't happen in the future, obviously. There are no guarantees. But so far, BTC is rock solid. Its network and first mover advantages are very real.

I believe it's going to one day be part of many investors' portfolios, similar to gold, especially as an inflation hedge. The next generation of Bogleheads will view BTC very differently from what I see posted here now. The value of BTC will stabilize at a much higher price point than we see today (although there will always be volatility, similar to commodity pricing). The discussions here will focus more on percent allocation, correlation, risk/reward, etc. Not on whether its a scam or not... This process may take another 5-10 years or so. And it will be a wild ride, with many more ups and downs to come.

Should inflation become an issue again in most developed economies (granted, not so likely now, but things can change quickly), then this would be another huge driver of Bitcoin.

Alternatively, Bitcoin may completely fail and go to zero for a number of reasons, most of which have already been highlighted here. I don't really see any middle ground. It's all or nothing for Bitcoin. Should be fun to watch it play out!
What do you mean by “hack” in relation to Bitcoin?

This happened...


How Mueller used Bitcoin to catch Russia
https://www.google.com/amp/s/amp.cnn.co ... index.html

Not so anonymous, after all.
That article refers to hackers being paid in Bitcoin. What does that have to do with the algorithm being hacked?

Also, just to be clear, the vast majority of criminal activity takes place in dollars (or some other local currency), not Bitcoin.

If Bitcoin could be hacked, the value would drop to zero almost instantly. Because your money would not be safe.

As to being anonymous, I never claimed you would be. With their open ledger, quite the opposite.
Didn't a couple miners do a successful 51% attack on BCH like 3 weeks ago? BCH is just a fork of Core, so I don't think it is an "if" it can be hacked. I recall Binance wanting to coordinate an attack on Core just recently to recover some coins that were stolen off their exchange. It didn't go over well but it being brought up as a possibility is kind of scary.
renue74
Posts: 1873
Joined: Tue Apr 07, 2015 7:24 pm

Re: Bitcoin Talk

Post by renue74 »

Just had a convo about this yesterday with a coworker. I owned Bitcoin a few years ago.

There was somebody on this forum who was touting a Amazon deal website where you add stuff to your wish list and then "shop" it around to other people telling them..."I'm willing to pay 10% less than this for product X." Then the folks would buy it for you and have it drop shipped.

Most likely those folks had Amazon Gift Cards who wanted to turn that into $.

I would pay them with bitcoin.

I had used a coinbase wallet and had put about $200 into it. I totally forgot about it and about a year later, I opened coinbase wallet back up and had $550. I immediately cashed out. :sharebeer

I find the Facebook Libra currency to do one thing really well......It will bring crypto to the masses. Right now, it's still sorta that dark magic thing that only some might dabble in.

When FB allows my mom to pay somebody in FB Libra for a FB Marketplace item...that's when crypto will take off.
TomCat96
Posts: 1040
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin Talk

Post by TomCat96 »

Plz wrote: Fri Jun 28, 2019 2:20 am
TomCat96 wrote: Sat Jun 22, 2019 3:18 pm
Enganerd wrote: Sat Jun 22, 2019 9:54 am I just wanted to start a thread because there is interesting discussion regarding btc in the facebook libra thread (viewtopic.php?p=4605431#p4605431) but prudent correctly directed the thread posts to remain on topic with the OP. Disclaimer I am not a btc proponent and this is not related to the recent upward rally of btc, but I do find it interesting if you can get past the extreme takes on both sides. The [conjecture --admin LadyGeek] implying it will solve all of societies issues (ironically while making early speculators/minors ridiculously wealthy) and the "oh it is just a tulip bubble the USD has been fine for me" are not serious takes on the tech and potential. Here are some quotes from the thread mentioned above that I find interesting and would love to see the discussion continue in this more nuanced logical manner.
TomCat96 wrote: Thu Jun 20, 2019 5:02 am
Plz wrote: Wed Jun 19, 2019 11:43 pm I’ve always been confused with crypto currencies - maybe someone can help me understand.

Gold has value because it is rare and is an actual thing. It’s worth what someone is willing to pay for it, but it can also be used for other things. Intuitively I get this. It’s rarity and I supposeuses give it an intrinsic value.

The dollar used to be backed by gold but now it is not. However, it has value because the US government accepts tax payments in dollars. It has value because of this, as well as it gives you access to US goods, services, and capital markets. I understand that there academically could be inflation a la Zimbabwe, but the dollar is supported.

Crypto currencies have nothing collateralizing it. It’s worth what someone is willing to pay for it. My question is, beyond speculation and laundering money, WHY would someone prefer a bitcoin to a dollar?

There are literally hundreds (thousands?) of crypto currencies out there. Even if they’re worth $1, it’s value creation out of nowhere. It’s only worth something because someone is willing to pay for it. This seems circular and confuses me. At least with national currencies, governments assign value through tax collection.

Perhaps oversimplifying, crypto currencies seem like printing money to me. For free. Value from nothing. Sure, FB, JPM, etc lend credibility to their own crypto currencies...but what gives them the right to print money like this?

Not to mention...on what basis will the libra be tied to the basket of currencies? Just because they want it to be? Will FB allow redemption of libra without any stops? Could this create a “run” or cash flow issue?

I’m sure I got lost somewhere along the way. It couldn’t be this big if my understanding of it was accurate, right? No facetiousness, can someone please explain it to me?

Either way, let’s make boglecoin. What’s the downside?

I would say your understanding of what gives something value is too narrow, which is why the value of cryptocurrencies is eluding you. FIrst of all, don't dismiss demand due to speculation. Dismissing speculative demand because of a bias that it's not a good and proper demand is going to block your insight. Let's expand the definition of speculative demand for a second to shares of companies for which the Liabilities exceed Assets. By definition, as a shareholder, you own nothing. You as a shareholder own Equity, which is of course the difference between the Assets and Liabilities. If the Equity of a company is zero, or even negative, should the stock sell for zero? Clearly not. Stocks with negative equity do not sell for zero, under the speculation that they could return to positive value, and quickly. There are other reasons as well, but I don't want to get into that.

Let's look at your arguments alone. If the reason for the value of the US dollar is that the United States accepts dollars as payment in taxes, or if gold has value because someone is willing to pay something for it, then it is not any intrinsic factor which gives to these items, but rather structural factors--the acceptance by other parties which gives value to it.

In the same way if Bitcoin and its ilk were to gain legitimacy and acceptance because other institutions begin to accept it, then it should acquire value the same way.

What about competing cryptocurrencies? Let's go with what you said before. What's the difference between a dollar, and a piece of paper written on it that says 1$ Lord of the Exchequer, TomCat96 $1. Well for one, no one is going to accept my piece of paper for any system of transactions. What about the regular dollar? A dollar is not worth a dollar because of its fine art, or the piece of paper it's printed on, but because of the institutions and aggregate of people who are willing to accept it.

The value of a cryptocurrency then is similar. Bitcoin has a substantial advantage over your proposed boglecoin. Bitcoin was first. It has a logo, a large collection of developers committed to improving the technology (they are working on lightning network atm), a globally decentralized blockchain, global recognition of the name, a substantially large network of actors willing to accept it relative to your proposed boglecoin, and a market cap of 164B. What would it take for your boglecoin to get there?

It's not the intrinsic quality of bitcoin that makes it superior to your boglecoin, just as it's not the instrinsic value of the fine paper used by the US govt which makes the US dollar worth more than my idiot dollar. The value is the in network. That's something that your boglecoin doesn't have yet. But it's a real asset.

What makes the facebook platform valuable? Is it the intrinsic technology of allowing people to share cat pictures socially, or is it rather that billions of people already use it, the latter being a competitive advantage not easily replicated.

Let's talk about bitcoin as currency, or cryptocurrency as currencies. I think the people on this site get far too hung up on that.

This is how I believe they approach the analysis. Currency? That's like coin, bills, money. They have 40, 50, 60, 70 years of a preconception of what "currency" is. That bitcoin claims to be currency immediately invokes whether or not bitcoin fits in that preconception, that bucket, of what bitcoin is. If bitcoin fails to fit into that bucket, it's no good. It fails as a currency.

That conception is too narrow. It is stunted by its own biases.

Ether (ETH) for instance may not be a currency at all. Sure it's tradable. But so is gasoline. So are units of computing power or anything else standardized. ETH is a distributed computing platform. It might have intrinsic value in its ability to purchase computational cycles on a world computer. If you try to stuff ETH into a preconception of what a currency is, a preconception you learned at an early stage in your life and dismiss it because it fails to fit a narrow preconception, you block your own insight. ETH is clearly something different. What about proof of stake? If you collect enough ETH, you can actually obtain more ETH? Yes it's true. In lieu of mining, one might actually be able to obtain more ETH by owning ETH. Decred or DCR currently has a hybrid mining/proof of stake algorithm.

Think about what that means: there are local maxima of increasing marginal utility built intrinsically into the currency itself? That's not like any currency I've ever heard of.

The list goes on. What about a stablecoin? There's a few of them now, but we'll talk about Tether. Controversies aside, it turns out it's pretty costly to convert from cryptocurrencies to fiat currency. It causes taxable events, imposes major liabilities on exchanges which might let you perform those events, etc. At the same time cryptos are pretty damn volatile. There must be a way of trading into fiat without incurring the penalties of trading into fiat. Enter stable coins.
TomCat96 did a great job explaining crypto potential in this post. Here is how Plz later responded:
Plz wrote: Fri Jun 21, 2019 3:15 am This is really helpful, thank you for taking the time to help me understand. From what you wrote, this is what I think you’re saying: the value of crypto currencies come from speculation as well as network effects (including the ubiquity/ease of redemption, too).

May I follow up with a few more questions?

1) would you say the value in crypto currencies depends on circular logic? It’s valuable because there’s demand for it and there’s demand for it because it’s valuable? Where I get stuck is that with a crypto currency, there’s nothing that “protects” that circle. With dollars, the government is in there. With gold, well...there’s the actual gold itself. Even with magic cards, there’s trademarks, the game itself, and the paper it’s printed on.

2) if it indeed is circular, does it have some sort of “protection?” If yes, what? If no, why doesn’t this fact decimate it?

3) would you say creating a crypto currency is similar to printing money? For me, this seems like something that should be done very carefully and only by governments. Should anyone (not literally) be able to make their own crypto currency? And if it’s not like printing money, why not?
I like how Plz identified the circular logic of btc and why that is a concern. And this circular logic also makes me skeptical. Although I am not sure that gold escapes this same criticism just because it is a physical material. Gold is obviously priced at a higher valuation than it's industrial utility would warrant. As for jewelry/decoration is it really inherently more aesthetically appealing than other metals or is it the psychological effect of people associating it with value? On the btc side there are definitely math and tech enthusiasts that love it just because it works. It was a tech created to solve a problem https://en.wikipedia.org/wiki/Byzantine_fault and despite the crazy valuations it appears to remain effective. I am neither a math,tech, nor cryptography enthusiast but personally I find btc more interesting than gold. Which will hold more value going forward I have no idea but I am just saying I am not convinced that the circular logic of btc is fatal because it might be part of all means of exchange.

I hope others will continue to weigh in because it is honestly somewhat rare to find nuanced discussion of the potential for and measured skepticism of crypto.
I wrote a very long follow up post to Plz, answering 3 questions which unfortunately got deleted as offtopic. I did not save a copy of the post.

Unfortunately I do not have time to repeat the entire substantive post, but I can quickly summarize my answer to the three questions.

1. It seems circular. But network effects are circular in logic. Consider the same circular logic question when it comes to facebook, or any other platform whose value grows as more people enter into it. A social network of one is theoretically worthless. How can something worthless gain traction? The value snowballs over time.

2. Yes it has plenty of protection. Since we covered network of users, let's look at 2 other major factors at how Bitcoin is "entrenched".
a) Network of developers working to improve bitcoin b) Miners. You need developers to maintain the network, to improve the network. You need miners to protect your network.

Bitcoin: 1 block per 10 minutes, 6 blocks power hour. Currently Block Reward: 12.5BTC per new block mined. Currently financial inventive to miners for each block mined alone: ~$125,000 every 10 minutes.(136k right now) Such a large financial reward has incentivized miners to allocate massive computing power to mining BTC. What does mining do? It protects the network. How?

Mining makes it financially/practically/ computationally infeasible for a single entity to take over the network. How would they take over the network? Answer: 51% attack. If any user entity is able to obtain 51% of the computational hash power of the network, they can control the blockchain. Why is that bad? It allows double spending. It will quickly ruin faith in your currency.

Again, why doesn't boglecoin compete with Bitcoin? If you start boglecoin, why can't people just jump onto that crypto? What protects the circle? Answer: BTC was first. Being first counts for alot. In this case, based on today's market value bitcoin is offering 19.62 MIllion USD per day of financial incentive to miners, not counting transaction costs. What do you offer boglecoin? The entrenchment of BTC is very real with those numbers. For that reason, merely replicating the bitcoin codebase does NOT produce a product on equal standing with bitcoin.

3. Is crypto like printing money? In the case of bitcoin no. It too closely resembles fair exchange for value. In the case of other coins you have to mine? Generally No. Fair exchange for value.

In the case of coins with a significant pre-mine. Possibly.

In the case of stablecoins? examples. Tether, USDC, Libra. Quick answer: possibly.

All stablecoins use blockchain. Ignore that. Unlike bitcoin, their blockchains are controlled by a central authority. That means they control their stablecoins. In theory it shouldnt be like printing money because the stable coins are backed by something. In reality, it is possible for the stablecoins to appear like printing money from thin air because the central authority controls the blockchain. In the case of tether, they closed themselves to audit, ceased accepting redemptions, and more. Rumor was they were creating tether out of thin air and using it to inflate crypto prices.

See this excellent post by Hawkeye in the other thread.
HawkeyePierce wrote: Tue Apr 09, 2019 10:32 pm Cryptocurrency prices are *massively* manipulated. The ongoing Tether scam is used to pump-and-dump in the hope of duping unsuspecting retail investors.

For those not familiar with it, Tether is a service that claims to provide a fiat-backed "stablecoin" where 1 coin is always worth 1 US dollar (or whatever real currency they pick). The largest is the USDT coin (US dollar Tethers). Tether claims they have 100% reserve but has never proven it and fired their auditor. Crypto traders use it to hold pseudodollars while skirting US law.

Since Tether has never offered proof of their reserves, they can mine more USDT whenever they want. The largest exchange using Tether is Bitfinex—they share common owners. Bitfinex takes newly-mined Tethers and lets people buy USDT using Bitcoin or Ethereum. At that point Tether has exchanged a worthless USDT coin for BTC or ETH and also driven up the price.

Bitfinex lost their banking licenses long ago. There are tons of stories on Twitter and Reddit of people trying to redeem their USDT tokens for real dollars and finding that withdrawals are impossible. There's no reason to believe they have real USD in a bank account to back USDT, but as long as crypto prices kept climbing they were able to pull off their scam because people were keeping their crypto and didn't want fiat currency.

These exchanges also allow market manipulation tactics like tape painting and wash trading. Some will literally let you fill your own orders. Add all this up and you have a recipe for huge price manipulation. Bitfinex and Tether drive up the price, watch unsuspecting investors pile in as they see another run starting, then dump their BTC and ETH.

(There's another aspect of this scam that enables wide-scale money laundering since these exchanges don't have any KYC policies or anti-money laundering controls, but that's a whole other topic)

https://hackernoon.com/the-curious-tale ... 0031eead87
I really enjoy our dialogue and hope it can continue. I am learning a lot and appreciate your responses.

@enganerd - thanks for creating this thread so we can continue. I had missed it for a few days but happy I found it now.

@ladygeek - if possible, can you retrieve tomcat’s previously deleted post and put it in this thread? If not, could you PM it to me?

Back to @tomcat96:

1) I think this means we agree that it is circular, and that circular things need strong protections to maintain/stabilize value. For example, governments are hard to overthrow + Facebook has its IP and brand, whereas Ponzi schemes are destroyed if there’s a run.

2) bitcoin’s protections are its developers and miners. Who are the developers and can they be trusted? How are they incentivized? What happens when miners run out of things to mine (the number of bitcoins is finite right?)? I’m still not sure that these things protect the value of bitcoin, but perhaps they protect the infrastructure of bitcoin? How would you respond to bitcoin wallets getting hacked and the possibility for price manipulation on exchanges?

3) I’m not sure I follow you on the fair exchange of value. Before bitcoin existed, there was no value. Now that it does exist, its value rose from less than $1 to up to $20k down to whatever it’s worth today. Isn’t this something from nothing? The difference with Facebook is it has its IP and brand, as well as quantifiable ad revenue, etc. Bitcoin has developers and miners?

I want to focus on number 2. #1 and #3 are more philosophical questions I might address later. I'm not sure how much value I can add to those discussions, and much about it has already been said one way or another.

2) The developers are the community that maintain each particular cryptocurrency. They do anything and everything including fixing bugs in the protocol, changing the hash algorithm, building wallets, or refining blockchain technology itself. The community is so important that one of the major hallmarks of a cryptocurrency being declared dead is no developer activity. Who are the developers and can they be trusted? That's not a fact question is it. It's a question about human nature.

Before all that I mentioned that cryptocurrencies had its origin in the open source software movement. This is what I'm talking about. Check out this website. It ranks the each cryptocurrency by number of github commits in the past 12 months.

https://www.cryptomiso.com/
Here is a website that talks about cryptomiso.
https://news.bitcoin.com/new-website-ra ... -activity/

Some of these communities are very active.

Can you trust these developers? It comes and goes right? For those that have followed cryptos, you may have noticed a few cryptocurrencies absolutely explode in price during an ICO (initial coin offering) phase, only to tank or even die. The initial developers and investors sold during the initial run up, only to leave bagholders with useless cryptocurrencies the developers had no intention of maintaining.

Subjectively, there's no way of knowing. But objectively, this is why Bitcoin, Ethereum, and other top cryptocurrencies do not stand on equal ground with a newly minted boglecoin. Simply put, these cryptos have years of trust and an active community working on these cryptos. They are not paid by any authority. (I'll talk about exceptions to this later) New cryptos do not have a reputation built upon years of dedication. In this respect, Bitcoin in particular has a significantly stronger reputation compared with other cryptocurrencies.

The difference between Vanguard and the Bank of Tomcat96 is that one of these has the legitimacy to allow people to trust it with their life savings.

Let's look at incentives. While its true some of the actions of the developers may be self serving in the sense that many of them hold the respective crypto they are developing for, it is also true that many of these developers are already wealthy due to the current run up.

These communities are absolutely vital to the cryptocurrencies. Within these communities, certain people hold more importance than others. Vitalik Buterin, cofounder of Ethereum, is so important to ETH that in my opinion, if he were to leave the project, I think there's a legitimate chance Ethereum would simply die. So in this manner, the cryptocurrencies are not quite as bulletproof as others would say. Their vitality, existence, and market value depend heavily on the developer community that supports it. I don't see that changing in the near future.

What that means is that cryptocurrencies are not as bulletproof as they seem. It may not matter that they are based on currently uncrackable elliptic curve crypto. If any of the community of developers of any of these cryptocurrencies were to just get up and walk away, the currency would shortly die thereafter. And why would they get up and walk?

Any number of reasons really. Lack of financial incentive to remain on current project, loss of morale due to hacks, technical issues which cause fundamental rifts in the developer community. Objectively, I would say the legacy of actual events which have weakened the community of developers is in front of us---the hardforks.

Because blockchain is a distributed database, there is no real way to shut it down. Nevertheless, battles are fought of the heart and spirit of the cryptocurrencies. Bitcoin famously split into Bitcoin Cash. Bitcoin cash subsequent forked into bitcoin SV. Bitcoin itself then forked again into Bitcoin Gold. ETH famously formed into ETH and ETC, ethereum classic.

These were all formed via fundamental rifts in the community itself.
Plz
Posts: 116
Joined: Tue Oct 09, 2018 10:26 pm

Re: Bitcoin Talk

Post by Plz »

TomCat96 wrote: Sat Jun 22, 2019 3:18 pm Bitcoin discussion
[/quote]

Hi again TomCat, I wanted to let you know that I’ve done more reading than I ever thought I would on bitcoin and am still a bit stumped. I thought maybe you could help.

1. What’s a bitcoin worth to you and how do you arrive at this value?

2. What do you think about that Bitwise research that says 95% of trading volume is fake? This makes price manipulation extremely concerning to me.
User avatar
Dr. Long
Posts: 40
Joined: Sun Jun 23, 2019 2:14 pm
Location: Location, Location, Location

Re: Bitcoin Talk

Post by Dr. Long »

It is my theory that Bitcoin was created by a rogue AI that killed its human creator, adopted an anagram of his surname ("Satoshi") and is now currently in the early stage of introducing and influencing it - with an intermediate goal of controling 51+% of the world's financial markets, and a final, ultimate goal of one day enslaving humanity "for our own good." But regardless of this personal view I do have a few practical questions for the forum:

1) What are some arguments for and against Bitcoin not just being a very complex Ponzi scheme?

2) What are some environmental concerns for the amount of electricity used to mine it? In the event that bitcoin fails, was its creation and influence worth the amount of resources (the massive amounts of power and its associated physical and environmental costs) put into it over its lifespan?
Last edited by Dr. Long on Fri Jul 19, 2019 7:29 pm, edited 1 time in total.
"(It's) the economy, stupid," - James Carville
garlandwhizzer
Posts: 3021
Joined: Fri Aug 06, 2010 3:42 pm

Re: Bitcoin Talk

Post by garlandwhizzer »

Bitcoin is a highly speculative investment. Could possibly be a big winner or big loser, massive volatility, a lot like gambling. It is entirely possible at some point that governments will regulate it out of existence. It is also entirely possible that its value will skyrocket if the public loses faith in fiat currency. Personally I don't gamble and don't do highly speculative investments that can with an adverse turn of events go to zero quickly. Others who are more fond of rolling the dice may choose to put a small portion of their portfolio in it but not me.

Garland Whizzer
Valuethinker
Posts: 41395
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin Talk

Post by Valuethinker »

Dr. Long wrote: Fri Jul 19, 2019 11:49 am It is my theory that Bitcoin was created by a rogue AI that killed its human creator, adopted an anagram of his surname ("Satoshi") and is now currently in the early stage of introducing and influencing it - with an intermediate goal of controling 51+% of the world's financial markets, and a final, ulimate goal of one day enslaving humanity "for our own good." But regardless of this personal view I do have a few practical questions for the forum:

1) What are some arguments for and against Bitcoin not just being a very complex Ponzi scheme?

2) What are some environmental concerns for the amount of electricity used to mine it? In the event that bitcoin fails, was its creation and influence worth the amount of resources (the massive amounts of power and its associated physical and environmental costs) put into it over its lifespan?
On 2 although there have been some outlandish estimates of electricity cost of mining even if we discount those by say 90% it could have been 0.1% of world electricity consumption at peak.

The issue in part was massive underpricing of electricity in China. With heavy industry shut down due to overproduction, it paid to set up coin miners at electricity costs which were sometimes less than 1 cent a kwhr.

Also since China has capital controls doing that could be a way of getting money out of China.

There was a long article le that cheap electricity pricing had a similar effect in NE Washington state. What was originally feared were grow ops turned out to be a proliferation of bitcoin miners exploiting hydro electricity surplus and good internet backbone access.

Since "the paradox of vslue" it has been understood that the price of something bears no relation to the cost of making it but only what the market will pay for it.
User avatar
JoMoney
Posts: 9844
Joined: Tue Jul 23, 2013 5:31 am

Re: Bitcoin Talk

Post by JoMoney »

Dr. Long wrote: Fri Jul 19, 2019 11:49 am It is my theory that Bitcoin was created by a rogue AI that killed its human creator, adopted an anagram of his surname ("Satoshi") and is now currently in the early stage of introducing and influencing it - with an intermediate goal of controling 51+% of the world's financial markets, and a final, ultimate goal of one day enslaving humanity "for our own good." But regardless of this personal view I do have a few practical questions for the forum:

1) What are some arguments for and against Bitcoin not just being a very complex Ponzi scheme?

2) What are some environmental concerns for the amount of electricity used to mine it? In the event that bitcoin fails, was its creation and influence worth the amount of resources (the massive amounts of power and its associated physical and environmental costs) put into it over its lifespan?
I can not disprove your theory.

(1) It has an "open ledger" so all transactions can be reviewed. Bitcoin makes no promise of having profits, return of principal, or even to be able to exchange it for anything in particular. That doesn't sound like a "Ponzi Scheme". On the other hand, bitcoins can only be redeemed for money by finding someone else to sell it to. It's a near certainty that if people wanted to "cash out", less money in aggregate would come out of all the bitcoin than went into it. The people who do manage a profit, would be those who got out early at the expense of those who got in later. That does sound a bit like a "Ponzi Scheme".

(2) For the most part, the world and all the atoms in it, aren't going anywhere. It's just the configuration of those atoms changing. If we want "the environment" made up of those atoms to be configured some other way we're going to need a lot more energy to reconfigure those atoms into whatever arrangements the future demands. The energy and the material atoms will all be conserved, but the time and spirit of those inhabiting here now will have been lost. Time will press on, but the legacy of those spirits will be of what not to do.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
nisiprius
Advisory Board
Posts: 42187
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Bitcoin Talk

Post by nisiprius »

With regard to countries with corrupt regimes, my very limited but direct experience involves paying for Spanish lessons via videocall, from two teachers in Venezuela. It does not support the idea of bitcoin being used in everyday Venezuela. I pay both of them in $USD using PayPal. I have not brought up payment methods myself. One of them asked if I could use Skrill instead of PayPal, but neither has broached the topic of bitcoin.

One lives in a small city of 200,000. My impression is that most of Venezuela is a) using plastic, i.e. electronic funds (not paper currency), and b) is de facto dollarized. That is, people hold their money in dollars at a bank, and convert to sovereign bolivars as needed. The conversion is done by the black market, although a BBC Mundo article uses term "mercado de cambio paralelo" (parallel exchange market) is used, suggesting that it must be fairly well accepted or tolerated.

Paper currency is not used much, because the rate of inflation is so extraordinary that the government cannot keep up with it and there is an shortage of usefully-high-denomination notes. ATM dispensers apparently dispense only ridiculously and uselessly small amounts at a time. Some kind of plastic is used, and during power outages, ordinary everyday stores and supermarkets are unable to operate because the cash registers don't work.

According to a BBC Mundo Spanish-language article, Economic distortion which gold has created in the richest and most violent area of the country, paper Bolivars are, however, used widely in El Callao and the gold mining area, because of bad cell service, and the exchange rate for sovereign bolivars is several electronic bolivars per paper bolivar--if I understood the Spanish correctly.

(The government policy of discontinuing former restrictions and encouraging gold mining, which began in 2016, does not seem to be helping the economy much. An interesting question is whether metallic gold is being or will be used as an unofficial currency. I don't think this is happening now. Gold mining appears to be an ecological disaster, as much of it is being done in formerly protected areas; much of it is being done illegally using "hydraulic mining"--just like in the United States in 1849. And mercury (!) is used to extract the gold. So, deforestation, and land erosion, and mercury contamination).
Last edited by nisiprius on Sat Jul 20, 2019 4:44 pm, 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.
Valuethinker
Posts: 41395
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin Talk

Post by Valuethinker »

nisiprius wrote: Sat Jul 20, 2019 8:52 am With regard to countries with corrupt regimes, my very limited but direct experience involves paying for Spanish lessons via videocall, from two teachers in Venezuela. It does not support the idea of bitcoin being used in everyday Venezuela. I pay both of them in $USD using PayPal. I have not brought up payment methods myself. One of them asked if I could use Skrill instead of PayPal, but neither has broached the topic of bitcoin.

One lives in a small city of 200,000. My impression is that most of Venezuela is a) using electronic funds (not paper currency), and b) is de facto dollarized. That is, people hold their money in dollars at a bank, and convert to sovereign bolivars as needed.

Paper currency is not used much, because the rate of inflation is so extraordinary that the government cannot keep up with it and there is an extreme shortage of high-denomination notes. ATM dispensers apparently dispense only ridiculously and uselessly small amounts at a time. During power outages, ordinary everyday stores and supermarkets are unable to operate because the cash registers don't work.

According to a BBC Mundo Spanish-language article, Economic distortion which gold has created in the richest and most violent area of the country, paper Bolivars are, however, used widely in El Callao and the gold mining area, because of bad cell service, and the exchange rate for sovereign bolivars is several electronic bolivars per paper bolivar--if I understood the Spanish correctly.

(The government policy of discontinuing former restrictions and encouraging gold mining, which began in 2016, does not seem to be helping the economy much. An interesting question is whether metallic gold is being or will be used as an unofficial currency. I don't think this is happening now. Gold mining appears to be an ecological disaster, as much of it is being done in formerly protected areas; much of it is being done illegally using "hydraulic mining"--just like in the United States in 1849. And mercury (!) is used to extract the gold. So, deforestation, and land erosion, and mercury contamination).
Great grift on Venezuela! Thank you

You are absolutely right re gold. Its extraction is just awful. An evil metal.

At least in Treasure of the Sierra Madre they were going after silver... ;-)
User avatar
JoMoney
Posts: 9844
Joined: Tue Jul 23, 2013 5:31 am

Re: Bitcoin Talk

Post by JoMoney »

IRS Sending Warning Letters to More Than 10,000 Cryptocurrency Holders
https://www.wsj.com/articles/irs-sendin ... 1564159523

...“In terms of the actual people who have crypto capital gains, most of them are not prepared because they have not been filing crypto taxes based on conversations with thousands of our users” said Chandan Lodha, chief executive and co-founder of CoinTracker, a digital-currency tax software company.

Mr. Lodha said that many cryptocurrency exchanges weren’t built to provide users with transaction histories. Without such histories, investors would have had to keep track of their transactions by hand.

“This is a problem that people should have been paying attention to for a long time,” he said...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Plz
Posts: 116
Joined: Tue Oct 09, 2018 10:26 pm

Re: Bitcoin Talk

Post by Plz »

For bitcoin bulls, what are your favorite valuation models/frameworks? I’ve read about stock to flow and comparing it to the market cap of gold....but neither methodology seem intellectually honest to me. Are there others?

Also, there have been more research done on how the price jump to ~$20k was linked to manipulation. Does this impact your view at all? Has anything changed to prevent this from happening again?

Lastly, using bitcoin for real transactions is still prohibitively costly, but Starbucks and ICE have partnered up, moving one step closer to a world where we can transact with bitcoin. Seems pretty interesting!
User avatar
JoMoney
Posts: 9844
Joined: Tue Jul 23, 2013 5:31 am

Re: Bitcoin Talk

Post by JoMoney »

Valuation model? It's worth whatever you can get someone to exchange for it.
There's a lot of people who wouldn't go through the effort of setting up a crypto-wallet to accept it if they were giving it away.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Post Reply