Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Post by vas » Fri Mar 20, 2015 2:13 pm

Picked up a copy of The Age of Cryptocurrency ... 1250065631 recently. Its a fascinating look at the way our financial system works and the fundamental nature of money. If you are curious about the history of BitCoin, or the potential impact of cryptocurrencies in general, its worth a read. Note that the authors diluted some of the technical details to the point of virtual nonsense in an effort to make the mathematics accessible to a wide audience. If this is frustrating for you there are white papers that provide more details. My initial interest was in the factors that made BitCoin finite and influenced its value. The book covered this well. It also provided a fascinating description of the process, banks, and costs involved in every point of sale credit card transaction. The amount of money earned by banks in the middle of these transactions is staggering.

What are your thoughts on cryptocurrency?

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Re: Cryptocurrency

Post by ShiftF5 » Fri Mar 20, 2015 3:47 pm

"The amount of money earned by banks in the middle of these transactions is staggering"

That strong headwind will certainly do all it can to keep Bitcoin etc. from taking hold IMHO.

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Re: Cryptocurrency

Post by Rainier » Fri Mar 20, 2015 3:50 pm

I bought Bitcoin for a client...the fees and hassle to buy and sell back to dollars was staggering.

Also, the massive price swings are even more staggering.

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Re: Cryptocurrency

Post by telemark » Fri Mar 20, 2015 4:49 pm

the process, banks, and costs involved in every point of sale credit card transaction. The amount of money earned by banks in the middle of these transactions is staggering.
The key phrase here is "point of sale." I can pull a credit card out of my wallet and use it to buy something almost anywhere, no computer or expensive phone needed. Heck, I can pull a $20 bill out of my wallet without even needing a credit card. I can't do that with bitcoin. I'm still looking for a convincing use case that doesn't involve doing something illegal. Evading currency controls or buying drugs over the internet, sure, but see the previous sentence.

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Re: Cryptocurrency

Post by nisiprius » Fri Mar 20, 2015 5:02 pm

1) One of the characteristics of any useful currency is a reasonably stable value. Since bitcoin and other cryptocurrencies do not even make an attempt to have a stable value, I conclude that whatever their purpose actually is, usability as a "currency" is not one of them.

2) The number of scams of some kind that are connected with cryptocurrency are enough to give me pause. Advocates of cryptocurrencies will say it is not the fault of the currency itself, so call it guilt by association if you like, but it is still impressive.

It's not just Mt. Gox.

It's Early Bitcoin Adopters Facing Extortion Threats.

It's FTC shuts down Butterfly Labs, the second-most hated company in Bitcoinland
The mining equipment company failed to deliver tens of thousands of computers, and delivered others so late they were obsolete
It's Hong Kong Bitcoin Exchange MyCoin "Lost" $387 Million of Customers' Money.

It's Bitcoin bank Flexcoin shuts down after hack
The Canadian Bitcoin bank goes offline after hackers steal 896 bitcoins -- valued at more than $580,000
bitcoin seems to be attracting some shady operators.

Meanwhile, in the world of pesky old government regulation, we've been hearing since July 2013 that the Winklevoss twins were within months of launching a bitcoin ETF--we know what the ticker symbol will be, COIN--last year it was said that it would launch before the end of 2014 and in January 2015 they were saying it was still "on track" for a launch in the "first quarter" of 2015, but as I write this there does not seem to be any quotation available, maybe in a few weeks.
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Re: Cryptocurrency

Post by ourbrooks » Fri Mar 20, 2015 5:27 pm

You don't really need to use crypto currencies to achieve nearly all of the benefits of crypto currencies for transferring money. The Automated Clearing House (ACH) system is a digital currency which is quickly converted from/to dollars at each end. Using ACH, no physical currency is ever moved around, particularly, not paper checks.

The cost of using the ACH digital currency is incredibly low. Many banks offer free bill pay services with very low minimum balances. I wouldn't be surprise if some banks offer free bill pay but charge for writing a paper check. There are no transaction fees.

More and more online businesses accept ACH payments; any time they refer to "paying directly from your checking account", that's what they mean. Amazon is one of the ones that does.

There are two big disadvantages to ACH: It's kind of slow; a transaction can take up to two business days to complete. (Is that always a disadvantage?) It only works in the U.S. although there are equivalent systems in Europe that are much faster.

If a crypto currency is transmitted and converted rapidly enough, a reasonably stable value doesn't matter. The value just has to stay constant for long enough for the transactions to take place. ACH already does that extremely well.

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Re: Cryptocurrency

Post by in_reality » Fri Mar 20, 2015 11:31 pm

vas wrote:
What are your thoughts on cryptocurrency?
Untraceable transactions are great for ransoms and should be illegal.

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Re: Cryptocurrency

Post by mjb » Sat Mar 21, 2015 8:48 am

The rise of crypto currencies signals a feeling by many that the banking and finance industries aren't serving their needs. It doesn't mean that cryptocurrencies are the solution, but they do shed light on a problem.

Crypto currencies have a lot of benefits in theory. Low transaction costs (fractions of a percent) within the network. The potential for no currency conversion costs. Cooperative control of the currency. The potential for predictable value when widely adopted (could be stable, inflationary, or deflationary) and encourage national currencies to compete to keep average citizens using the national currencies. A level of anonymity greater than credit cards but less than cash.

Not all of these have occurred and they have attracted illicit activity. That being said, after 2 bubbles, the value of the main cryptocurrency has mostly stabilized. Regulators and industry have made great strides in legitimization and legal compliance. And with companies like coinbase and bitpay, transactions are now easier for individuals and businesses with the transaction cost benefits.

I used to mine crypto currencies and I do use them. I am friends that have taken advantage of the low transaction costs, especially with online international transactions. I have been able to take advantage of cost savings as well.

The industry most threatened by crypto currencies is Western Union. Some fees for immigrants to send money home are over 25% where they can use crypto currencies with at most 5%. I know people that do this.

That being said, I think that unless you have a need to use them or know a lot about cryptography/computers that you should stay away. They are not ready for use by average citizens and may never need to be. PayPal and debit cards are now providing person to person transactions at prices competitive with Bitcoin. Lower cost credit card enhancements google pay, apple pay, PayPal direct from bank accounts, etch are narrowing the gap in terms of fees.


Cryptocurrencies show there is a market need
The a market is responding through parallel innovation
Only use them if you have a need or want to use a few to learn about them.

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Re: Cryptocurrency

Post by LadyGeek » Sat Mar 21, 2015 10:24 am

This thread has run its course and is locked (not personal nor actionable). See: A reminder that non-investing general comment threads are OT
- It must be personal. In other words, you must be asking about your own situation. You can also ask on behalf of someone specific, such as a family member.

- It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation.
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