Bitcoin: Significance of 12 transactions per second?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Gauss44
Posts: 76
Joined: Wed Apr 24, 2013 12:53 pm

Bitcoin: Significance of 12 transactions per second?

Post by Gauss44 » Sun Nov 12, 2017 12:34 pm

Just wondering if anyone has a good understanding of the significance of the 12 transactions per second thing announced about Bitcoin recently? Is it true? Does this mean Bitcoin can't scale? Can Bitcoin Cash scale?

alwayshedge
Posts: 139
Joined: Sat Nov 30, 2013 7:43 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by alwayshedge » Sun Nov 12, 2017 1:14 pm

I'd stay away from that space right now at least. From what I've been told by people involved, it seems like a giant mess of different coins trying to outdo each other through manipulation. You are essentially gambling.

User avatar
rmelvey
Posts: 739
Joined: Sat Sep 18, 2010 5:17 pm
Contact:

Re: Bitcoin: Significance of 12 transactions per second?

Post by rmelvey » Sun Nov 12, 2017 1:21 pm

There is basically a civil war within the Bitcoin community right now. I don't think anyone can truly know how it will shake out. If you are participating in the crypto market the safest thing to do is own both coins in proportion to their market cap so that you are agnostic as to which side wins (same principle as index investing). That is what I am doing.

User avatar
Oicuryy
Posts: 1136
Joined: Thu Feb 22, 2007 10:29 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by Oicuryy » Sun Nov 12, 2017 1:34 pm

Poster grayfox went on a five page discovery of Bitcoin. Here is where he discovered the capacity problem.

viewtopic.php?p=3504009#p3504009

Ron
Money is fungible | Abbreviations and Acronyms

daveydoo
Posts: 916
Joined: Sun May 15, 2016 1:53 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by daveydoo » Sun Nov 12, 2017 1:34 pm

rmelvey wrote:
Sun Nov 12, 2017 1:21 pm
There is basically a civil war within the Bitcoin community right now. I don't think anyone can truly know how it will shake out. If you are participating in the crypto market the safest thing to do is own both coins in proportion to their market cap so that you are agnostic as to which side wins
This is what I do in casino roulette -- I bet on red and black in proportion to their respective market shares on the wheel. That way, I know I will win no matter what.

MandyT
Posts: 128
Joined: Sat Feb 13, 2016 2:29 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by MandyT » Sun Nov 12, 2017 6:53 pm

daveydoo wrote:
Sun Nov 12, 2017 1:34 pm
rmelvey wrote:
Sun Nov 12, 2017 1:21 pm
There is basically a civil war within the Bitcoin community right now. I don't think anyone can truly know how it will shake out. If you are participating in the crypto market the safest thing to do is own both coins in proportion to their market cap so that you are agnostic as to which side wins
This is what I do in casino roulette -- I bet on red and black in proportion to their respective market shares on the wheel. That way, I know I will win no matter what.
Unless your point is that it's best not to own Bitcoin at all, I'm not sure I understand the analogy. At the roulette table, if you bet on red or black, you might win if you get lucky. However, if you bet equally on red and black, you cannot win--most of the time you break even, but you lose everything if 0 or 00 comes up. If you also hedge on 0 and 00, you're guaranteed to lose money on every spin. (Sort of like an AUM fee.)

People who buy Bitcoin are hoping that the expected value will be positive, which may or may not turn out to be the case, but it's definitely not the case for roulette.

User avatar
Jerry55
Posts: 525
Joined: Tue Jan 27, 2015 1:56 am
Location: That Toddlin' Town

Re: Bitcoin: Significance of 12 transactions per second?

Post by Jerry55 » Sun Nov 12, 2017 7:11 pm

i don't like bitcoin because I can't fold it and put it in my wallet....
Retired 12/19/2012 @ age 57 | Good Bye Tension, Hello Pension !!!

User avatar
nisiprius
Advisory Board
Posts: 34128
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: Significance of 12 transactions per second?

Post by nisiprius » Sun Nov 12, 2017 7:16 pm

Oicuryy wrote:
Sun Nov 12, 2017 1:34 pm
Poster grayfox went on a five page discovery of Bitcoin. Here is where he discovered the capacity problem.

viewtopic.php?p=3504009#p3504009

Ron
Wow, that's all fascinating. I'm a bitcoin skeptic but not so obsessed with it that I'd followed that thread. Apart from everything else, a cryptocurrency with a need for near-perfect security that also needs constant code revisions is... unattractive.

It's interesting to see people speculating on whether Ethereum (is it capitalized or not?) will displace bitcoin, because the last cryptocurrency news I'd noticed was that someone had "accidentally" (accidentally-on-purpose?) locked up $300 million worth of other peoples' Ethereum and thrown away the key. The advocacy spin on this is that it's not a big problem because none of it has actually been lost.
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.

daveydoo
Posts: 916
Joined: Sun May 15, 2016 1:53 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by daveydoo » Sun Nov 12, 2017 9:22 pm

MandyT wrote:
Sun Nov 12, 2017 6:53 pm
daveydoo wrote:
Sun Nov 12, 2017 1:34 pm
rmelvey wrote:
Sun Nov 12, 2017 1:21 pm
There is basically a civil war within the Bitcoin community right now. I don't think anyone can truly know how it will shake out. If you are participating in the crypto market the safest thing to do is own both coins in proportion to their market cap so that you are agnostic as to which side wins
This is what I do in casino roulette -- I bet on red and black in proportion to their respective market shares on the wheel. That way, I know I will win no matter what.
Unless your point is that it's best not to own Bitcoin at all, I'm not sure I understand the analogy. At the roulette table, if you bet on red or black, you might win if you get lucky. However, if you bet equally on red and black, you cannot win--most of the time you break even, but you lose everything if 0 or 00 comes up.
Yes. This was the joke. Comment I referred to from melvey above implied that there is a zero-sum game across the crypto currencies so if you bet on all, you have to win. It's very clear that they could all be losers, not just all but one.

User avatar
grayfox
Posts: 4570
Joined: Sat Sep 15, 2007 4:30 am
Location: Earth

Re: Bitcoin: Significance of 12 transactions per second?

Post by grayfox » Tue Nov 14, 2017 3:12 pm

Gauss44 wrote:
Sun Nov 12, 2017 12:34 pm
Just wondering if anyone has a good understanding of the significance of the 12 transactions per second thing announced about Bitcoin recently? Is it true? Does this mean Bitcoin can't scale? Can Bitcoin Cash scale?
Properties and functions of money:
1. Medium of Exchange - must be widely accepted as payment for goods and services
2. Unit of Account - prices, bank balances, etc must be posted in that currency
3. Store of Value - must hold purchasing power over time

1. With limited number of transactions it can support, Bitcoin has little or no usefulness as a medium of exchange. Because of the limited capacity, it has high fees and slow and unreliable transactions. It has already hit the limit by 2016 and is many orders of magnitude below capacity level needed to be useful. IMO, this is a showstopper. Bitcoin can never replace US dollars, Euros, Russian Rubles, Polish zloty, or any other national currency. OK, maybe Liechtenstein with only 33,000 people could adopt it as their national currency.

2. The exchange rate between bitcoin and Dollars/Euros is too volatile to list prices of goods in bitcoin. If you had price of a car set at 3 BTC, the dollar price would be going up and down 5 or 10 percent or even 20% on a daily basis. So forget about bitcoin as a unit of account.

3. The only function left for bitcoin is a store of value. Since it has no usefulness as a currency, they are trying to present bitcoin as Digital Gold. I don't see the logic there: How can something be a store of value if you can't buy things with it? All you can do is sell it to someone else. Trade it back and forth, but can never use it to pay for rent or groceries.

At this point, bitcoin looks only like something for speculators to gamble with. Good Luck with that!

:?: Is there a better cryptocurrency than bitcoin that does not have such a crippling capacity limitation. Which of the 1279 cryptocurrencies listed? Maybe DASH or Litecoin or Bitcoin Cash?
Gott mit uns.

User avatar
rmelvey
Posts: 739
Joined: Sat Sep 18, 2010 5:17 pm
Contact:

Re: Bitcoin: Significance of 12 transactions per second?

Post by rmelvey » Wed Nov 15, 2017 7:46 am

grayfox wrote:
Tue Nov 14, 2017 3:12 pm
Gauss44 wrote:
Sun Nov 12, 2017 12:34 pm
Just wondering if anyone has a good understanding of the significance of the 12 transactions per second thing announced about Bitcoin recently? Is it true? Does this mean Bitcoin can't scale? Can Bitcoin Cash scale?
Properties and functions of money:
1. Medium of Exchange - must be widely accepted as payment for goods and services
2. Unit of Account - prices, bank balances, etc must be posted in that currency
3. Store of Value - must hold purchasing power over time

1. With limited number of transactions it can support, Bitcoin has little or no usefulness as a medium of exchange. Because of the limited capacity, it has high fees and slow and unreliable transactions. It has already hit the limit by 2016 and is many orders of magnitude below capacity level needed to be useful. IMO, this is a showstopper. Bitcoin can never replace US dollars, Euros, Russian Rubles, Polish zloty, or any other national currency. OK, maybe Liechtenstein with only 33,000 people could adopt it as their national currency.

2. The exchange rate between bitcoin and Dollars/Euros is too volatile to list prices of goods in bitcoin. If you had price of a car set at 3 BTC, the dollar price would be going up and down 5 or 10 percent or even 20% on a daily basis. So forget about bitcoin as a unit of account.

3. The only function left for bitcoin is a store of value. Since it has no usefulness as a currency, they are trying to present bitcoin as Digital Gold. I don't see the logic there: How can something be a store of value if you can't buy things with it? All you can do is sell it to someone else. Trade it back and forth, but can never use it to pay for rent or groceries.

At this point, bitcoin looks only like something for speculators to gamble with. Good Luck with that!

:?: Is there a better cryptocurrency than bitcoin that does not have such a crippling capacity limitation. Which of the 1279 cryptocurrencies listed? Maybe DASH or Litecoin or Bitcoin Cash?
Something to keep in mind is that the Bitcoin protocol is always improving. It's a huge open source software project with hundreds of developers around the world. There are very exciting scaling solutions in the works. The most promising is the lightning network, which would allow for many transactions to get netted out before getting written to the chain, increasing throughput while keeping the chain light. The other cryptocurrencies have lower transaction fees largely because they aren't as popular. It's kind of like that old joke "No one goes to that restaurant anymore because it's too crowded."

I agree that Bitcoin is not useful as a day to day currency right now. I am using it only as store value / speculation. I appreciation you wishing us good luck, but I don't think we will need it :happy

User avatar
nisiprius
Advisory Board
Posts: 34128
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: Significance of 12 transactions per second?

Post by nisiprius » Wed Nov 15, 2017 10:17 am

It is significant in three ways.

1) It is another example of bitcoin not being what its advocates said it was. One more "oh, yeah, everybody in the in-group knew about that but we forget to mention it to you until now."

The most convincing case to me for bitcoin being "legit," and not just intended to enrich the first movers and early adopters, and not just intended to facilitate illegal transactions, was the claim that it was far cheaper and better than credit cards or other traditional routes. Soon, every eCommerce website would be adding "pay by bitcoin" to "pay by credit card" and "pay by Paypal" and noodging you to use bitcoin. Now we learn that it was never engineered to scale up enough for serious large-scale use.

2) It shows that the bitcoin world is roiled with competing factions pulling in different directions and no general agreement on how it ought to work, so the dead-simple and obvious solution of increasing the block size is impossible because of important stakeholders who want the block size left as it is.

It is dangerous to have this kind of chaos in a protocol that is now being entrusted with serious money. You have to trust the protocol itself because the whole idea was to engineer out the need to trust any people. This is very serious because the trustworthiness of the protocol rests on its being open source whose security is validated only by the hope that "many eyes" are inspecting it for safety and security. But we now realize the protocol is constantly being changed, revised, improved, debugged. The more complicated the protocol and the more often it changes, the more likely it is that bugs will slip through. And not, necessarily just innocent, accidental bugs. Right now, Apple Mail sucks, but I don't fear any conspiracy because the there is no financial motive for Apple to put bugs into Apple Mail. But because of the financial nature of bitcoin, there is a compelling motive for clever coders to try to slip back doors and nefarious features into the code, and the more forks and revisions and updates there are, the greater the chances of someone actually succeeding.

The bitcoin "Lightning Network" appears to be hugely controversial within the bitcoin community. I'm not in any situation to evaluate it for myself, but clearly there is no consensus on whether this is just a safe, secure, valid extension of bitcoin or whether it is actually a sneaky reintroduction of the idea of a trusted central authority. In any case, if "Lightning Network" is needed to make bitcoin actually do the things it was supposed to be able to do all by itself, then all considerations of safety and security need to be doubled--everyone needs to ask not only "can the bitcoin protocol be trusted," but "can the Lightning Network protocol and agency be trusted?"

If there isn't solid consensus in the bitcoin community on how bitcoin should work, and a very stable and fairly small code base for "many eyes" to review, then bitcoin fundamentally isn't safe.

3) In layered systems, watch out for sophistry with regard to which layers are at fault. On November 6th, 2017, a coder goofed and accidentally locked up and threw away the key to $130 million worth of Ethereum. Cryptocurrency apologists say we shouldn't blame Ethereum because all the ether is still there and besides the bug wasn't in Ethereum as such, it was a bug in something else that was running on top of Ethereum. That is the kind of nice distinction that rings hollow. If someone loses a lot of bitcoin they won't be cheered if someone says "Oh, that wasn't really lost by bitcoin itself, it was lost by Lightning Network." To cite an actual parallel in the past, if you lost money in the once-regarded-as-"reputable" Mt. Gox exchange, it is not very comforting to have someone say "you just need to be careful to use only a reputable exchange."
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.

Jonathan
Posts: 351
Joined: Tue Apr 30, 2013 5:36 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by Jonathan » Wed Nov 15, 2017 10:38 am

I think good bitcoin criticism is beneficial. However, you might consider reviewing some of the more established sources of research on it. There's actually an in-depth bitcoin wiki, with over 1,000 pages: https://en.bitcoin.it/wiki/Main_Page . That wiki has its own page on scalability that's over six years old. And there's also a Wikipedia page devoted to the bitcoin scalability problem.

One of the more digestible scalability solutions is simply to perform some transactions off-chain. That concept has its own criticisms too, but it's also easy to understand from a non-technical perspective: it's somewhat analogous to writing a check.

On a positive note, it seems like we've moved beyond "bitcoin is a Ponzi" and "bitcoin is tulips". This community has the intellectual resources to provide some of the best criticism of cryptocurrencies on the web.

Valuethinker
Posts: 33143
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by Valuethinker » Wed Nov 15, 2017 4:08 pm

Jonathan wrote:
Wed Nov 15, 2017 10:38 am
I think good bitcoin criticism is beneficial. However, you might consider reviewing some of the more established sources of research on it. There's actually an in-depth bitcoin wiki, with over 1,000 pages: https://en.bitcoin.it/wiki/Main_Page . That wiki has its own page on scalability that's over six years old. And there's also a Wikipedia page devoted to the bitcoin scalability problem.

One of the more digestible scalability solutions is simply to perform some transactions off-chain. That concept has its own criticisms too, but it's also easy to understand from a non-technical perspective: it's somewhat analogous to writing a check.

On a positive note, it seems like we've moved beyond "bitcoin is a Ponzi" and "bitcoin is tulips". This community has the intellectual resources to provide some of the best criticism of cryptocurrencies on the web.
How about "it is showing all the characteristics of an asset bubble?"

User avatar
nisiprius
Advisory Board
Posts: 34128
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: Significance of 12 transactions per second?

Post by nisiprius » Wed Nov 15, 2017 4:16 pm

Jonathan wrote:
Wed Nov 15, 2017 10:38 am
That wiki has its own page on scalability that's over six years old.
You mean the one that begins "[Note: This page is seriously outdated and largely unmaintained; due to past incidents of edit-warring it has not been subject to much peer review.]?"
And there's also a Wikipedia page devoted to the bitcoin scalability problem
And it was created this year.
One of the more digestible scalability solutions is simply to perform some transactions off-chain.
Simply?
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.

User avatar
rmelvey
Posts: 739
Joined: Sat Sep 18, 2010 5:17 pm
Contact:

Re: Bitcoin: Significance of 12 transactions per second?

Post by rmelvey » Wed Nov 15, 2017 5:10 pm

Valuethinker wrote:
Wed Nov 15, 2017 4:08 pm
How about "it is showing all the characteristics of an asset bubble?"
The area is very speculative, but bubbles usually involve wide participation and high market caps. Cryptocurrencies are still very clunky to use, limiting the field to enthusiasts right now. The entire cryptocurrency space only has a market cap of 220 billion. Think about how much global wealth is looking for anonymity, freedom from capital controls, opportunities for tax evasion (I am not condoning this, but think about how many billions are looking for this), opportunities for hiding assets from the legal system (again not condoning this, but think of how much this is worth), and zero correlation with interest rates and the business cycle. I see that as an asset class in the trillions, not the billions.

Look at the Saudi Prince Alaweed who poop-poo-ed Bitcoin saying it is worthless. Well, he recently got all of his assets frozen. If he had tucked away cryptocurrency he would be in a different position right now...

User avatar
3CT_Paddler
Posts: 3116
Joined: Wed Feb 04, 2009 5:28 pm
Location: Marietta, GA

Re: Bitcoin: Significance of 12 transactions per second?

Post by 3CT_Paddler » Wed Nov 15, 2017 6:01 pm

rmelvey wrote:
Wed Nov 15, 2017 5:10 pm
Valuethinker wrote:
Wed Nov 15, 2017 4:08 pm
How about "it is showing all the characteristics of an asset bubble?"
The area is very speculative, but bubbles usually involve wide participation and high market caps. Cryptocurrencies are still very clunky to use, limiting the field to enthusiasts right now. The entire cryptocurrency space only has a market cap of 220 billion. Think about how much global wealth is looking for anonymity, freedom from capital controls, opportunities for tax evasion (I am not condoning this, but think about how many billions are looking for this), opportunities for hiding assets from the legal system (again not condoning this, but think of how much this is worth), and zero correlation with interest rates and the business cycle. I see that as an asset class in the trillions, not the billions.

Look at the Saudi Prince Alaweed who poop-poo-ed Bitcoin saying it is worthless. Well, he recently got all of his assets frozen. If he had tucked away cryptocurrency he would be in a different position right now...
I think its safe to say that any Bitcoin assets he would have owned would also have been forfeited if the Saudi state had any records of Bitcoin purchases from bank transactions.

There have been many previous bubbles restricted to certain countries, regions or segments of the general population previously (Tulips!)... it doesn't require global adoption by the general population to be an asset bubble.

People don't pay $5000 per Bitcoin because of its utility, but because they believe it will provide future wealth. It's just a question of how big it will get before it crashes. It might continue to appreciate like crazy for years, but there is no intrinsic value there.

There is a viable competitor that just came out a couple months ago and it is rapidly appreciating, because it provides faster transactional approval and lower fees (Bitcoin Cash). If people continue to adopt it and see it as a better solution to transfer money it will rob from the original Bitcoin and cause Bitcoin to crash.

Blockchain technology itself is a great thing... investing in Bitcoin at today's prices is crazy risky.

alwayshedge
Posts: 139
Joined: Sat Nov 30, 2013 7:43 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by alwayshedge » Wed Nov 15, 2017 8:42 pm

3CT_Paddler wrote:
Wed Nov 15, 2017 6:01 pm
I think its safe to say that any Bitcoin assets he would have owned would also have been forfeited if the Saudi state had any records of Bitcoin purchases from bank transactions.
That's not possible. That's the whole point of Bitcoin.

TomCat96
Posts: 428
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by TomCat96 » Thu Nov 16, 2017 12:28 am

Jonathan wrote:
Wed Nov 15, 2017 10:38 am
I think good bitcoin criticism is beneficial. However, you might consider reviewing some of the more established sources of research on it. There's actually an in-depth bitcoin wiki, with over 1,000 pages: https://en.bitcoin.it/wiki/Main_Page . That wiki has its own page on scalability that's over six years old. And there's also a Wikipedia page devoted to the bitcoin scalability problem.

One of the more digestible scalability solutions is simply to perform some transactions off-chain. That concept has its own criticisms too, but it's also easy to understand from a non-technical perspective: it's somewhat analogous to writing a check.

On a positive note, it seems like we've moved beyond "bitcoin is a Ponzi" and "bitcoin is tulips". This community has the intellectual resources to provide some of the best criticism of cryptocurrencies on the web.

I think the community skepticism on Bitcoin is well-founded. A boglehead portfolio such as a three fund portfolio builds wealth steadily and definitively. It's supposed to be a plan you follow for 30, 40+ years. Out of nowhere comes this new asset bitcoin.

It did not exist prior to 2009. It has no inherent value. Where does such an asset fit into a plan we're supposed to follow for 30, 40 years? Nowhere.

The inherent genius behind stay the course is that it implies the investment plan you stay the course on is so rock solid, you can follow the same course from now until you die. It makes sense too. You're chopping up the global market into small purchasable chunks and buying those. If you keep buying legal interests in the the entire diversified market, you're going to build wealth. You can be sure you're going to have more chunks of the market tomorrow than you are today. If you trade in and out, you can't be sure of that. If you buy one stock, you can't be sure of that.

But you can be sure that the "market" will be around tomorrow(if you buy the entire market), and if you do nothing but steadily buy that market, you're going to have more wealth in the future.

I just don't see how bitcoin has any value in maintaining those assurances. If I keep buying more and more bitcoin, will I be wealthy by the time I retire? Will bitcoin be around in 40 years? I don't know. And based on prior history, the closest thing bitcoin seems to resemble is a ponzi scheme or tulip bulbs.

If you do get into bitcoin, the decision to enter into such market is going to a short term trade of sorts. I cannot just buy it and leave for the next 40 years. I might buy it and see what becomes of it in 5 years, or 5 months. But it is necessarily a decision based on judgment that I have to come back and re-evaluate. We discourage those kinds of active trading decisions for individual stock. How much more so for this 7 year old asset with zero inherent value?

Bitcoin is not a set it and forget it trade. Bitcoin is also not something you can buy and be assured your wealth has grown. In fact even if you diversified among all cryptocurrencies, you still cannot be sure your wealth has grown. And I mean wealth as in your share of the global pie of assets.

If I own more shares of the entire market. I can be pretty sure my wealth has grown. If tomorrow the entire market shrinks by 50%, you still own the same percentage of the market. It's the market itself that has gotten smaller. Your destiny is tied with the market, which if well diversified enough is essentially the sum of all human labor. You are collecting shares of ownership of the entire sum of human labor. Your wealth grows with the population, or the expansion of capital enterprise, which is what we(every laborer in a sense) are collectively working towards each day--the growth of the companies which employ us.

Bitcoin doesn't fit in that conceptual category. It fits in the conceptual category of sector bet--that a currently popular sector will expand dramatically in the future. I'm not arguing it won't. It may well continue to grow.

But looking at the characteristics:
--sector bet
--no inherent value
--growth based on speculation of its future role in global finance
--inherently a short term trade, and thereby an inherent market timing event.
--little conceptual assurance wealth has grown after purchase.

It just seems to me, it's not an appropriate component of the boglehead portfolio, in any way shape or form.

TravelGeek
Posts: 1163
Joined: Sat Oct 25, 2014 3:23 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by TravelGeek » Thu Nov 16, 2017 12:55 am

Jerry55 wrote:
Sun Nov 12, 2017 7:11 pm
i don't like bitcoin because I can't fold it and put it in my wallet....
I think you actually can.... this guy put them (the keys) under his daughter’s pillow.

https://www.wired.com/story/i-forgot-my ... n-bitcoin/

User avatar
Ged
Posts: 3291
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: Bitcoin: Significance of 12 transactions per second?

Post by Ged » Thu Nov 16, 2017 12:35 pm

TomCat96 wrote:
Thu Nov 16, 2017 12:28 am

It did not exist prior to 2009. It has no inherent value. Where does such an asset fit into a plan we're supposed to follow for 30, 40 years? Nowhere.
There are a lot of currencies that have no inherent value. The problems with bitcoin lie elsewhere. As a result I haven't purchased any bitcoins.

That being said I think blockchain is an extremely useful technology which I expect to see a lot of applications for.

Valuethinker
Posts: 33143
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by Valuethinker » Thu Nov 16, 2017 12:54 pm

rmelvey wrote:
Wed Nov 15, 2017 5:10 pm
Valuethinker wrote:
Wed Nov 15, 2017 4:08 pm
How about "it is showing all the characteristics of an asset bubble?"
The area is very speculative, but bubbles usually involve wide participation and high market caps. Cryptocurrencies are still very clunky to use, limiting the field to enthusiasts right now. The entire cryptocurrency space only has a market cap of 220 billion.
Do you remember the Australian mining bubble of the early 1970s? Just an example. Or the diamond mining company bubble in Australia and Canada in the 1990s?

The salient bubbles are big. Dot com bubble was probably a few trillion, US housing bubble bigger than that (at peak). But, actually, there are smaller financial bubbles all the time-- it's just we don't notice their expiry.
Think about how much global wealth is looking for anonymity, freedom from capital controls, opportunities for tax evasion (I am not condoning this, but think about how many billions are looking for this), opportunities for hiding assets from the legal system (again not condoning this, but think of how much this is worth), and zero correlation with interest rates and the business cycle. I see that as an asset class in the trillions, not the billions.

Look at the Saudi Prince Alaweed who poop-poo-ed Bitcoin saying it is worthless. Well, he recently got all of his assets frozen. If he had tucked away cryptocurrency he would be in a different position right now...
All of which is why I think it's going to get harder to use bitcoin, not easier.

There's an inefficiency which crypto currencies attack, the high cost of moving money between countries using conventional banking and foreign exchange, particularly for individuals. Western Union's fees were rapacious (don't know if they still are).

But as a store of value, they are not there yet.

User avatar
3CT_Paddler
Posts: 3116
Joined: Wed Feb 04, 2009 5:28 pm
Location: Marietta, GA

Re: Bitcoin: Significance of 12 transactions per second?

Post by 3CT_Paddler » Thu Nov 16, 2017 3:05 pm

alwayshedge wrote:
Wed Nov 15, 2017 8:42 pm
3CT_Paddler wrote:
Wed Nov 15, 2017 6:01 pm
I think its safe to say that any Bitcoin assets he would have owned would also have been forfeited if the Saudi state had any records of Bitcoin purchases from bank transactions.
That's not possible. That's the whole point of Bitcoin.
If you have the bank records you have proof/evidence of transfer of funds to a Bitcoin exchange. They could easily figure out the amount of Bitcoin he has accumulated based on those records (if he were to purchase Bitcoin).

The anonymous part would be what you do with the money once it is converted to Bitcoin. And even then, Bitcoin transactions are only pseudo anonymous... there are still ways to track the funds.

TomCat96
Posts: 428
Joined: Sun Oct 18, 2015 12:18 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by TomCat96 » Thu Nov 16, 2017 4:07 pm

Ged wrote:
Thu Nov 16, 2017 12:35 pm
TomCat96 wrote:
Thu Nov 16, 2017 12:28 am

It did not exist prior to 2009. It has no inherent value. Where does such an asset fit into a plan we're supposed to follow for 30, 40 years? Nowhere.
There are a lot of currencies that have no inherent value. The problems with bitcoin lie elsewhere. As a result I haven't purchased any bitcoins.

That being said I think blockchain is an extremely useful technology which I expect to see a lot of applications for.


That other currencies have no inherent value is not a problem with bitcoin. But it is a problem with currency as a store of value.
It's value is only as good as the faith placed into it. I don't invest in dollars or euros. I wouldn't invest in a diversified portfolios of such currencies either. The inherent worth of those currencies is nothing.

Better to simply buy assets which those currencies serve as a medium of exchange for.

Valuethinker
Posts: 33143
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by Valuethinker » Thu Nov 16, 2017 4:21 pm

TomCat96 wrote:
Thu Nov 16, 2017 4:07 pm
Ged wrote:
Thu Nov 16, 2017 12:35 pm
TomCat96 wrote:
Thu Nov 16, 2017 12:28 am

It did not exist prior to 2009. It has no inherent value. Where does such an asset fit into a plan we're supposed to follow for 30, 40 years? Nowhere.
There are a lot of currencies that have no inherent value. The problems with bitcoin lie elsewhere. As a result I haven't purchased any bitcoins.

That being said I think blockchain is an extremely useful technology which I expect to see a lot of applications for.


That other currencies have no inherent value is not a problem with bitcoin. But it is a problem with currency as a store of value.
It's value is only as good as the faith placed into it. I don't invest in dollars or euros. I wouldn't invest in a diversified portfolios of such currencies either. The inherent worth of those currencies is nothing.

Better to simply buy assets which those currencies serve as a medium of exchange for.
In some sense bitcoin comes across as a sort of electronic gold.

But gold has (mostly decorative) physical use. And thousands of years tradition as a store of monetary value.

It remains to be seen that bitcoin can duplicate that.

As ever, xkcd may have the definitive comment:

https://xkcd.com/1831/

alwayshedge
Posts: 139
Joined: Sat Nov 30, 2013 7:43 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by alwayshedge » Thu Nov 16, 2017 6:59 pm

3CT_Paddler wrote:
Thu Nov 16, 2017 3:05 pm
alwayshedge wrote:
Wed Nov 15, 2017 8:42 pm
3CT_Paddler wrote:
Wed Nov 15, 2017 6:01 pm
I think its safe to say that any Bitcoin assets he would have owned would also have been forfeited if the Saudi state had any records of Bitcoin purchases from bank transactions.
That's not possible. That's the whole point of Bitcoin.
If you have the bank records you have proof/evidence of transfer of funds to a Bitcoin exchange. They could easily figure out the amount of Bitcoin he has accumulated based on those records (if he were to purchase Bitcoin).

The anonymous part would be what you do with the money once it is converted to Bitcoin. And even then, Bitcoin transactions are only pseudo anonymous... there are still ways to track the funds.

Correct but you said forfeited in your original post. That's what I was referring to.

ianferrel
Posts: 161
Joined: Thu May 29, 2008 5:27 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by ianferrel » Thu Nov 16, 2017 7:16 pm

nisiprius wrote:
Wed Nov 15, 2017 10:17 am
To cite an actual parallel in the past, if you lost money in the once-regarded-as-"reputable" Mt. Gox exchange, it is not very comforting to have someone say "you just need to be careful to use only a reputable exchange."
In general, your post is excellent and I agree with all of it except the quoted part.

As someone who lost money from Mt. Gox, I don't believe anyone ever regarded it as reputable :)

User avatar
Steelersfan
Posts: 3336
Joined: Thu Jun 19, 2008 8:47 pm

Re: Bitcoin: Significance of 12 transactions per second?

Post by Steelersfan » Thu Nov 16, 2017 8:35 pm

Gauss44 wrote:
Sun Nov 12, 2017 12:34 pm
Just wondering if anyone has a good understanding of the significance of the 12 transactions per second thing announced about Bitcoin recently? Is it true? Does this mean Bitcoin can't scale? Can Bitcoin Cash scale?
At 12 transactions a second it will never support consumer type scale. If everyone at one large retail mall on black Friday did all their transactions with bitcoins, they'd use up all that available capacity all day and into the evening.

User avatar
telemark
Posts: 2055
Joined: Sat Aug 11, 2012 6:35 am

Re: Bitcoin: Significance of 12 transactions per second?

Post by telemark » Thu Nov 16, 2017 8:53 pm

My very simplified model of blockchain is that it make it possible, with considerable extra time, complexity, and expense, to do in a decentralized way the same things that could be done much more simply and easily in a centralized way, by keeping a ledger somewhere. The extra time and expense cannot be eliminated with clever algorithms since they are the part that makes the decentralization possible.

So the question becomes, what is the value of decentralization? My personal opinion is not much, but many other people disagree.

Post Reply