Crypto bulls are back. Are you getting in?

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-ryan-
Posts: 35
Joined: Fri Mar 01, 2019 7:14 am

Re: Crypto bulls are back. Are you getting in?

Post by -ryan- » Mon Apr 15, 2019 9:35 am

I'm a simple person. I invest in businesses, and I save and make purchases with real currency.

I don't have the FOMO that seems to drive so many people into cryptocurrencies and other alternatives to investing.

EnjoyIt
Posts: 1977
Joined: Sun Dec 29, 2013 8:06 pm

Re: Crypto bulls are back. Are you getting in?

Post by EnjoyIt » Mon Apr 15, 2019 10:58 am

TomCat96 wrote:
Sun Apr 14, 2019 1:12 am

Commenting because I want to reconcile a few things after doing fairly extensive research on bitcoin. Whatever the merits of bitcoin are, it's not a tulip, but it's no investment either--and it's not a currency in any traditional sense of the word. A cryptocurrency is really the definition of something new. Trying to pigeon-hole it into Tulip, Investment, or Currency is like trying to fit a round peg into a square hole. There's no need for it. We can accept it for what it is.

I think the more charitable use case for what a crypto is --not what it aspires to be--but what it actually is right now at this moment, is a method of transacting, inefficiently, through a medium that is private. How private? So private that in theory, the transaction can be 100% untrackable. (you must use something other than bitcoin overtly to do this)

If you follow the online forums, just like the bogleheads have a particular psychology, so too do crypto adherents have their own psychology. I'm sure some of them deal in illicit activity, but there are many many of them that have an anti-government, anti-establishment, conspiracy theory minded slant. Just watch some of their youtube channels. Obviously I'm not here to comment on that. What I am here to comment on is where the value of crypto-currencies derives from. Wheres the faith?

The faith interestingly comes from a lack of faith, in the system, a lack of faith in government and institutions. On bogleheads, we've seen this mania already many times. Why do people consistently believe the sky is about to fall in the stock markets, why do people push gold, why do people constantly push ideas of recession, etc. It's a kind of anti-faith. Faith in the failure of the system--faith because the belief exceeds evidence the system/market is about to collapse.

The value of cryptocurrencies, illicit purposes aside, derives from a faith in the failing of the system. Nisiprius pointed out one of the central ideas of the early uses cases was that transaction friction would be so great, that transacting with bitcoin would be cheaper.

It makes sense too, if you think the banks are out to get you so that they'll impose all kinds of intermediate surcharges, if you think government laws are inefficient making movement of money across borders inefficient, therein lies the value for cryptos, at the cost of ridiculous amounts of volatility and risk and total loss due to fraud. The value of crypto-currencies then is derived from costs imposed by governments and institutions, including the lack of faith by those governments and institutions.

In extreme cases like Venezuela, where the hyperinflation is in fact significantly higher than even the ridiculous volatility of bitcoin, there is some value to be had. see this article from the New York Times "Bitcoin Has Saved My Family"
https://www.nytimes.com/2019/02/23/opin ... ncies.html


For these reasons, I don't think cryptos will ever die. But I'm not sure they will or can ever take off.

Let's look at a legitimate use case. I want to buy a cup of coffee from starbucks.
There is nothing complex about that transaction technologically. Debit the cost of the coffee from me, Credit Starbucks. It can be done with a simple database. One computer. Yes you can increase the number of computers for redundancy, and atomicity of the transactions.

But compare it with bitcoin. Instead of using one database, you literally have to propagate the transaction through every node on the bitcoin network. That cannot possibly scale. Bitcoin uses a distributed blockchain ledger, established through consensus. How can it be that every time I buy a coffee, you need to update every single ledger on the network? What's more, every node needs a copy of the entire ledger---every single transaction that ever took place. In my prior comment I wrote that in trying to get a basic ethereum wallet to work, I found I could not because at this point the ethereum ledger has grown to exceed a terabyte.

It would be like if Visa decided that every single computer in the Visa financial network has to have the entire copy of the entire ledger of transactions that have ever taken place, and that with each new subsequent transaction, the update has to be propagated to every node. That's not hyperbole. That is in fact the technology.

Every node on the ethereum network needs a copy of a file that is already over a terabyte in size.
From a technological perspective, what this means is that idea that bitcoin has a use case in everyday transactions is for all intents and purposes impossible. It is significantly more inefficient than existing methods, and will forever be significantly more inefficient. There's just no two ways about this. Whether you want to use a tangle, a DAG, a lightning network, or some form of reconciled segregated witness, you're always going to be far more inefficient than an ordinary centralized network.

Which goes back to what I said before. The value of crypto derives not from trust, but a lack of trust. In a world where truly (and I mean truly truly) you can't trust anyone, it has value. But in a world where trust is reasonable, its value is minimal.

That is about as charitable as an interpretation I can give to the crypto cause at this time.
Very nice synopsis. Thanks for commenting.

Ferdinand2014
Posts: 180
Joined: Mon Dec 17, 2018 6:49 pm
Location: New England

Re: Crypto bulls are back. Are you getting in?

Post by Ferdinand2014 » Mon Apr 15, 2019 2:02 pm

No. I prefer real assets.

Quickfoot
Posts: 1089
Joined: Fri Jan 11, 2013 1:03 pm

Re: Crypto bulls are back. Are you getting in?

Post by Quickfoot » Mon Apr 15, 2019 3:11 pm

This post is funny, something is appreciating so buy it? Precisely the buy high, sell low thinking that results in people losing large sums of money.

I am someone who has been in technology for a long time and have a solid understanding of crypto currency and know people who make their living with it and wouldn't buy a single dollar of it. I actually turned down a well paying job because it was related to crypto currency. It is not an asset, it has no inherent value, and lacks both stability and regulation.

An argument could have been made to buy bitcoin at the bottom of its value IF you knew the bottom in advance, only because it was likely oversold but there is no advantage to buying now.

Gadget
Posts: 225
Joined: Fri Mar 17, 2017 1:38 pm

Re: Crypto bulls are back. Are you getting in?

Post by Gadget » Mon Apr 15, 2019 3:16 pm

Let's fast forward 20 years. What will be more valuable. A beanie baby, a tulip, or a bitcoin?

At least with a beanie baby, you can always find a 2 year old that will love it for a few days/weeks. My wife will likely still plant tulips in 20 years. I'm guessing that bitcoin will likely be worth less than both in 20 years. But if you had to guess at which one could give you an ever so slight chance of striking it rich, it would be bitcoin. By a slim margin.

Quickfoot
Posts: 1089
Joined: Fri Jan 11, 2013 1:03 pm

Re: Crypto bulls are back. Are you getting in?

Post by Quickfoot » Mon Apr 15, 2019 3:19 pm

The not so secret secret about crypto currency is the vast majority of people that get rich off it are the coin creators, extreme early adopters or fraudulent exchanges. The majority of money is made in the initial coin offering. The majority of money that is to be made by "investing" in cryptocurrency has been made at this point and if you weren't "invested" at the time you missed the boat. This is exactly the same way IPOs work and why it is such a bad idea to participate in one, the people that make money in the IPO are people that already have stock.

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