Man, this is just weird. I just bought 0.05 Bitcoins (you know FOMO and all that) and it just feels so much more empty than back in the days when I mined them myself with my brand new dual Xeon CPU and later on was thinking grand thoughts and building little projects with epaper ink displays to display QR codes on small devices that would work on low bandwidth connections and maybe offline. Lots of problems to be solved back then, but Bitcoin is just the same now. Nothing was solved. No progress and scams everywhere and people being all religious about Bitcoin. Every man for themselves and to the moon... These days I am even getting scam calls from something called the Bitcoin Academy with people cheering in the background, when it reaches the all time high. No kidding...
I have no idea what to do with my 0.05 BTC. Just let them sit there, I guess as a curiosity of old days. I don't really feel that I fit into the moon community and I don't really feel I want to build anything around this tech just because it is not about tech anymore.
Had lots of Bitcoin sift through my hands. Anyone remember the Bitcoin faucets? Those were the times.
Sincerely,
One of the first 1000 users of MtGox (proof in the leaked MtGox database :P)
I've always been a negative detractor of bitcoin. But then I realized the problem was it was marketed wrong. As a currency, it's a nightmare of a creation. But as a store of value, it's actually pretty good. As long as you don't buy in at one of the speculative bubbles (which admittedly is when the majority of people get in), it's been pretty good at more or less maintaining its value.
As a non-physical thing, it's a good place to go when you're not sure about where to put your money. That used to be the role of the dollar, but this is a good alternative that has cheaper forex fees.
I think the long-term value of bitcoin will not be buying groceries, but storing money while you wait for your the storm your grocery stores currency is in to subside. Probably not relevant to Americans right now, but I'm sure some people in Latin America can see the value.
> I've always been a negative detractor of bitcoin. But then I realized the problem was it was marketed wrong. As a currency, it's a nightmare of a creation. But as a store of value, it's actually pretty good.
This claim is absurd. Bitcoin is patently bad as a store of value, and that's perhaps bitcoin's worse and and most ill-suited applications. Even ignoring the speculative pressures and value manioulation being conducted, just look at how much bitcoin's market value has been fluctuating. Even yesterday it suffered a 10% drop for no reason at all. Who in their right mind believes it's a good idea to store value in a highly volatile service subjected to such speculative pressures?
Nowadays bitcoin sounds a whole lot like a pump-and-dump scheme, where shills come out of the woodwork praising bitcoin's magic and supernatural properties to fool unsuspecting fools to keep pumping money into the fraud.
I think a lot of people hear "Digital Currency" and think 'something like Apple Pay', when Bitcoin's competition is closer to ACH/wire transfers.
It's not a tech that everyone needs to use, and most people will pay an expert to use it for them. But if successful, could be a valuable medium for receiving payments from low-trust entities.
For example, if a stock exchange accepted Bitcoin for funding accounts, you could get your account up, funded and ready to trade in less than an hour. Most stock exchanges now take several days for funds to clear.
For what reason do you think a stock exchange would want to add artificial delay to Bitcoin deposits?
I could see holding a portion as 'pending' until many confirmations, or perhaps until the Bitcoin can be liquidated on the market, but both of those seem like they could still resolve an order of magnitude faster than the 'competition'.
In some cases, the financial institutions could be slowing things down so they can segment the market and have paid versions of similar but quicker services.
> As long as you don't buy in at one of the speculative bubbles
I'm not so sure about that. You could have bought BTC anytime before the past week or so and it would have appreciated significantly, regardless of whether you bought it in a peak or trough. It's just a question of magnitude. E.g. if you bought 1 BTC at the lowest or highest price in 2015 you would still have outrageous returns on it today.
This is not to say it will continue being the case going forward but it's crazy to look back at.
Let’s see how everyone feels after the next correction. The headlines today seem to change every time I load google news. Up 10%, down 20%. There’s no way to know where it will go from here.
I had bought about $50 worth of BTC a year ago and it's now worth $800. Did the bitcoin economy grow that much in the last year? I've heard of increasing adoption by banks and governments but I don't know to what extent they're investing. I don't follow it closely and at this valuation, I have no idea whether it's a good investment or not. Should I sell it now before the inevitable crash? Should I buy more? I don't trust myself to understand this kind of speculation yet.
Ask yourself first, why did the value climb 16x? If you cant answer that then I caution purchasing more. I would also spend some time understanding what "investing" is vs what speculating\gambling is.
> Ask yourself first, why did the value climb 16x?
Oh I can do that. I expect it to be 100x or more greater than what it is today. The reason why it is 16 as opposed to 8 or 32 is simply the speed of the uptake. It is going up in value because it is in the process of deflating the fixed-asset debt bubble. The only real question is, how big is that bubble.
> I would also spend some time understanding what "investing"
Investing is understanding what the value proposition is, and investing accordingly. You don't, and that's fine. Don't assume that other people have your understanding of the asset class in question though.
The question you should be asking is, why do you think it's important when other people invest in things that you don't understand.
> In your opinion, what is the intrinsic value of Bitcoin?
I use the 1:10000 rule (https://xkcd.com/1053/) for this argument. It is my opinion that the intrinsic value of bitcoin is far far greater than anyone really comprehends. People generally are too focused on people just buying and selling the asset, but not about the cryptographic proof, and incentive structure that perpetuates the network functioning. So when people like to ask what the intrinsic value of bitcoin is, I say :
You are thinking of the store of value property without the cryptographic property that secures it. You are talking about it as one would talk about valuable shells, and even shell sellers, and not the security that separates it from all forms of value exchange before it. To understand the intrinsic value of bitcoin it is good to use the analogy of an envelope. So i ask you : does an envelope have intrinsic value?
If I have a letter that I need to send securely, would I prefer to send it open, and ready to be read? Or would I prefer for it to be sent within the confines of an envelope? Now let's think... would I prefer to just leave an open envelope, or would I think it necessary to put some seal across it to ensure that it isn't opened, and read whilst en-route. Does a sealable envelope have more intrinsic value than an unsealable one? Hmm... but what if someone can counterfeit the seal? I need some method of ensuring that the message I want to get to that person isn't read, and preferably, isn't even identified as a message. That's when you need to get lawyers involved. Sounds expensive. There's obviously something intrinsically valuable about such a service, because many people pay oh-so-very-much money for it.
Now let's imagine we're not talking about letters, we're talking about money. Would you address a $100 note through the mail to your child for their birthday? You'd pay for a stamp at least. Would you encase it in an envelope that you paid for at the local post-shop? Hmm... bill in the envelope. Anyone will be able to see that it is money. Perhaps encase it in a card? What if it is $1000? $10,000? $10 million? Does the protection service of an envelope somehow decrease because the value of the contents of the package increases? It's the opposite, isn't it? Bitcoin is both the cryptographically sealed envelope, and the network to deliver it.
What say you? Is an envelope intrinsically valuable?
> It is my opinion that the intrinsic value of bitcoin is far far greater than anyone really comprehends
See? It's all speculative bullshit, where people who took a bet on bitcoin increasing price and expect to profit from this price increase are trolling other fools to keep pumping the bubble until they cash out.
Bitcoin is quite clearly a pump-and-dump scheme, and here we see some users cheering fools to keep on pumping the bubble with their cash.
The only intrinsic value that bitcoin has is it's use in money laundering deals, and only in short time scales. That's it. The rest is just speculative fraud.
I wrote this a few days ago to talk about the mania (Disclosure: I operate Crypto Lotus, a crypto hedge fund):
PSA: I generally can't give you advice about specific crypto investments as much as I want to for multiple reasons related to my job.
This is my one statement on the market: It is loud.
Crypto is moving very quickly and I regard it as the riskiest asset class that is available today. To invest in crypto is to accept that currency can be narrative driven and that juxtaposition requires accepting that currency can be simultaneously worth any amount and no amount. The things that favor crypto as an asset class are that there is lots of positive news, a reasonable long-term narrative, and some of the largest assets are deflationary in design. The things that are unfavorable to crypto are that the pricing is uncorrelated to observable reality, the regulatory risk, and the cryptographic risk.
Overall, it is a bizarre, whimsical space to be in right now, but it is also terrifying. Don't tread lightly, and please don't invest more than you can afford to lose.
Thar be Dragons.
______
For clarity, the reasonable long-term narrative is that bitcoin is easier to work with than existing banking infrastructure for some transactions. In particular, if you are a high net-worth individual negotiating with a nation state or a person of low means who conducts low-trust transactions, bitcoin serves you better than most other means of payment. For the vast majority of people who don't fit in those two categories, bitcoin isn't really useful.
This would certainly be the world's longest running pump and dump scheme. It could certainly be a bubble but I don't think it fits the definition of pump and dump.
Isn't the intrinsic value of Bitcoin the fact that it is decentralized and that no government or other entity has direct control over it?
Sure it's cryptographically secure, but what is the difference between that and a regular bank using encryption on their money transfer network?
I think the reason it's hard to say whether or not Bitcoin is worthwhile is that there has never been a decentralized currency at this scale before, and for all we know, unless it can serve some kind of purpose that a regular currency issued by a country cannot serve, it's not that useful. This is why Bitcoin is used a lot by people from countries were their own currency is struggling.
But with the central banks of many first-world countries printing money uncontrollably, some even bringing about negative interest rates, many fear the collapse of large economies in the near future. If that happens, Bitcoin will be a way to store your wealth and prevent all your money from becoming worthless pieces of paper.
Other ways of doing the same would be buying gold or some other form of valuable goods and storing it in your house or have someone else store it for you somewhere, but obviously the fact that Bitcoin is digital makes it a much easier to use and viable option.
But, we don't know if that will ever happen. Bitcoin itself also has so many problems. It's also arbitrary as to which digital currency to use since there are so many to invest in, some more popular than others, some have evolved to fix problems with previous versions, so it's really hard to say if all of this will amount to something useful.
Yea but what makes the bitcoin delivery network any better than a bank's delivery network, unless you take into account of the fact that it's decentralized? Banks deliver money all the time.
There is intrinsic value in bitcoin. The two more important questions are:-
1. Can that value be measured?
2. Do the people buying bitcoin know the reasons behind why they are buying it? I think not.
I know so many of my friends who own bitcoin and they have no idea what the hell this thing is. They just bought it as it’s growing up in value. These are the people who would sell it when the value goes down and we all know how that ends...
> Fixed assets, goods and services, etc., are stable relative to fiat, at least USD.
Of course it can. Its price. Bitcoin is money. Its price is the only measure of value.
What I'm saying is that it doesn't matter what people want it for. It's money. It enables things. It is just better money, because it can't be seized, payments can be made to anyone, it can be transported anywhere easily and redeemed anywhere easily, and most of all, it can't be debased. Any of these reasons is enough to want to use it, and people might not know all of the details, but they certainly understand the effects on their wealth.
There is no "intrinsic value", but the subjective value of Bitcoin is that could be a better money than any money that has existed so far.
Strictly speaking "intrinsic value" does not exist, there is only subjective value placed on things based on their properties and usefulness to humans.
Gold only has "intrinsic value" because we value that we can use it to build machines or shiny jewellery. But that is only valuable because we value machines and shiny things. Even air is only valuable to us because we require it to survive, but anaerobic lifeforms don't care. So the value is not intrinsic, but only subjectively "intrinsic" because most people value staying alive.
So the subjective value of Bitcoin is based on its its properties. Humans happen to use money, and the properties of Bitcoin could theoretically make it "better" money than any money that has existed so far.
Anything can be money, but is judged on how "good" a money it is depending on several criteria such as:
1.) Scarcity: Only a select group can create money.
2.) Durability: Should be resistant to aging and natural elements.
3.) Divisibility: Can be divided into smaller sub-units.
4.) Transportability: Easy to transport and transact in.
5.) Recognizability: Should be difficult to counterfeit.
6.) Fungibility: Any $1 bill is equal to any other $1 bill.
Bitcoin could theoretically be better in every category.
However, it is still suffering from lots of problems.
Currently "portability" is often suffering due to network congestion and high fees, which also impacts "divisibility" as it becomes impractical to move small amounts.
However, there's still a good chance that either Bitcoin Core or Bitcoin Cash or any other of the current cryptocurrencies will find a way to scale and retain good portability and divisibility.
tl;dr Bitcoin has no "intrinsic value", nothing does, but the subjective value is that it could be better money than any other.
Actually Google AdWords says that you have an average of 40k searches per month for "bitcoin" in Nigeria and more than 1 mio. searches/month in the US.
Right but the map seems to present the data in a way that implies those searches for bitcoin in Nigeria are more popular than other searches for their given country.
That only indicates demand for botcoin, not the reason for demand. Though emerging markets adopting it might explain the growth. It doesn't help assess bitcoin's value except to indicate it might have additional stability as a currency in some small nations.
Yes. But I already stated that in my response. We do not know the future and you shouldn't trust anyone who tells you differently.
My point is that there have been skeptics and people saying it's a bubble or too volatile for nearly all of Bitcoin's history. But if you bought BTC and held it--at any high or low, for any significant amount of time--you made a lot of money (either realized or unrealized, that doesn't matter).
> But if you bought BTC and held it--at any high or low, for any significant amount of time--you made a lot of money (either realized or unrealized, that doesn't matter).
This isn't entirely true. If you bought Bitcoin anywhere near the height of the late-2013 mania (which is of course a lot of people, since that's why the price was so high), you lost half your value within a month or two and then had to hold until 2017 before you started to break even. You lost 70% if you held for a year and a half and gave up.
The market from June to November 2011 was even more disastrous, falling from $29 to almost $2 and not recovering until February 2013.
These are obviously cherry-picked dates, and you'd clearly have made a profit eventually if you kept holding, but it's still very possible to hold Bitcoin for years and lose money.
Right. You would had to have bought and held until today for my claim to be true (and it is only true at the time I write this). But it's still the case that you could have bought in any peak or trough in the periods you're referring to and still have significant realized/unrealized gains right now.
Correct. The most difficult part of trading/investing/betting (call it what you want) is often confronting your own tolerance for risk and uncertainty.
The thing is, for someone who bought a year or more ago, anything less than a 50% correction is small. Also, prudent folk take some of their winnings out of play.
Bitcoin would have to drop 85% in value from where it is now to only have doubled in value over the past year. I'll take 100% yearly value growth any day of the week.
Your argument boils down to claiming that a pump and dump scheme is sound investment because those who enter early can still earn some cash when the bubble bursts.
Ponzi schemes are similarly profitable but for some reason they are frowned upon.
I agree with you that Bitcoin price is hugely speculative. There have been many bubbles. Most notably, $100->$1000->$200, in late 2013 through 2014, and $500->$10000->??? in 2016-2017. The future is unknowable, but arguably much of the overall ~10^6 increase since 2010 reflects real growth in demand. I mean, only some thousands were fully aware of Bitcoin in 2010-2011. Now billions are.
Even so, I don't believe that it's a Ponzi scheme. Maybe someone controlling Mt Gox accounts orchestrated the 2013-2014 bubble. Mt Gox had huge market share back then. But now, I doubt that any player dominates enough to run a Ponzi scheme.
also much more difficult for average person or even gigantic corporation to secure than a physical good e.g. gold. And coins change over time with forks n crap, gold just stays gold.
Over the past ~7 years, the price has increased by ~10^5. There have been some bubbles, for sure. But all that has paled over the past year. The price could crash, certainly. Still, if futures become available, it could spike a lot higher before it does.
And this is exactly what makes it a terrible store of value. As Wikipedia says, "The point of any store of value is risk management due to a stable demand for the underlying asset." Stable demand is definitely not a characteristic of Bitcoin.
no reason it stores value outside of the fact that we all agree that it does, and we all accept it for curreny. Bitcoin is at that point. It's turning into digital gold.
I agree with the original commenter. Looking at Bitcoin as a currency with terrible UX kept me from investing for the past years. Now it's going past inflection point - it's a store of value that will be acceptable everywhere soon.
You'd do better to spend a minute Googling before saying something so definitive. The use of gold for jewelry and industrial applications outweighs the investment use of it:
Gold has been valued from time immemorial for its unique aesthetic and practical properties entirely aside from its value as a currency.
That's clearly distinct from, say, paper dollars, which indeed have value only because we agree that they do (and because they're backed by the robust efforts of a government, of course).
Sorry, I'm not following. The thing that makes a store of value useful is stable demand. This metric demonstrates stable demand. Holdings are irrelevant.
As an example of the difference, look at oil or bananas. Demand for those is significant, but because storage is inconvenient, holdings are low compared with total commodity flow.
You said that jewelry and industrial use outweighs investment use, but gold reserves (investment) far outstrip yearly transaction amount, that is the difference with other commodities, where it is rare to have more than a year supply. It is a feature of gold and that is why people call it a "store of value".
Transactions are necessary but insufficient for something to become a store of value. For example, steel is sold in great amount, but it is not a store of value.
I think you've reversed cause and effect here. Gold reserves prove that people use it as a store of value, but they're not a necessary condition for something being a store of value.
For example, let's suppose that I made a deal with Porche to buy the first car off their assembly line each year. I take it and store it away as an investment. Is there an existing reserve of 2018 Porches? No, I have the first one. Does anybody else do this? Doesn't matter. It's still a good store of value as long as people keep wanting 2018 Porches.
People could use steel as a store of value; it's just an inconvenient commodity to deal with because the value per gram is so low. You need to store a lot of it. But rarer metals will do fine.
Yes, demand has overall increased dramatically since 2010. And it's still increasing. Perhaps dramatically. You can characterize that as unstable, if you like. But given that my mean cost basis is well under $1K, it's stable enough for me.
So is data, so are files, so are ledgers. Every program physically resides somewhere... Just because it's infinitesimally small and it's interface obfuscated doesn't mean it isn't real. Cue Feynman quote "the world is real and it's made of atoms!"
> If I move a rock from my left to my right does the rock weight more?
It does to your left and your right. If I have a piece of paper with a one on it, and another one with a zero on it, and I exchange them. Do they weigh differently?
Its a bit surprising that I'm being downvoted on a tech forum for asserting that information doesn't have weight.
I think the clarifications on what is physical were pretty clear. The information in a ledger isn't physical. The information stored in data isn't physical. It's information. Information isn't physical no matter what medium you choose to store it in.
I have to agree with you. If I take an empty hard drive and fill it with information, clearly it's information content has increased but its physical weight would be the same. You could argue that it contained 0s or 0xffs to begin with but since they are all the same the quantity of information is less. So information itself does not have a weight but it exists in the state of physical objects which do have weight.
Of course information has non-zero weight. Whether on a harddrive, or in your brain, it is a physical state, which has non-zero weight by definition. Why do you think information can exist that does not consist of matter?
Why can't people in Latin America just buy gold or dollars to store value ?
I mean it's a circular argument. To say bitcoin is a store of value, there has to be an apriori reason why it has value. It can't be a store of value because it is. Right ?
It is like if you and I took turns paying for lunch periodically and we used a ledger to track who paid what, and who owes who. The ledger itself is bitcoin. The ledger paper is worthless, but the entries on it "have value." For you and I, the ledger "has value" because that's where the history is.
If you printed 50 new blank ledgers, they wouldn't have value because they don't have the history and our mutual agreement.
Except it takes usually 2 to 3 days for the ink to dry in the ledger, and costs you $3 every time you wrote in it, and consumed more electricity than your house does in a week, and you do it this way because you want it to be trustless.
His analogy isn't perfect with all respect to bitcoin, but it is for that explanation. And transaction fees doesn't really matter when it's used as long term value storage for a significant amount of money. The small transaction fee is basically irrelevant.
I don't get it. why is it a store of value? what makes it have value? For example, suppose I just got paid and I buy bitcoin today. What is the force that will make my bitcoins not be worth 0.5X over the next 20 years ?
ok, so I had an upsight, to borrow Neil Stephenson's terminology. Speficifcally, that POW coins are inherently flawed. There is no fundamental reason to own one of them.
POS coins on the other hand, are a different animal. If you own a POS coin, you get paid transaction fees for helping verify transactions. Thus, POS coins make fundamental sense, can be valued accordingly and create a reason to actually own the coin - and should, therefore, prove a better store of value than POW coins. Of course, POS is somewhat theoretical, but if Ethereum can pull it off, it should supersede bitcoin. Now, ELI5 why I am wrong, please.
ok, I skimmed through it. I admit, I didn't get it. However, I don't think it addresses my fundamental point: there is no reason beyond speculation to own a POW coin. There is a reason, independent of speculation, to own a POS coin.
For example, if you own the most of a particular POW coin, it is not in your interest to corrupt the ledger because you will suffer the loss of faith in the currency worse than anyone.
but if you are one of the owners, how can owners rewrite the rules to your detriment? or, why would they? whether you own $10k worth of coins, or $10 million, in the case of POS, the incentives are aligned and the coin owners earn transaction fees. In the POW case, what underpins the value of the coin?
> In the case of POS, the incentives are aligned and the coin owners
Biggest owner wins. That's why it is not trustless. The only long-term game-theory outcome for the system is a monopoly. Owners own the miners, and dictate the rules to the users. Otherwise known as our world financial system.
> In the POW case, what underpins the value of the coin?
The network effect of the decentralization, i.e. the nodes. It is the nodes that are peers in the peer-to-peer cash of bitcoin. It is they who hold the blockchain, validate transactions, and validate blocks. Because there are so many of them (185,000 and counting) unless you can effectively convince all of those nodes to adopt consensus changes, the existing consensus rules apply.
PoW alone doesn't make something valuable. Its successful implementation does.
Not sure I follow. Biggest owner has the same incentives as the smallest owner - to keep the dollar price of the coin as high as possible. So, what I am asking is, in the case of a POW coin like bitcoin, what is the force, beyond pure speculation that keeps the coin worth X and not 0.5 X?
> Biggest owner has the same incentives as the smallest owner
Biggest owner can steal smallest owners money because biggest owner controls the consensus rules. So no, the incentives aren't aligned.
> what is the force
The only one that matters : Supply and demand, and no ability to cheat the system. The only thing that is happening is more and more people are recognizing it.
Biggest owner can steal smaller owners money, maybe, depending on the POS design. But that would make no sense. I mean the biggest owners have the biggest stake in the integrity of the network, no? supply and demand can clear at X and at 0.5X, so that doesn't answer the question for me.
Then you fail to understand the incentive structure. The only game-theory outcome to a PoS system is a monopoly. That's the reason why there aren't any successful ones. Because they require trust.
Agree, I fail to understand what you mean. If I'm a large owner of a POS coin, why would I want to steal smaller owners' coins ? Don't I want them to trust the system and keep buying more coins ?
Elaborate? I mean mining pools in China with the oligopoly bit. Are you saying that's not a problem? I would say the current bitcoin PoW scheme is inherently seeking to end up in a few actors having most of the power due to the higher and higher barriers of entry to mining on custom silicon. ELI5 why I'm wrong?
Nodes define and police consensus in bitcoin, not miners. Miners have a single choice : mine for bitcoin according to node consensus rules, or don't. That is the only power they have.
in theory. But in practice, if tomorrow fork XYZ comes out and miners decide to mine that fork, instead of the current one, the current one is finished. So, don't they hold all the power in practice ?
No. You completely don't get how it works. Only by mining according to bitcoin consensus rules do they get bitcoin rewards. Their fork relies upon you using their node client in order to give them tokens. If nodes don't switch clients, no one even knows the fork exists.
This entire episode over the past year has demonstrated this again and again. Miners talk a big game, but in the end, they do as they're told.
Uh... you have to physically store those things? Easy to steal? Can't send to someone across the country instantly? Bitcoin is way better than gold or dollars when you are in an unstable country. People in Venezuela are huge crypto-heads for that reason
Bitcoin is perhaps the most commonly stolen store of value the world has ever seen. It has its advantages, but being difficult to steal (or lose permanently!) is not one of them.
Perhaps it's easier to steal in different ways. Computer-based hacks, bugs, social based attacks (phishing, etc.) sure... but harder to break into a house and steal, as the private key can be hidden better. Easy to assume the safe is where 20 gold bars are.
Right, but you could create a crypto thingie that is tied to gold or dollars. I agree with what you said but it doesn't tell me how to calculate the price of bitcoin
It can get seized by the government. Any traditional assets or physical assets that is. Bitcoin and crypto is significantly harder to do that. You basically need to get the private key. IMO, this is the main reason that it is a a superior store of value compared to gold, dollars or traditional assets. If your government is corrupt then it is reasonable that the police will seize your gold. Not much of a store of value if it can just be taken away from you.
supply vs demand. More and more people are getting introduced to bitcoin, understanding it and buying into it. There's also a cap on the total number of bitcoins, so scarcity is another factor. Just like why gold is worth X instead of X/2
Why are you easily able to see gold as having intrinsic value but not Bitcoin? Both are valuable because a lot of people say so. There is no other value but utility and most currencies, including the dollar, do not have any utility other than their ability to function as currency.
Gold has physical value, right ? For example, used in electronics, jewelry, etc. but gold is a terrible investment so if bitcoin is like gold should we also assume it's a terrible investment like gold ?
I like the concept, but it’s rate of change and lengthy transaction period and confusing transaction fees make it inhospitable for goods and services that I’d use it for.
I also remember the early Bitcoin days. I didn't get any until over $100 but I came across it before it was worth anything. I remember the faucets, the alpaca socks, the triumphant day when a bitcoin reached parity with a dollar, all of it. It was a glorious, happy community of idealists back then.
Those days are gone for Bitcoin, but I've found a cryptocurrency community elsewhere that reminds me of those early Bitcoin days. I jumped in full-time and I'm having a blast.
One of the best things about Ethereum is how Vitalik focuses mostly on important technical solutions to difficult problems, notably scaling the network to millions/billions of tx/s - crucial to Ethereum's future success. He rises above the noise, it's really impressive given his young age.
Here's a list [1] of 400 exchanges you can buy Bitcoin from, 34 of trade BTC/USD. This doesn't include some sites that charge a premium and allow you to buy with debit cards. There are also Bitcoin ATMs, over 1000 of them in the United States [2].
That's not a useful response. ATM's will likely have over 1-2% in fees, and just trading USD isn't enough - you need a way to get your money in and out.
Create an Electrum wallet. Find a friend who has Bitcoin. Meet for lunch/dinner. They transfer ~70 mBTC to you, with a 1-2 mBTC fee. After 2-3 confirmations, you give them $710-$720 cash. Done.
Well, OP could just ask about mailing cash, instead of using Bitcoin ;) And do recall that OP has been banned by Coinbase, and doesn't want to pay over 1-2% fees. So they're a rather special case.
The 3% fee here is the same as a credit card but without any of the benefits, since a credit card nets you purchase protections, extends the manufacturers warranty, 2% or more in cash back and you don't have to pay it off immediately, and it also clears in seconds instead of hours. And the merchant pays the fee not you. Am I missing something?
The number mentioned for the record is wrong: Coinbase has added 100k users in a day, it is not adding 100k users per day [0]. That’s not evening considering the number of users who may be fraudulent, they are hiring [1].
Down? They've had tons of money and time since June[1] to scale up to handle much larger volume. They don't have a real excuse for these major outages. I got a recruiter email but didn't want to go near them because of how flaky they apparently are.
(Gemini has been much better but they went down for a lot of today too.)
This is (as someone who hasn't played around with bitcoin much) something I've been curious about. How easy is it to get significant amounts of bitcoin turned into cash? This is particularly applicable at a moment like the present. If I had, say, 25 bitcoins that I wanted to trade into dollars _right now_ what hurdles stand in my way, and how long would it take to clear them?
There are liquidation limits on the exchanges. I think Coinbase limits to $10k USD in exchange for your Bitcoins. You can get increases by providing additional identity verification. IRS is way up in Coinbase’s business since this is essentially a huge potential avenue for laundering and tax evasion.
So it might be that bitcoin is rising and rising ever more not just because owners are bullish on future development but also because some of those who are not are disallowed from selling? Best store of value ever, backed by inability to sell.
That’s certainly possible, however I suspect many of them just keep watching their money go up (at least for now). If really motivated you can find other ways to sell like LocalBitcoins, it’s just not as convenient as pressing the “sell” button.
Im also banned from coinbase for asking them to hurry my verification because I needed to buy vitamins. They are a pretty miserable company. How can they claim to sell something "useful" then ban you if you mention using it? They basically are admitting to selling a security if that is the case..wondering if we could take all the nonsensically banned users and do a class action lawsuit against them. It would be one thing if I said drugs but I didnt. They banned me for fucking vitamins.
> Im also banned from coinbase for asking them to hurry my verification because I needed to buy vitamins.
You don't see how that might be a red flag? What vitamins could possibly be so important that you couldn't wait a little while, and would be unavailable from another source?
Plus, the rudeness of "I'm more important than everyone else in the queue, hurry up" can't have helped.
He might be rude, but honestly a company should be expected to deal with rude customers.
It is their job to do deal with slightly rude customers, and I don't think they should be banning anybody for something so small as "being asked to go faster".
The rudeness can't have helped, but I'd imagine the "I desperately need my 'vitamins' that can only be bought with Bitcoin" bit is what got the account flagged.
It actually was vitamins from a foreign shop that took international payments thru bitcoin. I could have shown them if they wanted proof. However they never let me have any recourse. Just instaban, goodbye. As hard as it might be to believe its their job to remain professional. And they failed at that. My account didn't get flagged - I got outright banned- lets not mince words. Coinbase is ran by a bunch of assholes.
It's also their job not to get the company shuttered for knowingly allowing drug money to flow through their books.
If it's weird to me that you need to buy vitamins from a foreign company using Bitcoin (you couldn't get them for a month or two from a provider who takes PayPal/CC, and you couldn't go without for a little while?!), it's going to be really weird to the compliance department of a financial institution responsible for KYC stuff.
Its common for international shops to use Bitcoin. And its common for people to buy home vitamins and supplements, foods, etc.. from their ethnic countries of origin, because they are difficult to find anywhere else. Who exactly determines what someone buying bitcoin is allowed to use it for? If I want to trade it for vitamins or russian crackers or chocolate, am I now banned? Think about what you are saying -- that Bitcoin should be restricted to merely a speculation vehicle. Coinbase seems to have that opinion opaquely -- they function as more of a gambling/security sales portal in that case. And they should be held to the standards of that sector given their rather overt bans where users state a rather innocuous intention to use the Bitcoin for bartering.
Bitcoin itself is being harmed by the core developers who refuse to do anything to address the insane fees: bitcoin needs more bandwidth and throughput in its blocks, classic supply and demand.
Bitcoin cash or something like etherium are worth a look at. Bitcoin cash, as the name implies, holds the value that bitcoin should be able to be used as electronic cash.
All you bcash advocates should go learn a thing about the infeasibility of solving a (hyper)exponential scaling problem with linear "solutions" (aka block size increase). Alternatively, leave these matters to the engineers.
Bitcoin is Bitcoin Cash. We immediately restored the ability for Bitcoin to be adopted with low fees and fast confirmations by using 8 MB blocks.
The median income for the world is $6/day. High fees are unaffordable and unadoptable. The Core team has done Bitcoin an enormous disservice; like setting autopilot into the terrain.
You call your alt whatever you like. I'll call it bcash so that it removes confusion from peoples minds that it isn't bitcoin. The only thing that alt has is a name they've stolen from bitcoin. So bcash it is.
No one cares about the fees. If they did, they'd use litecoin. Blocks 4x the speed of bcash and bitcoin, and they have segwit too, so double the capacity of bcash.
8MB blocks don't solve the longterm scalability problem. I agree that high fees are unacceptable, but I'd rather wait for a solution that allows order a transaction increase of several orders of magnitude rather than scaling it linearly (and therefore reducing the number of people that can actually use it).
How is that “worse” though? This is free market at work. Energy being spent securing the bitcoin network will always correlate with value of bitcoin.
The end is existence of bitcoin as solution to fairly important problem of decentralized and censorship-resistant consensus mechanism over open ledger that everybody can transfer value within (and soon with convenient atomic swaps - across multiple chains). And that is just the lowest layer of operation.
Anybody claiming bitcoin mining is wasting energy assumes the solution to said problem is worthless or the problem doesn’t exist. Both of which I (and the market) disagree with.
As for whether there could be more “efficient” way to line bitcoins - this is irrelevant, because for every jump in efficiency there will be similar jump in mining difficulty by design.
That's the puzzling part. A lot of work has gone into Stake / Mixed proof chains that don't depend on consuming horrendous amounts of energy. There isn't a good reason to expect money not to shift to more efficient ledgers when things settle down.
Miners use less electricity (~15 TWh/yr today) than Christmas decorative lights in the world (probably 20 TWh/yr, of which 6.6 for the US alone according to US DoE). If we can afford to spend that much energy not even on useful lighting—just decorative—surely we can afford to run a transformative financial system such as Bitcoin.
The "small country" comparison is deceptive as the energy is equivalent to just a single nuclear power plant: 15 TWh/yr = 1.7 GW
Shit, somebody gave me 0.05 BTC a few years ago to go to a talk about what it was all about. Hopefully I still have that paper wallet, it must be worth close to $500
I got .20-someodd (.28, maybe? Maybe have even been in the .3 range.) years ago from spigots and a very brief experiment with mining, then thoughtlessly formatted right over the damn hard drive with the wallet on it and went "oh well, not like it's worth anything".
Don't suppose there are any low-level wallet-finder tools out there in case it hasn't been overwritten? It's finally worth a couple days to give that a shot on all my old hard drives (I forgot which one it was long ago, which is part of why it hasn't been worth it so far).
After I upgraded, I gave my Xeon Workstation to my Mother and actually kept the miner running when I gave it to her. She complained it was a bit slow, when she used Photoshop, so I turned the miner off and she was happy. There must have been something like 300 or 400 coins in that wallet.
I should ask her if she still has it next time I see her, but I am pretty sure she threw it in the garbage.
Probably. I actually wrote one about half a decade ago, though I'm not sure how well it works with recent or really old versions of the software: https://bitcointalk.org/index.php?topic=25091.0
That would actually be hilarious if a suffisent number of geeks tried to cash in the bitcoin that is dormant somewhere massively and at the exact same time.
This could well end the Ponzi scheme in a victorious way because people that mined them from almost nothing could extract a lot of real money from people (mostly speculators) who bought recently while totally tanking the valuation.
Wait... maybe that was always the plan... Is bitcoin actually a huge planned «Robin Hood» bubble?
Sounds about right. I paid 500 euros for my 0.05BTC piece of history (there were some fees and all that of course).
Maybe I just bought a piece of something like the Berlin wall and when everything goes to shit and this whole train wreck evolves into something more sane later on in 100 years or whatever, my grand children can sell my 0.05BTC on Sothebys or something :D ..
I went through all my old blockchain.info temporary wallets from 2014 in gmail the other day to collect the spare change I left in them at the time that is now worth $2k. Took 9hrs to confirm moving them, which is ridiculous. Guess it's time to switch to Monero or Zcash for use as a currency.
Lots of things to be improved, but even if nothing changes and Bitcoin is frozen exactly as it is right now, it would provide the best store of value we have for years. This "honeybadger" resilience attribute is rather an advantage for a store of value. Especially now that the big players will get in the game (CME, Nasdaq etc.)
You should not think of bitcoin as a payment network, and do not expect its tech innovate rapidly. It is digital gold. Its most important property is to be secure and battle tested. I think bitcoin will be even bigger than it is now. If you zoom out into hundreds of years timeline, it has a historical significance: to store value in an extremely secure and relatively convenient way without trusting a third party. That is big. Probably will be bigger than 172 billion dollars market cap. It is competing with gold, which is something like $7 trillion.
If you are interested in the future of payment, than you should invest into sometinhg like Dash instead, which is specifically designed and marketed for payment. Its price is rising rapidly, but it has not blown up as much as bitcoin yet. I hold an almost equal amount (in dollar value) in Dash as in Bitcoin.
I've said it before and I'll say it again. We've been cruising past orders of magnitude ($0.10 > $1 > $10 > $100 > $1000 > $10000) and at any one of those jumps it seemed like the top of a bubble and just as likely to go in the opposite direction with the same velocity.
Don't kick yourself for spending when you did, because as I'm sure you're aware, it's just as likely that you could be now saying "Thank goodness I used those Bitcoins when they still worth something".
I bought a bunch at ~$1, then they jumped to $10 and it started to be fun, because I had a bunch more value to play with, then they jumped to $100, I thought screw this. This is not why I bought them and if they keep up this volatility, then they're not going to be useful for what I want to use them for (ie. buying/selling online).
I don't regret selling them when I did, and I don't think you should either.
You can't judge the quality of decisions you made in the past based on what you know now. Imagine going to a casino, putting $100 on red in the roulette wheel, black coming up and then thinking, "Man, I really regret putting it on red, I should have put it on black".
How is that in any way useful or going to improve future decisions? Bet on black, because you know, that's where the trend line is going?
Case in point: Do you short Bitcoin now or not? Who freaking knows...
Its still the right attitude to have or else every hindsight choice is going to be regret, and we'll be talking trillionaires. No one can predict the future. It could have gone down to 0.10 instead of up to 1000. Should everyone buy in now and expect the value to go up to 20k?
Do you regret not buying every penny stock that went up in value, every roulette ball that landed on red you didn't bet on? From a get rich quick standpoint there is no difference.
Well I certainly missed the bus on this one. But I also think it's too late to climb on now.
As I said I bought VPN with it when this stuff was in baby stages. Now at 10k USD valuation the real world usage hasn't grown all that much from there...certainly nothing like the price growth. So I'm staying really fkin far away from this.
People called it right & made a killing of it - more power to them. Realistically this can't going though without some monster sized improvement in the underlying non-speculative transaction volume.
Real world utility and pricing have to converge at some point. Right now they seem to be growing apart exponentially and all I can think of is RIP whoever is on the wrong side of that when it returns to reality.
Have you checked out the Bitcoin Cash community on r/BTC? There’s plenty of hatred for Core developers on there, but there’s also a lot of grassroots projects going on, like the Bitcoin Cash Fund that recently raised about $85k to fund projects that spread adoption of Bitcoin Cash — feels a lot more like the early days.
Segwit is used in a small fraction of transactions[0] and SegWit2x was cancelled. While the price has skyrocketed the actual transaction rate has barely moved[1].
Combined with the low transaction rate I would assume people don't care about Bitcoin as currency -- only as a rapidly appreciating asset. As long as the price keeps skyrocketing why would you ever spend any unless you had no other currency?
Not really. I have a bitcoin debit card. This essentially puts the money in my wallet into bitcoin. The way bitcoin has been doing over the past year, all it does is make everything reduce in price relative to the time I put the money in the wallet.
How can we count votes of people who don't have the money for a single transaction fee? I thought Bitcoin was supposed to be better because it was the cheapest?
You subsidize them then. Mining isn't free. Running a node isn't free. Bitcoin was never about being cheap, it's about protecting your purchasing power.
My guess is that this is probably pretty meaningless.
There are a few things going against them.
- The CBOE and CME are both much larger futures exchanges and are going to be offering futures first
- since you can't net out futures contracts from different exchanges this means they tend to become winner take all
> One way Nasdaq seeks to differentiate itself seems to be in the amount of data it uses for pricing the digital currency contracts. VanEck Associates Corp., which recently withdrew plans for a bitcoin exchange-traded fund, will supply the data used to price the contracts, pulling figures from more than 50 sources, according to the person.
This might be interesting as one of the things that everyone is worried about is price manipulation.
If you haven't thought about how futures work with respect to margin and marking at the end of the trading day you need to know that you can be required to deposit more money into your margin account if the futures trade moves against you on any given day.
This means the marking price is very important and lost of institutional money is worried that the exchanges are easy to manipulate.
> Nasdaq’s product will reinvest proceeds from the spin-off back into the original bitcoin in a way meant to make the process more seamless for traders, the person said.
This is awesome,, right now the CBOE and CME both have punted on the question of forks saying, they'll have a best efforts to figure it out.
One difference is that NASDAQ is a name everyone in the world knows while CME is fairly anonymous. Yes, I know they are bigger but I can assure you that if you ask random people in my country most would know NASDAQ while very few would know CME. Seeing NASDAQ is adding it will add to the hype.
I imagine I'd get three "CME? Dunno WTF that is", "How about Chicago Mercantile Exchange?", "Oh yeah, I recognize that from the boring parts of morning news updates on the radio. They do something with soy beans, right?" and two "yeah, still dunno. Is it a farmer's market?"
> One way Nasdaq seeks to differentiate itself seems to be in the amount of data it uses for pricing the digital currency contracts. VanEck Associates Corp., which recently withdrew plans for a bitcoin exchange-traded fund, will supply the data used to price the contracts, pulling figures from more than 50 sources, according to the person. That appears to exceed CME’s plan to use four sources, and Cboe’s one. Nasdaq’s contracts will be cleared by Options Clearing Corp., the person said.
BitMEX bitcoin futures are already online. IDK how many price sources they pull?
Aren't there a few other companies already selling Bitcoin futures?
In general, when the CME enters a market for futures, they take all of the air out of the room. I don't think it's realistic to believe NASDAQ can compete with them.
Or, large investment banking houses will step in and create naked shorting opportunities to inflate sell pressure creating 'death spirals' to drive prices down and scoop them up and extreme discounts. This happens in the traditional public markets everyday.
> Or, large investment banking houses will step in and create naked shorting opportunities to inflate sell pressure creating 'death spirals' to drive prices down and scoop them up and extreme discounts. This happens in the traditional public markets everyday.
Yes, this can happen in a few different ways and is the reason why Ycombinator created SAFEs. When you have a public company you will get offers for what are called "credit lines", "debt financing" or "convertible notes". They are traditionally used to create death spirals https://www.investopedia.com/ask/answers/06/deathspiralbond.... as the size of your float increases by you, executive director (CEO/CFO), as a public company "issuing" more stock to cover the loan. The more you issue, the less you're worth until somebody comes along scoops you up and re-engineers the cap table which is a restructuring. However, manipulation can occur within institutions as well: https://news.ycombinator.com/threads?id=KasianFranks&next=14...
There is no such thing as an extreme discount for Bitcoin. I have yet to see anybody try to do a proper valuation for a Bitcoin to set a price target. If there were, institutional investors would buy in and its price in USD would stabilize nearly instantly.
No Bitcoin pumpers can give a proper value analysis because its actual value is something approaching 0. It has no use for which it is better than alternatives, even among cryptocurrencies. It is a classic bubble where people buy assuming that a greater fool will come along and buy at a higher price.
I get it. You don't understand the application of decentralization and consensus in bitcoin, and how its application separates it from all other alts. Bitcoin is the only real crypto-currency, because it is the only one to have achieved actual decentralization, and therefore is a working implementation of the previously thought unsolvable solution to the Byzantine Generals Problem.
Doesn't mean other people don't understand this though, and that number increases every day.
> Bitcoin is the only real crypto-currency, because it is the only one to have achieved actual decentralization
This is ridiculous because Bitcoin is arguably much more vulnerable to centralized manipulation than fiat money. You only need to compromise 2-3 of the major mining pools and suddenly a 51% attack isn't so unfathomable, and that's just one potential attack vector. The pools obscure the real source of the mining power -- wouldn't it be funny if it was a nation-state who had a backdoor, or even one who was just interested in promoting bitcoin because it makes it so much easier for them to track their citizen's activities and exchanges? What happens if a bitcoin core dev gets compromised? What about MtGox^WCoinbase? What if you wanted to destroy bitcoin, and blew up a hotel where the central bankers^W^Wmajor pool operators were all meeting at the same time, as they've been known to do? etc. Could go on for a long time.
If I wanted to disrupt the Federal Reserve the same way, where do I start? Can I get the interest rate changed by phishing Janet Yellin's Gmail password?
Bitcoin as an experiment in a democratized, decentralized mechanism of exchange that normal people could use as an alternative to conventional payment methods has completely failed. This is, in large part, due to the short-sighted design of the difficulty mechanism, which makes it impossible to mine on commodity hardware. As soon as someone releases affordable hardware that is useful for mining, it defeats itself on the next difficulty bump.
Bitcoin is something weird right now, but it's assuredly not what it was meant to be, because a central cartel of power brokers have it wrapped around their finger and the average citizen can't do anything about it, exactly the circumstance that most early adopters were hoping bitcoin could help solve.
> You only need to compromise 2-3 of the major mining pools and suddenly a 51% attack isn't so unfathomable, and that's just one potential attack vector.
If an attacker manages to gain control of 51% of the processing power, he can either a) choose to earn ~$350,000 per hour playing by the rules (mining to his own address) or b) perform a double spend attack on someone (in which case he needs to own over ~$350,000 and find someone willing to pay him in cash before either the mining pool or the network discovers the attack). Which will he realistically choose? The settlement time for USD is in the order of days. Will he risk a USD transfer being aborted before he can get his money, or play it safe and generate 12.5 bitcoins (~$100,000) within 20 minutes to his own address?
Also, exchanges and nodes can easily see that a fork is ongoing, with just barely half the hashing power on the honest chain. Chances are exchanges would shut down, clients would warn of a 51% attack, and the attacker would be left with the only option of mining honestly on the longest chain to his own address, thus taking money from poorly secured mining pools, but not affecting the stability of Bitcoin.
> What happens if a bitcoin core dev gets compromised?
I don’t know. What do you suggest would be the consequences of a single Bitcoin Core dev getting comprised? I highly doubt any code of his would even be merged into master, much less make it into a release.
> You only need to compromise 2-3 of the major mining pools and suddenly a 51% attack isn't so unfathomable,
Nodes control consensus in bitcoin, not miners. If miners ever 51% attack, the nodes simply change the pow algorithm. Miners get crushed. That's why they don't dare.
You should probably learn how bitcoin works. It's great.
1. How does the entire network just agree to switch to a new algorithm? How do they decide what the new algorithm is?
2. When everybody forks off of the compromised chain, haven't we effectively created an altcoin? What is the value of this nascent altcoin?
3. I'm thinking the value can't be very much, otherwise it would be way out of proportion to the difficulty considering there are not yet any ASICs for the new algorithm. Wouldn't it then be very much worth it for someone to attack it again using, say, a botnet?
I don't think you're actually interested in the answers. Any pow change would simply be a hard fork with no or opt-in replay protection. I say none, because there's no need to provide protection to the compromised chain. The patch will have already been developed. The core developers will already have vetted many pow algorithms, and a decision would be made at the time.
You don't get it. I understand how consensus works in Bitcoin. I argue that it doesn't provide any advantage over other systems in anything and has overwhelming downsides in all of its current applications. Notably, you have failed to mention any counterexample.
Also, the Byzantine Generals Problem was solved multiple times in the paper that introduced it.
You were somebody's greater fool. You believe that there will be more greater fools to come. Eventually, you will run out of fools.
No you don't, which is why you're still talking about it the way you are.
> you have failed to mention any counterexample.
What we have now. Inflation debasing your money.
This is actually a game theory problem. There are three groups in bitcoin. The users, the holders, and the miners. To understand the way that relationship works, you have to understand what keeps everyone separated and honest. That requires an understanding of the incentives of bitcoin, and that requires understanding what proof-of-work (https://en.wikipedia.org/wiki/Proof-of-work_system) is.
Proof-of-work aligns consensus with the users, because it is the users that are paying the miners through transaction fees. Even holders require users, and more importantly, node owners. Therefore, it is users that are incentivizing the miners. Proof-of-stake (https://en.wikipedia.org/wiki/Proof-of-stake) aligns consensus with the holders, who are paying the miners. That is an incentive structure that reflects our current financial system. But bitcoin changes this through incentive structures and cryptography. In bitcoin, it is the incentive of the payers, not the paid, that imo is the wild invention of satoshi, and enacted through cryptography.
PoS fails because there is only one outcome given that incentive structure. Holders being miners, and then controlling the users. PoW overcomes this because the outcome is the constant tension between all three.
At the heart of the solution is what was previously thought to be the unsolvable byzantine generals problem. (https://en.wikipedia.org/wiki/Byzantine_fault_tolerance) It is a variation on the two generals problem. The problem is "if you are a number of generals surrounding a castle, how do you coordinate an attack date and ensure that the message to attack is correctly received, when you know that the message may be altered along the way?". There's game theory around what is possible, but that's the gist of it. In the problem, a bad actor can game the system so that everyone loses. I have reduced it to three. Given you know one is a traitor, how do you deliver the message to attack?
The way that this is managed is that miners order the transactions, and race to hash them to an algorithm (the work in proof-of-work), which is in bitcoin, SHA-256, until they get an answer that will be accepted by the nodes (proof). They are incentivized to become more and more efficient, and spend more resources as the price increases. The nodes provide the proof in proof-of-work. They say "this block is valid", and all nodes that follow consensus will come to the same agreement. For that work, the nodes award miners bitcoin. The nodes can prove which miner spent more work, but it sometimes takes a few blocks to get it right, which is why you have to wait for a few confirmations.
The only real thing that miners can threaten to do is stop users (the people paying them) from receiving blocks. Users and holders, after all, control their own cryptographic proofs to the tokens. But the current miners are only miners of SHA-256 pow algorithm blocks. In an adversarial condition, the miners will have just stopped coming to the party, so the users say 'fuck this' and change the pow. They get a new set of miners, mining a new algorithm, and the holders go 'holy shit, do I wanna spend my cash with a bunch of numpties that couldn't behave themselves?'. And they start spending their cash on the chain that the users say is the real one, and everyone just goes about their business again. Old miners get crushed. New miners think happy days. If the nodes change their software, that's the end of the story. Because the nodes define the consensus, they can. The remaining node owners get to decide whether they want to be owned by the miners, or whether they actually want to still remain users. The holders decide whether they are more likely to be able to realize their money with the miners that now control a drastically centralized subset of nodes, or to continue on in the system that led to them being holders in the first place.
Users can't attack the system, because then they would become holders, and users would no longer trust them for the reasons already stated, and they don't hold the cryptographic proofs of the holders. If the holders do that, they lose all of their users, so the only thing they game-theory-wise would do, would be to instate a pow. Why would anyone prefer a system in which the people with the money have all of the power? Otherwise known as the world financial system.
Whoever attacks loses, and there's no real way to cheat the system. That's the brilliant solution to the byzantine generals problem. It is a self-sustaining financial system that rewards everyone for participating in it, where incentives are perfectly aligned for its longevity, with an ever reducing supply of tokens that are effectively infinitely divisible, increasing their value per-capita. And no, there isn't any other system in the world that shares these properties. Without these properties, the byzantine generals problem can't be solved, and decentralization can't be achieved. It is a fiendishly clever system, akin to an anti-body to debt-fueled inflation.
Like I said, SN was/is/will be a genius.
> Eventually, you will run out of fools.
That is what is happening to the fixed-asset debt bubble. Bitcoin is its reckoning.
What you’ve done here is offer a detailed technical explanation and then thrown in something about deflating a debt bubble, without actually connecting them.
I’m all for the technology, but the technology itself doesn’t solve any systemic financial issues, not directly. It’s the adoption itself, and how it may be used for legit commerce, say 5-10 years down the road, that would potentially do so. And this would be facilitated by technology evolution from now until then. Bitcoin may be at the center of that evolution, but it’s not assured just yet.
People are buying or holding on speculation for various reasons but most with a common speculation: They believe that the price will continue to rise relative to their cost basis. That’s it. Some of these folks have a fundamental belief about bitcoin’s future as a currency, but that future isn’t enabled directly by the technical details that you’ve offered. Most newcomers don’t care about the revolution, they’re just trying to hop aboard a rocket ship.
You have a solid understanding of bitcoin’s technical details. Just pointing out that such details don’t directly solve any economic / debt related issues, for many reasons. One of its key limitations is that the technology of bitcoin cannot facilitate commerce at scale, not currently.
Price of bitcoin will go up or down directly as a result of decisions of buyers and sellers, nothing less or more. Greater fools applies to bitcoin just the same as other open markets.
Fixed assets, goods and services, etc., are stable relative to fiat, at least USD. So bitcon isn’t deflating any bubbles.
I'm pretty sure we're discussing something new now, and that's cool.
> Fixed assets, goods and services, etc., are stable relative to fiat, at least USD.
Not house prices. As bitcoin gets larger and larger, you will see those prices stabilize and start to fall. What i think will happen, is that when the people who own all of those empty houses around the world that are used as a capital appreciation asset, start finding that that capital appreciation isn't increasing anymore, they will either sell them or rent them out. Feds ain't gonna take that lying down of course. They can't afford to, as the gfc proved. I expect an acceleration of qe.
Let's be clear, it is the price of these houses vs bitcoin that matters. If your capital appreciation of bitcoin is greater than housing, you will choose the one that has the best return. Bitcoin compared to the fixed asset market right now is a fraction of a fraction. But that is changing and it is changing fast. When bitcoin is 100 times the asset value of today, that metric becomes apparent.
And frankly it doesn't matter what people think. That's the beauty of the bitcoin design. It works because it doesn't rely upon questioning peoples motives, it relies on just working. And it is working. Oh is it working.
You believe housing will fall in fiat? So a $1MM home will be $900k, etc? What’s btc have to do with this? Why would housing go down in fiat if bitcoin is going up in fiat?
Is anyone pricing housing indexes in bitcoin? You could maybe come up with one yourself.
Bitcoin, like gold, does not stop inflation. Once again, what is a problem that Bitcoin solves that isn't solved better by another system?
See the original paper on The Byzantine Generals Problem by Lamport et al, where the authors present multiple solutions. Many more solutions have been successfully used in production. People who need to solve that problem do not need to hold any Bitcoin, so the Byzantine Generals Problem does not put any floor on the value of Bitcoin.
Straight from the frog's mouth: "Inflation debasing your money."
This was your sole example of a problem that Bitcoin solves better than any other. If you now disavow that example, do you concede that Bitcoin solves no useful problem better than other systems?
So here's a scheme that could be used to wildly profit in the fiat market. If you're what is considered a bitcoin "whale" holding millions worth of the currency you would just setup a short on bitcoin futures. Then you initiate a large sell from a well known whale wallet. This would trigger a large sell as stop losses are triggered. Profit then re-buy the dip.
So, free money? I welcome them to try. If anything, this would reveal the problem of trading with leverage.
There’s no guarantee that the market won’t start buying into the whale’s sell, because the market thinks the price is low. But if it works, it’s the leveraged traders who have a problem, and they deserve to be wiped out, in my opinion.
Furthermore, it’s already possible to go short on several exchanges, so if this worked like magic it would be happening right now.
Depending on what market makers are up to, this will work or won’t. Trend would be towards eventually not working if it does at all. Difficult to say how liquidity differences will affect ability of your strat to work.
> Do futures markets typically stabilize the price of a commodity?
Kind of. It doesn't necessarily stabilize the prices of the commodity so much as allow the transferring of the risk associated with price movements.
> Who loses out if a futures contract can't be fulfilled (for example due to lack of liquidity in the underlying market)?
The exchange acting as the clearing house is on the other side of each contract so they'd be left holding the empty bag. Exchanges deal with this by settling futures daily (so net cash movement based on current price) and by setting margin requirements on the members buying or selling contracts. The margin requirements vary based on the volatility of the future and for something like Bitcoin I wouldn't be surprised if was 100%.
What's particularly cool / safe (and interesting if you're a finance nut) about futures vs. actual trading of Bitcoins is that there is zero crypto involved. Everything is cash settled in dollars.
> What's particularly cool / safe (and interesting if you're a finance nut) about futures vs. actual trading of Bitcoins is that there is zero crypto involved. Everything is cash settled in dollars.
I certainly find this interesting, but I don't think it's a good vote of confidence for Bitcoin just yet, even if it's structurally safer for the exchange. For the most part futures are not cash-settled, or only cash-settled when it is very inconvenient for the buyer or exchange to settle them physically. If you buy futures, you are usually trying to gain speculative exposure to something that is otherwise very difficult to hold (e.g. oil futures vs oil barrels).
If there is no structural obstacle to settling futures physically, that implies there is another reason the market or the exchange doesn't particularly want to. This can mean various things; in the case of Bitcoin futures specifically, I interpret this to mean that the exchange would rather not handle Bitcoin directly, because historically holding a large amount of Bitcoin at once invites hackers to try and steal them.
That's pretty savvy and does seem good for overall safety, but from the perspective of financial stability, I think it's bad for Bitcoin's overall market confidence long term. My concern is that since Bitcoin is convenient to purchase and trade directly through existing exchanges, people who are long on Bitcoin should just buy Bitcoin directly, instead of Bitcoin futures.
Does this mean that tons of money could be invested in these - let's say a trillion dollars going long on bitcoin via cash settled futures - and the underlying price wouldn't necessarily go up at all? I always thought the play with bitcoin was to wait until the "dumb money" got in via financial institutions. But if the whales are just betting on the real price with cash settled futures, does that mess up my assumptions about supply/demand?
Let’s say the price of bitcoin is $10000. You want to go long using futures, so you start buying contracts. A few people will want to sell futures at $10000, but not for a trillion dollars. If you want to buy more futures, you will have to pay more. If you offer $11000 there will be more people willing to take the other side of the bet. And if the price of the underlying is still $10000 arbitrage is possible. I could buy one bitcoin for $10000 and sell you the future for $11000, pocketing $1000 no matter what the future price of bitcoin may be. That creates demand for bitcoin if there is huge demand for futures, pushing prices up.
So I buy a future for 1 bitcoin in 10 days with a price of $10k. The future is cash settled, so in 10 days the exchange will give me [price of BTC] - $10k, or I can sell the future before then. Where does the bitcoin come in? Is the exchange required to hold bitcoin = to the net of all futures?
For CME (and perhaps NASDAQ) they are doing cash settlement instead of physical settlement of the Bitcoin since it would introduce significant overhead. They are going to use a reference rate called their "Bitcoin Reference Rate" which has a collection of exchanges that it uses to determine the spot price.
I think it kind of does, in a way. Let's say I go long on bitcoin, but purchase futures that are short on it. If bitcoin plummets, I may lose on the bitcoin position, but the futures I purchased will go up, limiting my losses.
Southwest did something similar with oil a few years ago. Fuel is one of the biggest costs to an airline, so when the price of oil spiked a few years ago, many airlines had to raise ticket prices + add fees to make up for the loss. Southwest, on the other hand, had oil futures betting on the cost of oil going up. When the spike happened, their costs went up too, but they could make up for it with the futures.
That's called 'hedging' and is literally all hedge funds do. So long as markets remain 'sensible' its a brilliant strategy. Markets, of course, do not remain sensible for long. I'm presently listening to 'When Genius Failed', a book about the implosion and utter failure of Long Term Capital Management, one of the biggest hedge funds who learned just how utterly batshit irrational the market can actually be.
For practical purposes, these days, I believe a "hedge fund" is basically defined by its high fees (2&20), lack of regulation and disclosure compared to a mutual fund, and its restriction to "qualified investors" who are supposed to be wealthy enough to absorb losses. Certainly quite a few so-called hedge funds get a lot of publicity for the opposite of hedging - making wildly risky bets to try to beat benchmarks.
There was a 4 hour stretch this morning in which Bitcoin lost over 20% of its value. In the last 45 minutes it is up 13%. I wonder what a long straddle would cost on this thing.
Bitcoin has recovered from dips really well in the past weeks due to major buy pressure. Unfortunately GDAX (and Coinbase), Gemini, and other exchanges all went down at the same time this time around, making it impossible to buy the dip.
Not sure about this incident, but I recall there was an incident earlier this year or late last year where there was major price action and evidence of someone DDOS'ing some exchanges.
And if not DDOS, it's entirely possible that these exchanges are not able to handle the rush of people logging in to buy the dip. I don't think any of these exchanges have the throughput of something like NASDAQ, not yet anyway.
Crypto is a really really new market —- expect exchanges to go down, have flash crashes, be complicit in manipulation, have terrible customer services, and maybe even lose customer funds.
I have seen comments that there is sometimes heavy DDOS attacks on the various bitcoin exchanges during intense price movements. Don't know much beyond that.
with Coinbase, the best I could do is buy @ 9400 and sell @ 9800 ...lost money because of their bad servers (for some reason downtime only happens when Bitcoin's value drops a lot)
Not sure why you are being downvoted - very precisely (and probably accurately) conveyed what was happening. What are the chances of all these exchanges having trouble at the same time? I'd really like to see postmortem on this.
There are various, arguably valid, orthogonal aspects that motivated the technology behind distributed ledgers. And when those utopian dreams are subjected to the cold hard facts (of this world) it elicits a non-rational response. That is the positive view of this group-mind phenomena. The negative view would posit that voices that point out that "the emperor has no clothes" can derail what very much appears to be a pyramid scheme.
>... New York Stock Exchange owner Intercontinental Exchange Inc. is the only one of the four major U.S. exchange operators without public plans to offer bitcoin derivatives.
That's pretty big. A couple years ago people were very skeptical that the big players would ever start dabbling in Bitcoin.
I thought BTC going above 10000 was the end of the bubble, but with announces like that it's just the beginning.
Each time it grows I fear bigger damages... But I also hope I'm wrong and I'll be just proven to be a fool for not having a bigger amount of bitcoin (I mined some back in the days)
Hopefully it's not cash settled like the CME. That is the worst idea ever, and will probably cause a lot of people to get screwed over by market manipulation. Especially since the CME is basing the cash settlement price on a single exchange: GDAX. Anyone can go to GDAX and crash or spike the price for one minute at 4:00pm any day and trigger a bunch of margin calls on the CME.
Especially considering how easy it is to make a bitcoin transaction (compared to things like wheat, or oil...) it really should be "bitcoin settled".
I disagree completely. Cash settled futures let people bet on bitcoin without ever touching bitcoin itself. For example, suppose I am a huge bitcoin hater and want to bet that bitcoin will go down 100% in the next 3 months. Why force me to worry about wallets, etc.? I just want to have a way to express my conviction without messing with all that stuff.
On principle I agree, however Bitcoin poses additional complexities that other commodities do not, specifically in regards to contentious netsplits that result in irreconcilable forks (which may or may not be fighting for the name Bitcoin). In the event of a netsplit, barring physical delivery of actual outputs (private keys, not a settlement transaction), CME has the power to dictate which is settled and even which fork gets the BTC ticker for in-flight contracts. This gives CME quite a bit of influence in the outcome of a fork; for example, what would CME have called Bitcoin if their futures were live during the 2x hard fork? If they were swayed by some of the larger players in the space, this could cause serious consequences for the wider network (confusion, loss of funds and other moral hazards).
This is one of the complexities of the ETF filings, where the filers stated their intention to determine which fork the ETF represented by things like hashpower, market cap or other temporal data points. This is dangerous for many reasons, thus it is best for the contracts to represent all possible future forks and not make a decision on them, allow the private keys to be delivered and allow the party who the coins are delivered to take split as they see fit. While this condition could be represented in a cash settled contract, there are infinite possible forks and CME could not possibly keep up with them all, thus the only practical way to solve the problem is physical delivery of private keys.
Lots of people trade physically settled commodities futures contracts without handling the underlying products. You just have to make sure you close or roll your position before it settles.
That's not correct. They still have to pick a settlement price. Physically settled futures makes sense when customers are interested in the commodity itself and cash settled makes more sense for pure speculation.
Sure. But physically settled funancial futures such as bond futures are physical because customers actually want to get delivery of the underlying bonds. In the case of bitcoin futures, most likely they don't. Physically settled futures cost the exchange more in terms of additional expenses / infrastructure. So the exchange will go with physical only when there is a clear customer demand for that.
You're going off track. I'm just saying that phys settled allows the future to track the underlying better because you can take delivery. This is a completely seperate issue on if you actually want to hold the underlying (many people would prob love the idea of using cme to deal in btc directly since current exchanges are so terrible at it).
why does it track better just because you take delivery? either way, whether you take delivery or not, the exchange has to decide on a settlement mark to market price. So, delivery or not, it will track the same.
Because you can take delivery and sell on spot market either now or in the future (with carry costs) or buy on the spot now, carry, and sell into the future. This keeps the prices linked.
Why's that? For some derivatives, cash settlement is the only thing that makes sense. E.g., look at their weather derivatives. It's not like anybody wants to take delivery on a petagram of cold air.
The majority use case for Bitcoin isn't using Bitcoin at all. It's speculating on Bitcoin. Those people definitionally don't care about Bitcoin for its own sake.
I'm pretty sure the exchanges are offering these not because anybody actually has forward needs to buy or sell Bitcoin, as they would with, say, wheat. People just want to speculate. For those people, cash settlement is exactly what they're after.
Apparently there have been cash-settled futures on a whole bunch of commodities for years now, so this sounds like another case of "I just discovered how finance works and I don't like it".
Bitcoin differs from commodities like gold in that it's something which can be trivially transferred electronically. It doesn't make much sense to 'buy' cash instruments when you can just get the real thing.
Between poor usability, variable fees, blockchain congestion, and security I wouldn't say transferring Bitcoin is trivial.
There may also be a regulatory angle here. ETFs that are backed by Bitcoin have been repeatedly smacked down by the SEC, but futures that merely bet on the price while not touching actual Bitcoin seem to be OK. I can imagine that this probably infuriates true believers.
Holding any commodity comes with a huge amount of risk (what do I do with these oil barrels? ... livestock? ... crops?). Settling futures would involve moving these things from place to place.
But whither bitcoin, you say? Moving those is easy! Yes, but holding them is hard. Who wants Your Favorite Mutual Fund to hold bitcoins? Not them, that's for sure. There's much more risk there than necessary.
If you hold it, you own the risk of securing it. If I were a mutual fund, I'd much rather pay a premium to someone with expertise (like an exchange or some agent of the exchange).
I agree but it is ironic, because one of the great strengths of Bitcoin is that, with just a little education and following the right basic procedures, anyone can hold it directly with very little risk. No need the need for any middlemen, custodians or trusted third parties.
But yes I can see that some people/businesses would want to outsource that risk by trusting someone else to do it properly.
> It doesn't make much sense to 'buy' cash instruments when you can just get the real thing
It does if you only want to be exposed to price movements. With futures you can get that exposure with a much lower initial outlay than if you bought (or sold) the underlying. Leverage, in other words.
That's pretty much the point of them. Whether it's something that you'd find value in is somewhat beside the point. As well as speculation, I'd expect there is probably a market for people who actually want to use bitcoin as a medium of exchange. The current price fluctuations are a pain in the arse.
Why not? CME has futures that are settled with physical delivery.
It definitely makes it a pain for post-settlement management, and would likely prevent a lot of people from trading those futures, but why exactly is it not possible?
This makes me laugh and cry at the same time. Using tax dollars to bail out the big guys who bought derivatives based on a virtual currency would be such a cliche.
For all the complaining on HN about accredited investors, this is exacatly why they were invented in the first place: because there was too much speculative investment available to people who subsequently invested more than they could afford to lose. The big guys have the power to get a bailout but the small guys are the ones that starve to death because they can't.
That's all backwards. The little guys are supposed to need the protection. The big guys are said to be smart enough to know what they're doing and not need protection.
If the bitcoin price was increasing linearly people would not be blaming the technology so much. Rapid exponential growth followed by abrupt decline in repeated cycles makes people confused.
It's still gambling in a sense however there is a major difference in the type of randomness you are exposing yourself to. At a casino or when playing cards it's very easy to compute probabilities of all possible events - hence the house always wins. Here in order to compute the probabilities of price movements you'd need to model millions of human agents across dozens of markets. So unless someone has a lot of insider information, you have a decent chance of making some money.
One person’s useless is another’s breakthrough, critical mass solution to one of humanity’s oldest and most fundamental problems: tracking who has/owes what.
The places you use that aren't taking your Internet Fun Bucks though, it's just converting them into dirty fiat and giving that to merchants. Also, best hope that the $2 you spent on a carton of milk isn't worth $4 by the end of the week.
I don't see how that relates to the point you were making. Clarify?
> Bitcoin as a currency is fairly useless unless you're buying drugs or you're a botnet operator
You claim that Bitcoin is useless. This was to justify the point you made before (nothing will settle in Bitcoin) or maybe as a cheap dig. Either way, your statement as it stands is worded to be condescending and confusing.
It's like saying "Mouthwash is fairly useless unless you don't want bad breath." Turns out, the market for people who don't want bad breath is pretty big. Calling it useless is wrong.
What I'm getting at is that Bitcoin is essentially being traded as a security, where it's basically just how much electricity mining pools have wasted. Despite being designed as a currency, it sees very little use as such and mostly just gets moved around between people trying to get rich.
>your statement as it stands is worded to be condescending
That is intentional. I find Bitcoin is stupid and wasteful by design.
For drugs easily available from your local dealer, you're probably right. But if you wanna buy something fancy, or for anything to do with botnets if you live in the US/Western Europe, cash is a no-go since you can't easily move it internationally.
Of course I'd have to have got in early and had the balls not the sell, not lose the keys, not get hacked and not leave them on an exchange, for years.
I think one of the most important skills in trading is realizing the impossibility of 'ideal' trades.
Perfectly buying at the bottom of a dip and selling at the top are both very RISKY trades, particularly if trading with your whole stake: you don't have much information to indicate that the market is changing and could have been very wrong.
I think the healthiest perspective is just to compare investment vs. return in dollars. If you're beating the broad market, you're doing fine and should be happy. If you think about what you could have done with perfect hindsight, you'll just make yourself miserable.
The difference with bitcoin is the price increase from 1c / BTC to $10,000 means at many points someone could have purchased $1000 in BTC and been left with enough to retire.
I don't think anything else has had that levels of "returns"
You may be interested to know the creator of the crypto currency exchange Kraken was CEO of Lewt Inc. Many of the people involved in virtual item shop businesses over the past few decades are prominent holders and founders of crypto currency businesses and schemes.
There's a real case for the market. Bitcoin miners can short the futures contract and turn "use dollars to buy electricity and mining gear for bitcoins later with ??? prices" into "dollars now for bitcoins later at who-cares prices that nets out the short bitcoin position that gave us dollars now".
currency is a real thing that is mostly used for real transaction. Most people working in currency futures are working to offset risk - that is I shipped a widget when it is delivered the buyer will pay a set price in their currency which I have to convert back to mine. Bitcoin is used for transactions, but most of the futures are based on speculation on future value and not something fundamental.
Maximum snark: and that's why you aren't on the NASDAQ board?
Besides which, there's nothing underlying the US dollar either. Sure you can pay taxes, but that's about it. The rest of the economy is a shared belief, an illusion if you will.
Shocking alert: your existence is due to the permission of others.
I have no idea what to do with my 0.05 BTC. Just let them sit there, I guess as a curiosity of old days. I don't really feel that I fit into the moon community and I don't really feel I want to build anything around this tech just because it is not about tech anymore.
Had lots of Bitcoin sift through my hands. Anyone remember the Bitcoin faucets? Those were the times.
Sincerely, One of the first 1000 users of MtGox (proof in the leaked MtGox database :P)