Why Bitcoin will fail(meaningofstuff.blogspot.com)
meaningofstuff.blogspot.com
Why Bitcoin will fail
http://meaningofstuff.blogspot.com/2017/12/why-bitcoin-will-fail.html
42 comments
[deleted]
Debt collectors calling and having your credit score dinged isn’t the definition of violence.
I mean, ultimately if you try to keep your stuff, people will break into your house, beat you, throw you into a cage and lock you in close proximity with rapists.
If you try to keep your stuff and resist them, they will blow your brains out.
If you try to keep your stuff and resist them, they will blow your brains out.
Yeah one has to buy into the premise that debt based money is a good thing but I reject that premise.
At least each BTC represents a certain amount of work (in the form of electricity expended) that's already been performed.
Debt is great as long as there is enough work to be performed to square the accounts.
At least each BTC represents a certain amount of work (in the form of electricity expended) that's already been performed.
Debt is great as long as there is enough work to be performed to square the accounts.
Not really. You only have to buy in the premise that given 2 options:
1) a system with a lot of (risky) debt
2) a system in which debt is impossible
Then have competition between these 2 options. There is no doubt about the outcome. System 1 will devastate system 2 (in that the total economy size of system 1 will be a LOT larger than system 2).
Therefore the Nash equilibrium is a debt based system.
Nobody's claiming there aren't any advantages to a system where debt is not a possibility. I guess people are just claiming that not having debt is too expensive, in terms of missed opportunities.
The strength of bitcoin is the inflexibility and general incompetence of government based money systems. It wouldn't be too hard, I think, for a government to make a money system that would trounce bitcoin. Of course, they'd have to be prepared to trounce banks and most of the financial sector to do this.
1) a system with a lot of (risky) debt
2) a system in which debt is impossible
Then have competition between these 2 options. There is no doubt about the outcome. System 1 will devastate system 2 (in that the total economy size of system 1 will be a LOT larger than system 2).
Therefore the Nash equilibrium is a debt based system.
Nobody's claiming there aren't any advantages to a system where debt is not a possibility. I guess people are just claiming that not having debt is too expensive, in terms of missed opportunities.
The strength of bitcoin is the inflexibility and general incompetence of government based money systems. It wouldn't be too hard, I think, for a government to make a money system that would trounce bitcoin. Of course, they'd have to be prepared to trounce banks and most of the financial sector to do this.
It's already failed. It's gone from the currency of the future, to a store of a value, to just a pure speculative commodity. Nothing more or less. Use it to make money, and get out.
maybe local blockchain cryptocurrencies may stay useful without turning into gambling..
No, you see that's not Bitcoin. That's how different numbers of people perceive or use Bitcoin at different times. Bitcoin is ever adjusting and changing, often making short-term sacrifices and failing to meet certain expectations that people have at the time. It would really fail if a fundamental technical flaw was discovered or if it hit a brick wall where realistic solutions to current problems stopped being actively worked on. So far that hasn't been the case.
So what matters is the technical side, things that are actively being developed, such as the Lightning network, and that at least some entrepreneurs understand this technical side sufficiently enough to build services that translate its fundamental value into things that people can more easily understand and appreciate. Much like the internet in early days.
Someone could go back 20 years and say "where are all these revolutionary things we keep reading about that would be possible? Wild speculations, Internet has failed."
Of course Bitcoin might fail, but I believe something like Bitcoin will succeed -and Bitcoin itself seems like the best candidate at the moment.
So what matters is the technical side, things that are actively being developed, such as the Lightning network, and that at least some entrepreneurs understand this technical side sufficiently enough to build services that translate its fundamental value into things that people can more easily understand and appreciate. Much like the internet in early days.
Someone could go back 20 years and say "where are all these revolutionary things we keep reading about that would be possible? Wild speculations, Internet has failed."
Of course Bitcoin might fail, but I believe something like Bitcoin will succeed -and Bitcoin itself seems like the best candidate at the moment.
I've been putting up over 200 of my btc in various loans for over 15 months now. I do this on Bitfinex. It's a double blind loan and can only be used by the receiving party for margin trading. That party has to have maintain a certain reserve to be able to allow an automated stop-loss.
This system is fully automated and I've gotten some interesting rates on btc that would otherwise just have been idle.
This system is fully automated and I've gotten some interesting rates on btc that would otherwise just have been idle.
Good read.
There are more mature cryptocurrencies emerging that are based on 'loans' as the author describes. The Maker Project's stable coin 'Dai' is an example, which is only created by collateralized debt positions. However, the debt position is currently based on ETH, which is 'backed' by speculation.
There are more mature cryptocurrencies emerging that are based on 'loans' as the author describes. The Maker Project's stable coin 'Dai' is an example, which is only created by collateralized debt positions. However, the debt position is currently based on ETH, which is 'backed' by speculation.
In Poloniex you can lend money. Would that count as loans? There are pre-mined cryptocurrencies like Ripple and Stellar that doesn't need proof of work to solve the double spending problem, and thus doesn't need lots of electricity to work.
Has anyone tried to “peg” a cryptocurrency to USD? That seems like an ideal thing to have... Somehow change reward size based on exchange rate. That is increase supply when above 1:1 and decrease when below.
Yes, there is Tether - which is pegged to USD - and somewhat controversial for reasons I don't fully understand.
The controversy is that it is unclear whether every Tether is backed by real USD. See: Tether's TOS, Bitfinex's banking issues, etc.
I found this article on the matter very interesting: https://medium.com/@untetheredbtc/how-the-tether-usdt-distri...
MakerDAO just launched its stablecoin, DAI. It maintains stability by a complex system of smart contracts and CDPs. The problem is much more difficult than simply increasing/decreasing supply.
https://makerdao.com/
https://makerdao.com/
Looks interesting! The trusted oracle part seems concerning as a single point of failure but I suppose it’s necessary.
There's also BaseCoin, another attempt at a "stable coin" with prominent investors:
https://www.coindesk.com/basecoin-revealed-a16z-metastable-s...
https://www.coindesk.com/basecoin-revealed-a16z-metastable-s...
Bitcoin looks like a ponzi scheme to me as there is no value to a Bitcoin other than that of itself.
Currencies used to represent the gold stored by each government. These days currency represent the trust that the system that uses the currency, will trade goods for it. However we had to go through the gold equivalent to get here.
Bitcoin doesn’t represent anything and has nothing to back it up.
Currencies used to represent the gold stored by each government. These days currency represent the trust that the system that uses the currency, will trade goods for it. However we had to go through the gold equivalent to get here.
Bitcoin doesn’t represent anything and has nothing to back it up.
Bitcoin's value is connected to the costs to continuously mine it and consequently keep the blockchain intact and secure.
These costs include electricity, mining equipment, personnel, and warehousing.
As with normal equity valuation, these costs would be transparent, allowing for valuation to take place.
Since Bitcoin is decentralized and its "employees", or miners, are disparate; costs are not known.
This information asymmetry is one cause of Bitcoin's unbounded price discovery.
These costs include electricity, mining equipment, personnel, and warehousing.
As with normal equity valuation, these costs would be transparent, allowing for valuation to take place.
Since Bitcoin is decentralized and its "employees", or miners, are disparate; costs are not known.
This information asymmetry is one cause of Bitcoin's unbounded price discovery.
>Bitcoin's value is connected to the costs to continuously mine it and consequently keep the blockchain intact and secure.
That's wrong. Bitcoin isn't worth $X because miners are expending $X resources to obtain it. Miners are expending $X because people are buying bitcoin for $X.
Imagine a lottery where the reward is an ounce of gold which is worth $1200. A ticket costs $10. There is a guaranteed winner at the end of the lottery. When the lottery ends a random ticket will be selected and the owner gets the gold. Buying more tickets increases your chance of winning. Therefore participants will try to buy slightly less than $1200 worth of tickets. If the price of gold rises to $2400 people will buy twice as many tickets.
The block reward for mining is decreasing on a regular basis. Resources spent on mining will decrease because of lack of profitablity. If bitcoins value is dependent on mining then why isn't it decreasing with every year?
That's wrong. Bitcoin isn't worth $X because miners are expending $X resources to obtain it. Miners are expending $X because people are buying bitcoin for $X.
Imagine a lottery where the reward is an ounce of gold which is worth $1200. A ticket costs $10. There is a guaranteed winner at the end of the lottery. When the lottery ends a random ticket will be selected and the owner gets the gold. Buying more tickets increases your chance of winning. Therefore participants will try to buy slightly less than $1200 worth of tickets. If the price of gold rises to $2400 people will buy twice as many tickets.
The block reward for mining is decreasing on a regular basis. Resources spent on mining will decrease because of lack of profitablity. If bitcoins value is dependent on mining then why isn't it decreasing with every year?
What value do they create? Sure they burn electricity and energy but they don’t create any value other than the bitcoin value itself.
The incorruptibility of the ledger is the value.
> The incorruptibility of the ledger is the value.
It cannot feed me, it cannot protect me from the elements, I cannot grow food on it and is not a tool to help me create something desirable by the others. Hence it has no value.
It cannot feed me, it cannot protect me from the elements, I cannot grow food on it and is not a tool to help me create something desirable by the others. Hence it has no value.
Bitcoin, being a form of wealth, can give you all the things you just described.
That it has no value during an apocalyptic scenario, does not mean it does not have value in the non-apocalyptic times.
That it has no value during an apocalyptic scenario, does not mean it does not have value in the non-apocalyptic times.
You cannot call it wealth to describe its value. You are just saying that the value of it is in itself. Which is what I am supporting as well.
In order for me to exchange it for goods, as you described, there must be someone who has the goods and is willing to exchange them for bitcoin. There is no real reason for someone to do so.
It is not an apocalyptic scenario. That’s what 90% if the population fight for, day in day out. Food, protection from the elements, security.
In order for me to exchange it for goods, as you described, there must be someone who has the goods and is willing to exchange them for bitcoin. There is no real reason for someone to do so.
It is not an apocalyptic scenario. That’s what 90% if the population fight for, day in day out. Food, protection from the elements, security.
For a small fee you can buy anything with BTC via Bitpay Visa.
Just curious, do you think paper currencies have intrinsic value?
Just curious, do you think paper currencies have intrinsic value?
Very true. Ask Venezuela or Argentina if they trust the value of their fiat currency.
They printed a lot of fiat money without loaning it to people that can produce goods. The result is not enough loan pressure to "buy" the fiat papers over goods. On the good side, I guess they have some enforcement and a lot of violence :(
A limited supply coin does not guaranty a need to exchange goods over that particular coin and not another.
A limited supply coin does not guaranty a need to exchange goods over that particular coin and not another.
You are throwing away the possibility that there is an intrinsic value in Bitcoin, more related to socio-economic-political concerns, than survival. There is not only one domain in life.
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Ok, cool. We are getting somewhere now. What does Bitcoin offer in that perspective?
An incorruptible ledger resistant to the control of any individual, corporation, or state. Bitcoin may fail in its implementation of this goal. The future is still to be determined.
Bitcoin's underlying technology creates the possibility of decentralized governance, starting with currency, which is the connecting link between actors in societies based on economy.
Why such a future might be beneficial to mankind is that banking and finance being controlled by a few has led to errors with systemic consequences.
See the 2008 financial crisis and hyperinflation in Venezuela and Zimbabwe. See the seizure of funds by governments from individuals in Greek and Cyprus, scenarios where many of the affected did not write their own doom (others wrote it for them).
Bitcoin's underlying technology creates the possibility of decentralized governance, starting with currency, which is the connecting link between actors in societies based on economy.
Why such a future might be beneficial to mankind is that banking and finance being controlled by a few has led to errors with systemic consequences.
See the 2008 financial crisis and hyperinflation in Venezuela and Zimbabwe. See the seizure of funds by governments from individuals in Greek and Cyprus, scenarios where many of the affected did not write their own doom (others wrote it for them).
I think you're conflating the value of a block chain with the value of bitcoin.
Why is bitcoin more valuable in this regard than any other altcoin?
Why is bitcoin more valuable in this regard than any other altcoin?
Because it being the first successful implementation...it has 9 years of history at this point. It has proven itself resilient to hacks, ddos, Chinese bans, threats of regulation, exchange scandals, and bad press, and yet the protocol just keeps humming along. It being the first, all other cryptos are traded in terms of BTC. The network effect, and the mind share of BTC are substantial at this point. BTC has one largely fixable problem: it doesn't scale. Lightning network tests prove that it can if a second layer is added. Once this rolls out, the game will change.
You also can't make loans with BTC because debt needs to be enforceable. There must be violence behind debt. In the past that meant someone turns you into a slave or breaks your legs. Today the violence has been reduced (you get bad credit score and debt collectors keep calling), but it's still there. States have to have a monopoly on violence to enforce debt.
I don't really agree with where this guy is going, because the entire way loans are used to generate fiat currency isn't really sustainable. David Graeber has talked a lot about every great civilization has needed some form of debt relief at some point, either when a new leader comes in or when the civilization collapses.
People in the ancient world knew the empires they lived under would eventually end. Today in many high income countries, most people cannot see the end.