Bitcoin is a disaster(metzdowd.com)
metzdowd.com
Bitcoin is a disaster
https://www.metzdowd.com/pipermail/cryptography/2020-December/036510.html
977 comments
In payments the 99% case where everyone acts in good faith and no one makes a mistake is the easy part. It's when eg the seller refuses to send the phone that the extra overhead of the traditional payment system comes into play.
Establishing trust between seller and buyer is not a new problem. The same scenario that you described could be had with mailing checks, physical cash etc. wherever there is not a trusted escrow service.
Ironically, blockchain technology is the first technology that actually solves the age old problem of how to establish trust within a truestless system.
imho Bitcoin is a novel implementation of open-source technology, cryptography, and decentralized networks. I realize hackernews community has a disdain for greed and the avarice that is commonly connoted with "cryptocurrency" aka crypto-assets, but the reality is that bitcoin and crypto-assets are here to stay, and I for one am glad they are open-source.
Ironically, blockchain technology is the first technology that actually solves the age old problem of how to establish trust within a truestless system.
imho Bitcoin is a novel implementation of open-source technology, cryptography, and decentralized networks. I realize hackernews community has a disdain for greed and the avarice that is commonly connoted with "cryptocurrency" aka crypto-assets, but the reality is that bitcoin and crypto-assets are here to stay, and I for one am glad they are open-source.
My critique is not about greed. My critique is about crypto proponents claiming it does things it doesn’t do.
The GP complains about the overhead and data collection of traditional solutions, implying it’s a bunch of unnecessary cruft. In fact it’s to comply with local laws and protect the consumer and merchant from fraud. GP used Bitcoin to get around this hassle, renouncing any rights in the event of a dispute.
Now, maybe that’s a win, but it’s a much more nuanced and less generalized win than is put forth by crypto proponents.
Notice also the goalpost move of declaring Bitcoin a win over mailing cash. Ok, have you ever done that in your life? I have not been involved in mailed cash transactions aside from receiving $5 from my grandma in the mail 20 years ago.
The GP complains about the overhead and data collection of traditional solutions, implying it’s a bunch of unnecessary cruft. In fact it’s to comply with local laws and protect the consumer and merchant from fraud. GP used Bitcoin to get around this hassle, renouncing any rights in the event of a dispute.
Now, maybe that’s a win, but it’s a much more nuanced and less generalized win than is put forth by crypto proponents.
Notice also the goalpost move of declaring Bitcoin a win over mailing cash. Ok, have you ever done that in your life? I have not been involved in mailed cash transactions aside from receiving $5 from my grandma in the mail 20 years ago.
> The same scenario that you described could be had with mailing checks, physical cash etc. wherever there is not a trusted escrow service.
Isn't that exactly why this mailing cash/cheques fell out of favor compared to bank transfers, credit cards, PayPal, all these centralised systems that bitcoin posits are a problem
Isn't that exactly why this mailing cash/cheques fell out of favor compared to bank transfers, credit cards, PayPal, all these centralised systems that bitcoin posits are a problem
Can we have "cash you can email" that doesn't consume as much electricity as several nation states combined?
Here in Brazil, we have that since last month. The new money transfer system (Pix) allows anyone to send money to a key, which can be a person's CPF (the tax ID number nearly everyone has), a phone number, an email, or a randomly-generated number. These all map to a bank account (you can also use Pix to send directly to a bank account number); the directory with these mappings is kept by the Brazilian Central Bank, and the mappings are inserted by the participating financial institutions.
So assuming my email was [email protected], and I had asked my bank to map the Pix key "[email protected]" to my bank account, anyone could "send cash" through Pix to my [email protected] email; the cash would arrive at my bank account nearly instantly (even during weekends and/or holidays).
So assuming my email was [email protected], and I had asked my bank to map the Pix key "[email protected]" to my bank account, anyone could "send cash" through Pix to my [email protected] email; the cash would arrive at my bank account nearly instantly (even during weekends and/or holidays).
From this description it sounds like just name resolution that still uses the regular banking system.
The name resolution is just part of it (though the most visible part); there's also a new message exchange protocol, over the national inter-bank network, which does the instant transfers (before this new protocol, inter-bank transfers were only instant during banking hours, not on nights/weekends/holidays).
Fascinating, this is the first time I've heard of Pix. Can you own the private key? Can you create an account without having a bank account?
Can't talk for Pix, but UPI, a similar system implemented by Indian banks, wouldn't accept "private keys" or not having a bank account. No international payments either.
UPI is more like venmo on steroids, but it is no crypto-currency replacement.
https://en.wikipedia.org/wiki/Unified_Payments_Interface
UPI is more like venmo on steroids, but it is no crypto-currency replacement.
https://en.wikipedia.org/wiki/Unified_Payments_Interface
No, PIX is directly tied to your Bank Account. You need to have a bank account opened with an institution that connects your account to PIX.
Can you get banned from Pix?
Thats a good question. PIX is directly tied to your bank account, so I imagine if your bank decides to ban your account, you won't be able to use PIX through that account/bank anymore. But, I suppose you could open another account in another bank, move your previous PIX keys to it or create new ones.
Not how it works.. One banks bans you and you are screwed for life. That's the value proposition of bitcoin
Oh, didn't know that. Can you point out where it says that? From what I understand of PIX, it is tied to your transactional bank account. If you have multiple bank accounts and you are banned by one bank, your account on the other banks are not automatically banned and you can still transact with it, I would imagine PIX would still work.
Sure, you just need to trust people.
You got Pos wrong there is no trust involved
Sure, not until some entity gets over 50% of the stake
Sorry you do not understand how the system works. You can't buy 50% because the price would be worth more than all world gdp since each order is incrementally how gher and the supply of coins is not unlimited. Good to dig into things before you mindlessly dismiss them. Did you actually believe that people are designing and talking about Pos as a breakthrough when the main idea is "nobody rich enough will want to buy 50%"?
For newer PoS protocols, they would need over 66% and they would lose money if they misbehaved making it likely uneconomical to do so. This is the big advantage of PoS over PoW. There are both positive incentives (e.g. block rewards) but also negative ones (e.g. getting slashed for trying to stage a double spend attack).
Polkadot, Cardano, Stellar, soon to be Ethereum 2.0. Proof of Stake is where it's at if you are concerned with the power consumption of Proof of Work.
Yes. Proof of stake coins like nano don't require any proof of work. Peercoin, too. Ethereum is considering PoS IIRC.
Ethereum has a proof of stake chain in production right now, in the sense that it is running with over a billion dollars worth of real ETH. But it won't run user transactions and contracts until the EVM migrates over, probably late 2021, and that's when PoW will go away.
What about cash that you can send like an SMS on a network that offsets its CO2?
Celo is proof of stake based and also issues part of its block rewards to Project Wren. It has a native stablecoin and a decentralized phone verification protocol that lets you send money to any phone number.
Check out celo.org and ValoraApp.com
Celo is proof of stake based and also issues part of its block rewards to Project Wren. It has a native stablecoin and a decentralized phone verification protocol that lets you send money to any phone number.
Check out celo.org and ValoraApp.com
How much electricity do you think traditional money printing and transfers consume?
Much less? Bitcoin currently powers almost none of the world’s transactions, yet consumes all that energy.
The entire us consumes 75 twh in a year, the same as bitcoin’s global energy use.
Of that, the entire commercial sector is about 12 twh. That’s not just banks. That’s every company. Banks alone are surely far less. Maybe 2-3 twh? And the us is 15% of global gdp. So, global finance might consume about 14-32 twh.
Again, that is while doing all of global finance. Bitcoin powers a rounding error of transactions yet consumes 75 twh.
There’s just no comparison energy wise. My math could be off by several orders of magnitude and bitcoin would still consume more if it were actually powering the world’s transactions.
https://www.eia.gov/energyexplained/us-energy-facts/
https://digiconomist.net/bitcoin-energy-consumption
The entire us consumes 75 twh in a year, the same as bitcoin’s global energy use.
Of that, the entire commercial sector is about 12 twh. That’s not just banks. That’s every company. Banks alone are surely far less. Maybe 2-3 twh? And the us is 15% of global gdp. So, global finance might consume about 14-32 twh.
Again, that is while doing all of global finance. Bitcoin powers a rounding error of transactions yet consumes 75 twh.
There’s just no comparison energy wise. My math could be off by several orders of magnitude and bitcoin would still consume more if it were actually powering the world’s transactions.
https://www.eia.gov/energyexplained/us-energy-facts/
https://digiconomist.net/bitcoin-energy-consumption
The US consumes about 4 PWh/year, so bitcoin isn't comparable with the nation as a whole. However, that is more power consumption than many individual states, so your overall point remains completely valid.
Your units are funny. Using W-hr (energy) and then making it a rate by making it per year which gets you back to power. You could have just said, “the US consumes energy at a rate of 450 GW”.
There’s no need to introduce hrs and years to the mix. Watts describe precisely what you’re attempting to quantify.
https://www.google.com/search?hl=en&q=4+PW+hr%2Fyear+in+GW&o...
There’s no need to introduce hrs and years to the mix. Watts describe precisely what you’re attempting to quantify.
https://www.google.com/search?hl=en&q=4+PW+hr%2Fyear+in+GW&o...
Whoops yeah that should have been 9.4 quadrillion BTU. The online calculator I used for TWH conversion was very wrong. Looks like the correct value is about 2,000 twh for the us commercial sector?
If we assume banks are 10% of that, then it’s 200 twh. 3x bitcoin. But also, handling literally all finance and banking in the US. Vs essentially nothing for bitcoin, compared to the scale of the us economy.
If we assume banks are 10% of that, then it’s 200 twh. 3x bitcoin. But also, handling literally all finance and banking in the US. Vs essentially nothing for bitcoin, compared to the scale of the us economy.
It'd be really nice if I could find a study on this, but just because bitcoin doesn't power the majority of the transactions doesn't mean it couldn't do so without the energy needs scaling linearly with transactions. If anything I'd imagine it could become more efficient as more transactions were taking place. I see people argue this a lot and I think it's too narrow of a view on the situation.
Of course it'd be much better for us to adopt a crypto currency that uses a different algorithm that has even less energy usage. Even without that though I think it could prove to be more efficient than existing financial systems.
Of course it'd be much better for us to adopt a crypto currency that uses a different algorithm that has even less energy usage. Even without that though I think it could prove to be more efficient than existing financial systems.
Your numbers are totally wrong. The fact your own link suggests that bitcoin uses as much electrical energy as Chile should tell you it's not close to the USA. Recheck?
Bitcoin transacted way more money that PayPal etc
People actually buy stuff on paypal. They processed 2.5 billion transactions in 2020. Bitcoin processed about 250 million transactions.
The total amount of reported money transacted might be higher for bitcoin but that doesn’t come from contact with the real economy. So that depends on the valuation of bitcoin rather than economic impact.
https://www.statista.com/statistics/277841/paypals-total-pay...
https://www.statista.com/statistics/730806/daily-number-of-b...
The total amount of reported money transacted might be higher for bitcoin but that doesn’t come from contact with the real economy. So that depends on the valuation of bitcoin rather than economic impact.
https://www.statista.com/statistics/277841/paypals-total-pay...
https://www.statista.com/statistics/730806/daily-number-of-b...
When confronted with relatively concrete studies on Bitcoin's wasteful energy use, are you going to point to the fact that physical money printer energy use has not been studied to muddy the waters? The reason it hasn't been studied is that it doesn't use a huge amount of electricity.
Anyway, as another way of answering your question, physical money printing and transfers require no electricity at all, predating the invention of electric power by thousands of years.
Anyway, as another way of answering your question, physical money printing and transfers require no electricity at all, predating the invention of electric power by thousands of years.
Pretty sure the modern machines that
1. Print the money
2. Harvest the Cotton and other raw materials
3. Transport the money
4. Secure the money (even in electronic form)
5. and about 100 other things
All use "energy" the point of the OP's comment was about "wasted energy" which i would image is tied to climate change
The idea that "printed money uses no energy because it is old tech" is just ignorant
1. Print the money
2. Harvest the Cotton and other raw materials
3. Transport the money
4. Secure the money (even in electronic form)
5. and about 100 other things
All use "energy" the point of the OP's comment was about "wasted energy" which i would image is tied to climate change
The idea that "printed money uses no energy because it is old tech" is just ignorant
Zero bitcoiners going "BUT WHAT ABOUT CONVENTIONAL MONEY HUH" provide numbers.
Since you're too lazy to, I will:
* Bitcoin: 0.1% of all electricity in the world, 7tps.
* THE ENTIRE REST OF HUMAN CIVILISATION, EVERYONE IN IT AND EVERYTHING THEY DO: 99.9% of electricity, a hell of a lot more than 6,993tps.
Bitcoin is the most inefficient payment system in history.
Bitcoiners' usual objection at this point is to claim that transactions per second is a bad measure, for some reason - though if you're comparing how much each system achieves for the resources it uses, it's precisely the obvious and correct measure.
But if tps doesn't matter, then the entire bitcoin ecosystem should be replaced with a small rock. A whole country's less electricity use, and only 7tps less! Also, it'd be hard currency.
Since you're too lazy to, I will:
* Bitcoin: 0.1% of all electricity in the world, 7tps.
* THE ENTIRE REST OF HUMAN CIVILISATION, EVERYONE IN IT AND EVERYTHING THEY DO: 99.9% of electricity, a hell of a lot more than 6,993tps.
Bitcoin is the most inefficient payment system in history.
Bitcoiners' usual objection at this point is to claim that transactions per second is a bad measure, for some reason - though if you're comparing how much each system achieves for the resources it uses, it's precisely the obvious and correct measure.
But if tps doesn't matter, then the entire bitcoin ecosystem should be replaced with a small rock. A whole country's less electricity use, and only 7tps less! Also, it'd be hard currency.
> Bitcoiners' usual objection at this point is to claim that transactions per second is a bad measure, for some reason
You've probably been told before but I'll tell you the why again. Bitcoin's energy consumption is not proportional to the number of transactions it's processing.
The energy used is proportional to the block reward, the reward that miners get from mining a new block roughly every 10 minutes. They won't spend more money on energy than they get from mining, or they would go out of business. That mining reward goes up with price, (because it's paid out as a fixed amount of BTC) and goes down with each halving event (every ~4 years the block reward is cut in half in BTC terms).
The network can be doing 7tps or 7 million tps, doesn’t really matter for energy use, although higher usage can have indirect effects on price or other things.
You've probably been told before but I'll tell you the why again. Bitcoin's energy consumption is not proportional to the number of transactions it's processing.
The energy used is proportional to the block reward, the reward that miners get from mining a new block roughly every 10 minutes. They won't spend more money on energy than they get from mining, or they would go out of business. That mining reward goes up with price, (because it's paid out as a fixed amount of BTC) and goes down with each halving event (every ~4 years the block reward is cut in half in BTC terms).
The network can be doing 7tps or 7 million tps, doesn’t really matter for energy use, although higher usage can have indirect effects on price or other things.
> * Bitcoin: 0.1% of all electricity in the world, 7tps
And? Who are you to tell anyone how they should use their electricity? Do you want my advice on what you should be doing in your home?
> Bitcoin is the most inefficient payment system in history.
I think the "hauling big rocks between islands" currency was probably less efficient, at least on a per capita basis.
> then the entire bitcoin ecosystem should be replaced with a small rock
Then go ahead and do that. If people have trust in your rock then that will work fine.
You appear to have written two books about money. Do you not understand how it works yet?
And? Who are you to tell anyone how they should use their electricity? Do you want my advice on what you should be doing in your home?
> Bitcoin is the most inefficient payment system in history.
I think the "hauling big rocks between islands" currency was probably less efficient, at least on a per capita basis.
> then the entire bitcoin ecosystem should be replaced with a small rock
Then go ahead and do that. If people have trust in your rock then that will work fine.
You appear to have written two books about money. Do you not understand how it works yet?
The vast majority of dollars in circulation exist only in accounting records and do not exist as actual physical tokens. Printed money uses no energy because we do not print money anymore, we write it in a SQL database (or, god forbid, an Excel spreadsheet).
A lot less per transaction than Bitcoin?
But I'm no expert.
But I'm no expert.
Looking solely at that criterial, ACH transfers work.
ACH is US Banking only. You can not do Direct person to person transfers, you must go through a US Bank for ACH
ACH is also SLOW and painfully insecure relaying on the banking institutions to stop gap the security and its built in slowness to allow for reversals of fraud or error transfers
ACH is not a model people should be promoting as good method to do money transfer
ACH is also SLOW and painfully insecure relaying on the banking institutions to stop gap the security and its built in slowness to allow for reversals of fraud or error transfers
ACH is not a model people should be promoting as good method to do money transfer
Thanks, I didn't know ACH was US only. As for slow, I've had things go through literally instantly, where I make the transaction, login to my bank account, and see it posted. When it's been slow, that always seems to be a factor with the sending entity (like PayPal) not my receiving bank. (Could be bank specific though)
Might be something else going on (wire transfer, maybe?); ACH payments are batch-processed a couple times a day, and so can't be instant.
Bank transfers don't have to be slow. Within the UK they are almost always instant.
https://en.wikipedia.org/wiki/Faster_Payments_Service
https://en.wikipedia.org/wiki/Faster_Payments_Service
Does it work internationally though?
Edit: Or I should say, “Could it work internationally?” Because afaik it does not currently.
Edit: Or I should say, “Could it work internationally?” Because afaik it does not currently.
Not across countries.
Western Union is also very useful, but the vast majority of transactions are not made by Western Union because it has tradeoffs that make other things like credit/debit cards and checks a better option.
Bitcoin Evangelists are trying to pump up the price by advocating that bitcoin will be the best method of making payments for a huge variety of use cases.
I'm not going to call it a pump and dump scam because I think that a lot of these people truly think that it is going to 500k and beyond and that they will never need to dump it all.
Bitcoin Evangelists are trying to pump up the price by advocating that bitcoin will be the best method of making payments for a huge variety of use cases.
I'm not going to call it a pump and dump scam because I think that a lot of these people truly think that it is going to 500k and beyond and that they will never need to dump it all.
WU is very expensive though; btc, if you know what you are doing, does not come close. WU is a horrible but unavoidable evil for millions of workers worldwide. This is one of the cases that should be disrupted.
I just checked, it seems that WU charges approximately 1% for transfers relative to the nominal exchange rate.
I don't transfer money much, but superficially that doesn't seem too expensive considering the volatility risk to WU due to fluctuating exchange rates combined with the overheads of regulatory requirements.
It seems to me that Bitcoin is only as cheap as it is because it sidesteps those regulatory overheads. So it's great, I suppose, as long as everyone is fine with it being used to launder money from human trafficking, the drug trade, corruption, or whatever...
I don't transfer money much, but superficially that doesn't seem too expensive considering the volatility risk to WU due to fluctuating exchange rates combined with the overheads of regulatory requirements.
It seems to me that Bitcoin is only as cheap as it is because it sidesteps those regulatory overheads. So it's great, I suppose, as long as everyone is fine with it being used to launder money from human trafficking, the drug trade, corruption, or whatever...
I am not a big btc fan, I made some money with it and I like the concept somewhat for the purpose it is meant for.
But this btc is used for drugs, human trafficking etc is getting somewhat weird: sure it is, but normal money is far more. So you do not use that either? That is in fact regulated and more expensive and still human traffickers use it all the time. So I do not see the point: in the end btc is easier to follow than a suitcase of dollars coming from Medellin where it was taken from children in the sex trade. So not sure what you mean there besides parotting this point. Private groups and govs have advanced systems for doxxing Btc accounts: they were a bit late to start but now that mining is basically impossible, it is far easier to follow than dollar bills.
Also WU cash point to point money is quite well known for being off the taxes radar in most countries (for some reason): the remittance to the homeland of (illegally) earned money via WU and evade taxes back home is probably it's biggest usecase which is why they can use these depressingly bad rates.
But this btc is used for drugs, human trafficking etc is getting somewhat weird: sure it is, but normal money is far more. So you do not use that either? That is in fact regulated and more expensive and still human traffickers use it all the time. So I do not see the point: in the end btc is easier to follow than a suitcase of dollars coming from Medellin where it was taken from children in the sex trade. So not sure what you mean there besides parotting this point. Private groups and govs have advanced systems for doxxing Btc accounts: they were a bit late to start but now that mining is basically impossible, it is far easier to follow than dollar bills.
Also WU cash point to point money is quite well known for being off the taxes radar in most countries (for some reason): the remittance to the homeland of (illegally) earned money via WU and evade taxes back home is probably it's biggest usecase which is why they can use these depressingly bad rates.
IME, the real fees charged by WU often add up to 10-20%.
How? The pricing calculator literally says $0.00 fees for me, the only charge is the 1% spread on the exchange rate.
I know WU from the dropoff points where cheap labour bring their money to send home; they use an extremely bad conversion rate. Like paypal but even worse. Sources: official WU dropoff points in HK, SG, TH, NL and ES. The exchange rates + fees are indeed 10-20% removed from what they really are. Maybe if you send online it is 1%, but most use it to bring cash (from cleaning houses etc) to families abroad.
Edit:
> The pricing calculator literally says
Please go to a meatspace WU point and compare the conversion rates with the inter bank rates.
Edit:
> The pricing calculator literally says
Please go to a meatspace WU point and compare the conversion rates with the inter bank rates.
I don't think you'd be able to convert some weak currency from cash to cash in another weak currency efficiently with Bitcoin either. Last time I checked, its API didn't extend to collecting wads of bills!
I know a lot of immigrants that send money home, they all use bank-to-bank transfers. Whether they use WU or not, the overheads seem to be in the 1% range...
I know a lot of immigrants that send money home, they all use bank-to-bank transfers. Whether they use WU or not, the overheads seem to be in the 1% range...
Bank to bank sure, WU is much higher in all cases I have seen. But he, we are just some people on the internet. I can send you pics of conversion tables in WU cash points in HK which are off by 5-20% from the inter bank rate. Banks can do this cheaply (and you still get screwed with most banks but indeed 1-2%, not 5+) so WU definitely does something bad there.
Yeah, I had to transfer a few hundred dollars between Australia and Eurpoe last year and both bank transfer and WU would have cost a lot more and taken longer than using btc. With bitcoin, the transfer was complete in about 30 minutes and due to price volatility, I was able to cash out when the price was up enough to cover all fees. It was definitely very helpful.
bitcoin has beaten western union, international wire transfers for years now and will continue to do so as notoriety and adoption of crypto-asset grows. However, that in no way justifies its marketcap, which is just over 500 billions.
However overvalued it is, and however many times the price crashes dramatically, it is likely that the blockchain will continue to exist in 50-100 years. As long as computers and the internet still exist that is.
Interesting story.
Question: was there any possibility of escrow here? What if the phone never showed up?
Question: was there any possibility of escrow here? What if the phone never showed up?
I took on the counterparty risk. To be honest, the sellers I've dealt with with the last few years have turned out to have head-and-shoulders better customer service than their intermediaries like PayPal etc. I think escrow (and other risk mitigation techniques, e.g. reputational ratings) are definitely opportunities for enhancing the crypto ecosystem.
Long term I suspect some sort of arbitration mechanism may play a role in crypto realizing its full potential (law and commerce are deeply intertwined, and the proliferation of hacks suggest a potential thirst for more effective justice) but I don't yet know what that would look like and many hard core enthusiasts would balk at the suggestion.
Long term I suspect some sort of arbitration mechanism may play a role in crypto realizing its full potential (law and commerce are deeply intertwined, and the proliferation of hacks suggest a potential thirst for more effective justice) but I don't yet know what that would look like and many hard core enthusiasts would balk at the suggestion.
That must have been one expensive phone.
It wasn't so much Bitcoin that saved the day, but a choice of payment processor by the seller that caused the problem to begin with. Heck, PayPal works in HongKong. Ultimately bitcoin made your transaction much smoother, but it was a sufficient, not a necessary condition in making it smoother.
Being deeply rooted in financial system payment processors often compete not with service quality but with how they can deal with various stupid or intentional government requirements and restrictions. Bitcoin and crypto is an ultimate alternative which (I hope) triggering change in this industry.
You can find lots of stories about PayPal freezing accounts for random reasons. With well-known projects this usually resolves by public shaming, but I guess this can be impossible to solve for a small seller in a non-US/non-West-Europe country.
Example: https://neo900.org/news/paypal-trouble-delays-project
Example: https://neo900.org/news/paypal-trouble-delays-project
Fair point, for sure! Though I've gained a lot of frustration toward PayPal the last few years, as both a buyer and seller. Their platform has really gone downhill from my perspective and I wish there were enough alternatives in use out there that I could sever the business relationship (particularly for eBay transactions). Non-crypto competitors are just as welcome.
I have no idea what he is talking about.
I use bitcoin to buy things both onchain and via lightning and the experience is so smooth and much much better than the circa 2017 period when fees were high. Don't keep it on exchange. The real thing that is stopping adoption is countries trying to classify it as a commodity and insist to pay capital gains on every microtransaction. Some countries are backwards (US, UK) than the others. Germany and few other countries are forward looking. No VAT on bitcoin transactions and no CGT if held for a year.
I use bitcoin to buy things both onchain and via lightning and the experience is so smooth and much much better than the circa 2017 period when fees were high. Don't keep it on exchange. The real thing that is stopping adoption is countries trying to classify it as a commodity and insist to pay capital gains on every microtransaction. Some countries are backwards (US, UK) than the others. Germany and few other countries are forward looking. No VAT on bitcoin transactions and no CGT if held for a year.
> No VAT on bitcoin transactions
Sounds like a defect in the technology to me. A good currency should be able to support the full range of social policies (like VAT).
One of the problems of the Euro is not being able to inflate different countries within the Eurozone at different rates. If Bitcoin were ever to become popular for regular transactions within many countries, it'd be a fiscal policy disaster. Pretty soon you'd hear Portugal, Italy, Spain, and Greece banning its use, along with similarly wobbly countries in other parts of the world. I remember Malaysia catching flak for halting foreign currency exchange during the Asian Financial Crisis, but it turned out to be a really smart move. It turns out that a globally integrated economy isn't always best for the smaller economies. They need to be able to adjust the spigot.
Edit: I suppose this suggests a feature request for Bitcoin: namespacing, of a sort. If the currency were able to support cross-namespace conversion controls, like a tax determined by a function of the velocity and acceleration of exchange ... that'd be pretty darn cool. Each country could pick its namespace, and have control over its exchange tax function. Taking it further, you could tax intra-namespace transactions. VAT with no bureaucracy. Each account could be tied to a citizen, transactions taxed at some progressive schedule, and then uniformly distributed to every account daily. The transaction tax could be dynamic, to encourage currency flow in bad times, and to add some friction when things are overheating.
Sounds like a defect in the technology to me. A good currency should be able to support the full range of social policies (like VAT).
One of the problems of the Euro is not being able to inflate different countries within the Eurozone at different rates. If Bitcoin were ever to become popular for regular transactions within many countries, it'd be a fiscal policy disaster. Pretty soon you'd hear Portugal, Italy, Spain, and Greece banning its use, along with similarly wobbly countries in other parts of the world. I remember Malaysia catching flak for halting foreign currency exchange during the Asian Financial Crisis, but it turned out to be a really smart move. It turns out that a globally integrated economy isn't always best for the smaller economies. They need to be able to adjust the spigot.
Edit: I suppose this suggests a feature request for Bitcoin: namespacing, of a sort. If the currency were able to support cross-namespace conversion controls, like a tax determined by a function of the velocity and acceleration of exchange ... that'd be pretty darn cool. Each country could pick its namespace, and have control over its exchange tax function. Taking it further, you could tax intra-namespace transactions. VAT with no bureaucracy. Each account could be tied to a citizen, transactions taxed at some progressive schedule, and then uniformly distributed to every account daily. The transaction tax could be dynamic, to encourage currency flow in bad times, and to add some friction when things are overheating.
You are confused. There is nothing in Bitcoin that prevents VAT. It's just Germany's policy. Elsewhere they charge VAT on it like any other currency. I have paid VAT on all my bitcoin transactions like any other currency. I am not in Germany.
That's good to hear. What about exchange controls? How do you see governments adjusting inflation with widespread international Bitcoin usage?
My understanding is that the inability to control inflation is a “feature” of BTC, not a “bug”. I strongly suspect that this will eventually make BTC too rare for owners to trade very often, and not practical as a day-to-day currency.
There's no theoretical limit to it's divisibility. The total supply is known ahead of time but the world will never run out of Bitcoin to transact.
The comment describes a liquidity crisis, when the market clams up and price begins to fluctuate wildly. It's not that things aren't tradeable, but that very few people want to.
All currencies are infinitely dividable I've never understood this supposed advantage of Bitcoin.
How do I pay 0.005 USD to my friend?
If useful, the US Department of the Treasury can issue a coin or bill with a value of any denomination, including .005 USD, and so is “infinitely divisible”.
Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)
Whether this is “enough” is very difficult to answer definitively. If the demand for BTC is greater than the supply, the value of BTC will rise until supply and demand reach equilibrium. If the demand outpaces supply, holders (“HODLERS”) have less incentive to trade and more incentive to keep their BTC, because the value of their BTC increases.
If demand gets too great, few to no holders trade, because they get more value by doing nothing, and trades involving BTC slow or stop completely. (We can think of this as kind of a “consensus attack” by “store of value” advocates on the “medium of exchange” advocates.) The demand doesn’t go away, though, so supply and demand can’t reach equilibrium.
Eventually this would lead people to start using something else as a medium of exchange, perhaps just bartering at first, eventually settling on something common. So now we have a problem: BTC demand has been satisfied by another “medium of exchange”. But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”? Do coins become like works of art, traded infrequently for great sums? Or do they become worthless?
Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)
Whether this is “enough” is very difficult to answer definitively. If the demand for BTC is greater than the supply, the value of BTC will rise until supply and demand reach equilibrium. If the demand outpaces supply, holders (“HODLERS”) have less incentive to trade and more incentive to keep their BTC, because the value of their BTC increases.
If demand gets too great, few to no holders trade, because they get more value by doing nothing, and trades involving BTC slow or stop completely. (We can think of this as kind of a “consensus attack” by “store of value” advocates on the “medium of exchange” advocates.) The demand doesn’t go away, though, so supply and demand can’t reach equilibrium.
Eventually this would lead people to start using something else as a medium of exchange, perhaps just bartering at first, eventually settling on something common. So now we have a problem: BTC demand has been satisfied by another “medium of exchange”. But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”? Do coins become like works of art, traded infrequently for great sums? Or do they become worthless?
> If useful, the US Department of the Treasury can issue a coin or bill with a value of any denomination, including .005 USD, and so is “infinitely divisible”.
And how much does that cost? I bet it's more than 5 cents.
> Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)
Not by design, that's an implementation details that can easily be changed in the future if 1 sat starts to become valuable enough to make a difference.
> and trades involving BTC slow or stop completely.
Do you have an example of a single commodity in the history of humanity that simply stopped being traded because it became "too valuable"?
I can't even understand how that makes sense, if it's valuable some people will want to sell it and get something that is more useful to them, like a house, a car, whatever. People don't commonly decide to hold an asset until their death bed.
> But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”?
What happened to Gold?
And how much does that cost? I bet it's more than 5 cents.
> Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)
Not by design, that's an implementation details that can easily be changed in the future if 1 sat starts to become valuable enough to make a difference.
> and trades involving BTC slow or stop completely.
Do you have an example of a single commodity in the history of humanity that simply stopped being traded because it became "too valuable"?
I can't even understand how that makes sense, if it's valuable some people will want to sell it and get something that is more useful to them, like a house, a car, whatever. People don't commonly decide to hold an asset until their death bed.
> But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”?
What happened to Gold?
> Do you have an example ...?
The Great Depression.
https://en.m.wikipedia.org/wiki/Deflation#Deflationary_spira...
If you're looking for commodities only, it's easy enough to Google "commodities bubble".
https://en.m.wikipedia.org/wiki/2000s_commodities_boom#Opini...
The problem is that when markets get turbulent, they can suddenly shift to going the other direction. Instead of everyone wanting to buy, suddenly no one wants to be the last one out the door. And with Bitcoin, what authority is going to stop the panic?
> What happened to Gold?
I suppose it depends on which branch of Bitcoin you're on. Are we talking about store of value or medium of exchange?
Soros' comments on gold are helpful.
> “Typically, a self-reinforcing process undergoes orderly corrections in the early stages, and, if it survives them, the bias tends to be reinforced, and is less easily shaken. When the process is advanced, corrections become scarcer and the danger of a climactic reversal greater”.
http://blogs.reuters.com/great-debate/2010/09/30/gold-as-the...
The Great Depression.
https://en.m.wikipedia.org/wiki/Deflation#Deflationary_spira...
If you're looking for commodities only, it's easy enough to Google "commodities bubble".
https://en.m.wikipedia.org/wiki/2000s_commodities_boom#Opini...
The problem is that when markets get turbulent, they can suddenly shift to going the other direction. Instead of everyone wanting to buy, suddenly no one wants to be the last one out the door. And with Bitcoin, what authority is going to stop the panic?
> What happened to Gold?
I suppose it depends on which branch of Bitcoin you're on. Are we talking about store of value or medium of exchange?
Soros' comments on gold are helpful.
> “Typically, a self-reinforcing process undergoes orderly corrections in the early stages, and, if it survives them, the bias tends to be reinforced, and is less easily shaken. When the process is advanced, corrections become scarcer and the danger of a climactic reversal greater”.
http://blogs.reuters.com/great-debate/2010/09/30/gold-as-the...
> The Great Depression.
What commodities ceased being traded during the Great Depression?
> Are we talking about store of value or medium of exchange?
Mostly store of value for now, both when adoption improves and LN support is more widespread. Eventually the base layer will also need some capacity bumps.
> Soros' comments on gold are helpful.
A multi millennium bubble? Can't get more unprecedented than that.
What commodities ceased being traded during the Great Depression?
> Are we talking about store of value or medium of exchange?
Mostly store of value for now, both when adoption improves and LN support is more widespread. Eventually the base layer will also need some capacity bumps.
> Soros' comments on gold are helpful.
A multi millennium bubble? Can't get more unprecedented than that.
Government can do whatever inflation adjustments that it wants.
What it can't do, though, is force people to accept them.
If you want your money to inflate, you are free to use any infatuation currency that you want.
But other people, who prefer to not be subject to inflation, are now free to not be subject to it.
What it can't do, though, is force people to accept them.
If you want your money to inflate, you are free to use any infatuation currency that you want.
But other people, who prefer to not be subject to inflation, are now free to not be subject to it.
Can't the government force taxes to be paid in the currency of its choice, thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?
> thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?
It does not make them subject to inflation, no.
If you hold entirely cryptocurrency, you are not subject to the inflation of holding the currency. Instead, you can simply convert to that currency, only when you need to pay taxes.
This avoids the inflation, in the same way that hold stock in a company, and not holding any dollars, avoids you from being subject to inflation.
It does not make them subject to inflation, no.
If you hold entirely cryptocurrency, you are not subject to the inflation of holding the currency. Instead, you can simply convert to that currency, only when you need to pay taxes.
This avoids the inflation, in the same way that hold stock in a company, and not holding any dollars, avoids you from being subject to inflation.
Suppose you had a particular debt, denominated in currency A, owed at the end of the year. Would you want to hold some amount of currency A throughout the year to ensure you could pay that debt? I suppose you could argue that you'd buy some currency swaps or somesuch, but most people would just hold that currency.
Remember the Asian Financial Crisis, when a bunch of the "tigers" had loans denominated in USD, Francs, etc., and then there was a big capital outflow, tanking their local currencies against those debts? People will want to make sure they don't float against the currency they owe.
Remember the Asian Financial Crisis, when a bunch of the "tigers" had loans denominated in USD, Francs, etc., and then there was a big capital outflow, tanking their local currencies against those debts? People will want to make sure they don't float against the currency they owe.
Holding enough currency to have a small amount of hedged safety against risk of that currency changing in value is not really a good enough reason to say that a country would be able to "force" "taxpapers to be subject to its currency".
Even if we say that people would hold some of that original currency, there could still be a significant benefit to transferring most of your wealth to a deflationary currency. Therefore, people would still be able to avoid being subject to that original currency to a large degree.
Even if we say that people would hold some of that original currency, there could still be a significant benefit to transferring most of your wealth to a deflationary currency. Therefore, people would still be able to avoid being subject to that original currency to a large degree.
> significant benefit to transferring most of your wealth to a deflationary currency
I'm not familiar with any evidence of that claim, despite my economics education. I suppose the best historical corollary would be gold? If so, I think we can agree that almost no one has adopted that practice. Do you think Bitcoin is different enough than gold such that it would motivate different behavior?
Let's consider the effects of owing tax in the national currency. Retail businesses would owe sales tax in that currency, perhaps paid quarterly. Rather than adding complexity to each sale, they'd probably price goods in the national currency, even if not a legal requirement (which it easily could be). If goods are priced in national currency, it's handy to keep your working capital in that same currency. ... The incentives start to align to keep the bulk of domestic economic activity using the domestic currency.
For comparison, we can look at behavior in countries which make significant use of some foreign currency. For example, in some central American countries, banks make it easy to keep a USD-denomimated bank account. Why do people want USD instead of gold?
I'm not familiar with any evidence of that claim, despite my economics education. I suppose the best historical corollary would be gold? If so, I think we can agree that almost no one has adopted that practice. Do you think Bitcoin is different enough than gold such that it would motivate different behavior?
Let's consider the effects of owing tax in the national currency. Retail businesses would owe sales tax in that currency, perhaps paid quarterly. Rather than adding complexity to each sale, they'd probably price goods in the national currency, even if not a legal requirement (which it easily could be). If goods are priced in national currency, it's handy to keep your working capital in that same currency. ... The incentives start to align to keep the bulk of domestic economic activity using the domestic currency.
For comparison, we can look at behavior in countries which make significant use of some foreign currency. For example, in some central American countries, banks make it easy to keep a USD-denomimated bank account. Why do people want USD instead of gold?
> I suppose the best historical corollary would be gold?
Not really a good analogy. The difference between gold and other forms of alternative currency, is the ease at which it can be transferred.
This whole situation only works, in the case where it is simple and easy to transfer between the deflationary, and non deflationary currency.
Obviously, the ease at which it is possible to transfer currency to other people, is an important factor as to why someone would or would not use a currency.
> if goods are priced in national currency, it's handy to keep your working capital in that same currency.
Not necessarily. If there are easy ways of instantly transforming your deflationary currency, automatically, without you having to do anything, into that other currency, then there is no need to hold that other currency.
> Why do people want USD instead of gold?
Obviously it is because it is pretty difficult to spend gold at your supermarket.
This isn't a problem though, if you have a cryptocurrency credit card, for example, that immediately turns your deflationary crypto, into USD.
Not really a good analogy. The difference between gold and other forms of alternative currency, is the ease at which it can be transferred.
This whole situation only works, in the case where it is simple and easy to transfer between the deflationary, and non deflationary currency.
Obviously, the ease at which it is possible to transfer currency to other people, is an important factor as to why someone would or would not use a currency.
> if goods are priced in national currency, it's handy to keep your working capital in that same currency.
Not necessarily. If there are easy ways of instantly transforming your deflationary currency, automatically, without you having to do anything, into that other currency, then there is no need to hold that other currency.
> Why do people want USD instead of gold?
Obviously it is because it is pretty difficult to spend gold at your supermarket.
This isn't a problem though, if you have a cryptocurrency credit card, for example, that immediately turns your deflationary crypto, into USD.
Imagine we had some kind of credit card that was linked to VTI (and the market didn't have these silly business hours). When you charge the card, it automatically sells shares to fund your purchase.
Would you use that card? How does it differ from the scenario you described for Bitcoin?
Would you use that card? How does it differ from the scenario you described for Bitcoin?
[deleted]
> A good currency should be able to support the full range of social policies
This is not true. An infrastructure that does not even support oppressive policies can be (and often is) better. It’s similar to how it’s better that you can’t plug the USB wrongly.
This is not true. An infrastructure that does not even support oppressive policies can be (and often is) better. It’s similar to how it’s better that you can’t plug the USB wrongly.
DeafSquid(1)
> Don't keep it on exchange. The real thing that is stopping adoption...
The capital gains tax issue isn't stopping your average person from wanting to use Bitcoin. If we're being honest, how many people would be voluntarily reporting taxes on their Bitcoin purchases anyway? I suspect it would be similar to how many people self-reported the sales tax they owed on out of state online purchases before it was automated: Near zero.
The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards.
If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back.
If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma.
Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange.
The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.
I don't understand all of these mental gymnastics to explain away Bitcoin's shortcomings for payments.
The capital gains tax issue isn't stopping your average person from wanting to use Bitcoin. If we're being honest, how many people would be voluntarily reporting taxes on their Bitcoin purchases anyway? I suspect it would be similar to how many people self-reported the sales tax they owed on out of state online purchases before it was automated: Near zero.
The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards.
If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back.
If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma.
Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange.
The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.
I don't understand all of these mental gymnastics to explain away Bitcoin's shortcomings for payments.
>> The capital gains tax issue isn't stopping your average person from wanting to use Bitcoin
How are you so sure? if I had to report and fill forms for every single transaction that I do, like say buying coffee or video games I would be put off with trying to use the currency. it is a way to cripple it's usage.
>> The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards. >> If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back. >> If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma. >> Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange. >> The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.
I completely agree with these points. And I hope the ecosystem improves on these. Still the advantage of Bitcoin's fixed supply and it's ability to hold value vs fiat systems whilst it's capacity to also act as a currency is still something valuable. While it doesn't do everything the way horses (fiat) are now, it will get better as it is the car in the race.
How are you so sure? if I had to report and fill forms for every single transaction that I do, like say buying coffee or video games I would be put off with trying to use the currency. it is a way to cripple it's usage.
>> The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards. >> If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back. >> If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma. >> Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange. >> The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.
I completely agree with these points. And I hope the ecosystem improves on these. Still the advantage of Bitcoin's fixed supply and it's ability to hold value vs fiat systems whilst it's capacity to also act as a currency is still something valuable. While it doesn't do everything the way horses (fiat) are now, it will get better as it is the car in the race.
> Don't keep it on exchange.
This advice has always made me chuckle. It so profoundly misunderstands how non-techies actually think and operate, that I genuinely wonder how it arose. Exchanges exist and are incredibly popular because they're convenient. If you want to convince people to stop doing something that you think is bad, you need to provide a more convenient alternative, otherwise your advice will be ignored.
This advice has always made me chuckle. It so profoundly misunderstands how non-techies actually think and operate, that I genuinely wonder how it arose. Exchanges exist and are incredibly popular because they're convenient. If you want to convince people to stop doing something that you think is bad, you need to provide a more convenient alternative, otherwise your advice will be ignored.
Or provide the myriad examples of why "Don't keep it on exchange" is good advice[0][1][2]. But it's not up to the advice-giver to do the due diligence.
[0]:https://cryptosec.info/exchange-hacks/
[1]:https://coiniq.com/cryptocurrency-exchange-hacks/
[2]:https://selfkey.org/list-of-cryptocurrency-exchange-hacks/
[0]:https://cryptosec.info/exchange-hacks/
[1]:https://coiniq.com/cryptocurrency-exchange-hacks/
[2]:https://selfkey.org/list-of-cryptocurrency-exchange-hacks/
You’re kind of sidestepping my point.
Yes, it’s a good idea to keep your coins off the exchange, for all the reasons you’ve provided. The issue is that keeping your money off exchange is far less convenient, which is exactly why most people keep their couns on exchanges despite the risks. If the Bitcoin community in general wants people to stop getting hacked on exchanges, they need to provide more convenient alternatives rather than just continuing to say “keep your coins off the exchange” and blaming users who get hacked for not following this advice.
It’s a bit like recommending that everyone not drive to avoid dying in car crashes. This advice is strictly speaking true; the less you drive the less likely you are to die in a car crash. But it completely ignores why people drive and therefore most people won’t listen. As a society we’ve decided that rather than asking people to not drive, it makes more sense to focus on making driving safer per mile travelled. This is a much more effective strategy at reducing driver deaths.
Yes, it’s a good idea to keep your coins off the exchange, for all the reasons you’ve provided. The issue is that keeping your money off exchange is far less convenient, which is exactly why most people keep their couns on exchanges despite the risks. If the Bitcoin community in general wants people to stop getting hacked on exchanges, they need to provide more convenient alternatives rather than just continuing to say “keep your coins off the exchange” and blaming users who get hacked for not following this advice.
It’s a bit like recommending that everyone not drive to avoid dying in car crashes. This advice is strictly speaking true; the less you drive the less likely you are to die in a car crash. But it completely ignores why people drive and therefore most people won’t listen. As a society we’ve decided that rather than asking people to not drive, it makes more sense to focus on making driving safer per mile travelled. This is a much more effective strategy at reducing driver deaths.
If some people like to leave their house unlocked because it's convenient it's not my duty to make them a more convenient door lock, it's quite enough to warn them about the dangers and let them make their own decisions.
It's not like using a wallet is hard or inconvenient, it's just an extra step, like reaching for your keys before entering your house.
But there can certainly be a business opportunity there, sure.
It's not like using a wallet is hard or inconvenient, it's just an extra step, like reaching for your keys before entering your house.
But there can certainly be a business opportunity there, sure.
[deleted]
This is exactly my point. To you it seems so easy, you have no idea why others don’t do it. Yet the fact that others aren’t doing it enough implies that it isn’t easy for everyone else, which is why the repeated advice given to non-techies isn’t working.
> To you it seems so easy, you have no idea why others don’t do it.
Oh, I know, it's because they haven't tried using a wallet yet. That's the biggest hurdle, choosing one and actually setting it up. After that it's about as convenient as the exchange.
A lot of people trust exchanges way too much, and so they don't see a reason to do any extra steps until they get burned.
Oh, I know, it's because they haven't tried using a wallet yet. That's the biggest hurdle, choosing one and actually setting it up. After that it's about as convenient as the exchange.
A lot of people trust exchanges way too much, and so they don't see a reason to do any extra steps until they get burned.
Could you give some use examples? As of 2018, Bitcoin still appeared to be basically useless as a day-to-day cash substitute: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...
I guess it's not impossible that things have gotten better. But at least in my neighborhood and in the online merchants I frequent, Bitcoin adoption has declined. I think the last time I saw a Bitcoin logo on the street was August 2019.
I'd also be interested in statistics demonstrating that the consumer transaction volume is now nontrivial. Last I looked, M-Pesa had orders of more magnitude in use despite launching around the same time as Bitcoin.
I guess it's not impossible that things have gotten better. But at least in my neighborhood and in the online merchants I frequent, Bitcoin adoption has declined. I think the last time I saw a Bitcoin logo on the street was August 2019.
I'd also be interested in statistics demonstrating that the consumer transaction volume is now nontrivial. Last I looked, M-Pesa had orders of more magnitude in use despite launching around the same time as Bitcoin.
What kind of things do you buy with it and where? I remember seeing some adoption back when steam started accepting it, but sometime later they stopped because it was too volatile. I thought paying fees for the transaction made bitcoin very unappealing as well. It's not anonymous either, so I just couldn't find a reason to use it as it didn't solve anything that I couldn't do with my credit card. And my credit card offers me protections against fraud.
Has anything changed that I should look into?
Has anything changed that I should look into?
I buy computer hardware (SSDs, network switches etc.), recently bought t-shirts and etsy like stuff on gethaven.app
Bitcoin has always been pseudoanonymous and its perma history is something that I am aware off and not that bothered off. Though looks like the bitcoin devs are working towards something to improve privacy called taproot and schnorr.
The thing that it solves for me compared to traditional fiat currencies is that it retains its value very well over a period of time. some of the bitcoin stuff I bought long back and spent it on hardware now means I got the hardware for nearly more than 500% cheaper if I had chosen to hold it in dollar or other fiat currencies.
Fiat currencies are a liability (depreciating value) if you are not constantly trying to invest them just to keep their value from crashing due to accelerating money printing/inflation.
Bitcoin has always been pseudoanonymous and its perma history is something that I am aware off and not that bothered off. Though looks like the bitcoin devs are working towards something to improve privacy called taproot and schnorr.
The thing that it solves for me compared to traditional fiat currencies is that it retains its value very well over a period of time. some of the bitcoin stuff I bought long back and spent it on hardware now means I got the hardware for nearly more than 500% cheaper if I had chosen to hold it in dollar or other fiat currencies.
Fiat currencies are a liability (depreciating value) if you are not constantly trying to invest them just to keep their value from crashing due to accelerating money printing/inflation.
I think you might be one of a small handful of people that I've heard from that continue to use BTC as a currency for goods over the past few years. It's good to know that this still happens!
Out of curiosity, you mention depreciating value for fiat being a liability, which is absolutely true. That being said, doesn't appreciation also create a different sort of liability?
For example, let's say I buy a 1TB SSD for $60 worth of BTC on Monday, and then that same amount of BTC is worth $75 on Friday. In theory, would it be reasonable for me to feel like I've overpaid?
Of course in this scenario, I pay for rent, food, taxes etc. using fiat, so I'm exposed to the difference in conversion rates. I suppose if I lived somewhere where I could transact wholly in BTC for everything and its value wasn't in any way tied to a fiat currency and the value of goods and services were negotiated in BTC in a way that's entirely decoupled from market value on exchanges, this wouldn't be an issue for me. Is this possible?
Out of curiosity, you mention depreciating value for fiat being a liability, which is absolutely true. That being said, doesn't appreciation also create a different sort of liability?
For example, let's say I buy a 1TB SSD for $60 worth of BTC on Monday, and then that same amount of BTC is worth $75 on Friday. In theory, would it be reasonable for me to feel like I've overpaid?
Of course in this scenario, I pay for rent, food, taxes etc. using fiat, so I'm exposed to the difference in conversion rates. I suppose if I lived somewhere where I could transact wholly in BTC for everything and its value wasn't in any way tied to a fiat currency and the value of goods and services were negotiated in BTC in a way that's entirely decoupled from market value on exchanges, this wouldn't be an issue for me. Is this possible?
What you are describing is basically how any fiat currency is used, so it's definitely possible to live in bitcoin land. The issue is that price fluctuation for bitcoin is so extreme, not that you can buy other currencies with it.
If on Monday 1 USD buys 1 EUR and on Friday it buys 2 EUR you would have "overpaid" as well for many goods that you could have imported and maybe more directly if you had invested in EUR denominated securities etc..
If on Monday 1 USD buys 1 EUR and on Friday it buys 2 EUR you would have "overpaid" as well for many goods that you could have imported and maybe more directly if you had invested in EUR denominated securities etc..
Well, instead of a liability, it could also be a feature. A mechanism that allows people by choice to reduce consumption, thus lowering their ecologic footprint.
Actually there is a big wave of people using Bitcoin powered Visa cards right now to buy stuff
Go lookup currency deflation and what happens at the end. The transaction rate is to low and the energy use is to high to be useful. We are near the end stage when people and institutions start hoarding it.
The current problem in fiat money is what the new money is funding. This is a society/government policy choice and isn't an inherent flaw in fiat money. In the west the money is primary used to boost asset prices instead of used for production.
The current problem in fiat money is what the new money is funding. This is a society/government policy choice and isn't an inherent flaw in fiat money. In the west the money is primary used to boost asset prices instead of used for production.
Last time I checked it was the only currency accepted by most dark markets.
> What kind of things do you buy with it and where?
Drugs, CP, cryptotrojan ransom, other crime related transactions.
Bitcoin value is directly related to relevant criminal activity.
Drugs, CP, cryptotrojan ransom, other crime related transactions.
Bitcoin value is directly related to relevant criminal activity.
These are all terrible uses of Bitcoin, as mentioned in the OP. All transactions are publicly visible in an immutable database. With a little investigation, law enforcement can find out who owns certain accounts and trace transactions very easily from there. If you are a criminal, you want no paper trail whatsoever, which is why they use paper money.
Bitcoin is pseudonymous if you take enough precautions i.e. always use tor, only use addresses once, coin join everything before converting.
I guess that’d work if you’re the guy from White Collar or something, but I’m not sure your average criminal would have the attention to detail and knowledge to get that all right. And one misclick or bug can pretty much seal your fate.
You are right though that you can take measures to make it much more difficult to trace.
You are right though that you can take measures to make it much more difficult to trace.
Precautions on that or higher levels of expense and complexity, like burner phones, dead drops, networks of couriers, cell and gang org structure are standard procedures in organized crime. Un"organized" single small criminals might have a larger fraction of bad opsec, but they aren't all stupid.
A few will be caught by making mistakes, but the rest will learn from that. Criminal methods undergo evolutionary pressure.
A few will be caught by making mistakes, but the rest will learn from that. Criminal methods undergo evolutionary pressure.
[deleted]
Never heard of crypto mixing obviously
What happens when the NSA hacks the mixing services or congress passes a law forcing them to store information for law enforcement? Surely the mixing services know at least for a certain amount of time where the coin is coming from and going to.
I think those laws might already exist, imho anonymous mixing could be prosecuted under the relevant money laundering laws.
Dollar is STILL the king of criminal activity, money laundering, kidnapping, ransom ... it will take awhile for the shift to happen.
I didn't say all criminal activity is done via bitcoin. But there are segments of crime like cryptotrojans and CP trading that seem to be almost exclusively bitcoin-based. Others, like internet drug ordering, are at least partially in bitcoin.
Edit: replaced "any" with "all" in the first sentence
Edit: replaced "any" with "all" in the first sentence
yeah, agreed some new type of activities were using bitcoin... but after some of these gangs were busted they seem to be switching to monero...
Its very risky to buy with bitcoin if you are in a jurisdiction that makes drugs illegal. I think still cash is king in those places.
Its very risky to buy with bitcoin if you are in a jurisdiction that makes drugs illegal. I think still cash is king in those places.
I thought the Euro was taking over thanks to the 500EU note?
They are not printing any more 500EU notes, but they do remain legal tender for now. They might start being worth more than 500EU over time. Seems like a good note to keep your cash savings in if you live in Europe.
Huh. Didn't know these were all the main exports of Nigeria
The Lightning Network doesn't solve the congestion problem for global adoption. To open a lightning channel you need an on-chain transaction. The same is true to close one. Assuming 2,500 transactions per block, you will need ~970 days to just open a lightning channel for each US citizen (assuming 350 million citizens and no other Bitcoin transactions).
Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.
Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.
>Assuming 2,500 transactions per block, you will need ~970 days to just open a lightning channel for each US citizen (assuming 350 million citizens and no other Bitcoin transactions).
>Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.
But do we need to onboard everyone everyone in a year? It's like saying the internet will never scale because modem manufacturers can't keep up.
>Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.
But do we need to onboard everyone everyone in a year? It's like saying the internet will never scale because modem manufacturers can't keep up.
I'm mostly guessing at this because I'm not very familiar with Lightning Network, but I think they'd need to be closed out periodically as well in order to settle up? Plus, I think you'd ideally want an account with each vendor that you deal with, not just one account, otherwise I think the channel would probably need to be managed by some central authority who manages the accounting between you and whoever you're keeping these side accounts with, which seems not great for a number of reasons....and then on top of that there's that 350 million is just one country, let alone the entire planet.
>I'm mostly guessing at this because I'm not very familiar with Lightning Network, but I think they'd need to be closed out periodically as well in order to settle up?
AFAIK they can be kept open indefinitely.
>Plus, I think you'd ideally want an account with each vendor that you deal with, not just one account, otherwise I think the channel would probably need to be managed by some central authority who manages the accounting between you and whoever you're keeping these side accounts with
The whole point of lightning is that you can use the network to route money between nodes, so you could make payments even if you don't have a channel open with the person you want to make payments with. It's not unlike how international wires work. If you bank with a local credit union in country A and you want to wire money to another local credit union in country B, the wire might bounce between multiple "correspondent banks" eg. credit union A -> big bank A -> big bank B -> credit union B.
AFAIK they can be kept open indefinitely.
>Plus, I think you'd ideally want an account with each vendor that you deal with, not just one account, otherwise I think the channel would probably need to be managed by some central authority who manages the accounting between you and whoever you're keeping these side accounts with
The whole point of lightning is that you can use the network to route money between nodes, so you could make payments even if you don't have a channel open with the person you want to make payments with. It's not unlike how international wires work. If you bank with a local credit union in country A and you want to wire money to another local credit union in country B, the wire might bounce between multiple "correspondent banks" eg. credit union A -> big bank A -> big bank B -> credit union B.
Now they reinvented credit cards. Cryptocurrencies are really speedrunning financial history.
That a German seller doesn’t charge VAT does not imply that you do not have to pay VAT.
You may have to inform your tax office about the purchase, after which it will send you an invoice for VAT (happens for ‘normal’ bank transactions, too.)
https://europa.eu/youreurope/business/taxation/vat/vat-rules...:
“For EU-based companies, VAT is chargeable on most sales and purchases of goods within the EU. In such cases, VAT is charged and due in the EU country where the goods are consumed by the final consumer. Likewise, VAT is charged on services at the time they are carried out in each EU country.
VAT isn't charged on exports of goods to countries outside the EU. In these cases, VAT is charged and due in the country of import”
You may have to inform your tax office about the purchase, after which it will send you an invoice for VAT (happens for ‘normal’ bank transactions, too.)
https://europa.eu/youreurope/business/taxation/vat/vat-rules...:
“For EU-based companies, VAT is chargeable on most sales and purchases of goods within the EU. In such cases, VAT is charged and due in the EU country where the goods are consumed by the final consumer. Likewise, VAT is charged on services at the time they are carried out in each EU country.
VAT isn't charged on exports of goods to countries outside the EU. In these cases, VAT is charged and due in the country of import”
It's called "reverse charge". If there is a general tax agreement between your country and the EU, no VAT becomes due at the country of origin (of goods and/or services), but you are supposed to declare the purchase locally and pay local VAT, if applicable. There's also usually a marginal sum, below wich goods and services are free of charge (the sum of it, which includes any postage), about EUR 20.
(Mind that this mechanism requires tax or VAT IDs on both sides of the transactions, which are to be declared.)
(Mind that this mechanism requires tax or VAT IDs on both sides of the transactions, which are to be declared.)
Serious question: Bitcoin being subject to deflation, why would you spend it? Sort of like the $82 million pizzas [1]
1. https://qz.com/1285209/bitcoin-pizza-day-2018-eight-years-ag...
1. https://qz.com/1285209/bitcoin-pizza-day-2018-eight-years-ag...
That's $300 million today, which illustrates your point further.
Bitcoin is inflating, and will for 130 more years, though it is seeing increased adoption and is riding in price.
But in answer to your question,I’m glad you picked food fir your example— would you starve to hold onto your bitcoin?
Is your computer ten years old because next year better ones will come out? Or did you bite the bullet and upgrade because your time preference made it worthwhile?
It is true, deflation encourages savings, but that is the essence of capitalism, savings keeps people better able to avoid poverty in the event of a bad year, and capital accumulation makes you more able to do a startup and retain control.
Part of the reason there is so much VC money is inflation (VCs get new dollars cheap and carry trade through startups)with a hard currency like bitcoin the fotmula would be reversed, and founders would retain more ownership.
But in answer to your question,I’m glad you picked food fir your example— would you starve to hold onto your bitcoin?
Is your computer ten years old because next year better ones will come out? Or did you bite the bullet and upgrade because your time preference made it worthwhile?
It is true, deflation encourages savings, but that is the essence of capitalism, savings keeps people better able to avoid poverty in the event of a bad year, and capital accumulation makes you more able to do a startup and retain control.
Part of the reason there is so much VC money is inflation (VCs get new dollars cheap and carry trade through startups)with a hard currency like bitcoin the fotmula would be reversed, and founders would retain more ownership.
Why do you believe there should be no capital gains on it?
Possibly funny thought: If you have to declare a capital gain on every BTC purchase of a cup of coffee, why can't you declare a capital loss every time you spend dollars that you earned long ago, and which have decreased significantly in value since then, due to inflation?
Serious answer: In the US, capital gains and losses are defined relative to the US dollar.
The responses are valid as far as they go, but the larger point is that the government in a jurisdiction is free to inflate its own currency at great benefit to itself while simultaneously extracting taxes on fictitious "gains" of other currencies or equivalents (like BTC) against that currency.
Technically yes, the same rules apply as if you were trading in any international currency. If you sell yen at a profit to convert to USD & purchase something, you owe tax. What sort of tax can be complicated depending on how long the asset was held. I'm not an accountant, but I think assets held less than a year are taxed as personal income, so marginal rates apply. Assets held longer than a year are, I believe, taxed as regular capital gains.
I'm not sure what would/should happen with extremely short term trades, i.e, you convert to Euros from USD for a vacation, the USD crashes, you convert back upon return from your vacation. I doubt the IRS worries too much about it, but I suppose technically you should file Form 8949 along with a Schedule D.
I'm not sure what would/should happen with extremely short term trades, i.e, you convert to Euros from USD for a vacation, the USD crashes, you convert back upon return from your vacation. I doubt the IRS worries too much about it, but I suppose technically you should file Form 8949 along with a Schedule D.
you can and would declare capital losses on gold sold at a loss. Cash does not have gains/losses, as they are themselves the unit of accounting.
The inflation effect causing cash to lose value is something you suck up - it's incentive to invest the cash.
The inflation effect causing cash to lose value is something you suck up - it's incentive to invest the cash.
US cash doesn't have gains/losses, but assets held in foreign currencies & converted to USD are subject to capital gains/losses.
because you can't use it as a money if you need to pay capital gains on every stick of gum you buy. they should find other ways to collect taxes that doesn't inhibit it.
If you held any other foreign currency you would have to track it like this. For example, I live in Canada and if I bought USD and then spent it over the course of a year in Canada I would be responsible for the capital gain tracked on each expenditure based on the day's exchange rate. It's hard to see how Bitcoin should be any different.
because the goal would be to have bitcoin be an international money, not a national one. i'm not saying people shouldn't pay taxes, i would just suggest that there are better ways to collect it such that it doesn't inhibit progress. as it exists right now it is infeasible to use bitcoin as money day to day and accurately report your taxes.
There's an exemption for foreign currencies that does not apply to cryptocurrency.
Or subject to VAT...
> 2017 period when fees were high
Current fees are 8$. That's still too high
Current fees are 8$. That's still too high
There does seem to be a fundamental design issue in bitcoin and proof of work in general: Mining has economies of scale and therefore winner takes all mechanics leading to centralization.
At that point the mechanism that ensures ledger integrity is the calculation that if the miner tampers with the ledger, that would destroy trust in the coin and hurt the miner in that way.
But 1) that's exactly how conventional currencies work too and 2) it's actually an untested hypothesis. Who knows what would happen in a world where the economy runs on bitcoin and there's some "good reason" to deviate from the protocol.
At that point the mechanism that ensures ledger integrity is the calculation that if the miner tampers with the ledger, that would destroy trust in the coin and hurt the miner in that way.
But 1) that's exactly how conventional currencies work too and 2) it's actually an untested hypothesis. Who knows what would happen in a world where the economy runs on bitcoin and there's some "good reason" to deviate from the protocol.
A miner can not tamper with the ledger. A miner can prevent certain transactions from coming through if they are the only miner on the network, but they can't forge transactions.
Re: 1, I don't see conventional currencies working that way.
Has any government promised how and why they will maintain their currency. They supposedly claim they help people why screwing up the very same people. Case in point, the 2008 crisis and the various modern monetary based crises.
Has any government promised how and why they will maintain their currency. They supposedly claim they help people why screwing up the very same people. Case in point, the 2008 crisis and the various modern monetary based crises.
I agree that governments can manipulate their monetary policy in ways that are not in the best interests of their people. But I also don't see how widespread crypto currency would 1) have prevented the '08/'09 financial collapse, and 2) it appears that fiat monetary policy has more flexibility in responding to such crisis by inserting liquidity, facilitating the controlled dissolution of defunct financial institutions, etc.
2008 is a great example of why fiat currency is helpful. The government can simply create more to stimulate cash flow and/or prevent a crisis of confidence in a non-government institution.
But when the government 'simply create more', they are not creating any more wealth. They are creating more units of currency to represent the same wealth as before, which eventually makes every unit of currency worth slightly less.
The people who have assets in cash end up paying for it. That includes the poor who have most of their net worth in cash as they live paycheck to paycheck, and whose purchasing power has been stagnant for decades.
The people who have assets in cash end up paying for it. That includes the poor who have most of their net worth in cash as they live paycheck to paycheck, and whose purchasing power has been stagnant for decades.
If the government "prints" money and immediately distributes it uniformly to the population, it benefits the poor most of all. Especially debtors.
This year was a great example. Mortgage refinancing bonanza. If inflation really takes hold, those debtors will be very happy.
> And that’s not a “rich get richer” kind of thing — the poverty rate fell. And it’s no surprise. Peter Ganong, Pacal Noel, and Joseph Vavra found that under the CARES superdole, “two-thirds of UI eligible workers can receive benefits which exceed lost earnings and one-fifth can receive benefits at least double lost earnings.”
https://www.slowboring.com/p/the-cares-superdole-was-a-huge-...
This year was a great example. Mortgage refinancing bonanza. If inflation really takes hold, those debtors will be very happy.
> And that’s not a “rich get richer” kind of thing — the poverty rate fell. And it’s no surprise. Peter Ganong, Pacal Noel, and Joseph Vavra found that under the CARES superdole, “two-thirds of UI eligible workers can receive benefits which exceed lost earnings and one-fifth can receive benefits at least double lost earnings.”
https://www.slowboring.com/p/the-cares-superdole-was-a-huge-...
Twelve years later and I'm still waiting on that severe/total economic collapse wrought of quantitative easing that the libertarian hawks envisaged.
> The pseudonymity of coins being owned by the bearer of some
> cryptographic key is a failure; People have been eavesdropping and
> aggressively analyzing the block chain from day 1. And the block chain
> will always be there, it will always be public, and it will always be
> subject to further analysis. And we are learning that analysis of that
> record is sufficient to destroy any pretense of anonymity or
> pseudonymity.
Yeah, privacy is a joke on blockchains. Perhaps that is why actually private coins like Monero are having such 'difficulty' getting adoption on mainstream platforms, with shitcoins getting preference. I suspect that if coinbase tried to add Monero, they would get a very angry letter from the CIA/FBI (perhaps this already happened, they have been having 'technical difficulties' adding it for years now).
Yeah, privacy is a joke on blockchains. Perhaps that is why actually private coins like Monero are having such 'difficulty' getting adoption on mainstream platforms, with shitcoins getting preference. I suspect that if coinbase tried to add Monero, they would get a very angry letter from the CIA/FBI (perhaps this already happened, they have been having 'technical difficulties' adding it for years now).
I wonder how many Bitcoin users have read and understand the following extensive list of privacy "pitfalls" (mistakes that can reveal information about unwary Bitcoin users):
https://en.bitcoin.it/wiki/Privacy
Are you careful to avoid these numerous privacy pitfalls? If not, you're leaking information about yourself, into the public ledger (blockchain)
https://en.bitcoin.it/wiki/Privacy
Are you careful to avoid these numerous privacy pitfalls? If not, you're leaking information about yourself, into the public ledger (blockchain)
Most BTC holders are on exchanges that all have KYC rules in place, so there is no anonymity or privacy assumed. It is just like buying KO shares on Etrade.
It makes me wonder how many people have gotten busted for either buying or selling drugs with cryptocurrencies, thinking it was automatically safe and private.
It's simply an extra layer & bit of effort law enforcement has to jump through, and as understanding of crypto permeates society & law enforcement, even those barriers will be removed.
Wow that's a ludacris list of pitfalls. I've overwhelmed just looking at the list of sections in that document.
Well, I think it's important to keep in mind that the criticisms seem specific to bitcoin, not crypto in general, and some of them are perfectly valid observations (even if you don't consider them "bugs")
Coinbase does have Zcash. So they don't seem entirely opposed to privacy coins
well,that escalated quickly.
I honestly expected Monero or Zcash to take off because it they both progressed on this issue but that just hasn't happened.
Whether privacy is a joke or not on Bitcoin isn't the point. Consider most systems in place 10 years ago all were discovered to have holes in them and have been subsequently patched. The belief that today's software, or tomorrow's software, will also have a non-joke level privacy option that is functional long term is, in my opinion, unobtainable.
Bitcoin still manages to be useful in proving identity, however.
Bitcoin still manages to be useful in proving identity, however.
> ultimately a "scalable" cryptocurrency would be doing things exactly the same way as a credit card processor
That seems to be true of Bitcoin, but several others are working hard on scaling. The one I'm most familiar with is Ethereum, where:
- Zkrollups store transactions on-chain in a highly compressed format without loss of security. For simple value transfers, a zkrollup system in production now can handle up to 9000 per second, if the network isn't doing anything else.
- Data sharding, coming in about a year, multiplies that by 64X initially. Rollups have minimal reliance on computation on chain, so just scaling the data is enough.
- Replacing merkle trees with more efficient data witnesses like polynomial commitments could multiply data capacity by another factor of ten.
= All of this is subject to quadratic scaling. As individual nodes get more powerful, it multiplies both the capacity of individual shards and the number of shards.
Of course several chains are doing away with mining, and several others have fixed the anonymity issue.
That seems to be true of Bitcoin, but several others are working hard on scaling. The one I'm most familiar with is Ethereum, where:
- Zkrollups store transactions on-chain in a highly compressed format without loss of security. For simple value transfers, a zkrollup system in production now can handle up to 9000 per second, if the network isn't doing anything else.
- Data sharding, coming in about a year, multiplies that by 64X initially. Rollups have minimal reliance on computation on chain, so just scaling the data is enough.
- Replacing merkle trees with more efficient data witnesses like polynomial commitments could multiply data capacity by another factor of ten.
= All of this is subject to quadratic scaling. As individual nodes get more powerful, it multiplies both the capacity of individual shards and the number of shards.
Of course several chains are doing away with mining, and several others have fixed the anonymity issue.
I think the biggest failure of Bitcoin is that it was marketed as a "currency" and ended up becoming a commodity. Bitcoin isn't something you use to spend wealth, it's used to hold wealth. Unlike a stock, however, whose value is based on what price people are willing to pay for it, Bitcoin's value is determined by its scarcity. Sound familiar?
That's why I hate the term "cryptocurrency". It has a lie baked right into it, the fact that this is supposed to be a "currency", when in reality it's just the same kind of digital assets that dominate all forms of entertainment these days. If the term you're using to refer to your product is itself a lie, what does that say for the rest of the product? The organization creating it?
Crypto, overall, is just hard to trust.
That's why I hate the term "cryptocurrency". It has a lie baked right into it, the fact that this is supposed to be a "currency", when in reality it's just the same kind of digital assets that dominate all forms of entertainment these days. If the term you're using to refer to your product is itself a lie, what does that say for the rest of the product? The organization creating it?
Crypto, overall, is just hard to trust.
> Unlike a stock, however, whose value is based on what price people are willing to pay for it
This isn’t quite right. Stocks have value because they represent ownership. The price is based on the perceived value, not the other way around.
But even if no one was willing to buy apple shares, say, they would still have immense value. Shareholders are entitled to the profits.
This is not true of bitcoin, which has no intrinsic value outside of what people are willing to pay for it.
Warren Buffett made this point in an argument against gold investing. If you were an investor in 1900 you would expect stock investments to be worth more in 2000, and for gold not to be, because stocks have productive value and gold doesn’t. And that’s more or less what happened.
This isn’t quite right. Stocks have value because they represent ownership. The price is based on the perceived value, not the other way around.
But even if no one was willing to buy apple shares, say, they would still have immense value. Shareholders are entitled to the profits.
This is not true of bitcoin, which has no intrinsic value outside of what people are willing to pay for it.
Warren Buffett made this point in an argument against gold investing. If you were an investor in 1900 you would expect stock investments to be worth more in 2000, and for gold not to be, because stocks have productive value and gold doesn’t. And that’s more or less what happened.
The thing is, for the vast majority of civilized human history, currencies have been commodities.
Cryptocommodity does have a nice ring to it, though.
Cryptocommodity does have a nice ring to it, though.
It really is a currency, however. It's not a matter of perception but rather of how Bitcoin functions. The biggest difference between a commodity and currency is that a commodity is essential for some process or product. A currency is just one of many ways of funding that process/product. You can't build a computer without gold, copper, and some rare earth metals (commodities) but you can pay for it with USD, bitcoin, yuan, GBP, etc.
Aswath Damodaran has written a lot more on this topic. https://aswathdamodaran.blogspot.com/2017/10/the-bitcoin-boo...
He does agree with you in that Bitcoin will be judged as a currency, so its strengths and deficiencies as a currency will determine its fate.
Aswath Damodaran has written a lot more on this topic. https://aswathdamodaran.blogspot.com/2017/10/the-bitcoin-boo...
He does agree with you in that Bitcoin will be judged as a currency, so its strengths and deficiencies as a currency will determine its fate.
A currency is a commodity whose utility is in being a medium of exchange.
This is a similar argument to the semantics of black lives matter and refund the police. Sure, maybe there's a better name to make a better first impression, maybe not. Move past it.
Ironically you already have by simply referring to it as "crypto" as most do. Things evolve, like "e-mail" becoming "email" and countless other evolutions as things find their niche and become mainstream.
Ironically you already have by simply referring to it as "crypto" as most do. Things evolve, like "e-mail" becoming "email" and countless other evolutions as things find their niche and become mainstream.
People here talking about Venezuela seem to be ignoring the fact that maybe if that country wasn't such a disaster politically bottom-of-barrel solutions like Bitcoin wouldn't be needed.
If the best excuse for Bitcoin is that it's the only thing that works when a governed society has broken down almost completely then maybe it's better to think about how we can avoid that kind of breakdown than it is to invest energy into trash like cryptocurrency.
If the best excuse for Bitcoin is that it's the only thing that works when a governed society has broken down almost completely then maybe it's better to think about how we can avoid that kind of breakdown than it is to invest energy into trash like cryptocurrency.
Yes, magic is much better than Bitcoin. Unfortunately, magic doesn’t exist, while dysfunctional governments have existed from the dawn of man.
> maybe it's better to think about how we can avoid that kind of breakdown
Yes, how about unite and peace instead of divide and conquer?
Yes, how about unite and peace instead of divide and conquer?
> the best excuse for Bitcoin is that it's the only thing that works when a governed society has broken down almost completely
It's no coincidence that the loudest voices supporting Bitcoin are very often stubbornly zealous libertarians.
The total collapse of functioning Government is kind of a libertarian folk dream. They want the proverbial barrel to be empty, and to have basic services paid for through user fees alone.
It's no coincidence that the loudest voices supporting Bitcoin are very often stubbornly zealous libertarians.
The total collapse of functioning Government is kind of a libertarian folk dream. They want the proverbial barrel to be empty, and to have basic services paid for through user fees alone.
[deleted]
The situation reminds me a bit of Robert Nozick's Anarchy, State, and Utopia. It's a great bit of political philosophy where he argues pretty convincingly that an anarchist society cannot exist for any appreciable length of time. Because the arrangement is fundamentally unstable, and will inevitably be replaced by certain minimal set of social mechanisms in response to some basic social forces. Those mechanisms are, collectively, things that we recognize as basic features of government, such as police and taxation.
Bitcoin strikes me as an experiment to see if the same kind of thing happens in economics. It would seem that it does.
Bitcoin strikes me as an experiment to see if the same kind of thing happens in economics. It would seem that it does.
Nozick may be accessible through web.archive.org
https://duckduckgo.com/?q=Anarchy%2C+State%2C+and+Utopia+arc...
https://duckduckgo.com/?q=Anarchy%2C+State%2C+and+Utopia+arc...
I was real excited the first time that Bitcoin was explained to me. I saw it as the first real alternative to paper money. But what I soon learned is that most of the people associated with Bitcoin saw it as digital gold and were only interested in seeing the value rise and cashing out.
I've seen a few positive developments every once in a while that fail to get much adoption. So I keep waiting and waiting. It increasingly looks to me like whatever solution eventually wins will be built upon the existing banking system ;<(.
I've seen a few positive developments every once in a while that fail to get much adoption. So I keep waiting and waiting. It increasingly looks to me like whatever solution eventually wins will be built upon the existing banking system ;<(.
> "But what I soon learned is that most of the people associated with Bitcoin saw it as digital gold "
Since it was basically designed to work like a pseudo-physical commodity, and most of the rhetoric to support its existence is warmed-over goldbuggery, why should this be surprising?
Since it was basically designed to work like a pseudo-physical commodity, and most of the rhetoric to support its existence is warmed-over goldbuggery, why should this be surprising?
Gold seems like it was always an odd thing to pin an economy to to begin with. A resource that isn't inherently tied to value that seems to have been "chosen" by centuries of evolution towards a scarce material that could be centrally controlled. What's more, it has become less scarce as better technologies have emerged for extracting it. And just like printing excess fiat currency, early gold rushes showed the same type of rapid inflation in local economies, with money made by those selling mining tools & services to miners, and those purchasing the mined gold to arbitrage it out to other geographical regions. It was still just an abstraction layer put on top of direct bartering to solve the liquidity problems inherent to direct bartering once the # of goods and services reach a high enough level.
The fundamental principal of economics that many people miss when they focus mainly on monetary supply is that the velocity of capital [0] is of equal or perhaps even greater importance.
[0] https://www.aier.org/article/what-is-money-velocity-and-why-...
The fundamental principal of economics that many people miss when they focus mainly on monetary supply is that the velocity of capital [0] is of equal or perhaps even greater importance.
[0] https://www.aier.org/article/what-is-money-velocity-and-why-...
Because you could easily tweak the algorithms to make it act like stockpiling cheese. If you use a value time pair adding inflation that reduces the value of old coins is trivial.
Seems like adoption as a payment method halted when Bitcoin had scaling issues.
Now the community seems pretty split in two. There's people who are for Bitcoin and see it as a store of value and people who are for Bitcoin Cash who see it as a store of value and a method of payment.
The main contention seems to be around block sizes and wether to increase the block size to make it more scalable, hence the BCH fork.
Now the community seems pretty split in two. There's people who are for Bitcoin and see it as a store of value and people who are for Bitcoin Cash who see it as a store of value and a method of payment.
The main contention seems to be around block sizes and wether to increase the block size to make it more scalable, hence the BCH fork.
They both want to scale transactions, they just disagree about how. Bitcoin Cash wants much higher transaction throughput at the base layer (i.e. the actual blockchain). While Bitcoin wants the high throughput lower value transactions to happen at layers built on top of the base chain, e.g. Lightning
Bitcoin is pretty much the modern gold, if you’re looking for something revolutionary as in “can be used for day to day transactions” you’ll have to check more modern cryptocurrencies that aim to be stable, regulated, and fast.
Same here. I thought it sounded great because I have zero knowledge of monetary policy, which has been at it in modern form since Isaac Newton. So naturally I thought it was a godsend. Truth is: financial institutions aren't just something a few hackers can whip up in a decade. The mill-billionaire bitcoin hackers were in the right place at the right time for lightening to strike. I think like ADAS/SDV, cryptocurrency has a looooong way to go.
Ethereum is probably more exciting from a tech perspective currently.
A comment a few messages down thread that I wholeheartedly agree with:
"It never fails to amuse me how so many cryptocurrency enthusiasts imagine they have deep new economic insights when they are just reinventing the past, badly."
"It never fails to amuse me how so many cryptocurrency enthusiasts imagine they have deep new economic insights when they are just reinventing the past, badly."
If you think Bitcoin is bad, don't use it. Bitcoin is free market protocol. Often in free market it comes down to preferences, and this kind of opinion pieces are just a statement that I don't like what other people don't like, and other people shouldn't like what they like.
Bitcoin is also bad for you even if you don't use it. Greenhouse gas emission affects everyone, for example. So it makes sense to try to convince others to stop using it as well.
This type of mentality stunts discussion and equally applies to your comment as well as the post. If you truly believed in what you wrote you would simply ignore an opinion piece that you didn't like instead of commenting on it.
Related: the current rise of Bitcoin prices has been peculiar to me, and seems to be a bit of a canary in an inflationary coal mine.
We've injected trillions of dollars of fiat into the economy this year. It feels like the sky-high valuations of technology companies and Bitcoin are "shock absorbers" of sorts, or early signals of inflation-yet-to-come. If we assume the market is efficiently pricing these assets (like AirBnB's IPO) then it could very well be that the actual value of a fiat dollar has dropped dramatically -- making sky-high valuations more reasonable -- and we'll only see that reflected in the price of consumer goods and commodities once industry leaders collectively feel comfortable the economy is on track again. After all, you can only charge what consumers can afford to pay.
I'm an armchair economist at best. I just can't make sense of the market right now, and wouldn't be surprised to see the price of things like groceries, beer and travel double or triple what they were in 2019. Is there anybody writing about this that I haven't been paying attention to? Am I missing something?
We've injected trillions of dollars of fiat into the economy this year. It feels like the sky-high valuations of technology companies and Bitcoin are "shock absorbers" of sorts, or early signals of inflation-yet-to-come. If we assume the market is efficiently pricing these assets (like AirBnB's IPO) then it could very well be that the actual value of a fiat dollar has dropped dramatically -- making sky-high valuations more reasonable -- and we'll only see that reflected in the price of consumer goods and commodities once industry leaders collectively feel comfortable the economy is on track again. After all, you can only charge what consumers can afford to pay.
I'm an armchair economist at best. I just can't make sense of the market right now, and wouldn't be surprised to see the price of things like groceries, beer and travel double or triple what they were in 2019. Is there anybody writing about this that I haven't been paying attention to? Am I missing something?
BTC prices have approximately zero relation to inflation in the real economy (for whatever definition of that you want to use). Rising BTC prices are driven by pyramid scams, fraud, and speculation. There is no useful signal here related to anything else.
Is there a useful signal in the dollar price? Price of silver? They are all used in hedging bets. Same for BTC, people with a lot of cash are looking for a safe spot while we have the possibility of hyper inflation.
The entire BTC market cap is minuscule -- about 600bn as of this writing.
That seems like a lot, but compare it to Apple -- the market cap of just this one company's stock is currently ~2,238bn.
The market cap of gold, US dollars, Euros, etc. are all many times more than Apple. The value of all BTC is a tiny microscopic speck compared to the amount of USD or gold in the world.
This means (among other things) a few small players (with tiny capital relative to, say, the size of all USD) can swing the BTC market either way with a comparatively tiny amount of value moving around.
That would seem to greatly limit BTC's usefulness as any kind of inflation gauge for the broader economy.
That seems like a lot, but compare it to Apple -- the market cap of just this one company's stock is currently ~2,238bn.
The market cap of gold, US dollars, Euros, etc. are all many times more than Apple. The value of all BTC is a tiny microscopic speck compared to the amount of USD or gold in the world.
This means (among other things) a few small players (with tiny capital relative to, say, the size of all USD) can swing the BTC market either way with a comparatively tiny amount of value moving around.
That would seem to greatly limit BTC's usefulness as any kind of inflation gauge for the broader economy.
To give an another view:
600bn is more than gdp of majority of countries.
600bn is more than gdp of majority of countries.
For individual humans that’s like saying ”My net worth is $100k and that is more than most people earn in a year”. Yes that is true, it is larger. But it is meaningless comparison and misleading at best.
Correct, and those countries' economies also give us little to no signal about US dollar inflation. The proposition was that BTC prices somehow inform us about that.
Market cap is a stock. GDP is a flow. Comparing the two is nonsense.
GDP is income. What you are doing is the equivalent of comparing your mortgage payment with the price of the house when you bought it.
comparing GDP to market cap is also a very irrelevant kind of comparison. Just because the use the same dimension (like dollar) doesn't mean they are directly comparable.
There is no meaningful threat of hyperinflation in first world economies until China's GDP per capita has reached $20k - $30k and even then there are investment opportunities in India (if they get their corruption under control) or other Asian countries.
Look at the Money Velocity. It’s decreasing. You cannot have hyper inflation with a decreasing velocity.
Hey leopict, strange question... I saw your comment about the PG::Internal Error in the 'Is Apple Silicon Ready' thread but wasn't able to reply there. I've been experiencing the same thing for two weeks and have tried everything. Did you have any luck resolving the issue?
How much has the velocity of Venezuelan Bolivares increased in the last few years?
(or) you are wrong and there are some people who see asset inflation caused by stupid governments printing for everything and moving away wealth from these systems into Bitcoin.
BTC prices have been driven by institutional demand and federal monetary policy.
Or 21 billion fake tether dollars.
I have serious questions about tether.
As far as I know, they have not proven they even have 1 billion on reserve. How can they claim 21 billion?
Is this pyramid scheme the real reason bitcoin prices are so high?
As far as I know, they have not proven they even have 1 billion on reserve. How can they claim 21 billion?
Is this pyramid scheme the real reason bitcoin prices are so high?
I've seen sources to corroborate institutional demand, but is there a source for your claim on the link to federal monetary policy? Ideally beyond correlation to show causation.
I don’t, but it is one of the core reasons why Bitcoin is attractive to anyone.
Asset prices are up across the board.
Asset prices are up across the board.
Do you believe that speculative activity is not related in any way to inflation or expectations of inflation?
IMO BTC's relation to inflation in the real economy is the same as any alternative investment like gold - it's usage as a "safe haven".
In theory the USD price of bitcoin is tracking the inflation of the USD but with excessive volatility. However, it is possible for it to grow slightly faster than inflation if a significant portion of the central bank money is arriving in cryptocurrencies. In practice it's getting dwarfed by the factors you mentioned. Lots of irrational investors are pumping BTC until it crashes.
Over the long term (several decades) you can expect it to perform like gold once it has turned into a mature market.
Over the long term (several decades) you can expect it to perform like gold once it has turned into a mature market.
Sorry, the USD price of bitcoin is tracking the inflation of USD in theory? What theory's that?
Ponzi schemes give an INCOME RETURN
Bitcoin gives a PRICE APPRECIATION RETURN
One could call this then a “greater fool” play except it has algorithmic reduction in supply which repairs “greater fool” aspect.
Bitcoin gives a PRICE APPRECIATION RETURN
One could call this then a “greater fool” play except it has algorithmic reduction in supply which repairs “greater fool” aspect.
If the limited supply was the only thing bitcoin had going for it then it would merely perform exactly like gold but it is over performing which means there is an additional irrational component driving bubbles and busts.
I guess "I want to invest in crime, but I don't want to have to do crime to invest in it" falls under speculation.
If I wanted to invest in crime I'd buy bank stocks and US bonds.
> After all, you can only charge what consumers can afford to pay.
In the US, it is more like "you can only charge what consumers can go into debt for". The self-correcting force of consumer inflation on price discovery has been time-delayed buffered and confusing price signals for a long time for select industries by acommodative consumer debt issuance. Without that effect upon price discovery, I suspect the number one reason bankruptcies occur to consumers to trade categories every few years as the inflation works its way through different key industries and their customers. Which is why US personal bankruptcy has been quite consistently caused by medical bills for decades [1].
When/If this inflation wave takes root in the consumer sector, it first has to overcome the deflationary secular bias that has plagued developed world economies for a few decades. I suspect this is because price discovery in wages has been quite robust, but in goods and services it is obfuscated by many means (consumer debt issuance is only one of many mechanisms), and the end effect is people are functionally broke.
If it breaks that deflationary bias, then it will break a great many households who cannot bear inflation while their wages stay functionally unresponsive to the same inflation. If that happens, then I expect the deflationary bias to turn into a depression.
[1] https://www.debt.org/bankruptcy/statistics/
In the US, it is more like "you can only charge what consumers can go into debt for". The self-correcting force of consumer inflation on price discovery has been time-delayed buffered and confusing price signals for a long time for select industries by acommodative consumer debt issuance. Without that effect upon price discovery, I suspect the number one reason bankruptcies occur to consumers to trade categories every few years as the inflation works its way through different key industries and their customers. Which is why US personal bankruptcy has been quite consistently caused by medical bills for decades [1].
When/If this inflation wave takes root in the consumer sector, it first has to overcome the deflationary secular bias that has plagued developed world economies for a few decades. I suspect this is because price discovery in wages has been quite robust, but in goods and services it is obfuscated by many means (consumer debt issuance is only one of many mechanisms), and the end effect is people are functionally broke.
If it breaks that deflationary bias, then it will break a great many households who cannot bear inflation while their wages stay functionally unresponsive to the same inflation. If that happens, then I expect the deflationary bias to turn into a depression.
[1] https://www.debt.org/bankruptcy/statistics/
Thanks. This is super interesting. Can I rephrase to make sure I understand?
What you're saying is that; due to debt issuance in the US, it's hard for commodities and consumer goods to be priced efficiently. I interpret "confusing price signals" to mean that e.g. Apple can charge $1k for an iPhone and sell out to families who wouldn't typically be able to afford it, but the price of bread remains the same. Your medical bill comment -- you're basically saying that when one of these families hits a statistically predictable snag, they're instantly bankrupt because they've always been functionally broke, propped up by the consumer debt industry?
And so you're saying that most commodity goods face deflationary pressure as a means to stabilize the market? So if the price of commodity goods does increase significantly beyond the capacity of debt issuance, we're likely to see a depression?
What you're saying is that; due to debt issuance in the US, it's hard for commodities and consumer goods to be priced efficiently. I interpret "confusing price signals" to mean that e.g. Apple can charge $1k for an iPhone and sell out to families who wouldn't typically be able to afford it, but the price of bread remains the same. Your medical bill comment -- you're basically saying that when one of these families hits a statistically predictable snag, they're instantly bankrupt because they've always been functionally broke, propped up by the consumer debt industry?
And so you're saying that most commodity goods face deflationary pressure as a means to stabilize the market? So if the price of commodity goods does increase significantly beyond the capacity of debt issuance, we're likely to see a depression?
Actually the real problem is that the iPhones are not produced in the US so any profit that accrues goes to well paid Apple engineers and Apple shareholders. If you are not a highly skilled worker you are not going to get a share of the profit. That's the general problem first world countries are facing, lack of demand for low skilled labor unless it is illegal immigrant labor because that is the only form of labor that is cheap enough to compete with foreign countries. You can either train everyone (very hard) or make sure there are enough low skilled jobs (government stimulus).
> I interpret "confusing price signals" to mean that e.g. Apple can charge $1k for an iPhone and sell out to families who wouldn't typically be able to afford it, but the price of bread remains the same.
It is more an interplay between wages and price signals of consumer goods and services than between price signals of separate commodities and consumer goods. Consumer debt (primarily credit card, but also HELOC) distorts the timely impact of purchasing signals upon pricing, but wages-offered signals are much quicker to respond. The debt acts as phantom wages, but only for awhile does this levitating act suspend disbelief in the pricing signals, until the debt service overwhelms consumers. By then, the purchasing decision has already long since been priced into the market, and the correction of the debt overwhelming the consumer is either completely ignored because it is by now disconnected, or attenuated away into irrelevance.
"Awhile" in this use case is longer than the time horizon of most consumers, on the order of a few months to a few years depending upon the individual, but in any case long enough to modify consumer behavior. The glass half-full perspective is this behavior implies a strong optimistic bias to consumers; nearly everyone believes they will make the debt nut over time. Looking at the historic patterns of US institutions laying off however, most working and middle class US consumers should be much more secularly pessimistic in looking after their own interests: they should be acting on a cash-basis only, and make very austere purchasing decisions therefrom until they can use capital to help themselves, instead of capital using them via debt (with extremely few exceptions, like home mortgage in very circumscribed circumstances which most of them do not qualify for).
> Your medical bill comment -- you're basically saying that when one of these families hits a statistically predictable snag, they're instantly bankrupt because they've always been functionally broke, propped up by the consumer debt industry?
Correct. Most working and middle class families are under-insured. Using plans that only pay 80% of covered procedures. Or have very high annual deductibles to afford the premiums, which are orders of magnitude more than what they can pay from savings. Most such families struggle to find $400 to spare [1]. A typical high-deductible-low-premium health plan will typically set back a family $2-4,000 before the plan kicks in, and for many of these families, the plan offered by employers only pays 80% of covered procedures, and there are many exceptions to covered procedures.
Unless you are well-educated, persistent, have time to set aside, apply an extremely low time preference, and able to learn the ropes, these families are completely unprepared for the probable budget killing black swans. One bad broken bone, or God forbid a serious disease, they first get blind-sided by a $2,500 deductible. Which they'll take on debt to meet. Then they start getting the bills and dunning letters. Many of which are wrong, but that's where the "well-educated, persistent, have time to set aside" part comes into play: you have to be willing to pay the cost in your own time and energy to make the phone calls and figure out which bills are legitimately what you have to pay, and which the insurance company has to pay, and do other people's jobs for them by pointing out where it says in the black letter policies their own companies wrote. So many of these families start good-naturedly taking on more debt for multi-hundred (if they're lucky) and multi-thousand (typical) bills they shouldn't, which they cannot afford.
It is not unusual for a mean household income of $68,000 to get blindsided with $30,000 in medical debt. At high double-digit interest rates. Mix in a chronic, terminal or serious illness, and they start racking up nearly that much every single year. The US system is fundamentally broken.
> And so you're saying that most commodity goods face deflationary pressure as a means to stabilize the market? So if the price of commodity goods does increase significantly beyond the capacity of debt issuance, we're likely to see a depression?
Most commodity goods consumed by working and middle classes are facing deflationary pressure on the consumer buy side because the bulk of consumers in working and middle classes are barely staying afloat through sheer, literal luck of the draw. But yes, with those qualifiers in place, you rephrased what I intended convey.
Due to the US lack of adequate response to COVID-19, the presence of an unknown, yet statistically significant recovered population exhibiting what so far appear to be chronic after effects, and the above dynamics with medical debt, one factor to the US economic recovery story I'm watching is how many people go into bankruptcy because their after-acute-recovery conditions require too much care (in the US, any ongoing care is too much for such financially-stressed families). 19.9M infected is large enough to affect the margins if enough of them require even medium-term (3-7 year) care, not to speak of life-long care. I wish I had hedge fund-grade access to data, as this is tradeable information at the macro scale.
[1] https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-...
It is more an interplay between wages and price signals of consumer goods and services than between price signals of separate commodities and consumer goods. Consumer debt (primarily credit card, but also HELOC) distorts the timely impact of purchasing signals upon pricing, but wages-offered signals are much quicker to respond. The debt acts as phantom wages, but only for awhile does this levitating act suspend disbelief in the pricing signals, until the debt service overwhelms consumers. By then, the purchasing decision has already long since been priced into the market, and the correction of the debt overwhelming the consumer is either completely ignored because it is by now disconnected, or attenuated away into irrelevance.
"Awhile" in this use case is longer than the time horizon of most consumers, on the order of a few months to a few years depending upon the individual, but in any case long enough to modify consumer behavior. The glass half-full perspective is this behavior implies a strong optimistic bias to consumers; nearly everyone believes they will make the debt nut over time. Looking at the historic patterns of US institutions laying off however, most working and middle class US consumers should be much more secularly pessimistic in looking after their own interests: they should be acting on a cash-basis only, and make very austere purchasing decisions therefrom until they can use capital to help themselves, instead of capital using them via debt (with extremely few exceptions, like home mortgage in very circumscribed circumstances which most of them do not qualify for).
> Your medical bill comment -- you're basically saying that when one of these families hits a statistically predictable snag, they're instantly bankrupt because they've always been functionally broke, propped up by the consumer debt industry?
Correct. Most working and middle class families are under-insured. Using plans that only pay 80% of covered procedures. Or have very high annual deductibles to afford the premiums, which are orders of magnitude more than what they can pay from savings. Most such families struggle to find $400 to spare [1]. A typical high-deductible-low-premium health plan will typically set back a family $2-4,000 before the plan kicks in, and for many of these families, the plan offered by employers only pays 80% of covered procedures, and there are many exceptions to covered procedures.
Unless you are well-educated, persistent, have time to set aside, apply an extremely low time preference, and able to learn the ropes, these families are completely unprepared for the probable budget killing black swans. One bad broken bone, or God forbid a serious disease, they first get blind-sided by a $2,500 deductible. Which they'll take on debt to meet. Then they start getting the bills and dunning letters. Many of which are wrong, but that's where the "well-educated, persistent, have time to set aside" part comes into play: you have to be willing to pay the cost in your own time and energy to make the phone calls and figure out which bills are legitimately what you have to pay, and which the insurance company has to pay, and do other people's jobs for them by pointing out where it says in the black letter policies their own companies wrote. So many of these families start good-naturedly taking on more debt for multi-hundred (if they're lucky) and multi-thousand (typical) bills they shouldn't, which they cannot afford.
It is not unusual for a mean household income of $68,000 to get blindsided with $30,000 in medical debt. At high double-digit interest rates. Mix in a chronic, terminal or serious illness, and they start racking up nearly that much every single year. The US system is fundamentally broken.
> And so you're saying that most commodity goods face deflationary pressure as a means to stabilize the market? So if the price of commodity goods does increase significantly beyond the capacity of debt issuance, we're likely to see a depression?
Most commodity goods consumed by working and middle classes are facing deflationary pressure on the consumer buy side because the bulk of consumers in working and middle classes are barely staying afloat through sheer, literal luck of the draw. But yes, with those qualifiers in place, you rephrased what I intended convey.
Due to the US lack of adequate response to COVID-19, the presence of an unknown, yet statistically significant recovered population exhibiting what so far appear to be chronic after effects, and the above dynamics with medical debt, one factor to the US economic recovery story I'm watching is how many people go into bankruptcy because their after-acute-recovery conditions require too much care (in the US, any ongoing care is too much for such financially-stressed families). 19.9M infected is large enough to affect the margins if enough of them require even medium-term (3-7 year) care, not to speak of life-long care. I wish I had hedge fund-grade access to data, as this is tradeable information at the macro scale.
[1] https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-...
This is very informative. During the financial crises of 2007 to 2010 about 3 to 4M properties went into foreclosure. I have not looked into statistics of home ownership vs rent for those impacted by covid, but given the number of infected you stated and if there are long term care requirements, could this lead to another large set of foreclosures? Unlike last time though, the housing supply currently seems fairly tight in many areas, so a large pricing collapse downward seems not nearly as likely.
> I have not looked into statistics of home ownership vs rent for those impacted by covid, but given the number of infected you stated and if there are long term care requirements, could this lead to another large set of foreclosures?
US numbers are missing on how many enter aftercare; when someone contracts COVID-19 then is eventually discharged from acute care to rehabilitation, as far as I have been able to tell, they disappear from the statistical models, lumped into an unhelpful puddle called "Recovered". Only the insurance companies and Medicare/Medicaid have those numbers for their individual policy holders. That's why I think only a hedge fund would have the funding and clout to call up and cajole those kinds of numbers out from each of those entities to assemble a data mosaic.
Because of this, there is just no telling how widespread this issue is at this time. It is widespread enough that some medical specialists like pulmonologists and cardiologists are noting very abnormal (worst in their professional experience) rates of complications requiring extensive and sometimes life-long rehabilitation. Not widespread enough (yet?) to tax the available rehabilitation resources. We have rough ideas of available rehabilitation resources in the US, but to make a speculative bet on this ahead of the crowd, you'd need this information before it gets to that point. One microsecond after the headline "US Rehab Units Full from COVID Patients" hits the Reuters news wire, all the good bets are already placed.
A common narrative going around is with the anticipated failure of US politicians to enact sufficient financial relief for working and middle class members, there will be a lot of foreclosures on that dynamic alone, and residential rental will see lots of demand. Lots of long bets have already been placed on residential multi-family rental ventures (wish I knew of an exclusively US MFH residential REIT, but my EFT screening yielded none such, lots of them are over-salted with extensive commercial properties holdings, but I'm only using public data sources).
Backing in from your 4M figure, if the US hits a 20% (and declining, as the number of infected keeps rising) rate of long-term aftercare complications, then it starts to seriously toy with the possibility of a medical bankruptcy-induced foreclosure wave just as big as the 2007-10 recession. This is on top of the pain from economic disruption, which lowers the threshold when medical bankruptcy would be declared; I'm pretty sure that data of general versus medical DTI before bankruptcy is declared could be teased out of historical bankruptcy data at various banks and then assembled into risk tranches along various categories of profiling, pretty straightforward ML work. The US political and financial establishment will probably try to amortize the pain out as much as possible through piling up medical social benefits debt and various kinds of staged mortgage note relief for the capital holders (I see insufficient political power on all sides to directly assist citizens sufficiently to have the same effect, and the decision makers are probably tunnel visioned into the systemic damage done if the capital underwriters of the notes zero out without noticing they get a two-fer by transiting the stimulus funds through those who took out mortgages first). So whether the US enters another credit crisis comes down to some mix of political, monetary, and currency exchange factors.
> Unlike last time though, the housing supply currently seems fairly tight in many areas, so a large pricing collapse downward seems not nearly as likely.
I suspect this is more due to the large amounts of monetary stimulus that makes its way into investment venture fundings than organic demand shaping.
But yes, I believe for partly the reason you cite, and mostly the reason I gave, that the pressure to hold up residential (and to some extent commercial) real estate asset pricing is immense, and likely to continue. The US is walking straight into the 80's Tokyo Trap: real estate asset pricing levitated by so much hot money flows that it mostly disconnected from its original utility to function as a natural world good. Kind of ironic, natural persons using natural world goods usurped by corporate persons using financial world goods. But this levitation continues for much longer than most people expect (Keynes' “markets...irrational longer than you...solvent” quip), and I suspect this continues until the US Congress' spending is reined in by the forex markets (which might be in a kind of a regulatory capture of their own peculiar kind).
Use every year the US political establishment kicks the can down the road to put away your larder. It's going to be a bumpy ride if the levees break the way I fear they will in about 3-4 years.
US numbers are missing on how many enter aftercare; when someone contracts COVID-19 then is eventually discharged from acute care to rehabilitation, as far as I have been able to tell, they disappear from the statistical models, lumped into an unhelpful puddle called "Recovered". Only the insurance companies and Medicare/Medicaid have those numbers for their individual policy holders. That's why I think only a hedge fund would have the funding and clout to call up and cajole those kinds of numbers out from each of those entities to assemble a data mosaic.
Because of this, there is just no telling how widespread this issue is at this time. It is widespread enough that some medical specialists like pulmonologists and cardiologists are noting very abnormal (worst in their professional experience) rates of complications requiring extensive and sometimes life-long rehabilitation. Not widespread enough (yet?) to tax the available rehabilitation resources. We have rough ideas of available rehabilitation resources in the US, but to make a speculative bet on this ahead of the crowd, you'd need this information before it gets to that point. One microsecond after the headline "US Rehab Units Full from COVID Patients" hits the Reuters news wire, all the good bets are already placed.
A common narrative going around is with the anticipated failure of US politicians to enact sufficient financial relief for working and middle class members, there will be a lot of foreclosures on that dynamic alone, and residential rental will see lots of demand. Lots of long bets have already been placed on residential multi-family rental ventures (wish I knew of an exclusively US MFH residential REIT, but my EFT screening yielded none such, lots of them are over-salted with extensive commercial properties holdings, but I'm only using public data sources).
Backing in from your 4M figure, if the US hits a 20% (and declining, as the number of infected keeps rising) rate of long-term aftercare complications, then it starts to seriously toy with the possibility of a medical bankruptcy-induced foreclosure wave just as big as the 2007-10 recession. This is on top of the pain from economic disruption, which lowers the threshold when medical bankruptcy would be declared; I'm pretty sure that data of general versus medical DTI before bankruptcy is declared could be teased out of historical bankruptcy data at various banks and then assembled into risk tranches along various categories of profiling, pretty straightforward ML work. The US political and financial establishment will probably try to amortize the pain out as much as possible through piling up medical social benefits debt and various kinds of staged mortgage note relief for the capital holders (I see insufficient political power on all sides to directly assist citizens sufficiently to have the same effect, and the decision makers are probably tunnel visioned into the systemic damage done if the capital underwriters of the notes zero out without noticing they get a two-fer by transiting the stimulus funds through those who took out mortgages first). So whether the US enters another credit crisis comes down to some mix of political, monetary, and currency exchange factors.
> Unlike last time though, the housing supply currently seems fairly tight in many areas, so a large pricing collapse downward seems not nearly as likely.
I suspect this is more due to the large amounts of monetary stimulus that makes its way into investment venture fundings than organic demand shaping.
But yes, I believe for partly the reason you cite, and mostly the reason I gave, that the pressure to hold up residential (and to some extent commercial) real estate asset pricing is immense, and likely to continue. The US is walking straight into the 80's Tokyo Trap: real estate asset pricing levitated by so much hot money flows that it mostly disconnected from its original utility to function as a natural world good. Kind of ironic, natural persons using natural world goods usurped by corporate persons using financial world goods. But this levitation continues for much longer than most people expect (Keynes' “markets...irrational longer than you...solvent” quip), and I suspect this continues until the US Congress' spending is reined in by the forex markets (which might be in a kind of a regulatory capture of their own peculiar kind).
Use every year the US political establishment kicks the can down the road to put away your larder. It's going to be a bumpy ride if the levees break the way I fear they will in about 3-4 years.
> It feels like the sky-high valuations of technology companies and Bitcoin are "shock absorbers" of sorts, or early signals of inflation-yet-to-come. If we assume the market is efficiently pricing these assets (like AirBnB's IPO) then it could very well be that the actual value of a fiat dollar has dropped dramatically -- making sky-high valuations more reasonable
To me, the most reasonable interpretation of these valuations is a savings glut. People are being given extra income, but instead of going out and spending it on more impulse purchases (such as fine dining or an exotic vacation), they're shoveling that into savings accounts. And assets that reflect a long-term saving mindset--real estate, stocks--are going up in price, while more immediate consumptive assets (e.g., food) are staying stable.
> wouldn't be surprised to see the price of things like groceries, beer and travel double or triple what they were in 2019.
That would be an effective inflation rate of 100-200%. If you're assuming that would happen within a year, the number of countries right now with that high of an inflation rate is 3: Venezuela, Zimbabwe, and Iran. Even the developing world doesn't regularly see inflation quite that high, you'd expect more like 10-30% annual inflation for those countries.
To me, the most reasonable interpretation of these valuations is a savings glut. People are being given extra income, but instead of going out and spending it on more impulse purchases (such as fine dining or an exotic vacation), they're shoveling that into savings accounts. And assets that reflect a long-term saving mindset--real estate, stocks--are going up in price, while more immediate consumptive assets (e.g., food) are staying stable.
> wouldn't be surprised to see the price of things like groceries, beer and travel double or triple what they were in 2019.
That would be an effective inflation rate of 100-200%. If you're assuming that would happen within a year, the number of countries right now with that high of an inflation rate is 3: Venezuela, Zimbabwe, and Iran. Even the developing world doesn't regularly see inflation quite that high, you'd expect more like 10-30% annual inflation for those countries.
> If we assume the market is efficiently pricing these assets (like AirBnB's IPO) then it could very well be that the actual value of a fiat dollar has dropped dramatically
Note that many other assets such as energy, financial, and real estate stocks, consumer goods, etc. are not experiencing sky-high valuations - indeed, some of those asset classes are down for the year.
So it's not just fiat dollars that have dropped dramatically in value by your reasoning.
It seems to me more likely the market is simply overpricing one class of assets (tech stocks) here. Occam's Razor comes to mind.
Note that many other assets such as energy, financial, and real estate stocks, consumer goods, etc. are not experiencing sky-high valuations - indeed, some of those asset classes are down for the year.
So it's not just fiat dollars that have dropped dramatically in value by your reasoning.
It seems to me more likely the market is simply overpricing one class of assets (tech stocks) here. Occam's Razor comes to mind.
Overpricing one class of assets is functionally equivalent to underpricing the other classes. Facing inflation, money will aggregate first in the assets most likely to maintain + outpace an increase in monetary supply. Once they start appearing too overpriced, the overflow will affect other industries.
I'd invoke Occam's Razor to state that inflation due to increase in monetary supply is more likely to manifest as "overpricing" of one or two asset classes first. As opposed to a crash, where one asset class bottoms out and takes the other with it, stimulus and inflation, in theory, would cause the opposite -- would they not?
I haven't studied hyperinflation. So consider me inquisitive on the subject. But it's certainly happened before, and the dynamics seem like they have the potential to create a positive feedback loop similar to a crash.
I'd invoke Occam's Razor to state that inflation due to increase in monetary supply is more likely to manifest as "overpricing" of one or two asset classes first. As opposed to a crash, where one asset class bottoms out and takes the other with it, stimulus and inflation, in theory, would cause the opposite -- would they not?
I haven't studied hyperinflation. So consider me inquisitive on the subject. But it's certainly happened before, and the dynamics seem like they have the potential to create a positive feedback loop similar to a crash.
well said.!!
> Bitcoin are "shock absorbers" of sorts, or early signals of inflation-yet-to-come.
Bitcoin doesn't go up because inflation is coming. The current value of bitcoin is an early indication of people betting on inflation. There doesn't need to be inflation, there only needs to be an expectation of inflation for investors to pile into bitcoin, thus massively driving up the price. And investors piling in will drive the price massively because there's a fixed supply of bitcoin so the price is entirely driven by demand and the current present value of all the bitcoins in existence is still ~500Bn, the same amount as a company on the stock excahnge. The price of all the gold in the world for comparison is ~10Tn. Or to put it another way, if inflation now doesn't happen, the price of bitcoin looks ridiculous and there'd be a massive crash as everyone floods back out. In fact, further than that, if inflation doesn't sky rocket then the value of BTC looks silly.
Bitcoin doesn't go up because inflation is coming. The current value of bitcoin is an early indication of people betting on inflation. There doesn't need to be inflation, there only needs to be an expectation of inflation for investors to pile into bitcoin, thus massively driving up the price. And investors piling in will drive the price massively because there's a fixed supply of bitcoin so the price is entirely driven by demand and the current present value of all the bitcoins in existence is still ~500Bn, the same amount as a company on the stock excahnge. The price of all the gold in the world for comparison is ~10Tn. Or to put it another way, if inflation now doesn't happen, the price of bitcoin looks ridiculous and there'd be a massive crash as everyone floods back out. In fact, further than that, if inflation doesn't sky rocket then the value of BTC looks silly.
> the price of things like groceries, beer and travel double or triple what they were in 2019.
It's already the case. Not 2x or 3x but double digits inflation on groceries notably meat products won't be surprising when we do the math next year.
It's already the case. Not 2x or 3x but double digits inflation on groceries notably meat products won't be surprising when we do the math next year.
Overall inflation is at roughly the same nearly flat level it's been for a decade. Food has gone up and energy has gone down, and both of those are easily explained by coronavirus-related supply and demand shifts.
If that were true then it would be time to rejoice and watch underemployment disappear. The central bank can then unload its balance sheets and reduce inflation to sustainable levels. If that does not help you can also increase taxation to take care of inflation. There are a lot of tools that can trivially deal with too much inflation but with deflation the only tool you have is the central bank pumping money into the market and so far it is failing to achieve its stated goals.
> We've injected trillions of dollars of fiat into the economy this year
When the government issues debt and then uses the money to send out cheques, that money had to come from investors in the first place. So the money was reallocated, not created. (New assets did get created: someone is going to hold those bonds and count them as part of their assets. But they can't use these bonds directly to buy groceries.)
When the government issues debt and then uses the money to send out cheques, that money had to come from investors in the first place. So the money was reallocated, not created. (New assets did get created: someone is going to hold those bonds and count them as part of their assets. But they can't use these bonds directly to buy groceries.)
But recently, the U.S. Treasury has issued a ton of debt to the Federal Reserve. The Fed is creating dollars and handing them to the Treasury in exchange for T-notes. The recent debt increase has actually created U.S. Dollars out of thin air. Following this line of thought, those dollars have made their way into the "real" economy in the form of PPP loans and Covid checks. It was a similar story in 2008, but the amount of federal debt held by the Fed has exploded this year [1].
Furthermore, the last time the Fed has tried to draw down its balance sheet of federal debt, commodity prices went crazy and Jerome Powell had to abandon that quantitative tightening program. So, it's not even like the Fed can easily move those T-notes to the private sector and pull USD out of circulation -- we're stuck in an inflationary period.
[1] https://fred.stlouisfed.org/series/FDHBFRBN
Furthermore, the last time the Fed has tried to draw down its balance sheet of federal debt, commodity prices went crazy and Jerome Powell had to abandon that quantitative tightening program. So, it's not even like the Fed can easily move those T-notes to the private sector and pull USD out of circulation -- we're stuck in an inflationary period.
[1] https://fred.stlouisfed.org/series/FDHBFRBN
The fed creates bank reserves, which is different from the commercial bank money in your account. It's quite confusing because both are called "dollars", but they can't be used in the same way.
That’s not true when the buyers of the debt include the Federal Reserve using new money, as is happening here.
I think quantiative easing added trillions of dollars during covid.
https://en.wikipedia.org/wiki/Quantitative_easing
https://en.wikipedia.org/wiki/Quantitative_easing
When the government issues bonds, they sell them for commercial bank money, the same type of money in your bank account.
When the central bank later buys those bonds from banks (they never buy them directly), something different happens: the bonds are exchanged for "bank reserves", a different type of digital money that only exists as numbers in the central bank's database. This "money" cannot be used to buy groceries.
When the central bank later buys those bonds from banks (they never buy them directly), something different happens: the bonds are exchanged for "bank reserves", a different type of digital money that only exists as numbers in the central bank's database. This "money" cannot be used to buy groceries.
> A central bank implements quantitative easing by buying financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply.
Quantitative easing increases the money supply. They've injected trillions. Who got it is a separate question.
Quantitative easing increases the money supply. They've injected trillions. Who got it is a separate question.
Quantitative easing only increases "bank reserves" in the accounts at the fed, not the money supply. The accounts at the fed are an isolated system. To increase the money supply, commercial banks need to create money via loans.
The reserve requirement is 0%, increasing a bank's reserves doesn't allow them to lend more. There are mechanisms that allow an increase in bank reserves to be spent in the economy without loans [0].
[0] https://positivemoney.org/how-money-works/advanced/how-quant...
[0] https://positivemoney.org/how-money-works/advanced/how-quant...
I read the post you linked, and was surprised by the description of money being created when a UK bank buys a government bond from a pension fund. I thought commercial banks were only allowed to create money when creating loan assets. Is creation of money when banks buy assets a unique feature of the UK banking system, or does it also happen elsewhere?
If banks would buy financial assets and create money in the process as described in the post, then that would certainly be inflationary. (e.g. I can imagine hypothetical legislation that forces banks to buy government bonds, that would be the time to run for inflation protection.) As far as I understand, this has not happened, or at least not to the degree that it caused inflation. The effect of QE has been to increase bank reserves but not the money supply, which is why we haven't seen inflation since the financial crisis.
If banks would buy financial assets and create money in the process as described in the post, then that would certainly be inflationary. (e.g. I can imagine hypothetical legislation that forces banks to buy government bonds, that would be the time to run for inflation protection.) As far as I understand, this has not happened, or at least not to the degree that it caused inflation. The effect of QE has been to increase bank reserves but not the money supply, which is why we haven't seen inflation since the financial crisis.
The purpose of QE is to cause inflation, the federal reserve is explicitly trying to avoid a Japan situation where there are low interest rates and deflation [0]. To avoid a deflationary spiral [1].
I can't find a source that explains the mechanism for how QE affects the economy.
[0] https://www.investopedia.com/articles/investing/051315/what-... [1] https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
I can't find a source that explains the mechanism for how QE affects the economy.
[0] https://www.investopedia.com/articles/investing/051315/what-... [1] https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
Why coca-cola would 3ple their prices in 2021? The loans are cheap, the wages are stagnant, energy and raw materials are cheap.
I really don't see this scenario playing out unless the financial institutions collapse.
Armchair economists have been predicting inflation since 2008.
And they were right; it has been with us all the time. Look at health care and food.
If that were really true the trivial fix would be to train more medical personnel and invest into more food production. In reality it's just a temporary corona related increase.
And housing. But since cheap crap remains just has cheap and crappy as ever, somehow some people take that to mean inflation isn't a thing?
I think you're right.
The economic stimulus is mostly going in rich people's pockets which happen to like the idea of BTC and Tesla.
They're likely worried about inflation, so they need to invest the money.
And that's how you get BTC and Tesla's meteoric rise.
And that's how you get BTC and Tesla's meteoric rise.
If by "rich people" you mean institutional investors, then yes. The flows into crypto from institutional investors is absolutely staggering. And it will only continue. This is just the beginning.
Even if the returns of btc were poor, it would still be a very attractive investment as uncorrelated assets boost the risk adjusted returns of a portfolio.
Even if the returns of btc were poor, it would still be a very attractive investment as uncorrelated assets boost the risk adjusted returns of a portfolio.
I have been buying small amounts of bitcoin since around 2015. I have a very small portfolio, but growing?
Recently I have had friends that are very far from the tech scene, but well versed in investment risk pick up BTC as institutions announced the onboarding of coins.
I have no idea if $30k / btc is reasonable or insane, but I think we will know when bitcoin gets to the final price as the correlation to gold gets closer to 1.
Housing price is up, but not rent (all over US), that is driven by lower rates rather than inflation.
All that said, a ton of money was dumped on the market. We won't know until later in the year what the result of that is.
Recently I have had friends that are very far from the tech scene, but well versed in investment risk pick up BTC as institutions announced the onboarding of coins.
I have no idea if $30k / btc is reasonable or insane, but I think we will know when bitcoin gets to the final price as the correlation to gold gets closer to 1.
Housing price is up, but not rent (all over US), that is driven by lower rates rather than inflation.
All that said, a ton of money was dumped on the market. We won't know until later in the year what the result of that is.
How do you explain gold though? It certainly hasn’t kept up with bitcoin.
You are not missing anything, QE means the value of the currency has dropped, there is no escaping this simple fact. Whether it can be hidden for a while and for how long, remains to be seen.
If almost the entirety of the money ends up, in the medium run, in the hands of a few wealthy people who want to invest, it explains the lack of inflation for everything but investments
Consider that the money is mostly going to the owners of assets. Assets have the unfortunate property of only giving returns to their owners and most people simply do not own assets so it's an incredibly poor way of introducing money to consumers.
Yes, many have speculated that as oil and gold prices in the past acted as hedges against inflation, btc may very well be that next place that investors go in times of heavy inflation. If liquidity is good, I think that this works. But the problem is that liquidity in bitcoin is so different from other classes of investments, and we don't fully know what is possible with this kind of market yet.
Why do you think that money would ever reach normal people? Or stays in stock /bitcoin until sind and then gets reinvested to make more money...
Your armchair analysis is on the mark. in a fiat dominated world, any market distortions caused by monetary mismanagement (money printing through QE, asset inflation) is not visible as everything in the market is priced in the same underlying asset (USD globally). Since bitcoin is outside this system it is actually holding up a mirror to the increasing worthlessness of the USD and other mismanaged fiat currencies.
> as everything in the market is priced in the same underlying asset
> the increasing worthlessness of the USD
I think you must be using words different from what I take them to mean, which means you can draw radically different conclusions from how I read them.
If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside."
Inflation is defined by the purchasing power of money within the economy. If that's not changing, inflation isn't happening.
Pointing to a single asset whose price is fluctuating wildly and insinuating that that is the only real source of truth, and that literally everything else is hiding the true cost of living seems to be just showing what you want to believe.
(Note, I'm not saying that there's been no inflation. It's been about 2.5%/yr over the past 20 years. But simply that the notion that it isn't visible from "inside" the economy is contradictory.)
> the increasing worthlessness of the USD
I think you must be using words different from what I take them to mean, which means you can draw radically different conclusions from how I read them.
If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside."
Inflation is defined by the purchasing power of money within the economy. If that's not changing, inflation isn't happening.
Pointing to a single asset whose price is fluctuating wildly and insinuating that that is the only real source of truth, and that literally everything else is hiding the true cost of living seems to be just showing what you want to believe.
(Note, I'm not saying that there's been no inflation. It's been about 2.5%/yr over the past 20 years. But simply that the notion that it isn't visible from "inside" the economy is contradictory.)
To my understanding, inflation -- and the causes of such -- is something that can only really be assessed ex post facto.
What's being asked is, "is what we're seeing a warning sign of inflation-yet-to-come?" Rephrased, "are people bullish on technology stocks and Bitcoin because they're speculating that there's major fiat inflationary risk and these asset classes are most likely to hold value?"
What's being asked is, "is what we're seeing a warning sign of inflation-yet-to-come?" Rephrased, "are people bullish on technology stocks and Bitcoin because they're speculating that there's major fiat inflationary risk and these asset classes are most likely to hold value?"
Inflation is a loss of value and it hasn't happened until it has happened, and when it happens, you notice very much instantly.
Not really. It’s a matter of what you’re measuring. If you measure inflation by assessing the price of a Whopper, you won’t find much. If you measure inflation by measuring the cost of college tuition, you’ll find plenty. What’s meaningful varies dramatically from person to person. That’s why I think it’s almost pointless to talk about inflation as a single, measurable thing.
Consumer inflation is well defined and a policy goal so it does make sense. The problem is that you have to clarify which goods are inflating, otherwise you run into misunderstandings.
> If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside."
The key ingredient missing from your calculation is time. If you are simply measuring how much an hour of work can purchase now, you are completely ignoring that some people want to save money.
If $10 is the measurement for an hour of work and 4 gallons of gas today, in a decade or so, you might need $20 to pay for 4 gallons of gas, and you might get paid $20 for an hour of work. But somebody who saved $10 worked today, and chooses to spend it a decade later, will only be able to acquire 2 gallons of gas. The result of their labour would have been reduced to half.
This is what Bitcoin intends to fix. We want to be able to store wealth into the future - so that an hour worked today is still worth an hour (or more) tomorrow. The potential appreciation in purchasing power is reward for thrift.
As it stands, if one wants to preserve wealth into the future, they must put money into risky investments to ensure that the dollar value of the savings appreciates at a greater rate than its purchasing power is lost to inflation. They also run the risk that their savings or pensions could be lost with companies going bust or if hyperinflation occurs.
Bitcoin is a pension plan.
As for using Bitcoin as a reference frame of measurement, there's a good reason to do this. Bitcoin is a fixed system of measurement which is disjoint of time or other externalities. There is an absolute maximum of 21M bitcoin, so any whole bitcoin is always 1/21M of the total supply. This is a truth that holds today and in a decade. It is immutable.
Consider measurement of length. If you only have cows in a field, how do you measure the length of a field? You could say it is 100 cows long and 80 cows wide, but how long is the cow? The cow grows as it ages. Once you get hold of an external tool of measurement - a meter (or yard, etc), then you can measure both the field and each cow against it.
The same is now true for economic value. Before Bitcoin, there was no fixed scale of measurement. The dollar was flexible, just as any other commodity. Bitcoin OTOH, is not flexible. The exchange rate of BTC/USD might be flexible, but when you use BTC as the frame of reference, you can instead measure how much value the dollar is losing against bitcoin. https://usdsat.com
As you can see, the dollar is losing value so rapidly that inflation of the dollar is negligible. It is the perception of inflation which is causing it to plummet far quicker than the actual rate of inflation.
The key ingredient missing from your calculation is time. If you are simply measuring how much an hour of work can purchase now, you are completely ignoring that some people want to save money.
If $10 is the measurement for an hour of work and 4 gallons of gas today, in a decade or so, you might need $20 to pay for 4 gallons of gas, and you might get paid $20 for an hour of work. But somebody who saved $10 worked today, and chooses to spend it a decade later, will only be able to acquire 2 gallons of gas. The result of their labour would have been reduced to half.
This is what Bitcoin intends to fix. We want to be able to store wealth into the future - so that an hour worked today is still worth an hour (or more) tomorrow. The potential appreciation in purchasing power is reward for thrift.
As it stands, if one wants to preserve wealth into the future, they must put money into risky investments to ensure that the dollar value of the savings appreciates at a greater rate than its purchasing power is lost to inflation. They also run the risk that their savings or pensions could be lost with companies going bust or if hyperinflation occurs.
Bitcoin is a pension plan.
As for using Bitcoin as a reference frame of measurement, there's a good reason to do this. Bitcoin is a fixed system of measurement which is disjoint of time or other externalities. There is an absolute maximum of 21M bitcoin, so any whole bitcoin is always 1/21M of the total supply. This is a truth that holds today and in a decade. It is immutable.
Consider measurement of length. If you only have cows in a field, how do you measure the length of a field? You could say it is 100 cows long and 80 cows wide, but how long is the cow? The cow grows as it ages. Once you get hold of an external tool of measurement - a meter (or yard, etc), then you can measure both the field and each cow against it.
The same is now true for economic value. Before Bitcoin, there was no fixed scale of measurement. The dollar was flexible, just as any other commodity. Bitcoin OTOH, is not flexible. The exchange rate of BTC/USD might be flexible, but when you use BTC as the frame of reference, you can instead measure how much value the dollar is losing against bitcoin. https://usdsat.com
As you can see, the dollar is losing value so rapidly that inflation of the dollar is negligible. It is the perception of inflation which is causing it to plummet far quicker than the actual rate of inflation.
Economists weren’t born yesterday. Inflation is measured in many ways, most often by looking at a basket of goods where the prices are relatively non-volatile. Using the USD/Bitcoin ratio as a yardstick for inflation seems very misguided, as Bitcoin is heavily speculated.
>> Economists weren’t born yesterday.
So? They can still be idiots. Idiocy does not have an age limit.
>> Inflation is measured in many ways, most often by looking at a basket of goods where the prices are relatively non-volatile.
Meaning you remove the items from the basket if it's price jump too much ? so if you tamper with the items in the basket you can project(pretend) that the inflation is not happening.?
>> using the USD/Bitcoin ratio as a yardstick for inflation seems very misguided, as Bitcoin is heavily speculated.
No it doesn't need to be a yardstick as Bitcoin is not yet in full circulation in the economy but it's growth indicates people are increasingly prioritising it over paper to store value.
Re: speculation, everything is a speculation, there are those who keep holding USD in cash and banks and keep speculating that the economic prophets will do the right thing to retain value in their chosen currency.
So? They can still be idiots. Idiocy does not have an age limit.
>> Inflation is measured in many ways, most often by looking at a basket of goods where the prices are relatively non-volatile.
Meaning you remove the items from the basket if it's price jump too much ? so if you tamper with the items in the basket you can project(pretend) that the inflation is not happening.?
>> using the USD/Bitcoin ratio as a yardstick for inflation seems very misguided, as Bitcoin is heavily speculated.
No it doesn't need to be a yardstick as Bitcoin is not yet in full circulation in the economy but it's growth indicates people are increasingly prioritising it over paper to store value.
Re: speculation, everything is a speculation, there are those who keep holding USD in cash and banks and keep speculating that the economic prophets will do the right thing to retain value in their chosen currency.
It seems a bit arrogant to claim that every one of the thousands of economists who study inflation are idiots.
You can look up the methodologies used to determine the basket of goods. By non-volatile I mean that they’re aggregates over purchasing categories - for example, it’s not the simply the price of a “40inch TV” or cod fillet (which may change in ways non-representative of general purchasing practices - as TVs of a given size get cheaper, or cod has a good year) but an aggregate over the entire purchasing category (fresh fish, consumer electronics) based on typical purchasing habits.
https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2019001...
When things are added or removed it’s because people have stopped buying that thing (DVD rentals for example).
You can look up the methodologies used to determine the basket of goods. By non-volatile I mean that they’re aggregates over purchasing categories - for example, it’s not the simply the price of a “40inch TV” or cod fillet (which may change in ways non-representative of general purchasing practices - as TVs of a given size get cheaper, or cod has a good year) but an aggregate over the entire purchasing category (fresh fish, consumer electronics) based on typical purchasing habits.
https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2019001...
When things are added or removed it’s because people have stopped buying that thing (DVD rentals for example).
> but it's growth indicates people are increasingly prioritising it over paper to store value.
Or simply that there are thousands of speculators. (Which isn't even that many people considering the number of people who speculate in stocks.)
Or simply that there are thousands of speculators. (Which isn't even that many people considering the number of people who speculate in stocks.)
Inflation doesn't need to be measured in many ways, you can view it directly on the m2 money supply chart: https://fred.stlouisfed.org/series/M2
Everything else is just a derivative of this. You're measuring the side effects of inflation. If you want the deeper cause, it's here.
Everything else is just a derivative of this. You're measuring the side effects of inflation. If you want the deeper cause, it's here.
Inflation is a loss of value, most directly observed in rising prices.
Everything else–money supply, borrowing costs, etc are linked to it, but do not necessarily correlate. The price of a Big Mac is almost certain to be a far better approximation than any of those indicators.
This really isn't that complicated.
Everything else–money supply, borrowing costs, etc are linked to it, but do not necessarily correlate. The price of a Big Mac is almost certain to be a far better approximation than any of those indicators.
This really isn't that complicated.
Inflation is the result of consumer demand outpacing supply. It's effectively a measure of how much work could not be done. From this perspective hyperinflation is just the result of the government demanding exceedingly far more work than the country as a whole can do. Prices adjust upwards until the existing money supply is exactly enough to pay for all the work that can be done.
If you have a lot of unemployment and inflation is low that basically means there is very little work for your people. This is the reason why 2% inflation is a policy goal. You always want there to be just a tiny little bit more work than there are workers. If there is a way to do more work thanks to technology that is increasing productivity it will be done.
If you have a lot of unemployment and inflation is low that basically means there is very little work for your people. This is the reason why 2% inflation is a policy goal. You always want there to be just a tiny little bit more work than there are workers. If there is a way to do more work thanks to technology that is increasing productivity it will be done.
It really isn't, you're right.
Historically, inflation always meant inflation of the money supply. Its definition has changed over time and you've been swindled.
If you have a name for something, name the root cause, otherwise you're obfuscating its study, and perpetuating the non-identification of the root cause.
"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." [0]
[0] https://mises.org/library/defining-inflation
Historically, inflation always meant inflation of the money supply. Its definition has changed over time and you've been swindled.
If you have a name for something, name the root cause, otherwise you're obfuscating its study, and perpetuating the non-identification of the root cause.
"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." [0]
[0] https://mises.org/library/defining-inflation
Isn’t the issue exactly that money supply is increasing decoupled from the real economy? This is why quantitative easing hasn’t particularly increased consumer prices, which are one important indicator of value.
Money supply rarely goes directly to consumers, it first has to be spent by the receiving parties and distributed to the wider economy before consumer prices begin increasing.
But it doesn't happen without the prerequisite of money being printed.
But it doesn't happen without the prerequisite of money being printed.
That hasn’t happened though - money has gone to corporations and asset holders. It hasn’t trickled down to consumers. Banks aren’t lending to small businesses.
> Inflation doesn't need to be measured in many ways, you can view it directly on the m2 money supply
but this chart doesnt take into account increases in productive capacity. If there exists production capacity to match this growth in money supply, goods will remain relatively priced the same, even if more is printed.
but this chart doesnt take into account increases in productive capacity. If there exists production capacity to match this growth in money supply, goods will remain relatively priced the same, even if more is printed.
It's not just a quantitative problem, it's also a qualitative one. You want the dollars to circulate and therefore it makes sense to look at the most important subset of goods that is relevant to the every day person.
[deleted]
But then what would one invest in? The stock market may just as easily crash.
But a stock represents ownership of a real company that (hopefully) will make profits that can be distributed as a dividend or be used to grow the company and increase the value.
A Bitcoin is totally speculative and has virtually no useful purpose in the real world yet. You can’t actually buy stuff with it from stores, due to its niche status, high fees, slow transactions, and wild price fluctuations.
Looking at it that way, it’s clear that a stock is a much safer investment than a Bitcoin.
A Bitcoin is totally speculative and has virtually no useful purpose in the real world yet. You can’t actually buy stuff with it from stores, due to its niche status, high fees, slow transactions, and wild price fluctuations.
Looking at it that way, it’s clear that a stock is a much safer investment than a Bitcoin.
It doesn't matter how safe an investment is. Uncorrelated alternative assets (metals, crypto, art, etc), when added to your portfolio, lower the total volatility (risk) and boost the risk adjusted returns. You can take a really crappy asset with low returns and high volatility (like gold) and add it to your portfolio to boost your risk adjusted return.
In short, from a quantitative perspective, it never makes sense to look at a security or asset in isolation. Instead one must consider the total portfolio as a whole.
Source: work as a quant trader
tldr: If the question is "does crypto have a place in everyone's portfolio?" The answer is emphatic an "yes". And indeed, we are quickly moving towards a world in which crypto is held by most institutional investors. Even at this early stage, the institutional flows into btc is staggering. And it will only increase with time. From my vantage point as an insider, btc is here to stay. full stop
In short, from a quantitative perspective, it never makes sense to look at a security or asset in isolation. Instead one must consider the total portfolio as a whole.
Source: work as a quant trader
tldr: If the question is "does crypto have a place in everyone's portfolio?" The answer is emphatic an "yes". And indeed, we are quickly moving towards a world in which crypto is held by most institutional investors. Even at this early stage, the institutional flows into btc is staggering. And it will only increase with time. From my vantage point as an insider, btc is here to stay. full stop
One of the most common critiques of modern portfolio theory is that it defines risk by volatility rather than downside risk. While a stock will never have price-to-book multiple less than 1 (unless fraud has occurred) a cryptocurrency has no such limit on how far it can fall.
Well a crypto currency can only fall 100%, so it's not unlimited. Moreover, some stocks do actually have a P/B ratio below one, for example Deutsche Banks PB is currently around 0.3.
You could instead look at downside deviation instead of volatility, but in my experience standard volatility and upside/downside deviation look very similar for most securities. This is somewhat paradoxical for me personally, but it is what it is.
You could instead look at downside deviation instead of volatility, but in my experience standard volatility and upside/downside deviation look very similar for most securities. This is somewhat paradoxical for me personally, but it is what it is.
I just wanted to point out that stocks have had price to book multiples less than one, per various comments by Buffett and Benjamin Graham. Also, for another example, there are funds that sell at a discount to the total value of shares held by the fund.
> stocks have had price to book multiples less than one
It's not even that unusual, or newsworthy. It's pretty common for banks, basically the rule for European banks. I'm still not convinced the numbers are "real" though. As I understand it, there are a few main arguments as to why "buy and strip" price arbitrage doesnt happen, and I'm not sure which is/are true:
- Regulatory barriers. JPM or Apple can't just buy Deutsche Bank because lawmakers won't allow it.
- They're too big to be bought out out by (European?) private equity, or controlling stakes aren't available.
- That's not real book value. Try to wind it down and it'll evaporate.
Maybe there are more. I understand that dividends and buybacks are currently limited by regulators in Europe, and that closes one valve for the price arbitrage, but still...
It's not even that unusual, or newsworthy. It's pretty common for banks, basically the rule for European banks. I'm still not convinced the numbers are "real" though. As I understand it, there are a few main arguments as to why "buy and strip" price arbitrage doesnt happen, and I'm not sure which is/are true:
- Regulatory barriers. JPM or Apple can't just buy Deutsche Bank because lawmakers won't allow it.
- They're too big to be bought out out by (European?) private equity, or controlling stakes aren't available.
- That's not real book value. Try to wind it down and it'll evaporate.
Maybe there are more. I understand that dividends and buybacks are currently limited by regulators in Europe, and that closes one valve for the price arbitrage, but still...
Sure, maybe put a few percent of your portfolio in it. But my point is that Bitcoin is highly speculative and risky compared to pretty much any other kind of investment. Even gold has industrial uses and isn’t simply a token of value like Bitcoin.
I will concede though that there is a huge market of derivatives which often seem pretty unusual and risky to an amateur investor such as myself, so maybe Bitcoin isn’t that different from some of those investments. I don’t know a lot about that market, other than that it played a large role in the Great Recession, which is a dubious distinction.
I will concede though that there is a huge market of derivatives which often seem pretty unusual and risky to an amateur investor such as myself, so maybe Bitcoin isn’t that different from some of those investments. I don’t know a lot about that market, other than that it played a large role in the Great Recession, which is a dubious distinction.
Then you probably won't be pleased to hear that crypto derivatives are far more popular than actual hard crypto :)
Most people are unaware, the the derivative volume of btc is yuuuge compared to the spot volume.
Most people are unaware, the the derivative volume of btc is yuuuge compared to the spot volume.
All investments have an inherent risk. Typically there is a direct relationship between risk and return. The more risky an investment is the higher the return investors demand. Thus, when considering an investment, a key question to ask is whether the expected return on the investment is commensurate with the risk that this particular investment entails. This is called a mean-variance analysis, and before investing in BTC, or in the stock market for that matter, you should probably do exactly that kind of analysis.
Most of the criticisms in this thread seem to be missing that Bitcoin is only layer 1. Bitcoin isn't Visa or cash - its gold. Rather than shipping gold across the Atlantic, large institutions will settle in a few minutes in Bitcoin. L2/L3/L4 solutions (built into Apple Pay, etc.) will allow for instant payments for coffee, allow for privacy similar to physical cash, etc.
Before this is possible, the price has to stabilize. Just takes time to go from $0.1 to $10M per coin. Once Bitcoin has eaten all the "store of value" value & only appreciates at the rate new wealth is created, L2/L3/L4 solutions will go mainstream.
Before this is possible, the price has to stabilize. Just takes time to go from $0.1 to $10M per coin. Once Bitcoin has eaten all the "store of value" value & only appreciates at the rate new wealth is created, L2/L3/L4 solutions will go mainstream.
Except Bitcoin has no way to “stabilize”. Without central banks’ intervention and governance, even regular currencies would fluctuate like crazy. Unless the bitcoin world can come up with a Federal Reserve / ECB equivalent, it will continue to be a wild ride, which will effectively impede further uses. It will always be a speculation vehicle rather than a store of value.
I think the difference is that currencies fluctuate against each other, whereas if everything is priced in Bitcoin, its whatever you're pairing it against that's fluctuating. Goods (ex: loaf of bread for 200 satoshis for example) would stay stable
Humans are creativity machines. We are always expanding the amount of value there is in the world. The only way to have stable prices is to have a currency that inflates to match the amount of new stuff created.
But do we really want stable prices? Today you can buy a device a million times faster than 20 years ago for the same price. Imagine if everything were like that.
But do we really want stable prices? Today you can buy a device a million times faster than 20 years ago for the same price. Imagine if everything were like that.
> Today you can buy a device a million times faster than 20 years ago for the same price.
And as you can see that massive deflation completely destroyed the computing industry, as everyone sat around waiting for next year's device that was faster and better for a similar price.
Wait, that didn't happen? People still buy things when there is deflation? No, that can't be, how else can I justify the morals of my money printer?
And as you can see that massive deflation completely destroyed the computing industry, as everyone sat around waiting for next year's device that was faster and better for a similar price.
Wait, that didn't happen? People still buy things when there is deflation? No, that can't be, how else can I justify the morals of my money printer?
You joke but this is an actual factor that hardware companies have to proactively manage. Apple, for example, grants free replacements to people who bought laptops in the last few months before an upgrade is announced. Precisely because, otherwise, people will sit on their hands waiting for the new model.
But really, you can just look at bitcoin itself: it keeps appreciating on the upward swings, but people continue to not use it for everyday transactions - it's purely a speculation target. That's not what a currency should be for.
But really, you can just look at bitcoin itself: it keeps appreciating on the upward swings, but people continue to not use it for everyday transactions - it's purely a speculation target. That's not what a currency should be for.
Oh, I agree that it has an effect, I just really doubt that we'll plunge into Great Depression part Deux if we have deflation for a few years.
Most people like buying things more than they like saving money.
Most people like buying things more than they like saving money.
When you have a system that can only function if everything and everyone works in the same way at the same time, it will never actually function. The whole world is not going to move to Bitcoin, there will always be competing currencies - hence, there will always be speculation and uncontrollable fluctuations.
Currencies fluctuate against demand in the foreign exchange market, not against each other. Governments then step up to stabilize that demand. Bitcoin doesn't have that support so it fluctuates wildly, exactly like it's been doing since it's inception.
It's been 12 years.
12 years is nothing.
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I can't tell if you're agreeing by saying "its only been 12 years," or if you're disappointed by a 10 million % appreciation in 12 years
Bitcoin ain't sold. Gold had it's value being tradeable offline.
Price action would seem to agree with your typo
You could have said that 4 years ago too
Completely agreeable, albeit it misses a point:
Governments can't print more of it.
That's it really, everything else is noise.
I can sympathize with btc (I wish we still had a gold standard, or a standard based on the price of common goods) but I don't see much the other benefits.
On top of this, governments could ban btc.
That's it really, everything else is noise.
I can sympathize with btc (I wish we still had a gold standard, or a standard based on the price of common goods) but I don't see much the other benefits.
On top of this, governments could ban btc.
I mean, the 21 million cap is just a line of code no? No reason why if enough people agree to it they could just print more. Or they could fork and print more no? I find it strange that people speak of bitcoin's scarcity as if it were a physical thing.
It isn't as simple as that. Not only have you got to change that line of code, you need to convince all users of bitcoin to run that version of the code including miners. Otherwise you have forked the coin and you might be the only user of it (your version is incompatible with the rest).
You don’t need most to agree. Just the basic majority (50%+).
And of course that’s exactly what the major mining consortiums will do: Collude to increase the limit when it’s reached. After all, the rewards are in the mining, not the transaction fee.
And of course that’s exactly what the major mining consortiums will do: Collude to increase the limit when it’s reached. After all, the rewards are in the mining, not the transaction fee.
The miners aren't the only ones enforcing the limit, so is every other bitcoin node out there. Just because you have 51% of the mining capacity doesn't mean everyone else (merchants, users, exchanges)[1] will agree. If they decide to unilaterally change the block reward all that would do is cause them to mine worthless blocks.
[1] https://en.bitcoin.it/wiki/Economic_majority
[1] https://en.bitcoin.it/wiki/Economic_majority
No, miners are far more powerful than all the other stakeholders. While acceptance by merchants is a relevant factor, miners also have to facilitate any transaction. Any fork without miners is instantly unable to transact, making the coins useless and therefore worthless.
>Any fork without miners is instantly unable to transact, making the coins useless and therefore worthless.
The incentive structure discourages this. If half the hash power goes off to mine Bitcoin Infinite (the fork with uncapped Bitcoin generation), then mining the original Bitcoin would be twice as lucrative because there's half the competition. This gets better the more miners leave. If 95% of miners leave for Bitcoin Infinite, then mining Bitcoin becomes 20x more lucrative. There's the matter of the difficulty adjustment, but that has been historically dealt with using emergency difficulty adjustments.
Meanwhile, the miners who are mining the fork have real expenses (electricity, equipment), which need to be paid, and if there isn't sufficient demand for their Bitcoin Infinite coins, they'll quickly go bankrupt. Some napkin math:
* If the hash and economic power are both split 50-50, then there will be little impact in profitability, but also little impact on Bitcoin
* If 90% of the mining power goes to Bitcoin Infinite and only 25% of the economic power follows them, then the miners can expect to see a 72% drop in revenue. If their original profit margins were 20%, they can expect their profit margins to drop to -66%. If we use the price/generation rate of just prior to the last halving (May 2020), then that would represent a loss of $9.9M per day (not including opportunity costs/lost profits).
The incentive structure discourages this. If half the hash power goes off to mine Bitcoin Infinite (the fork with uncapped Bitcoin generation), then mining the original Bitcoin would be twice as lucrative because there's half the competition. This gets better the more miners leave. If 95% of miners leave for Bitcoin Infinite, then mining Bitcoin becomes 20x more lucrative. There's the matter of the difficulty adjustment, but that has been historically dealt with using emergency difficulty adjustments.
Meanwhile, the miners who are mining the fork have real expenses (electricity, equipment), which need to be paid, and if there isn't sufficient demand for their Bitcoin Infinite coins, they'll quickly go bankrupt. Some napkin math:
* If the hash and economic power are both split 50-50, then there will be little impact in profitability, but also little impact on Bitcoin
* If 90% of the mining power goes to Bitcoin Infinite and only 25% of the economic power follows them, then the miners can expect to see a 72% drop in revenue. If their original profit margins were 20%, they can expect their profit margins to drop to -66%. If we use the price/generation rate of just prior to the last halving (May 2020), then that would represent a loss of $9.9M per day (not including opportunity costs/lost profits).
The incentive structure falls apart once Bitcoin original runs out of blocks to mine. That’s the starting point for this discussion.
The only incentive to mine then is to earn the transaction fee. These fees ($8) are currently orders of magnitude smaller than the mining reward of 6.25 coins ($125,000 at $20,000/coin). Either fees have to dramatically compensate by rising stratospherically or miners will depart for greener pastures. Yes, difficulty level drops eventually, but by then a large number of users have also followed miners off the network, in which case the price will drop too. As the price collapses, there will be a selling frenzy, further reducing the price. In this scenario, Bitcoin may settle to something as low as $10 per token.
Once miners depart en masse, network resilience will drop precipitously. That makes it an attractive target for someone to stage a coordinated attack, which would destroy remaining residual trust in the network and bringing about the end of Bitcoin original.
The only incentive to mine then is to earn the transaction fee. These fees ($8) are currently orders of magnitude smaller than the mining reward of 6.25 coins ($125,000 at $20,000/coin). Either fees have to dramatically compensate by rising stratospherically or miners will depart for greener pastures. Yes, difficulty level drops eventually, but by then a large number of users have also followed miners off the network, in which case the price will drop too. As the price collapses, there will be a selling frenzy, further reducing the price. In this scenario, Bitcoin may settle to something as low as $10 per token.
Once miners depart en masse, network resilience will drop precipitously. That makes it an attractive target for someone to stage a coordinated attack, which would destroy remaining residual trust in the network and bringing about the end of Bitcoin original.
This is not true. Bitcoin can proceed with half its miners or with 3/4 its miners with no consequence aside a decrease in its resilience to attacks.
> You don’t need most to agree. Just the basic majority (50%+).
This is a common misconception about how consensus works. Everyone on the network has to agree, anyone who doesn't agree by definition won't be on the same network. They won't be able to receive the same fork of bitcoin that everyone else is sending.
This is a common misconception about how consensus works. Everyone on the network has to agree, anyone who doesn't agree by definition won't be on the same network. They won't be able to receive the same fork of bitcoin that everyone else is sending.
On the contrary: Consensus is defined precisely at 50%+, not 100% as you imply. In Bitcoin, the longest chain wins, therefore any chain with 50%+ support of the total mining power will inevitably end up with the longest chain.
Forks are occurring all the time at the apex of the chain. They wither and die slowly as 50%+ miners accept successive blocks as the next block. That’s why most exchanges and users wait for six blocks on average to deem the transaction settled.
Forks are occurring all the time at the apex of the chain. They wither and die slowly as 50%+ miners accept successive blocks as the next block. That’s why most exchanges and users wait for six blocks on average to deem the transaction settled.
> You don’t need most to agree. Just the basic majority (50%+). And of course that’s exactly what the major mining consortiums will do
You don't need anyone else to agree to start mining your own fork / altcoin. However, even if most of the miners change the protocol, it doesn't mean that the users will.
You don't need anyone else to agree to start mining your own fork / altcoin. However, even if most of the miners change the protocol, it doesn't mean that the users will.
Sure, but my coin isn’t worth $20,000. Or even $2.
The transaction fees are extremely relevant to miners, it is currently the icing on the cake, but will become more relevant over time.
Getting most people to agree to such a fork is likely impossible
It has happened before. Ethereum Classic is the "original" version of Ethereum, but it's a nondescript altcoin, while the one that reversed transactions is the number #2 in the world.
I don't see why that can't happen to Bitcoin if the network participants (ideally normal users but practically the miners) and major stakeholders can benefit from it.
I don't see why that can't happen to Bitcoin if the network participants (ideally normal users but practically the miners) and major stakeholders can benefit from it.
They won't benefit because that will tank the price like nothing else.
That's a good point and example, but I just don't imagine them thinking they would benefit from it is all. The future holds many mysteries, so it's at least possible, but I definitely would not bet on it, knowing what I do now.
Agreed. There have been 21 million forks of Bitcoin with all manner of modifications. You don't hear about them because practically no one agrees with them enough to mine/trade/use them. You could make your own fork in an afternoon. The hard part is convincing anyone else to care.
Why would they agree to that? Deflation is what guarantees the investment for most users.
Sure it's a line of code but if you fork and change that line of code you need to find consensus on the network to accept your fork as the "true" Bitcoin. See Bitcoin cash for an example.
Isn’t this what Bitcoin Cash is? I’m really asking, but I thought so.
Bitcoin Cash is about trying to make transactions faster and cheaper by increasing the block size (and rate?). Upside: Might be able to use it directly to buy coffee with a reasonable UX. Downside: would likely lead to a small number of huge machines managing the world's blockchain. The Bitcoin Core group really wants people in poor nations to be able to run their own Bitcoin nodes on their cell phones eventually. They value decentralization above UX.
No, they want Bitcoin to be a "store of value", whatever that means. Poor people being able to run a full node on a low-end phone is pointless when a transaction fee due to the artificial block size limit is more than a months wages.
>Poor people being able to run a full node on a low-end phone is pointless when a transaction fee due to the artificial block size limit is more than a months wages.
or just wait for a lull in the transaction volume and pay pennies per tx? eg https://blockstream.info/tx/3b9ce26a827b014e5f6cda461f5fa112... from last block only paid 14 cents.
or just wait for a lull in the transaction volume and pay pennies per tx? eg https://blockstream.info/tx/3b9ce26a827b014e5f6cda461f5fa112... from last block only paid 14 cents.
I'm not sure why every user needs to run a full node. Satoshi himself said that SPV clients would be enough for most users:
"Simplified Payment Verification is for lightweight client-only users who only do transactions and don't generate and don't participate in the node network. They wouldn't need to download blocks, just the hash chain, which is currently about 2MB and very quick to verify (less than a second to verify the whole chain)."[0]
It's not clear what benefit the user or the currency gains from having 90% of users running full nodes instead of, say, 50% or 10% doing so. In any case, when people in poor nations have phones that can manage uninterrupted 24/7 connections to the bitcoin network, they'll probably also be able to afford 2 TB of storage (currently costing about $50) which would be enough to store 10 years of 4 MB blocks.
[0] https://blockchain.news/wiki/satoshi-quote-on-trust
"Simplified Payment Verification is for lightweight client-only users who only do transactions and don't generate and don't participate in the node network. They wouldn't need to download blocks, just the hash chain, which is currently about 2MB and very quick to verify (less than a second to verify the whole chain)."[0]
It's not clear what benefit the user or the currency gains from having 90% of users running full nodes instead of, say, 50% or 10% doing so. In any case, when people in poor nations have phones that can manage uninterrupted 24/7 connections to the bitcoin network, they'll probably also be able to afford 2 TB of storage (currently costing about $50) which would be enough to store 10 years of 4 MB blocks.
[0] https://blockchain.news/wiki/satoshi-quote-on-trust
Perhaps the most powerful thing about Bitcoin is that the guy who created it is unknown (if Satoshi was a guy or a lone person at all) and that it mostly runs on autopilot and at this point is not governed by a single body. It can't be sued. The creator of it can't be sued. And yes, more of it can't be made and there is deflation built into it. Genius.
I think you mean deflation, the exact opposite of inflation, is built into Bitcoin.
I mean... "can't" is a pretty strong word. Sure, they probably can't break SHA256 or elliptic cryptography, but you really think a government couldn't sanction every single [random crypto coin] developer, seize every obtainable asset, and generally strong-arm them into changing the rules? I think people are not being imaginative enough with the tools state entities have at their disposal to coerce whatever result they want.
It is next to impossible to seize bitcoin if you make it so. The government could try coerce custodial companies, but it will only be effective on the first time; next time, people will move their bitcoins to safer places where government intromission will be immensely costly.
I have been reading about people pining for gold standard but doesn't anyone anymore remember the Great Depression where the gold standard actually made the matters a lot worse when the governments couldn't print more money? I get the ideological pathos but gold standard doesn't seem very realistic to me anymore. Whenever a negative feedback loop happens in economy you want to have very robust means to stop it if necessary.
> Governments can't print more of it.
I never really understood that line of reasoning. Why would one person want to reduce the ability to apply economic policy in their country?
Certainly, you could use Gold instead of Bitcoin as a similar investment tool, right?
I never really understood that line of reasoning. Why would one person want to reduce the ability to apply economic policy in their country?
Certainly, you could use Gold instead of Bitcoin as a similar investment tool, right?
"Why would one person want to reduce the ability to apply economic policy in their country?"
What do you think happens to your currency when they print more of it?
One problem with gold though is that we know where plenty of gold is, its just too expensive to mine. Once the price of gold rises, more gold becomes profitable to mine, supply increases, and the price goes back down.
What do you think happens to your currency when they print more of it?
One problem with gold though is that we know where plenty of gold is, its just too expensive to mine. Once the price of gold rises, more gold becomes profitable to mine, supply increases, and the price goes back down.
"They" print more every day. In the US, I think the economic stimulus has been a success this year. Trump should have spent his campaign talking about all the efforts to boost unemployment insurance benefits. He might have fared a bit better in the election.
The economic stimulus has certainly been a success for asset prices, in dollars...
Not just asset prices.
https://www.slowboring.com/p/the-cares-superdole-was-a-huge-...
https://www.slowboring.com/p/the-cares-superdole-was-a-huge-...
> Why would one person want to reduce the ability to apply economic policy in their country?
It might not be good for the people as a whole, but preventing your money from being inflated is very good for any given person taken individually.
It might not be good for the people as a whole, but preventing your money from being inflated is very good for any given person taken individually.
> Completely agreeable, albeit it misses a point: Governments can't print more of it.
That only matters if Bitcoin has a monopoly for a given use case. Bitcoins chief advantage is its hash power, and therefore, its security. So far, the only use case I can think of that relies strongly on that is digital gold use case.
For everything else, having a constrained money supply has side effects that are often pretty undesirable. Folks can simply mint new coins for those use cases.
That only matters if Bitcoin has a monopoly for a given use case. Bitcoins chief advantage is its hash power, and therefore, its security. So far, the only use case I can think of that relies strongly on that is digital gold use case.
For everything else, having a constrained money supply has side effects that are often pretty undesirable. Folks can simply mint new coins for those use cases.
The government finance system is run by finance executives who are investing in Bitcoin not so they can shut it down but to speculate and diversify.
But governments can subsidize the electricity to create new Bitcoins. Isn't that the same as printing money?
>Isn't that the same as printing money
Yes, if electricity was FREE, at which point printing money is the best next logical step as you've achieved free energy with utopia just around the corner.
Yes, if electricity was FREE, at which point printing money is the best next logical step as you've achieved free energy with utopia just around the corner.
That would have an impact but you would still be constrained by the growing difficulty of the algorithm.
No. Blocks will always be mined with a 10 minutes interval between each other. It doesn't matter how much energy is being invested.
Government forks bitcoin, adds the ability for a trusted address to add more coins. Kills anyone who doesn't switch.
Welcome to China, you just lost the majority of your mining pool.
Welcome to China, you just lost the majority of your mining pool.
All governments would have to follow suit in lock step for that to work, at which point you have far bigger problems, i.e why not just nuke the internet all together, far easier.
that's just a normal bank with more steps. why even use bitcoin infrastructure when credit cards and digital banking is much easier/faster in this case?
That’s nonsense. Bitcoin is as good a store of value as gold due to one unique feature: scarcity. Actually, it’s even less power consuming than the gold industry and is much more transparent. I wouldn’t really advise bitcoin for anything else, like day to day transactions, although I and many of my friends have used bitcoin to transact on dark markets and it works.
The only argument I’ve heard about gold being better than bitcoin is that you can do something with gold. That’s horse in my opinion. Gold is good for nothing useful imo, but is used in jewlery and other because it has value (not the other way around, as in gold has value because people make jewelry with it).
The only argument I’ve heard about gold being better than bitcoin is that you can do something with gold. That’s horse in my opinion. Gold is good for nothing useful imo, but is used in jewlery and other because it has value (not the other way around, as in gold has value because people make jewelry with it).
> Gold is good for nothing useful imo, but is used in jewlery and other because it has value (not the other way around, as in gold has value because people make jewelry with it).
You do know that gold has super low reactivity and it's a very good conductor, right? :-)
You do know that gold has super low reactivity and it's a very good conductor, right? :-)
The vast majority of mined gold in existence is not used for industrial purposes.
But industrial use is big (see the link from the other poster, 37% in the US), and growing. Gold is a very useful material and not only for its shininess.
This is an underappreciated possibility of bitcoin.
All that insane amount of gold that's collecting dust in vaults being used as a store of value? Suddenly free to be used productively if bitcoin replaces it. Same with real estate that owners let sit unsed because they're primarily using it as a store of value rather than a productive asset.
All that insane amount of gold that's collecting dust in vaults being used as a store of value? Suddenly free to be used productively if bitcoin replaces it. Same with real estate that owners let sit unsed because they're primarily using it as a store of value rather than a productive asset.
How often is it used for that use case? Does gold have a high value due to this? No. I would even say that we might see more use industrially if people weren’t inflating its price by using it as a store of value.
37% of gold use in the US is for electronics.
https://geology.com/minerals/gold/uses-of-gold.shtml
https://geology.com/minerals/gold/uses-of-gold.shtml
Unless I'm mistaken, this is showing gold used for anything but storage of value. So that number is misleading.
Stats that include gold used as a store of value show much different numbers. But as I said earlier, the price of gold was never inflated by industrial use, it’s the other way around. The good thing about bitcoin: you’re investing in something that won’t negatively impact real world use cases.
> How often is it used for that use case?
100% of all cases. You just used gold to ask that question.
100% of all cases. You just used gold to ask that question.
Most gold is not used for industrial purposes
Well, low reactivity is why it stays shiny, right? People like the shiny squishy heavy rocks
Scarcity only matters if there's demand.
I could take an A4 sheet and draw a triangle on it. It's scarce (there's only one A4 sheet with that precise badly-drawn triangle), but since nobody wants it, it's worth as much as the paper it was drawn on.
The same happens with both Bitcoin and gold. Since they are scarce, as long as there's enough demand their price will increase. However, there's a difference: gold has industrial uses for which there are no replacements with the same characteristics, and this provides a baseline level of demand. For Bitcoin, that is not the case; for any use case, there is (or can be created) another cryptocurrency which can be used instead of Bitcoin. This means there's no floor for the Bitcoin demand; for instance, if everyone decides that Ethereum's proof-of-stake is the best thing since sliced bread, the demand for Bitcoin can almost completely evaporate, and its price will go to zero. (There's a small intrinsic demand for Bitcoin as a collectible, since it was the first proof-of-work cryptocurrency, but that by itself is not enough to sustain its price.)
I could take an A4 sheet and draw a triangle on it. It's scarce (there's only one A4 sheet with that precise badly-drawn triangle), but since nobody wants it, it's worth as much as the paper it was drawn on.
The same happens with both Bitcoin and gold. Since they are scarce, as long as there's enough demand their price will increase. However, there's a difference: gold has industrial uses for which there are no replacements with the same characteristics, and this provides a baseline level of demand. For Bitcoin, that is not the case; for any use case, there is (or can be created) another cryptocurrency which can be used instead of Bitcoin. This means there's no floor for the Bitcoin demand; for instance, if everyone decides that Ethereum's proof-of-stake is the best thing since sliced bread, the demand for Bitcoin can almost completely evaporate, and its price will go to zero. (There's a small intrinsic demand for Bitcoin as a collectible, since it was the first proof-of-work cryptocurrency, but that by itself is not enough to sustain its price.)
Was there an industrial demand when gold rush was a thing? Do we see significant proof that industrial use has a significant impact in gold being used as a store of value (besides theories)? Is that industrial use strongly linked to gold’s high price? Then how do you explain bitcoin replacing gold successfully?
With only the industrial value of gold propping it up, its value would likely drop to 1/50th of the current price. So who cares about having a floor if it’s that low?
If Bitcoin all of a sudden had a floor that was also 1/50th of its current value, no one would care.
If Bitcoin all of a sudden had a floor that was also 1/50th of its current value, no one would care.
Gold is very much used in almost any electronic appliance because it's a noble metal with low electric resistance.
Jade however is actually without any industrial application and is purely valued for it's scarcity.
Jade however is actually without any industrial application and is purely valued for it's scarcity.
Nope, sorry.
Bitcoin doesn't store anything, you can only get real wealth back for it if someone decides to trade. Then they are in the position of holding a worthless token that they have to dump on somebody else, ideally higher - and people only buy if they expect that to happen. Theoretically pumps and dumps could continue indefinitely, but in reality people are going to get bored of it and move to newer and more shiny ponzis.
Real wealth has value regardless of what other people think about it and has it by itself. A profitable company is a form of wealth even if nobody wants to buy it - because it generates profits. Same for farmland. Things with direct utility have value in that utility. Utility is ultimately defined by physical needs, which makes it an objective metric of value that can only be estimated better or worse by humans. Value isn't subjective - people and societies that are too wrong about valuations for too long wither and die (possibly conquered). The West as a whole is definitely on that path.
Gold was a store of value when governments forced people to pay taxes in it - selling what they had for gold - for thousands of years. It's not a store of value as that ended. Some people just didn't get the memo yet, but new generations are visibly unenthusiastic about gold, so it's only cultural inertia. It has some utility in itself, so it's better than bitcoin, but its price based on that demand alone would be much lower.
Real wealth has value regardless of what other people think about it and has it by itself. A profitable company is a form of wealth even if nobody wants to buy it - because it generates profits. Same for farmland. Things with direct utility have value in that utility. Utility is ultimately defined by physical needs, which makes it an objective metric of value that can only be estimated better or worse by humans. Value isn't subjective - people and societies that are too wrong about valuations for too long wither and die (possibly conquered). The West as a whole is definitely on that path.
Gold was a store of value when governments forced people to pay taxes in it - selling what they had for gold - for thousands of years. It's not a store of value as that ended. Some people just didn't get the memo yet, but new generations are visibly unenthusiastic about gold, so it's only cultural inertia. It has some utility in itself, so it's better than bitcoin, but its price based on that demand alone would be much lower.
Bitcoin is scarce like beanie babies are scarce, except you can make more bitcoins.
Their scarcity is not "like". The owner of beanie babies has/had full power to produce any amount of beanies, inflating their supply. The owner could start up the factory again and flood the earth with beanies.
Bitcoin scarcity is protected by mathematics and the nature of the universe. And the public ledger.
I guess anyone can dream up a new mathematical system and ledger and unlimited dreams can be dreamt making more supply of electronic currency. But the specific instance of a dream "bitcoin" and it's public ledger cannot be inflated.
Bitcoin scarcity is protected by mathematics and the nature of the universe. And the public ledger.
I guess anyone can dream up a new mathematical system and ledger and unlimited dreams can be dreamt making more supply of electronic currency. But the specific instance of a dream "bitcoin" and it's public ledger cannot be inflated.
No you cannot
I see a lot of biased posts on Hacker news regarding Bitcoin. How it will replace fiat, how it will revolutionize banking, how it will continue to go up in price.
The fact is that the technology powering Bitcoin is not great. There are better alternatives to Bitcoin, transactions still take a long time to finish on Bitcoin. And the alternatives themselves need to be refined too.
There are also still a lot of scam coins in play, I personally know a few founders (no relation and no business doing work with them), where they admitted to me their coin was a scam in them getting rich.
So I’m skeptical, very very skeptical. These “friends” got rich off poor chaps looking to make a quick buck. I am almost envious, then I remember that the feds or IRS or some other institution will come after then at some point.
One of them is paying off their current user base because they got hacked.
The fact is that the technology powering Bitcoin is not great. There are better alternatives to Bitcoin, transactions still take a long time to finish on Bitcoin. And the alternatives themselves need to be refined too.
There are also still a lot of scam coins in play, I personally know a few founders (no relation and no business doing work with them), where they admitted to me their coin was a scam in them getting rich.
So I’m skeptical, very very skeptical. These “friends” got rich off poor chaps looking to make a quick buck. I am almost envious, then I remember that the feds or IRS or some other institution will come after then at some point.
One of them is paying off their current user base because they got hacked.
You're missing the entire importance of balance. Unfortunately, I'm not sure you understand what makes Bitcoin valuable.
It's a balance between: Decentralization, Security, and Speed of Transaction but still doesn't compromised on the other two. Bitcoin is balanced with immaculate conception. There's no 'altcoin' that will be able to achieve this.
It's a balance between: Decentralization, Security, and Speed of Transaction but still doesn't compromised on the other two. Bitcoin is balanced with immaculate conception. There's no 'altcoin' that will be able to achieve this.
There has been some work being done by the EU to make a digital euro [0]. China [1] and the US [2] are also exploring digital alternatives. I believe if these alternatives are well implemented they are going to change banking forever. Banks could become a frontend to that digital infrastructure that would only add features to the network (safety, insurance, help keep your transactions anonymous...). Naturally, everything that I am saying is 100% speculation, but I don't see a world where the current digital currencies (Bitcoin et al.) get backed by the governments.
[0]: https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr2010...
[1]: https://www.wsj.com/articles/china-to-expand-testing-of-a-di...
[2]: https://www.forbes.com/sites/billybambrough/2020/08/22/digit...
[0]: https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr2010...
[1]: https://www.wsj.com/articles/china-to-expand-testing-of-a-di...
[2]: https://www.forbes.com/sites/billybambrough/2020/08/22/digit...
Consumers want safety(fraud/transaction protection) not anonymity.
Currently the largest and most motivated group of users that want transaction anonymity are those that want to deliberately circumvent tracking for gain.
Credit cards solved the digital currency problem decades ago.
The anonymity feature argument was always going to fall on deaf ears with consumers.
Currently the largest and most motivated group of users that want transaction anonymity are those that want to deliberately circumvent tracking for gain.
Credit cards solved the digital currency problem decades ago.
The anonymity feature argument was always going to fall on deaf ears with consumers.
I was following along until this bit which seems to hold up the entire argument:
> [BTC mining] is often done using electricity which is effectively stolen from taxpayers with the help of government officials
Can somebody elaborate on the stolen/corruption angle?
> [BTC mining] is often done using electricity which is effectively stolen from taxpayers with the help of government officials
Can somebody elaborate on the stolen/corruption angle?
I think he's exaggerating here, but there are definitely examples where people especially in China have setup huge operations with the help of local officials who give them sweetheart deals on the electricity prices -- seems likely that the officials helping this happen may get some sort of benefit from this arrangement, but not sure if that has actually been reported or just assumed. In Washington state there were a number of bitcoin operations that started in areas with low cost power that promised to bring jobs to the area and my understanding was that the local power company often did upgrades to lines and substations to accommodate the added power needs -- the local taxpayers definitely would either pay for that capital cost or pay the additional maintenance costs down the road.
I mean: https://www.google.com/search?q=bitcoin+mining+using+stolen+...
The first four links for me are:
* 13 arrested for stealing $3million of electricity to mine BTC (China)
* Illegal Crypto Miner Caught After Stealing More Than $400k [in electricity] (Russia)
* Bulgarian Electricity Company Unveils Details of Historic Power Theft [it's Bitcoin miners]
* Bitcoin mining operators steal $1.5 million in electricity (Australia)
These are just the ones who've been caught so far.
The first four links for me are:
* 13 arrested for stealing $3million of electricity to mine BTC (China)
* Illegal Crypto Miner Caught After Stealing More Than $400k [in electricity] (Russia)
* Bulgarian Electricity Company Unveils Details of Historic Power Theft [it's Bitcoin miners]
* Bitcoin mining operators steal $1.5 million in electricity (Australia)
These are just the ones who've been caught so far.
Those articles point out that the governments stopped it rather than enabling it for considerable periods of time. You probably have to pay off a police officer when you're climbing the tower, but I don't see any cases where corruption at wide scale was involved.
The articles point out the value of the electricity stolen but not the gained profit. E.g., what percentage of BTC was mined with stolen electricity based on the cases we've found so far?
If only a vanishingly small amount of BTC was mined with stolen electricity then the rest of the argument kind of falls apart.
The articles point out the value of the electricity stolen but not the gained profit. E.g., what percentage of BTC was mined with stolen electricity based on the cases we've found so far?
If only a vanishingly small amount of BTC was mined with stolen electricity then the rest of the argument kind of falls apart.
> ... rather than enabling it for considerable periods of time.
The $3 million example from China was operational for over 2 years.
> The articles point out the value of the electricity stolen but not the gained profit.
Sure. Random internet source says average Chinese industrial electricity is $0.084/kWh. So that's approx. 36 million kWh total, or average 1.4 million kWh/month (1.4 GWh/mo) during their operation.
> E.g., what percentage of BTC was mined with stolen electricity based on the cases we've found so far?
https://digiconomist.net/bitcoin-energy-consumption/ for Mar 2017 through May 2019 estimates global BTC energy consumption at 10 TWh/yr (830 GWh/mo) minimum to 73 TWh/yr (6,100 GWh/mo) maximum. Absolute lower bounds are 3.4 TWh/yr-60TWh/yr (280-5000 GWh/mo).
So, making some hand-wavy assumptions that they did not scale their operation over time, or reduce mining if prices fell, and that their ASICs were approximately as good as everyone else's, they were anywhere from 0.2%-0.5% (early 2017) to 0.02-0.03% (2018 peak) of global BTC energy consumption.
Per https://www.blockchain.com/charts/total-bitcoins the number of BTC in circulation rose from 16.193M to 17.728M (= ~1.535M) coins during that time. Just as rough bounds, 0.02% would be 307 coins and 0.5% would be 7675 coins.
https://www.coindesk.com/price/bitcoin price in Mar 2017 was ~$1200 USD, peaking in 2018 at $19,000, and $8,700 in May 2019. I don't have a weighted average for that period, but I'd approximate the average price over the period as roughly $5k. So: our extreme low estimate of 307 coins, sold immediately on mining, yields revenue of $1.5 million (on $3mil stolen electricity). On the high end, $38 million in revenue. Probably they made something in between.
> If only a vanishingly small amount of BTC was mined with stolen electricity
That is just the one operation, which got caught. It doesn't include any other illegal operations which got caught, and it does not include illegal operations which have not been caught. 0.5% is small, but significant. 0.02% is maybe less so.
This estimate of percent-BTC-produced-with-unpaid-electricity doesn't include legal operations that went bankrupt and will not be able to pay what they owe to the local utility. (There was a lot of this after the 2018 boom-crash.)
> then the rest of the argument kind of falls apart.
I don't really agree. The incentives here are all terrible and will encourage more of this going forward, especially with BTC prices astronomical again.
(1) Burn as much electricity as possible. This is just bad for society and the world.
(2) Acquire electricity as cheaply as possible. In the absence of theft, this encourages consuming electricity in locales that do not price carbon production externalities into electricity costs. Obviously, theft makes electricity even less expensive.
(3) Maaaybe you can take your stolen profits and run, because BTC is pseudonymous and freshly mined coins aren't connected to real world identities. This encourages illegal operations.
Thanks for reading :-).
The $3 million example from China was operational for over 2 years.
> The articles point out the value of the electricity stolen but not the gained profit.
Sure. Random internet source says average Chinese industrial electricity is $0.084/kWh. So that's approx. 36 million kWh total, or average 1.4 million kWh/month (1.4 GWh/mo) during their operation.
> E.g., what percentage of BTC was mined with stolen electricity based on the cases we've found so far?
https://digiconomist.net/bitcoin-energy-consumption/ for Mar 2017 through May 2019 estimates global BTC energy consumption at 10 TWh/yr (830 GWh/mo) minimum to 73 TWh/yr (6,100 GWh/mo) maximum. Absolute lower bounds are 3.4 TWh/yr-60TWh/yr (280-5000 GWh/mo).
So, making some hand-wavy assumptions that they did not scale their operation over time, or reduce mining if prices fell, and that their ASICs were approximately as good as everyone else's, they were anywhere from 0.2%-0.5% (early 2017) to 0.02-0.03% (2018 peak) of global BTC energy consumption.
Per https://www.blockchain.com/charts/total-bitcoins the number of BTC in circulation rose from 16.193M to 17.728M (= ~1.535M) coins during that time. Just as rough bounds, 0.02% would be 307 coins and 0.5% would be 7675 coins.
https://www.coindesk.com/price/bitcoin price in Mar 2017 was ~$1200 USD, peaking in 2018 at $19,000, and $8,700 in May 2019. I don't have a weighted average for that period, but I'd approximate the average price over the period as roughly $5k. So: our extreme low estimate of 307 coins, sold immediately on mining, yields revenue of $1.5 million (on $3mil stolen electricity). On the high end, $38 million in revenue. Probably they made something in between.
> If only a vanishingly small amount of BTC was mined with stolen electricity
That is just the one operation, which got caught. It doesn't include any other illegal operations which got caught, and it does not include illegal operations which have not been caught. 0.5% is small, but significant. 0.02% is maybe less so.
This estimate of percent-BTC-produced-with-unpaid-electricity doesn't include legal operations that went bankrupt and will not be able to pay what they owe to the local utility. (There was a lot of this after the 2018 boom-crash.)
> then the rest of the argument kind of falls apart.
I don't really agree. The incentives here are all terrible and will encourage more of this going forward, especially with BTC prices astronomical again.
(1) Burn as much electricity as possible. This is just bad for society and the world.
(2) Acquire electricity as cheaply as possible. In the absence of theft, this encourages consuming electricity in locales that do not price carbon production externalities into electricity costs. Obviously, theft makes electricity even less expensive.
(3) Maaaybe you can take your stolen profits and run, because BTC is pseudonymous and freshly mined coins aren't connected to real world identities. This encourages illegal operations.
Thanks for reading :-).
proof of work is an energy black hole. it goes to where energy is cheapest. this means that it has a tendency to go to places where subsidies exist and destroy said subsidy. if there is a place where electricity is being propped up by taxes or other such things for the benefit of the community, there is no reason for them to not just plug in a bunch of miners there and suck that subsidy dry.
Not 100% sure but there was some news a few years back about miners setting up shop in towns which had really low energy costs because they bought a fixed block of power from a nearby source and thus it was super cheap... as long as they didn't have to go over that initial purchase, after that it became more expensive than normal for everyone.
This was done in the state of Washington (Wenatchee area) due to cheap electricity from dams.
> Can somebody elaborate on the stolen/corruption angle?
It's easy to find articles about stolen electricity [1][2], but since these are both about people who were arrested it seems the governments weren't helping them.
[1] https://phys.org/news/2019-07-china-police-bitcoin-miners-mn...
[2] https://news.bitcoin.com/bulgarian-electricity-company-unvei...
It's easy to find articles about stolen electricity [1][2], but since these are both about people who were arrested it seems the governments weren't helping them.
[1] https://phys.org/news/2019-07-china-police-bitcoin-miners-mn...
[2] https://news.bitcoin.com/bulgarian-electricity-company-unvei...
I think he's referring to miners stealing electricity in China
[deleted]
Well this isn’t new is it? I recall chat from 2015 where people were pointing out that mining is just bad. Even when Ethereum started growing, one of the big arguments quickly became that proof of stake would be a superior approach.
I agree. I think the use cases have never materialized. I do believe there’s potential in peer to peer, or at least federated approaches. Email works. Matrix works. Irc works.
But I don’t think that a globally replicated ledger is the way to go. Especially with the ambition to use it as the basis for a currency that’s expected to be used for every day purchases.
I agree. I think the use cases have never materialized. I do believe there’s potential in peer to peer, or at least federated approaches. Email works. Matrix works. Irc works.
But I don’t think that a globally replicated ledger is the way to go. Especially with the ambition to use it as the basis for a currency that’s expected to be used for every day purchases.
What is needed is an AI digital currency where training deep networks for representation learning has a side effect that mints coins without costing a lot of extra resources. Then mining coins is useful and we get more better AI to enslave humanity.
I'm confused by how much I agree with you
I think its a no brainer and possible doom scenario. Is it possible? There are common operations like... the L1L2 norm that are used across machine learning. Is there a way to craft an operation like a regularizer that is both useful and profitable? Or could up you use a block as an initialization parameter and somehow make use of it? A prediction task itself might work - solve this provably hard problem and you own the cash. I don’t know but it seems like what is needed.
What's kind of amazing is that all of this has been obvious for years, and yet we're still talking about the same flaws and promises of bitcoin.
For those who don't know, Ray Dillinger is one of the first people to review the Bitcoin source. He collaborated with Satoshi prior to the first release:
> In November of 2008, I did a code review and security audit for the block chain portion of the Bitcoin source code. The late Hal Finney did code review and audit for the scripting language, and we both looked at the accounting code. Satoshi Nakamoto, the pseudonymous architect and author of the code, alternated between answering questions and asking them.
https://www.linkedin.com/pulse/id-known-what-we-were-startin...
To pick the first point of his critique:
> The pseudonymity of coins being owned by the bearer of some cryptographic key is a failure; People have been eavesdropping and aggressively analyzing the block chain from day 1. And the block chain will always be there, it will always be public, and it will always be subject to further analysis. And we are learning that analysis of that record is sufficient to destroy any pretense of anonymity or pseudonymity.
The public nature of the Bitcoin block chain, and its privacy implications, were discussed in the white paper and have been known since the beginning. So it's odd to be labeling Bitcoin a failure now, given that nothing new has developed within Bitcoin itself on that front.
What has happened since 2009 is that exchanges have fallen under the influence of the US government and its perpetual wars on terror and drugs. The on/off ramps are where most of the privacy loss is happening. Bitcoin users do the rest to themselves by lax opsec, including address reuse and address publication.
The rest of the points are not that clearly laid out. To take the very next one:
> The scarcity of block chain space has led people to re-invent every last feature of the banks they thought they were going to be escaping. Including debt brokering (lightning network) ...
The lightning network isn't debt brokering because no debt is involved. It's a consensus-enforced contract over bearer instruments.
The critique on mining centralization has been around for many years now, and Dillenger's analysis doesn't bring anything new to the table.
> In November of 2008, I did a code review and security audit for the block chain portion of the Bitcoin source code. The late Hal Finney did code review and audit for the scripting language, and we both looked at the accounting code. Satoshi Nakamoto, the pseudonymous architect and author of the code, alternated between answering questions and asking them.
https://www.linkedin.com/pulse/id-known-what-we-were-startin...
To pick the first point of his critique:
> The pseudonymity of coins being owned by the bearer of some cryptographic key is a failure; People have been eavesdropping and aggressively analyzing the block chain from day 1. And the block chain will always be there, it will always be public, and it will always be subject to further analysis. And we are learning that analysis of that record is sufficient to destroy any pretense of anonymity or pseudonymity.
The public nature of the Bitcoin block chain, and its privacy implications, were discussed in the white paper and have been known since the beginning. So it's odd to be labeling Bitcoin a failure now, given that nothing new has developed within Bitcoin itself on that front.
What has happened since 2009 is that exchanges have fallen under the influence of the US government and its perpetual wars on terror and drugs. The on/off ramps are where most of the privacy loss is happening. Bitcoin users do the rest to themselves by lax opsec, including address reuse and address publication.
The rest of the points are not that clearly laid out. To take the very next one:
> The scarcity of block chain space has led people to re-invent every last feature of the banks they thought they were going to be escaping. Including debt brokering (lightning network) ...
The lightning network isn't debt brokering because no debt is involved. It's a consensus-enforced contract over bearer instruments.
The critique on mining centralization has been around for many years now, and Dillenger's analysis doesn't bring anything new to the table.
I commented something similar to this below - the true value of Bitcoin is that it was put on autopilot and took off - in the meantime, there is no record of who the creator of it is - except a persona called Satoshi Nakamoto. It has been adopted widely enough that it cannot be shut down. It is decentralized, extra-governmental, and you can't sue or indict the founder or a centralized organization. Yes, bitcoin is code. Yes it is being used for the same purposes as fiat and banking. Yes it could certainly still use lots of adaptation. The simple matter that most people don't understand (yet) however is that Bitcoin is Anarchy.
Is it really "Anarchy" if it's essentially controlled by small a clique of miners with specialized hardware that most people don't have / can't realistically have access to?
To the system as it exists? Absolutely.
How? What I've described is closer to an oligarchy than it is to anarchy.
So either you disagree with my initial description, or you disagree that that description matches something other than anarchy. Either way, I think you'll find either one of those a difficult argument to make.
So either you disagree with my initial description, or you disagree that that description matches something other than anarchy. Either way, I think you'll find either one of those a difficult argument to make.
Only if you presuppose that the 'small clique of miners with specialized hardware' represents the same interests as the system that bitcoin is slowly starting to displace.
Perhaps I should have specified anarchy to the system as it currently exists. It's a time bomb built and released to destroy the economic status quo.
Perhaps I should have specified anarchy to the system as it currently exists. It's a time bomb built and released to destroy the economic status quo.
The misunderstanding about anarchy is that no one really knows what will come out of it.
Bitcoin has demonstrated the existence of a deep, pent-up need for a financial instrument that:
- can preserves value over the long term (implemented in this case via demonstrably finite supply)
- isn't easily manipulated by governments trying to finance their mismanagement of public money
Fiat currency is one the most beneficial economic developments ever. Goldbuggery is idiotic.
>Fiat currency is one the most beneficial economic developments ever.
Currency certainly is.
Fiat most certainly not [1]
[1] https://ginifoundation.org/kb/fiat-currency-graveyard-a-hist...
>Goldbuggery is idiotic.
Whenever something is being thought of as useful by a sizable portion of the population over large swaths of time, calling it idiotic is pretty much guaranteed to be a boomerang.
Currency certainly is.
Fiat most certainly not [1]
[1] https://ginifoundation.org/kb/fiat-currency-graveyard-a-hist...
>Goldbuggery is idiotic.
Whenever something is being thought of as useful by a sizable portion of the population over large swaths of time, calling it idiotic is pretty much guaranteed to be a boomerang.
https://www.youtube.com/watch?v=iKYKLgzyF9o this is what you uneducated goldbugs sound like
First you're assuming I'm a gold bug : I'm not.
Second, the person who looks like an absolute ass in this video is not who you think.
Third, there are a lot more house sessions where Ron Paul is giving various heads of the fed, including Bernanke, a healthy dose of reality check. They're all really worth watching, thaanks for pointing them out.
Finally: the only point I was trying to make is that fiat currency have been systematically used throughout history by governments to milk their citizenry without them noticing.
The USD and the feds are following a pattern that has existed since the Romans[1]: debasing currency to hide their incompetence at managing budgets.
The actual implementation vary through history, becoming increasingly sophisticated with time: the Romans slowly decreased the amount of silver in their coins hoping no one would notice.
The USG uses quantitative easing, which is much less noticeable by John Does in the street.
[1] http://numismatics.org/rome-a-thousand-years-of-monetary-his...
Second, the person who looks like an absolute ass in this video is not who you think.
Third, there are a lot more house sessions where Ron Paul is giving various heads of the fed, including Bernanke, a healthy dose of reality check. They're all really worth watching, thaanks for pointing them out.
Finally: the only point I was trying to make is that fiat currency have been systematically used throughout history by governments to milk their citizenry without them noticing.
The USD and the feds are following a pattern that has existed since the Romans[1]: debasing currency to hide their incompetence at managing budgets.
The actual implementation vary through history, becoming increasingly sophisticated with time: the Romans slowly decreased the amount of silver in their coins hoping no one would notice.
The USG uses quantitative easing, which is much less noticeable by John Does in the street.
[1] http://numismatics.org/rome-a-thousand-years-of-monetary-his...
Bitcoin's value prop isn't in its anonymity.
Early adopters weren't enthusiastic about bitcoin because they hoped it would end fractional reserve banking or any other financial product. Rather, it was incredible to see the entire financial industry quickly rebuilt on top of sound money.
I agree that small transactions and mining can be (and are being) improved, but not for the same reasons. It's silly to blame bitcoin for government corruption and people taking advantage of government subsidies. Bitcoin is simply doing what was always done more efficiently.
I would expect that an individual like Bear would be more in tune with what bitcoin was trying to accomplish.
Early adopters weren't enthusiastic about bitcoin because they hoped it would end fractional reserve banking or any other financial product. Rather, it was incredible to see the entire financial industry quickly rebuilt on top of sound money.
I agree that small transactions and mining can be (and are being) improved, but not for the same reasons. It's silly to blame bitcoin for government corruption and people taking advantage of government subsidies. Bitcoin is simply doing what was always done more efficiently.
I would expect that an individual like Bear would be more in tune with what bitcoin was trying to accomplish.
> Early adopters weren't enthusiastic about bitcoin because they hoped it would end fractional reserve banking
Just to amplify your point: There is a weird idea that that monetary multiplication (like fractional-reserve banking) is not possible with bitcoin. However, anytime someone lends bitcoin or shorts it on an exchange, they increase the bitcoin in circulation past the base count of 21 million btc (or however many have been minted at the time).
The idea that bitcoin would somehow escape fractional-reserve banking was only held by people who do not understand the difference between M0 and M1/M2 in elementary macroeconomics.
Just to amplify your point: There is a weird idea that that monetary multiplication (like fractional-reserve banking) is not possible with bitcoin. However, anytime someone lends bitcoin or shorts it on an exchange, they increase the bitcoin in circulation past the base count of 21 million btc (or however many have been minted at the time).
The idea that bitcoin would somehow escape fractional-reserve banking was only held by people who do not understand the difference between M0 and M1/M2 in elementary macroeconomics.
There is a subtle distinction though. When a bank lends out US dollars, they are effectively creating new money that is treated as “real” money. They don’t technically lend out the deposits. In contrast, crypto lenders can’t create new bitcoin. They need deposits to lend out. The depositer in turn is aware they don’t hold real bitcoin, just a deposit credit at the lender. This is the origin of the crypto mantra “Not your keys, not your crypto.”
It’s true that the “M1” value can increase, but unlike fiat money the distinction is (for now) visible to the user.
It’s true that the “M1” value can increase, but unlike fiat money the distinction is (for now) visible to the user.
> When a bank lends out US dollars, they are effectively creating new money that is treated as “real” money. They don’t technically lend out the deposits.
This is exactly wrong. In fact, it is the origin of the term "fractional reserve": They are reserving a fraction of the deposits and lending out the rest.
This is exactly wrong. In fact, it is the origin of the term "fractional reserve": They are reserving a fraction of the deposits and lending out the rest.
Right, but in crypto world most people regard coins held in custody as different from coins held in a private wallet. The Mt Gox experience was a good lesson on this topic, if it’s not your keys, it’s not your bitcoin.
In comparison, very few people distinguish paper cash money from a bank credit backed by a fractional reserve.
In comparison, very few people distinguish paper cash money from a bank credit backed by a fractional reserve.
> In comparison, very few people distinguish paper cash money from a bank credit backed by a fractional reserve.
I would add the words "in the modern era". My grandparents generation regarded those two as very different, having lived through the bank runs of the depression.
The difference between their gen and mine is due to the advent of the FDIC. This would also address your point about Mt Gox: Had there been insurance, Mt Gox would not have been such a clusterfk.
So no surprise: Coinbase and Bakkt both tout the insurance of their holdings. It's not quite FDIC levels (ie, a defacto government backing) but it's getting closer. As a consequence, it is not too hard for me to imagine a time that custodial accounts will have nearly the same confidence as a private wallet, because the equivalent of FDIC will likely be created by bitcoin-based institutions.
I would add the words "in the modern era". My grandparents generation regarded those two as very different, having lived through the bank runs of the depression.
The difference between their gen and mine is due to the advent of the FDIC. This would also address your point about Mt Gox: Had there been insurance, Mt Gox would not have been such a clusterfk.
So no surprise: Coinbase and Bakkt both tout the insurance of their holdings. It's not quite FDIC levels (ie, a defacto government backing) but it's getting closer. As a consequence, it is not too hard for me to imagine a time that custodial accounts will have nearly the same confidence as a private wallet, because the equivalent of FDIC will likely be created by bitcoin-based institutions.
Isn't the fundamental difference here that we can't print more bitcoin to bail out bad investments?
Yeah, you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Contrast this to the current environment where we are constantly bailing out and even financially rewarding business and investment failures, which comes at the expense of the working class who both foot the tax bill and aren't well insulated from the ensuing inflation.
Yeah, you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Contrast this to the current environment where we are constantly bailing out and even financially rewarding business and investment failures, which comes at the expense of the working class who both foot the tax bill and aren't well insulated from the ensuing inflation.
> Isn't the fundamental difference here that we can't print more bitcoin to bail out bad investments?
Absolutely. (Although it's "a" difference, not "the" difference.)
> you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Yes, and the subeconomy of bitcoin investing has a very different risk profile. As an example: I mentioned in another comment, the exchanges are already doing fractional reserves in spades. Bitmex has an insurance fund, and there has been at least one occasion where liquidation could not be covered by the traders and then exhausted the insurance fund. What happened then? The insurance fund paid out pro-rata on the successful bets (the successful traders made less than they should have") and much grousing ensued.
So it's the rough equivalent of an old-fashioned bank run, but tempers lessened because some money was made and nobody was zeroed out (other than the losing bets who should have gone negative but were only zeroed out).
Absolutely. (Although it's "a" difference, not "the" difference.)
> you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Yes, and the subeconomy of bitcoin investing has a very different risk profile. As an example: I mentioned in another comment, the exchanges are already doing fractional reserves in spades. Bitmex has an insurance fund, and there has been at least one occasion where liquidation could not be covered by the traders and then exhausted the insurance fund. What happened then? The insurance fund paid out pro-rata on the successful bets (the successful traders made less than they should have") and much grousing ensued.
So it's the rough equivalent of an old-fashioned bank run, but tempers lessened because some money was made and nobody was zeroed out (other than the losing bets who should have gone negative but were only zeroed out).
I'm not sure the occasional bank run by people who get over zealous with their greed and desire for MORE is necessarily a bad thing.
The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors. This might mean we'll have to get used a world where we pay banks a tiny fee to secure our money, rather than the risk free interest we expect now.
The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors. This might mean we'll have to get used a world where we pay banks a tiny fee to secure our money, rather than the risk free interest we expect now.
> I'm not sure the occasional bank run by people who get over zealous with their greed and desire for MORE is necessarily a bad thing.
I mostly agree. I think one of the biggest problems with the bank meltdown of 2008 is that no heads rolled, so it's no surprise that there has ultimately been very little behavioral change.
> The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors.
All of them are consenting (FRB is what banks do, they don't make money by simply holding a deposit) but boy is there a lack of understanding on how the modern bank works as a business and it's effect on the money supply.
I mostly agree. I think one of the biggest problems with the bank meltdown of 2008 is that no heads rolled, so it's no surprise that there has ultimately been very little behavioral change.
> The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors.
All of them are consenting (FRB is what banks do, they don't make money by simply holding a deposit) but boy is there a lack of understanding on how the modern bank works as a business and it's effect on the money supply.
>The idea that bitcoin would somehow escape fractional-reserve banking
You are correct, but unlike with banks, at least there is an escape hatch: "not your keys, not your coins", which is a lot simpler to implement than walking to your bank and withdrawing all your savings in cash.
Sadly, the vast majority of Bicoin buyers just leave their coin on the exchange (or worse: in the case of Paypal, they can't do anything else), thereby opening the door to all kind of shady practices, including FRB.
You are correct, but unlike with banks, at least there is an escape hatch: "not your keys, not your coins", which is a lot simpler to implement than walking to your bank and withdrawing all your savings in cash.
Sadly, the vast majority of Bicoin buyers just leave their coin on the exchange (or worse: in the case of Paypal, they can't do anything else), thereby opening the door to all kind of shady practices, including FRB.
> You are correct, but unlike with banks, at least there is an escape hatch: "not your keys, not your coins", which is a lot simpler to implement than walking to your bank and withdrawing all your savings in cash.
To be clear: "Not your keys, not your coin" equivalent in the fiat world is not putting your money in the bank, but holding on to it instead. So you put all your fiat in a safe eg.
> Sadly, the vast majority of Bicoin buyers just leave their coin on the exchange (or worse: in the case of Paypal, they can't do anything else), thereby opening the door to all kind of shady practices, including FRB.
In order to short bitcoin on the exchanges, the exchanges need to have bitcoin to lend out. Naturally these lent bitcoin come from deposits. Exchanges are already practicing FRB on a large scale, but somehow nobody is calling it that (mostly because FRB is not well-understood by the bitcoin community.)
To be clear: "Not your keys, not your coin" equivalent in the fiat world is not putting your money in the bank, but holding on to it instead. So you put all your fiat in a safe eg.
> Sadly, the vast majority of Bicoin buyers just leave their coin on the exchange (or worse: in the case of Paypal, they can't do anything else), thereby opening the door to all kind of shady practices, including FRB.
In order to short bitcoin on the exchanges, the exchanges need to have bitcoin to lend out. Naturally these lent bitcoin come from deposits. Exchanges are already practicing FRB on a large scale, but somehow nobody is calling it that (mostly because FRB is not well-understood by the bitcoin community.)
> Rather, it was incredible to see the entire financial industry quickly rebuilt on top of sound money.
What is your definition of sound money?
It has been said many times but it bears repeating that a money supply that grows more slowly than the economy it is traded in will be deflationary. Deflation inhibits economic activity because money saved is worth more tomorrow than today even when not invested in productive enterprise. Deflation enriches existing asset holders at the expense of new entrants, even if those asset holders are just stuffing their money in the proverbial mattress. Economists consider deflation a terrible outcome for an economy; Japan has experienced it for thirty years now.
What is your definition of sound money?
It has been said many times but it bears repeating that a money supply that grows more slowly than the economy it is traded in will be deflationary. Deflation inhibits economic activity because money saved is worth more tomorrow than today even when not invested in productive enterprise. Deflation enriches existing asset holders at the expense of new entrants, even if those asset holders are just stuffing their money in the proverbial mattress. Economists consider deflation a terrible outcome for an economy; Japan has experienced it for thirty years now.
> Deflation inhibits economic activity because money saved is worth more tomorrow than today even when not invested in productive enterprise.
What is the rationale for this? Because by that token, nobody would ever buy computers, because the money saved by not buying a computer today can go into buying a better computer tomorrow.
if anything, deflation is fantastic because it makes you think twice before rampantly consuming shit, which is going to be much better for the environment than the misaligned incentives of demand-side economics. (not that supply-side is any better).
Finally, inflation redirects real returns from the poor to the rich and deflation does the reverse. Japan (which has had net ~0% official inflation over the last 30 years) has had a stable GINI coefficient; the US has gotten worse and worse.
What is the rationale for this? Because by that token, nobody would ever buy computers, because the money saved by not buying a computer today can go into buying a better computer tomorrow.
if anything, deflation is fantastic because it makes you think twice before rampantly consuming shit, which is going to be much better for the environment than the misaligned incentives of demand-side economics. (not that supply-side is any better).
Finally, inflation redirects real returns from the poor to the rich and deflation does the reverse. Japan (which has had net ~0% official inflation over the last 30 years) has had a stable GINI coefficient; the US has gotten worse and worse.
> > Deflation inhibits economic activity because money saved is worth more tomorrow than today even when not invested in productive enterprise.
> What is the rationale for this?
The rationale is explicitly stated.
> Because by that token, nobody would ever buy computers, because the money saved by not buying a computer today can go into buying a better computer tomorrow.
No, because then you lose out on the utility of the computer today.
The argument was about financial investments; that it discourages investments in productive enterprise since holding cash produces a real gain at low risk. Putting off buying future potential money via investment in productive enterprises because holding money gives you more value of money in the future with less risk than investment in productive enterprise and the liquidity of money now is not parallel to deferring buying a computer to buy a better one later.
> if anything, deflation is fantastic because it makes you think twice before rampantly consuming shit,
While you call it “fantastic”, that's just another way deflation depresses economic activity, discouraging consumption as well as productive investment. (Of course, discouraging consumption also further discourages investment itself.)
> What is the rationale for this?
The rationale is explicitly stated.
> Because by that token, nobody would ever buy computers, because the money saved by not buying a computer today can go into buying a better computer tomorrow.
No, because then you lose out on the utility of the computer today.
The argument was about financial investments; that it discourages investments in productive enterprise since holding cash produces a real gain at low risk. Putting off buying future potential money via investment in productive enterprises because holding money gives you more value of money in the future with less risk than investment in productive enterprise and the liquidity of money now is not parallel to deferring buying a computer to buy a better one later.
> if anything, deflation is fantastic because it makes you think twice before rampantly consuming shit,
While you call it “fantastic”, that's just another way deflation depresses economic activity, discouraging consumption as well as productive investment. (Of course, discouraging consumption also further discourages investment itself.)
Your assertions are simply not borne out by historical truth, there have been periods of history where there was no inflation or deflation, where there was plenty of investment and growth. For example, post-civil war US. Similarly the 1850-1900 sweden free banking era. Oh. And Japan. Do you seriously think there is NO productive investment in Japan currently, simply because there is no inflation?
People grow and invest in things with only minor regard to whether or not there is inflation, just when there is inflation they invest more in dumber shit like juicero and theranos, because if you are on a moving compounding treadmill you have no choice but to participate in the casino.
People grow and invest in things with only minor regard to whether or not there is inflation, just when there is inflation they invest more in dumber shit like juicero and theranos, because if you are on a moving compounding treadmill you have no choice but to participate in the casino.
> Your assertions are simply not borne out by historical truth
What assertions?
> there have been periods of history where there was no inflation or deflation, where there was plenty of investment and growth.
That...doesn't contradict anything I've said. I have not stated or implied that, in the absence of inflation or deflation, one would not expect productive investment and growth. I have agreed with upthread claims that deflation discourages economic activity, and also pointed out that the effect you praise of deflation discouraging consumption is an example of discouraging economic activity.
> For example, post-civil war US.
You mean the 1865-1867 recession (which also featured significant deflation, not “no inflation or deflation”) or the 1869-1870 recession (ditto), or the Long Depression starting in 1873 (ditto, again.) The post Civil War 19thC USA is actually a pretty good example of the association between deflation and poor economic performance, and definitely not an example (for good or ill) of a period with “no inflation or deflation”.
What assertions?
> there have been periods of history where there was no inflation or deflation, where there was plenty of investment and growth.
That...doesn't contradict anything I've said. I have not stated or implied that, in the absence of inflation or deflation, one would not expect productive investment and growth. I have agreed with upthread claims that deflation discourages economic activity, and also pointed out that the effect you praise of deflation discouraging consumption is an example of discouraging economic activity.
> For example, post-civil war US.
You mean the 1865-1867 recession (which also featured significant deflation, not “no inflation or deflation”) or the 1869-1870 recession (ditto), or the Long Depression starting in 1873 (ditto, again.) The post Civil War 19thC USA is actually a pretty good example of the association between deflation and poor economic performance, and definitely not an example (for good or ill) of a period with “no inflation or deflation”.
How can you claim the us had poor economic performance in that era? The country went from "having torn itself in two" to "becoming a international superpower" in 50 or so years. The rejection of reality implied by your selective analysis of economic history is truly astounding.
> deflation
You are making a lot of assumptions. But yes, a productive enterprise has to outperform doing nothing to be successful. And no, it is not possible to generate unlimited wealth simply by investing in a deflationary currency.
You are making a lot of assumptions. But yes, a productive enterprise has to outperform doing nothing to be successful. And no, it is not possible to generate unlimited wealth simply by investing in a deflationary currency.
> Bitcoin is simply doing what was always done more efficiently.
Where by "more efficiently" you mean "vastly less efficiently", right?
Where by "more efficiently" you mean "vastly less efficiently", right?
I'm not anti-crypto, but I honestly don't know what you mean by "sound money". Could you elaborate?
Many, or even most people, believe that money must be controlled by the government for the economy to function. "Sound money" is money whose supply cannot be controlled by the government. Some further reading:
* https://fee.org/articles/what-do-we-mean-by-sound-money/
* https://mises.org/library/principle-sound-money
* https://www.aier.org/pertinent_category/sound-money-project/
* https://fee.org/articles/what-do-we-mean-by-sound-money/
* https://mises.org/library/principle-sound-money
* https://www.aier.org/pertinent_category/sound-money-project/
Thanks, a good explanation. And I don't think money has an inherent need to be government controlled in order to be stable either. (Though I do see some benefits)
But I think it's relevant to split hairs a bit and say that "sound" often has the sense of "firm" or "solid/reliable", but that is not an inherent property of non-governmental currencies that can be controlled by groups that are no more beholden to users of the currency than governments. (Consider Facebook's attempt at creating a currency as an example)
But I think it's relevant to split hairs a bit and say that "sound" often has the sense of "firm" or "solid/reliable", but that is not an inherent property of non-governmental currencies that can be controlled by groups that are no more beholden to users of the currency than governments. (Consider Facebook's attempt at creating a currency as an example)
Yes, you're right! That was my mistake.
A huge energy cost most of all https://www.bbc.com/news/technology-48853230, so environmental damages (maintenance of those machines, and all hidden pollution behind just the pure electricity consumption)
We know. Hell, Bitcoin Core developers have known for years, that's why they never endorsed a base block increase. That's why they've put all their energy into adding upper layers with transactions secured by flimsy game theory rather than flimsy hashcash. That's why they pushed for SegWit, purely because it would make the complicated transactions necessary to run those upper layers not more expensive than direct transfers. That's why they added a bunch of ways to tack on fees to unconfirmed transactions, and talked a bunch about a "fee market" (even though that's not how Bitcoin transactions work) because it was obvious someone had to pay for all this stolen electricity.
I'd also argue that Bitcoin hasn't just failed to meet it's goals, but that it's goals aren't something the average person should want. The explicit goal of Bitcoin was untraceable payments you can't cancel. In practice this means fraudulent payments cannot be reversed, and stealing Bitcoin is so cheap and easy to do we've literally caught Ruby packages designed to slip into developers' computers and steal Bitcoin. Cryptominers have also plagued the web to the point where browser vendors have to actively restrict what you can do in JavaScript.
(I'd also ALSO argue that anonymous payments are bad for society, and that financial privacy shouldn't be a thing.)
I'd also argue that Bitcoin hasn't just failed to meet it's goals, but that it's goals aren't something the average person should want. The explicit goal of Bitcoin was untraceable payments you can't cancel. In practice this means fraudulent payments cannot be reversed, and stealing Bitcoin is so cheap and easy to do we've literally caught Ruby packages designed to slip into developers' computers and steal Bitcoin. Cryptominers have also plagued the web to the point where browser vendors have to actively restrict what you can do in JavaScript.
(I'd also ALSO argue that anonymous payments are bad for society, and that financial privacy shouldn't be a thing.)
The SegWit project quadrupled the max block size in 2016. Since then there’s never been significant backlogs.
Even with record high prices, one hour transactions are less than a dollar. Maybe even a $0.10 fee will clear in that time.
I don’t know why this claim it never happened persists, except certain people who wanted to tule over bitcoin have spent millions employing an army if bots to spread the lie.
Even with record high prices, one hour transactions are less than a dollar. Maybe even a $0.10 fee will clear in that time.
I don’t know why this claim it never happened persists, except certain people who wanted to tule over bitcoin have spent millions employing an army if bots to spread the lie.
If a transaction will clear in less than an hour for less than a dollar (or even ten cents), why is the average fee currently $9.10?
Because lots of businesses don't care that much when they're moving much higher amounts, so they use really basic/dumb algorithms to choose their fees.
Good points. Centralized mining and existing wealth inequality really don't allow us to escape the fundamental problems with big banks. BTC is an emergent bank where the first and wealthiest movers who own the most mining real estate act as the new big banks.
It seems that, asymptotically, bitcoin will just end up suffering from the very things it meant to fix. The whole idea behind proof-of-work was rooted in "one cpu, one vote", but we clearly see that this does not imply "one person one vote". Proof-of-stake suffers from centralization as well, albeit being a green solution.
Proof-of-I-am-a-unique-human does not exist yet and is an unsolved problem in the intersection between biology, physics, and engineering. Neuralink comes to mind as the closest existing thing that might be relevant here, but it's not even close. Until you can really guarantee that a single human can only represent a single vote, blockchain doesn't seem viable as a "fix for banks", it's just a reincarnation. Even then, nothing stops people from coming together and forming vote schemes.
It seems that, asymptotically, bitcoin will just end up suffering from the very things it meant to fix. The whole idea behind proof-of-work was rooted in "one cpu, one vote", but we clearly see that this does not imply "one person one vote". Proof-of-stake suffers from centralization as well, albeit being a green solution.
Proof-of-I-am-a-unique-human does not exist yet and is an unsolved problem in the intersection between biology, physics, and engineering. Neuralink comes to mind as the closest existing thing that might be relevant here, but it's not even close. Until you can really guarantee that a single human can only represent a single vote, blockchain doesn't seem viable as a "fix for banks", it's just a reincarnation. Even then, nothing stops people from coming together and forming vote schemes.
Bitcoin is a very interesting piece of technology that has become a bubble due to a combination of historically low interest rates (and QE, and other forms of actual money printing) combined with a scarcity of good investments.
Without the forces transforming it into a bubble, Bitcoin and other cryptocurrencies would be interesting technologies used by enthusiasts, as an international wire transfer method, and for some black and grey market commerce. They wouldn't be anywhere near as insane as they are.
These same forces are causing the stock market and real estate to go apeshit in the middle of a pandemic-driven massive recession, which is in some ways even more insane than Bitcoin.
We are in a chronically demand-constrained economy. Until we actually recapitalize the consumer, nothing will change. We'll continue to print money forever in an attempt to revitalize the economy, and all it will do is inflate more bubbles and probably even nuttier ones.
Without the forces transforming it into a bubble, Bitcoin and other cryptocurrencies would be interesting technologies used by enthusiasts, as an international wire transfer method, and for some black and grey market commerce. They wouldn't be anywhere near as insane as they are.
These same forces are causing the stock market and real estate to go apeshit in the middle of a pandemic-driven massive recession, which is in some ways even more insane than Bitcoin.
We are in a chronically demand-constrained economy. Until we actually recapitalize the consumer, nothing will change. We'll continue to print money forever in an attempt to revitalize the economy, and all it will do is inflate more bubbles and probably even nuttier ones.
Each bubble has popped and maitinted a price higher than last.
The author is Ray Dillinger, who has an axe to grind, having been involved with BTC since early days, and losing out hugely.
> losing out hugely
Would like to learn more about this. Thanks.
Would like to learn more about this. Thanks.
I appreciate the context.
Maybe Bitcoin is a disaster from the perspective of solving all of these problems, but alt-coins have solved a lot of them. The idea of Bitcoin as a digital gold has always made the most sense to me. While the initial goal may have been to use it as a literal form of digital cash, what it's evolved into isn't exactly a failure imo.
It seems that instead of wiping the slate clean, it'd be better to more actively promote Bitcoin as just that, gold, not cash. Then, on the technical side, focus on making the conversion of that "gold" to a more cash-like cryptocurrency as easy as possible.
I'm not terrible well-versed on the technical side of Bitcoin (just a high-level understanding), but this post seems kind of fatalist. Bitcoin is a success purely on the basis that over a decade later, after countless claims on its death, it's still chugging along. That resiliency deserves credit.
It seems that instead of wiping the slate clean, it'd be better to more actively promote Bitcoin as just that, gold, not cash. Then, on the technical side, focus on making the conversion of that "gold" to a more cash-like cryptocurrency as easy as possible.
I'm not terrible well-versed on the technical side of Bitcoin (just a high-level understanding), but this post seems kind of fatalist. Bitcoin is a success purely on the basis that over a decade later, after countless claims on its death, it's still chugging along. That resiliency deserves credit.
>The scarcity of block chain space has led people to re-invent every last feature of the banks they thought they were going to be escaping.
This is a pretty funny point because every time I go on twitter and see people talk about crypto, what they're essentially having is a discussion about public policy, and often they seem to try to reinvent institutions that already exist without even knowing it. From market-makers, exchanges, insurance and so on, precisely as the author points out all the dreaded middlemen they were trying to avoid
This is a pretty funny point because every time I go on twitter and see people talk about crypto, what they're essentially having is a discussion about public policy, and often they seem to try to reinvent institutions that already exist without even knowing it. From market-makers, exchanges, insurance and so on, precisely as the author points out all the dreaded middlemen they were trying to avoid
I don't see the irony.
The point is that Bitcoin has introduced an actual "digital cash" currency without institutional/governmental middlemen. That institutions can be built on top of that, and that some people want such institutions, doesn't change the novel utility of finally having a currency that functions like digital cash.
It's like saying it's ironic that people use physical USD for anonymous p2p transactions when USD banking systems have KYC laws. It's a non sequitur.
The point is that Bitcoin has introduced an actual "digital cash" currency without institutional/governmental middlemen. That institutions can be built on top of that, and that some people want such institutions, doesn't change the novel utility of finally having a currency that functions like digital cash.
It's like saying it's ironic that people use physical USD for anonymous p2p transactions when USD banking systems have KYC laws. It's a non sequitur.
No one treats Bitcoin as a currency. It’s treated as an investment vehicle.
And the reason behind that is obvious. Something whose value may double in a month or whose value may halve within weeks is a terrible currency.
If I expect it’s value to increase then I would be a fool to spend it. If I expect it’s value to drop I would be a fool to accept it.
Cryptocurrencies are anything but currencies.
And the reason behind that is obvious. Something whose value may double in a month or whose value may halve within weeks is a terrible currency.
If I expect it’s value to increase then I would be a fool to spend it. If I expect it’s value to drop I would be a fool to accept it.
Cryptocurrencies are anything but currencies.
Technically speaking, it's also a terrible investment vehicle for those same reasons. It's a fantastic parlor game of speculation though, where the point is the volatility.
I stopped being annoyed by crypto generally when people stopped pitching me insane scams of how the entire internet 2.0 was going to run on blockchain (its not) and they accepted its a fun gambling vehicle.
Exactly. It frustrates me that the term "investment" has been stretched to include raw speculation. People are welcome to do either one, but it's dangerous when people confuse zero-sum and positive-sum games. Buying any currency, crypto- or otherwise, is like playing the ponies: for every dollar won, there's (at least) a dollar lost. That's very different than investing in a company, which hopefully uses the money to create value.
that‘s not true.
Would be true if bitcoin was full premined, but it wasn‘t.
There are still 900 new bitcoins mined per day, and with an open source / patent free environment the space is a competitive market, the cost to produce one should tend towards the price of selling it (less so when the price rises quickly).
So how is at least a dollar lost (for every dollar won)?
Would be true if bitcoin was full premined, but it wasn‘t.
There are still 900 new bitcoins mined per day, and with an open source / patent free environment the space is a competitive market, the cost to produce one should tend towards the price of selling it (less so when the price rises quickly).
So how is at least a dollar lost (for every dollar won)?
The new coins aren't handed out generally. They are rewards to the "miners". They're relevant only for people going into the mining business. I'm talking about price speculation.
For people speculating, there's always a buyer and a seller. If I buy $100 of Bitcoin from person A and then later sell that for $101 to person B, then I have gained a dollar. A dollar that A would have gotten had they held on, or B would have gotten had they bought in earlier. It's a zero sum game. Except that everybody involved is paying transaction fees, putting in otherwise-valuable time, and taking risk (e.g., of theft), so in reality it's a negative sum game.
That's very different than actual investing. If I put $100 into a friend's company, then they will hopefully use that money to create something more valuable than the total investment. I'll come out ahead, but so will my friend and my friend's customers. That's a positive-sum game.
For people speculating, there's always a buyer and a seller. If I buy $100 of Bitcoin from person A and then later sell that for $101 to person B, then I have gained a dollar. A dollar that A would have gotten had they held on, or B would have gotten had they bought in earlier. It's a zero sum game. Except that everybody involved is paying transaction fees, putting in otherwise-valuable time, and taking risk (e.g., of theft), so in reality it's a negative sum game.
That's very different than actual investing. If I put $100 into a friend's company, then they will hopefully use that money to create something more valuable than the total investment. I'll come out ahead, but so will my friend and my friend's customers. That's a positive-sum game.
If your point was that bitcoin is worse than zero-sum because it generates net losses, then you're right.
It's volatile, but the overwhelming trend has been upwards. Historically it's a great investment if you can weather volatility
> overwhelming trend has been upwards
You’re cherry picking your price analysis time period. Last year I could have said “BTC has trended down tremendously the last 2 years” and I’d have been right as well.
You’re cherry picking your price analysis time period. Last year I could have said “BTC has trended down tremendously the last 2 years” and I’d have been right as well.
I'm looking a lot further back than two years. What I said is true even if you ignore the current run up.
If you want to make the opposite argument, that it has a downward trend, you have to cherry pick a fairly small period.
If you want to make the opposite argument, that it has a downward trend, you have to cherry pick a fairly small period.
This is a pretty silly comment. It's you that's cherry picking. The overall trend of Bitcoin over its lifetime has been up. Any complete analysis of its time series would tell you that. Buying at any point in its history would have been a good idea.
This is the same argument Wirecard shareholders always made.
No it isn't. I am not arguing that the price going up makes it good. That would be silly. I am merely disputing the characterization of the prior comment as 'cherry picking'.
Bitcoin never dropped below its previous peak.
You have to cherry-pick narrow enough time period to see bitcoin dropping in price.
If you pick sufficiently large time period bitcoin always grows. This screms 'investment'.
You have to cherry-pick narrow enough time period to see bitcoin dropping in price.
If you pick sufficiently large time period bitcoin always grows. This screms 'investment'.
So did Enron
Except that bitcoin books are open and they don't describe the thing, they are the thing.
Do any simple technical analysis and you will find an upward trend over its existence. You don't look at a narrow window.
Technical analysis has continually been shown to not work in predicting future prices.
I am talking about past prices.
While HN pundits have clearly been much more successful at it.
So is roulette if you win. A "good investment" in many contexts has a 20 year lifespan and low risk profile, so TBD.
I'm not saying its bad, but its an extremely high risk investment so not suitable for the money you can't afford to lose. I've heard of many people withdrawing superannuation to put into crypto (or using credit) for example.
I'm not saying its bad, but its an extremely high risk investment so not suitable for the money you can't afford to lose. I've heard of many people withdrawing superannuation to put into crypto (or using credit) for example.
I really dislike the way the finance industry has been conflating two notions that - while related - are actually different: that of volatility and that of risk.
Volatility results from the fact that the markets have a very hard time pricing an asset (because the asset's properties are hard to understand and its future behavior is therefor hard to predict).
This results in the creation of noise on the price signal.
It does not mean the asset is inherently bad. It just reflects lack of knowledge.
Volatility results from the fact that the markets have a very hard time pricing an asset (because the asset's properties are hard to understand and its future behavior is therefor hard to predict).
This results in the creation of noise on the price signal.
It does not mean the asset is inherently bad. It just reflects lack of knowledge.
Well I don't think roulette is a good comparison, roulette has a capped upside with a known, negative expected value. Agree with the rest of your comment though.
Over period of 10 years behavior of Bitcoin price was extremely predictable.
https://miro.medium.com/max/1838/1*Ao2C0phpSfknHvorWl2a3Q.pn...
https://miro.medium.com/max/1838/1*Ao2C0phpSfknHvorWl2a3Q.pn...
I use Bitcoin where ever possible, so your opening claim is wrong.
I've been banned from Paypal. I've run into many verification issues over the last decade with banks because I have no proof of residency once my driver's license expired.
Like physical cash, it doesn't need to be superior in all ways to be useful at all.
I've been banned from Paypal. I've run into many verification issues over the last decade with banks because I have no proof of residency once my driver's license expired.
Like physical cash, it doesn't need to be superior in all ways to be useful at all.
I have no proof of residency once my driver's license expired.
Every state I've lived in (13 so far) has an ID card that looks and acts exactly like a driver's license, with the only legal difference being that it is not valid for driving.
Unless you're not in America, in which case someone else can chime in.
Every state I've lived in (13 so far) has an ID card that looks and acts exactly like a driver's license, with the only legal difference being that it is not valid for driving.
Unless you're not in America, in which case someone else can chime in.
If you don't live in the US, then it becomes difficult to prove state residency as they want things like pay stubs, cellphone bills, and rent payments. Or you need to find someone who can prove residency and then claim (lie) that you reside (domicile) with them.
I don't have any of that. But maybe you can appreciate that I don't want to have to jump through those hoops just to be able to send someone $100 digitally.
I don't have any of that. But maybe you can appreciate that I don't want to have to jump through those hoops just to be able to send someone $100 digitally.
> But maybe you can appreciate that I don't want to have to jump through those hoops just to be able to send someone $100 digitally.
Surely you store fiat currency somewhere, and isn't there a "transfer money" button where you plug in an account number and institution and the money arrives shortly after?
Surely you store fiat currency somewhere, and isn't there a "transfer money" button where you plug in an account number and institution and the money arrives shortly after?
for almost 1/4 of the population of the US that isn't actually true.
While I assume you're talking about those without bank accounts in this statistic, it's also not true of most bank accounts in the US either so far as I can tell.
The inability to make transfers immediately and without fees between accounts held at different banks is bizarre for those used to UK banking.
The inability to make transfers immediately and without fees between accounts held at different banks is bizarre for those used to UK banking.
Do you live in the US? If so, how do you deal with the tax implications of buying lots of things with crypto? It's my understanding that each of those is considered a taxable event that you have to report on your tax return.
>It's my understanding that each of those is considered a taxable event that you have to report on your tax return.
Isn't that trivial to do from a reporting point of view? Just export your wallet history and do a lookup on that day's price.
Isn't that trivial to do from a reporting point of view? Just export your wallet history and do a lookup on that day's price.
Yeah I guess so, it still seems like it could be a major pain. Especially if somebody, say, transferred money between wallets and didn't keep good records. Or messed up the cost basis somehow. Or didn't think to set aside the necessary taxes every time, and then finds themselves with an unexpectedly large tax bill at the end of the year.
It's another reason why using a cryptocurrency is still a gigantic hassle in comparison to fiat.
It's another reason why using a cryptocurrency is still a gigantic hassle in comparison to fiat.
You also need a valid ID verification to buy BTC from the main platforms now
Yeah, Coinbase changed the other year, only for US citizens, where a passport is insufficient, you need to prove state residency (i.e. for most people, a driver's license).
But one of my points here is that, while I'm sure some people here are chomping at the bit to nail me with a gleeful "see? ironic!", I simply don't have to use Coinbase. I can, for example, exchange Bitcoin locally the same way I can trade USD for pesos with my roommate. I was SOL at one point when I was simultaneously banned from Paypal while my bank at the time spontaneously rejected further access to my own account, the two institutions I was depending on to operate abroad. It's what made me turn to Bitcoin, and I began considering how ridiculous the state of our financial status quo where I have precarious access to my own money.
I can appreciate that my outlier needs make it hard for people to relate to me the same way most people don't understand why an HNer cares about Linux when Windows works for them, but I think most people here are disappointingly eager to reject any possible upside of "digital cash". Even if its upsides are exceedingly niche for most people, that's not reason to dismiss them.
To me it's like reading an HN thread where everyone dismisses Purism's smartphone because Android and iPhone do the job for 99.9999% of people, and who the hell could possibly care about separating the CPU from cellular baseband? Or maybe they're claiming that only criminals would care about that. Well, that very few people are in a position to appreciate it has no basis on whether we deserve the option.
This is my last comment on this particular submission.
But one of my points here is that, while I'm sure some people here are chomping at the bit to nail me with a gleeful "see? ironic!", I simply don't have to use Coinbase. I can, for example, exchange Bitcoin locally the same way I can trade USD for pesos with my roommate. I was SOL at one point when I was simultaneously banned from Paypal while my bank at the time spontaneously rejected further access to my own account, the two institutions I was depending on to operate abroad. It's what made me turn to Bitcoin, and I began considering how ridiculous the state of our financial status quo where I have precarious access to my own money.
I can appreciate that my outlier needs make it hard for people to relate to me the same way most people don't understand why an HNer cares about Linux when Windows works for them, but I think most people here are disappointingly eager to reject any possible upside of "digital cash". Even if its upsides are exceedingly niche for most people, that's not reason to dismiss them.
To me it's like reading an HN thread where everyone dismisses Purism's smartphone because Android and iPhone do the job for 99.9999% of people, and who the hell could possibly care about separating the CPU from cellular baseband? Or maybe they're claiming that only criminals would care about that. Well, that very few people are in a position to appreciate it has no basis on whether we deserve the option.
This is my last comment on this particular submission.
Are you primarily engaged in illegal actions for your source of income? Your other comments in this thread seem to imply that is the case. No judgement, but if so, I think this is a pertinent piece of information.
It is not difficult for most citizens in first world nations to keep and maintain a bank account.
It is not difficult for most citizens in first world nations to keep and maintain a bank account.
22% of the US doesn't have a bank account. For myself when I lost my house I also ended up owing my bank money for an almost $500 overdraft used to pay the cost of moving bam no bank account and auto denial insofar as opening another account anywhere else.
Those analogies don't work for me. I already have "digital cash". The great bulk of the money I spend never takes physical form. And I use Linux because it's demonstrably superior for the tasks most important to me. Bitcoin, though, mainly seems to solve problems for speculators and people engaging in light financial crime. Is there a niche I'm missing?
>Bitcoin, though, mainly seems to solve problems for speculators and people engaging in light financial crime. Is there a niche I'm missing?
Do you have a source for that?
Do you have a source for that?
The comment you replied to is the source. What other type of source would you like for what something "seems" like to an individual?
It seems to me that asking for sources is a common technique for discrediting opinions on HN. It looks like a legitimate question but obviously if they had a source it would be a fact rather than an opinion.
If you are actually interested in how that opinion is formed ask a relevant question or point out what they are missing.
Personally I find that opinion entirely reasonable given that there are no problems I have that Bitcoin would solve better than the alternatives unless I was inclined to buy something online anonymously or to speculate on Bitcoin itself.
It seems to me that asking for sources is a common technique for discrediting opinions on HN. It looks like a legitimate question but obviously if they had a source it would be a fact rather than an opinion.
If you are actually interested in how that opinion is formed ask a relevant question or point out what they are missing.
Personally I find that opinion entirely reasonable given that there are no problems I have that Bitcoin would solve better than the alternatives unless I was inclined to buy something online anonymously or to speculate on Bitcoin itself.
> I use Bitcoin where ever possible, so your opening claim is wrong.
Just because a random guy barters bitcoins for goods/services, that by no means implies that bitcoin is anything close to money.
There is a very specific definition of what money is, and bitcoin's volatility alone rules it completely out.
Just because a random guy barters bitcoins for goods/services, that by no means implies that bitcoin is anything close to money.
There is a very specific definition of what money is, and bitcoin's volatility alone rules it completely out.
It's not one guy bartering, it's a lot of services offering it as a payment option, treating it effectively like a foreign currency with a different set of payment providers
> It's not one guy bartering
It takes two to barter.
> treating it effectively like a foreign currency
They really aren't. They accept bitcoins in exchange for goods/services, just like we see in any barter system.
Calling bitcoins "foreign currency" is just a desperate attempt to hide the obvious consequences of it's volatility, which eliminates it's role as money, not only as a store of value but also as unit of account.
https://en.wikipedia.org/wiki/Money
It takes two to barter.
> treating it effectively like a foreign currency
They really aren't. They accept bitcoins in exchange for goods/services, just like we see in any barter system.
Calling bitcoins "foreign currency" is just a desperate attempt to hide the obvious consequences of it's volatility, which eliminates it's role as money, not only as a store of value but also as unit of account.
https://en.wikipedia.org/wiki/Money
oh what is this very specific definition of what money is does the non-random guy on internet have?
> oh what is this very specific definition of what money is does the non-random guy on internet have?
Each and every single random guy on the internet who wants to buy stuff with money cares about money, and the properties that allow something to work as money.
Specifically, properties like being stable in its value within the market, and reliable both as a means of deferred payments and meet debts.
Bitcoin, or any cryptocurrency, is nothing of the sort. Far from it.
Each and every single random guy on the internet who wants to buy stuff with money cares about money, and the properties that allow something to work as money.
Specifically, properties like being stable in its value within the market, and reliable both as a means of deferred payments and meet debts.
Bitcoin, or any cryptocurrency, is nothing of the sort. Far from it.
>> Bitcoin, or any cryptocurrency, is nothing of the sort. Far from it.
For some random guys on the internet. yes. Some other guys are using it without waiting for it to be everything the previous system had. (deferred payments etc.).
For some random guys on the internet. yes. Some other guys are using it without waiting for it to be everything the previous system had. (deferred payments etc.).
Well bitcoin is as much money as FIAT money, except if you consider money credit. Than indeed, bitcoin would not be money.
> Well bitcoin is as much money as FIAT money
No, it's not. It’s too volatile to be an efficient store of value or a useful unit of account for general purposes; it's got some use as a competitive medium of exchange for certain circumstances (but again not really with the generality of any major fiat currency.)
It's commodity that seems to (retrospectively, at least, and there is some reason to expect this to continue for the near future) have good investment performance if you are in a position to wait out down periods, which makes it nice as a component of an investment portfolio.
It's good at things that aren't the purpose of money, but mostly not good for things that are the purposes of money, except for a narrow subset of one of three major purposes of money.
No, it's not. It’s too volatile to be an efficient store of value or a useful unit of account for general purposes; it's got some use as a competitive medium of exchange for certain circumstances (but again not really with the generality of any major fiat currency.)
It's commodity that seems to (retrospectively, at least, and there is some reason to expect this to continue for the near future) have good investment performance if you are in a position to wait out down periods, which makes it nice as a component of an investment portfolio.
It's good at things that aren't the purpose of money, but mostly not good for things that are the purposes of money, except for a narrow subset of one of three major purposes of money.
> Than indeed, bitcoin would not be money.
Bitcoin is obviously not money, and among the many reasons the fact that it does not serve as a store of value nor a means to defer payments, which is a single requirement that comprised the very definition of money, is just one of them.
Bitcoin is obviously not money, and among the many reasons the fact that it does not serve as a store of value nor a means to defer payments, which is a single requirement that comprised the very definition of money, is just one of them.
The US government would not accept BTC as payment for anything, so it is definitely NOT a fiat money.
The actual only criteria of fiat money I learned in austrian high school was "government will accept taxes in that currency". We have quiet a long history of taxes here, ranging from cows or sacks of grain to gold to gold coins to gulden to reichsmark to schilling to euro. Probably a good measure of centuries more than the US (which basically got kickstarted with the UK system at the time). Funnily enough, the above definition was the only thing holding true through the centuries. Thing is, if your government accepts taxes in a certain currency (even if it's a foreign one, that's perfectly fine too) it creates a stability by itself which fosters the usability (call it user friendlyness if you like) of the currency.
In that sense, I'm fairly sure that unless you are personal friends with the president you cannot pay your taxes in Euro the same way you cannot pay them in ₿, Pesos or ¥ because the currency the US claims their taxes in is USD.
Please prove me wrong or gib a better definition if I'm wrong :)
Happy New Year everyone!
The kind of problems you have are not solved with crypto currency, let’s be real about this.
> No one treats Bitcoin as a currency. ... And the reason behind that is obvious. Something whose value may double in a month or whose value may halve within weeks is a terrible currency.
Nope. I don't buy things in crypto only because of the reporting burden. Every cup of coffee bought with crypto has to be reported on a tax return.
Nope. I don't buy things in crypto only because of the reporting burden. Every cup of coffee bought with crypto has to be reported on a tax return.
> t buy things in crypto only because of the reporting burden.
You should.
And then report every cup of coffe on your tax return.
And file on actual physical paper, preferably printed with a font that's hard to machine-read.
You should.
And then report every cup of coffe on your tax return.
And file on actual physical paper, preferably printed with a font that's hard to machine-read.
That makes no sense unless you are converting the bitcoin to dollars but then it's not being used as a currency. If it was a currency the business would accept bitcoin directly and thus there would be no need to report it on your tax returns.
That’s incorrect. When you buy something with bitcoin, even if it is priced in bitcoin, the IRS considers it a sale or exchange of a capital asset and you have to report the transaction on your return.
I didn’t know this is the case. Source?
https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21
It's reported as a security - other, which is laid out like the stock trades 1099. Your taxable amount is the difference in price between what you paid for the currency and what you "sold" it for (both in USD).
It's reported as a security - other, which is laid out like the stock trades 1099. Your taxable amount is the difference in price between what you paid for the currency and what you "sold" it for (both in USD).
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> I've been advised that there's an income tax exemption for "hobby income" ... up to 10k USD per year
If you're talking about the US, I think you're wrong: you need to declare all your hobby income, and since 2018, you can't deduct hobby expenses.
See e.g. https://www.creditkarma.com/tax/i/hobby-income-taxed https://turbotax.intuit.com/tax-tips/self-employment-taxes/4...
If you're talking about the US, I think you're wrong: you need to declare all your hobby income, and since 2018, you can't deduct hobby expenses.
See e.g. https://www.creditkarma.com/tax/i/hobby-income-taxed https://turbotax.intuit.com/tax-tips/self-employment-taxes/4...
Ah yeah, looks like things might have changed since I got that guidance.
That's annoying. Would be nice if they didn't keep changing things around all the time.
That's annoying. Would be nice if they didn't keep changing things around all the time.
"No one treats Bitcoin as a currency. It’s treated as an investment vehicle."
I, for one, have and will continue to use it as a currency in some cases. I'm quite sure I'm not the only one.
I, for one, have and will continue to use it as a currency in some cases. I'm quite sure I'm not the only one.
To a first order approximation, nobody uses bitcoin as a currency. There are a handful of enthusiasts who might use it such as yourself, but you are in the absolute minority of bitcoin holders.
HODL would not be the meme it was if the goal was to actually use bitcoin in day to day transactions.
HODL would not be the meme it was if the goal was to actually use bitcoin in day to day transactions.
This is an opinion presented as a fact. A source would be helpful.
I’ll call BS on this - are you actively selling it to buy things online? And you buying BTC when you have spare money in checking accounts? Is your turnover like 10-20%? I’m guessing you’re a buy and hold person with BTC, which makes you an investor in it.
I've accepted payments for a holiday rental via Bitcoin, some of which I've used to purchase other items.
I'll admit that I do buy bitcoin for use as currency. It is still the easiest way to remain pseudonymous digitally. To me it's similar to gold. Most people use it as an investment vehicle, some use it because it's an efficient way to store value that is hard to track.
I used to buy things with bitcoin, but every time I have regretted it. It would've been better to use cash and keep holding.
> t buy things in crypto only because of the reporting burden.
There's an easy solution to that problem: spend BTC when you buy things, and then every week-end, buy it back to get rid of whatever monkey money (fiat) people gave you (salary,payments,etc...)
That seems like a lot of work, but it's easy to automate.
And if enough people do this, this will strengthen the BTC economy and weaken fiat, so you can feel good about yourself when you go to bed.
There's an easy solution to that problem: spend BTC when you buy things, and then every week-end, buy it back to get rid of whatever monkey money (fiat) people gave you (salary,payments,etc...)
That seems like a lot of work, but it's easy to automate.
And if enough people do this, this will strengthen the BTC economy and weaken fiat, so you can feel good about yourself when you go to bed.
I also use Bitcoin as a currency (via Coinbase). I love the reactions. It’s not commonly accepted in my area so I’m only using it for haircuts and holiday bonuses, but would gladly buy more with it. Excited about Etherium’s DApps but having trouble creating viable ones in my industry (insurance). BTC’s transaction cost is worrisome (who is spending $6 in transactions fees for small purchases). Monero has some serious advantages over BTC (privacy and transaction costs).
Encourage your current 'Bitcoin friendly vendors' to accept Lightning network payments. Your Bitcoin tx fees can then be fractions of cents.
Isn’t it impossible for the market value to change without both a buyer and a seller?
This is solved on the vendor and the buyer side by using "acceptable thresholds of difference" that can be specified with a configuration file. For example, Coinbase Commerce uses this mechanism.
Buying drugs with BTC is very widespread and probably what fuelled the initial adoption. How is that anything but a currency?
By that logic, Tide is now a currency.
So buying drugs in 2010 makes it a currency, gotcha.
Last time I checked drugs were still pretty popular in 2020 and no one wants to hang around big Daves dirty house to buy some weed
Monero is used now. Not Bitcoin.
Most of Monero is actually paid for in Bitcoin via online exchanges. WH stopped doing auto-exchange just few weeks ago, but many other exchanges are still up with barely any kind of validation, not even an e-mail.
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> No one treats Bitcoin as a currency.
Ask the people who bought hundreds of millions of dollars (without inflation) of drugs on Silk Road, Empire Market, White House Market etc since 2013 until now. I am making up hundreds of millions based on the seized Bitcoins by the FBI, the real number probably exceeded Billions a long time ago already.
The WannaCry and other ransomware folks don't sit on their millions of dollars of extorted Monero/Bitcoin either. They buy cars and fancy things with them, and that's one reason many of them got arrested.
Few real world examples of scams against everyday folks:
https://www.youtube.com/results?search_query=canada+bitcoin+...
Safeway now has BTC ATMs and we we'll be able to drop "canada" from the query and get good results from the US soon.
Ask the people who bought hundreds of millions of dollars (without inflation) of drugs on Silk Road, Empire Market, White House Market etc since 2013 until now. I am making up hundreds of millions based on the seized Bitcoins by the FBI, the real number probably exceeded Billions a long time ago already.
The WannaCry and other ransomware folks don't sit on their millions of dollars of extorted Monero/Bitcoin either. They buy cars and fancy things with them, and that's one reason many of them got arrested.
Few real world examples of scams against everyday folks:
https://www.youtube.com/results?search_query=canada+bitcoin+...
Safeway now has BTC ATMs and we we'll be able to drop "canada" from the query and get good results from the US soon.
I grew up in Ukraine where my parents were earning and spending hryvna (local currency, high inflation) while saving in USD (much more stable).
And a big value prop in favor of US dollar was its immunity to local country’s politics.
Bitcoin has a potential to serve as that kind of saving “currency” a lot of people actually need.
Bitcoin has a potential to serve as that kind of saving “currency” a lot of people actually need.
Not to burst your bubble but assets with extreme volatility, like bitcoin, are not suitable for saving purposes. Investment maybe, but not saving. I assume "saving" purpose in this case means that it withholds its value while being easily liquidable.
If you on the other hand have a long saving window so you can tolerate huge swings in the price of the bitcoin (or other cryptocurrency) then the question arises why not diversify your investments like regular people and buy ETFs or other assets?
Maybe buying ETFs is harder than buying bitcoins, but in general the idea is (I assume) the same. However, what I feel most people are allured by with bitcoin is its random price movements where out of nowhere its price surges up and creates a total hysteria in the market.
I myself heavily dislike assets which price is mainly driven by emotional rationale and while bitcoin's idea may be good, I would not suggest anyone to put their savings in bitcoin. It would seem to encourage people to treat markets with magical thinking where the prices are set by otherworldly powers and not as tied to the revenue stream that is generated by the said asset.
If you on the other hand have a long saving window so you can tolerate huge swings in the price of the bitcoin (or other cryptocurrency) then the question arises why not diversify your investments like regular people and buy ETFs or other assets?
Maybe buying ETFs is harder than buying bitcoins, but in general the idea is (I assume) the same. However, what I feel most people are allured by with bitcoin is its random price movements where out of nowhere its price surges up and creates a total hysteria in the market.
I myself heavily dislike assets which price is mainly driven by emotional rationale and while bitcoin's idea may be good, I would not suggest anyone to put their savings in bitcoin. It would seem to encourage people to treat markets with magical thinking where the prices are set by otherworldly powers and not as tied to the revenue stream that is generated by the said asset.
Despite the crazy year, bitcoin still has less extreme volatility than some actual country's currencies. So for that small percentage of the world, bitcoin is a better "currency" too - besides for obvious things like local brick and mortar acceptance.
Sure but the de facto standard way of dealing with this issue is storing cash in a well-established fiat currency, like US dollar. Although I'm not sure what are you implying. I would assume buying US dollars is as easy as buying bitcoins in most cases. And more accepted too. The only problem being having to have either a bank account or physical notes somewhere stored.
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As a freelance programmer/UX designer I offer my clients to pay in Bitcoin (yes, as a currency).
So far over the course of my decade-ish long career most invoices are paid via fiat but actually my record sale was paid in Bitcoin. The client paid for approx 500 consulting hours in BTC (and is still a client to this day, paying for many more hours than that batch in subsequent purchases albeit sometimes in fiat).
I prefer Bitcoin over government fiat currency when doing large transactions like that because of the risk that a bank will freeze the funds or hold the transaction arbitrarily without warning and on either side of the equation; ie- you don't know if the party sending or receiving may be subject to the freeze.
So far over the course of my decade-ish long career most invoices are paid via fiat but actually my record sale was paid in Bitcoin. The client paid for approx 500 consulting hours in BTC (and is still a client to this day, paying for many more hours than that batch in subsequent purchases albeit sometimes in fiat).
I prefer Bitcoin over government fiat currency when doing large transactions like that because of the risk that a bank will freeze the funds or hold the transaction arbitrarily without warning and on either side of the equation; ie- you don't know if the party sending or receiving may be subject to the freeze.
>No one treats Bitcoin as a currency.
I wouldn't necessarily say that most of its market cap is coming from people treating it like a currency. But I most definitely think it is effectively a currency in some places and in some special circumstances.
I take it that the point of the post is that, by and large, due to the fact that the blockchain is public and analyzed and mining is conceivably traceable to special purpose hardware, it's not for many practical purposes usable as a stateless, institution-free vehicle for transactions.
I'm not sure how to square the circle on this, but it certainly is a currency in some cases.
I wouldn't necessarily say that most of its market cap is coming from people treating it like a currency. But I most definitely think it is effectively a currency in some places and in some special circumstances.
I take it that the point of the post is that, by and large, due to the fact that the blockchain is public and analyzed and mining is conceivably traceable to special purpose hardware, it's not for many practical purposes usable as a stateless, institution-free vehicle for transactions.
I'm not sure how to square the circle on this, but it certainly is a currency in some cases.
My spouse in European and before her immigration to the US happened I would send her bitcoin or litecoin when she needed money (she was in school). It worked despite the volatility. She'd tell me when she needs some, I'd send it and she'd sell. Total flight time was ~10 minutes. Super useful for sending amounts that are less than 200 dollars.
This is only true if everyone using the currency agreed completely on its future value. Currently, some people think it'll tank and sell, and others think it'll rise and buy.
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You can just hedge your exposure on a futures exchange and still use BTC to transact but be unexposed to any price movements. Although doing that is very complicated and defeats the purpose of an easy to use alternative to centralized cash.
That sounds like it could be a PITA for everyday people tho.
Indeed but I wonder if one could build a platform that does this behind the scenes. User sends BTC to the online wallet, and the site hedges on behalf of the user on one of the liquid future exchanges, locking in the prevailing BTC price. People can make payments out of this online wallet with just as much ease as they're currently doing. Then they have an easy to use digital cash without any price risk.
The site charges a small fee for the service of derisking the holdings.
This does seem to solve a real user pain point (risk and the complexity of hedging) and benefits from scale economies.
The site charges a small fee for the service of derisking the holdings.
This does seem to solve a real user pain point (risk and the complexity of hedging) and benefits from scale economies.
Bitcoin is volatile because it is not yet widely used and the market for is still relatively small.
Yes, people are investing to speculate on its price, but they are also investing because it has a fixed supply that cannot be inflated away by governments.
Take a look at the U.S. M2 money supply YTD and the DXY and consider what happens next as more wealthy investors begin to recognize this advantage inherent in Bitcoin.
Yes, people are investing to speculate on its price, but they are also investing because it has a fixed supply that cannot be inflated away by governments.
Take a look at the U.S. M2 money supply YTD and the DXY and consider what happens next as more wealthy investors begin to recognize this advantage inherent in Bitcoin.
Wealthy investors are exactly the kind of people who (through lobbying) designed the current financial system.
That's true, how does it relate to what I was saying?
The intent was 'actual digital cash', the result was 'instrument for speculation, money laundering and other fraud' which is entirely dependent on actual real money (and its institutions). Whether one finds that ironic or not is a matter of taste but it's clearly not exactly what the goal of "digital cash" was supposed to be.
That's just the reality of cash, no less in digital form, so it would be naive to think Bitcoin wouldn't inherit the same uses of USD (speculation, money laundering, fraud). It's just not very damning. Though I'm sure various people in the government/Visa would love to ban USD cash with the same demonization.
Except that cash in USD is also used as a medium of exchange.
Any VPN service offers the option to pay in bitcoin, as do many other sites. There are entire marketplaces on Tor where bitcoin is the primary currency.
hombre_fatal(4)
Not the reality of cash as cash doesn’t change value like Bitcoin (in either direction), it’s also usually not scarce, and always much easier to use.
The dollar doesn't change value like Bitcoin, not cash as a whole.
What we define as a good currency doesn’t. A currency that inflates or deflates dramatically is foundering.
So are we talking about "a good currency", or "cash"? Because the initial comment said "cash".
oh yes it does, it has crashed more than 2000% vs Bitcoin in a decade.
That’s completely wrong. You would never say “the US dollar has crashed compared to Microsoft stock“. That’s a dumb comparison to compare a currency to an investment. The dollar has been mostly stable the past 10 years. A gallon of milk is still around $3.50
why are you comparing a currency (bitcoin) to a stock.
USD vs Bitcoin is a comparison of currency.
USD vs Bitcoin is a comparison of currency.
Bitcoin is a security closer to gold than anything. Limited supply and high cost of production.
The dollar also lost a lot of value when compared to the stock market, or compared to land prices, or to gold.
The value of cash dollars changes all the time. You just don't notice it because you pay for everything in the same dollar denomination. But when everything gets more expensive year by year that's your dollar devaluing. CPI is one measure of that.
Dollar is still the king of money laundering. Regulatory support, shoddy bank regulations makes it a smooth experience of money launderers and mafia with USD.
Yes because the dollar is still the king of, well, money. All the Bitcoin fraud and money laundering ends up being dollar fraud and dollar money laundering, otherwise nobody would care.
So even for one of the things Bitcoin is actually good for - moving money "surreptitiously" - it's less good at than real dollars?
>> The point is that Bitcoin has introduced an actual "digital cash" currency without institutional/governmental middlemen.
The emergent cartel of miners becomes that.
The emergent cartel of miners becomes that.
If you think this, you don't understand Bitcoin.
Or maybe the other way around. Don't just assert. Explain.
From the article:
> The whole idea of proof-of-work mining is broken the instant hardware comes out which is specialized for mining and useless for general computation because at that point the need to have compute power for other purposes is absolutely irrelevant in having any effect on mining, and there ceases to be any force that causes mining to be distributed around the world. It becomes a "race to the bottom" to find where people can get the cheapest electricity, and then mining anywhere else - anywhere the government tries to make sure ordinary people actually get the benefit from electricity bought for tax money, for example - becomes first pointless, then a net loss.
It's the same story as some countries not having good quality coffee, avocados, quinoa, etc. because the export-quality goods are priced out of widespread domestic consumption.
With electricity production and distribution being a natural monopoly (and therefore typically regulated by the government), blockchain can't escape the realities of foreign exchange rates and government control.
From the article:
> The whole idea of proof-of-work mining is broken the instant hardware comes out which is specialized for mining and useless for general computation because at that point the need to have compute power for other purposes is absolutely irrelevant in having any effect on mining, and there ceases to be any force that causes mining to be distributed around the world. It becomes a "race to the bottom" to find where people can get the cheapest electricity, and then mining anywhere else - anywhere the government tries to make sure ordinary people actually get the benefit from electricity bought for tax money, for example - becomes first pointless, then a net loss.
It's the same story as some countries not having good quality coffee, avocados, quinoa, etc. because the export-quality goods are priced out of widespread domestic consumption.
With electricity production and distribution being a natural monopoly (and therefore typically regulated by the government), blockchain can't escape the realities of foreign exchange rates and government control.
Miners have no ability to retract or redirect transactions. And to exclude them would require 100% collusion. Miners as "middlemen" doesn't make sense.
Edit: Your comment was edited after I made this one. I see no relation between the quote from the article and how miners are supposed to be middlemen.
Edit: Your comment was edited after I made this one. I see no relation between the quote from the article and how miners are supposed to be middlemen.
> collusion
It doesn't take 100% collusion, but certainly no more than 51%, and I've read speculation (though no proof) that less is sufficient.
> middlemen
A mining cartel can't edit a blockchain, but they can choose to accept a different blockchain, which is effectively the same thing. Do you accept the premise that a sufficiently large cartel can exist, by state intervention in the price of electricity?
[Apologies for the edits. I often find I dislike my first draft.]
It doesn't take 100% collusion, but certainly no more than 51%, and I've read speculation (though no proof) that less is sufficient.
> middlemen
A mining cartel can't edit a blockchain, but they can choose to accept a different blockchain, which is effectively the same thing. Do you accept the premise that a sufficiently large cartel can exist, by state intervention in the price of electricity?
[Apologies for the edits. I often find I dislike my first draft.]
It requires 100% because it only takes one miner to include the transaction for it to eventually be included.
Chain splits do not "edit" blockchains, they still require their own proof of work, and they cannot modify transactions, only drop them. Honest participants in a chain that is orphaned will not have had their money spent in the new chain, leaving it available to spend again. That's all that can be done. It requires a lot of work to be done once, let alone maintained over time on consecutive blocks, and in extremely short order the rewards sacrificed by fucking with the blockchain make continued attacks expensive to the degree that they'd be practically impossible.
People aren't thinking this through. The "race to the bottom" endgame is not that miners consolidate in one state with subsidized electricity, but that mining operations eventually power themselves off-grid through renewables, making distribution entirely detached from geography and jurisdiction.
Chain splits do not "edit" blockchains, they still require their own proof of work, and they cannot modify transactions, only drop them. Honest participants in a chain that is orphaned will not have had their money spent in the new chain, leaving it available to spend again. That's all that can be done. It requires a lot of work to be done once, let alone maintained over time on consecutive blocks, and in extremely short order the rewards sacrificed by fucking with the blockchain make continued attacks expensive to the degree that they'd be practically impossible.
People aren't thinking this through. The "race to the bottom" endgame is not that miners consolidate in one state with subsidized electricity, but that mining operations eventually power themselves off-grid through renewables, making distribution entirely detached from geography and jurisdiction.
> continued attacks ... practically impossible
I agree that continued attacks makes a complicated situation, given the cartel participants would probably hold a significant amount of coin and would risk devaluing themselves against some other currency (though in the end-game scenario, what other currency matters?).
Let's imagine that the majority of domestic and international trade is conducted in Bitcoin, with maybe some alterations to the protocol to enable hundreds of thousands of transactions per second at essentially zero cost from the perspective of an individual actor (non-miner), even bursting up to tens of millions of transactions per second, somehow. Suppose then that two large governments, say the Unites States of America and the People's Republic of China, get into a little tiff about some boats hanging around the Taiwan Strait. Would these societies (in aggregate) prefer that their domestic and international trade be conducted in Bitcoin, or in a domestically-controlled currency?
A cartel could lock out a set of accounts from the Bitcoin network. Perhaps only temporarily, but long enough to have serious effects.
> power themselves off-grid through renewables
That'd be cool, but I doubt that off-grid will ever reach the efficiency and scale that on-grid will provide, due to fluctuations in the power sources and the economies of scale. It's hard to make a currency choice by betting on that technology, especially as the calculation could swap as the technology changes.
I agree that continued attacks makes a complicated situation, given the cartel participants would probably hold a significant amount of coin and would risk devaluing themselves against some other currency (though in the end-game scenario, what other currency matters?).
Let's imagine that the majority of domestic and international trade is conducted in Bitcoin, with maybe some alterations to the protocol to enable hundreds of thousands of transactions per second at essentially zero cost from the perspective of an individual actor (non-miner), even bursting up to tens of millions of transactions per second, somehow. Suppose then that two large governments, say the Unites States of America and the People's Republic of China, get into a little tiff about some boats hanging around the Taiwan Strait. Would these societies (in aggregate) prefer that their domestic and international trade be conducted in Bitcoin, or in a domestically-controlled currency?
A cartel could lock out a set of accounts from the Bitcoin network. Perhaps only temporarily, but long enough to have serious effects.
> power themselves off-grid through renewables
That'd be cool, but I doubt that off-grid will ever reach the efficiency and scale that on-grid will provide, due to fluctuations in the power sources and the economies of scale. It's hard to make a currency choice by betting on that technology, especially as the calculation could swap as the technology changes.
Bitcoin is the digital version of those huge coins people had on Easter Island. Had the Easter Islanders invented fractional reserve banking they might have taken over the world instead of England.
Since Bitcoin transactions are enabled only by spending electricity, isn't the whole system dependent on utility companies, which are either in part or in whole extensions of the government?
If you want to be reductionist, you can argue that since almost all of the world's land, people, resources, and equipment are under the control of some government, it's hard for anything to be independent of them.
I don't think that's reductionist. I think that's a reasonable statement. It is indeed hard for anything to be independent of government control, except perhaps in failed states. Which is sort-of the definition of a failed state.
Well, yeah. Why else would Elon want a Mars colony so badly?
If electricity became less available the mining rate of Bitcoin would automatically adjust to the scarcity of available computation - it's not like there's a specified amount of electricity that has to be used per transaction.
It's less about steady-state global availability than burst capacity. What if the People's Liberation Army decides that temporary control of the Bitcoin network is a valuable capability?
What's "digital cash" in this context? What does it offer extra compared to regular cash and online payments?
Theoretically companies like Mindgeek who have been kicked off of the VISA/Mastercard duopoly, would be able to use Bitcoin as a censorship-resistant way to accept online payment. There's additional benefits as mentioned earlier like not needing to comply with KYC laws.
Of course, as Bitcoin currently stands, it's difficult for this to come to fruition because most holders are speculators rather than people interested in using it as currency.
Of course, as Bitcoin currently stands, it's difficult for this to come to fruition because most holders are speculators rather than people interested in using it as currency.
> There's additional benefits as mentioned earlier like not needing to comply with KYC laws.
Why would Bitcoin transactions be exempt from KYC?
Why would Bitcoin transactions be exempt from KYC?
Because the fact that it's (in theory) anonymous means that most people think that it also cannot be regulated by laws. People just don't outright say that though because it might sound like enabling fraud, tax evasion, and other unsavory activities was the point.
>like not needing to comply with KYC laws
You can also not comply with KYC laws in the traditional banking system; you're just going to get roflstomp'd by the financial authorities, c.f. $200mm fine for Deutsche Bank for insufficient AML/KYC controls in 2012-2015 time period.
Why would you imagine the result will be any different for crypto-banking? FinCEN is already promoting KYC for exchange-hosted wallets.
You can also not comply with KYC laws in the traditional banking system; you're just going to get roflstomp'd by the financial authorities, c.f. $200mm fine for Deutsche Bank for insufficient AML/KYC controls in 2012-2015 time period.
Why would you imagine the result will be any different for crypto-banking? FinCEN is already promoting KYC for exchange-hosted wallets.
> There's additional benefits as mentioned earlier like not needing to comply with KYC laws.
In many situations lack of KYC is a bug, not a feature.
In many situations lack of KYC is a bug, not a feature.
>In many situations lack of KYC is a bug, not a feature.
Some people seem to be actually believe that.
You just happen to be one of them.
Some people seem to be actually believe that.
You just happen to be one of them.
How do you track money laundering? Not everyone doing it is a virtuous rebel Fighing The Powah. A lot of them are just plain old crooks or other kinds of criminals.
> How do you track money laundering?
You don't.
Just like free speech, tracking what people do with their money is a violation of basic human rights.
Giving governments that kind of power is downright crazy.
If you want to catch criminals, resort to traditional ways.
You don't.
Just like free speech, tracking what people do with their money is a violation of basic human rights.
Giving governments that kind of power is downright crazy.
If you want to catch criminals, resort to traditional ways.
Exactly. And barring an unlikely collapse, cash/dollar isn't going to fluctuate much at all in value. So... a feature.
At this point, bitcoin is a competitor to gold as an asset store. Maybe it will be more like a currency at some point. But there's a long way to go and a lot of forces against it for that to occur.
At this point, bitcoin is a competitor to gold as an asset store. Maybe it will be more like a currency at some point. But there's a long way to go and a lot of forces against it for that to occur.
Just pointing out; there exist also those who consider the possibility of a collapse of cash/dollar more likely than your estimate.
There exist those who predict the collapse of everything. That's not a valid answer.
Who are they? How many are they? What insight do they have that we don't have? Is this chance higher than the possibility of collapse for Bitcoin?
Who are they? How many are they? What insight do they have that we don't have? Is this chance higher than the possibility of collapse for Bitcoin?
Seriously. Will it do the equivalent of being ~20k then go to 3k. Then come back to 29k? Highly unlikely. As much as people want to predict a collapse, you can't store a ton of money safely outside of Treasuries.
With cash you can hand it to another person in payment. With conventional digital payments you request a trusted intermediary (your bank) to transfer that value to them. What if you don't trust banks but still want to be able to pay people?
Bitcoin was born in the Global Financial Crisis when the world was discovering the massive scam which the financial services industry had perpetrated, causing the whole problem. People wanted a way to do transactions without having to trust institutions which demonstrably couldn't be trusted. Hence Bitcoin which acts like digital cash with no trusted intermediary.
Bitcoin was born in the Global Financial Crisis when the world was discovering the massive scam which the financial services industry had perpetrated, causing the whole problem. People wanted a way to do transactions without having to trust institutions which demonstrably couldn't be trusted. Hence Bitcoin which acts like digital cash with no trusted intermediary.
Well, take the upsides of cash (e.g. don't need to open a bank, prove residence, etc.) and now add the ability to exchange it digitally without the pointless gatekeeping of large corporations like Paypal.
Who will be the largest Bitcoin vendor because they are trusted.
But they won’t be the only vendor. There is no license required that gives them a monopoly on bitcoin. If they serve a market segment, great! Others will use something else. Bitcoin is entirely open - it’s a protocol.
So is EDI used by banks with other currencies. I am old enough to have used it :)
That's fine. Bitcoin adoption by these institutions makes it easier for people to receive it who don't actually want to hold it.
Still, note that you don't need Paypal to move Bitcoin.
Still, note that you don't need Paypal to move Bitcoin.
Bitcoin isn't going to be a currency. It's a digital store of value. It will never be anything other than that. People may build new currencies on top of it in the near future. As the volatility fades from Bitcoin over time and it becomes extraordinarily boring (ie quite stable), some small nations will experiment with linking their fiat to Bitcoin for stability (seems laughable today, it won't be in a decade).
Don't all currencies work that way?
How do you send USD to someone digitally?
A lot of ways. And the banks reconcile the cash movement behind the scenes. As I understand it, in a simple example, if you send $1k to someone. And someone at their bank sends $1k to someone at your bank, there's nothing that the banks need to do other than record it.
That you brought up banking is precisely my point. Imagine if you needed a bank account to give someone $100 cash. Or to spend a few bucks at a street hotdog vendor.
Most people take it for granted that they need a bank to do anything, and they don't really consider how powerless they are over their own money. Like how it's illegal to carry too much cash (and it can simply be taken away). And how your bank can impose arbitrary restrictions against you like rejecting transactions and freezing your account. I've lost various bank accounts over the years as a permanent traveler. I'm banned from Paypal.
I want to be able to send $100 cash digitally with the operational minimalism of giving someone $100 cash in person. I want some control over my money even when I want to exchange it digitally.
Most people take it for granted that they need a bank to do anything, and they don't really consider how powerless they are over their own money. Like how it's illegal to carry too much cash (and it can simply be taken away). And how your bank can impose arbitrary restrictions against you like rejecting transactions and freezing your account. I've lost various bank accounts over the years as a permanent traveler. I'm banned from Paypal.
I want to be able to send $100 cash digitally with the operational minimalism of giving someone $100 cash in person. I want some control over my money even when I want to exchange it digitally.
Understood that is a concern for you and some. I hope it gets there. But I'm not sure most people care.
Bitcoin isn't a currency yet. Most people can call up their credit card and get stuff blocked and returned instantly. Debit cards are definitely less of a service in that regard though and shouldn't be used like credit cards.
But the services are valued by most people.
As a currency, and as someone mentioned earlier - it's currently terrible due to it having an unstable valuation.
Bitcoin isn't a currency yet. Most people can call up their credit card and get stuff blocked and returned instantly. Debit cards are definitely less of a service in that regard though and shouldn't be used like credit cards.
But the services are valued by most people.
As a currency, and as someone mentioned earlier - it's currently terrible due to it having an unstable valuation.
Credit cards are debt instruments. Very easy to use of course, but having credit card UX isn't required to qualify as a currency. There were no credit cards 100 years ago. Many countries still rely exclusively on cash and debit cards.
Agreed. My comment wasn't organized well and I can see that it linked the two statements, but I don't mean it like that.
I was referring to credit cards being a service that consumers value because they have fraud protection and other things. The parent was talking about arbitrary restrictions and freezing accounts. That typically happens when you have fraud on cash accounts (bank account, debit card, etc). And a credit card layer works extremely well.
I just had someone accidentally send me money on Venmo and I returned it to them right away. Cash or cash equivalent digital services are nice, but it limits "purchasing power" (great for consumers IMO, bad for merchants), has no rewards, and little to zero fraud protections.
Countries that use chip and pin on debit cards are definitely more secure. This should be in place in all countries. Fraud on a debit card is a nightmare. Fraud on a credit card is not usually a big deal for consumers.
Regardless of the various financial instruments, bitcoin cannot be a real currency when it's value is unstable.
I was referring to credit cards being a service that consumers value because they have fraud protection and other things. The parent was talking about arbitrary restrictions and freezing accounts. That typically happens when you have fraud on cash accounts (bank account, debit card, etc). And a credit card layer works extremely well.
I just had someone accidentally send me money on Venmo and I returned it to them right away. Cash or cash equivalent digital services are nice, but it limits "purchasing power" (great for consumers IMO, bad for merchants), has no rewards, and little to zero fraud protections.
Countries that use chip and pin on debit cards are definitely more secure. This should be in place in all countries. Fraud on a debit card is a nightmare. Fraud on a credit card is not usually a big deal for consumers.
Regardless of the various financial instruments, bitcoin cannot be a real currency when it's value is unstable.
> Most people take it for granted that they need a bank to do anything, and they don't really consider how powerless they are over their own money
People use banks because they provide financial services. You don't have to use banks, if for some reason you want to avoid them, but then you're left without access to those services. As far as I know, Bitcoin doesn't provide financial services, so it's not a replacement for banking.
People use banks because they provide financial services. You don't have to use banks, if for some reason you want to avoid them, but then you're left without access to those services. As far as I know, Bitcoin doesn't provide financial services, so it's not a replacement for banking.
Most banks provide most services at loss and make most of their money on mortgages. So they will provide payment services in the hope that 20 years later you get a mortgage from the bank you are familiar with.
Notice also that the whole business model relies on the bank having privileged access to central bank money and sharing that access with the plebs for some percentage interest. However current technology makes it feasible for central banks to simply interact with consumers directly. The only remaining problem is how to decide who is likely to pay back the loan. Retail banks could be relegated to credit check providers.
Notice also that the whole business model relies on the bank having privileged access to central bank money and sharing that access with the plebs for some percentage interest. However current technology makes it feasible for central banks to simply interact with consumers directly. The only remaining problem is how to decide who is likely to pay back the loan. Retail banks could be relegated to credit check providers.
> Like how it's illegal to carry too much cash
Which country is that? It's not illegal anywhere I know of.
Which country is that? It's not illegal anywhere I know of.
He's probably talking about the horror stories of people getting their cash/assets seized via civil forfeiture. eg. https://www.washingtonpost.com/nation/2018/09/01/police-seiz...
Yeah, that's different from carrying cash being illegal.
It makes it illegal in practice, just not in name.
Are you really free if you have any arbitrarily defined “large” amount of money, only to have it sorted and it become YOUR burden of proof to show the origins of the cash?
Are you really free if you have any arbitrarily defined “large” amount of money, only to have it sorted and it become YOUR burden of proof to show the origins of the cash?
Cash transactions over 10,000 lakh are illegal in India [1]. Spain, France and Greece have all recently introduced limits [2]. Germany [3] has tried to introduce similar limits but have failed (so far). Australia's introducing a limit soon [4].
[1] https://babatax.com/cash-transaction-limit-in-india-cash-pay...
[2] https://wolfstreet.com/2017/01/28/europe-limits-on-cash-tran...
[3] https://www.theguardian.com/world/2016/feb/08/german-plan-pr...
[4] https://www.accountantsdaily.com.au/business/14087-governmen...
[1] https://babatax.com/cash-transaction-limit-in-india-cash-pay...
[2] https://wolfstreet.com/2017/01/28/europe-limits-on-cash-tran...
[3] https://www.theguardian.com/world/2016/feb/08/german-plan-pr...
[4] https://www.accountantsdaily.com.au/business/14087-governmen...
Sure, there are limits of non-tax-traceable payments in a few places. The part that surprised me was literally "carry too much cash" which is not quite the same thing.
In my country (Italy) is kind of illegal. I mean, not carrying too much cash (but of course if they find you with a suitcase full of cash, they will ask you where you got all that cash from), but you can't pay in a shop more than 2.000 euros (and they will lower this limit to 1.000 and possibly less in the future). Also you can't pay your employee cash, you have to pay in traceable manners something that you want to deduct from taxes like medical expenses, and so on.
Transaction with cash between private citizens are permitted tough (like buying a used car in cash), but it's not a good idea to do so if you don't trust the other party (because then how can I prove that I gave you the money?)
Transaction with cash between private citizens are permitted tough (like buying a used car in cash), but it's not a good idea to do so if you don't trust the other party (because then how can I prove that I gave you the money?)
[deleted]
Using one of the 100s of services, apps and websites that exist.
You missed the last part of TFA:
> The more scalable the network becomes, the more centralized it becomes, until ultimately a "scalable" cryptocurrency would be doing things exactly the same way as a credit card processor.
> The more scalable the network becomes, the more centralized it becomes, until ultimately a "scalable" cryptocurrency would be doing things exactly the same way as a credit card processor.
That is a good way of thinking about it. "The Internet of Money" is a very good way of labeling it. The internet protocols itself and it's openess are very foundational like bitcoin. Everything we use today is built on top of that. BTC is really just the brand right now. Moving forward we will see if BTC is Yahoo/Myspace and who will be the Google/Amazon of this new sector.
No, this is the incorrect way of thinking of it.
It's more like TCP/IP than businesses built on top of the protocol.
It's more like TCP/IP than businesses built on top of the protocol.
I prefer "The US dollar without democratic institutions"
Every Bitcoin transaction is crawling with industrial and governmental middlemen, often with the latter trying to arrest the former for stealing all your money.
Ah, yes, physical currency doesn't have institutional/governmental middlemen because private regulated banks aren't the government. /s
Try to make a concrete point without encumbering it with sarcasm. I don't want to guess at what you mean and then have a meta discussion over whether I correctly interpreted your point.
Amen
Well, obviously the designer of bitcoin or any so called cryptos did not take a serious thought why centralized financial authorities are there. They believed books kept by those financial authorities are the real problems and thus they made the books public and introduced the mining process. The real problems have never been about records, they are really about the integrity of the transactions, which in turn pointing to the trustworthiness of the counterpart. By making books public can never ever resolve those trustworthiness issue and actually introduced more problems such as everyone is storing heaps of info which does not concern them at all, 51% attack etc. To establish trust between parties in the transactions, as you mentioned, market-makers, exchanges etc came into play, which defeats the purpose: to decentralize by introducing other centralized authorities which are actually less trustworthy than current ones. In other words, catch-22.
Bitcoin has done a great job educating me as to why we have the rules we have regarding financial orgs, and currency.
Every new scam or venture that runs into regulatory issues is a fascinating trip that often results in "well yeah that's a terrible idea..."
Every new scam or venture that runs into regulatory issues is a fascinating trip that often results in "well yeah that's a terrible idea..."
Your inalterable blockchain either dies young or lives long enough to see a hard fork.
I agree with you mostly, but market makers on exchanges are not middle-men, they are simply market participants like any other. Conceptually, there's no difference between a professional market maker and a individual who puts a limit order on the book.
The problem is not with Bitcoin. The problem is the 1mb block size cap. The block size cap restricts the number of transactions that can be processed in a block. It's an artificial restriction of supply. When demand increases the price (tx fee) goes (way) up.
There is some magical thinking within the Bitcoin community that only a fixed block size will prevent centralization. I have never heard a solid argument to back that up. Everything in technology is growing exponentially (cpu power, network throughput, disc space). So in relative terms the block size is decreasing exponentially. Technically Bitcoin mining should get exponentially more decentralized. This is not happening.
If we let the block size grow at the same rate as the surrounding tech, or at least at some rate, the supply problem would go away. The transaction fee would go down and we would not need to use flaky and centralizing tech like the lightning network that mimics the financial system that we wanted to escape.
For a long time this was a theory. However several forks of Bitcoin have tried it in practice (eg BCH, LTC, BSV). Over several years these experiments have shown that if you stop restricting the block size you get a system that is dependable, cheap to use, and scalable.
My wish for 2021 is for people in Bitcoin to reconsider if they have made a mistake in restricting the blockchain. I hope they will have the courage to change their minds in light of data.
There is some magical thinking within the Bitcoin community that only a fixed block size will prevent centralization. I have never heard a solid argument to back that up. Everything in technology is growing exponentially (cpu power, network throughput, disc space). So in relative terms the block size is decreasing exponentially. Technically Bitcoin mining should get exponentially more decentralized. This is not happening.
If we let the block size grow at the same rate as the surrounding tech, or at least at some rate, the supply problem would go away. The transaction fee would go down and we would not need to use flaky and centralizing tech like the lightning network that mimics the financial system that we wanted to escape.
For a long time this was a theory. However several forks of Bitcoin have tried it in practice (eg BCH, LTC, BSV). Over several years these experiments have shown that if you stop restricting the block size you get a system that is dependable, cheap to use, and scalable.
My wish for 2021 is for people in Bitcoin to reconsider if they have made a mistake in restricting the blockchain. I hope they will have the courage to change their minds in light of data.
This isn't a very good criticism. Lots of new things recapitulate the structures they are replacing in many ways, while improving on them in just one or a few areas. The fact that ground is being retread is not itself a criticism or a sign of a lack of innovation.
Yes, Bitcoin requires many of the same structures as traditional finance. That does not make them equivalent. Traditional finance does not allow you sovereignty over your money. Bitcoin has central custody, sure. But it's opt in. That's what makes it different. You may or may not care about this property, but its undeniable that it's novel in the digital realm, and empirically many people do care about it.
Yes, Bitcoin requires many of the same structures as traditional finance. That does not make them equivalent. Traditional finance does not allow you sovereignty over your money. Bitcoin has central custody, sure. But it's opt in. That's what makes it different. You may or may not care about this property, but its undeniable that it's novel in the digital realm, and empirically many people do care about it.
It's not that the structures are inherently bad, it's that such structures are, philosophically, the exact sorts of things that many early (and current) proponents of crypto wanted to avoid. In that sense bitcoin hasn't failed as a system in & of itself, but it has failed to achieve the philosophical goals of those people.
Bitcoin & crypto also might not be sovereign in origin but they have plenty of sovereign influence, basically as much as any sovereignty wants to impose on it. Especially as entities like the SEC & IRS come to terms with it, it will be just as vulnerable to government control as fiat currency. This is especially the case because any wide-spread adoption will require adoption by large financial institutions, which cannot avoid regulatory regimes of their local jurisdictions. From the US government's standpoint, US citizens holding bitcoins is not much different than US citizens holding Euros. How that money enters into the US economy & interacts with US financial institutions or changes hands from person to person are basically subject to the same rules & regulations. If you're conducting a a transaction in excess of $10,000 then whatever mechanism facilitates that will still be subject to CTR's, and any "suspicious" transaction of lower limits will still be reported, by law, to the government.
Basically, if you want to convert bitcoin to the local currency to buy something, you'll need to use some sort of off-ramp that will be a regulatory bottleneck. Want to build a "shadow" economy purely driven by crypto exchange? Well, you'll still have to deal with the IRS knocking on your door & saying "You have things of value that you are performing work to receive. We don't care what currency or form you received them in, you received things of value. Give us our cut."
In short, it doesn't matter that it wasn't created by a sovereign authority: The control a sovereign authority can exert over it is, contrary to many of the most philosophical hopes for crypto, indistinguishable from sovereign currency in everything but name & source of origin.
Let me be clear though: I'm not anti-crypto. I'm probably a little ambivalent, and a little optimistic that it might replace high-friction mechanisms that exist in current financial infrastructure. What I do believe is that crypto cannot both go mainstream and fulfill the philosophical hopes that many had wanted for it.
Bitcoin & crypto also might not be sovereign in origin but they have plenty of sovereign influence, basically as much as any sovereignty wants to impose on it. Especially as entities like the SEC & IRS come to terms with it, it will be just as vulnerable to government control as fiat currency. This is especially the case because any wide-spread adoption will require adoption by large financial institutions, which cannot avoid regulatory regimes of their local jurisdictions. From the US government's standpoint, US citizens holding bitcoins is not much different than US citizens holding Euros. How that money enters into the US economy & interacts with US financial institutions or changes hands from person to person are basically subject to the same rules & regulations. If you're conducting a a transaction in excess of $10,000 then whatever mechanism facilitates that will still be subject to CTR's, and any "suspicious" transaction of lower limits will still be reported, by law, to the government.
Basically, if you want to convert bitcoin to the local currency to buy something, you'll need to use some sort of off-ramp that will be a regulatory bottleneck. Want to build a "shadow" economy purely driven by crypto exchange? Well, you'll still have to deal with the IRS knocking on your door & saying "You have things of value that you are performing work to receive. We don't care what currency or form you received them in, you received things of value. Give us our cut."
In short, it doesn't matter that it wasn't created by a sovereign authority: The control a sovereign authority can exert over it is, contrary to many of the most philosophical hopes for crypto, indistinguishable from sovereign currency in everything but name & source of origin.
Let me be clear though: I'm not anti-crypto. I'm probably a little ambivalent, and a little optimistic that it might replace high-friction mechanisms that exist in current financial infrastructure. What I do believe is that crypto cannot both go mainstream and fulfill the philosophical hopes that many had wanted for it.
> It's not that the structures are inherently bad, it's that such structures are, philosophically, the exact sorts of things that many early (and current) proponents of crypto wanted to avoid. In that sense bitcoin hasn't failed as a system in & of itself, but it has failed to achieve the philosophical goals of those people.
I'm not sure that's quite true. Decentralization was a goal, but it wasn't necessarily the case that that decentralization had to pervade all use of the currency. The values of the ecosystem are that more decentralization is better - that's true, so Satoshi et al would have preferred to make decentralized transactions sufficiently scalable not to require centralized exchanges, but I don't think that it has fundamentally failed in its goals just because a lot of transactions happen in bank-like entities. The point is that users have the power to do it in a decentralized way.
> Bitcoin & crypto also might not be sovereign in origin but they have plenty of sovereign influence, basically as much as any sovereignty wants to impose on it. Especially as entities like the SEC & IRS come to terms with it, it will be just as vulnerable to government control as fiat currency. This is especially the case because any wide-spread adoption will require adoption by large financial institutions, which cannot avoid regulatory regimes of their local jurisdictions. From the US government's standpoint, US citizens holding bitcoins is not much different than US citizens holding Euros. How that money enters into the US economy & interacts with US financial institutions or changes hands from person to person are basically subject to the same rules & regulations. If you're conducting a a transaction in excess of $10,000 then whatever mechanism facilitates that will still be subject to CTR's, and any "suspicious" transaction of lower limits will still be reported, by law, to the government.
This just isn't accurate. It may in fact be vulnerable to some level of government influence, due to the fiat gateways involved. But it's just not true that it's equivalent to fiat in that regard. Cryptocurrencies will never be as regulable as fiat is, and I think it's pretty clear that that's true, given how widely they've been adopted by cyber criminals and darknet markets. Governments have been completely unable to prevent their use in this way, and will continue to be unable to do so.
It's true from a legal perspective that the government views it just like foreign currency (actually, in the US, they treat it like property, not currency, but we can ignore that for now). But from a technical perspective, its very very different. The technical differences make it very difficult to regulate. Think about music. When music got digitized, its legal status didn't change. It was just as illegal to download an MP3 as it was to steal a CD. What changed is the topology of the technical landscape underneath it, and that is what made all the difference.
> Basically, if you want to convert bitcoin to the local currency to buy something, you'll need to use some sort of off-ramp that will be a regulatory bottleneck. Want to build a "shadow" economy purely driven by crypto exchange? Well, you'll still have to deal with the IRS knocking on your door & saying "You have things of value that you are performing work to receive. We don't care what currency or form you received them in, you received things of value. Give us our cut."
I think you are under-weighting the significance of friction. In principle, sure, the IRS might do that - but we don't live in principle. We live in a physical world with resource constraints. If you make something harder to accomplish, it may no longer be economical to do it. Collecting income taxes from people that keep their money in crypto who don't want to pay them will never be as efficient as doing so in the fiat banking system.
I'm not sure that's quite true. Decentralization was a goal, but it wasn't necessarily the case that that decentralization had to pervade all use of the currency. The values of the ecosystem are that more decentralization is better - that's true, so Satoshi et al would have preferred to make decentralized transactions sufficiently scalable not to require centralized exchanges, but I don't think that it has fundamentally failed in its goals just because a lot of transactions happen in bank-like entities. The point is that users have the power to do it in a decentralized way.
> Bitcoin & crypto also might not be sovereign in origin but they have plenty of sovereign influence, basically as much as any sovereignty wants to impose on it. Especially as entities like the SEC & IRS come to terms with it, it will be just as vulnerable to government control as fiat currency. This is especially the case because any wide-spread adoption will require adoption by large financial institutions, which cannot avoid regulatory regimes of their local jurisdictions. From the US government's standpoint, US citizens holding bitcoins is not much different than US citizens holding Euros. How that money enters into the US economy & interacts with US financial institutions or changes hands from person to person are basically subject to the same rules & regulations. If you're conducting a a transaction in excess of $10,000 then whatever mechanism facilitates that will still be subject to CTR's, and any "suspicious" transaction of lower limits will still be reported, by law, to the government.
This just isn't accurate. It may in fact be vulnerable to some level of government influence, due to the fiat gateways involved. But it's just not true that it's equivalent to fiat in that regard. Cryptocurrencies will never be as regulable as fiat is, and I think it's pretty clear that that's true, given how widely they've been adopted by cyber criminals and darknet markets. Governments have been completely unable to prevent their use in this way, and will continue to be unable to do so.
It's true from a legal perspective that the government views it just like foreign currency (actually, in the US, they treat it like property, not currency, but we can ignore that for now). But from a technical perspective, its very very different. The technical differences make it very difficult to regulate. Think about music. When music got digitized, its legal status didn't change. It was just as illegal to download an MP3 as it was to steal a CD. What changed is the topology of the technical landscape underneath it, and that is what made all the difference.
> Basically, if you want to convert bitcoin to the local currency to buy something, you'll need to use some sort of off-ramp that will be a regulatory bottleneck. Want to build a "shadow" economy purely driven by crypto exchange? Well, you'll still have to deal with the IRS knocking on your door & saying "You have things of value that you are performing work to receive. We don't care what currency or form you received them in, you received things of value. Give us our cut."
I think you are under-weighting the significance of friction. In principle, sure, the IRS might do that - but we don't live in principle. We live in a physical world with resource constraints. If you make something harder to accomplish, it may no longer be economical to do it. Collecting income taxes from people that keep their money in crypto who don't want to pay them will never be as efficient as doing so in the fiat banking system.
> Traditional finance does not allow you sovereignty over your money.
What do you mean sovereignty? Do you mean property? Traditional finance is not only compatible with the ownership of money, it relies entirely on it!
What do you mean sovereignty? Do you mean property? Traditional finance is not only compatible with the ownership of money, it relies entirely on it!
I mean sovereignty in the sense of actual control. When you put your money in a bank account, you give up control of it to that bank. The money may legally be yours, but they physically possess it, and can keep you from transacting with it whenever they wish. I in fact just had this issue the other day. I have a company, and due to a clerical error with the state its registered in, my company was listed as being "not in good standing", and because of this, Wells Fargo froze my accounts and wouldn't let me transact for two weeks until I got the whole thing cleared up. That could never happen with a crypto wallet, because I have actual sovereignty over my crypto wallets, nobody can freeze them for any reason.
Ok, that's not sovereignty. Sovereignty refers to the highest authority in a territory. Yes, in traditional banking, customers cede control of the money they deposit with the bank to the bank. They do not cede the ownership of that money, which they continue to own. Now, transferring money without making a deposit is possible with any currency, not just BTC. You make it sound like it's a feature of BTC but it's not. It's a feature of the financial industry, whether it provides this particular service.
Highest authority means actual physical control. When your money is in a bank, the highest authority is the bank. Not you. This is the literal definition of sovereignty, and it's used in many digital contexts, not just crypto. E.g. 'self-sovereign identity'. This isn't a word usage made up by crypto, it's quite common, and this is its meaning.
Possession and ownership are two very different things. Physical control can be transferred without loss of ownership. This is what happens when somebody rents a car, or when somebody deposits money with a bank. Sovereignty is a concept very specific to political science. It doesn't make a lot of sense to use it in other contexts. You can use it, if you want, but it's usually a sign that the person using it doesn't really know what they're talking about.
Or maybe it's that you don't really know what you're talking about. People have been using the term in this way for quite a while, and it isn't specific to crypto. It also comports just fine with the dictionary definition. So it seems to me that it's you who's definition is idiosyncratic. But the meanings of words are beside the point. Sovereignty in this sense is a property crypto has that other financial assets do not, whatever word you want to use for it.
Yes, I see the irony.
So much talk about the benefit of crypto currencies seems - in my eyes at least - based on a fundamental misunderstanding of how societies work.
And most of all: you can’t replace trust with tech.
So much talk about the benefit of crypto currencies seems - in my eyes at least - based on a fundamental misunderstanding of how societies work.
And most of all: you can’t replace trust with tech.
> fundamental understanding
From the tone of your statement, I think you meant mis-understanding. I'll add also a misunderstanding of macroeconomics and a rejection of empiricism. The cryptocurrency folks read a bit too much of von Mises.
From the tone of your statement, I think you meant mis-understanding. I'll add also a misunderstanding of macroeconomics and a rejection of empiricism. The cryptocurrency folks read a bit too much of von Mises.
Yes, sorry.
> And most of all: you can’t replace trust with tech.
I'd say, you can (Bitcoin is one of many recent exercises of replacing trust with math). But it's not worth the price. Or, put another way, trust is a ridiculously powerful optimization that enabled humanity to form societies in the first place. It's very similar to how introducing a central node into a network reduces communication costs from O(n^2) to O(n). In the general case, it's stupid to not take advantage of it.
I consider Bitcoin to be the closest we've came so far to expressing trust in units of energy. POW shows us how much computation has to happen to achieve mathematical guarantees in lieu of trust. Somebody could probably derive some upper and lower bounds on the energy costs of trust in terms of information theory. I'd love to read such a paper.
I'd say, you can (Bitcoin is one of many recent exercises of replacing trust with math). But it's not worth the price. Or, put another way, trust is a ridiculously powerful optimization that enabled humanity to form societies in the first place. It's very similar to how introducing a central node into a network reduces communication costs from O(n^2) to O(n). In the general case, it's stupid to not take advantage of it.
I consider Bitcoin to be the closest we've came so far to expressing trust in units of energy. POW shows us how much computation has to happen to achieve mathematical guarantees in lieu of trust. Somebody could probably derive some upper and lower bounds on the energy costs of trust in terms of information theory. I'd love to read such a paper.
Bitcoin doesn't solve any trust problem outside of how many bitcoins are in each wallet.
Even in the very basic ecommerce use case: buyer purchases item online with bitcoin. The buyer must necessarily trust the vendor to deliver.
There's no recourse outside of the good graces of the vendor. There's no chargebacks or third party mediation.
Thus Bitcoin actually reverses the risk assumed by online purchases from the vendor to the buyer.
This is the reason why Bitcoin is a failure outside of niche grey and black market concerns. It is far worse for the consumer than existing solutions that isolate them from transaction risk, and will usually kick back a small percentage in cash back.
Even in the very basic ecommerce use case: buyer purchases item online with bitcoin. The buyer must necessarily trust the vendor to deliver.
There's no recourse outside of the good graces of the vendor. There's no chargebacks or third party mediation.
Thus Bitcoin actually reverses the risk assumed by online purchases from the vendor to the buyer.
This is the reason why Bitcoin is a failure outside of niche grey and black market concerns. It is far worse for the consumer than existing solutions that isolate them from transaction risk, and will usually kick back a small percentage in cash back.
There’s a problem with this argument.
The middlemen are being created again yes, but they are being replaced with mostly open-sourced software solutions like smart contacts and auditable ledgers. Bitcoin started the party, but the other projects are now finding their feet with technology that uses open consensus as the basis for open, functional, opt-in systems.
Look at Gitcoin, this would not have been possible without the Bitcoin project gaining traction.
The middlemen are being created again yes, but they are being replaced with mostly open-sourced software solutions like smart contacts and auditable ledgers. Bitcoin started the party, but the other projects are now finding their feet with technology that uses open consensus as the basis for open, functional, opt-in systems.
Look at Gitcoin, this would not have been possible without the Bitcoin project gaining traction.
But in bitcoin they aren't mandatory and there are essentially no borders. I'm not a fan of it personally but you can cut out the middlemen if you like. As to if that will be the case in the future as more and more regulations (and criminal precedents are set) are added on then it because much murkier.
> re-invent every last feature of the banks they thought they were going to be escaping.
> centralized mining activity in a country where centralization means it's effectively owned by exactly the kind of government most people thought they DIDN'T want looking up their butts and where the people who that government allows to "own" this whole business work together as a cartel.
It looks to me like an attack on the reserve currency status of the USD. It's not a sure bet, but China is willing to tolerate it in the event it succeeds. Chins holds the mining power, so they effectively win if Bitcoin takes over. It's easy for them to clamp down and control.
> This is a pretty funny point because every time I go on twitter and see people talk about crypto, what they're essentially having is a discussion about public policy, and often they seem to try to reinvent institutions that already exist
The Bitcoin early adopters want to replace the incumbent systems with their own so that they can enrich themselves.
Now that Bitcoin has had time to play out, it feels like an attack on USD with way too many downsides.
> centralized mining activity in a country where centralization means it's effectively owned by exactly the kind of government most people thought they DIDN'T want looking up their butts and where the people who that government allows to "own" this whole business work together as a cartel.
It looks to me like an attack on the reserve currency status of the USD. It's not a sure bet, but China is willing to tolerate it in the event it succeeds. Chins holds the mining power, so they effectively win if Bitcoin takes over. It's easy for them to clamp down and control.
> This is a pretty funny point because every time I go on twitter and see people talk about crypto, what they're essentially having is a discussion about public policy, and often they seem to try to reinvent institutions that already exist
The Bitcoin early adopters want to replace the incumbent systems with their own so that they can enrich themselves.
Now that Bitcoin has had time to play out, it feels like an attack on USD with way too many downsides.
It’s like refactoring a codebase without understanding the problems behind the current implementation, and then acting surprised when the code is just as ugly.
Ironic isnt it
nothing wrong with reinventing the old stuff as long as the new ones are better.
Bitcoins are digital-hawalas and therefore are keepsakes. You can find yourself or pay to get someone's keepsakes. There is no counter-party, just like gold and oil. Once I own it, there is no way to consume it other than to barter it. It could be made illegal anytime by authorities.
Fentanyl, Meth, Shrooms, Credit Reports, child abuse videos, guns and gun parts, credit reports, scamming the elderly out of their lifesavings with BTC ATMs and strong arming hospitals into paying tens of millions with ransomware during the pandemic are "keepsakes"?
Please fix your time machine and join us in 2021, Its awesome in here!
Please fix your time machine and join us in 2021, Its awesome in here!
I also like the digital-hawala analogy for explaining bitcoin's value.
The fact that it could be declared illegal by fiat doesn't completely remove its usefulness because at the end of the day it's open source software.
The fact that it could be declared illegal by fiat doesn't completely remove its usefulness because at the end of the day it's open source software.
On the other hand, the existince of a cryptocurrency ecosystem has given us a really easy and clear indicator that a company or individual is lacking in scruples, and that we should move on from whatever they're hawking.
Sure, but it's a beautiful disaster that's helped explore the space, & both train & incentivize people for various offshoots & successors that will resolve all of Dillinger's concerns, and more.
This is unduly pessimistic overly sentimental. Bitcoin is anything but a failure, and represents an enormous step forward in the creation of digital currency. It's been a incredibly successful experiment regardless of it's long term future and Blockchain will most certainly be around forever. Scaling to much larger on chain transactions is of course the holy grail, but this is far from unsolvable and if bitcoin doesn't do it another crypto will.
I wish the crypto currency described in the second half of Applied Cryptography had caught on.
Basically, the bank issues a signed secret coin, and you (recursively) spend the money by using the secret to generate another signed secret. As with onion routing, you can only “look back” one step of the signature chain unless you collude.
It’s anonymous and supports offline spending. Anonymity can be broken via collusion by an unbroken chain of downstream recipients of the money, but that’s a necessary feature to catch double spenders.
It also integrates in well with modern day to day transactions, in that “atm”’s can issue and retire currency at will. There is not blockchain, so it trivially scales linearly, and is not energy intensive.
It could be a reserve currency, but it’s not optimized for that. Instead, think of it as allowing any bank to issue its own digital fiat currency.
In short, it solves most of the problems everyday people wish bitcoin solved, but isn’t very interesting to speculators.
Basically, the bank issues a signed secret coin, and you (recursively) spend the money by using the secret to generate another signed secret. As with onion routing, you can only “look back” one step of the signature chain unless you collude.
It’s anonymous and supports offline spending. Anonymity can be broken via collusion by an unbroken chain of downstream recipients of the money, but that’s a necessary feature to catch double spenders.
It also integrates in well with modern day to day transactions, in that “atm”’s can issue and retire currency at will. There is not blockchain, so it trivially scales linearly, and is not energy intensive.
It could be a reserve currency, but it’s not optimized for that. Instead, think of it as allowing any bank to issue its own digital fiat currency.
In short, it solves most of the problems everyday people wish bitcoin solved, but isn’t very interesting to speculators.
How does this scheme support offline spending and also prevent double spending ?
When you double spend, someone eventually cashes the money in at a bank, and the bank notices. With their authorization, their wallet decrypts and divulges the person that gave them the double spent currency to the authorities. This continues recursively until the double spender is discovered.
One problem with this scheme is that you could lose your wallet, then be found to be complicit in double spending years later (when you refuse to / can’t divulge the identity of the upstream spender).
One problem with this scheme is that you could lose your wallet, then be found to be complicit in double spending years later (when you refuse to / can’t divulge the identity of the upstream spender).
Very well written. How I wish this would be heeded. Instead I fear we’ll be stuck with BTC and its clones for many more years.
Yes the public nature of transactions is a feature. Yes the scarcity is a feature (remember this in 5 years when hyperinflation hits you). And the point of making money fair isn't to reinvent its features its to make them transparent and equal to all without catering to the special parasitic aspects of our societies.
Bitcoin is a disaster alright but a disaster for the fiat system and for the parasites who need the fiat system to survive.
Funny thing is bitcoin is only a small technology that will hurt the fiat system, there are more such disruptive technologies on the way but governments are far too stupid to see the writing on the wall.
Funny thing is bitcoin is only a small technology that will hurt the fiat system, there are more such disruptive technologies on the way but governments are far too stupid to see the writing on the wall.
> Funny thing is bitcoin is only a small technology that will hurt the fiat system, there are more such disruptive technologies on the way but governments are far too stupid to see the writing on the wall.
Examples?
Examples?
I'm not the person you're responding to, but smart contracts will be disruptive to the finance industry.
Why settle a contract in court when a computer can make a free, automatic, final deliberation based on software rules that both parties agreed to?
Why settle a contract in court when a computer can make a free, automatic, final deliberation based on software rules that both parties agreed to?
Because you only end up in court when the humans that agreed to the contract no longer agree on the contract.
In theory you only end up in court if parties don't agree on the intent of the contract, not when they just change their mind about the contract.
If one party no longer likes what they agreed to, yet the contract is clear and unambiguous, then a demand letter and/or a settlement often keeps the issue out of court.
If one party no longer likes what they agreed to, yet the contract is clear and unambiguous, then a demand letter and/or a settlement often keeps the issue out of court.
Maybe future historians will grab his heads when they find out we consumed the energy of a mid sized country during a climate change global existential threat just to run a big speculation digital game. In some sense, bitcoin seems to be the epitome of human irrationality.
The entire point of some of the alt-coins was to address all these complaints. So instead of piling onto Bitcoin which is years of stuff we already know about, focus on those alt-coins that support the ideas you want in a cryptocurrency.
I've been reading about the tech behind bitcoin and I find it interesting yet have been skeptical due to some perceived flaws. I've been concerned about the market externality due to the amount of energy it takes to mine blocks. What are some alt coins worth exploring?
>And we are learning that analysis of that
record is sufficient to destroy any pretense of anonymity or
pseudonymity.
Fortunately we have Monero! And pretty much every other issue too he raises, Monero has it better.
Fortunately we have Monero! And pretty much every other issue too he raises, Monero has it better.
Monero really is what most people thought Bitcoin was!
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> Hal shipped the prototype because he had just been told he had a terminal illness.
That's from Phillip Hallam-Baker.
Is there evidence Hal was Satoshi, or is this just more speculation?
Or am I misunderstanding his response?
That's from Phillip Hallam-Baker.
Is there evidence Hal was Satoshi, or is this just more speculation?
Or am I misunderstanding his response?
Hal is not satoshi. This is baseless speculation which puts Hal’s family at risk.
Interesting reading Deryk Makgill's response:
https://www.metzdowd.com/pipermail/cryptography/2020-Decembe...
and then Ray's response back:
https://twitter.com/wakgill/status/1344760972116942850
https://www.metzdowd.com/pipermail/cryptography/2020-Decembe...
and then Ray's response back:
https://twitter.com/wakgill/status/1344760972116942850
BTC is incredibly overvalued. if you value Bitcoin as much as the cost of the labor it takes to create one, then it should be worth a lot less.
The labor theory of value doesn't seem to match how people actually assign valuations or make transactions.
The cost of labor (and other inputs) obviously affects prices, but there are many other factors. The main one being if anyone is interested in actually paying the amount in question.
It doesn't matter how much labor it took to make something if no one wants it. On the other hand, if others can't produce a comparable product and there is significant demand, then the price may easily be much higher than the cost of the inputs.
The cost of labor (and other inputs) obviously affects prices, but there are many other factors. The main one being if anyone is interested in actually paying the amount in question.
It doesn't matter how much labor it took to make something if no one wants it. On the other hand, if others can't produce a comparable product and there is significant demand, then the price may easily be much higher than the cost of the inputs.
Bitcoin all-time-high, has someone missed the boat? Bitcoin is bad, that's why there are thousands of alternative crypto coins. For me, Bitcoin is a commodity, digital gold. It's fast and easy to move across country borders, it's quicker than international wire transfers. And because nothing is 100% perfect in the world, Bitcoin is not perfect, either.
the biggest difference between this rally and 2017 is that it appears to be mostly just bitcoin and, to a smaller extent, eth, and seems largely driven by institutions who now feel it is finally investable.
imo there isn’t quite the same level of excitement even though the price is much higher now. just feels like another asset Wall Street is accumulating.
imo there isn’t quite the same level of excitement even though the price is much higher now. just feels like another asset Wall Street is accumulating.
The author has an opinion. This opinion has at least five debatable concerns. Each of them could be contradicted with good arguments. But discussing this arguments does not make much sense online, nowadays there is only pro or contra at all costs. So the market must decide.
From my POV the ideological reason behind supporting bitcoin is somewhat weakened given that you'll just have the caste of early adopters completely dominate the market. Essentially trading one elite with another with possibly even greater inequality this time
I think this is why it will fail but some other cc will rise that actually has the characteristics of the original intent of bitcoin.
This year, more so than before, bitcoin is being used as a store of value - “digital gold”. There are other crypto coins that can be used for making transactions. People are buying bitcoin to hold it long term, not to send it to other people on the most part.
This is written from the perspective of a person who believes in blockchain-based currencies but thinks Bitcoin as an implementation of said currency is a failure. He thinks the concept of mining is a fundamental flaw.
But he keeps the door open for different implementations. Personally, I think the whole concept of blockchain-based currencies is flawed. But let’s not go there right now.
The value of Bitcoin is very high and that’s very scary. Who is buying? All those investors who have no place else to go? Gambling on Bitcoin to find ‘growth’?
Bitcoin is quickly becoming too big to fail. But it will fail at some point, because I believe it isn’t anything. (You may disagree, but hear me out). So when the music stops, I think it could be the event that triggers another 2007/2008. Bot big enough by itself. But it triggers the same avalanche of bankruptcies, the dominos will fall.
This time though, all financial instruments to save us are exhausted. Interest is zero. The worst may yet to come.
But he keeps the door open for different implementations. Personally, I think the whole concept of blockchain-based currencies is flawed. But let’s not go there right now.
The value of Bitcoin is very high and that’s very scary. Who is buying? All those investors who have no place else to go? Gambling on Bitcoin to find ‘growth’?
Bitcoin is quickly becoming too big to fail. But it will fail at some point, because I believe it isn’t anything. (You may disagree, but hear me out). So when the music stops, I think it could be the event that triggers another 2007/2008. Bot big enough by itself. But it triggers the same avalanche of bankruptcies, the dominos will fall.
This time though, all financial instruments to save us are exhausted. Interest is zero. The worst may yet to come.
Bitcoin total market cap is ~$500 billion, so it's still a pretty small niche, and I think there's quite a ways to go before it becomes "too big to fail".
For comparison, the market cap of gold is ~$10 trillion. The majority of the US economy is not hooked into Bitcoin, and very few institutional investors have any significant exposure to Bitcoin. Contrast that with the '08 financial crisis that was based in real estate -- the US real estate market at the peak of the crisis was ~$23 trillion [1], with nearly every major financial institution heavily exposed.
[1]: https://www.federalreserve.gov/releases/z1/dataviz/z1/balanc...
For comparison, the market cap of gold is ~$10 trillion. The majority of the US economy is not hooked into Bitcoin, and very few institutional investors have any significant exposure to Bitcoin. Contrast that with the '08 financial crisis that was based in real estate -- the US real estate market at the peak of the crisis was ~$23 trillion [1], with nearly every major financial institution heavily exposed.
[1]: https://www.federalreserve.gov/releases/z1/dataviz/z1/balanc...
I hope you are right and only a few people will get hurt.
That people will seriously get hurt, that’s not a question.
That people will seriously get hurt, that’s not a question.
If there is going to be a debt fueled bubble I would prefer it to be in Bitcoin over something that actually matters like housing or education.
If Bitcoin prices go up 10x nobody really cares. If housing prices go up 10x then people can't afford shelter and become homeless.
If Bitcoin prices go up 10x nobody really cares. If housing prices go up 10x then people can't afford shelter and become homeless.
I agree that it’s inherently flawed, however I don’t see how it would be big enough to trigger another 2008. That seems way out of proportion to me. I think bitcoins affect on the real economy is just too small.
Why would you put your money in gold rather than bitcoin?
Also why is the concept of blockchain as currency is flawed? What construction would you use instead for a currency that is trusted throughout the world?
Also why is the concept of blockchain as currency is flawed? What construction would you use instead for a currency that is trusted throughout the world?
I think the problems we face are not solved by technology but through policy.
It may never be solved, but I believe no crypto currency will ever solve an inate human trust problem.
It may never be solved, but I believe no crypto currency will ever solve an inate human trust problem.
Huh?
- It's easy enough to store bitcoin on a hardware wallet and not use an exchange.
- As the world pivots to solar and EV's electricity becomes much less of an issue over time.
- There are significant technological breakthroughs (e.g. Eth 2.0) coming every day in the way of scaling blockchains.
- It's easy enough to store bitcoin on a hardware wallet and not use an exchange.
- As the world pivots to solar and EV's electricity becomes much less of an issue over time.
- There are significant technological breakthroughs (e.g. Eth 2.0) coming every day in the way of scaling blockchains.
[deleted]
My problem with bitcoin is the fees just to use it.
Coinbase charges 4% plus a fee to exchange to another crypto currency, plus 1% for the buy/sell spread and then even more fees to put the money back in my bank.
Western Union is much more competitive and is actually used.
Coinbase charges 4% plus a fee to exchange to another crypto currency, plus 1% for the buy/sell spread and then even more fees to put the money back in my bank.
Western Union is much more competitive and is actually used.
BTC is so pointless to me. The problem is it keeps going up. It looks like its more likely to hit $100,000 before $0, so you can still make a lot of money by buying now. Which is why I bought some.
Unless it’s a long term hedge for a new global reserve currency. Then this is exactly what you would want.
And anonymity is never going to be a feature for financial transactions, that’s just kinda naive TBH.
And anonymity is never going to be a feature for financial transactions, that’s just kinda naive TBH.
>Bitcoin is a disaster
Clearly. [1]
[1] https://www.bitstamp.net/markets/btc/usd/
Clearly. [1]
[1] https://www.bitstamp.net/markets/btc/usd/
Sounds like alot of complaining. If it's so terrible, don't use it or build something better! Bitcoin is completely optional. Thanks for sharing your opinion I guess?
when emotions speak, you loose credibility
people mad at bitcoin are the jealous people who didn't buy when it was only just $30
it's fine, you missed an opportunity
NOW, what's bad about bitcoin is just what's bad about our society
You can make money from nothing, you don't even need to work, we reward the wrong people with a better life
While the normies have to break their back at work to make sure they can feed their kids and pay the bills, that's stressful
2021, hopefully the year of the big collapse, and a healthly reset
people mad at bitcoin are the jealous people who didn't buy when it was only just $30
it's fine, you missed an opportunity
NOW, what's bad about bitcoin is just what's bad about our society
You can make money from nothing, you don't even need to work, we reward the wrong people with a better life
While the normies have to break their back at work to make sure they can feed their kids and pay the bills, that's stressful
2021, hopefully the year of the big collapse, and a healthly reset
Anyone know if any bitcoin exchanges definitively have a fractional reserve of bitcoin? Seems to be that would be a recipe for bankruptcy given the volatility.
From what I understand, the availability of coin that can be "mined" halves every year (?), so at some point there will be essentially no new coin. What you have is what you have out there. It will just keep going up in price to include all the accumulating "worth". That should be fun to watch.
In addition, just yesterday the headline flashed in front of me, Marketwatch: "After recent price spike, bitcoin requires enough power for a country of more than 200 million people".
In addition, just yesterday the headline flashed in front of me, Marketwatch: "After recent price spike, bitcoin requires enough power for a country of more than 200 million people".
Disaster , disaster, but if not for Bitcoin (or cryptocurrencies in general) I wouldn't have any option for paying online.
Yup. I mean thank you, Captain Obvious.
Are you surprised that people are inventing the institutions that people have already invented?
I really, REALLY don't understand how cryptocurrency people think these institutions were created in the first place. It's as if they think they were invented by accident the first time, and if they just restart it from scratch then they won't get invented again.
No... they were invented on purpose. How do you not understand that?
Are you surprised that people are inventing the institutions that people have already invented?
I really, REALLY don't understand how cryptocurrency people think these institutions were created in the first place. It's as if they think they were invented by accident the first time, and if they just restart it from scratch then they won't get invented again.
No... they were invented on purpose. How do you not understand that?
Stablecoins on Ethereum are much better at P2P transactions than Bitcoin, but Bitcoin is great as a store of value.
the posted thread is rather interesting and I would love to see more critical discussions like this on the issues of bitcoin. unlike the often seen circle jerk of bitcoin maxis, this could actually lead to solutions or issues getting addressed before they become bigger.
Monero and Ethereum are not disasters according to these arguments unless OP is a hater in general
Checkout the first sentence of the REAMDE
https://github.com/bitcoin/bitcoin/blob/master/README.md
Bitcoin is an experimental digital currency
The keyword being "experimental"
Bitcoin is an experimental digital currency
The keyword being "experimental"
Bitcoin is crypto version 1.0.
Don't ever buy version 1.0 unless you want to be a beta tester.
Don't ever buy version 1.0 unless you want to be a beta tester.
You could write the same critique of banks and the postal service, except that those institutions are far more brittle and failure prone, unless propped up by the justice system.
Bitcoin is far, far from perfect, but to claim it’s a failure is at best myopic and most reasonably just dumb ignorance.
Bitcoin is far, far from perfect, but to claim it’s a failure is at best myopic and most reasonably just dumb ignorance.
Does bitcoin moving to a proof-of-stake algorithm change your opinion?
What is the difference? Maybe at the start, but after rich entities will buy the most, they will only need to decide whether to buy "shares" or hardware, a random person will not have more say either way.
I recommend looking up the pareto distribution.
But bitcoin is not moving to a proof-of-stake algorithm, .. there are a lot of alt coins trying that and flailing around with that notion.
Several coins started off with proof of stake and aren't flailing arguably.
It is a good idea but doesn't address several other points of critique in this post.
Bitcoin doesn’t care about these articles. Ignore it if you want - many people do. Bitcoin gives the choice to opt of the current financial system. No problem if you don’t, it’s completely voluntarily.
Yep, such a disaster it's died a thousand times.
*and here is what you can do to help it improve:
[deleted]
It really hadn't hit home to me that yes, BTC is being mined using ASICS by a handful of players, probably operating out of various authoritarian regimes. We've got the US getting all angry because TikTok is a Chinese country, and yet we've oestensibly got libertarians telling us to move out money into a currency controlled by Chinese BTC miners. It'd be fascinating if China could cause a recession in the west by taking down bitcoin overnight.
That's not even the real danger. The real danger is that by controlling 51% of the network, authoritarian regimes can block transactions by people they don't like or cause people to accept money that turns out not to exist.
I think the point is that any of these style of attacks are quickly discoverable and immediately destroy the value of all bitcoins.
It depends on the target. If some rich, nontechnical bitcoin hodler announced "I can't spend my money because the government is censoring my transactions," do you think the response would be a community investigation (which would risk all the investigators' bitcoins losing their value) or deriding the complainer as a conspiracy theorist who doesn't get how Bitcoin's design makes censorship impossible?
[deleted]
Took this long to realise?
hmm...think this misses the point.
bitcoin is a store of value against inflation
bitcoin is a store of value against inflation
That's a nope.
Yup, such a disaster it's died a thousand times.
Best performing asset of the decade.
I agree with most of the points raised by the author but as a Venezuelan Bitcoin is a godsend. If you live abroad and want to send remittances to your friends and family it can be pretty easy in a normal country , with wire transfers,western union and so on. If your family lives in Venezuela your options are extremely more limited.
These are some of the options Venezuelans have had to use:
1. Ask the money to be sent to Colombia with WU and then travel hundreds of kms to get what usually amounts to a few hundred dollars at most.
2. Use Zelle, send dollars in the US, and receive Bolivares in Venezuela. But for that you need to have an US bank account, and find a person you can trust also with an US bank account and plenty of highly volatile Bolivares in Venezuela willing to make the exchange.
3. Use paypal, same as above with way higher commissions and the risk that paypal (and the other person) will fuck you.
4. Buy Amazon gift cards and use the same schema above, be exposed to scams and high commisions fees.
Trading bitcoins in say localbitcoins.com, you have a very liquid market and somewhat secure transactions (Bitcoins are not liberated until you check the money is in the Venezuela account). There are risks of course, especially because of BTC volatility but at least is a fast,convenient,widespread option. I wish something like that, only more stable and with less of that Tulip-craze whiff BTC has.
These are some of the options Venezuelans have had to use:
1. Ask the money to be sent to Colombia with WU and then travel hundreds of kms to get what usually amounts to a few hundred dollars at most.
2. Use Zelle, send dollars in the US, and receive Bolivares in Venezuela. But for that you need to have an US bank account, and find a person you can trust also with an US bank account and plenty of highly volatile Bolivares in Venezuela willing to make the exchange.
3. Use paypal, same as above with way higher commissions and the risk that paypal (and the other person) will fuck you.
4. Buy Amazon gift cards and use the same schema above, be exposed to scams and high commisions fees.
Trading bitcoins in say localbitcoins.com, you have a very liquid market and somewhat secure transactions (Bitcoins are not liberated until you check the money is in the Venezuela account). There are risks of course, especially because of BTC volatility but at least is a fast,convenient,widespread option. I wish something like that, only more stable and with less of that Tulip-craze whiff BTC has.
Personal experience: not only bitcoin was the only practical way I was able to receive funds in Russia from an Indonesian client, it was cheaper than just one leg of converting Indonesian currency (to USD).
Think of it. Buying bitcoin, sending and selling resulted being cheaper than just buying USD. The spread was that much lower. (It was in a relatively static price period in summer 2016)
And regular banks just didn't do such transactions between Russia and Indonesia, like, nope. And PayPal was somehow banning the client for some reason.
Think of it. Buying bitcoin, sending and selling resulted being cheaper than just buying USD. The spread was that much lower. (It was in a relatively static price period in summer 2016)
And regular banks just didn't do such transactions between Russia and Indonesia, like, nope. And PayPal was somehow banning the client for some reason.
>And PayPal was somehow banning the client for some reason.
Maybe the russian was on OFAC's sanctioned entities list? (only half joking)
Maybe the russian was on OFAC's sanctioned entities list? (only half joking)
The banned person was Indonesian. Something something his bank account. (One more reason for me why payment system of the future must be permissionless. Like, you know, bitcoin)
> One more reason for me why payment system of the future must be permissionless. Like, you know, bitcoin
That's not possible with a public ledger and current state of analysis - instead of proactive cancellation of the transaction on the legacy banking system, you'll get a delayed reaction from the authorities. When you file your tax return you'll get a notice to explain transaction ID 0x...34 to a certain banned individual. So it will be about as "permissionless" as tax-fraud: you will only be able to get away with it for a while, and I don't doubt there will be future analytical tools (and laws) that will make tracing payments even easier. It is politically untenable for bitcoin payments to be opaque when "Funding Terrorism" is a high-priority security issue.
That's not possible with a public ledger and current state of analysis - instead of proactive cancellation of the transaction on the legacy banking system, you'll get a delayed reaction from the authorities. When you file your tax return you'll get a notice to explain transaction ID 0x...34 to a certain banned individual. So it will be about as "permissionless" as tax-fraud: you will only be able to get away with it for a while, and I don't doubt there will be future analytical tools (and laws) that will make tracing payments even easier. It is politically untenable for bitcoin payments to be opaque when "Funding Terrorism" is a high-priority security issue.
Bitcoin payments might be traceable from wallet to wallet, but wallets don't have a name on them. Not even for governments. So if anyone takes basic precautions, you can't trace them.
Although I assure you a normal person can't read bitcoin transactions lists like they can a bank statement, and this goes for people working at the tax office too. And they can't forbid those transactions, either. It raises the bar significantly on Tax offices, and therefore means less enforcement.
And if need be, there are several anonymous cryptocurrencies that would love nothing more than to replace Bitcoin, and of course they will as soon as governments actually start tracing payments.
https://coinmarketcap.com/alexandria/article/is-cryptocurren...
Although I assure you a normal person can't read bitcoin transactions lists like they can a bank statement, and this goes for people working at the tax office too. And they can't forbid those transactions, either. It raises the bar significantly on Tax offices, and therefore means less enforcement.
And if need be, there are several anonymous cryptocurrencies that would love nothing more than to replace Bitcoin, and of course they will as soon as governments actually start tracing payments.
https://coinmarketcap.com/alexandria/article/is-cryptocurren...
That's actually can be circumvented rather trivially. Wallets are anonymous, and you can just do some mixer transactions off chain. Wallet A pays to mixer M, mixer's address N sends funds to wallets B and C minus comission. In effect A paid B (and C), and nothing links them to each other. Schemes can get even less transparent with Lightning network.
> When you file your tax return you'll get a notice to explain transaction ID 0x...34 to a certain banned individual. S
We were talking about PayPal banning someone and you equate that to tax authorities banning someone?!
We were talking about PayPal banning someone and you equate that to tax authorities banning someone?!
There are already ways to avoid that outcome today. You can use a fresh wallet and launder the money through a mixer like the other poster suggests, but you can also use shielded transactions like Zcash has (based on zero knowledge proofs) or coins where transactions are private if there is enough volume like Monero.
Or just had a similar name or used a “bad” word. The data quality for those lists is very poor.
Did you actually try multiple banks? Is the banking ststem really that broken in Indonesia?
My experience is that bank fees vary greatly.
My (limited) experience with US banks is that they have huge hidden fees and you get really bad currency exchange rates. I'm talking about 8% of funds miraculously disappearing during currency exchange. I don't understand why anybody would bother going via USD.
My Austrian bank on the other hand has much better rates and low fees. I think it was less than 1% for transfers of a few thousand USD last time I checked.
And finally, there are services like Transferwise; I just checked and they show rates of 1.5 - 2% for converting IDR to RUB.
My experience is that bank fees vary greatly.
My (limited) experience with US banks is that they have huge hidden fees and you get really bad currency exchange rates. I'm talking about 8% of funds miraculously disappearing during currency exchange. I don't understand why anybody would bother going via USD.
My Austrian bank on the other hand has much better rates and low fees. I think it was less than 1% for transfers of a few thousand USD last time I checked.
And finally, there are services like Transferwise; I just checked and they show rates of 1.5 - 2% for converting IDR to RUB.
> Did you actually try multiple banks? Is the banking ststem really that broken in Indonesia?
I like how you consider that opening an account on another bank was both cheaper and easier than using Bitcoin.
I like how you consider that opening an account on another bank was both cheaper and easier than using Bitcoin.
Opening bank accounts is pretty cheap and easy in Austria.
I don't know what it's like in Indonesia, hence my question.
I don't know what it's like in Indonesia, hence my question.
> My (limited) experience with US banks is that they have huge hidden fees and you get really bad currency exchange rates. I'm talking about 8% of funds miraculously disappearing during currency exchange. I don't understand why anybody would bother going via USD.
You need to shop around for a better US bank account. This is not a common thing for us to do so if you pick up a random bank then you’ll be paying close to 10% in various conversion and fx fees. There are definitely US banks that charge 1%, some even 0%.
You need to shop around for a better US bank account. This is not a common thing for us to do so if you pick up a random bank then you’ll be paying close to 10% in various conversion and fx fees. There are definitely US banks that charge 1%, some even 0%.
The problem in that case was with a partners bank, not my own. The solution was to request payments in USD rather than EUR and have my bank do the conversion.
> That broken
The crux of the issue. It’s tragic how the new woke fads exaggerate and even imagine plights for minorities near themselves, while completely ignoring big crises further away.
The crux of the issue. It’s tragic how the new woke fads exaggerate and even imagine plights for minorities near themselves, while completely ignoring big crises further away.
how much counterparty risk does the rapid price fluctuation result in? Can't imagine pricing a contract in bitcoin, as someone's getting screwed at payment if the BTC/fiat rate has changed during the lifetime of the contract
We just accepted the price of bitcoin in USD at the time the client bought BTC, and I accepted the risks of fluctuating price to myself. I actually gained somewhat, though, way less than if I'd just hold those coins till today. :)
You can peg the contract in USD (or better put, the original price was in USD) and just accept the bitcoins within a very small window, say 30 min/1h.
Don't you have a similar problem with Russian currency? From Jun 2014 to Jan 2015, it lost more than half of it's value relative to USD.
In the past 110 years Russian currency depreciated against USD at a something like trillion times.
It's a safe bet that it'll continue the trend (with some occasional and not too long lapses of stae slowish decline), and actually bitcoin is a rather safe bet against rouble. After all, it's not backed by Putin's government!
It's a safe bet that it'll continue the trend (with some occasional and not too long lapses of stae slowish decline), and actually bitcoin is a rather safe bet against rouble. After all, it's not backed by Putin's government!
This is an utterly ridiculous statement. Not only is the trillion fold devaluation not at all a reasonable assessment of the situation, the exchange rate only matters at the time of the exchange, not after. That's the point.
I was answering to a person who said that RUB lost half of its value against USD in a span of a year. I just pointed that it is a part of a general trend, what do you find ridiculous about that?
Btw, 'a trillion times' is an understatement. Exact figure in 2014 was... 57 460 000 000 000 000 (fifty seven quadrillion four hundred and sixty trillion) times [1], and just add some more since that time. Still thinking that bitcoin is a risky currency, huh?
[1]: https://zhartun.me/2014/12/usd.html
Btw, 'a trillion times' is an understatement. Exact figure in 2014 was... 57 460 000 000 000 000 (fifty seven quadrillion four hundred and sixty trillion) times [1], and just add some more since that time. Still thinking that bitcoin is a risky currency, huh?
[1]: https://zhartun.me/2014/12/usd.html
Yes of course it's the risky investment. BTC has seen 3 drawdowns of -86% in the last couple of years, and also, what happened to XRP shows that the football can be deflated in seconds with the right SEC memo.
Currency isn't an investment. Currency has never been an investment. You're not supposed to hold currency. You're supposed to use currency to buy assets. A spot exchange rate means absolutely nothing. This is ECON-101.
Currency isn't an investment. Currency has never been an investment. You're not supposed to hold currency. You're supposed to use currency to buy assets. A spot exchange rate means absolutely nothing. This is ECON-101.
Is gold an asset or a currency? Now it is definitely the former, but throughout history it was mostly an asset and a currency, with rather vague lines between them.
Bitcoin is not a USD replacement. It's more of a gold replacement: finite supply, great malleability, but with modern benefits regarding storage and transfer.
Bitcoin is not a USD replacement. It's more of a gold replacement: finite supply, great malleability, but with modern benefits regarding storage and transfer.
> Bitcoin is not a USD replacement. It's more of a gold replacement: finite supply, great malleability, but with modern benefits regarding storage and transfer.
This is an opinion that Bitcoin advocates throw out every time someone criticizes Bitcoin's ability to be a currency. As soon as someone criticizes its ability to be an asset, someone trots out that its actually been a currency this whole time. It's bad at both.
It's bad at both in no small part because it tries to bring back the asset-backed currency approach, which was dreadful last time around, and that's why it was ended.
This is an opinion that Bitcoin advocates throw out every time someone criticizes Bitcoin's ability to be a currency. As soon as someone criticizes its ability to be an asset, someone trots out that its actually been a currency this whole time. It's bad at both.
It's bad at both in no small part because it tries to bring back the asset-backed currency approach, which was dreadful last time around, and that's why it was ended.
> This is an opinion that Bitcoin advocates throw out every time someone criticizes Bitcoin's ability to be a currency.
This 'opinion' comparing Bitcoin properties to Gold appeared before Bitcoin antagonists appeared. It is part of a design.
This 'opinion' comparing Bitcoin properties to Gold appeared before Bitcoin antagonists appeared. It is part of a design.
The white paper is literally titled “A Peer-to-Peer Electronic Cash System” and the first line of the abstract states “ A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
For this purpose it is abjectly poorly suited.
Neither the word “gold” nor “store of value” nor anything else of the sort appear in the abstract.
For this purpose it is abjectly poorly suited.
Neither the word “gold” nor “store of value” nor anything else of the sort appear in the abstract.
every currency transaction creates this risk. Nothing to do with Bitcoin. I suppose you could say that this is a problem Bitcoin doesn't fix ... but judging by the Bitcoin market cap, it's not as much as a problem as normal banks.
> every currency transaction creates this risk.
This is a disingenuous straw man and a desperate attempt to brush away Bitcoin's failure as currency. The OP explicitly referred to cryptocurrencies' inherent high volatility, and volatility is not a mere transaction risk. Seeing your debt explode, because you either borrowed or deferred payments, due to cryotocurrency volatility is not a transaction risk. It's simply the fact that cryptocurrency fails as being money.
This is a disingenuous straw man and a desperate attempt to brush away Bitcoin's failure as currency. The OP explicitly referred to cryptocurrencies' inherent high volatility, and volatility is not a mere transaction risk. Seeing your debt explode, because you either borrowed or deferred payments, due to cryotocurrency volatility is not a transaction risk. It's simply the fact that cryptocurrency fails as being money.
Is this from personal experience? And is there any data available to show that it's doing significant volume in Venezuela versus other options?
It is ironic because the economy in Venezuela is fucked, but almost every crypto-service or novel online pay modality is a huge hit in Venezuela.There are many FOREIGN apps where the customer base is +70% Venezuelan.
Some links:
https://cointelegraph.com/news/venezuela-sets-new-bitcoin-vo...
https://www.coindesk.com/bitcoin-adoption-venezuela-research
Some links:
https://cointelegraph.com/news/venezuela-sets-new-bitcoin-vo...
https://www.coindesk.com/bitcoin-adoption-venezuela-research
Taking that first one and looking at current graphs, it looks like we're talking volumes of less than 500 BTC/week for the last year or so: https://coin.dance/volume/localbitcoins/VES/BTC
If we call it a rough average of $10k per BTC, that's $5m/week, or $250m/year. That sounds like a lot, but it's still only ~0.1% of GDP. In contrast, if we look at M-Pesa in Kenya, they report for 2017 doing $62.6 billion in transaction volume, or about 80% of GDP.
So it's not clear to me that Bitcoin is a major player even in Venezuela.
If we call it a rough average of $10k per BTC, that's $5m/week, or $250m/year. That sounds like a lot, but it's still only ~0.1% of GDP. In contrast, if we look at M-Pesa in Kenya, they report for 2017 doing $62.6 billion in transaction volume, or about 80% of GDP.
So it's not clear to me that Bitcoin is a major player even in Venezuela.
I'm not OP.
I looked and Chainalytics claim Venezuela is world number 3 in bitcoin use. But it's not clear what they're basing that on. My (very limited) understanding is that they can't directly see the country of origin of a bitcoin transaction. So they must be relying on figures from exchanges or apps?
https://blog.chainalysis.com/reports/venezuela-cryptocurrenc...
Does anyone know if you can tell country of origin of a transaction request? Maybe the IP sending the request is public to the network?
I looked and Chainalytics claim Venezuela is world number 3 in bitcoin use. But it's not clear what they're basing that on. My (very limited) understanding is that they can't directly see the country of origin of a bitcoin transaction. So they must be relying on figures from exchanges or apps?
https://blog.chainalysis.com/reports/venezuela-cryptocurrenc...
Does anyone know if you can tell country of origin of a transaction request? Maybe the IP sending the request is public to the network?
Bitcoin adoption in venezuela is Absolutely fake/nonexistant
Bitcoin is only used as a bridge for exchange VES:USD a.k.a money laundering from corruption and drugs, with some remittances transactions caught in the middle of those laundry waves.
there is absolutely 0 adoption for bitcoin in Venezuela, Im a bitcoin enthusiast since 2011 and I hold bitcoin and I live in Caracas (capital) and move around all tech communities and yet to see a real crypto transaction. Some people used the “get rich quick” schemes from DASH and other silly alts and tried to make a big media (international media) about Venezuelans using bitcoin to try to money grab international money into their scams, they manage to convince some stores and local food chains to “accept” their silly cryptos but of course no one uses, yet they got the money from their international sponsors trying to force adoption in the country.. there is hillarious threads on DASH forums about it
You can read my other post on details on the only use for bitcoin in venezuela, that big money laundery called localbitcoins
Bitcoin is only used as a bridge for exchange VES:USD a.k.a money laundering from corruption and drugs, with some remittances transactions caught in the middle of those laundry waves.
there is absolutely 0 adoption for bitcoin in Venezuela, Im a bitcoin enthusiast since 2011 and I hold bitcoin and I live in Caracas (capital) and move around all tech communities and yet to see a real crypto transaction. Some people used the “get rich quick” schemes from DASH and other silly alts and tried to make a big media (international media) about Venezuelans using bitcoin to try to money grab international money into their scams, they manage to convince some stores and local food chains to “accept” their silly cryptos but of course no one uses, yet they got the money from their international sponsors trying to force adoption in the country.. there is hillarious threads on DASH forums about it
You can read my other post on details on the only use for bitcoin in venezuela, that big money laundery called localbitcoins
>Bitcoin adoption in venezuela is Absolutely fake/nonexistant
This is completely and absolutely false. I personally know hundreds of (mostly very poor) Venezuelans who absolutely depend on bitcoin and other crypto currencies to survive. The people I'm personally familiar with eke out a few dollars creating content on platforms like Hive and Steemit, trade their alt crypto for bitcoin, pool it crypto together, and have it sent to Venezuela in small bundles where they collect it and use it to supplement their very meager incomes.
https://hive.blog/
https://steemit.com/
This is completely and absolutely false. I personally know hundreds of (mostly very poor) Venezuelans who absolutely depend on bitcoin and other crypto currencies to survive. The people I'm personally familiar with eke out a few dollars creating content on platforms like Hive and Steemit, trade their alt crypto for bitcoin, pool it crypto together, and have it sent to Venezuela in small bundles where they collect it and use it to supplement their very meager incomes.
https://hive.blog/
https://steemit.com/
You personally know hundreds of people there? That seems like quite a lot. How did you meet them?
Also, I'm not sure I'd call that significant Bitcoin adoption if their only use for it is as an intermediary to exit a different cryptocurrency.
Also, I'm not sure I'd call that significant Bitcoin adoption if their only use for it is as an intermediary to exit a different cryptocurrency.
>You personally know hundreds of people there? That seems like quite a lot. How did you meet them?
As an active member for years I've chatted and interacted with them for years and gotten to know many of them quite well.
>Also, I'm not sure I'd call that significant Bitcoin adoption if their only use for it is as an intermediary to exit a different cryptocurrency.
Why is that so? As far as I'm concerned (as an early adopter of bitcoin and other crypto), Bitcoin's primary use has always been to fill the void when government-sanctioned currencies and financial systems fail. Without Bitcoin these poor people would be unable to cash out the fruits of their creative endeavors - its absolutely critical. Different people use Bitcoin for difference purposes, but none of these purposes is inherently less legitimate than another.
As an active member for years I've chatted and interacted with them for years and gotten to know many of them quite well.
>Also, I'm not sure I'd call that significant Bitcoin adoption if their only use for it is as an intermediary to exit a different cryptocurrency.
Why is that so? As far as I'm concerned (as an early adopter of bitcoin and other crypto), Bitcoin's primary use has always been to fill the void when government-sanctioned currencies and financial systems fail. Without Bitcoin these poor people would be unable to cash out the fruits of their creative endeavors - its absolutely critical. Different people use Bitcoin for difference purposes, but none of these purposes is inherently less legitimate than another.
How do you deal with the ongoing devaluation of the bolivar currently?
Truthfully? There's no good answer, period.
The government needs to be replaced. This is the false promise of bitcoin. As long as the government needs to be replaced you have much bigger problems than the currency. As soon as the government is replaced, you no longer have to worry about the currency.
Bitcoin always has been, and always will be, a solution in search of a problem.
Forget Venezuela for a second and ask yourself how Bitcoin is helping the North Koreans.
The government needs to be replaced. This is the false promise of bitcoin. As long as the government needs to be replaced you have much bigger problems than the currency. As soon as the government is replaced, you no longer have to worry about the currency.
Bitcoin always has been, and always will be, a solution in search of a problem.
Forget Venezuela for a second and ask yourself how Bitcoin is helping the North Koreans.
How is the USD helping the North Koreans?
No one claimed that Bitcoin is useful in NK so I don't get the point of the question.
No one claimed that Bitcoin is useful in NK so I don't get the point of the question.
They print USD. And perhaps buying methamphetamine -base-products from China or whereever is more plausably deniable or less WONG or whatever than f around with chinese bills. Whatever they do, they're doing all kinds of shit. And they print USD, or has, and, everything else they do isn't really great, all the time. They counterfeit USD and probably tons of other shit. All the 'coinage' in paper-form from everywhere around the country or the world probably, bar the 3d and biometric and advanced shit probably. It's all shit over there man. In terms of the governance, governing, it's not good!
The point is that yes, an authoritarian government can definitely just shut down bitcoin, so authoritarian government resistance is not a feature of bitcoin.
Sorry for late answer.
The best way to deal with devaluation is just, spend the money instantly, is not really that hard, people barely get Venezuelan Bolivars (minimum wage is 3$ month equivalent) and like 90% of all transactions are already done in USD
So people really don't hold venezuelan bolivars for more than 1 day, savings in bolivars doesnt exist at all in this country.
In case you actually need to just save the money, you just trade it (it takes barely no time) for USD and hold the usd either in cash or in some usa bank (most people have access to them) or paypal.
So, the unofficial "forex" market is always there..
BTW this might sound funny but with only 450million USD you can buy the entire M2 in venezuela. So yeah, hyperinflation might be solved really easy whenever we actually get a new goverment
The best way to deal with devaluation is just, spend the money instantly, is not really that hard, people barely get Venezuelan Bolivars (minimum wage is 3$ month equivalent) and like 90% of all transactions are already done in USD
So people really don't hold venezuelan bolivars for more than 1 day, savings in bolivars doesnt exist at all in this country.
In case you actually need to just save the money, you just trade it (it takes barely no time) for USD and hold the usd either in cash or in some usa bank (most people have access to them) or paypal.
So, the unofficial "forex" market is always there..
BTW this might sound funny but with only 450million USD you can buy the entire M2 in venezuela. So yeah, hyperinflation might be solved really easy whenever we actually get a new goverment
Thanks for this. Given the level of ungrounded Bitcoin hype that's always going on, I'm not surprised to hear it. Once again, Bitcoin turns out to be mainly useful for light financial crime.
Most Venezuela Bitcoin statistics are based on information published by localbitcoins.com
I wouldn't trust anything published by Chainalysis. Their accuracy is much lower than their reputation
Venezuela is often painted as a "Bitcoin solves this" poster child. Yes, Bitcoin is sent from the USA and other countries into Venezuela, mostly by Venezuelan expatriates to family. It's useful for buying USD in Venezuela. But USD liquidity in Venezuela is very weak, so Bitcoin doesn't really solve much at all there. You can't buy groceries in Venezuela with Bitcoin
>Does anyone know if you can tell country of origin of a transaction request?
You can not
> Maybe the IP sending the request is public to the network?
If the sender is using his own Bitcoin node, the sender's IP is known only to the other nodes the transaction was broadcast to. If the sender is using a third-party service, that service records the IP addresses of its customers in the same way as any Web site does, just as my IP is known to ycombinator when I submit this comment
I wouldn't trust anything published by Chainalysis. Their accuracy is much lower than their reputation
Venezuela is often painted as a "Bitcoin solves this" poster child. Yes, Bitcoin is sent from the USA and other countries into Venezuela, mostly by Venezuelan expatriates to family. It's useful for buying USD in Venezuela. But USD liquidity in Venezuela is very weak, so Bitcoin doesn't really solve much at all there. You can't buy groceries in Venezuela with Bitcoin
>Does anyone know if you can tell country of origin of a transaction request?
You can not
> Maybe the IP sending the request is public to the network?
If the sender is using his own Bitcoin node, the sender's IP is known only to the other nodes the transaction was broadcast to. If the sender is using a third-party service, that service records the IP addresses of its customers in the same way as any Web site does, just as my IP is known to ycombinator when I submit this comment
> Does anyone know if you can tell country of origin of a transaction request? Maybe the IP sending the request is public to the network?
In this kind of setting, where the transaction is illicit, you wouldn't go through an exchange, you'd publish the transaction directly to the bitcoin network, and organizations like chainalytics do track the origin IP addresses.
In this kind of setting, where the transaction is illicit, you wouldn't go through an exchange, you'd publish the transaction directly to the bitcoin network, and organizations like chainalytics do track the origin IP addresses.
That makes sense.
Not to criticise but... Isn't the IP of a transaction initiator being public a bit of a design flaw? Is it just assumed that users will obscure their own IPs (vpn, tor, etc)? Otherwise my isp/government can see my transactions and infer wallet ownership and I'm suddenly very un-anonymous...
Not to criticise but... Isn't the IP of a transaction initiator being public a bit of a design flaw? Is it just assumed that users will obscure their own IPs (vpn, tor, etc)? Otherwise my isp/government can see my transactions and infer wallet ownership and I'm suddenly very un-anonymous...
Transactions are relayed to all the nodes in the network, not broadcast. That means when a node sees a transaction from another node, it's impossible to know whether the node was the originator of the transaction, or was merely relaying it from another node. AFAIK bitcoin core also has some mitigations such as delaying broadcast to a subset of the nodes, to make it look like your node wasn't the first node to learn about the transaction.
There are wallets that support schemes like Dandelion, intended to make it harder to deanonymize users: https://en.bitcoin.it/wiki/BIP_0156
Edit: apparently this has been delayed so you likely can't use it at this point https://bitcoin.stackexchange.com/questions/81503/what-is-th...
Edit: apparently this has been delayed so you likely can't use it at this point https://bitcoin.stackexchange.com/questions/81503/what-is-th...
Last I looked, bitcoin p2p connections are not encrypted by default, so your ISP/government can see any transactions you initiate yourself. I implored the bitcoin developers to add this functionality about five or six years ago for this exact reason.
That said, someone who isn't in a position to monitor the L2 network can't know if you are initiating a transaction or simply rebroadcasting it.
That said, someone who isn't in a position to monitor the L2 network can't know if you are initiating a transaction or simply rebroadcasting it.
Venezuela aside, a lot of these LatAm countries have some type of capital controls in place. (Girlfriend is Colombian)
Unless you have originally brought cash in the country and received some type of pre clearance from the government, it generally is not so easy to convert back to EUR/USD/etc and move meaningful amounts of cash out of the country.
Don't know what the adoption rate is in Argentina, but with inflation being 30 to 40% a year, why would you even bother holding local currency?
Unless you have originally brought cash in the country and received some type of pre clearance from the government, it generally is not so easy to convert back to EUR/USD/etc and move meaningful amounts of cash out of the country.
Don't know what the adoption rate is in Argentina, but with inflation being 30 to 40% a year, why would you even bother holding local currency?
It’s a godsend to a small handful of Venezuelans, it’s not a general solution as of course a transaction fee is a few months minimum wage. It does literally nothing to solve the problem more broadly. You’d be better off holding value on their behalf stateside.
Of course the government could shut it off in a heartbeat. How many North Koreans does Bitcoin help?
Of course the government could shut it off in a heartbeat. How many North Koreans does Bitcoin help?
read my answer, it's pretty well explained there
You are all missing the the trend over the last 7 years for bitcoin is to create a digital asset that is a store of wealth. To say bitcoin is a payments system in the sense of cash is to miss the executed tech roadmap where cheap one off transactions is a secondary concern (not bitcoin core's). Listen Saylor talk about MicroStrategy's investment in bitcoin. He is very clear that is a store of wealth and appreciating asset on the books, not a payment rail for MicroStrategy subscription base.
Currency has more than two functions. Transferring wealth is not the same as paying for goods, and storing wealth is not the same as holding a speculative asset class.
Bitcoin is volatile. Holding it is more like holding gold, not USD.
Bitcoin is very easy to move across borders. Moving it is much more like a bank transfer, than paying for a pizza.
Bitcoin is volatile. Holding it is more like holding gold, not USD.
Bitcoin is very easy to move across borders. Moving it is much more like a bank transfer, than paying for a pizza.
They haven’t changed Bitcoin a single bit since 2008. Saylor sounds like he got taken by the Bitcoin euphoria.
The point is the commenters here on this thread listen to too many youtube crypto channels for an accurate analysis of what bitcoin is and wants to be.
Yeah but, why BTC specifically? Why not ETH or ETH tokens, or any of the hundreds of other cryptocurrencies that are faster and have lower fees?
Bitcoin has the most infrastructure surrounding it. And Bitcoin is the most careful to make life easy for infrastructure providers.
Eth is very challenging to operate securely. Breaking updates are frequent, often with little warning. Bitcoin hasn't changed in many years, and new software updates are optional, and don't require you to write any new code or change how you operate. Most other cryptos suffer from the same challenges.
Eth has more features and flexibility, but for the explicit use case of sovereign money, Bitcoin really stands in a class of its own.
Eth is very challenging to operate securely. Breaking updates are frequent, often with little warning. Bitcoin hasn't changed in many years, and new software updates are optional, and don't require you to write any new code or change how you operate. Most other cryptos suffer from the same challenges.
Eth has more features and flexibility, but for the explicit use case of sovereign money, Bitcoin really stands in a class of its own.
> and don't require you to write any new code or change how you operate.
This one was fun, but I guess quadrigacx was always going to be insolvent anyway: https://old.reddit.com/r/ethereum/comments/6ettq5/statement_...
(I think the top ranked post can be ignored, it gets good here: https://old.reddit.com/r/ethereum/comments/6ettq5/statement_... )
This one was fun, but I guess quadrigacx was always going to be insolvent anyway: https://old.reddit.com/r/ethereum/comments/6ettq5/statement_...
(I think the top ranked post can be ignored, it gets good here: https://old.reddit.com/r/ethereum/comments/6ettq5/statement_... )
Care to give some examples? I use eth on a regular basis for ~3yrs now and have never encountered any updates that broke basic functionality, or any updates at all for that mater that weren't broadcasted for months ahead of time.
Are you perhaps referring to some specific dapp built on Eth that you don't like?
Are you perhaps referring to some specific dapp built on Eth that you don't like?
Breaking updates are not frequent, there's never been a breaking update on the ethereum blockchain.
Bitcoin changes all the time (e.g., taproot)
Bitcoin changes all the time (e.g., taproot)
Ethereum literally just had this issue a month ago https://www.coindesk.com/ethereums-hard-fork-disruption
Binance had to suspend wallets because of it
Binance had to suspend wallets because of it
Lol well you should probably stop using binance and centralized exchanges generally.
You have actual permissionless dexs trading on Ethereum wallet to wallet. Literally, no bullshit in between where you don't have to worry about the CEO of the shitty CEX you're using taking a powder for 33 day's. There's nothing permissionless about bitcoin infrastructure, it requires custodial counterparties to trade hands. ETH and all the many tokens do not. Economics aside, that's probably the most bearish development for bitcoin
You can turn your nose and say ethereum dapps all have that admin key smell but things like uniswap, starks, the Dai stablecoin, yearn are dope as hell and I'd think worth a looksie
You have actual permissionless dexs trading on Ethereum wallet to wallet. Literally, no bullshit in between where you don't have to worry about the CEO of the shitty CEX you're using taking a powder for 33 day's. There's nothing permissionless about bitcoin infrastructure, it requires custodial counterparties to trade hands. ETH and all the many tokens do not. Economics aside, that's probably the most bearish development for bitcoin
You can turn your nose and say ethereum dapps all have that admin key smell but things like uniswap, starks, the Dai stablecoin, yearn are dope as hell and I'd think worth a looksie
I’m not a bitcoin maxi. I love Ethereum and I am an industry professional. I’m just correcting lies to keep information accurate.
Remember the DAO?
Fire feeds on obstacles homie
lol, if code = law were any good, everyone would be on ETH classic.
The DAO was a classic example of crypto being trustless for thee but none for me thanks.
The DAO was a classic example of crypto being trustless for thee but none for me thanks.
There's not a good reason. Of all the cryptocurrencies, BTC is one of the worst for this use case.
Of course there's a good reason. BTC is much, much easier for the Indonesian person on one side of the contract to purchase with their local currency, and much, much easier for the Russian person on the other side of the contract to liquidate into their local currency. Almost any country has a highly liquid market of local currency <-> BTC, and that's often not true for any other crypto.
Another fellow Venezuelan here, this guy points are actually wrong and he's just using the momentum to prove some point related to bitcoin that is not true
Before hand, I would like people to know that the current VES:USD rates are the following:
- Official rate: 1.107.198,58 per each USD [1]
- Unofficial rate: 1.027.812,89 per each USD [2]
So now, The way that remittances work in Venezuela is pretty simple, let’s say a person A, wants to send 100$ to his grandma in Venezuela, and Person B has Venezuelan Bolivars.
Person A gets in contact with person B (or viceversa), they agree on a rate based on the 2 rates i said before, person A sends the 100$ usd to person B and person B sends the Venezuelan Bolivars equivalent to person A grandmother. There is always a factor trust on said trade/ remittance where someone has to send the money 1st.
Now, this exchange for the USD side is USUALLY made using Zelle (in the case of USD remittances) but its also done a lot in actual cash USD, it can also be done in any other method such as Paypal, AirTM, Cashapp, Venmo, etc.. it could even be in hello kitty coins if person A and B agrees. It doesnt really matter.. As for the venezuelan bolivars parts, its always done in venezuelan banks.
What the poster here says in point (1) its wrong, you can use W.U, MoneyGram to send money to Venezuela, it uses the official exchange rate, thus, you don't have to go to colombia to send money to venezuela, remitances using those services are working online (they deposit to your bank), there is also fully operational exchanges like zoom casa de cambio, that will take remitances from different companies worldwide. [3]
So this is my point. As I say, venezuelans do not need bitcoin, they could trade even hello kitty online coins or whatever any other method that allows them to send some value worth. Directly, they just use Zelle or cash, some others use paypal or whatever they want.
So, bitcoin doesn't really benefits Venezuelans, the only thing that benefits venezuelans is the localbitcoins escrow service, but this is not because its cripto or because its bitcoin, it's just because noone else offers an escrow service to sucessfully exchange currency, that's pretty much it. Venezuelans just lack some place to properly exchange money it doesnt need bitcoin
In fact, if you go ahead and check localbitcoin prices for exchange between VES:USD, the rate is always worse, you can check this site that tracks the rate on real time [https://dolardeverdad.com/]
Adding to this, there is another layer to this, it's the fact that it's really hard for Venezuelans to convert bitcoin into USD, not only because we are not welcome on sites like coinbase.com
Now, you wonder right now, how come there is a lot of bitcoin being bought in venezuela's localbitcoin market, now I will answer you, it's plain and simple money laundering, that's it, there is drug dealers, corrupt goverment officials and a bunch of shady people who has TONS of venezuelans bolivars and they want to get them turned into something else. Using my example before, the person B would be the corrupt/drug dealer and the person A would be you trying to send money to your grandma
So no, don't come with the "bitcoin is saving venezuela" speech, it', Bitcoin its a workaround for corruption and dirty venezuelan money to find its way into USD.
[1] http://www.bcv.org.ve/
[2] https://www.instagram.com/p/CJbfgj3FLft/
[3] https://www.zoomcasadecambio.com/
Before hand, I would like people to know that the current VES:USD rates are the following:
- Official rate: 1.107.198,58 per each USD [1]
- Unofficial rate: 1.027.812,89 per each USD [2]
So now, The way that remittances work in Venezuela is pretty simple, let’s say a person A, wants to send 100$ to his grandma in Venezuela, and Person B has Venezuelan Bolivars.
Person A gets in contact with person B (or viceversa), they agree on a rate based on the 2 rates i said before, person A sends the 100$ usd to person B and person B sends the Venezuelan Bolivars equivalent to person A grandmother. There is always a factor trust on said trade/ remittance where someone has to send the money 1st.
Now, this exchange for the USD side is USUALLY made using Zelle (in the case of USD remittances) but its also done a lot in actual cash USD, it can also be done in any other method such as Paypal, AirTM, Cashapp, Venmo, etc.. it could even be in hello kitty coins if person A and B agrees. It doesnt really matter.. As for the venezuelan bolivars parts, its always done in venezuelan banks.
What the poster here says in point (1) its wrong, you can use W.U, MoneyGram to send money to Venezuela, it uses the official exchange rate, thus, you don't have to go to colombia to send money to venezuela, remitances using those services are working online (they deposit to your bank), there is also fully operational exchanges like zoom casa de cambio, that will take remitances from different companies worldwide. [3]
So this is my point. As I say, venezuelans do not need bitcoin, they could trade even hello kitty online coins or whatever any other method that allows them to send some value worth. Directly, they just use Zelle or cash, some others use paypal or whatever they want.
So, bitcoin doesn't really benefits Venezuelans, the only thing that benefits venezuelans is the localbitcoins escrow service, but this is not because its cripto or because its bitcoin, it's just because noone else offers an escrow service to sucessfully exchange currency, that's pretty much it. Venezuelans just lack some place to properly exchange money it doesnt need bitcoin
In fact, if you go ahead and check localbitcoin prices for exchange between VES:USD, the rate is always worse, you can check this site that tracks the rate on real time [https://dolardeverdad.com/]
Adding to this, there is another layer to this, it's the fact that it's really hard for Venezuelans to convert bitcoin into USD, not only because we are not welcome on sites like coinbase.com
Now, you wonder right now, how come there is a lot of bitcoin being bought in venezuela's localbitcoin market, now I will answer you, it's plain and simple money laundering, that's it, there is drug dealers, corrupt goverment officials and a bunch of shady people who has TONS of venezuelans bolivars and they want to get them turned into something else. Using my example before, the person B would be the corrupt/drug dealer and the person A would be you trying to send money to your grandma
So no, don't come with the "bitcoin is saving venezuela" speech, it', Bitcoin its a workaround for corruption and dirty venezuelan money to find its way into USD.
[1] http://www.bcv.org.ve/
[2] https://www.instagram.com/p/CJbfgj3FLft/
[3] https://www.zoomcasadecambio.com/
cambalache(3)
They could use hawala, a value exchange system which has been around for centuries. Fees are reasonable, the system is extremely trustworthy and use is not limited to Muslims.
TransferWise is the tech incarnation of it. I bet they don’t operate in Venezuela due to US trade sanctions.
The TransferWise model is the future of global banking imho (disclosure: I work in the financial infra space). One user account, the ability to hold a variety of currencies simultaneously, and banking info for each currency to plug into financial rails for said currency (routing/acct in US, IBAN in the EU, etc).
Turns out money is just rows in a database and ISO 20022 messages, queued and processed.
Turns out money is just rows in a database and ISO 20022 messages, queued and processed.
I had enormous problems trying to do anything with Transferwise from Cambodia. It's still plagued with problems left over from the conventional banking system.
This loops back to one of the few things cryptocurrencies do well: they're extrajudicial, so they're often used for illegal transactions (drugs, ransom, bypassing sanctions). Bitcoin just happens to be really bad for this since the blockchain is forever.
>western union
if you don't mind the usury-level fees
if you don't mind the usury-level fees
Western Union had, hands-down, the best rates and the least hassle for me sending money to my home country. The old reputation of WU just doesn't hold ground any more.
Their fees are surprisingly competitive, take another look. In places where fees are high it usually has to do with risks of doing business in the locale that they have to price in.
You could buy either a stablecoin or ETH (it tends to have more liquidity) and uniswap to a stablecoin like USDC (Owned by Circle and Coinbase, not sketchy, decent liquidity) or USDT (kinda sketchy, insane liquidity). Then you are only really exposed to the volitility for the time it takes to swap, with uniswap that can be literally seconds.
Why aren’t there any mention of highly popular alt-coins like Litecoin? It’s less volatile for real use as a fiat alternative and transaction speeds are a lot faster because of the low service fee to speed things up. I kinda regretted keeping funds in Litecoin but it was one of the first to fix Bitcoin’s shortcomings.
Litecoin is extremely similar to Bitcoin.
The fact that some of the currency's "fundamental constants" have been tweaked to make it slightly better for certain situations does not change the fundamentals.
It's kind of like the multiplicative constants in algorithm complexity theory.
And while there are many other alt-coins that claim to have solved the scalability problem while remaining truly decentralized, I have yet to see one actually deliver.
The fact that some of the currency's "fundamental constants" have been tweaked to make it slightly better for certain situations does not change the fundamentals.
It's kind of like the multiplicative constants in algorithm complexity theory.
And while there are many other alt-coins that claim to have solved the scalability problem while remaining truly decentralized, I have yet to see one actually deliver.
alt-coins don't have the market depth of Bitcoin. Moving money in LTC will move the market, BTC is approaching institutional market depth.
I still question the early bag-holders of Bitcoin. Where are they and what do they do now? I think Litecoin came at a time when more people had an awareness of cryptocurrency, it's more democratized during the initial phases because of Scrypt and GPU's being the dominant mining tool at the time. ASICs shifted that balance again but I still have my doubts about who owns the majority of Bitcoin.
I would bet a lot of folks have been selling it over time. My wallet once held ~10 BTC for a few transactions back in the early days. I ended up with 5 btc left over that I rode the bull market with, selling half the position post bull run each time.
I kick myself for loosing the BTC my friend and I mined back in '09 on CPU time when it truly was worthless. But I was a dumb college student at the time and was simply playing around with it for a few days. I wonder how many BTC were permanently lost in this period.
I kick myself for loosing the BTC my friend and I mined back in '09 on CPU time when it truly was worthless. But I was a dumb college student at the time and was simply playing around with it for a few days. I wonder how many BTC were permanently lost in this period.
Oh man, I'm right there with you. I had the Bitcoin wallet app on my LG G3 years ago... I found a backup USB stick with the wallet backed up to it. Tried to restore the wallet, realize I've forgotten the password. It didn't have much on it, maybe 23 mBTC or so, but that's about $700 nowadays.
I would love to understand this in detail.
If you mined it once you get a hash. When you say you lost those coins you lost the hash to the account? When you mined in 2009 was the hash smaller than today? Is brute forcing possible?
If you mined it once you get a hash. When you say you lost those coins you lost the hash to the account? When you mined in 2009 was the hash smaller than today? Is brute forcing possible?
They lost the private keys, and they are not brute forceable.
https://en.wikipedia.org/wiki/Elliptic_Curve_Digital_Signatu...
https://en.wikipedia.org/wiki/Elliptic_Curve_Digital_Signatu...
Bag-holder usually has the connotation of holding a worthless asset, bitcoin is currently at an all time high.
The underlying asset is utterly worthless, for all the reasons posited here in the article and more — that people are willing to pay you for it doesn’t change that.
>that people are willing to pay you for it doesn’t change that.
I dare to insist it most certainly does. Anything is economically wothless unless there are people willing to participate in exchanging it.
I dare to insist it most certainly does. Anything is economically wothless unless there are people willing to participate in exchanging it.
In the long term this definition is murkier, see the Dutch Tulip bulb bubble of the 1630s.
I'm not sure we have any definition here :-) But claim that anything is economically wothless unless there are people willing to participate in exchanging it is in fact supported (not denied as you seem to imply) by any example of speculative bubble, including of course Tulipmania.
People are using bitcoins price to justify its value. Price is not value, certainly not on a short timescale. Consider that in the short term a market is a popularity content but in the long term, it weighs actual value. This is another way of saying that the market can remain irrational longer than you can remain solvent.
If you actually attempt to assess fundamental value of Bitcoin based on anything comparable it’s value approaches zero. It’s pretty much worthless at anything it’s ever been positioned to achieve except crime and speculation.
Frankly it’s not even good at crime.
If you actually attempt to assess fundamental value of Bitcoin based on anything comparable it’s value approaches zero. It’s pretty much worthless at anything it’s ever been positioned to achieve except crime and speculation.
Frankly it’s not even good at crime.
The value of a bitcoin is the rarity of owning a coin is limited and the way it works opens up transactions globally. The price is the market demand.
oooh the rarity of owning a some digital magic beans, right, thanks I'll pass.
Yes it does change that. If you can sell something for $29K you're not bag holding...
Depends how long you hold it for.
Well yeah, exactly, you're not a bag holder until it's a bag of something worthless.
Litecoin is extremely under the radar right now. With the upcoming MimbleWimble integration it could become a privacy alternative to Monero.
An unsuspecting onlooker would be easily convinced that this comment is random babble generated by a bot.
To be fair, neither of you are providing any tangible, verifiable fact one way or the other.
Is there a Mimblewimble / Litecoin integration effort? If so, I'd sure love to learn more about it.
And if there isn't can you offer something in the way of a proof?
Is there a Mimblewimble / Litecoin integration effort? If so, I'd sure love to learn more about it.
And if there isn't can you offer something in the way of a proof?
You can see the progress of the MWEB (MimbleWimble Extension Block) project here [1], headed by Grin++ [2] developer David Burkett.
[1] https://litecoindotcom.medium.com/litecoin-mimblewimble-nove...
[2] https://grinplusplus.github.io/
[1] https://litecoindotcom.medium.com/litecoin-mimblewimble-nove...
[2] https://grinplusplus.github.io/
TY
Hey guys, y’all seem to know what y’all are talking about.
Please give me a min of yalls time.
My boss has been talking up Bitcoin SV to me for the past 2 years and he watches hours upon hours of podcast and YouTube videos (https://youtube.com/playlist?list=PLOqZWfHm-gzDyMoDGmPCJbBhg...) that playlist is what he showed me that he watched. Anyways, he sort has convinced me.. I’ve done a little research but I’m not familiar with it as y’all seem to be. Is there any hope in BSV? my avg is 169.xx and I just wonder if this thing he told me about BSV being the only one that can “scale up” or whatever that is.. anyway any comments/tips are appreciated. Happy New Year!
Please give me a min of yalls time.
My boss has been talking up Bitcoin SV to me for the past 2 years and he watches hours upon hours of podcast and YouTube videos (https://youtube.com/playlist?list=PLOqZWfHm-gzDyMoDGmPCJbBhg...) that playlist is what he showed me that he watched. Anyways, he sort has convinced me.. I’ve done a little research but I’m not familiar with it as y’all seem to be. Is there any hope in BSV? my avg is 169.xx and I just wonder if this thing he told me about BSV being the only one that can “scale up” or whatever that is.. anyway any comments/tips are appreciated. Happy New Year!
No, BSV is hopeless because nobody wants anything to do with Craig S. Wright (Good summary here: https://bitcoinmagazine.com/articles/op-ed-how-many-wrongs-m...).
Also, if BSV had enough users to ever experience scaling, its network would be so centralized it would be like a new PayPal but with Craig's employer running the show. Not surprisingly, after 2 years this idea has not caught on at all and the value of BSV as a fraction of BTC continues to plunge to new lows.
My suggestion is to get out of this scam immediately and stop listening to your gullible boss.
Also, if BSV had enough users to ever experience scaling, its network would be so centralized it would be like a new PayPal but with Craig's employer running the show. Not surprisingly, after 2 years this idea has not caught on at all and the value of BSV as a fraction of BTC continues to plunge to new lows.
My suggestion is to get out of this scam immediately and stop listening to your gullible boss.
There are options like SureRemit that has extremely low fees built for this exact purpose (at least that’s what it’s being built for). Hope this purpose of blockchain tech pans out and improves compared to other existing options.
you are exactly arguing the authors point, just in a use-case not specifically addressed. the hassle involved in transfurring funds internationally exists for a reason, and as soon we rediscover the associated problems there will be an outcry for some manner of regulation bitcoin purposefully subverted in the first place.
Venezuela? come on , You mean only failed states use it. all these sites could be banned any day.
Not to downplay the shitty situation that Venezuela is in right now, it says something when that's the only situation a quasi-currency is good in. It's almost like for all of Bitcoin's problems, Venezuela has more.
Why are they using bitcoin rather than dollar stablecoins? Too new?
Of course! Every exchange and currency are as valuable and accepted as the group decides them to be. Same way you can pay anywhere with US dollars and not with South-African Rands.
> you can pay anywhere with US dollars
Huh? Maybe with a credit card that converts your usd to a local currency. I’d like to see you walk into a French or Japanese grocery store and offer them your freedom bucks
Huh? Maybe with a credit card that converts your usd to a local currency. I’d like to see you walk into a French or Japanese grocery store and offer them your freedom bucks
Localbitcoins doesnt exchange stables.
Binance does exchange USDT to VES but is not that popular
Binance does exchange USDT to VES but is not that popular
[deleted]
How do people use bitcoin effectively when it has $9 transaction fees from having its block size limited? Do you mean cryptocurrency in general?
The fee someone pays to get a transaction into a block is similar to what passengers pay to be on the same flight—everyone pays something different.
You could have paid $300 while the person sitting next to you could have significantly more or less, depending on a whole host of factors.
Same with bitcoin: someone could have paid $1.50 for a transaction in the same block as your $9 transaction, depending on its size and how quickly the sender needed to have it confirmed. Someone also paid $.50 to be in that block but they were okay with waiting for an hour before it would be confirmed.
A dashboard such as https://bitbo.io will show you fee estimates.
You could have paid $300 while the person sitting next to you could have significantly more or less, depending on a whole host of factors.
Same with bitcoin: someone could have paid $1.50 for a transaction in the same block as your $9 transaction, depending on its size and how quickly the sender needed to have it confirmed. Someone also paid $.50 to be in that block but they were okay with waiting for an hour before it would be confirmed.
A dashboard such as https://bitbo.io will show you fee estimates.
What you are saying is somewhere between a gross distortion and a lie.
I said $9 because the average transaction was $9, the median was over $5. If someone is paying $300 under those circumstances it is because they have a large, complex transaction. Transaction sizes vary, transactions costs aren't as random as you are implying.
> someone could have paid $1.50 for a transaction in the same block as your $9 transaction, depending on its size and how quickly the sender needed to have it confirmed.
That's not how it works. Most transactions are small, you can't somehow cut them down to a fraction of the size it takes for a basic transaction from one address to another.
> Someone also paid $.50 to be in that block
What transaction is what block are you talking about? I didn't mention a specific block, some have had even higher average transaction costs. Where did you see that?
> but they were okay with waiting for an hour before it would be confirmed.
Again, that isn't how it works. If you put a transaction fee that is too low, you wait until there are no higher value transactions for yours to be included into a block.
I said $9 because the average transaction was $9, the median was over $5. If someone is paying $300 under those circumstances it is because they have a large, complex transaction. Transaction sizes vary, transactions costs aren't as random as you are implying.
> someone could have paid $1.50 for a transaction in the same block as your $9 transaction, depending on its size and how quickly the sender needed to have it confirmed.
That's not how it works. Most transactions are small, you can't somehow cut them down to a fraction of the size it takes for a basic transaction from one address to another.
> Someone also paid $.50 to be in that block
What transaction is what block are you talking about? I didn't mention a specific block, some have had even higher average transaction costs. Where did you see that?
> but they were okay with waiting for an hour before it would be confirmed.
Again, that isn't how it works. If you put a transaction fee that is too low, you wait until there are no higher value transactions for yours to be included into a block.
Check out Stellar, it’s been created for that, Faster than bitcoin and really lows fees.
Stop shilling, please.
The only reason BTC works in this scenario is that the authorities are not chasing it down. If they decide to, it will be just as unviable as the other options and authorities have many methods at their disposal to make bitcoin transfers difficult.
BTC is cool, but no amount of tech can solve what is essentially a policy issue: overseas remittances.
BTC is cool, but no amount of tech can solve what is essentially a policy issue: overseas remittances.
You can make the same argument about AirBNB or Uber. The bottom line is that when a technology becomes available that makes life much easier for its users, it's really hard for the government to then crack down on it.
There's not much reason for any government to want to crack down on BTC simply for the sake of cracking down on it. People talk about governments cracking down on BTC because it will undermine the local currency or banking system but I think that's mostly paranoia, there's not much of any evidence to substantiate the hypothesis that any government is fearful of cryptocurrencies.
There were some governments and regulatory agencies that were concerned that BTC is a scam, or needs to be subject to security regulations, and had legitimate concerns about it but for the most part governments don't care that much about BTC in terms of a danger or a threat to their legitimacy.
There's not much reason for any government to want to crack down on BTC simply for the sake of cracking down on it. People talk about governments cracking down on BTC because it will undermine the local currency or banking system but I think that's mostly paranoia, there's not much of any evidence to substantiate the hypothesis that any government is fearful of cryptocurrencies.
There were some governments and regulatory agencies that were concerned that BTC is a scam, or needs to be subject to security regulations, and had legitimate concerns about it but for the most part governments don't care that much about BTC in terms of a danger or a threat to their legitimacy.
In fact, governments like New York have cracked down on Uber and AirBnb. I do think if BTC or another crypto were to be a problem for a country they would simply legislate away people’s right to hold or exchange it. US would pass a bill that makes the exchanges illegal. Sure, people would find ways around that, but it would be enough to deter your average citizen and to squash widespread adoption.
Whether BTC becomes a problem is a question, but if use in laundering or escaping taxes gets past a certain point, I do think it is a risk.
Whether BTC becomes a problem is a question, but if use in laundering or escaping taxes gets past a certain point, I do think it is a risk.
>>People talk about governments cracking down on BTC because it will undermine the local currency or banking system but I think that's mostly paranoia
Incorrect, the government has no concerns over undermining the local currency. The primary purpose of banking regulations is population control, it has nothing to do with currency perservation
Know your Customer laws, book keeping regulations, etc are all about control and intelligence. If they can get this intel and allow BTC to operate as is they will leave it alone, if however they can not get the intel they need on how money is moving well you can bet your life they will crack down hard
Governments, all governments even yours, are about Power, Control, and Authority not what people seem to naively think that the government is there to "help" or "protect" or any other just altruistic goals.
Incorrect, the government has no concerns over undermining the local currency. The primary purpose of banking regulations is population control, it has nothing to do with currency perservation
Know your Customer laws, book keeping regulations, etc are all about control and intelligence. If they can get this intel and allow BTC to operate as is they will leave it alone, if however they can not get the intel they need on how money is moving well you can bet your life they will crack down hard
Governments, all governments even yours, are about Power, Control, and Authority not what people seem to naively think that the government is there to "help" or "protect" or any other just altruistic goals.
Government isn't a monolith. There are individuals within the government that have altruistic goals. It may be helpful for certain analyses to simplify and consider a government as an individual, but for other analyses that's counter-productive.
Government is a monolith, the goals of the individuals that make up the government are irrelevant.
The road to hell is paved with good intentions, and the most terrifying phrase in the English language is "We must do _____ for the greater good"
Government is not reason, it is not eloquence,it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action.
The road to hell is paved with good intentions, and the most terrifying phrase in the English language is "We must do _____ for the greater good"
Government is not reason, it is not eloquence,it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action.
You're spouting platitudes, which I enjoy sometimes for a dramatic turn of phrase, but they aren't helpful for rational discussion. They're best used for introducing a topic, but then we need a little more structure behind the facade.
Going back to the monolith question, the other day someone at the public utility helped me fix a mistake with my bill. That individual was not irrelevant to my experience with government power.
Going back to the monolith question, the other day someone at the public utility helped me fix a mistake with my bill. That individual was not irrelevant to my experience with government power.
I’ve been noticing this sort of comment a lot in discussions of cryptocurrencies.
Take for instance the following response to the Ray Dillinger’s email:
Internet also became a disaster. We're very far from original ideas: Uncensored, decentralized ideals are forgotten.
I remember, in the beginning, governments were really afraid of people's reactions, even to make small regulations. Today, we don't even discuss before accepting any regulation about Internet. Infrastructure is almost completely controlled/owned by governments or cartels. [1]
That is so far beyond reality that it’s hard to believe this person was there “at the beginning”. The Internet, after all, started as a DARPA project...
1. https://www.metzdowd.com/pipermail/cryptography/2020-Decembe...
Take for instance the following response to the Ray Dillinger’s email:
Internet also became a disaster. We're very far from original ideas: Uncensored, decentralized ideals are forgotten.
I remember, in the beginning, governments were really afraid of people's reactions, even to make small regulations. Today, we don't even discuss before accepting any regulation about Internet. Infrastructure is almost completely controlled/owned by governments or cartels. [1]
That is so far beyond reality that it’s hard to believe this person was there “at the beginning”. The Internet, after all, started as a DARPA project...
1. https://www.metzdowd.com/pipermail/cryptography/2020-Decembe...
Why is it obvious that no amount of tech can solve it? Tech can also influence policy. If something is nearly impossible to stop, it likely won't be stopped. The policy will be changed instead.
This hasn’t proven true in countries with functioning govts: they very much have applied tax and securities law to bitcoin.
The rideshare industry had a clear impact on local laws in every first world country for one example.
Right, because it was hard to control and ridesharing was clearly better. My point was the experience in functioning countries has not shown this to be true of bitcoin.
It has been easy enough for govts to enforce tax and security laws where they’ve tried. What laws have been changed for bitcoin?
It has been easy enough for govts to enforce tax and security laws where they’ve tried. What laws have been changed for bitcoin?
The IRS issued official guidance on it but there's no need for new laws around it.
That’s the point! Bitcoin didn’t bend the world to its will. Whereas ridesharing forced legalization of ridesharing.
I should note that I do not necessarily imply in my comment that it would be Bitcoin that would bend the world to its will. Bitcoin is just one member of a larger cluster of cryptocurrencies. There are certainly some cryptocurrencies for which it is not so obvious that governments will be able to enforce exactly the same laws as they enforce now.
That said, even with Bitcoin, I do think it shifted the world ever so slightly in a new direction of financial independence which just wasn't there before. There is something distinctly different about sending money to someone else in any part of the world just by typing their address, with no one being able to stop you. With traditional methods, governments could impose and have regularly interfered and imposed bureaucracy already on this sending step. With Bitcoin they do not do this because it isn't very practical.
That said, even with Bitcoin, I do think it shifted the world ever so slightly in a new direction of financial independence which just wasn't there before. There is something distinctly different about sending money to someone else in any part of the world just by typing their address, with no one being able to stop you. With traditional methods, governments could impose and have regularly interfered and imposed bureaucracy already on this sending step. With Bitcoin they do not do this because it isn't very practical.
You could argue its popularity has prevented governments from regulating against it as hard as they would have liked to.
> nearly impossible to stop
What's nearly impossible to stop? Can't the government simply shut down the internet to stop Bitcoin? Or insert itself as the man in the middle of all network traffic.
What's nearly impossible to stop? Can't the government simply shut down the internet to stop Bitcoin? Or insert itself as the man in the middle of all network traffic.
No, the government can't "just shut down the internet".
If any government did that, then the country would suffer extreme economic damages, if such a policy was maintained for a long time.
Your argument would be like if someone were to say "actually, the government can stop all theft, now and forever. All it has to do is launch 1 thousand nukes, start world war 3, and kill off 99% of the population".
Like, sure. The government could end the world, by launch a nuke at every major city in the world. And it is true that by doing this it would end all theft .. because everyone is dead.
But you are kinda missing the bigger picture if you are seriously suggesting this as a counter argument to anything.
If any government did that, then the country would suffer extreme economic damages, if such a policy was maintained for a long time.
Your argument would be like if someone were to say "actually, the government can stop all theft, now and forever. All it has to do is launch 1 thousand nukes, start world war 3, and kill off 99% of the population".
Like, sure. The government could end the world, by launch a nuke at every major city in the world. And it is true that by doing this it would end all theft .. because everyone is dead.
But you are kinda missing the bigger picture if you are seriously suggesting this as a counter argument to anything.
My point was that the government has control of the internet, and thereby all activity on the internet.
> extreme economic damages
We're talking about Venezuela, which has had extreme economic damages caused by a government trying to maintain control over its population. It seems that they don't care about damage, only power domestically, not internationally. The comment we're replying to said that Bitcoin is valuable in transactions with Venezuelan counter-parties because of Venezuela's government's damage to the domestic economy.
> extreme economic damages
We're talking about Venezuela, which has had extreme economic damages caused by a government trying to maintain control over its population. It seems that they don't care about damage, only power domestically, not internationally. The comment we're replying to said that Bitcoin is valuable in transactions with Venezuelan counter-parties because of Venezuela's government's damage to the domestic economy.
> My point was that the government has control of the internet, and thereby all activity on the internet.
Yes, if you're a big enough bully, you have control over many things. However, sometimes the control would imply too much destruction so even the bully chooses not to proceed. This is essentially what is happening right now.
Yes, if you're a big enough bully, you have control over many things. However, sometimes the control would imply too much destruction so even the bully chooses not to proceed. This is essentially what is happening right now.
https://www.cnn.com/2020/12/18/americas/venezuela-death-of-s...
> In more recent years, even the state's hold on the country's financial system has been badly shaken, with the US dollar growing commonplace in day-to-day transactions. In March 2019, Venezuela's entire electric grid collapsed, leaving some regions without power for up to a week. Without electricity, electronic transactions including credit and debit card payments were impossible, and paying cash was futile with even the highest-denomination bolivar notes worth only pennies. So Venezuelans started using the option left: illegal foreign banknotes.
How would they use Bitcoin when electricity is out? Generators only last so long when fuel is rationed.
> the government for the first time allowed a private company to issue bonds in dollars, and by doing so, raise capital outside of government control.
They key word there is "allowed" because that emphasizes the ability to disallow at some point in the future.
People have this sci-fi imagining of megacorps and the collapse of government power. Instead, we have Jack Ma probably afraid for his life, because he insulted the wrong person.
> In more recent years, even the state's hold on the country's financial system has been badly shaken, with the US dollar growing commonplace in day-to-day transactions. In March 2019, Venezuela's entire electric grid collapsed, leaving some regions without power for up to a week. Without electricity, electronic transactions including credit and debit card payments were impossible, and paying cash was futile with even the highest-denomination bolivar notes worth only pennies. So Venezuelans started using the option left: illegal foreign banknotes.
How would they use Bitcoin when electricity is out? Generators only last so long when fuel is rationed.
> the government for the first time allowed a private company to issue bonds in dollars, and by doing so, raise capital outside of government control.
They key word there is "allowed" because that emphasizes the ability to disallow at some point in the future.
People have this sci-fi imagining of megacorps and the collapse of government power. Instead, we have Jack Ma probably afraid for his life, because he insulted the wrong person.
> My point was that the government has control of the internet, and thereby all activity on the internet.
And yet, here we are, living in a world where such controls are pretty difficult to enact and simply aren't happening.
Even in places where there are government controls over the internet, such controls are apparently not even close to perfect, on many many people are successfully able to get around them.
So, the evidence shows, that despite any argument that you are making about how governments might control the internet and stop anyone from ever doing anything at all that they don't like, that is simply not happening right now to such a perfect degree that you suggest should happen, even in currently authoritarian countries.
> We're talking about Venezuela, which has had extreme economic damages caused by a government trying to maintain control over its population
And yet, despite all of that, it doesn't really seem to be enacting extreme/perfect control over the internet, despite many motivations to do so, that have nothing to do with crypto.
> The comment we're replying to said that Bitcoin is valuable in transactions with Venezuelan counter-parties because of Venezuela's government's damage to the domestic economy.
Ok, and Venezuela isn't at all successfully preventing this damage. They aren't doing that. So the evidence shows that, for some reason, Venezuela is unable or unwilling to put extreme controls on crypto, do the the consequences or difficulty of doing so.
Any hypothetical, or arguments that you can possibly think of, as for why Venezuela should put extreme controls on crypto or the internet, needs to deal with the fact that Venezuela simply isn't doing that right now, likely for a good reason. Because it is very difficult to do that.
And yet, here we are, living in a world where such controls are pretty difficult to enact and simply aren't happening.
Even in places where there are government controls over the internet, such controls are apparently not even close to perfect, on many many people are successfully able to get around them.
So, the evidence shows, that despite any argument that you are making about how governments might control the internet and stop anyone from ever doing anything at all that they don't like, that is simply not happening right now to such a perfect degree that you suggest should happen, even in currently authoritarian countries.
> We're talking about Venezuela, which has had extreme economic damages caused by a government trying to maintain control over its population
And yet, despite all of that, it doesn't really seem to be enacting extreme/perfect control over the internet, despite many motivations to do so, that have nothing to do with crypto.
> The comment we're replying to said that Bitcoin is valuable in transactions with Venezuelan counter-parties because of Venezuela's government's damage to the domestic economy.
Ok, and Venezuela isn't at all successfully preventing this damage. They aren't doing that. So the evidence shows that, for some reason, Venezuela is unable or unwilling to put extreme controls on crypto, do the the consequences or difficulty of doing so.
Any hypothetical, or arguments that you can possibly think of, as for why Venezuela should put extreme controls on crypto or the internet, needs to deal with the fact that Venezuela simply isn't doing that right now, likely for a good reason. Because it is very difficult to do that.
Nope, I'm not familiar with how widespread cryptocurrency usage is for international exchange with Venezuela. I do know that they keep tight control over traditional foreign currency exchange via public markets.
> I do know that they keep tight control
I was talking about how much control they have over the internet.
The fact of the matter is, that even the most authoritarian countries out there, are simply are unable to have a 100% perfect authoritarian control over their internet, as of today.
Despite the many motivations that current authoritarian countries have for definitely wanting to control their internet, right now, the evidence is showing that they are failing to perfectly control everything over the internet.
I was talking about how much control they have over the internet.
The fact of the matter is, that even the most authoritarian countries out there, are simply are unable to have a 100% perfect authoritarian control over their internet, as of today.
Despite the many motivations that current authoritarian countries have for definitely wanting to control their internet, right now, the evidence is showing that they are failing to perfectly control everything over the internet.
I don't think the aim is to have 100% control, but just enough. I'll admit I didn't read closely, but I have read a few news articles about some government or another temporarily shutting down internet access during a protest. I'd expect Venezuela could do something similar if they felt like it. They seem perfectly happy letting their citizenry go without basic staples, I'm sure they'd be fine turning off internet for a while.
> I'd expect Venezuela could do something similar if they felt like it.
And yet, if you look at the real world, and how things exist already, you see that these types of efforts have failed.
This is not a hypothetical situation. This is not about stuff that may or may not happen in the future.
Instead, you can look at real world situations, that happen right now, in existing countries all around the world, and you will see that the efforts to control the internet, have mostly failed.
Ex: Just look at china, which is the most famous example of internet control. . Lots of people have VPNs and can get around these restrictions in china.
The evidence already proves you wrong. There are multiple countries who have attempted to enact strict controls, over the internet, already, and they have mostly failed.
And yet, if you look at the real world, and how things exist already, you see that these types of efforts have failed.
This is not a hypothetical situation. This is not about stuff that may or may not happen in the future.
Instead, you can look at real world situations, that happen right now, in existing countries all around the world, and you will see that the efforts to control the internet, have mostly failed.
Ex: Just look at china, which is the most famous example of internet control. . Lots of people have VPNs and can get around these restrictions in china.
The evidence already proves you wrong. There are multiple countries who have attempted to enact strict controls, over the internet, already, and they have mostly failed.
On the contrary, I think China is a good example of how the government can have its cake and eat it, too.
When you say, "lots of people," how many are we talking about? The majority? If so, you'd think the government would just give up trying to have control, it wouldn't be worth the effort.
Remember, we're not talking about trying to have a technology that a few hobbyists can use. The goal is widespread usage, enough that it prevents governments from controlling currency.
When you say, "lots of people," how many are we talking about? The majority? If so, you'd think the government would just give up trying to have control, it wouldn't be worth the effort.
Remember, we're not talking about trying to have a technology that a few hobbyists can use. The goal is widespread usage, enough that it prevents governments from controlling currency.
Have you met North Korea?
That bastion of great economic management and economic growth...
Indeed however Bitcoin is positioned as a way of fighting back against these administrations. However it helps literally nobody in North Korea because they just shut down their internet.
I think Bitcoin does help people in North Korea though. Just not the average citizen.
No citizen of North Korea whose not a party member gets to use Bitcoin. The only people who do are using it to finance the hermit kingdom's nuclear weapons program. That's not a good thing.
I see BTC as an immensely successful first try at making this kind of thing - and like any emerging tech it's slow, inefficient, sharp edges, mostly used by experts. It's a tech channeled towards an Ayn Randian utopian fantasy, and has run right into the limits of that fantasy as a working philosophy.
And yet, it still has practically useful properties.
The coins that win as a currency will have to loosen their grasp on the rentier-merchant aspects, become more energy efficient, more usable, more integrated into society(within and without its institutions).
And yet, it still has practically useful properties.
The coins that win as a currency will have to loosen their grasp on the rentier-merchant aspects, become more energy efficient, more usable, more integrated into society(within and without its institutions).
Most of the problems of Bitcoin are solved by centralization. Reversibility, transaction speed, increasing and decreasing the supply. The problem is that centralization creates an investment contract. We already have a medium for exchanging those. It's called the stock market. Bitcoin operates out of the control of any government or regulation. Thus, the decentralization imposes limitations on its design.
XRP tried to make a centralized cryptocurrency that solved those problems and now the SEC is basically telling them they have to give all the money back because it's an investment contract.
XRP tried to make a centralized cryptocurrency that solved those problems and now the SEC is basically telling them they have to give all the money back because it's an investment contract.
> and like any emerging tech
The problem that everyone else sees is that Bitcoin has been "emerging tech" with all its rough edges for so many years.
The problem that everyone else sees is that Bitcoin has been "emerging tech" with all its rough edges for so many years.
Is that wrong? What other new asset class was developed this rapidly?
Think about what other technology is 12 years old you’d call “nascent” - 12 years is an eternity in tech. The iPhone is 12 years old and bears only a passing semblance to what was launched. Bitcoin is practically identical.
The first ETF launched in 1993, and 12 years later they had 400 billion in net asset value - 533 adjusted for inflation. Your argument that the growth is unprecedented is specious.
The first ETF launched in 1993, and 12 years later they had 400 billion in net asset value - 533 adjusted for inflation. Your argument that the growth is unprecedented is specious.
> Think about what other technology is 12 years old you’d call “nascent”
Cars, Steam engines, Airplanes, Trains, the Internet, Radio, Phones, Mobile phones, Smart phones, Cinema, TV's, basically anything that is actually new technology?
I actually can't think of any new technology that reached maturity within 12 years of it's original prototype.
> The first ETF launched in 1993,
ETF's are a contract, they're not technology. By the way, BTC currently has 450 billion in net asset value, so...
Cars, Steam engines, Airplanes, Trains, the Internet, Radio, Phones, Mobile phones, Smart phones, Cinema, TV's, basically anything that is actually new technology?
I actually can't think of any new technology that reached maturity within 12 years of it's original prototype.
> The first ETF launched in 1993,
ETF's are a contract, they're not technology. By the way, BTC currently has 450 billion in net asset value, so...
As I type this, bitcoin's market cap is a little over $554 billion.
What technology do you use from 2008 that hasn't changed at all since then, and is also considered nascent?
I don't know but Bitcoin is definitely not it, it's seen multiple large improvements over the years.
Oh cool! Does it exceed 7tx/sec now? That's great news.
Yeah, but I believe it's the economic side which is moving slowly, not the technological side. People have been working on improved technologies for cryptocurrencies for a while now but the problem is that none of them have gained the same trust as Bitcoin.
I suspect ETF cash inflows far, far outpace crypto cash inflows.
I suspect you could take a lot less cash out of crypto without collapsing the market.
lol that’s very much backwards, by crypto advocates own admission there’s zero liquidity in the space.
Orange Money Bad!
sounds salty
The weakest link of any non-fiat currency is that the point of transforming fiat to cryptocurrency becomes. This makes it almost impossible for it to achieve its manifesto of being an alternative.
Many in the industry conveniently overlook over the fact that the government can just ban you from wiring money to anyone selling cryptocurrency on a whim.
It is my theory that cryptocurrency is being actively allowed because of its political, counter-intelligence value.
Imagine if you invited all the bad people in your country and tricked them into using a currency they all believed to be infallable and anonymous. You simply ignore the middle level dealers or criminals and able to keep track of potential state level actors utilizing criminal networks to subvert your country.
Many in the industry conveniently overlook over the fact that the government can just ban you from wiring money to anyone selling cryptocurrency on a whim.
It is my theory that cryptocurrency is being actively allowed because of its political, counter-intelligence value.
Imagine if you invited all the bad people in your country and tricked them into using a currency they all believed to be infallable and anonymous. You simply ignore the middle level dealers or criminals and able to keep track of potential state level actors utilizing criminal networks to subvert your country.
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[flagged]
Please don't break the site guidelines like this. For example, these:
"Don't be snarky."
"Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."
https://news.ycombinator.com/newsguidelines.html
"Don't be snarky."
"Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."
https://news.ycombinator.com/newsguidelines.html
The trollish Bitcoiner answer to every criticism: "you just jelly of my internet money".
I definitely am!
I can't believe btc got this far.
I never bought anything because it sounds ridiculous and the kind of thing any western government would ban immediately - turns out I was wrong.
I know people who are completely clueless about the economy who retired just by betting on BTC.
I can't believe btc got this far.
I never bought anything because it sounds ridiculous and the kind of thing any western government would ban immediately - turns out I was wrong.
I know people who are completely clueless about the economy who retired just by betting on BTC.
The difficulty in criticizing Bitcoin and what it could have been is that everyone willing to engage you on it is quite literally invested in being right.
Zealots betting the house can't afford to be wrong because it would often make them bankrupt.
Zealots betting the house can't afford to be wrong because it would often make them bankrupt.
Note that "Ray Dillinger" is a very early pseudonymous Bitcoiner, on par with Hal Finney.
See https://www.linkedin.com/pulse/id-known-what-we-were-startin...
See https://www.linkedin.com/pulse/id-known-what-we-were-startin...
The author of the post, Ray Dillinger <[email protected]>, was involved in the bitcoin project alongside Satoshi at the very beginning: http://diswww.mit.edu/bloom-picayune/crypto/137799
He's among a very small group of original authors. He quite literally bought into Bitcoin when it was just an idea.
He's among a very small group of original authors. He quite literally bought into Bitcoin when it was just an idea.
Bought in and unfortunately sold out @ $1/BTC. At $30K/BTC it's a life of regrets left to live.
Written by a guy who holds a patent for for identifying the context of a statement made to a virtual robot.
The seller initially requested payment via Transferwise, who sought crazy amounts of personal information and bullied me into a privacy-hostile customer agreement. Days went by and they still hadn't activated my account.
Growing frustrated, I convinced the seller to accept Bitcoin, which was comparatively instant. The phone arrived a few days later, meanwhile the Transferwise morons still had their heads up their arses with no movement and no good explanation. I'm not a financial risk; I'm a good little citizen with no red flags. Reading between the lines my sense was their staff were overloaded or their onboarding system was simply broken.
Bitcoin was incredibly helpful for me that day, and my favorite feature about the phone is the way I paid. In addition to a great story, I've got to admit there was something liberating and empowering about giving what felt like a big middle finger to the slow, decrepit, old-fashioned institution who couldn't even deliver on their core business proposition. Like saying "screw you, I don't need you and your crappy service anymore, come back when you can compete on merits".
Whatever else you criticize about Bitcoin, it's still "cash you can email", and even if that's all it ever amounts to I still find it a bloody useful innovation.