Bitcoin passes 10,000 USD
coinmarketcap.com
coinmarketcap.com
There's a cafe down the street from me that accepts Bitcoin. I could literally buy a meal with it right now.
It may not be rational, but it has actual utility.
They also do now, but coupled with the creation of new bitcoins.
If you have 100k of bitcoin right now and needed to transfer it to someone, you can do it in one go with one flat fee that is the same regardless of your transaction amount.
I pay no fee's to obtain bitcoin, ether but that shouldn't matter. We're talkign dollar to dollar transfers, btc to btc transfers, eth to eth transfers.
Doing it in dollars is objectively worse. It takes more time, more money and raises more scrutiny. I've recently used ether to transfer over 5k to a friend with a fee a few cents and a transaction time of 40 seconds.
You can't do that with dollars.
"10,000 bitcoin bought 2 pizzas in 2010 — and now it'd be worth $20 million":
Not sure how it would work now, but I think even now chances are that the transaction would eventually be confirmed, so the POS system could gamble on that and "accept" it if it includes some minimal fee.
How it may work in the future: Off-blockchain processing solutions like the Lightning network (1) have been proposed to decentralize some degree of transactions.
However, this inevitably takes some of the power away from the miners/those who make money off every transaction fee. This has in essence been the struggle/division behind many of the most recent forks or proposed forks; a tradeoff between scale and economics for those that are generating coins or facilitating transactions.
The Bitcoin drama is far from over, and for it to be anything other than (primarily) a store of value in the longer term will require significant technical changes. In fact, at this point, no existing cryptocurrency can support the scale of, say, VISA. It's early days and the race to solve this problem (or fail) is a fascinating drama to watch.
1. https://cointelegraph.com/explained/lightning-network-explai...
(The last numbers I heard and may have misunderstood were more than 10 dollars and hours to confirm. That is negative utility to me, as in that case someone would need to literally pay me to use bitcoin for buying my coffee.)
However in the future the lightning network will really solve this problem hopefully once and for all. Read the overview about how it works at [0] but the gist is that you can create a network of trustless "deferred" payments that you and another party can agree on new balances for each of you off the blockchain, and at any point either of you can "settle" the latest balance on the blockchain.
And by building a network of these "deferred" payment channels, you can pay parties that you don't even have a direct channel with by routing it through others that you do have a channel with. It was a pretty mindblowing idea once I was able to grasp it. I really encourage anyone that is even a little curious about it to read the website at [0]. The abstract is very approachable, and the actual paper does a good job walking you through the details.
If you think that Bitcoin is a Ponzi, that's fine, but many many people don't, and they see real value in what it provides, and allowing quick easy small payments will fix the last major issue I have with the currency.
And many people currently keep nontrivial amounts of wealth in BTC, but I'm talking about keeping "PayPal" amounts of wealth in it if you want. Charge up your BTC address with $200 and then use it on little shit for the month. That's the kind of thing that lightning enables.
Also, lightning is optional, if you don't want to open a channel, you can use it like it currently is without having to do 2+ transactions just to make one, you'd only open a channel if you wanted to. There's never a situation where you are forced to use lightning.
Of course, there are also differences. With ponzi people typically are deceived to think there is some other value proposal, bitcoin is quite open that there is none.
You may want to evaluate the difference in ponzi/bitcoin value creation against selected other asset classes:
- Company stock. A company can increase profitability and pay out dividends. (Of course, a stock can turn out in a bubble).
- A bond or other tradable debt instrument. This will appreciate in values as time passes and interest accrues to the creditor.
- Real estate. You can rent the real estate out or enjoy the value a real estate generates yourself.
You see, the ponzi/bitcoin really is distinct from the others in the value creation model?
[1] only source for increasing value would be finding more and more people that are willing to pay more and more of the right to hold the asset.
With bitcoin I can send $20 to a friend without him worrying about paypal freezing his account because of "shady activity", or I can receive donations on my website without needing to rely on a tipping service that could go under at any moment. I can spend my bitcoin anywhere that accepts it without worrying that they will double charge me, or continue charging me monthly, or lose my account info causing a hacker to be able to charge me.
That has value, and the idea that it's entirely worthless because you can't make money with it via some 3rd party enforcement is silly.
If you don't see the value in what bitcoin offers, then you'd be crazy to invest! I agree that if I ignore that part of bitocoin, it looks an awful lot like a crazy investment bubble that is going to explode down to nothing. But I do think it has value, and whether it's $10,000 a bitcoin or $1 a bitcoin, it will continue to have value for me because of the secure, decentralized, and fast nature of using it as a payment system.
Sure, as likely did whatever tokens were used to mark participation in Ponzi's scheme;)
> It is a quick and secure payment channel that isn't at the mercy of any one government or bank. That alone is extremely valuable.
You need to distinguish the concepts of holding the bitcoin and using a bitcoin. You do not need to hold bitcoins to use that as a payment channel. You can just buy one when you need to transact, and then the receiver can again convert the bitcoin to a stable currency. If this is the source of the demand of bitcoins, current valuation is staggering. It is something like 40 dollars on average under transaction for each and every person on the planet. (300 billion USD vs 7.6 billion people) Global GDP is 15,800 USD per capita so that would mean roughly the full global gdp would need to be under transactions that take about a day to create this demand. (If the transactions are faster, there is less demand for bitcoin). So to the Lightning solution, which says that it is enough to have the 40 dollars on each persons Lightning wallet to generate the basis for current valuation. Now, let's assume that an average person would need/want to top up or cash his Lightning wallet once a month with a proper bitcoin blockchain transaction. 7.6 billion wallets (let's be conservative and only one wallet per crawling/walking/wheelchairing person on earth) would mean about 3000 transactions per second on the blockchain. That is around three orders of magnitude more than what the current capacity is. (And not a single speculative trade included). These pieces just don't fit in my head to make sense.
> All too often i've found that I can't access my own money. Keeping it in cash is a recipe for disaster, banks often close accounts, have poor business hours, and have unfortunate amounts of fraud meaning I need to get a new credit card pretty often because some vendor I gave that number to decided to charge me more, or continue charging me after our business was done. I've been stuck while traveling multiple times because my bank decided to close my card due to what they thought looked like fraud, leaving me stranded.
Of course, this is highly personal and sensitive question so I definitely do not mind you not answering, but I am a bit curious whereabout in the world you are located and whether you are engaged in some kind of illegal business or is there some other reason you are targeted by financial institutions so often? What I actually do would like to get an answer for is that why would you think that is a representative state of affairs? In my neck of woods (Europe), if normal persons can't access money due to bank's fault, it is a big news. Most of my banking business I can take care of online whenever I want, and I remember precisely once that my credit card was cancelled due to some thing or another (don't remember details) and precisely twice when I have been travelling and all my credit cards have failed to give me money from an ATM.
> I can spend my bitcoin anywhere that accepts it without worrying that they will double charge me, or continue charging me monthly, or lose my account info causing a hacker to be able to charge me.
Again, where I am, I can call Visa and it is the burden of the vendor to prove that I actually bought the pizza twice. Those really are not worries to me. Especially if I start comparing that to the risk that someone hacks my cmputer/wallet/exchange account/whatever, and I definitely have no recourse on my money.
> it will continue to have value for me because of the secure, decentralized, and fast nature of using it as a payment system.
The "fast" applies only if you are willing to stomach the volatility and other risks holding bitcoin entails. And "secure" depends on the point of view.
(And just to be clear, I do see that gold actually is very similar to bitcoin as an asset. And I do think that any sensible central bank should sell their gold reserves before others come to their senses, as if all central banks sold their gold reserves, gold price would be a fraction of what it currently is.)
>You can just buy one when you need to transact, and then the receiver can again convert the bitcoin to a stable currency.
But then you are just using fiat currency with an extra step. The bank can still disable your card used to buy bitcoin, the bank can still decide it doesn't like you selling cryptocurrency and freeze your account. The bank still has garbage business hours and poor customer service. The benefits only work when you keep your "spending money" in bitcoin.
> Now, let's assume that an average person would need/want to top up or cash his Lightning wallet once a month with a proper bitcoin blockchain transaction.
That's the secret, you wouldn't need a "proper bitcoin transaction". You'd open a channel with someone like coinbase, and then use that forever. Generally the only time you would ever need to close a channel, is to force payment from a party that is no longer participating for whatever reason. And, it can be even less than that. If you have a channel open with me, and I have a channel open with coinbase, you can buy from coinbase and route the payment through me to you without needing to open a second channel. And the whole system is trustless, so I can't backstab you and try to steal your money, and much like how you can take hundreds of routes between 2 IP addresses, you could take hundreds of different routes between lightning channels.
Combine that with other new possible features in the future like schnorr signatures (which allow, oversimplified, multiple transactions' signatures to be combined into one signature, making most transactions be the minimum size on the blockchain).
Everyone agrees that bitcoin's blocksize will need to scale eventually, but the idea is to have it follow the size of harddrives, and not outpace them. Bitcoin won't have 7.6 billion users tomorrow, or next year, or within the next 5 years. So writing it off because it can't currently run at that scale is pointless when there are plans in place to hopefully one day get there. Whether you or I think those plans will eventually materialize is up to each of us.
>I am a bit curious whereabout in the world you are located and whether you are engaged in some kind of illegal business or is there some other reason you are targeted by financial institutions so often?
I'm in the US, and it often happens when I go out of state, and especially out of the country. If I don't notify my bank that I'm going somewhere ahead of time, they will most likely shut my card off due to fraud alerts. In one case they even shut it off because I used it twice at the same gas station near my house within 5 minutes (the first pump was broken, I pulled forward and tried it again, and like an hour later my card was locked). I'm not doing anything illegal, or even borderline illegal (no online gambling or anything frowned upon by banks), but simply using a credit card in the US in Pennsylvania on monday, and at a gas station in Florida on wednesday is enough to get my account closed and a new card shipped to my house in Pennsylvania (which is the last place I need it when i'm in Florida for another 5 days...)
>Again, where I am, I can call Visa and it is the burden of the vendor to prove that I actually bought the pizza twice. Those really are not worries to me. Especially if I start comparing that to the risk that someone hacks my cmputer/wallet/exchange account/whatever, and I definitely have no recourse on my money.
Where I live, I need to monitor my own card, as the longer I let a charge go without contesting it the less likely it is that my bank will believe me and refund it. Not to mention the amount of time I'd need to spend on the phone contesting the charge, getting mail about the contesting, following up to ensure I won't be re-charged by visa if they side with the other party, and in one case having to file a police report before they would refund my money.
And while the risk of being your own bank is difficult and risky in some ways (hacking, etc...), Bitcoin gives you the choice. You can use a custodial service if you want (AKA a bank which will insure your money in the event of a hack or fraud), or you can be your own bank. Both still let you use bitcoin with all of it's benefits.
It's obviously not for everyone, and Bitcoin is absolutely a risky "asset" to be involved with right now, but as adoption grows that volatility will begin to level out. It already has compared to the early days of bitcoin with 50%+ swings in a single day in many cases. I'm putting what I can afford to lose into it, as I really believe in the technology and what it provides, and I do genuinely think it's a better form of currency than anything else that has widespread use. It's not perfect, but it's ability to change and improve over time means that it will continue to get better, and as new usecases pop up, it can adapt and change to work with them.
If Bitcoin's value halves tomorrow, I'd be upset as a lot of potential value will never materialize for me, but I'd still use and support bitcoin, as would many others, due to the benefits it provides, and not just because of it's valuation. And that right there is why I know that it's not a ponzi scheme. This "pop" already happened once, it went from $1000 to $200 and stayed there for quite a while, but I and many others never stopped using it, and if it happens again I'll continue as well this time.
Thank you, it is interesting.
> But then you are just using fiat currency with an extra step
That is for me and my counterparty to decide separately, the actual transaciton is still made with bitcoin. You can also argue that as long as you use fiat to determine the value of the transaction (10 USD for a pizza converted to whatever is current exchange rate instead of 0.0xxxx bitcoin) you still are using fiat in the transaction, even if only in a secondary role.
> That's the secret, you wouldn't need a "proper bitcoin transaction". You'd open a channel with someone like coinbase, and then use that forever.
It seems I have missed now something. I open a channel and allocate a certain amount of bitcoin there for me to spend. After a while, I have bought loads of pizza, and my channel has no more "credit". How do I top up my channel if there is no single blockchain transaction to be used?
> You can use a custodial service if you want (AKA a bank which will insure your money in the event of a hack or fraud),
Interesting. How much does such bank charge for these services and what are the "banks" allowed to do with the coins thay have under custody? Can they e.g. lend them or use them in any other way? Who does insure these "banks"?
> volatility will begin to level out.
Unfortunately not. There really is no mechanism to do that. You can have a look at a historical price charts of gold [1], and you see that once there have been no central bank enforcing nominal gold price stability, the volatility has been massive (compared to what I would like to have with my savings). And gold has had much more time (and much more "market cap") for the price to stabilize. And it has not.
As a side note, I actually think that we would need additional currencies/monies (sorry, as a non-native english speaker I have never quite grasped the distinction) to the "official" ones. But the main source of my scepticism towards current cryptocurrencies is that as a proper currency, they are really bad. And almost antithetical to what I think a good alternative currency should be. (I am thinking mostly from macroeconomic perspective here) I am thinking that modern money is credit and postoned consumption (I will buy you a pizza today instrad of buying a beer and you promise to buy me a pizza tomorrow, that one pizza tomorrow is basically money that I can use when I agree with someone that actually, buy me a beer, you are going to buy a pizza to that someone instead of me. That's credit (i.e. trust). But bitcoin does not have that. Nobody is guaranteed to buy me a pizza tomorrow if I have a bitcoin. I only can hope that I find tomorrow someone that will buy my bitcoin. Another thing is that this postponed consupmtion needs to have a price (i.e. interest rate). And the biggest fault with the current monetary system is that the price has a(n approximately) zero floor due to cash. We would need to be able to set the interest rate below zero in certain circumstances to facilitate consumption to keep the economy running. But negative interest rates are as close to heresy as there is for a typical cryptocoiner - as far as I understand. And there is no way to do this, anyway, in bitcoin. And adjusting the interest rate would require the ability to adust the money supply, which, again, is antithetical to bitcoin. (Somehow it would be cool if money could be created by anyone that needs it, but I have no good ideas how that kind of money would have any value. After all, it is a bit of stupid restriction that we can't make a real world value creating transaction just because one of us does not have money)
[1]http://www.macrotrends.net/1333/historical-gold-prices-100-y...
I believe this works via the routing system. So even though you don't have any more BTC in your initial allocation, you can get some from someone else still in the lightning network. So if you have a channel open with me, and I have one with coinbase, you can pay coinbase $20 USD and have them route you $20 in BTC (through me or someone else), which you can then give to me, and as long as we are all happy, nobody needs to close the channel and add anything to the blockchain.
>Interesting. How much does such bank charge for these services and what are the "banks" allowed to do with the coins thay have under custody? Can they e.g. lend them or use them in any other way? Who does insure these "banks"?
Coinbase is the biggest one. Currently there aren't many enforced regulations in this space (and I personally welcome some that aren't just "stop using cryptocurrencies"). Currently coinbase does not "loan" out any money you deposit with them (at least they claim they don't, I haven't verified it myself, and I haven't read of anyone even attempting to do so. I'm not trying to imply something here, just trying to point out that i'm taking them for their word here), but there is no reason they couldn't. And I'm assuming that custodial services like Coinbase will eventually follow the same path as banks as bitcoin grows. As for the insurance, Coinbase insures all USD in your account under the US FDIC, and all cryptocurrency is privately insured through them. My wish is a government backed (or at least enforced) FDIC-like insurance for cryptocurrencies one day that ensures people storing their cryptocurrency with a custodial service don't need to put their faith in a single company.
>You can have a look at a historical price charts of gold [1]
That is really eye-opening. I've never looked at such a historical record of it.
> I am thinking that modern money is credit and postoned consumption...
Now this is where my understanding begins to break down. I'm not an economist, and I don't truly understand all of the factors at play here. The rest of my response here is mostly my own poor understanding of things, and should be treated as if I have no idea what I'm talking about, because I really don't...
> We would need to be able to set the interest rate below zero in certain circumstances to facilitate consumption to keep the economy running.
I personally disagree. People will always need to buy things, and people will always want. I don't buy a house on credit because the interest rate is low, I buy a house on credit because I need a house. Consumption won't stop because there is no inflation, it might slow down, but I really truly don't believe that is a bad thing in the long run.
In a deflationary system, interest rates would be significantly higher than they are now, mostly because if I'm going to give you a loan, you need to pay me more value back than my money would make just sitting around. But the key part is that if you also use that same deflationary asset, then your money will also be worth more over time at the same rate as theirs. If you truly live on the asset, then it doesn't really matter what it's value is for external transactions as long as you stay within the system. If I get paid 1 bitcoin per year, I get paid 1 bitcoin per year, regardless of whether it's worth $1000 USD or $100,000 USD. And if you give me a .1 bitcoin loan for 6% interest, I'm going to pay back .1 bitcoin + 6% interest in bitcoin.
Obviously this breaks down at the edges, but I think there will be a way around this, and if there isn't, bitcoin can conceivably adapt. The only reason bitcoin is deflationary is because the code says it has a maximum cap. If it ends up that a deflationary asset just won't work in the future, and a consensus is achieved between the majority of bitcoin users, that cap can be extended, or entirely removed. As you said, most "cryptocoiners" (i like that term!) currently treat the deflationary nature of Bitcoin as a large benefit, but if it was found to be hurting most or all involved, that tune would change quickly. I personally see it as a "necessary evil" (bitcoin needed some speculation to get off the ground, and a promise of deflation one day, combined with the "halving" of rewards for mining encouraged investment in the beginning), but not one which is core to the currency, and certainly not a value of it that is unchangeable in the far-ish future.
And that is probably my favorite feature of cryptocurrencies. Bitcoin is a democratic, trustless, adaptable currency. It can change, it can improve, it can adapt over time, and it requires a consensus from both the miners, users, and developers to make any changes. All of which distrust one another.
Okay, so I could buy BTC from coinbase without making a single blockchain transaction? I still don't quite follow how this would happen within the trustless network, though. Now, if you get your salary paid in lightning, then of course you just wait for your next paycheck, but otherwise you need to pay fiat to someone in the lightning network or make a transaction in blockchain?
> Currently coinbase does not "loan" out any money you deposit with them, but there is no reason they couldn't. And I'm assuming that custodial services like Coinbase will eventually follow the same path as banks as bitcoin grows
That is about to open an extremely interesting rabbit hole just there:) First step is for Coinbase and their customers to realize that the custodian services can be much cheaper if coinbase is allowed (very prudently) to lend the coins forward. So much cheaper, actually, that Coinbase will pay you if you use their custodian services with letting Coinbase to lend your coins forward. Second step is for Coinbase and their customers to realize that as Coinbase is very prudent, a coin at their "custody" is actually as valid token for payment as a coin in a custody of their customer. Bang. You are in fractional reserve banking, and there suddenly is no more only 21 million bitcoin denominated payment tokens, but Coinbase is able to create more of them. (And trust me, there are some really good reasons why fractional reserve banking is very tightly regulated business). The last step is, of course, to realize that it actually is burdensome to have Coinbase to link the credit creation to physical bitcoin, as they are practically a distraction in the process, so we can move to full fiat currency.
> Now this is where my understanding begins to break down. I'm not an economist,
Frankly, I doubt anyone understands money properly. It is one of the most complex and fascinating concepts I have stumbled upon (and I am no economist either). My working hypothesis is that any simple statement about money is somehow false.
> People will always need to buy things, and people will always want. I don't buy a house on credit because the interest rate is low,
But if interest rate is lower, people do buy more stuff. The companies invest more to machinery if the interest rate is low than when it is high. That is a very fundamental thing in how economy works. Further, we need to keep people buying stuff to keep those people (i.e. most of us) employed who are selling the stuff. Also people save more (which equals to buying less stuff today) if the interest rate is high. So we can adjust the aggregate demand in an economy by adjusting the interest rate. And if we have artificial limits on how to set the interest rate, we are going to have welfare losses. So we for sure would need to be able to set negative interest rates.
> If I'm going to give you a loan, you need to pay me more value back than my money would make just sitting around.
And that is exactly the problem with current money and bitcoin. You can let money just sit around, which sets the artificial lower limit to the interest rates. But the interest rate is the price for you postponing your consumption and yes, we are very used to the idea that if you agree to not buy 100 pizzas today but lend that money to someone, they are more than willing to promise you more than 100 pizzas in one year's time. But if there is nobody willing to make that promise of more than 100 pizzas, and you still want to eat pizzas in one year's time, what is so wrong with getting only 99 pizzas, if that is what the "consumption postponing market" at the moment offers? (note the distinction between fiat and bitcoin. With fiat, there are organizations, contracts and laws made for the purpose of guaranteeing that your fiat money is approximately worth 100 pizzas plus interest rate in one year's time. With bitcoin you can only hope that there is someone in one year's time willing to pay 100 pizzas for your bitcoin. (Again, same applies currently to gold)
> currently treat the deflationary nature of Bitcoin as a large benefit, but if it was found to be hurting most or all involved, that tune would change quickly.
Well, my understanding from the history of money is quite clear that deflationary monies are bad for society. (sorry, should have sources here).
> it requires a consensus from both the miners, users, and developers to make any changes. All of which distrust one another.
Apologies for being cynical, but to me that reads about "there is no practical way to make important changes in any timely manner". That's the power of democracy. You can run over minorities if needed.
You need A transaction at some point on the blockchain to start with, but then as long as you can build a network between any channels you have open, and the person you are trying to transact with, you never need to open another.
The metaphor that helped me a bit was that Lightning makes the blockchain act like a "trial" in the legal system. Just because you enter into a contract with someone, doesn't mean you need to go to court every time you speak to them. You only go to court when there is a problem. Lightning and the blockchain work like that. Once you have a transaction which gets you onto the network, you don't ever need to go back to the blockchain unless someone tries to cheat you (the way it works is if you broadcast something other than the latest transaction between us, I can broadcast a counter transaction that instead forces you to give me all the money in the contract for both sides, and sends it into the blockchain once and for all).
>First step is for Coinbase and their customers to realize...
I don't think it will ever get to the point of a traditional credit system, but will instead start with "sidechains" where coinbase can loan out money, but have it be transparent and somewhat enforceable via smart contracts of some sort. I just don't see the bitcoin crowd ever wanting to go back to fractional reserves without any mathematical checks and balances built into it.
>And if we have artificial limits on how to set the interest rate, we are going to have welfare losses. So we for sure would need to be able to set negative interest rates.
I think it only works that way because society is okay with waiting until inflation comes back. If you know that in 5 years there's a good chance you'll be able to get a cheaper interest rate, you won't buy a house now if you can avoid it. But if you know that in 5 years there is very very little chance that interest rates will go down, then the incentive to wait is lost.
Now bitcoin was designed in a way that this could have been avoided. Currently bitcoin is still inflationary, 12.5 BTC is being generated from mining every 10 minutes or so. But over time this will halve, and halve again, and halve many more times until it's fully deflationary. That slows the transition from an inflationary system to a deflationary system that won't ever become inflationary again (assuming everyone doesn't change the rules of bitcoin at some point). That gives time for the world to adapt and change, and lessens the impact. Although as you point out, it could be a rocky ride getting to that point.
>Well, my understanding from the history of money is quite clear that deflationary monies are bad for society. (sorry, should have sources here).
I don't have any sources either, but I don't think a deflationary currency has ever really been done on purpose at scale before. We have a bunch of examples of it happening by accident, and obviously it hurts, but it's never been committed to. So I think bitcoin and (some) other cryptocurrencies are a first here, and I personally believe it's worth a shot.
The whole argument for deflation vs inflation strikes me as similar to the whole idea of "tax holidays" in some countries. It's a game of chicken where companies will hold money out of the country, and will only bring it in during special periods where the government decides to lower the tax rate for something like "one day only". If companies knew the government would never do it again, they would just pay the taxes and be done with it, but because they have happened before, it's likely they will happen again, so they would rather just wait and lobby for it.
Bitcoin turns that around. Society won't stop consuming and start waiting for the next inflationary "kickstart" to the economy, because there won't be one. And they won't be able to get one, because as you said, it's extremely difficult to change the "rules" of bitcoin if everyone isn't onboard.
>That's the power of democracy. You can run over minorities if needed.
And in bitcoin, you still can in some ways, although it's less ideal. The play between "users", "miners" and "developers" can cause a stalemate, but if 2 of them gang up on the 3rd group they can often be overpowered (which is what happened with the Segwit activation earlier this year).
That is quite weird concept for me. How can I, as a borrower, use borrowed money in any meaningful way if that money is destined to go back to the lender? Why would anyone accept that as payment? To me, either you have credit (as in trust with risk that someone does not pay back) in the system, or you do not. If you do, you can count on financial engineers to build fractional reserve banking. And maybe it is just lack of my imagination, but I have difficulties seeing a modern society without credit.
Then I can decide as a user if I want to hold my currency in a "bank" that loans out 70% of their assets, or one that loans out 10% of their assets.
But but both of them are by the definition a fractional reserve bank. And I am (honestly...) not trying to be pejorative here, but it is delusional to think that customers would be better regulators of a fractional reserve bank (or a straight out scam that is just dressed up like a fractional reserve bank...) than separate independent bank regulator.
(It may be time to call quits on this discussion as the HN pending comment algorithm seems to think that this is too dep:) Anyway, thanks, at least I think I have learned a lot (even if I haven't changed my mind on the future of BTC...))
Yes, in the short term, it's nice if you have some Bitcoins and they keep increasing in value, but does anybody really think the current surges are anything other than a bubble? If you accept that, then you have to accept that there will eventually be a correction. In which case, accepting Bitcoin in lieu of traditional currencies is like a a cafe letting customer pay for goods using a collateralised debt obligation or some other risky security.
If Bitcoin is going to make it as a digital currency, or even just as the "digital gold" that some of its adherents now seem to settling for, then it needs to get past this bubble phase. And the quicker the better, because the harder the correction, the more wary people are going to be of going anywhere near it afterwards, and the more likely that governments are to introduce hefty regulation to avoid a second bubble.
https://www.smithsonianmag.com/history/there-never-was-real-...
You can make millions of dollars if you're right.
May be search for an Ethereum contract, which allows betting against Bitcoin. Solidity new hack discovery permitting, you can make a small killing. Would be nice way of making a point with some skin in the game.
http://www.cmegroup.com/media-room/press-releases/2017/10/31...
What happened in the end? The value crashed, of course, and a lot of people lost all their money.
https://nypost.com/2015/02/22/how-the-beanie-baby-craze-was-...
a) How is that different that how it was in the beginning? and b) I beg to disagree - Instantaneous global transfer of value as well as a store of value that cannot be (easily) confiscated seems like something that could amount to something useful.
As far as "easily confiscated" this is not true for fiat currencies.
If you hold your cash in fiat currencies and use an account such as PayPal to hold small amounts for actual (even global) transactions, it's practically superior to Bitcoin.
Also--if you're going to hold your cash in fiat, be sure it's not in Venezuela, Zimbabwe, Cyprus, or India. And keep telling yourself issues like theirs can't happen with the fiat currency you're using.
At present day, SEPA SCT (no Inst) offers low to zero fee same-day transactions, Bitcoin transactions of the same fee will take longer (I had one stuck for a couple days at a 5ct fee this year)
Would you be able to re-send that $10,000 to someone else after that 15 seconds?
I'm no expert on SEPA, but it looks to me like (as a practical matter) we are not talking about 15 seconds for normal people [1].
[1] https://ingpcm.com/en/payments-collections/sepa/sepa-credit-...
SCT Inst, the new standard that is coming out is 15 seconds and yes, if you send me 10k$ I can book those 10k$ elsewhere within those 15 seconds (if I can type my TAN that fast)
I can agree that Bitcoin can makes some guarantees that a Bank for example could not make. But to some extend I doubt I need those guarantees, my bank hasn't stolen from me and has no track record of doing so, personally, I'm fine with trusting them for most of my net value.
That of course doesn't mean I don't play around with Cryptocurrencies, Ethereum is quite an exciting tool to play around with for example. Bitcoin is a bit boring though, plenty of other coins have replicated the functionality.
Because a company has a value.
I'm still struggling to define what's the value of BTC
+ Uhm, why? Our current currencies are very useful as currencies. Nobody wants VISA charges, but that's a secondary issue, nothing to do with decentralization.
"But what you describe is no different from any other investment."
+ No - not at all. Putting money in BTC is just speculation, it's not investing. It's not the same as buying stocks, bonds or real estate.
When we invest, we make assertions about the future value of the stock. Also - can possibly take control over the company and direct it to create greater value.
Which is exactly how you described people "speculating" with Bitcoin. There is no difference.
No - utterly not the same thing.
When we make assertions about the 'future' of Apple, we are making rational assumptions about demand, value chains, tax codes.
When you see the various predictions or valuations for Apple stock price - there is some 'consensus'. We reward those with better predictive capability - and this enhances civilization at least a little bit.
For BTC - there is no 'valuation'. There is no 'prediction'.
It's predicting BTC is like predicting the flip of a coin - or rather, it's just a game of trying to predict how average joe's across the street will value it. There is no objective means to value it - so it's a total crap shoot. BTC is just a meme.
Analysts doing industrial forecasts add some value to society in the end.
Predicting the value of BTC ads zero value.
"But as a HN reader I would expect you to understand" ...
HN readers tend to have a high level of technical ability, and are very intelligent - but generally have a very limited understanding of finance and economics. Combined with some hubris, this makes for problems.
BTC is the intersection of this: super cool tech promulgated mostly by people who have not clue what a 'currency' is, and of course, the hustlers who do know but don't care.
BTC is a very neat idea, that won't work for anything, and ultimately, it's turned into a hustle.
I hope BTC fails because it's a massively stupid waste of time.
It's 'making people money' about as much as any other Ponzi scheme.
There are other fintech avenues to pursue that are better for everyone.
Wait, we are creating currency, not value. Do you know how the federal reserve works? It puts more money into the system from nowhere.
>Bitcoin is useless, you can't do anything with it
You can buy things with it, that is the point of money. The more it is adopted, the more you will be able to buy.
+ The point of any new tool or innovation is to add value. Without currency, we could not have an economy, ergo, currency creates value.
+ "Do you know how the federal reserve works? It puts more money into the system from nowhere." This is false and misleading. The Fed exchanges TBils for USD. It pulls one kind of asset off the market, and exchanges it with another, which is more liquid. It does this with specific objectives in mind.
"You can buy things with it, that is the point of money."
You can't buy jack with BTC. It can be used as a currency, but it is not, and never will be.
In my view, this is a huge point. I hope this doesn't sound like quibbling, but I would expand the point by speculating that the functioning of a money system influences the overall prosperity of an economy. In other words, one economy could be more prosperous than another, simply based on which one has a "better" money system. In addition, like any other technology, people will use whatever money system is available to them, that works best for what they want to do.
In countries with dysfunctional money systems, people try to move their wealth into assets that are denominated in dollars, euro's, or something like that. If someone doesn't believe that their local money, or dollars, will function for them under some scenario, they might move to bitcoins or gold. I suspect that bitcoins could fill in that void for some people.
We don't know what our economy would look like without the major government money systems as they currently function.
I can't really think of many reasons why you would use crypto to pay for a coffee or a sandwich if you live in the West (or frankly, even most developing nations).
On the other hand, I can definitely see the utility in a censorship-resistant digital medium to store wealth. To me, this latter use case has much, much more potential to serve the unbanked (as well as the banked).
Some use cases I can think off the top of my head:
(1) You are from Syria and need to flee war and escape into Europe – however bank transfers into Europe are almost impossible if you are a common Syrian. Bitcoin allows you to take your wealth with you, in your brain, as you escape across the border, by just memorising your twelve word private key.
(2) You are from Venezuela or Zimbabwe – The government has issued capital controls and is devaluing currency by the day. You transfer your wealth into Bitcoin in order to offset capital erosion due to hyper-inflation. When the situation stabilises, you transfer your Bitcoin back into fiat.
(3) You are Saudi billionaire Al-Waleed bin Talal. The government freezes all your assets in a political coup. If you have a portion of your wealth in Bitcoin, you could protect them from government expropriation and anonymously transfer them to associates or family members abroad.
(4) You are whistleblower Julian Assance and have been cut off from the financial system as a way to censor your speech. Bitcoin allows you to have an unbreakable digital "Swiss bank account" that the authorities are not able to reach.
This reminds me of Peter Thiel's recent words about Bitcoin [1]: "it's like a reserve form of money, it's like gold, and it's just a store of value. You don't need to use it to make payments."
Reference:
[1]: https://www.cnbc.com/2017/10/26/bitcoin-underestimated-peter...
However, I do not at all understand why you are apparently being downvoted for a calm and logical counter argument supported with good use cases.
I see the cryptocurrency ecosystem as several layers used in concert.
-- Apps & Exchanges --
-- Smart Contracts & Tokens --
--Slow, Reliable Store of Value & Large Trans--
Similarly, the "internet of money" has multiple components that each do one thing well.
Thank you for this.
I will quote your response in the future when this point comes up again, if it's OK?
I was listening to Naval Ravikant who makes exactly the same point about Bitcoin.
www.coindesk.com/tokenized-tor-orchid-blockchain-decentralized-internet/
Credit card companies/banks sell your transaction data for a lot of money, and plenty of unscrupulous players can garner a lot about your life from such data. While BTC is only pseudonymous, it can provide some shielding from this.
Also coins like Dash have some nice anonymization tools built-in.
For something to be a store of value you want it to appreciate in value and have enough liquidity for you to cash out.
If you want it to appreciate in value there must be something driving the price. It cannot be others who only want to store their value as then the price is dependent on greater fools entering with new capital. Pure speculation cannot uphold the price long term.
Wanting Bitcoin to be only a store of value or only digital cash misses the point. It should be both.
Are people buying gold "greater fools"?
If so, why?
Nowadays it is also used in industrial purposes and as decoration.
Gold certainly isn't only a store of value.
If I walked around with a bunch of gold coins I would have a harder time.
Cashing out is even more difficult (as someone who grew up in California's gold country and knew many a gold bug, it involves humans and haggling).
The difference, of course, is that gold used to be currency, then was the backing for currency, but then that was abstracted away. Bitcoin essentially replaces rare-earth mining with it's own, in theory "repairing" this abstraction with cryptography.
The total value of gold ever mined is about $8 Trillion, something like 50 times more than Bitcoin. There's probably a lot more value just stored in gold that isn't being exchanged every day for goods and services than the total market cap of Bitcoin.
As you point out gold isn't a perfect store of value either as it has liquidity problems.
> (2) You are from Venezuela or Zimbabwe – The government has issued capital controls and is devaluing currency by the day. You transfer your wealth into Bitcoin in order to offset capital erosion due to hyper-inflation. When the situation stabilises, you transfer your Bitcoin back into fiat.
Only if you can find someone else willing to exchange Bitcoin for that problematic currency.
> (3) You are Saudi billionaire Al-Waleed bin Talal. The government freezes all your assets in a political coup. If you have a portion of your wealth in Bitcoin, you could protect them from government expropriation and anonymously transfer them to associates or family members abroad.
The FBI was able to seize Bitcoins from the Silk Road. The Saudis could ask them for help.
Change out 'Bitcoin' for 'Gold' and you've just described a 'speculative bubble' that has been going for centuries.
Value is arbitrary. Just like gold, Bitcoin might well just keep on rising and rising. Volatile, but valueble.
HN used to have tremendous creative energy, with new ideas every day on how to disrupt entire dinosaur industries.
We are the ones with the unique combination of ideas, skills and judgment to make it happen.
I don't give a shit about the price of Bitcoin, but it's clear that cryptocurrencies and distributed ledgers are world-changing inventions.
Wouldn't it be great to talk about how to change the world with these technologies rather than dump on those too short-sighted to see past the current exchange rate?
in order for bitcoin to change the world I think it really needs to scale transaction value, I do imagine a world where there is no longer a need to exchange it into any currency because it is more valuable to just keep it in bitcoin and use that as the defacto currency.
in regards to eth (Note I know _nothing_ about smart contracts) I was wondering if smart contracts could be used for friends to immediately split bills at restaurants for food so no sorting of anything needs to be done, as soon as the bill is provided the contract is enacted and everyone goes about their way. if this is a worthwhile idea it is free :-)
There's a mania to the current market, but that's not enough information on its own to predict the size or timing of a correction. The cryptocurrency markets can stay irrational longer than you can remain solvent, just like normal markets.
Bitcoin is just like other stores of value that fluctuate in price based on some mix of speculation and "actual" value. If you're FOMOing about Bitcoin, why not fear missing out about bluechip stocks? or owning real estate? or futures? or bullion?
It is true that creation events for stores of value don't happen just happen every year/decade/century but I wonder why the FOMO around Bitcoin is so acute (for me at least)... it's like a penny stock that I feel like I should have known was going to pop
[EDIT] - bouillon -> bullion
Just in case anyone thought they’d missed out on the French soup stock bubble ;)
I also... don't speak French so my apologies to whoever had to suffer through that
But I have zero regret about not buying Bitcoin. I think it's better to invest money with an outlook for how it can grow. Irrespective of future cryptocurrencies and blockchains, Bitcoin has no fundamental justification for its valuation. I don't deny many people would get rich with Bitcoin. Even $10k might be peanuts with respect to future valuation but I rather have my money grow 10-20% / year, than bet on something which is pure speculation.
Personally I think Bitcoin and/or blockchain could be the future, but the current value is 90-95% based on dumb speculation. It’s use as a practical currency are years away, and it’s still super risky (ie. it could easily lose most of its value overnight for one reason or another). I don’t begrudge people making money from it, but I’m fed up of people telling me how awesome and groundbreaking it is, when at the moment, in practical terms, it’s just a giant pyramid scheme.
Hopefully one day we will create a currency where the supply is determined more by demand, so it has a stable purchasing power. This'll make it much more practical for businesses and consumers to use for buying goods and services.
This is not a stock so there is no rational way to price BTC
BTC pricing is a total fantasy.
It's whatever the guy next to you thinks it's worth. That's it.
With all other assets - you get a range of prices built around various predictions of future events (sales, weather, geopolitics) - and knowledge is built into that. You get some 'consensus'.
BTC is just a number.
1 Trillion?
1 cent?
Currency is what we oil the gears of the economy with, it's a tool, not an investment.
First - the comparison was made to stocks - which is not valid.
Second - yes, valuing currency is much more speculative in nature - and it's generally not considered an 'investment' - it's either speculation - or used to hedge things, or as a financial instrument (i.e. you're doing a lot of business in Euros, buy a lot now to smooth earnings).
But even then, it's still possible to make some rationalizations.
GBP will not go 100x this year. Neither will it go to zero. BTC cold go to $100K, it could go to $0.
Finally - within an economy, the value of the currency is usually a moot issue, because only when things go international does it matter.
2) BTC is not being used as a currency, it's being used as an 'investment' and a (very bad) store of value. 'Stores of value' we should definitely be able to value - but currencies are hard to do that with.
3) As far as valuing USD vs BTC - it's difficult to value, but you can do it. Oil futures, Fed Movements, capital controls and flows - it's possible to predict within a range where currencies will go. With BTC, there's nothing to value it with.
What it is now is a disgrace.
Not a new use case. Not a new retailer accepting it. It's worth more because the same people who bought it last year will spend more to buy it this year.
$170B worth of value today? No. But price is current value + potential future value * likelihood of getting there. People are starting to understand the potential, and working towards that future.
also china.
Therefore the fees are often too high, and the confirmations can be delayed a lot unless you pay a lot, for it to be very useful. For example it often doesn't make much sense to pay for games on steam using Bitcoin as the fees take a large portion of the payment.
How do you propose we increase throughput on a competitive space without compromising the byzantine fault tolerance of the bitcoin network?
Go on, I'll wait.
It isn't just 'make the blocks bigger'. That's like telling a developer to just ship more code. We didn't scale the early internet by making packets bigger. Open your mind and stop repeating things you read just because you read it. Think for yourself and if you are uninformed about a technology then do not open your mouth to speak. You don't reach scale and adjust a hundred billion dollar network by hacking fixes, you do it by carefully making calculated changes with science and testing behind your decisions. The developers working on bitcoin today have done more to contribute to the growth of bitcoin than detract and the sheer volume and scale are unprecedented. Nobody is equipped to say one solution is obviously better.
Bitcoin has become to slow and expensive (transactions) for that...
Ethereum devs are also working on the raiden network which I believe is atm on the testnet and might release sometime the next months.
You can also use services which convert your coin of choice to Bitcoin, for example using shapeshift or for Monero xmr.to which is excellent. You can't avoid the fees on Bitcoin if you do that though...
There are many coins which have cheap and fast confirmations, for example Ethereum or Bitcoin Cash.
Bitcoin is limited to a fixed blocksize and ASIC mining while Ethereum has a dynamically adjusting blocksize to fit the network usage and capabilities.
And IIRC Ethereum is atm handling more Transactions than Bitcoin and ETH TX are arguably more complex, yet the network hasn't broken apart.
It confuses a lot of tech people that it has something of value to it that we don't totally understand and we keep thinking that it'll crash or the bubble we're all certain we're seeing will pop.
No, I think it was just as smart to avoid it then as it is now.
And people won’t be able to get out in time. When the price begins dropping in earnest, liquidity will dry up completely.
All of this has happened before, and will happen again. This is the most predictable thing in history, including the fact that Cassandras will be ignored.
And that makes me bitter.
But I also don't regret it. Because I also clearly remember that when it hit $9 I thought at the time that if I owned any Bitcoin I would certainly sell now. With the amount I would have invested I could have maybe earned $1k.
But it's foolish to think that you would be rich by now if you just had invested a bit because you can't know when you would have sold them again.
Current market capitalization in US dollars:
Global money supply (broad) over $90.0 trillion [a]
US dollar money supply (M2) $13.8 trillion [b]
Euro money supply (M2) $13.2 trillion [c]
All coins and banknotes in circulation $7.6 trillion [d]
All gold ever mined $7.1 trillion [e]
Bitcoin under $0.2 trillion [f]
Compared to the other money-like assets on the list, Bitcoin is very different. Like gold, Bitcoin's continued existence doesn't depend on the good management of any national economy; however, it depends on the continued existence of the Internet. Unlike the other assets on the list, bitcoins are digital so they can be encrypted, backed up, emailed, etc. Finally, bitcoins will always be scarce -- no more than 21 million bitcoins will ever exist. Bitcoin is truly a new kind of money-like asset.
The trillion-dollar question is, to what extent does the world need, to function in the 21st century, a money-like asset with Bitcoin's unique characteristics?
Sources: [a] http://money.visualcapitalist.com/worlds-money-markets-one-v... [b] https://fred.stlouisfed.org/series/M2 [c] http://sdw.ecb.europa.eu/reports.do?node=1000003501 [d] http://money.visualcapitalist.com/worlds-money-markets-one-v... [e] https://www.fool.com/investing/2017/08/17/how-does-bitcoins-... [f] https://coinmarketcap.com/currencies/bitcoin/
Excellent question, although I'm not sure "need" is the right word. How much does the world "need" gold? People desire it and choose to use it for various reasons.
I expect cryptocurrencies will become much more desired if faith in the USD / EUR is shaken. If that happens, I don't think people will be sprinting toward saving / spending / investing with a fiat currency.
72 days ago I said to buy in at $3k: https://news.ycombinator.com/item?id=15259134
Both times people were skeptical. I'm not sure there's any moral to this, but it's been an interesting few months.
Totally this. I get asked by friends if they should buy in (or buy more) and my answer is always "if you can afford to lose it, sure". I feel like people asking if they should buy or not right now will be far too distracted by the volatility to profit. If you're asking this (in the hope of a black and white "yes/no" answer) then you will probably also panic sell if it drops 10%, which would be nothing in the context of this year.
Dollar cost averaging is what I suggest to my friends (and again, only if they are "happy" to potentially lose a percentage of it quickly as much as they gain). Of course, nobody wants to hear that!
Oh, wait ...
It's just gambling and speculation. Some will win, some will lose. It's fine if you jump on the train and play, but don't be surprised when the bubble pops.
People lose money because they sell. Sometimes because they need to sell independently of what the price is doing.
There's not, you're like every other financial analyst claiming the market will go up or down tomorrow. Your whole analysis is basically "buy low/sell high". That's not meant to be an insult, there's just nothing in your posts justifying being correct.
Cryptocurrency is pure speculation. You can't know if an exchange is going to blow up or get defrauded or hacked. You can't know how regulators are going to treat it in the future unless you're in the room. Then there is understanding forks and the development process and the drama around that. Then you could always get hacked and lose your money.
It's a financial instrument requiring enormous amounts of concentration and technical ability just to participate at the baseline. Which is fine if you already have enough money to afford the time to do that, and to afford a complete loss of investment. It's always fundamentally about what level of risk you are willing to tolerate.
Two months from now, $10k could be seen as a completely reasonably buy-in price when it hits $30k. We just have no idea how high it's going to go because it's the first of its kind.
And yes, maybe you buy at the top of a crash and your portfolio drops 50%, but then months later it recovers to 100% above the point where it crashed previously.
All of the things that have happened to Bitcoin and bitcoin services (Silk Road) make me think that if cryptocurrency is going to stay around, it will cycle just as the stock market and businesses do, which means there will be plenty of opportunities down the line to make 1000% gains -- in bitcoin or other cryptocurrencies.
Until you have regulators on your side (which means a government isn't going to raid an exchange), and much of the hacking and drama goes away, it's never going to be more than technically complex gambling.
If someone sold everything they have and bet it on red in roulette (47.4% chance of win), even if they win I'd still call the idea stupid.
Bitcoin is currently a risky investment and investing in it is not a good idea and is closer to gambling - regardless of the final outcome.
Bitcoin seems to be driven purely by speculation right now. Before the next breakthrough, which may or may not happen, the only reason Bitcoin is so high is that people think it is a good idea to buy.
Not sure if that means the ship has sailed now, or that BTC is hitting the mainstream.
https://twitter.com/officialmcafee/status/887024683379544065...
Ding ding ding! You guessed it!
The price must rise. The utility has not degraded and just looking at 'number of transactions' is not useful. Just because I can move some arbitrary number of units in a given timeframe does not mean my unit is more valuable. Banks can move way more than 600k USD transfers in a day.
No, the price rise is not in any way conditioned on the block size being limited. Whether $1 billion worth of coins is being moved via 1 million or 1 thousand txs has no bearing on what the per coin price has to be. All that matters is the value moved and the number of coins doing the moving.
>>The utility has not degraded and just looking at 'number of transactions' is not useful.
Being limited to larger value transactions with higher fees hugely degrades utility.
I have plenty of FOMO for not buying a couple years ago. But not trying to jump on the bandwagon now.
While I regret not grabbing a couple extra coins back in 2013 when I was playing with BTC I know for a fact I'd have cashed out in the hundreds. If not then definitely would have when it was worth $1000/1BTC
Probably so! Either that, or I'd be dollar cost averaging through the booms and busts and it wouldn't matter anyway. That's why I don't really kick myself over it.
I keep going back to my fundamental beliefs:
- There's definitely something to the underlying technology.
- It has not yet impacted the life of anyone I know, aside from its fluctuating price. So basically, it's had about the same impact as sports betting.
- It's yet not clear to me whether trustlessness is worth it. (i.e. whither Bitcoin, Ethereum, or permissioned blockchains)
BTC has doubled in value the past three months, that's still an amazing return on investment very few business could ever give you specially in such a short amount of time. How could you not have FOMO if you had it before?
I reserve my FOMO for things I think I could have known.
This all creates a self reinforcing dynamic, where further price rises feed even more of this sentiment, which leads to more buying and price increases.
2. A pyramid effect (more and more people are getting in)
3. The prospect that owning 1 or 2 bitcoin now might be a fortune in 30-40 years
The last point is interesting because it might true. Bitcoin might be a very valuable and scarse resource in the future. Or it might just pop and become another bubble you can read about on wikipedia. It's hard to predict.
The sell wall at 10k is pretty huge.
The news that it went to 9,000?
Hm.
These hidden markets, though usually under radar of the public, could contribute significantly the bitcoin's market cap.
Btw, this weekend I hacked together to chatbot to send me bitcoin-related news alert. Feel free to try it out:
Otherwise I risk buying goods when the price of coin is high, but when I want to sell my goods the price might have halved, at which point I'd either have to take a loss, or hold off from selling my drugs until the coin value has recovered, which could be ages, it'd be bad for business.
Got in early enough later though.
Still, I have high hopes for cryptos to overtake the current financial system and end the bubble-crash cycle
Been watching it since it was at $8. It got up to 30, crashed back to 4. And I felt lucky for not investing .____.
jschulenklopper made this awesome post yesterday:
There's some story (that I can't find online now) about a group going on a 24 hour journey through a desert. Just before they enter the desert, a man says to them that in the midst of night, they are about to cross a river. "Take as many rocks from the river bed as you can. The next day, you all will be equally sad and happy at the same time." The group indeed crosses a river in the night, and each of the party take a couple of rocks. Some just what they can carry themselves, some what their horse can hold. The next day, when they leave the desert, they discover that the rocks were precious stones (or rocks with gold encased). And everyone in the group is comparably joyful about their new wealth, and comparably sad that they didn't take more rocks.
Rich and sad is still better than just sad.
Adding up all the markets where the price is >$10k, it represents 28.43% of current activity.
With that representation, it isn't unreasonable to say price is above $10k.