Bitcoin Takes Bigger Wall Street Stage with Smooth CME Debut | Hacker News Reader

Bitcoin Takes Bigger Wall Street Stage with Smooth CME Debut

bloomberg.com

125 pointsrbanffy216 comments

Just to give someone who doesn't live in these markets some idea of how volatile they are

> Goldman Sachs Group Inc. demanded some clients set aside collateral equal to 100 percent of the value of their trades, people familiar with the investments said last week. The guidelines are inclusive of other margin requirements such as Options Clearing Corp.’s 44 percent, required to clear contracts traded at Cboe, and the 47 percent CME is demanding.

> Interactive Brokers Group Inc., which has said it handled 53 percent of the first day’s trading in Cboe’s bitcoin futures, will require a margin of 50 percent for long investments, and about 240 percent for short selling, based on current rates

For a more typical futures contract like say wheat, its common to have to put up 5 to 15% margin. SO there isn't alot of leverage that you can get from these, which is almost certainly a good thing:)

The odd part to me is that people forget how much you get for the measly 2% or so in fees you pay to a bank annually. You get FDIC insurance, protection against fraud, someone you can call for assistance, relative stability, ability to pay for things anywhere. With btc you get none of that, plus risk of losing your assets due to a user negligence, ignorance, hacks, sophisticated scams, or other culprits.

Assuming 2% inflation (and 0 fees and interest), you also get 81 ct purchasing power back on the dollar after 10 years.

For some people that amounts to fraud.

You also get the de facto obligation to bail them out when they get too wild.

There's a fair bit to unpack there.

It used to be that savings & loan type banking couldn't mix it up with serious financial engineering. Then the rules governing these things were broken down, and retail banks started taking on more and more fancy (and risky) investments. That's the kind of stuff that eventually led to the bailouts.

But I don't think it can be stressed enough that "getting too wild" meant getting involved in a lot of capital markets that were traditionally firewalled off from savings & loan banking.

Holding up what happened to the banks during the financial crisis as an argument for savings & loan banking being riskier than investing in the open market is a lot like telling people that, if they don't like the heat in the frying pan, they'd be a lot better off in the fire.

(edit: totally mistyped in that last paragraph)

If by "get too wild" you mean "achieve regulatory capture over the agencies and frameworks intended to prevent them from engaging in short-term profitable but long-term risky behaviors", then, sure.

But you can swap out currencies and still have that exact same problem. In some Bitcoin-based parallel universe, you'd just have a different set of companies hiring the same lobbyists and cutting the same political contribution checks, in order to achieve the same sort of favorable regulation and risk shielding.

This is the key problem that I think Bitcoin boosters fail to grasp: the government didn't bail out the banks because they're banks. The government bailed out the banks because they got themselves into a position where they could demand a bailout and get it. There's nothing about banking qua banking that allows this; you can do it (and historically it has happened) in other industries.

Blockchains don't fix that, because it's not a technological problem. It's a political and sociological problem, not amenable to quick technical fixes.

> For some people that amounts to fraud.

But it very clearly isn’t. That’s an egregious abuse of the word, “fraud” by any commonly accepted definition.

Some sorts of fraud are legal if that's what you mean.

Usually, when committed by the government.

Examples:

- Underfunded pension funds,

- bank bailouts with taxpayer money,

- wars with made-up reasons,

The cost of each should be in the trillions but it's not fraud. By the same reasoning, previously one could expect to get a positive real interest rate (= nominal interest rate - inflation), yet that's not the case. Legally fraud? No. Challenging the economics of the last few milleniums? Yes.

> bank bailouts with taxpayer money

You do know the banks payed back the bailout money with interest and added fines right? Overall it was a net positive for tax payers. Not sure how that's a fraud... Your other examples are suspect as well...

http://www.nj.com/news/index.ssf/2010/08/sec_finds_nj_acting...

Yes, NJ did illegal actions and they were charged with fraud... Not sure what you are saying here? You are supporting my case.

Yes I am supporting your case. I should have posted more than just the link.

Just because they were able to sell it this time doesn't mean it was a good decision.

If in Russian roulette you have a chance of 1 in 6 to win 1 million and 5 in 6 to die, winning the million doesn't mean you made a good decision.

What happens if they cannot sell it? They lose lots of money, equivalent to food and shelter for millions of the poor or maybe ten thousands of chemo-therapies. Government is not good with investment.

> Some sorts of fraud are legal if that's what you mean.

No, that's not at all what I mean. What I mean is what I said - inflation isn't just not fraud, the two terms are not even definitionally relevant to one another.

> Usually, when committed by the government.

Examples:

- Underfunded pension funds,

- bank bailouts with taxpayer money,

- wars with made-up reasons,

I'm not going to engage in a discussion about whether or not governments do things which are economically controversial or a net loss for society (nor am I going to agree or disagree that your examples are good examples of that observation in practice).

What I will say is that "bank bailouts with taxpayer money" are not fraud, even if the banks themselves were complicit in fraudulent activity, because the bailouts were a practical matter of economic preservation. The government itself did not defraud the American people in this example, and your framing here is a rearrangement of the actual facts. Using taxpayer funds (which is tantamount to the government doing nearly anything) for something which you disagree with and which is related to a financial system does not constitute fraud.

As for the other two examples: I won't comment on war, but can you clarify what you mean by "underfunded pension funds"? How does this example constitute fraud, and what exactly do you mean by these funds being underfunded? Deliberately so? By whom? To what effect?

> The cost of each should be in the trillions but it's not fraud. By the same reasoning, previously one could expect to get a positive real interest rate (= nominal interest rate - inflation), yet that's not the case. Legally fraud? No. Challenging the economics of the last few milleniums? Yes.

Fraud requires a conscientious, covert decision on the part of one party to cause, and thereby profit from, a loss for another party. You can't feasibly map fraud to inflation. It's not just that it isn't fraud (it isn't!), it's that monetary policy is so complex, and its incumbents' decisions so diverse, that it's conceptually orthogonal to fraud.

Economic control systems and their feedback mechanisms are very complex and influenced by many unrelated parties; you need not ascribe malicious motive or conspiratorial profiteering to the government to end up with characteristics you're unhappy with.

> What I will say is that "bank bailouts with taxpayer money" are not fraud, even if the banks themselves were complicit in fraudulent activity, because the bailouts were a practical matter of economic preservation. The government itself did not defraud the American people in this example

I see where you come from but there are two things you should consider:

1. Intention is really hard to prove. Just as much as you say that there was no intention I can say there was because there can be no proof and the government can (and most probably will) do everything in its power to eliminate the slightest evidence of intention, regardless of intention or not.

2. But more importantly, intention doesn't matter. If a trillion goes missing, it doesn't matter whether it was fraud or lack of oversight, the end result is the same and if the government were your employee, you'd just fire them for incompetence (again, regardless of intention).

In that sense I used fraud and I honestly wasn't aware that it might sound (and even be) hyperbolic.

The above lines should explain better the examples:

- Inflation (induced by printing money): You cannot seriously just increase a number in a computer somewhere or print a few notes and expect the economy or living standard to suddenly improve. Otherwise we could just all stop working and live of printed money.

- Underfunded pension funds: https://www.bloomberg.com/news/articles/2017-12-14/fees-rise... The problem here is not being underfunded but that promises are made to future retirees while it's obvious that these promises cant be kept. There are more examples, just google for some combination of "pension fund shortfall underfunded". Note this problem is the same in Europe.

>You cannot seriously just increase a number in a computer somewhere or print a few notes and expect the economy or living standard to suddenly improve.

You sure can. Mild inflation is useful on the macro scale (even though I'm a bit of a skeptic when it comes to a lot of macroeconomics). It increases aggregate demand which increases production, which improves the economy. A simple example is real-estate. There's inflation in the that market which is why it attracts investments, which increases demand with the developers, who then hire more people to build houses, etc etc.

Further more, on a currency level, devaluing your currency makes your exports cheaper. If I was exporting my product for $2 which gave me 10 Franks, and now I get 20 Franks because of my currency being devalued, that's awesome as long as the devaluation happens slower than the inflation.

Anyway, these are well established, and well understood economic concepts. Certainly, there is more nuance to them.

> Mild inflation is useful on the macro scale

I know this is mainstream economics but if you're an engineer you should ask "What is mild inflation? Where is the limit? What are the forces that equilibrate mild inflation" I know the theory behind it but it just doesn't make sense. Have you ever thought about why tech hardware thrives, yet we have heavy deflation? Should we put price controls there? Do you realize that whenever a big problem is solved (via the wheel, factories, cars, ...) the stuff deflates heavily? There are other theories out there that make much more sense than what is mainstream.

> Further more, on a currency level, devaluing your currency makes your exports cheaper.

Same here, following your advice everyone should devalue his currency, trying to outcompete other devaluing currencies. So how can we explain that Germany with its strong mark was such an economic power given the absence of mild inflation and currency devaluation?

Finally and again, you think that printing a piece of paper (money) solves a problem? So we get "something for nothing"?

If you want to know an alternative (and IMO much more consistent) view, read "Economics in One Lesson" by H. Hazlitt. Yes, the one that is 60 years old.

There's a certain family of oft-posted-about-online economic/political ideologies that, as best I can tell, spread primarily by abusing language in this way, hoping the reader does not catch them sliding in a metaphorical, colloquial, or simply not-quite-right terms, then trying to leverage those terms' stricter and more correct definitions when drawing conclusions. Later the converted reader will happily and confidently spread the same message, e.g. "taxation IS theft!"

we should coin a term for this, but I can't think of a good one - "licentious language" doesn't quite have the same ring as "fake news!"

What's wrong with "bullshit" ?

In Less Wrong/Slate Star Codex circles, it's called the Non-Central Fallacy (basically, trying to assert that a technically-valid edge case of X should be treated as if it's a typical example of X):

http://lesswrong.com/lw/e95/the_noncentral_fallacy_the_worst...

I guess you're wanting both a more specific and more infectious (or virulent?) word, but: equivocation.

"Taxation is theft" is spread by Libertarians based on the principle that any forced / coerced taking away of your property without having legally signed a contract to do so is theft.

It's certainly not an abuse of language, it's a fact if you don't assume ex ante that the state can do what others are forbidden.

The reasons you describe here are mixing up an "others are stupid" attitude with legitimate and consistent views of the world. It's sad to see these views derided and the child commenters applaud.

Ever heard of Ayn Rand, Ludwig von Mises or Milton Friedman? Well, guess they are stupid as well.

Let me know if you want to read something about it before deriding not-your-opinion next time.

1) There isn't anything misleading going on, so who is doing the defrauding?

2) You'd lose that value if you just kept it in a box.

3) You really shouldn't be keeping substantial amounts of money in bank for 10 years.

Ah, except that capital equipment in your business you pay 2% interest to finance? The manufacturer sold it at a cost + profit margin that included the 2% fee they're paying on their equipment, payroll bridge loans, etc. So did their suppliers, which factors into the costs paid further upstream and passed on down. There could be many, many layers from resource extraction (mining) to consumer goods, making a multiplying effect. And what is GDP? The aggregation of all these transactions.

So even if the bank only captured 2% from you, in aggregate the banking system sucks double-digit percentage of word GDP into their coffers for something that history has shown they don't actually do a good job of providing, in the absence of bail-outs.

(And, fwiw, I don't know where you're getting 2% interest. Any real industrial financing would be much higher, with larger compounding effects.)

World GDP is something like $100 trillion.

Top thousand banks make something like $1 trillion (as per http://www.businessinsider.com/r-global-bank-profits-hit-920...). I think we can safely ignore the long tail here, as it consists solely of banks making under a billion.

So, about 1% of global gdp is profit for banks.

That $1 trillion number is retail banking only. It's a small factor in the scope of what I'm talking about.

So, mind showing me what firms are making multiples of that?

How is profit defined?

If a bank creates the money for a loan on a house, the loan defaults, and the house is foreclosed on, does that foreclosed asset count as a profit?

Assets get valued using various valuation models. But banks generally will try to sell houses as quickly as possible, they don't like sitting on stuff like that.

You are mixing concepts. GDP measures all of the value created. Profit measures value captured by the banks above their costs.

If banks operate on a 10% gross profit margin, that profit number means banks are consuming 1%/10%=10% of the world GDP. If true, that would be an enormous cost, and I can easily see the opportunity for optimization that cryptocurrency advocates talk about.

Bank costs are things like loans being defaulted on, which is good for society (lending is risky, and interest from loans that pay back covers defaults).

The profit is the amount the banks make that isn't consumed by those costs, so that's the right number to use.

Let's take a look at wells fargo.

https://www.marketwatch.com/investing/stock/wfc/financials

Interest income: 53.66B Interest expense: 5.91B Net interest: 47.75B

Net income: 21.94B

so already, we're working off of closer to 40% net margin.

Now let's look at what actually causes the difference between those numbers:

>10.08B in taxes

Pretax is 32.12B, so there's about 15B left to explain

This turns out, roughly, to be the difference between Non-Interest Income and Non-Interest Expense - in other words, stuff that isn't really related to regular banking stuff.

I'm not going to repeat this analysis for another 1000 banks, but it seems like, at best, you might double that number if you decide that some of these expenses aren't needed.

GDP doesn't measure value created; it measures money spent. If I hire you to dig a big hole and then fill it in, GDP rises but no value was created.

Also if I pay you $50 to pay me $50, GDP rises by $100.

Are you arguing all entertainment costs are wasteful?

If I hire you to act in a TV show and then stream it to a million people, would you also say no value is created?

What is value, if not what makes people happy / gives them utility? If someone is willing to pay someone to dig a hole, then that digging gives them value (assuming no fraud/ etc).

i don't need those services. thank you

until you do, though

Then I'll happily keep your money in my mattress for only 1% annual fees.

You really get nothing because the 2% doesn't make up for inflation. Heh, in fact you are probably losing money keeping it in a FDIC insured savings or checking account that pays interest.

This is going to sound completely ridiculous but I'm going to posit this anyway.

Avoiding the debate of whether there are any widespread real-world usage for cryptocurrencies, is it possible that cryptocurrency is valuable (and has long-term staying power) simply because the ecosystem surrounding it is so much fun for a non-negligible swath of people?

I know this sounds ridiculous. But hear me out. The entire process of setting up exchange accounts, reading about alternative coins, jumping into the drama, worrying about massive gains or losses, buying hardware wallets, chatting with others doing the same thing, thinking about complex systems and new coins, etc. is a lot of fun.

Could it be that cryptocurrencies are somewhat of a 'simulation currency trading market' that just so happens to allow you to cash in and cash out with fiat currency?

I have little doubt that the current value of BTC and other coins will blow up in the future, and if you've got anything more than disposable income invested in it, you'll probably get burnt really bad. I think it's almost a given. But I suspect that the idea of cryptocurrency is here to stay, at least for my lifetime. Solely because it's fun. But of course like anything, I could be wrong.

Basically, online gambling.

Yeah, that's not the prettiest way of describing it ;)

But if it really is just online gambling, is that in and of itself enough to sustain over the long term? I don't mean the ~20k BTC price, but the ecosystem itself. After all, casinos/lottery/gambling have been around for a long, long time.

> I have little doubt that the current value of BTC and other coins will probably blow up in the future

Blow up bigger, or blow up smaller?

I mean a big price drop. I feel like insane drops in price and cryptocurrency go together like peanut butter and jelly.

> and if you've got anything more than disposable income invested in it, you'll probably get burnt really bad.

Maybe, if you’re stupid enough not to have a stop loss. In that case you probably _deserve_ to lose everything.

It's very unlikely a stop loss will help you in case of a bitcoin 'run'.

Stop losses don't protect you if the fall is rapid enough and there are no buyers. Your order simply won't get executed (at least not where you want it). That's what I think will happen if the Bitcoin bubble bursts. Being 'intelligent' doesn't protect you from reality. But I'm sure you knew all that, and don't _deserve_ to lose your money.

I wonder how that would work in reality. There are so many exchanges. You’d have to do a massive coordinated effort. Any “massive” drop on a single exchange would be seen as a great arbitrage opportunity and get eaten up.

There are a lot of exchanges. But YOU (or any person in particular) trying to cash out at any point in time will need to move your coins to that exchange (and create an account, etc), and then try to sell. There aren't a lot of buyers when a bubble is popping. And not much potential for arbitrage when everything is going down. And with Bitcoin's slow confirmation rates, I think it would be worse than a typical stock market. No, if the bubble pops, it's going to be bad for everyone involved.

This has already happened in reality with ETH on GDAX:

https://www.google.com/amp/s/www.cnbc.com/amp/2017/06/22/eth...

I don't see how that's going to have long term staying power. It certainly helped it initially as the first adopters were largely curious hobbyists.

> Avoiding the debate of whether there are any widespread real-world usage for cryptocurrencies...

That is not debatable. Some of our customers pay our company in Argentina in BTC and at the end we have more money that if we use wire transfer via banks and with all the legal support. This is because banks in many countries don't offer a fair exchange rate and via Bitcoin we can reduce the difference.

Most people in HN don't see benefits because they live in well developed countries with highly developed financial services.

How do you account for Bitcoin’s volatility in your accounting? I think this is one of my biggest critiques about using bitcoin as a payment method - I am much less certain about how many dollars I am receiving (At scale people can and will abuse this).

We use a third party in this case so from the accounting point of view we are receiving fiat currency. Regarding volatility, yes, we are exposed to volatility which until this point is less than the spread between the real exchange rate and the bank one. But obviously there is a risk associated with unexpected events.

Bubbles are fun. People are enjoying everything you mention because of the volatility (see, e.g., the rollercoaster meme), and because they are making money. The same reason people in the 90s enjoyed day-trading Internet stocks, people in the 1600s enjoyed talking about Tulips, or people in the 00s enjoyed talking about flipping houses.

At some point it will pop. People will despair and move on, except for the true believers. They will build something lasting, and less volatile, but no, I don't think the speculators will continue to find fun in something that is no longer moving up so rapidly (even if it's steadily increasing and creating value).

It's a collectible market, like beanie babies or pokemon.

It's not just fun, it's really practical.

Every time I have to wait days to transfer money between Robinhood, my bank, exchanges, etc.. I'm reminded of the value of crypto currency.

Wire transfers and moving money internationally has higher fees and is more complicated than sending crypto.

Also I don't need a bank account to store it. I don't need to go through middle-men like paypal, venmo, visa, etc.. to send it.

The biggest problem with crypto right now is not enough people/business are using it so we have to currently exchange it to/from USD, etc.. Also the crypto of choice (bitcoin)'s parameters aren't optimal so something like litecoin is more practical.

Best cryptocurrencies anology you could make is if you think them as they were part of an a online trading card game. In any TGC you can buy cards with fiat currencies and can sell yours cards for more cards or fiat currencies, the exchange value is speculative based on how many people wants that card and increases his value while more people is playing the game.

For me bitcoin is a beautiful experiment on how things would work if you let a capitalist's control the market without a government limiting their activities.

But governments are limiting activities through legislation and taxes.

Say the crypto of your choice dips by 15 percent, but if you want to cash out you'll have to pay capital gains tax + the exchange fees. You then may decide to just leave the money in the market in hopes that it reverses the trend. Thus the market is not really working freely in my opinion.

Governments can only limit exchanges, maybe fine or prosecute miners but they can't control the exchange market in other countries, they can't ban transactions between two peers, they can't takeover your funds and more importantly they can't issue more currency to paid their loans.

Sounds like a libertarian paradise but these also comes with double edge since it leaves his citizens without consumer protections, makes value speculative to trading volume therefore subject to foreign control and limits the government enforcing power.

The market is free, exchanges aren't.

I'm talking about taxes distorting the market. A taxed market is not a libertarian paradise.

you are talking about taxes after exchanging cryptocurrency for a fiat currency, cryptocurrencies doesn't have taxes (well transactions cost kinda work like a community tax but in the real world there are also transactions costs and taxes), exchanging from crytpocurrency to fiat has.

What stops you from exchanging your crytpocurrency to a fiat currency that doesn't impose taxes?

Good point and I agree. That said I still don't think this would count like a true libertarian experiment because -like you point out- it is in the real world where you still have to abide by the rules of government/society.

But yeah, this is probably the closest we have gotten to a libertarian test-drive through technology.

Setup from yesterday:

We are at a restaurant in Manhattan. Place is reasonably priced by Manhattan standards (i.e. overpriced for 99.9% eveywhere else) but it delivers value - a very decent brunch for 2 people with a 2 glasses of wine + tip $80.

Behind us there's a table of 3 people. They are debating if they want to order another glass of wine and basically tip nearly nothing to the waiter or if they tip to the waiter the customary 20% and go home: they dont have the money to do another round and tip.

Kicker: for last twenty minutes they were talking how all of them on Friday invested into bitcoin and how they are going to be rich.

This is the current bitcoin investor.

These people sound a lot more like normies than the NEETs in /biz/.

>simply because the ecosystem surrounding it is so much fun for a non-negligible swath of people?

Sure, and also:

1) You can probably get away without paying taxes on it for now

2) It probably inherited some enthusiasm from the 2008-2017 Silicon Valley investors being a technical product

3) it's a new financial product that's not wrapped in 37 layers of redirection or rebundled existing products (like synthetic CDOs as they were explained to me by The Big Short). If you're bored of spreadsheets, learning Bitcoin was probably a breath of fresh air

> Avoiding the debate of whether there are any widespread real-world usage for cryptocurrencies, is it possible that cryptocurrency is valuable (and has long-term staying power) simply because the ecosystem surrounding it is so much fun for a non-negligible swath of people?

Yes, but that is the basis of a fad, not something with long-term value.

Altcoins = fantasy football for nerds :)

Why would that not include bitcoin, given that there are technically better alt-coins than bitcoin? I am just curious because I have seen similar analogies elsewhere.

I'm interested in collecting strategies for destroying bitcoin. Would anyone like to brainstorm?

If the resources of all governments combined were brought to bear on the problem of demolishing BTC, what would be a way to accomplish that?

Making it illegal won't work. Neither will buying it – that will just raise the price. 51% attacks aren't effective because all they can do is double-spend coins, not arbitrarily reassign wealth.

Just let it unregulated, it will destroy itself through all of the tried and tested methods that brought said regulations in the first place.

It's worth worrying that it won't. There's no upper bound on the price, and everyone who thought BTC wouldn't continue growing exponentially was wrong.

BTC is gearing up to be the biggest financial disaster in history, and it's better to start planning for it now.

Are you just sad that you didn't buy in a year ago? Don't worry, me too. :) Heck, my brother in law who is a lawyer and don't know anything about blockchain bought some and my niece's college education is paid for now. LOL.

You should check his comment history, its worth reading.

has he successfully converted his bitcoin into "fiat" currency? or does the college accept and denominate tuition in BTC?

It's pretty easy to do - sell for fiat on any exchange that trades in it, and deposit fiat to your linked bank account. Unless you're unloading millions, then you're better off doing an auction.

Serious question - is there any doubt that one can successfully convert BTC to fiat? I've done it many times on the major exchanges (Gemini & Coinbase) with absolutely no problem.

because past $100K it becomes difficult rising to impossible from every person I've directly spoken to

Ah yes, the "you're just jealous" argument, champion to people who are too blind to realize that BTC has serious downsides. Look man, a massive speculative bubble popping is gonna have huge repercussions to a non-trivial number of average non-techie people who read an article about how some nerd got rich on digital Beanie Babies and threw their life's savings at it. Those are the people who are gonna get fucked, not the people over at Bitcoin Idiots, LLC who can afford to lose some fun money betting on Internet bucks.

>BTC is gearing up to be the biggest financial disaster in history, and it's better to start planning for it now.

I can see how one can arrive at this sentiment based on how quickly the price has increased, but I wonder how bad it would really be since the vast majority of Bitcoin investment is not debt based. Additionally most people I've talked to on the matter, only invest what they are willing to lose.

Now, if a significant amount of investors get in via margin and other debt-based approaches, then that could be problematic. BTC have seen huge drops in value in the past, how individuals new to the space react is unknown.

> BTC is gearing up to be the biggest financial disaster in history

Lots of value evaporating doesn't necessarily make for a disaster. It only does that when it interacts with the larger financial universe in unexpected ways. In countries where people will start missing their mortgage payments as a result of Bitcoin losses, yes, there are systemic risks. In the United States, we're still far from that point.

Another concern is that Satoshi probably passed his coins to his heirs. Whoever they are, they could emerge a de-facto world power since they alone control ~5% of wealth.

And there's no way for society to decide that should change. They can act as evil as they want with no fear of losing their coins.

"8 people owns 50% of the world."

https://www.theguardian.com/global-development/2017/jan/16/w...

The upper bound is how much capital can be deployed to pump it up.

It's one thing if hedge funds are pouring in, another if housewives in Japan (if the press stories are to be believed), but at the end of the day there's a finite amount of capital that will be pumped into it, as capital wants to go to other investments, too.

All that will happen is that the growth rate will slow down. When that happens, the opportunity for people to spend on investments that offer a greater return on investment will become attractive to holders.

You go after the exchanges. Don't make BTC illegal. Make it illegal to trade it for fiat currency or vice-versa.

When forex trading becomes illegal for the regular Joe, those trades just goes out on the street instead. See USD/Peso situation in Argentina for an example.

Friction matters. Especially for something that relies on a network effect. Banning transactions might not prevent all transactions, but it would prevent many of them.

It's virtually indestructible. But global prohibition would limit its utility and likely cascade to diminished investment in mining.

But it will likely never go away until/unless you could find an unfixable flaw. For example, a flaw in the hashing algorithm that permits you to double-spend. Unfortunately there's effectively an enormous bounty on that particular defect that no one has yet claimed. If someone did, another coin with another hashing algorithm would take bitcoin's place.

More importantly -- what is your motivation? Let's please enumerate the evils going on in the world and rank bitcoin appropriately. It's not worth your time.

If you are really in a huff over the energy consumption I think your consternation is poorly focused. Again, let's rank our concerns here. In any case, the best way to "destroy" proof-of-work coins is to invest and promote coins that are similarly effective without proof-of-work. e.g. proof-of-stake coins like Raiblocks.

If china decided to shut down the mining operations, that would have a massive impact on the block chain.

You're mistaken. The difficulty would re-calibrate and it's business as usual.

However, if China or some other government compelled miners to sign invalid transactions, this would have a big impact. This is a weakness of proof-of-work secured coins (note that they also have many strengths that proof-of-stake coins lack).

EDIT: I was unclear what I meant by "this is a weakness of PoW" -- the energy signature of concentrated mining operations make them easy for governments to find.

I don't think a transaction would just become valid if a miner (who mined a block) signs it. Each participating node will independently verify the chain for signatures of transactions before it accepts the latest block. So a miner who mines a block with invalid block will just waste his efforts on it. The chain length is used a proxy to find out a valid chain only when two competing chains have valid blocks throughout but have different lengths.

Depends on how much the hashrate changed: http://bitcoinandtheblockchain.blogspot.com/2017/08/chain-de...

You are correct, this seems like a defect that should be addressed.

it depends on what you mean by "invalid transactions". If you mine a block that doesn't follow the rules, the rest of the network will just ignore it, and so you've wasted your computation.

> 51% attacks aren't effective because all they can do is double-spend coins, not arbitrarily reassign wealth.

The only problem Bitcoin solves is double spending. Without this ability it’s worthless.

This is completely true. A blockchain that didn't prevent double spending could be both very efficient and support hidden transactions without any tricky math.

* Crack ECDSA and forge transactions (slowly/slyly enough to make a hard fork fix infeasible)

* Create exchange(s), get users, then implode them ("oops, bad code / we got hacked") (bonus: free $ for black ops)

* Create competing coins, either crappy ones just to suck away mindshare or legit one(s) backed by the gov't that grants some stability through gov't capability. Or heck just designed well enough that people want to actually use it for spending.

Or just go the more traditional / direct route and create regulations or make it outright illegal, and shut down exchanges and throw people in jail (probably the most effective)

51% attacks can also censor transactions, ensuring that they never confirm and that any block which attempts to do so is rewritten out of history.

Making it illegal would have a huge impact on mainstream uptake. If it were made illegal across the US and Canada, Europe and SE Asia, that could effectively kill it for most people.

Slowly infiltrate the development team and sabotage the progress from within. Utilize divide and conquer and fracture the community by controlling social media with strong censorship and an army of trolls. Sabotage the development by inserting poison pills, stalling any progress and develop vaporware.

There is a substantial demand for money laundering and purchasing things like drugs that traditional payment processors will not allow. Bitcoin works for this now. Another crypto currency could replace bitcoin, and destroy the value. If the value goes down enough, miners will switch currencies and this could leave bitcoin as unusuable with a frisbee on roof attack. To destroy crypto currencies in general you would need to solve the underlying issues and reduce demand or block money laundering and payments for illegal goods.

DDOS some of the biggest miners while simultaneously deploying a large force of compute power to exceed the 51%, even for a few minutes?

This is my best guess, and I'm legitimately curious if it's a believable threat.

This would be difficult because the hash rate doesn't change dynamically every block, so you'd need to make up all the hash power of the DDOS'ed miners.

But you could just do the DDOS, then blocks would stop being confirmed and the value would plummet.

Has anyone found a place where detailed arguments for bitcoin (pros and cons) are laid out? Forums seem to be meme-based (e.g. "HODL") and/or superficial.

reddit.com/r/bitcoindiscussion is pretty civil with plenty of well informed people.

tl;dr

pros: decentralized, judgement resistant store of value cons: unconnected to any economic fundamentals, therefore without any analytical way to determine price.

Fundamentals are same as in social networks. But we don't know yet how to formalize them clearly.

There are fundamentals: aggregate demand for money laundering and currency control evasion.

right, but money laundering is to take dirty dollars and convert them to clean dollars. It's not obvious to me how aggregate demand for money laundering supports a specific price of bitcoin. If bitcoin is a mechanism for doing it, then the right metric is to look at the fees people charge for laundering money, not the amt of money laundered.

With cryptocurrencies those two are tightly coupled. For example if 10mil had to be laundered in one go and the entire market cap is just 10mil or so, liquidity becomes a concern.

If there are $20b waiting to be laundered and the total number of bitcoins is 20m the aggregate demand would support $1000 value of BC.

This is what I would call "direct utility". There is also "indirect utility" - mindset of bystanders who are willing to transact BC because they know that others will provide liquidity.

why does it support $1000? if I launder 1 dollar, I buy a bitcoin and sell a bitcoin, so why does it support any particular stable value?

Assuming you mean legal judgement, I don't see why they'd be especially resistant. If the coins are held at an exchange then they are as reachable securities held that way. If they are in cold storage they are as reachable as a negotiable instrument (e.g. bearer bonds) or chattels for that matter (e.g. gold coins).

The case of H. Beatty Chadwick is also worth keeping in mind (spent 14 years in jail in contempt of court because he claimed that he had lost all his money right before a divorce and the court didn't believe him.)

If the coins are held at an exchange then they are ss reachable a securities held that way.

If you're storing coins on an exchange, they're not your coins. The point of BTC is you don't need to do that.

A solid point, but two counterarguments: There's safety in numbers – if everyone were to do this, courts probably wouldn't jail more than a dozen or so – and at the end of your jail term, you'd still have your wealth.

> There's safety in numbers – if everyone were to do this, courts probably wouldn't jail more than a dozen or so

As I mentioned, there's nothing specific to bitcoin about this strategy. You can do it with buried gold coins or with cash as HBC did. Or a dozen other ways. If "everyone" wanted to do it, they would have already.

But ...

> and at the end of your jail term, you'd still have your wealth.

How much is 14 years of your life worth?

Rivers and Mountains has a good selection of pro Bitcoin Cash material to read.

https://www.yours.org/user/riversandmountains/

https://www.tradingview.com/u/RiversAndMountains/

https://twitter.com/upsupsanddowns

BCash is a scammy altcoin

What I don't get is why people keep bringing it into btc discussions. I don't see other altcoins getting added to discussions this way. You can't equate them both in anyway because btc has lot more network effects going on for it. How ever, you can confuse people new to crypto currencies with it and I don't think that is good.

Oh please, not here as well.

Im not sure I've ever seen a comment section about btc in the last six months that didnt include a discussion of eth and at least one other alternative. BCH is not unique in this.

>How ever, you can confuse people new to crypto currencies with it and I don't think that is good.

I think that was the intention of bcash. They did everything to brand it as being the true bitcoin.

Litecoin at least changed the damn name.

This discussion makes Bitcoin fans look like bickering, factional children.

Here's a solid "pro":

http://nakamotoinstitute.org/mempool/

Some highlights:

The Bitcoin Central Bank's Perfect Monetary Policy

Hyperbitcoinization

Speculative Attack

About 10 seconds of searching w/ your favourite search engine would reveal the Bitcoin wiki, which has this nice document: https://en.bitcoin.it/wiki/Myths

Curate a list of people in the space to follow, whether on Twitter, Reddit, or elsewhere.

For example, Vitalik Buterin (Ethereum's creator), is always thoughtful, wary of the bubble hype, and posts interesting technical items on his blog, Twitter, and on Reddit. He obviously focuses on Ethereum, not Bitcoin, but some of his insights on blockchain are generally applicable.

Vitalik keeps on endorsing ICOs while he promised he would stop due to the abuse of the schemes. He keeps promising things while the existing software keeps on failing due to bad design and not strict rules or guidelines.

It takes weeks for a really beefy machine to fully sync a full node. "Smart" contracts remain really difficulty to be written safely. Ethereum was unusualable when it reached its scaling limits just by one silly app of cat breeding. They are on the verge of doing another hard-fork to effectively revert some transactions and move some stuck ETH. It's really a clownfest that keeps on pushing badly written software just so they can sell it to greater fools and enterprise "smart"-dump money. Can't have respect for this kind of behavior.

From what I've seen, this is inaccurate FUD. If I'm wrong, I'd appreciate examples with links.

Some specific responses:

1.) All blockchains are having issues with scaling, including Bitcoin. Vitalik is working hard on scaling (see, e.g., his recent work on sharding and Plasma). I am not saying he will necessarily be successful. It's possible a newer competitor (like EOS, Cardano, Ripple, Stellar Lumens, IOTA, etc.) may have a better approach to scaling, although a lot of those competitors are overhyped, do not have a working mainnet yet, or have used other tradeoffs (e.g, security or centralization) in order to provide scalability. I'm not saying Ethereum is the best project, I'm saying that Vitalik seems like an honest, hardworking, direct, technical guy who avoids hype/FUD more than most in this space.

2.) "They are on the verge of doing another hard-fork to effectively revert some transactions and move some stuck ETH." What is this referencing? The Parity folks proposed something along these lines, but the community was not in favor and I believe it's been dropped. I have not seen Vitalik or the other Eth devs push this.

3.) Vitalik has urged people to be cautious of these overhyped valuations and ICOs. He has advised projects that are technically interesting, without endorsing the ICO raise itself or their valuations. I don't personally see a problem with that, although perhaps people differ.

When the CryptoKitties craze was at its highest, the Ethereum network was still faster and cheaper than Bitcoin. It kept processing transactions (faster than ever, even). You just needed to pay more than usual.

You make some good points, like Solidity being a horrible language. The community needs to discover better metaphors for blockchain-aware programming.

As for the rest, I'm not sure if you really want to discuss what you say, or just to cry aloud. Any serious read into the Parity multisig bug would lead you into protocol upgrade discussions, not into bailout discussions. It turns out that some ether previously thought lost could be mathematically proved to belong to a certain address, so giving an option to retrieve the money would be a net gain. The multisig bug made people look into this. If it can be done, rejecting the change "to make them learn from their mistakes" would be petty.

I just synced a full Ethereum node in < 1 day without any problems.

I'm talking about the full-node mode, not the fast-sync mode that doesn't fully verify the blockchain.

From my understanding, the main benefit is zero trust transactions. You can make a digital transaction without trusting anyone, especially the other party.

The downside is this guarantee has some trade-offs. Mainly transaction speed is super slow (10m to confirm a transaction went through) and transaction fees are very high (especially now with the "bubble", it's something above 10$/transaction). Furthermore, all transactions are public record, which isn't desirable if you're a fan of privacy. The value is very volotile right now, making it hard to really budget out your net worth.

IMO, if you can just trust a third party (eg, credit card processing), then you get much better guarantees. (Fast payment, relative privacy, low transaction fees), with the further benefit of chargebacks. If someone steals money from your Bitcoin wallet, you're screwed, with a credit card you phone them up and they undo it.

Actually, even with Bitcoin you need to trust a third party: the exchange. Many people hold their money in the exchange, and there have been multiple cases where they've lost a bunch of user's money. IMO a real bank or credit card processor is more trust worthy than a crypto exchange.

That's all to say that currently crypto makes no sense for real transactions. That's not to say the issues are unfixable, for example Monero provides privacy guarantees.

As well, other uses may be valid, the main case is "a hold of value", like gold. IMO, crypto has no intrinsic value (not even decorative like gold) and is very volotile, so it's up to you to decide whether it's going to last.

Lastly, there are novelty uses like ethereum's trusted computation platform. That's a complicated topic in itself but pretty much each of these uses has a counterpart with much better guarantees if you can use a trusted third party.

It isn't zero trust though, you're trusting the miners(collectively) at a minimum.

You're not trusting the miners, you're trusting a system that was designed so that one would need 51% of the mining power to perform an attack. While there is a worrisome level of centralization in mining, you are also trusting the economic incentive structure of the miners is sufficient for no one to coordinate a 51% attack given the current dynamics.

Right, so you're trusting the miners. Got it.

kind of. But the miners have a financial incentive to follow the system. The system is built in such a way that it's in their best interest to follow the system (except in a coordinated 51% attack, then the system falls apart).

Which is the same thing as saying that you are trusting that miners will be motivated by the financial incentive.

That's a generally sane reason to trust the miners, but the truth is, the mining nodes are controlled by people, and people can be motivated by many things other than money, including fear of people with much political power.

What about this scenario:

Mining becomes even more centralized due to high cost.

Next, attackers (mean, naughty miners) simultaneously launch / initiate / pay for a DDOS attack on the others such that they can reach this 51% figure?

Ethereum's ecosystem is trying to solve a lot of this. For example, the 0x protocol allows exchanges (in the 0x parlance, 'Relayers') to forego holding customer assets (and therefore also avoid KYC/AML/etc.). They take a fee for creating the UI and matching orders, but the matched orders execute as smart contracts on the Ethereum blockchain pursuant to the open 0x protocol. Multiple relayers will compete for business using this protocol. The first relayers will be launching soon (e.g. Radar Relay).

That would be really useful if blockchains could handle more than 20-ish transaction per second without sacrificing either decentralization, security, or both.

The comparison to credit card theft is inappropriate; you are not exposing your private information in the same way you are with a credit card. When you pay for something online, you are transmitting your credit card number over the wire. When you pay for something with BTC, you are sending merely a signed transaction over the wire. When submitting a credit card or debit card number, you are trusting that the merchant or people that work for the merchant will not steal all the funds from your account, and that is why you need extra guarantees from your bank (granted, those guarantees are not always upheld https://nypost.com/2017/12/14/after-losing-familys-846k-inhe...). With BTC, it is not a requirement for an online transaction to expose credentials which allow an untrustworthy actor to drain your account. Similarly, you do not have as much risk from a Man-In-The-Middle attack with BTC.

For sure there are some untrustworthy exchanges as there are untrustworthy ICOs, but you have two options that are far better. You can rely on US Banking regulations and pay higher fees through Coinbase and Gemini, where your deposits are insured; or you can use a decentralized exchange like etherdelta that relies on atomic swap contracts.

As you mentioned, Monero (and potentially z-cash) are there as solutions to anonymity.

With a credit card, all I have to do is raise a dispute. I was overcharged, I didn't get the goods, it was DoA and the merchant didn't want to know. Money back in minutes.

With BTC you have to really, really trust the merchant, because you can't compel them to refund you. Without the chargeback ability, a lot of smaller merchants would never get business in the first place.

> With a credit card, all I have to do is raise a dispute.

And that's a real problem if you're trying to run a business.

You know what's a worse problem? Not having any customers, because nobody wants to get scammed and have no recourse.

Having a choice is always better. You are not required to accept crypto currencies.

Nor credit cards, for that matter.

That's my point. More choices = better for business. Not everyone is scared of being scammed because they pay with a crypto currency.

They will be, after a few bad experiences. And that never takes long.

There are countries where card usage is not as widespread as in the US, for various reasons. For example, in Germany most smaller merchants don't accept Visa and Mastercard.

You are not guaranteed to win a credit card dispute. Depending on the card, it takes a great deal of your time to file the dispute and continue to submit supporting evidence down the line. You are paying 1-3% on all of your transactions for this privilege; do you really want to pay that 1-3% every time you buy coffee? On the other side of the token is the merchant. How often do they lose out from a fraudulent credit card dispute? There are many businesses that refuse Amex for this reason among others.

The blockchain and smart contracts provide interesting ways to tackle these problems with clever and transparent protocols. It is not difficult to imagine a credit score system (https://hellobloom.io/) that is based off a transaction history tied to an identity token (https://www.uport.me/). In that case, merchants and customers can choose who they want to engage with based off reputation and history.

That is one way of doing a transaction with a merchant. Another way would be to use a hashed time lock contract that allows you to get a refund on demand. In that event, the merchant has to trust you.

As both a consumer and a business owner, I am excited to see a highly diverse market of options for how we do transactions, as opposed to a market dominated by 3-4 players.

I'm not guaranteed to win, but I am guaranteed to get my money back immediately, and have the case looked into.

The fees don't have much effect on me buying coffee and reputation based systems are a libertarian panacea that honestly, look nutty to the rest of us.

As a European consumer I too am looking forward to lots more options in the near future, some of which will ditch fees entirely,and none of them cryptocurrency based.

Right, but when you lose the case, you lose that money again, or vice versa as the business.

To many Americans and world citizens with less disposable income, you might seem kind of nutty to not worry about losing 3% on your under $15 purchases. Credit score and insurance industries are ubiquitous. For most folks if they move to another country you will often be penalized by that country's insurance or credit score agencies for not having recent history. There is certainly room for improvement.

Sure, but in the mean time,the consumer is protected, leaving them much more confident about trying new merchants, or about transacting at all.

And I'm not losing 3%, the business may be but I'm not in any way that's visible.

Further, there are new products and methods entering the market that require neither Visa/Mastercard nor a hideously inefficient PoW blockchain or multiple exchange parties.

Payments (in Europe at least) are likely to change in the near future, but not to that.

Links?

Keywords to search include -

  Payment Services Directive 2 (PSD2)
  Open Banking

This is what the EU payments industry are watching, according to my various links in that industry.

There is also no central authority printing or seizing money. There will only ever be 21 million BTC and they are released on a schedule. The code is open source.

> You can make a digital transaction without trusting anyone, especially the other party.

Well you would need to trust the other party to get something in return, unless you're giving it away. The big part is making a transaction without trusting a 3rd party.

> Mainly transaction speed is super slow (10m to confirm a transaction went through)

It depends on how large your transactions are. If you buy a car for example you want to wait for more, maybe 6, confirmations while if you pay for coffee you can use a coin where zero-conf (basically instant) transactions can be considered okay.

Put that with the context that VISA has a settlement time of around 30 days.

> and transaction fees are very high (especially now with the "bubble", it's something above 10$/transaction)

Only for the crippled coin Bitcoin. Bitcoin Cash could for example easily handle all Bitcoin's transactions for pennies.

> (Fast payment, relative privacy, low transaction fees), with the further benefit of chargebacks. If someone steals money from your Bitcoin wallet, you're screwed, with a credit card you phone them up and they undo it.

If you're a business chargebacks are actually an anti feature. Chargeback fraud is a very real and very common occurrance.

> Actually, even with Bitcoin you need to trust a third party: the exchange.

Only if you use it to enter/exit with fiat.

> IMO a real bank or credit card processor is more trust worthy than a crypto exchange.

Absolutely. That's why it's recommended to hold your coins yourself and don't leave it on any exchange. Of course they could become more trustworthy as time goes on.

> That's all to say that currently crypto makes no sense for real transactions

Except I have used it successfully several times to buy stuff. It's also much better than any alternatives for donations (where for example PayPal cannot freeze the funds) or remittance to far away/difficult locations.

> As well, other uses may be valid, the main case is "a hold of value", like gold.

I find that stupid though.

> IMO, crypto has no intrinsic value (not even decorative like gold) and is very volotile, so it's up to you to decide whether it's going to last.

The value is transactions without a 3rd party and it's very hard to reverse already made transactions. There's no need to have any physical value.

https://www.reddit.com/r/BitcoinMarkets is slightly less terrible, but doesn't go in much on technical details

Honestly, no, I haven’t. But, in my opinion, the pros and cons of Bitcoin are similar to the pros and cons of any decentralized system:

Pros: as long as you are able to keep your private key a secret, no one can take your bitcoins from you; doesn’t require trust in party knowing what it’s doing

Cons: no one there to bail you out; poor throughput (currently around 10 transactions per second)

Most other pros/cons I can come up with depend on ones convictions regarding economic theory, so I only included the objectively true ones.

I think it's closer to four transactions per second:

https://blockchain.info/charts/transactions-per-second

I’m talking maximum, not average. Also, it depends on transaction size; there really is no true transactions-per-second figure for Bitcoin. On top of that it depends on wallet software, too — most of which aren’t yet ready to benefit from the recent SegWit protocol upgrade (which increases TPS somewhat).

In other words: 10 TPS is possible, but this assumes 1) taking advantage of SegWit and 2) a simple transfer from one account (input) to two accounts (destination+change output).

Pros and cons compared to what?

Here's about 150 links to get you started: http://lopp.net/bitcoin.html

The arguments for digital cash have been laid out since the cypherpunk days of the early '90s. Go read True Names: and the Opening of the Cyberspace Frontier for the philosophical underpinnings.

One of the big ones driving the value (AFAICT) is that it's a way to get your money out of a government-controlled bank account. Not too useful in the US, but very useful when you have high inflation risk or tight controls on how much money you can take out of the country.

Someone posted this link on reddit today.

https://think.ing.com/uploads/reports/171218_Why_Bitcoin_to_...

I put here two of my favorite youtubers on crypto; they post almost daily. They are positive about the space, but also throw so-often-missed caution, plus thoughtful technical details and repercussions of the various cryptotokens.

2. Crypto Investor: https://www.youtube.com/channel/UCTKyJALgd09WxZBuWVbZzXQ 1. DataDash: https://www.youtube.com/channel/UCCatR7nWbYrkVXdxXb4cGXw

This will sound absurd, but https://www.reddit.com/r/Buttcoin/ is the best place I've found for rational and serious discussion of bitcoin (and yes the occasional butt joke).

Try posting a serious question there and see what happens!

People discussing Bitcoin's cons are typically downvoted away by the same people yelling "HODL" and spewing various unhinged, delusional predictions about how a single Bitcoin will eventually be worth more than the US GDP. Because there are so many greater fools buying at ATH then trying to create more of themselves to avoid being the last one off the bus, it's pretty difficult to find an internet forum where it's possible to have an honest discussion of Bitcoin's pros/cons.

Read the whitepaper.

https://bitcoin.org/bitcoin.pdf

It's not a pro or con article, but it's the most cogent description of Bitcoin you'll find.

BitMEX Research continues to do very smart and sophisticated observations in the crypto space. Regarding your question you might want to have a look at this specific blog entry https://blog.bitmex.com/value_proposition/

I'm not a Bitcoin expert, but I don't see how anyone can view Bitcoin as anything other than an elaborate pyramid scheme. Said another way, why would anyone "invest" in Bitcoin unless there is an expectation that the price of Bitcoin will increase? At some point, the price of Bitcoin will level off, investors will exit, and then the price will fall, quickly and steeply.

why would anyone invest in anything unless there is an expectation that the price will increase? investing isnt charity

We could say that many had an educated guess that Bitcoin would be the way of the future. It's initial promise was brilliant, however at the time of writing it seems to have lost much of its use (e.g. cheap micro-transactions between peers), due to technical and economic issues (limited transaction rates, insane volatility). It's not clear whether any of these will change, so I wonder what people are investing in? I believe what the parent poster was referring to is that much of the investment seems to be purely driven by speculation on the value, rather than its promise as a platform.

Bitcoin's purpose isn't for investing. People might choose to invest and speculate on the future value of Bitcoin but, among other things, Bitcoin's purpose is a currency that is decoupled from a central government.

How do you decouple from governments banning businesses from accepting it?

Sell it for cash to someone via localbitcoins.com? Fly to another country that does accept it, open a checking account there?

It is only important that people accept it. I think we can call that mission accomplished.

How feasible is Bitcoin as a currency when transaction fees can exceed $20/USD?

Not very feasible, right now. There are some technical hurdles that can be overcome with some improvements in the code which will drop the transactions fees to almost nothing.

For now, Bitcoin seems to be taking shape as a store of value, like gold. Another, more updated crypto currency, might take over as day-to-day currency while Bitcoin is the larger value store.

Hard to say how things will shake out but it's surprisingly still the early days of crypto technology.

Wants important is the blockchain technology. As Bitcoin continues to grow it further legitimizes the strength of the blockchain technology which can be applied to many other areas in tech. Bitcoin itself is useless, essentially sending "thin air" back and forth as someone else put it.

And if bitcoin crashes and people who took out mortgages to buy it end up on the street it could take the reputation of blockchain down with it...

Lets tone it a down a bit. I'm sure there are idiots who took out a HELOC to buy BTC, just like idiots who did it with gold, or to bet the horses, or buy lottery tickets. A few idiots can't really change the reputation of something. The internet somehow survived through a crash that led the economy into a recession. When/If BTC crashes, it will be a small blip in the economy.

I think dismissing Bitcoin and promoting blockchain technology kind of misses the point. Sure, a lot of companies will invest in blockchain tech and maybe roll out their own blockchains, but that doesn’t make a lot of sense to me.

A blockchain without a peer to peer/decentralized network and a crypto currency/incentive system is nothing more than an over-architected centralized database.

The trust provided by using a blockchain is based mostly on the incentive for people to secure the network. Sure you can use hashing and encryption to verify transactions without it, but if it is a private chain, then one person with access can perform a 51% attack and alter all of the transactions. That is the exact thing something like Bitcoin is trying to prevent.

I agree that Bitcoin itself may not end up being the final coin that survives in 5 or 10 or 20 years, but it has the first mover advantage and strong brand recognition, and I don’t see that changing anytime soon.

Go ahead and say "speculate on", and throw away your scare quotes.

Prior to the current bubble, the value of bitcoin was largely based on it's use cases for selling illicit goods over the internet, collecting money for ransom ware, evading currency controls and taxes, and general money laundering.

An investment in bitcoin was a bet that it would continue to be used for criminal activity.

The current bubble is based on exactly what you say, though. Price manipulation by a few shady, unregulated exchanges leading to insane price increases, followed by a speculative mania.

> The current bubble is based on exactly what you say, though. Price manipulation by a few shady, unregulated exchanges leading to insane price increases, followed by a speculative mania.

The current bubble is mostly based on what you say, but it is still great for all the things you mentioned earlier, "selling illicit goods over the internet, collecting money for ransom ware, evading currency controls and taxes, and general money laundering"

What's the point of investing in anything? If you work for a salary, as opposed to working for food, ie. hunting, gathering, or farming, then you do investment. Do you expect the "price" of that salary to increase?

Except that pyramid schemes are usually designed from the start as such.

Bitcoin wasn't: it was designed in good faith as a cryptocurrency. That people ended up using it as a speculative device says more about these people than the actual technology.

Also pyramid schemes are usually run by few people that cash out when it is no longer sustainable. Once it is so, it's over, as it usually the scheme gets exposed and owners lose all credibility. Bitcoin on the other hand went already through several "crises", and came out even stronger.

Also, in the case of Bitcoins, as more people buy them, and original owners cash out, the amount of actual owners dilute, so that the possibility of a few people dictating huge movements in price lessens over time.

Calling it a pyramid scheme it is an oversimplification, although on the surface it shares many traits with them: I don't think many people can predict how it will turn out.

It's true the price is fueled by speculation, not Bitcoin's underlying usefulness, but there's no reason to believe it's a pyramid or ponzi scheme.

It's entirely possible that, at least some of, the price is being boosted by mechanisms that would be illegal in other, regulated, markets. But it's not clear, at least to me, how much of an issue that is either legally or practically.

> At some point, the price of Bitcoin will level off, investors will exit, and then the price will fall, quickly and steeply.

As someone who has been in the space for a while, this is exactly what happens. There have been multiple 80%+ declines from peak to trough over the years.

> elaborate pyramid scheme

Having been in the industry since 2011, I have heard this sentiment since day one. Also tulips.

>I'm not a Bitcoin expert, but I don't see how anyone can view Bitcoin...

As a self-admitted non-expert, these initial observations might make sense. Become an expert and you will see differently. (It took me about two years to understand Bitcoin)

Could you share what took you so long to understand and what have you learned? Not being sarcastic, but it took me a month to have a good grip on the subject, so I cannot imagine what took you two years to learn. Can you please share?

The things that clicked last for me were the nitty-gritty of the transaction structure and scripting system.

It also took some time to understand the cypherpunk roots of Bitcoin.

I read someone else who wrote about this before. One question I have is why you think that specifically about Bitcoin and not about other things like gold or stocks?

People who purchase stocks early do so expecting the price to rise when more people buy in later for higher prices. Same thing with gold. People say stocks have value because they provide dividends, but when was the last time anyone made significant income due to dividends? I think most companies do not even pay dividends.

If Bitcoin was actually a pyramid scheme then the early investors would be eager to cash out at the expense of everyone else, but many people involved in Bitcoin truly believe in the technology and the idea of a global currency that exists outside of government/bank control. Those people are not eager to part with their Bitcoins, and I don’t know why that would change all of a sudden.

>One question I have is why you think that specifically about Bitcoin and not about other things like gold or stocks?

Gold has similar issues. But there is significant non-speculative value in gold. How much, I'm not sure, but it's useful for electronics and for decoration, etc. Also, gold's value is the supposed stability. Bitcoin's value is it's supposed growth, which leads to nasty feedback loops.

I wouldn't invest in gold. I think it's still in a bit of bubble caused by the 08 financial crisis.

Stocks are a different story altogether. You are buying equity in a company that has value. The stock market might be under or overvalued at any given time, but it is still tied to the value of the companies.

Every company goes bankrupt eventually. The idea is to make money, no matter how you want to look at it.

Sure eventually, but most pay out dividends over their lifetime that are greater than their current value or get bought out. Growth companies don't, but that's because they think they'd do a better job reinvesting.

> Stocks are a different story altogether. You are buying equity in a company that has value. The stock market might be under or overvalued at any given time, but it is still tied to the value of the companies.

I would say stocks are valued by the perceived value of the company and/or the potential future value. They are somewhat speculative too. Look at Tesla or Amazon for example. They have insane values despite not even turning a profit for long periods of time.

I get your point though. Bitcoin has no intrinsic value tied to anything specific, but I still don’t think that makes it a pyramid scheme. Bitcoin has A LOT value to people in countries that are on the brink of economic collapse due to inflation. Even in the United States, the FED prints over $200 billion a month. So in theory Bitcoin should hold value over the long term better than the US dollar.

Stocks are definitely speculative, but just not nearly to the same degree. They are speculating on what will happen in the meatspace. Telsa's valued because people are betting they'll become a major car company. And stocks like Tesla are outliers.

Bitcoin speculation is now just speculation based on price alone. Why is bitcoin going up? Because people think it will go up. That is a nasty feedback loop, that right now is causing it to have insane growth. The higher the price the more demand, the more demand, the more price goes up, etc.

But the opposite can (and will) happen. The demand for bitcoin drops because the price drops, the demand drops cause the price to drop further. etc.

Since the stock market is based on meatspace demand, if Tesla started to spiral for no reason, someone would buy it just to make a cash profit from it. People like Warren Buffet buy companies they think are undervalued to capture the profit.

>Bitcoin has A LOT value to people in countries that are on the brink of economic collapse due to inflation. Even in the United States, the FED prints over $200 billion a month. So in theory Bitcoin should hold value over the long term better than the US dollar.

They'd be better off buying property, securities, or even just USDs.

Bitcoin has gone up over 10 times this year. There is a huge risk it'll go back down to 1/10th. I wouldn't put any significant amount of money in such a volitile "asset."

Even stocks that don't pay dividends have a value floor(assuming the company doesn't go bankrupt)- the amount of money you can get by selling off company assets(office buildings, tech, equipment, patents etc.).

Bitcoin, gold, and stocks couldn't be more different. Gold has intrinsic value and stocks give you ownership in a value producing company.

> I'm not a Bitcoin expert, but I don't see how anyone can view Bitcoin as anything other than an elaborate pyramid scheme.

A pyramid scheme requires unsustainable exponential growth in number of new participants. Bitcoin can survive without that, so it's not a pyramid scheme.

> Said another way, why would anyone "invest" in Bitcoin unless there is an expectation that the price of Bitcoin will increase?

Investment being motivated by expectation of future price increases is not enough to make something a pyramid scheme. I mean, that's what motivated most investment in anything.

> Bitcoin can survive without that, so it's not a pyramid scheme.

Can Bitcoin really survive without an ever-increasing price? If it can't, it's a pyramid, because it does not generate wealth like most investment avenues.

> Can Bitcoin really survive without an ever-increasing price?

Requiring ever-increasing price as measured in some other currency is not what defined a pyramid.

Requiring unsustainable growth rate which must eventually consume all of the available number of something limited is; most strictly, a pyramid scheme requires exponentially increasing number of participants at a rate that exceeds population growth (usually on the scale of requiring the entire population to participate in a very short period of time.)

To not be a shrinking role in the economy, Bitcoin may needs a long-term growth rate (once coin mining is exhausted) equal to the growth rate of the economy (which may or may not be always positive over the long-term, and if it is may only be logistic), but that's not a pyramid.

you can buy drugs and other stuff online with bitcoin.

uber paid hackers in 50mil in bitcoin to delete data.

Do you see a value with a trustless peer-to-peer digital currency?

Bitcoin is probably in a large bubble, but there is real value behind it.

One question these smooth debut articles don't answer is - How easy it is to short bitcoin futures on these markets? Without an effective way to short, this is still unproven.

Wow, the downvotes. it seems the fanboys don't really want to hear the truth. So long it is an echo chamber, on with the ponzi scheme.

You can short right now but there are heavy margin requirements. But you are absolutely correct that being able to short is critical here. BTC futures are cash settled, which relies on market forces to keep the future market tied to the underlying asset. However it seems to be OK so far bc CME futures are at 18960 and gemini spot is at 18500. We saw 15% spreads when CBOE launched last week so this is a good sign.

My best guess is that this is great for everyone involved. Traders and investors can hedge future risk, brokers and exchanges can rack up fees, and institutional banks can hold the futures contract of an unregulated asset on their balance sheet. Eventually something will have to give, but for now I don't see any negatives here.

"Anyone who thinks that you can have infinite growth on a planet with finite resources is either a madman or an economist." - Sir David Attenborough.

Now we can add "bitcoin investors" to the list.

What good is this? You might just as well post a bible verse.

What makes that quote entirely meaningless, is that it doesn't in any way define the potential of the non-infinite growth. If humans can manage 2-3% global economic expansion per year vs sub 1% population expansion for the next several hundred years, growth might as well be infinite for our purposes. There's no reason to think that very modest outcome can't be accomplished given our demonstrated ability to make great technological leaps over time.

Humans can also increase the resource potential of the planet through engineering, which has already begun in a massive way with eg agriculture and will dramatically accelerate with robotics, AI, CRISPR, etc. It also ignores the ability to harvest the solar system and pull greater resources toward earth, which we will do in the coming centuries.

There's nobody of any credibility seriously proposing infinite growth, it's an invented strawman to easily knock down by Attenborough, for ideological purposes.

Stop trying to understand bitcoin, you privileged, elitists hacker news folk won't ever understand it how is to deal with a hostile corrupt government that through banks/inflation just robs you.

I can't tell if this comment is serious or an attempt at sarcasm. Regardless, there's a very valid point in there that if you're in a "hostile" country, BTC has given you an opportunity to get your money out in an easier and more secure way than ever -- if you can deal with the volatility.

/s ?

Would you please stop posting unsubstantive comments to HN? You've done it a lot, and eventually we ban accounts that keep doing that.

I'm sure you could have made something more substantive out of your comment here. We're looking for thoughtful conversation on this site.

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