How the Winklevoss Twins Found Vindication in a Bitcoin Fortune
nytimes.com
nytimes.com
If you settlement was 10Mi (example), sell 1Mi shares in cash: congrats, you're rich now, then invest the remaining 9Mi in higher risk stuff
And its not just with start ups. People who are more closer to work, generally tend to maximize returns for themselves above those are who are away from it.
This is true even in Big companies. Most product managers I know barely contribute anything to the product, most of the times its the engineers doing all the work and the product manager is just there to provide the validation 'This looks fine to me'.
There is a good reason why carpenters, plumbers, drivers, <skilled_worker> generally do better on the longer run than the supervisor ever does.
Let's add some ambiguity to our "poor genius"/"brilliant thief" scenario :)
At the time I thought they were foolish for not having a contract and for not having built up enough technical skill to understand that Zuckerberg was taking them for a ride. This is definitely true, but they corrected the problem and have recovered brilliantly.
Ergo; in the context we discuss, that's less of an achievement for rich American kids than for poor people.
Therefore not a good delimiter.
And certainly not inspiring. The circumstances for the vast majority of people on earth are different. To start with, their financial circumstances.
Less impressive because they're rich, sure, I'm with you. It makes it easier. But dismissing it as not a good delimiter and not inspiring is pretty ridiculous.
For me, it depends on the sport. Some sports are simply elitist. Cricket is an example, tennis is another, hockey yet another. There's many more. You could even see the very notion of sport is elitist. Poor people need to focus on the bacon alone.
Furthermore, when I learn about the circumstances of certain sports(wo)men I get touched. Lance Armstrong was an example of that because of his illness. Unfortunately he was a fraud, and I watched him win the Tour de France 7 times. We had Sochi as well, where so many Russians suddenly were winning while normally that isn't the case, now is it?
Then there's the stories of poor people winning in sports. Those move me as well, but they seem to be rather rare.
These 3 realizations destroyed a lot of the respect I had for Olympics or sports in general. Even though I am a hobbyist sporter myself (jogging), and have been a competing gamer in the past (the same is true there: if you got rich parents you're one step ahead). Its a personal value, YMMV.
The world is full of people who want to tear down other peoples accomplishments - "Accomplishment X isn't that impressive because of starving people in country Y." Using that standard, nothing done by anyone who "won the ovarian lottery" by being born in a 1st world country would qualify as "impressive".
When faced with a beautiful sunset, you can say "Meh, I'm not impressed. The sunsets in Hawaii are much better." or you can appreciate the beautiful sunset for what it is. The latter approach is happier path in life I think.
It means it gets lost like tears in the rain. At one point, one gets bored by the accomplishments and its about outliers within the winners. That's how an overstimulation of signal tends to work out.
> The world is full of people who want to tear down other peoples accomplishments - "Accomplishment X isn't that impressive because of starving people in country Y." Using that standard, nothing done by anyone who "won the ovarian lottery" by being born in a 1st world country would qualify as "impressive".
I'm arguing these [of the Winklevoss] are no accomplishments; they're expected. If something's expected of you, how is it an accomplishment if you reach that goal? You'd only be disappointed when you wouldn't reach the goal.
> When faced with a beautiful sunset, you can say "Meh, I'm not impressed. The sunsets in Hawaii are much better." or you can appreciate the beautiful sunset for what it is. The latter approach is happier path in life I think.
Moot comparison. At one point in your life, you've seen so many sunsets that it becomes pointless to care about them. You focus on different things, or on one of those sunsets which has something special. Such as that one time in Hawaii. Keeping caring about things which don't move you, seems like a one way ticket to endless depression.
Although everyone's free to enjoy sunsets, and I have no intention to take that liberty away from one, I am equally free to describe they're not that beautiful.
I think you're just mistaken about the percentage of rich people who achieve something like participating in the Olympics. I don't think it's expected in the way you seem to think it is.
Investing 100K then to have 18M now or whatever is a gamble you can only take if you're already doing quite well.
I didn't.
And it hasn't displaced anything, has it? I still don't expect it to do anything of the sort.
Also I'm not sure how "prescient" their seeing the potential of bitcoin was. They were literally sitting on a beach in Ibiza when a stranger approached them and told them about investing in bitcoin.
This same stranger fom the beach them puts them in the touch with the Bitinstant folks. When the brother meet Charlie Shrem and Erik Voorhes from Bitinstant they observe how much those two believe in the potential of bitcoin. See:
https://qz.com/405950/ibiza-the-hamptons-downtown-manhattan-...
It's no different from startups. A lot of investors were pitched by AirBnB and almost all of them passed. Fred Wilson from USV even had PaulG badgering him with emails telling him to invest and he still passed.
All this talk about how "prescient" they are and how they have now been "vindicated" is all pretty ridiculous. This is revisionist history. The NYTimes piece reads like a press release.
There 's a fair amount of luck involved in investing. They've been lucky twice. You notice there is no mention in this fluff piece about the investments they have made that have gone south because.
Then again, being able to anticipate irrational investment in bitcoin is arguably also a skill, assuming it’s not just dumb luck.
1. I'm jealous because they were born rich
2. I'm jealous because they made a lot of money with betting correctly on Facebook
3. I'm jealous because they also made a lot of money on correctly betting on Bitcoin
4. I'm jealous because they made the news and are probably getting all the hottest chicks.
So let's all agree to only say negative stuff about them, and blame all their luck on them being born rich.
We are not rich, so therefore are excused for not buying bitcoin at <$10.
A tennis player who reaches exactly the same goal as another one (e.g. winning a grand slam) yet without rich parents is more impressive. Their circumstances gave them a harder time in life within the sport, and outside of it. Think of material, training costs, quality of life (that goes far!), etc etc. There's some sports which are simply elitist while others are more free for all due to lower barrier of entry.
Speculating with Bitcoin, including starting a business around such speculation in order to stimulate your speculation (huh-huh, sounds less brilliant than it is now) requires savings. If you got 100M USD and you spend 100k (0,1%) on speculation there's virtually nothing you will lose. Because even if that 100k evaporates, you're still a multi-millionaire. Compare that to a poor, hard working woman from Bangladesh who's making our Nike shoes so Bob can win his grand slams. She can only speculate with say a dollar, and that's a huge cut in her budget which she'll feel for time to come. Oh wait, she doesn't even have a computer to start with. Even if she did, 0,1% of her entire savings is still essentially nothing cause like the vast majority of people on earth she either cannot afford to spend that 0,1% or it isn't much so doesn't yield much. Like, she can't even afford fee costs with that. So much for this world-wide cryptocurrency called Bitcoin.
The fact is that the vast majority of people on earth, and even the vast majority of people in rich countries such as the United States cannot afford to speculate with large sums of money. And if they did, they'd be belly up if their speculating would go wrong.
These factors make their achievements a lot less impressive. Note that I'm not saying "unimpressive"; (and I'll repeat once more): I am saying a lot less impressive. Subtle difference.
And fuck being reliant on luck. That is a silly excuse from losers which I heard in gaming all the time (the other one is "not having their day"). Skill is what matters. Good players work around bad luck turning the odds in their favor. They end up with a good long-term ratio or track record. Provided the playing field is equal. The playing field in life is not equal. Some people are born rich, and that gives them an ample amount of chances to score in life. The Winklevoss Twins are a perfect example of that, and that makes them a boring example. The life stories of personae who became rich and famous via hard work and who wasn't rich to start with, like J.K. Rowling, are much more inspiring for the general population.
People are trying their luck all the time in the lottery. They're losing, but false hope keeps that "game" alive. By ignoring the circumstances of the Winklevoss brothers whilst articulating their successes, you're doing the same. Please stop it.
(And that's a post written without going much into the problem of speculation regarding Bitcoin, ignoring issues like Mt. Gox and Tether.)
You assume one wanted to be part of this specific pyramid scheme. I already experimented with another in the '00s and figured that I'm not fit for MLM (it involved sales though), or pyramid schemes for that matter. I'm a terrible salesman because I am too honest and extensive. I didn't expect the world would fall for this pyramid scheme either. Cause frankly, I found it sucked, cause the various times I checked I couldn't use it as currency anywhere (still pretty much true). Which would mean I'm locked, sitting on gold nobody wants to have. What good is a currency you cannot use? You never know beforehand for which ones they're gonna fall for and which ones they won't. Furthermore, it isn't anonymous either, so you can't use it to avoid taxes. At this point, its still difficult to execute transactions due to latency and cost. Its also difficult to find a shop which accepts it as currency.
The only thing Bitcoin has going for it, is that its the first cryptocurrency. The flaws it has cannot be solved easily without a full reset, or consensus of a majority. Plus, the question is if people are responsible enough to own a hardware wallet.
So yeah, what I was doing with my savings is I was investing and I had it on the bank. Which are both luxuries a lot of people in this world cannot afford. And yet, we're talking pennies compared to what Winklevoss owned the moment they were born. All cause of mom 'n pop. You cannot just take that out of the equation.
I found this to be the most fascinating part of the article.
Gold is rare on its kind and rare on its abundance. It may be hard to mine more gold, but it's way harder to find another gold-like commodity.
Bitcoin is only rare in the abundance sense. It is hard to mine more bitcoin, but it's pretty easy to find a (arguably better) substitute for what it does.
I can agree with it being better (having more utility) than gold, though. So I'd agree that the sum of all e-coins will surpass gold, but I see no reason for Bitcoin to do it alone.
Bitcoin isn't even rare in the abundance sense if you consider that how hard it is to mine new coins is merely a function of a mathematical curve that can be adjusted as a software change. Certainly any change to the mining difficulty and/or coin pool ceiling would be hugely controversial, but it's not like it's mathematically impossible merely politically improbable, for now.
As I said, the scarcity of Bitcoin is much more a political structure than an inherent nature of Bitcoin. The miners control Bitcoin so much as anyone does and it is their political intent as much as anything else that creates any scarcity in Bitcoin at all.
But i agree that's not enough to defend against competitors like Bitcoin, but the same cannot be said of Bitcoin. Other than sociological factors (that are arguably much stronger on gold), there's nothing that would help it defend against others e-coins.
platinum. i will agree that gold is easier to tell apart (it's yellow) than platinum. although realistically that's a moot point because you're going to want to do chemical tests when dealing in non-trivial amounts of precious metals.
Now find a few hundreds more and we will be closer (not really) to Bitcoin's rarity of kind.
The same argument applies to platinum: it has essential physical applications that are hard to replicate, so it will retain a high baseline value just on the merits of "we need it for essential hardware."
If a cryptocurrency manages to pull off the software equivalent of "essential engineering applications," then the conversation about cryptocurrencies will change dramatically. As it stands, blockchains will probably prove to be situationally useful, but blockchain =/= cryptocurrency.
You cannot invent a new noble metal. You can't fork an existing noble metal.
All of these properties are what made gold valuable sociologically. Silver is nearly as easy to work and refine, but it is far more abundant and it also tarnishes easily, so it is two orders of magnitude less valuable.
Platinum is also far more abundant, but much harder to refine, which is the sole reason for its high price. It is also much harder to work, requiring much higher temperatures to melt. It is a far harder and tougher metal than gold, which is why it is often used for the crowns in which precious stones are set, and as a plating material for gold.
Bitcoin is just vapor, good for nothing in a practical sense. It doesn't even have attractive designs like paper money. Fiat money is susceptible to going to zero value; gold will never go to zero, even in some total societal collapse scenario.
At no point in history has gold been worthless.
As far as you and I know, gold has had worth as long as society has had the capability to get it.
At one point Mussolini was alive. Therefore it is provable that Mussolini could live again.
Sorry, try again.
At one point, these grains of sand were in this glass. Then I poured them into the ocean. But they were in the glass so they could be in there again.
Except no, no they couldn’t. The 2nd law of thermodynamics makes many things non-repeatable.
Before his birth, Mussolini was not alive. Therefore, it is possible that he could not be alive again.
At one point, there were no grains of sand in this glass. Therefore it is possible that there will be no grains of sand in this glass again.
I know it is hard to imagine because generally bitcoin is new technology, but also because of that - its not that it is impossible.
Meanwhile gold is gold; a physical object with very high temperature of vaporization.
And, uhh, if you don't know why having a good idea of your potential downside is useful when investing, maybe consider finding a trustworthy financial adviser?
We could pick any number of gold-like commmodities, but like Bitcoin, gold has had a history of large expenditures to acquire it. Both are buoyed by that past.
So many tokens and blockchains are coming out with incremental improvements or niche capabilities, but in the end I think consolidation of market cap is inevitable. I think it ends up Bitcoin as store of value, Ethereum as contracts/api and a large amount of application specific token/chains. Most applications would be backed by ethereum (like most tokens are now), but ones like Ripple could definitely be top 5.
There isn't one company for internet searches and there isn't one provider for online video content. Why should there be just a handful of currencies?
The natural state of a healthy ecosystem includes competition and variety.
I only mean to say a handful will capture the vast majority of market share/cap.
Youtube and netflix are both on demand television as are amazon instant, modern cable tv subscriptions, and a variety of specific channels (hbo, showtime, etc).
There will definitely be use case dominance, but they may not be the same whales as we currently see.
That bitcoin is a (sort-of) working cryptocurrency and that bitcoin has a history are basically the primary arguments for bitcoin's continued value.
But it seems implausible to claim that this will allow bitcoin to become a store of value investment. I think it's clear those buying bitcoins today either are doing so with an eye to increase their investments through bitcoin's rise or are trying to get money out of some nation which prevents capital exports.
As a thought experiment, if a person knew for certain that bitcoin would have the same price in six months, would that person ever prefer bitcoins to a us savings account with the same amount of money? It seems to me no one would.
Moreover, if bitcoins are essentially always going to be speculative, this leaves that possibility of them always being possibly displaced by an equivalent.
Even in the US, holding Bitcoin at the same buying power would be a hedge against inflation.
Of course the Bitcoin price in USD would still fluctuate, if it were pegged to USD there wouldn't be much use other than easier to move around.
I would have put that the other way around ("like gold, bitcoin ...") but even so the scale of the relevant histories are not even in the same ballpark. Bitcoin has had held value for seven years. Gold for more than seven thousand years.
The scale is incomparable, but every year the history grows and the likelihood of permanent acceptance increases.
The Spanish pulled a large amount of gold out of their New World colonies. It reduced the price of gold in Europe... by 20%. That seems to me to be not much of a swing, given the magnitude of the event.
The biggest swing that I know of was when the US allowed the price of gold to move. The US held the price of gold at $35/oz from (about) 1932 to (about) 1975. When they allowed gold to float, it went to $200/oz, dropped to $100/oz, then went to $800/oz. But I'd ascribe that set of "ridiculous swings" to government messing with the market, not to gold itself.
Off topic, but too fun not to mention: An ounce of gold weighs more than an ounce of feathers. This is because an ounce of gold is a troy ounce (1/12 of a pound), and an ounce of feathers is an avoirdupois ounce (1/16 of a pound).
As a native from a country that uses the metric system, this sentence is both amusing and saddening.
> Musa's generous actions inadvertently devastated the economies of the regions through which he passed. In the cities of Cairo, Medina, and Mecca, the sudden influx of gold devalued the metal for the next decade. Prices on goods and wares greatly inflated. To rectify the gold market, on his way back from Mecca, Musa borrowed all the gold he could carry from money-lenders in Cairo, at high interest. This is the only time recorded in history that one man directly controlled the price of gold in the Mediterranean.
And isn't Bitcoin hackable in a near-ish future with quantum computing?
I have been hearing that for last 15 years.
Here's my attempt: Gold is just a "metal" just like Bitcoin is a "cryptocurrency." There are many types of metals and other materials. Some can directly replace gold while others have way different uses - just like cryptocurrencies.
Any store of value that makes sense for humanity in the long term has to be both digital and reflect the work/real value creation process that matters in the future. I'm not sure it's going to be bitcoin but it's definitely not gold.
It might be too useful for Mars to use as reserve!
https://www.itmtrading.com/blog/aerospace-gold-the-next-fron... https://www.geek.com/news/geek-answers-why-does-nasa-use-so-...
I know this doesn't answer your question but it's still relevant. Currently Bitcoin is the most expensive, least convenient currency available. According to estimatefee.com it would take about a $25 fee in order to get your transaction through in an hour.
My point is that nothing about Bitcoin will ever really be "implicit" like it is with gold. Gold exists as it exists, cryptocurrencies only have the properties that are created by the developers, and/or are run on machines by participants in the network. In Bitcoin's case, the developers and the network have not been able to handle the load of all the transactions.
I used to be in the "Bitcoin is the new gold" camp. But after seeing what's happened with Bitcoin, I'm certain it's not that simple.
1. The claim of "rare" doesn't exactly hold true.
Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price).
The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people.
Best estimates are that there are about one million
holders of Bitcoin; 47 individuals hold about 30 percent,
another 900 hold a further 20 percent, the next 10,000
about 25% and another million about 20%, with 5% being
lost. So 1/10th of one percent represent about half the
holdings of Bitcoin and 1 percent close to 80 percent
(http://www.businessinsider.com/927-people-own-half-
of-the-bitcoins-2013-12). The concentration of Litecoin
ownership is similar
(http://litecoin-rich-list.blogspot.com).
Most of the big wallets have been in place from early on,
so sitting back and watching your capital grow has been a
very successful strategy.
The distribution of Bitcoin holdings looks much like the
distribution of wealth in North Korea and makes the
China’s and even the US’ wealth distribution look like
that of a workers’ paradise
3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners.
4. Electricty usage is unsustainable, GOTO 3
[1] https://bitcoin.stackexchange.com/questions/86/is-it-possibl...
http://www.businessinsider.com/bitcoin-inequality-2014-1
[2] https://www.youtube.com/watch?v=6r04gfWfRkE
[3] https://qz.com/1055126/photos-china-has-one-of-worlds-larges...
2. BTC is being used as the reserve currency for almost all exchanges. BTC has a vast network and even as popular as ETH has gotten, it has some ways to go before it's accepted at the same level as BTC. The others, like LTC & XMR also rarely have trades delimited in their currency.
EtherDelta is only compatible with Tokens generated within the Ethereum network, i.e. digital "assets" produced not by mining but by writing a separate contract that immediately creates or "pre-mines" millions of Tokens.
Pre-mined Tokens are a gimmick that amounts to a gift card for a Business, but the marketing tries to claim this is a magic software network where a limited amount of giftcards are released into the wild and you need to horde the giftcards to use the services offered by the business. Please feel free to show proof where this is not the case.
2. BTC is not a "reserve currency", it's merely referenced in the form of a ratio for other crypto-assets. BTC could fall to $0.001 USD and you would simply see the ratio as BTC 6 : 1 OTHER-CRYPTO
If you can point to 90° drops on GDAX, I'd be interested to see them.
I don't think the network would cease to function. If that happened, the difficulty for the network would drop drastically, and GPU miners would come back online, similar to the early days of BTC
- Both are in fixed quantity so none is more rare than other.
- Gold has practical use in industry which puts lower bound on its value. BTC has no lower bound.
- Gold is exchangeable virtually in any country and any culture regardless of how technologically advanced that society is.
- Thousands of years of history has proven that humans have almost natural lust for this shiny metal and it gets displayed as jewelry uses. This again further sets the lower bound for gold prices.
- Gold is not only rare but is virtually rust proof and can be stowed away without any advanced tech for 100s of years. BTC will be pointless if there was a natural or human made disaster and few people had electricity.
- Gold is far more unlikely to be made illegal by governments.
- There are no new rare metals popping up every day like whole slew of new cryptocurrencies which might fragment and trump each other. No one knows which cryptocurrency will end up dominating 10 years down the line.
- BTC has huge risk of getting stolen and hacked because someone exploiting zero day vulnerabilities in your system even if you did everything you possibly could to keep your system safe.
- Governments can start their secret operations to control the crypto market behind the scene, hack in to exchanges, find vulnerabilities or do dirty trades.
- Crypto exchanges are wild west without regulations which means clever deep pocketed traders would be exploiting them by techniques like frontrunning, wash trades, willybot, spoofing etc. This enables big investors to profit at the expense of small investors.
Above arguments should make it clear that btc has very real upper bound that it can rationally reach and its most definitely less than gold market cap. Of course, big investors can juice up things in the short term but it would be impossible to sustain irrational highs on long term.
There is 80% more gold aboveground today than there was in 1980.
If you ask your Shaman to produce a poison and send it to every gold miner in the world and as a result no new gold will be mined, you still won't dig up much by simply putting shovel in your backyard. You would have to go to the last crust level they been at and start to dig from there, which makes it incredible expensive and complicated.
Meanwhile, if for any reason, including breaking a Bitcoin blockchain by state-sponsored actor (or someone powerful enough; or simply forcing ISPs to ban traffic on mining ports now that NN is gone), when miners stop or move to something else, you can pick up from where they left off of and alone mine one bitcoin a minute on your mediocre laptop.
Whether someone will pick up these coins from you at $15k per pop, that's a different story.
If the government can force ISPs to implement content-neutral routing, what on earth would stop the government from forcing ISPs to mandate content-neutral routing for everything except mining ports, or going even further to demand that DPI be used to investigate the content of all ports to prohibit mining activity?
Also keep in mind that a technological breakthrough could produce a sudden glut in gold supply, as we have seen recently with oil and gas fracking.
The main reason the price has gone up is that the world population is in aggregate far richer than in 1980. What's more, Indians and Chinese (who are culturally inclined to invest in gold) have seen their wealth grow particularly rapidly, so the proportion of world assets stored in gold has likely increased.
PS: Remember the value of Bitcoin is limited as a function of the cost of that 51% attack. If the price increases by 10x the transaction fees need to also increase by 10x or Bitcoin becomes less secure.
1. They have BEP printing press; instead of stealing or brute forcing into bitcoin and then selling the loot for $, the might as well ask Bernanke to print few thousands more sheets of 100 dollar bills (of course not legally but i'm sure there is some overprint like in any business).
2. screwing people out of bitcoins would mean screwing US citizens as well. Why would any part of government do that just to upset Congress and get themselves in front of bunch of congresspeople for grilling? Doesn't make sense.
Someone shorting Bitcoin on the other hand has an economic incentive to destroy it. The cost benefit of doing so scales with the size of their short vs the current hashing power. But, a malware writer may have access to a 51% attack briefly without owning any equipment.
There was a recent paper shared here on an article about new type of currency or exchange system. Although I don't understand details, it explained that since 51% of coins are already mined by just a few pools, if these pools orchestrate together, then can break the chain. But unsure how true this is (cannot find the post anymore, sorry)
By the way, you can only double spend with the 51% attack.
Besides there's a huge supply problem here. ASICs need to be manufactured. You can't just buy several hundred thousand of them. The whole point of Bitcoin is that it's prohibitively expensive to just perform a 51% attack and impossible to entirely regulate.
The idea that a 51% attack on Bitcoin is plausible just isn't sound, imho.
Might be popular with the ladies, though.
They exist in that safe until someone with a plasma cutter or a Hilti coring rig takes it from you.
Interesting. First time I'm hearing about these two. Anyone know of any real life instances where someone perpetrated this w.r.t. bitcoins / crypto trading?
https://cointelegraph.com/news/mt-gox-trial-update-karpeles-...
Your other arguments are not bad (well, it varies), but this one is very weak. You do know that a lot of 3rd world citizens now have access to cell phones? Technology is pervasive nowadays.
How did that work out for oil a couple years ago?
Yes there's some lower bound on gold, but if it turns out it's lower than you thought, or if the supply can be altered to manipulate the price and drive it even lower, it's not very useful.
Given that gold prices 20 years ago were somewhere around 1/6 the maximum price in that period ($300 vs $1800), it's reasonable to assert that this lower bound on gold lower than even that. Meaning if I invest in gold and people completely lose faith in it, I could lose 85%+ of my investment. Not a very helpful safety net.
Do you think there's a new technology on the way that will increase the supply of gold the way fracking increased the supply of natural gas and oil?
Fun to think about asteroid mining...
Starting to look less and lesser like a currency, becoming more and more a security.
edit add links:
[1] https://blockchain.info/unconfirmed-transactions
[2]: https://bitcoinfees.earn.com/Why is a new Ferrari so expensive? Ferrari could manufacture a lot more cars if they wanted to. They could also charge less, their margins are tremendous. It's an obvious function of supply and demand. The price is so high because people say it's worth paying that. It's that simple. If all of their customers suddenly decided it wasn't worth paying that, Ferrari would either lower their prices or go out of business.
Even bond ratings are often open to significant subjectivism that can swing their value considerably.
If enough people decide that a Bitcoin is worth $100,000, then that is what they will be worth. That is in fact how most things in the world are valued. Bitcoin's scarcity and the fact that in the near future it will become almost impossible to mine new coins, adds to the premise.
The question is: does Bitcoin's low utility value and ease of trading in proportion to its market cap, particularly open it up to dramatic whims of the mob? Yes, which you see in its volatility. That won't change until or unless it finds greater baselining usefulness.
Now you can argue that Antiques should not gain value from age, but old junk is not valueable, old pristine stuff is. So your argument is people overvalue something they have a rational reason to value, which is different than placing clause on something without inherent value.
I am not saying Bitcoins shpuld be worth zero today, I am saying they will be worth zero in 100 years after the fad ends unless they fix the inherent problems with the protocol so it can be used as a medium of exchange.
You answered the question there is nothing more than that.
Which bring us back to the question, just because it's a currency, its a scam?
Once the mining stops, they make money by transaction fees.
Do you expect people to work for free?
I am only saying the current structure ends up as a scam, not that the eventual successful currency can't solve these problems.
Who pays for the electricity costs till then?
I dont think you understand the meaning of the word scam, the miners are not cheating anyone with some false promise nor are they getting commissions if they bring other people under their fold like a pyramid scheme
The incentives are needed for miners to start mining in the first place, if you dont like it you are free to start your own currency.
If one untrusted middle man produces a proof of work for a transaction request, the other untrusted middle men verify the PoW to be valid, if there is consensus §, they collectively agree to append the transaction to the next block on the blockchain. The untrusted middle man is then rewarded for their efforts by being paid the mining fee that was accruable for the transaction.
[§] If 2 or more untrusted middle men solve the PoW for a transaction request independently, i.e. they are competing to be rewarded with the same mining fee, then the untrusted middle man with the longest confirmations from other nodes on the network is the one whose block will be appended to the blockchain, the others will be discarded.
Would appreciate any corrections to my gross simplification.
Yes, gold is fixed by the limited amount of it in the world, solar system, and universe. We haven’t even mined most of the gold on earth. If you’re worried about supply shocks, gold is infinitely more vulnerable.
I was going to respond to more of your points but many of them are obviously the exact opposite of true. Are you being sarcastic?
Empirically this has not been the case, particularly in the US [1].
Gold is great as a store of value when things are good, and incredibly shitty when your government turns on you.
> Empirically
Bitcoin has been legal for 100% of US history.
"BitCoin" is just a particular name for a bunch of numbers. If every single wallet in the world disappeared today, you could restart a new block chain tomorrow, and would get numbers just as good as the bitcoins were (And in fact, the # of Bitcoins doubles every time there is a fork). Any scarcity is purely by fiat and consensus.
I have nothing to say about bitcoin, or cryptocurrencies, but this statement is currently false because (AFAIK) bitcoin has not been made illegal by any government, whereas gold has:
BTC has zero value if the network stops (you could say it could have some value but "infinite illiquidity" which is basically the same)
Specifically, how does the game theory play out for his comments? Does it point towards him being genuine? Or does it point to him trying to do something else?
:)
Well. This could be another Facebook level embarrassment if it turns out false.
Because it's so exponential, I would imagine a rapid sale of 5% would remove 90% of the value, but I'd love to know the specifics.
The future value of Bitcoin in USD is entirely dependent on people in the future wanting to buy Bitcoin for USD; if no one wants to, it is not worth any USD.
No one really notes the "total volume" of the trades of stocks, which is what you're asking for for Bitcoin; it isn't really a meaningful number. If people pass a stock - or a Bitcoin - back and forth for 10 trades for [$99, $101] or for 100 trades for [$99, $101], it isn't really meaningful.
The best you can do for Bitcoin is to try to gauge the "depth of the market" right now, ie, how many "buy" and "sell" orders are out at what prices, how much Bitcoin you could buy or sell right now and what the average price you could buy or sell a large quantity of Bitcoin at. (Eg, if you wanted to sell X Bitcoin, you might be able to sell X/2 Bitcoin at $PRICE and X/2 Bitcoin at $PRICE/2, for an average price of $PRICE*3/4.)
OP is asking about Market Cap not volume.
The question at hand is - market cap vs. money invested by current owners of bitcoin. Hypothesis being that this ratio is high.
That total is almost certainly less than the "market cap".
What does that number tell you? It doesn't tell you the minimum value of a Bitcoin.
What I would like to know is how much money has actually been transferred into the exchanges. That is what matters. If Coinbase has 12 million accounts, and on average only $100 was invested (I'm assuming there are MANY opened yet unfunded accounts), then we're talking about $1.2billion at play moving back and forth on that exchange. (this is just a hypothetical number, I would love Coinbase to produce statistics, but know they have no incentive to.)
If no new accounts get opened and no more money flows in, That $1.2b will slowly drop to zero as Coinbase and the miners eat up that pool with fees.
Every USD "put into" AAPL is simultaneously taken out by the person on the other side of the trade.
Very few things truly destroy money, and I'm pretty sure all of them are done by banks or treasuries.
Otherwise I can also say the same thing, that you can literally put dollars into Bitcoin by buying GBTC shares, since the dollars become "assets inside" the Bitcoin Investment Trust company.
But what are those assets worth? AAPL owns patents, inventory, raw material, real estate, subsidiaries, investments (stocks, bonds, commodities, T-bills, the whole shebang) and straight-up cash. You can add all those together and you can evaluate each of them based on how their value can change over time and under different market conditions.
What assets does GBTC hold? If the answer is "Bitcoin", you've just recursed on "What is the value of a Bitcoin?"; if the answer is "Bitcoin, cash, other cryptocurrencies, and a whole lot of other assets", great, you can evaluate each of them independently and add them all together. But again, you're recursing on the value of cryptocurrencies without really coming any closer to an answer.
Just the claim that "you can't put dollars into Bitcoin, because there is a seller on the other side which takes the dollars" somehow applies to Bitcoin in a special way. My claim is that this is true for most assets out there, stocks, commodities, or financial contracts.
What do you now own in each case?
AAPL liquidates all of its assets, pays off its debts, and distributes the balance to its former shareholders. You probably don't get $1000, you probably get something like $50 or $100.
Someone delivers some number of physical, frozen pork bellies to you.
And from Bitcoin you get nothing.
This is what I mean when I say all of the buying doesn't actually "put money" into Bitcoin: it is an investment with no underlying value. With all other markets, what you think of as a two-party trade, between the buyer and the seller, is actually a three-party affair, between the buyer, the seller, and the company or asset being traded. "Putting money" into a company ultimately results in that company having more money to build out their business with; "putting money" into a commodity ultimately results in more producers producing more of the commodity. "Putting money" into Bitcoin ultimately results ... in nothing.
I realize it's not a perfect comparison, but I think it highlights the fact that large sales aren't going to just decimate bitcoin's value.
An every day analogy: saying a river can never flood because there it has a big dam.
Given those figures come from the completely unregulated, unaudited, incredibly sketchy exchanges themselves, I would take that with a huge grain of salt. Odds are good a vast majority of that $3 billion is trades using funny money or, for all you know, made up out of thin air. Easy to just trade with yourself all day...
One thing we know is that the USD exchange volume for the last 30 days was about $295 billion [0] (or almost 100% of the market cap). However, a lot of this volume is due to the same group of traders circulating the same coins back and forth.
Ultimately and as other commenters pointed out, it doesn't really matter. It is possible that people who bought BTC with "hard earned cash" are statistically more unwilling to sell at a loss but that's about how much you could infer from that statistic in my opinion.
1b is a lot of money. Even for these guys.
A crash is always coming. Be it stock market or bitcoin. Everyone knows that but nobody knows when. It is just like saying we all are gonna die. Nobody knows when.
The payments got passed on to his children, who didn't want to deal with that in the wake of their dad's death.
This kind of regret is exactly how you know it is a bullshit scam. No real-world investment behaves like bitcoin. It is massive, souped up penny stock designed to suck in libertarians and tech nerds.
Plus, who the fuck wants to adopt a "currency" where only the early investors get to be rich? Like, a vast majority of the BTC wealth is in a tiny, tiny fraction of people who were mining BTC way back in the day. How in the holy heck is that something you'd want in a mainstream currency?
Isn't that also true of fiat currencies though? Most of the wealth is concentrated in the hands of a few, and passed down through families as inheritance over centuries.
Until we can find a way to manufacture gold atoms on a mass scale at least gold will continue to be scarce.
Bitcoin isn't the original white paper, to be carried on into infinity. Bitcoin is a brand. The white paper(s) and code can change (while honouring historic transactions) and adapt to changes in crypto, but you are still holding bitcoin, you are still buying and transaction bitcoin.
The word Bitcoin is essentially a "pointer" to the current accepted bitcoin implementation.
Bitcoin market cap is $291 billion right now and the trade volume an order of magnitude higher. So pretty sure they wouldn't have much problem unloading their position.
is not the same thing as liquidity
Surely there's a lot more sophisticated high-volume trading algorithms taking place than what I did.
Take a look at GDAX's full book [1] -- Even going all the way down to a BTC price of $8600 (-50% current prices), there's only outstanding buy orders to consume 5169 BTC if someone entered a market sell order. Obviously that would trigger a lot of automated trades that don't live on the book but I think the assumption that "trading volume" == "liquidity" is very dangerous.
We've seen those and the price jumps back almost immediately because BTC trades on many exchanges and currency pairs.
If you wanted to measure the current book, I think you'd have to sum up the various fiat books across exchanges to get a good sense of what the market can bear at the moment.
edit: Thank you for forcing me to clarify my thinking, I shouldn't have directly linked volume to liquidity but absent good data I tend to associate them.
I’m starting to lose sympathy for the people who are ultimately going to get hurt when this crashes. The signs are not hard to see at all.
Oh but this time it's different™
Seriously though, given all these trades occur on god knows what kind of sketchy exchanges for all we know half that stuff is literally random inserts in a database with no bearing in reality at all. Toss in "innovative" things like Tether and who really knows what the true value of BTC is.
This stuff is gonna fail, and fail hard. Hopefully for good. BTC and the whole crypto bandwagon is a massive, massive waste of energy.
Given the price increase of bitcoin since then, based on the number of bitcoin involved, it'd be about $450 million dollars worth right now.
No matter what, they'll not be able to exchange all of their imaginary wealth to real wealth but they'll definitely make a killing. Unless they really intend to go down with the ship which would be poetic in its own way.
I'm sure they'll still be rich. But $1.65 billion rich? Probably not.
Sure, by selling to greater fools. Every dime they made came out of some other fools pocket. Eventually the music is gonna stop playing and some fool is going to be left holding the bag.
note: on a very small scale (like ~100$ total "aum")
Exchanges have open APIs that you can use for trading. They execute pretty much instantly.
I'm perfectly fine paying 10 cents for every $100 I trade.
But GDAX is a vertically integrated exchange and retail trading platform, so the 0.1% taker fee is all you pay. A stock exchange won't talk to you directly so you must pay additional broker/clearing/bank fees.
Real all-in fees for stock can be 2 USD to trade 2k USD, so 0.1%, same as GDAX. But you can also find fees of 10 USD to trade 100k USD and many other rate examples which are either higher or lower.
I think a lot of people don't notice the huge difference between a traditional exchange (which does not handle money, only agreements about money) and GDAX (vertically integrated exchange + clearing house + trading application).
But given how it's posed for the photo it's (hopefully) a prop.
That's what a smart investor would do.
The linked article even cites one hodlr that purchased a professional hockey team with his crypto profits.
That's also why I quoted USD, if you include crypto-crypto volume and some of the zero fee exchanges it definitely becomes nonsense.
BTC plummeted from mid $17.8k to $14.9k in 15 minutes, now back to $16.6k. ETH from $857 to $700 same period, back to $771 now.
Good times...
Edit: ah did you mean dollars?
The coin itself is of course quite liquid although transaction fees mean you aren't buying your weekly shopping with bitcoin. But maybe you can pay your monthly rent.
If I keep Krugerrands stashed under my pillow because I expect Neo-Stalinists to one day take control of the continent and confiscate all property held in digital systems, it doesn't seem like Bitcoin will give me much peace of mind. Surely the New World Order will shut down my Internet access too?
(I could be wrong though. The Bitcoin maximalists are a weird bunch. I follow one such guy on Twitter, and he seems to post a lot of pictures of guns with USB sticks when he's not promising to take more Bitcoin tattoos or bashing Ethereum as "beta cuck fake coin".)
There's a range of topics (money, power, sex, death) that do funny things to the human mind. When broaching said topics, most if not all people become unfathomably stupid in various ways.
I'm not entirely sure how sending bitcoin wallets through email would solve liquidity issues though.
But again, you're right. The barbarous relic of forlorn ages can't be emailed. It must rely on the tentative lack of duplicator ray technology to avoid double spending problems.
Where by "instantly" you mean "takes at least an hour and costs a fortune"?
No. I could email the private keys for any amount of bitcoin to anyone on earth instantly. Or do it with morse code over a telegraph...or smoke signals, it doesn't matter. Transactions on the blockchain are a different issue entirely.
In this sense, bitcoin and gold are similar, though it is probably easier to trade gold as a paper asset, and easier to spend bitcoin as a currency.
But I don't think any of the above are a fair characterization of bitcoin beyond the current moment. It is changing too quickly. Over the next 6 months I can easily imagine bitcoin having further liquidity issues as popularity gains, block size limits # of transactions, etc. I can equally imagine the next 6 months easing these issues as the inflection point of these issues force change that has been unpalatable until no alternative was possible.
All speculation though, and probably not very insightful for anyone familiar with the topics. My point is simply that gold and its market dynamics will not change in that time frame, while bitcoin's must change, so comparisons to gold are stretching an analogy at this point.