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Comment by adamnemecek | Hacker News Reader

The comparison with the other company makes no sense. A company has a "single point of failure". At this point there's waayy too many actors and people who want Bitcoin to succeed.

The market is huge at this point. Like NASDAQ is like 7T IIRC. Crypto is today ~550B. It was like ~750B not too long ago.

Note how there's no glue joining the idea of the company and crypto. It could go down but it could also go really up even higher.

It's funny how the one thing that North Korea agrees with the West on is how dope Bitcoin is. Like in some sense NK, is very vested in this going well.

And re: zero. No, it will never be a literal zero. No buying or purchasing happens when things are priced at zero.

EDIT: HN seems to be really anti-crypto. I setup a slack channel right now, if anyone is interested in having a discussion about crypto beyond "what if it goes to zero".

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> At this point there's waayy too many actors and people who want Bitcoin to succeed

This has no relation to whether something goes to zero (or practically zero). Political influence? Sure. But I don't think anyone expects D.C. to bail out Bitcoin.

> A company has a "single point of failure"

Companies trade after bankruptcy. There are stubs, practical and theoretical, for companies improperly wound up going back decades.

Even if a state says "XYZ failed to pay franchise taxes and is now inactive," a shareholder can sue the former directors, holders of proceeds from the company, et cetera. (Company "ownership" is de-centralised and ambiguous, a fact that becomes uncomfortably clear post mortem.)

Colloquially, we call "practically worthless," i.e. where the cost of valuing something is likely more than it's worth, zero.

Agree. Too big to fail is a terrible, copy-pasta argument that makes no sense.

The combined worth of all the crypto-currencies put together is a drop in the global-financial bucket. The only people who would be hurt by a collapse to zero are those trying to artificially pump the price to cash out rich.

I used to be anti-FUD, but whatever the term for the opposite is - it's way more infuriating.

The opposite of FUD is hype. Or maybe, a specific form of hype?

> But I don't think anyone expects D.C. to bail out Bitcoin.

What does it mean for Bitcoin to be bailed out? How can Bitcoin "fail"?

> But a penny price is as good as zero.

Why would it go to zero?

> Why would it go to zero?

Crisis of faith. There's nothing else behind it.

The thing tho is that people have seen the insane gains it can provide. There will always be buyers. If Bitcoin went to $50 tomorrow, you can bet I would buy a lot. I'm not the only one. It's done magic once, it might again.

The point is, there will always be buyers.

> The point is, there will always be buyers

Someone could have said the same for the Dutch East India Trading Company. "What, will the colonies sink into the ocean?"

Note: I'm not saying it will become worthless. But you're grossly underestimating this risk.

To buy Bitcoin, a miner somewhere has to produce a block with your transaction in it. If the value of Bitcoin falls that much, it will no longer be profitable to mine. With no miners, nobody could buy or sell anything.

That was planned for. Like there's only 20million Bitcoins tops.

It has nothing to do with the issue rate of Bitcoin, frisbee-on-the-roof is potentially a real problem.

Say Bitcoin crashes down to $1 tomorrow, such that it's no longer profitable to mine. A bunch of miners go dark. What happens to the block time?

Now remember that difficulty readjusts every 2016 blocks. If there are now 1% as many miners, that means a 1000-minute blocktime and potentially up to 1400 days per adjustment period (average of 700).

In this situation, the only option would be a hardfork to bootstrap the network back to a live state, either by directly adjusting the difficulty or by readjusting more frequently and more aggressively.

Are you saying this will happen to all crypto or just Bitcoin? Ok if Bitcoin goes away, it might over time, exponential decay and what not. Or might also go up. But crypto overall will most likely go up. Like you can't go back.

And I feel like people for example aren't talking about the fact that technology doesn't really go away. Like any technology we've ever invented is still used somewhere. This will very much be like bitcoin.

Specifically Bitcoin, other coins have more robust difficulty readjustment mechanisms.

Bitcoin can fork to change it's Difficulty Adjustment Algorithm.

And then the hashing algorithm self-corrects in difficulty downwards, and an individual could mine on their own PC again, like it did in the beginning when almost no one was using it, let alone dedicated mining equipment.

The difficulty will be adjusted accordingly and automatically (it's part of the protocol). Your scenario can't happen.

Sure it can happen. The difficulty is adjusted every 2016 blocks, which normally means every two weeks.

Let's say the most recent difficulty adjustment has just passed, and the total network hash power suddenly drops by a factor of two. That means each block takes twice as long to find, so now you have to wait four weeks for it to correct itself. And during those four weeks, if the hash rate continues to drop, the adjustment gets further and further away.

Basically, if hash power drops by 5% per day for a sustained period, the network can't recover fast enough.

https://en.bitcoin.it/wiki/Difficulty

> What does it mean for Bitcoin to be bailed out?

Around when Bitcoin was trading at $19,000, my Uber driver told me about the second line he'd taken on his home to buy some. That's not a systemic problem in America. But it might be in some other countries, e.g. South Korea.

Suppose Bitcoin crashed 90% and stayed down for a few months. It is conceivable that Seoul might pay out, to avoid social tension. Directly, e.g. you get a jeon for every won you lost, or indirectly, e.g. temporarily increasing welfare benefits [1].

Note that I said "conceivable." It is unlikely, hence why I think arguing that because lots of people are involved it cannot become worthless is silly.

> Why would it go to zero?

Why would it go to $50,000? Because people decide it's worthless (or worth more).

[1] https://www.theguardian.com/business/2014/sep/03/long-term-u...

Ask yourself what exactly is behind that “~550B”. The answer is nothing but faith.

You are comparing the market cap of cryptocurrencies to NASDAQ, a portfolio of the highest profit driving, real asset laden companies on earth. How is this even remotely realistic?

All investment is just faith to a certain degree. I own stock that could also go to zero over night. So do many other people.

Bitcoin will enable many more exchanges that weren't possible before.

And here is the inevitable “all money is just faith” argument.

Investing has nothing to do with faith, that’s called speculation. Investment is based on sound financial principals of expected future return based on debts and cash flow, where actual value is being created and added to the economy. This is mania.

Everything is based on faith to a certain extent. None of us (that I'm aware of) have crystal balls that see the exact future. Even companies that have lots of assets behind them could potentially make catastrophic fuck ups that tank their stock (i.e. BP and their Deepwater Horizon spill) in an instant.

I think you see the point the parent comment was making. Even if BP makes a colossal mistake and their stock dives, at the very least they can sell of their real physical assets. Crypto can actually dive to zero, there is no safety net since there are no physical goods.

Crypto as a whole going to zero? It would only go to zero if there was zero utility. Whether or not the market is overvalued at the present, there's plenty of value there.

Look at the BP chart: yes, it dipped but having a real business meant that it didn’t go anywhere near zero and came back up.

Something based on faith can drop all the way to zero and stay there because e.g. everyone bailed to something else and there was no reason to come back.

Do we have to have a discussion about the value of non-physical things?

"If everyone stopped using google tomorrow, their stock would go to zero. Investing in google is based entirely on faith."

Do you agree with this statement?

That's overly simplified: Google's stock value is based on a history of successfully competing in advertising and receiving billions of dollars, based on their ability to deliver products which billions of people use and many are willing to sign contracts or make ongoing payments for.

Yes, there's some faith involved in assuming that the advertising market won't change overnight or that Google won't suddenly stop being able to compete effectively but that's orders of magnitude less than the level of faith needed to justify the current valuations, especially when the argument is not just that despite being unproven cryptocurrencies are certain to become mainstream but going further to say that a specific unproven implementation is going to win.

I looked at it before I made the post. They went from $60 a share to ~$27 a share in the aftereffects of the spill. It was an example of how these companies with great assets could still lose you money due to unexpected circumstances. I'm not asserting it went to zero. They've actually recovered quite a bit, probably due to the goldfish-like memories of the general public and the moral apathy of most investors.

That's kind of my point, really. If crypto goes low enough, especially if the price is down for no good reason (i.e. it's based on a single country in the entire world cracking down on it, not because the tech stopped being useful or interesting), there will be investors who will think it's underpriced and will jump back in, which will bump the price and draw more people back in, etc etc etc. Bitcoin went through exactly this in 2013-2015. It kept dropping and dropping and dropping, all the news was terrible for it, but it never dropped to zero because there was enough people who thought it was underpriced and bought and held, waiting to see if it would go back up. And boy, if they held through last year, those people won big time.

So cryptocurrencies are like Enron? Too big to fail? Too useful? Too what?

Can I interest you in a Venezuelan bolivar fuerte. There are 30,000,000+ people vested in it. There are billions of USD worth of them out in the world. What could possibly go wrong?

BP's spill is not a great example of the evanescence of traditional industry. Despite the "catastrophe" you reference, their market cap is still $130 B and they pay out 5% in dividends...

(In fairness, there's a lot of faith involved in your broker doing the trade in BP, the ADRs if applicable, the DTCC holding your actual shares, etc., but not a lot of faith required to believe that thousands of people are actually drilling useful shit out of the Earth for BP's owners.)

People made a version of that argument with mortgages and mortgage backed securities. Mortgages are spread across too many people, too many geographic areas, etc., and there's no way they'll all decline or default at once.

Well they were wrong to make that argument. If for no other reason they were all spread across too many people IN THE US, which kinda invalidates the claim.

Crashes and recessions can be global. In fact, economic interconnection makes that more and more likely. Globalism is not a zero-sum game, everyone can win at the same time, and in fact everyone can lose at the same time as well.

But you're not wrong to make that argument, right?

The point api is making is that they were sure they were right.

and there's no way they'll all decline or default at once.

This is where Credit Default Swaps came in. What is the cryptocurrency equivalent of a Credit Default Swap?

It wouldn't be a CDS, it would just be a swap (like a currency swap). A bitcoin isn't a credit instrument, so there's no possibility of default. (Although it's also true that swaps usually anticipate a currency's local interest rate -- what's that for bitcoins?)

And, you probably wouldn't use a swap for hedging bitcoin currency exchange risk, unless you were doing an actual useful transaction where the sources and uses were in different currencies. People with bitcoins are either speculating or taking duration risk approximately equal to the delivery delay of a Priority Mail envelope full of heroin, as I understand it.

But what's analogous to CDS for Bitcoin isn't just a Swap. It's any mechanism which could cause a cascade of loss between the various cryptocurrencies.

To be fair, mortgages didn't all default at once. Some companies over extended themselves with subprime mortgages and that's how we got the real estate bubble.

Crypto is nowhere near that, for one, very little of crypto's value comes from loaned money.

How do you know how much debt is tied to cryptocurrencies?

We don't know for sure, we only know that banks are not lending against crypto, for obvious reasons. What folks are putting on their credit cards, etc, well that is impossible to really track, but shouldn't be any different than retail sales, etc.

You've obviously left out the people who have taken seconds on their houses, home equity lines, student loans, payday loans, and all the other forms of debt that could finance a purchase. And credit card debt alone could easily explain all the value in all the cryptocurrencies combined.

So, I've heard like 3 accounts of people taking out seconds on their houses. I don't think this is a widespread practice. Do you know how many trillions of dollars were loaned out during the real estate boom? Unless you have data to back up your claims that most of the money in crypto is leveraged on the back of all these lines of credit you quoted, I think that's dubious to say.

At any rate, the value of cryptocurrency market isn't a reflection of the amount of money that has been poured into it. The market cap is a product of the last price paid on any given exchange times the circulating supply of currency. So a $500B market cap might be the result of less than $50B worth of cash infusion, so long as the last person who bought in paid $13K for a Bitcoin.

> No buying or purchasing happens when things are priced at zero.

One could make a good argument that the air is worth zero.

Yet one would be wrong: http://www.telegraph.co.uk/news/worldnews/asia/china/1205135...

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