On being a currency, since its price fluctuates too much to be taken seriously, so it's used as an investment instead.
People spend a ton of energy (that could otherwise to actual useful things) on shifting around bits that they then claim are very valuable.
You could make a similar claim about fiat money except that actually makes commerce easier. Bitcoin is not a good way to transfer value since like you said it's too volatile for a currency.
So it's built on nothing, it does nothing and underpins nothing, it wastes huge amounts of otherwise useful energy and that makes it a good investment?
Maybe I'm just too dumb to see the genius of it.
Yet many do use it as a currency, volatility isn't a showstopper. Just look at the use in darknet markets, most serious VPNs and VPS services offer it and you can buy all sorts of stuff on for example Webhallen or Inet (two of the biggest Swedish online computer stores).
> So it's built on nothing, it does nothing and underpins nothing
And this is wrong. It's secured by cryptography and game theory.
The big thing it does is fairly simple: It enables digital payments without a trusted third party. It's relevant for businesses who cannot accept credit cards and there are thousands of stories where startups gets their accounts frozen, for arbitrary reasons, which may tank their business.
I wrote about this and more here: https://whycryptocurrencies.com/
> it wastes huge amounts of otherwise useful energy
Actually most of the energy comes from renewable sources, which would be wasted otherwise. The Bitcoin mining industry is so competitive, it wouldn't be profitable otherwise.
I don't want to wave away the concerns as nothing, because it is a valid concern, but there are tons of other things we waste much more energy on.
Regarding this:
>Actually most of the energy comes from renewable sources, which would be wasted otherwise. The Bitcoin mining industry is so competitive, it wouldn't be profitable otherwise.
Geothermal energy isn't renewable unless it's used sparingly. Hydro-power requires huge sacrifices of land, usually fertile valleys, in the reservoir lakes. Windmills are loud, huge and ugly. Power lines require sacrifices of land. And everything needs to be produced, with the environmental impact that brings.
I'm not saying renewables are bad, they're not, but they are not so pristine that using them for bitcoins isn't a sad thing.
It's not only black-market commerce though. Porn, legal marijuana, gambling, auctions are for example considered off limits by most payment processors and in some cases even banks. PayPal even froze Minecraft's account (but it was quickly reinstated due to it's popularity, many others have not been so lucky).
Excellent point about renewable energy.
And they can be used for more sensible things than mining crypto.
But that's an argument, which never can be won in discussions with crypto enthusiasts.
An enthusiasm, which, to me, has almost cultish qualities.
That argument is just silly. I don't think that miners give a flying fuck where the energy is coming from as long as it's cheap.
You're very welcome to add me to the dumb club too.
In addition I'm a smidgeon confused about how the bitcoin exchange rate is determined. It seems to be whatever exchanges say it is. There must be some metrics to determine that, but overall the market seems so illiquid and some of those exchanges seem a bit like easily hacked two bit shysters with some PHP scripts and a snazzy whitepaper.
But again, that's maybe just us in the dumb club.
What I'm arguing, though, is that the market making "algorithm" is highly intransparent.
But we probably have to agree to disagree here.
Your confusion seems to be that the exchanges are coming up with the prices, which is not at all how it works. Again, the price is set exactly the same way as it is on the NYSE, by matching bids and asks.
This is all read and theoretical - I certainly don't have any practical experience with either combatting or committing money laundering.
Anyway fine art and wines are infamous as pretextual transfer vehicles because the values are often so subjective - bitcoin swinginess serves the same purpose, especially if the hypothetical enterprises control enough to manipulate the market. Big assumptions of course that such a thing exists but it highlights who it could be useful to (intelligence agencies and organized crime - which are arguably largely the same thing to the host country - both break the law in pursuit of their agenda).
Anyway that form of laundering involves buy something at a lower/normal price and selling high. The selling high can be from having a contact buy it for higher with your dirty money. Of course open sales would be preferrable - not only because deals only between connections are obvious but some bonus profit. If someone not involved outbids or provides enough of a margin to be worth backing off all the better - you can move the dirty money another day.
If one needs to funnel clean into dirty do it in reverse order essentially.
A lot of work was spent moving it only to never use it. Value is a strange thing, I guess. One would think they could skip that massively expensive and somewhat dangerous unnecessary part and just count large numbers instead, or something.
With gold bars at the very least you have in your hands a concentrated lump of actual material that will survive a power outage or a lost password or something.
But of course that whole process is as absurd as you point out today because gold holds residual value from when it actually was a convenient universally recognized store of value.
Just an armchair hypothesis, but perhaps given it's lack of underlying utility (vs gold for example) Bitcoins "value" is mostly just a measurement of the level of distrust in fiat currencies and the institutions and governments that back them.
There are a subset of people who by nature will never trust fiat currencies, or govts and institutions that back them, and the "floor" of Bitcoin is defined by their participation, as well as those with a vested interest (i.e. a large early stake) in Bitcoin. As the distrusting population expands and contracts, Bitcoin will vary in value.
I do wonder whether rising energy costs will take a bite out of the value proposition for it, though.