Why I'm Putting All My Savings into Bitcoin (2011)
falkvinge.net
falkvinge.net
- Past performance has plateaued for years.
- Use cases are niche instead of regular transactions.
- Since the use cases are niche there is few uptake drivers.
You know it has doubled since the bottom this year?
Early my ass.
1. People who believe that Bitcoin can eat the world, do not care when it goes up and down. Periodic rallies are unsurprising and upper limit is still to be reached (at very least, the entire mass of gold - about $8 trillion). It's still early and cheap at current $200 bln capitalization.
2. People who do not buy the premise ("displace fiat and physical moneys"), or don't think that Bitcoin is going to deliver ("something better will come along"), do not care about the price either - it's just a giant bubble waiting to pop.
3. Plus a crowd of short-term speculators who are no different than Forex people, just with higher volatility at hand.
- I used to see brick-and-mortar and online businesses accept Bitcoin, and ATMs; these have all but dried up.
- As the mining difficulty has increased, more people are genuinely concerned about the carbon footprint.
- I've seen more pessimism about scalability, as off-chain solutions have failed to meaningfully materialize.
- Post the big bubble of 2018, the public Bitcoin "brand" is basically tied to get-rich-quick scams and ransomware. Even if insiders believe that it's more than that, the public perception is important if it is to be adopted beyond current insiders.
People were accepting bitcoin for payments under a flawed assumption that a zero-confirmation transaction was in some way "secure," despite this not being enforced in any way by bitcoin's consensus rules. The introduction of RBF made it clearer to people who had made this bad assumption, and they revised their policies about accepting unconfirmed payments.
ATMs are still around, and growing in number, but they seem to be getting more expensive to use. See coinatmradar.com. There are magnitudes more now in 2020 than there were in 2015.
> As the mining difficulty has increased, more people are genuinely concerned about the carbon footprint.
People who think this need to ask themselves: "what can I do about it?" The answer to this is absolutely nothing. People are going to mine bitcoin, and you're going to have to get over it, because you can't change their decision. If it is inevitable that people are going to mine bitcoin, then rejecting bitcoin because you don't agree with that is simply self-harm. You are foregoing potential benefits (of price appreciation, technological improvement, etc) because of a religious-like belief that humanity would be better off using less electricity. (Ironically while spending half the day in front of a computer, having a TV in every room, carrying a smartphone around 24 hours a day and cooling down with the aircon.)
> I've seen more pessimism about scalability, as off-chain solutions have failed to meaningfully materialize.
They are materializing. The Lightning Network is running now, and improving frequently. I suspect people who are pessimistic about this have not actually attempted to run their own node yet and are waiting for adoption to grow first. Kind of reminds me of people who were waiting for Bitcoin adoption to rise in 2011, and failed to capitalize on an enormous opportunity.
> Post the big bubble of 2018, the public Bitcoin "brand" is basically tied to get-rich-quick scams and ransomware.
It was associated with this way before 2018. When I first heard of it in 2011 it was being branded as a ponzi scheme. It was tied with the silk-road for buying drugs. WannaCry was just the case that brought it to more people's attention.
Bitcoin is still doing as it always was, and in many ways it being distinguished from other get-rich-schemes (known as shitcoins), by focusing on the fundamentals of its finite supply and network effects. The shitcoiners are doing bitcoin a favour by dissociating themselves with it and trying to promote their scams.
This is only as true as saying that any personal attempt to minimize your carbon footprint is self-harm. But here, it has other implications as well: society needs to "agree" that Bitcoin has value. If Bitcoin starts (rightfully, IMHO) being seen as a "dirty" good, it becomes less desirable on the market even if I, personally, were indifferent to the carbon footprint.
> The Lightning Network is running now
What volume of transactions is it doing? (This isn't rhetorical, I genuinely haven't been able to find this out and I'm curious)
> When I first heard of it in 2011 it was being branded as a ponzi scheme
Yep, I remember those days. The difference was, that perception was mostly wrong at the time. The community was filled with people who genuinely wanted to make Bitcoin happen. Sure it would make them rich in the process, but at least they were willing to put in the work.
Once Bitcoin became relatively mainstream, grifters moved in and it was tragedy of the commons; all the goodwill was capitalized by scammers and ICO promoters. People who were involved in the early days became either disillusioned or displaced and lost control of the brand. It's hard to recover from that sort of public image problem without a central authority to control the brand.
I sometimes wonder, when the mining energy question is raised, about the carbon footprint of all the servers and buildings and air conditioning in all the banks in all the world.
"Society" is a mythical entity. Not everyone needs to agree. It only needs the people who use it to agree, and the rest will follow. Even if you don't agree about the carbon footprint, there is nothing you can do to stop it. It's pointless worrying yourself over something that is absolutely out of your control, and will never be under your control, no matter how much as you crave the power to control other people's behavior.
> What volume of transactions is it doing? (This isn't rhetorical, I genuinely haven't been able to find this out and I'm curious)
Nobody knows because it is not known. Transactions are private, and individual nodes in the network are dumb routers who know naught of the transactions they forward. No nodes know about the volume because they have incomplete information. This is by design.
> Yep, I remember those days. The difference was, that perception was mostly wrong at the time. The community was filled with people who genuinely wanted to make Bitcoin happen. Sure it would make them rich in the process, but at least they were willing to put in the work.
Not sure about your version of events here. Early on there were plenty of people discussing their gains and selling off bitcoin, which is what caused a lot of the early publicity in 2010 and 2011. If it had merely been a cryptographer's toy then it would probably never have left the mailing lists. The finance guys were some of the first people in Bitcoin and were not at all concerned with the fundamentals, only making a quick profit.
Those same people sidelined Bitcoin to focus on shitcoins and ICOs because they were no longer able to make a quick killing from Bitcoin. Bitcoin became expensive, and the profit margins for trading it were shrinking. ICOs and other scams were just the continuation for these guys, who don't care about economics or technology, or have any second thoughts about literally scamming people out of hard earned money.
It is also being used by all sorts of international freelancers being paid in Bitcoin, although, most of them convert into fiat swiftly to pay bills. So they are not contributing to holding. But Bitcoin is useful for them, as it's a much cheaper and safer way to pay and get paid internationally.
Everyone else is a speculator, sitting on their stash, waiting for price to climb up. That's pure speculators/investors, who use Bitcoin to diversify their porfolio of whatever else they got. And as such, Bitcoin is highly useful, as it provides virtually unlimited upside with limited downside.
Personally, I don't think most people care about Bitcoin as a currency. There is some sizable percentage of people who bought in the run up to $20k who are just waiting to make their money back.
Imagine standing in the queue at your supermarket waiting for a bitcoin transaction approval.
Before you complain that "this is too slow," consider what the equivalent is in the banking world. Imagine you walk into a shop which only takes cards, and you have no bank account.
You must go to a bank, talk to a rep, fill out a bunch of paper work, wait for some background checks to be done, then have a card issued to you via snail mail. Now you can go to the shop (days later).
Your initial, flawed assumption is that people have already done this and already have a card to pay with. Most people in the developed world have this access now, but it didn't come instantly - it has progressed over about 3 decades. Back in the 90s, if you weren't paying with cash, you would be writing out a cheque in the store and holding up the queue.
So when you unravel your assumption, it's actually much faster to acquire some bitcoin and load some payment channels. Just few people have done it yet, and the software for doing it is under heavy development.
Give it a decade or so, like we have allowed for payment cards to proliferate, and the assumption will be that people already have some loaded payment channels which are ready to make instant payments. There will be no standing in queues waiting to pay.
It seems like every bitcoin thread on hacker news endlessly generates nothing but 2013/14 era FUD. I don't see people installing lightning wallets and playing around.
What I am looking for is a mechanism to protect againt (imho highly probably future) US Dollar devaluation and potential SHTF political/societal conditions here. The historically time-tested approach (but not practical in USA) was to convert to physical gold that both retained value, was generally accepted by all, and could be easily transported across borders. BTC has the border/security angle covered but the value retention aspect is not clear.
Let's say you bought an ounce of gold today for $1,955 and then the US economy craters and the USD is worthless. What are you going to do with that ounce of gold? Do you really think you'll be able to barter with that gold to get the rough equivalent of $2,000 in 2020 purchasing power?
Or in a true SHTF situation will there even be networks available for you to trade Bitcoin? Or servers to continue to mine and process transactions? I doubt it.
I don't understand your money math there, btw. If 1 oz. of Gold will buy you a say tailored suit before SHTF, historically it will still buy you that suit after SHTF. That's one of the reasons there are Gold bugs (not I) out there. Conversely, your $2000.00 will buy you that suit today, but may only be enough to buy a carton of milk after SHTF.
This has never really been tested, especially not after we left the gold standard. The utility value of gold has never been lower. I believe that in a situation where USD is worthless, the real world value of gold would plummet.
Let us say shit has truly hit the fan. USD is completely worthless. You have a year of dehydrated food that you bought for $2,000. Would you swap that food for an ounce of gold? Me personally, no fucking way.
I think gold is comically overvalued and completely detached from the reality of its worth as a shiny metal. People buy it because you can invest in gold contracts and watch your net worth tick up like it's a video game.
I'd argue they're contributing more by transacting in it, helping the overall network ecosystem in general. This provides better utility too.
Sounds like using to me.
>earn wealth if society is tricked
You might want to read the reasons PTJ and MicroStrategy are holding it.
What's Bitcoin missing in technological or infrastructure terms that's holding it back? I'd wager nothing.
For the vast majority of people, Bitcoin doesn't solve anything - in fact, 'is slightly incomprehensible and weird' and so is actvely disuassive of its use.
The technological solution to the slight incomprehensibility is a huge part of what holds back adoption.
Also, regulatory issues are considerable for a certain class of user that would probably like to take advantage of e.g. 1000x gainz.
Yet...?
It's a solution wherein principally the currently-invested are the only stakeholders hungry for a problem to solve.
A cross between ease-of-use and simple knowledge that it exists.
As one example, I know of digital artists who sell their work over the internet, but have trouble receiving payments because paypal doesn't like their platform being used for porn. Bitcoin (& etc) would be the perfect solution, but it doesn't ever seem to even cross their minds as a possibility.
Mobile phones didn't gain popularity until the mid 90s, twenty years after the prototype and about 50 (!) years after the first rough tests. Mobile phones didn't gain widespread use until the 2000s even.
To say they only took 7 years to be adopted is ridiculous and ignores a ton of work that went it to developing them and making them useful.
https://falkvinge.net/2017/06/11/right-money-bitcoin-hits-30...
Interestingly, he was very wrong about the 2nd reason to buy BTC (it hasn't exactly replaced the existing financial system), but the other two -- past performance and "civil liberties" (for drugs, ransomware etc) were close enough.
In 2011 maybe what he spotted was how human greed was going to make the whole thing skyrocket, but over-analyzing it made him think BTC is a solution for the future, etc, etc.
Meanwhile, we're still waiting for John McAfee to consume his reproductive organs on TV:
And as for civil liberties — Ross Ulbricht might want to have a word with the author regarding the drug use case. And I don't think even the most hardcore libertarians would consider the ransomware business a civil liberty.
Shrug. At least I got a decent return. Calling the top is hard.
Can anybody comment on the state of this today, right now?
Personally it seems like bitcoin would involve _more_ bureaucracy and delays for me than using the regular banking system. However I'm sure I'm not representative.
Are there other situations where bitcoin does, right now, reduce bureaucratic overhead?
Sending money to venezuela.
Keeping millions of dollars untouched by intermediaries by memorizing a secret phrase and deleting all other records.
Of course, seller fraud is still possible - the complete opposite of how PayPal works, where the buyer is always right. Seller fraud is mostly preventable with reputation systems. A seller accumulates more feedback than a buyer, but it requires the consumer take responsibility in checking who they're buying from. (People being responsible for their own purchases, imagine that?)
Why would you ever want to defend fraud? There is no justification for fraud on either side. Especially when first parties like Amazon stand to profit off of it and therefore do nothing to stop it.
Bank transactions (in the US at least) take 2-5 days to clear because of insufficient bureaucracy. The banks are understaffed and slow to develop new, more efficient tech. They close on weekends and holidays. Increasing bank bureaucracy would fix a lot of the current problems.
Bitcoin has more bureaucracy than banks in the form of miners (1M+). They never go to sleep and the transactions never slow down.
Reducing "bureaucratic overhead" is a non-goal.
It was cool to use Bitcoin in 2013 as a currency and sadly the number of useful things you could buy then are about the same as today.
These days Bitcoin is too expensive and too slow to be used as actively used currency for every day transactions.
Lighting Network is not looking too hot either.
In what way?
You can still transact with very low fees, but this is kind of directly related with the amount you want to move. For instance, somebody transferred $2.2bn by paying a $7 fee [0]. That seems super cheap, but if you wanted to transact $2, paying $7 would be ridiculous.
I believe this was at least one of the motivators for the big-block/small-block debate and subsequent forks.
[0] https://news.bitcoin.com/bitcoin-whale-transfers-2-2-billion...
Coinbase at that time was spamming the blockchain with dust right before the halving and finally got called out on it over twitter. Transaction fees went back down shortly after that.
Actually, it is, by some means.
Although now he seems unhappy with where bitcoin has ended up: https://falkvinge.net/2017/11/17/new-google-management-decid...
Even if Bitcoin were the best investment out there, putting all of one's savings into one asset is gambling. If one has financial responsibility to/for others (e.g. dependents or clients) it's malfeasance. Even the people with the very best ability to predict the future hedge those bets.