Good business move for them. I always chuckle to myself how these things come full circle - this is now back to the old "banking with a credit card" model. The core value of crypto and it's anonymity are now gone, and it's regulated.
0: In the Bitcoin protocol a transaction which generates new coins and issues them to the miner of a block is called a coinbase transaction.
[1] Which constitute some tiny fraction of the user-base of cryptocurrencies - which is predominantly a gaggle of day-traders, conmen, and the occasional normie who needs to pay a ransomware operator in Belarus.
Though, of course, neither are perfect, we're going to keep finding attacks on these things for a while: https://crypto.stanford.edu/timings/
Here is an active deanonymization attack [1]:
> We show how an attacker can take advantage of Monero’s Bulletproof protocol, which reduces transaction fees, to flood the network with his own transactions and, consequently, remove mixins from transaction inputs. Assuming an attack timeframe of 12 months, our findings show that an attacker can trace up to 47.63% of the transaction inputs at a cost of just 1,746.53 USD.
Sounds pretty bad to me.
Here's another attack [2]:
> First, about 62% of transaction inputs with one or more mixins are vulnerable to “chain-reaction” analysis — that is, the real input can be deduced by elimination. Second, Monero mixins are sampled in such away that they can be easily distinguished from the real coins by their age distribution; in short, the real input is usually the “newest” input. We estimate that this heuristic can be used to guess the real input with 80 %accuracy over all transactions with 1 or more mixins.
I don't care what "calculations" say, if so many transactions can be deanonymized then those calculations were calculating the wrong thing.
[1] https://eprint.iacr.org/2019/455 [2] https://arxiv.org/pdf/1704.04299/
Though, if there are only a few transactions each day that's not as large of an issue as it sounds; the blockchain still has no linkability between transactions. Active attacks might work but few attackers can pull those off, and no attacker is able to go back in time to deanonymize older transactions (assuming the cryptography holds).
You may be able to trace the addresses that bitcoin is connected to, but you will at some point have to do additional work to investigate ip addresses and hope that they don't all lead to anonymous VPNs ran through a coffee shop wifi before the bitcoin is passed on to someone else.
The reason you should care about that is a pure fiat currency like Bitcoin only has value with other people who agree. Using USD for all real transactions means that merchants continue to have no reason to take on the additional risk and expense of directly accepting it. It lets some speculators cash out but it's not contributing to the growth of the system or give anyone who hasn't already bought in a reason to do so.
So did Beanie Babies, until they didn't. But the point of Bitcoin was not supposed to be a vehicle for speculation, it was supposed to be...
well, I've been around HN long enough to know that it's impossible to finish that sentence in a way everyone would agree with. But, remember all those breathlessly optimistic posts and essays from early 2010s about what Bitcoin could be? It seems pretty inarguable that the Bitcoin of 2020 ain't that, and isn't on track to be.
If you enjoy speculation, that's no more weird than keeping your money in a stamp collection but you don't grow into a real part of the financial system by giving people fewer reasons to care.
Yet, gold isn't a fiat asset because its value is anchored to its physical properties. It is finite and cannot be freely created. It doesn't oxidize, is resistant to most acids and other corrosives, and has the highest specific gravity of any naturally occurring element. It is a naturally good store of value because of these properties.
Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics. Take that as you will, but both assets are much more solid than Fed Coin (USD) which is effectively backed by the government's commitment to enforce the federal reserve act while trying their best--and failing--to resist printing more and more money to perpetuate an unsustainable system.
[0] - https://www.statista.com/statistics/299609/gold-demand-by-in...
https://en.m.wikipedia.org/wiki/Fiat_money
The source of your misunderstanding is here:
> Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics.
The Bitcoin algorithm has some interesting properties but they don’t have much practical value to balance the enormous inefficiency and, far more important to this topic, that doesn’t make any particular blockchain valuable - anyone who wants those properties can set up their own for free without enriching the current Bitcoin holders. The only reason why you would consider those hashes to be worth paying money for is the community belief that they have a certain value - nobody has any need to use it otherwise. That’s why Bitcoin is an especially pure fiat currency: the community consensus is quite literally the only thing backing it’s valuation. In contrast a currency like the US dollar has curbs on fluctuation not just from much greater usage but also because millions of people receive it from government salaries and purchases or need that currency to pay taxes — unlike Bitcoin, which has value only to the extent that you can find someone else who thinks it’ll be worth more in the future.
After all, you can already get gold-plated tungsten bars [1] from companies like chinatungsten as 'novelty paperweights' [2] - even though tungsten is fractionally less dense than gold.
As iridium and osmium are traded in very low volumes and toxic/acidic, platinum is more expensive than gold, and tungsten is fractionally lighter, fake gold is seldom undetectable.
[1] https://www.google.com/search?q=tungsten+gold+bar&tbm=isch [2] http://www.paper-weight.cn/products-show.html
Central banks would be crazy to hold Bitcoin. If a better technology came along which had mass adoption Bitcoin could be made worthless overnight. Many people predicted this could happen in 2017 during the rise of Ethereum.
Personally I can't ever see bitcoin surpassing the the market cap. of gold.
There is only the law of supply and demand. Econ 101.
Even the argument that something has intrinsic value because you have a use for it is flawed: how much is a gallon of breathable air worth?
A gallon of air is tremendously useful. How much does it cost ?
Infinite Supply = Zero Value.
There is no such thing as "Intrinsic Value".
https://en.m.wikipedia.org/wiki/Intrinsic_value_(numismatics...
Gold has intrinsic value based on the industrial and jewelry uses: you could lose a lot more over the industrial demand point but it won’t go below that point because people use it for things other than speculation.
In contrast, random hashes have no value outside of a particular community consensus. You can’t do anything with them and the ones in the Bitcoin blockchain have no more inherent value than those in any other network.
I would say the same about gold (though you probably disagree). Gold has some "intrinsic value" (e.g., as a plating on electrical conductors) but would be worth much much less if no one believed that it is a good way to store money.
But perhaps more importantly, Bitcoin differs drastically from most fiat currencies in that its rate of inflation is capped: over 85% of all bitcoin that will ever be created have already been created.
The same BTW cannot be said of gold, which is being mined at an increasing rate:
https://fee.org/media/30406/figure-1_bitcoin_inflation.png
https://fee.org/media/30407/figure-2_inflation_bitcoin_gold....
It's also worth noting that the meteoric rises of bitcoin since its inception has very little to do with this fundamental form of cryptocurrency relative appreciation, outside of attracting the kooks who want to believe in alternatives.
Other coins are even harder in just creating ALL supply in one instant. That makes them both harder and worse.
A constant emission would minimize concentration of wealth yet still have inflation rate going to zero.
You're also making the mistake of assuming equal demand: Bitcoin is inherently deflationary but it's also completely voluntary — few people use it and nobody is required to use it. Bitcoin's high variability over the years shows that speculator demand can last for years but there's no lock-in and many competing options. There are a few people who've put large amounts of money into it but statistically almost nobody uses it so there's little defense against a competitor because most people have no sunk cost and most of the percentage who do have only a small holding at risk.
USD is being actively and significantly devalued (take a look at the US Dollar Index, as an example), as are most other major fiat currencies. I was using hyperinflation a bit hyperbolically, but the point still stands. One potential interpretation for the the appreciation of bitcoin vs. USD (which, I should add, is the longest its ever been over 10K/btc spot) over the last few weeks is a reaction to the ongoing attempts to jumpstart the various economies of the world that have been put on life support since the start of the pandemic.
Obviously bitcoin and USD don't have equal demand curves, but compare the supply curves: stable vs. arbitrary. If you're comparing two assets, they don't necessarily need to have equivalent instantaneous demand functions - that seems a bit specious.
> even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts.
Sir, do you want workers to make a fair wage? We can't have that. You should be supporting inflation.
- Paul Krugman, visionary & scholar
Here's a long answer to the question: https://medium.com/@danhedl/planting-bitcoin-sound-money-72e...
If you want those things, go ahead and use them. Coinbase Card isn't stopping you.