Bitcoin breaks above $20k
nasdaq.com
nasdaq.com
The price of Bitcoin is largely irrelevant given how interesting the tech. that powers it actually is.
Bitcoin is a fluid that aims to power a hydraulic machine, and once Lightning gets to where it should be (it's been a while, yes :\), my bet is that many of the naysayers will have no choice but to take a second look at it.
The rise in price is just a side-effect.
Though I still have a lot of hope that the community can steer in the right direction."
He has worked with the UN world food program, and posts a lot of material on voting, economic fairness, and social aspects of blockchain in general. It seems like he is genuinely interested in using blockchain for general societal good, rather than just speculative price chasing.
This was quietly slipped through with no debate. ETH shouldn't be trusted.
So in relation (for this particular scenario) the USD is undergoing hyperdeflation..?
Whatever you call it the psychological effect with computers is the same as with a rising bitcoin price - you get more bang for the buck the longer you hold off on your purchase.
Relative to computers/processing power, yes, although you generally wouldn't describe it that way, since USD is (comparatively) stable with respect most other stores of value - it's computers that are changing in value, so it's computers that should be described as undergoing inflation.
Relative to (the relevant average of) other stores of value, dollars are undergoing inflation, just more slowly than computers.
Exactly. Similarly, if you buy a dollar, its value will drop (though not as quickly).
OTOH, bitcoins are the opposite of both dollars and computers: bitcoins are deflationary, and rise in value. This is a terrible property for a currency, since it encourages speculation and hording in preference to circulation.
Edit for a bit more clarity: Inflation / Deflation is relative to a "base asset" which is considered unchanged in value. For USD this is normally a standard basket of assets (foreign currencies or a "market basket").
Issuance right now is 2 ETH/block. The white paper just promised 5 ETH/block forever.
The reasons for it, even on their own, all make a lot of sense:
- Ethereum has always wanted to move to Proof of Stake, a move that would have been impossible if 25% of the networks funds were suddenly in the hands of a nefarious actor.
- The DAO was intended to seed development into projects that would benefit ethereum and the blockchain space as a whole. It was an incredible amount of capital that was all intended to help evolve the network. Losing all this capital and momentum would have been detrimental to that goal.
- The DAO was arguably an unlicensed security and losing the funds of that many investors would have been a problem for many who had a hand in building it. By returning investments, they basically made this a non-issue.
So again, do I agree with the choice? Absolutely not, you should not proclaim "code is law!" until it's inconvenient for you. Did they have a choice? No, the roll-back was inevitable as soon as the DAO contract was deployed.
1) There wasn't a rollback of the blockchain - the method to fix this was an irregular state change (I.e - at block z, change balance at address x to address y). This was only possible because the nature of the attack left all of the compromised funds locked in place for 30 days. Arguably, if it required a rollback of the blockchain, people probably wouldn't have gone along with it. (Though node operators and miners may still have as evidenced by the bitcoin supply bug and rollback in 2010)
2) The funds in the DAO at the time were roughly 14% of the total supply at the time. This is ~1.5x the amount of ether currently custodied by the largest ether custodians today.
3) The common argument of this event being a slippery slope and that it would lead to frequent recovery of hacked funds has turned out to be false.
4) Since the state change was introduced as a software upgrade, node operators (mining pools & infrastructure providers) all had to opt into the change - which a large majority did. This would indicate that most organizations and individuals were either in favor of this solution or were apathetic to the solution
The reasoning is Ethereum is an early project, its design is highly centralized like a startup because very few people have the convictions and breadth of knowledge that Vitalik and co. possess. It's aspirations are not the same as Bitcoin: Bitcoin wants to provide value by being irrefutable property. Ethereum wants to be the world computer.
Ethereum's technical complexity makes Bitcoin look like a Ford Model T, while Ethereum is trying to be a space ship with warp speed capability. Obviously it is not the within the spirit of blockchains to conduct a rollback to save people's funds from hackers. But at that early stage, it might hurt adoption more than help if people get burned so badly. If we look at the tradeoffs, I think its worth it. If people prefer absolute immutability, they can use Ethereum Classic.
Bitcoin people will object and say that was a bug with the blockchain itself. However, sample code on ethereum.org had vulnerabilities similar to TheDAO's bug, so arguably it was a platform issue on Ethereum as well.
There have been large thefts from contracts since then, including a >$100M theft from Parity, the most popular client at the time. Parity made several attempts to get another fork to recover their funds, and they were roundly rejected by the community.
>Bitcoin people will object and say that was a bug with the blockchain itself. However, sample code on ethereum.org had vulnerabilities similar to TheDAO's bug, so arguably it was a platform issue on Ethereum as well.
I think the main difference here was that bitcoin never had a "code is law" belief, whereas ethereum did.
It was also necessary for success, but the Bitcoin community has little grounds for moral superiority here.
change my mind with an actual existing application that's not done by anything else.
The truth is excitement and hype around price is the lowest common denominator for people interested in cryptocurrency so naturally it would be the most visible topic.
Tech around this is still very... technical, young non-vital, niche.
I understand why people worry and even discard the value of price-obsession, but (at least for bitcoin) price of the token (along with other variables that indicate adoption) is crucial for security and growth of the platform.
Even Satoshi recognized that hype-cycles would be important for adoption of bitcoin.
Echoing this, I'm involved in several more technical cryptocurrency groups, and there is little reference to the price, even today. Pretty much all of the discussion is around the technology itself, and what it can do.
[0] https://www.cnn.com/2020/12/14/business/mastercard-visa-disc...
> We can argue about whether or not all of the opportunities are a good thing for society or not, but crypto does solve a problem for them.
Agreed. I'd argue that being able to buy drugs online is a great solution, but there are good arguments against it as well.
Crypto is also immune to confiscation of funds, due to whatever reasons (tax fraud investigation, whatever), this can also be argued whether it's a good thing or not. Many countries have banks and governments that most certainly can't be trusted.
The bottom line with crypto is what I would expect Americans in general to appreciate - freedom/choice.
(a) changed its policies radically within days, spurred by the threat of being dropped by credit card processors (thus demonstrating that they had no faith in cryptocurrency picking up nearly sufficient slack).
(b) those changes were almost universally considered to be for the better (a crackdown on non-consensual porn), so if cryptocurrency HAD succeeded in stepping in, it arguably would not have been a social good.
The serious crypto currency developers out there who are working on Bitcoin, Ethereum, Stellar, and a few others are definitely focused on how the technology can be useful for society and they have been so for years.
That's why their prices are going up (over time, not today specifically)... because a lot of people with a lot of money see the potential value of holding them.
But yes in general 99% of the "community" you see in crypto related social media spheres only cares about price and profit, I would agree with that statement.
And I think the root cause of that is that productivity growth in areas needed for basic survival - housing, health care, not getting screwed (legal) - hasn't grown nearly as fast as productivity in consumer goods. Combined with population growth and the entry of the developing world into the developed world, it means that more people are increasingly chasing the same limited pool of houses and doctors, and basically all disposable income goes to them. The focus on get-rich-quick schemes is a rational reaction to being stuck in a game of musical chairs where there are not enough chairs to go around.
All this is actually starting to make me doubt global warming. The banks certainly never gave a damn about global warming before. Do I think that people in power suddenly became more altruistic over the past few years? No, from my experience, they became much more selfish! The whole timing with Greta Thunberg media hype followed by COVID19 then multi-trillion dollar bailouts followed by talks of 'green new deals' and the great reset (which is actually just a continuation of existing policies; not a reset by any definition of the word) is starting to all look a bit too convenient.
I've seen first hand how money can corrupt everything. So I'm wondering if it is the science which is attracting the money or the money which is attracting the 'science'. All the climate models are oversimplified and phony; it's pseudoscience... They have tens of thousands of different models and each year they cherry-pick the ones which guessed correctly... Then they keep switching to newer models which keeps proving them right claiming that they did so to keep up with technology (of course not because they were running out of correct old models to cherry pick from)... It's a joke.
It's a way to justify why we should all be playing the game of musical chairs instead of the game of 'make more chairs' or even 'make more chairs, but each person should only have one chair'.
It all stinks like corruption. If you really wanted to solve global warming, the best solution would be to limit population growth, you could just give people tax incentives to have fewer children. Could be implemented as UBI: You get less basic income if you have more children. That is a much simpler and fairer solution and doesn't require deceiving billions of people with an epic global monetary ponzi scheme. Also we could get rid of useless bureaucratic jobs which are making the lives of billions of people miserable.
You just need a handful of people to independently see a few opportunities to profit from different activities (which are related in non-obvious ways) and together they can effect great malice without any single individual being aware of their collective malice.
The Upton Sinclair principle ensures that the perpetrators of malice are not aware of it: "It is difficult to get a man to understand something, when his salary depends on his not understanding it."
Only the victims of malice can see it as such, the perpetrators are the last to see it.
Just wanted to add that the track record of predictions about the environment doesn‘t shine a bright light on the (popular) science in the ways you mentioned. Just have a look at the club of rome report. When a part of science gets overly politicised you should get wary.
You are _supposed_ to buy and hold Bitcoin for a long time, because Bitcoin is most important where it gives you an alternative when government money is poor (or even just as a threat to governments that are making monetary decisions - they need to know that their population has a viable alternative if their currency doesn't add enough value).
That necessarily drives a big focus on price.
"The market structure is fundamentally built on layers of intermediaries and settlement of both securities and payments happen on a delayed net settlement basis. By contrast in crypto, the markets are decentralized, no layers of intermediaries, settlement happens on a real time gross settlement basis..."
That is, the size of the population at which the welfare/wealth of the median individual is maximized.
Given that, as you say, prime land, prime housing, prime infrastructure, prime tourist destinations don't easily scale, yet more people enable better technologies/more efficient production of other consumer goods and services.
Have too few people (in the extreme - a dozen), and you cannot have many nice things - not enough people to create nice art, build houses and cars and computers. Have too many (in the extreme - 100 billion), and there is too much competition for the same houses and tourist spots and what not.
There are quite a few fields you could at least slash in half overnight too. Bureaucracy is one: here (small European country) we have way too many managers and people that are only there to move boxes around and cause communication overhead to explode, offering practically no benefit whatsoever.
I look back at things you could buy 30,40,50 years ago, much of it sucks and doesn’t compare to what you find today. Back then you didn’t need much money because there wasn’t much to buy. I look at the ads and they’re garbage, not engaging at all and doesn’t convince me to want the product. And because people weren’t posting pics of things they purchased to some social media, seeing something cool that I might want to buy usually only happened when going over to a friends house, or seeing a random passerby in the streets. And that meant those people were usually close to your own economic class, so the items weren’t out of your league.
That being said, I think that major Bitcoin forums like /r/bitcoin serve a good purpose because it acts as a containment board for people who just want to talk about the price.
But you are very incorrect if you believe that is the only topic of conversation. Perhaps using /r/Bitcoin is not a valid sample size.
In my day job, I'm neck deep in blockchain and cryptocurrency use cases - and there are conferences, webinars, real-world enterprise adoption, etc.
The blockchain is a critical part of the infrastructure because the hosts need to be paid for the services they provide, but as untrusted entities we need assurances from them. Also, if you don't have a blockchain in the middle you need something like PayPal in the middle, which is a single point of failure.
I think it's important to separate Bitcoin itself from the general concept of blockchains as a new type of data structure. Personally I think the real benefits to society will be had by applying Bitcoin's concepts to brand new unrelated things, and hopefully Bitcoin mindshare can help spark that creativity in people. To me, someone saying "The Blockchain" is like someone saying "The Linked-List". They're not thinking about it generically yet.
It is more like a discord server than it is like a data structure.
Just saying "this will help the poor because they have nothing" over and over with no real plan, let alone action, doesn't make it true.
One guy I argued with once told me about him donating his bitcoins to buy pizzas for people who needed it. Which, cool. That's awesome. But the donation argument makes it sound like people dont donate dollars or euros. Or even like theres some grand mechanism that makes bitcoin better than traditional currencies... even though crypto gets converted to traditional currency so it can become useful.
I used to work at a bitcoin company, and we had large user communities in countries where the local currency was subject to very high inflation, and access to stabler currencies (like dollars or euros) was severely limited. We were actually helping proper deal with real problems, and we were proud of it.
Then the investment-tool-for-rich-white-kids mentality took over. :(
Look, I'm not trying to be a dick, but bitcoin was sold on the lie that it helps poor people. You're not wrong for wanting to help poor people. But people need to come to the realization that bitcoin has been Theranos-like the whole time. It's a waste of time if you're goal is to help the poor.
The local regime cannot take your Bitcoins away from you, which it could by hyperinflation, reform etc with the traditional currency. In other words, the trust in the owner of the currency is in fact higher.
Local gangsters as well, cannot take your Bitcoins away from you as easily. You have a higher chance at keeping your stash.
I can see what you're doing, you won't get away with this.
At any rate, the price instability is exactly that — unstable. It’s not systematic hyperflation. For when you don’t have access to conventional forex, it’s better than nothing.
> You're not wrong for wanting to help poor people. But people need to come to the realization that bitcoin has been Theranos-like the whole time. It's a waste of time if you're goal is to help the poor.
Yeah. That’s a large part of why I used to work at a Bitcoin company.
While I get it's beneficial for average citizens looking to save a bit on tax/duty fees... it's a lot like wearing a condom when both of you dont care to know each other's name. You have that practice for a reason.
It was all about adoption - new merchants accepting it, new people spending it, new use-cases enabled by its peer-to-peer electronic cash and immutable and permissionless record-keeping functionality, etc.
Everything changed after the 'purge', where the head moderator took a harsh stance against members trying to build consensus for a hard fork that would help realize Bitcoin's potential as a global peer-to-peer electronic cash, and started banning people left and right. The Bitcoin subreddit turned into a full time price pumping forum after that.
Ironically, Bitcoin saw more rapid price growth before 2015, when the primary topic of discussion was consciously steered away from price, than after.
> Well this is an exceptionally cute idea, but there is absolutely no way that anyone is going to have any faith in this currency.
Bitcoin is not a bundle of securities, nor is an ETF a currency. Why would you confuse the two?
Just based on a hobby currency?
Being in an ETF does not make something a real currency. BTC is still hobby money.
GBTC has a $14B market cap. Do any Dogecoin ETFs? No?
Then maybe BTC is more than a hobby. It's a serious long-term store of value people are increasingly using as a hedge. A serious currency with commercial and institutional investors.
When you understand why Dogecoin doesn't have these things, you'll understand what a "hobby" actually is.
> BTC is still hobby money.
Can you post a single reason to believe that?
You keep listing characteristics of assets, like existing in an ETF or having a market cap or having commercial investors.
Those are not characteristics of currencies, which are widely accepted, engaged with, and in use by people and organizations in commerce.
> currencies, which are widely accepted, engaged with, and in use by people and organizations in commerce
So billions of dollars of institutional trading means BTC is widely accepted, engaged with, and in use by people and organizations in commerce. So, you said it's a currency.
That makes no mention of the consumer space, where I bought my widescreen monitor with BTC and pay my friends in BTC with PayPal. Have you heard of PayPal?
> BTC is still hobby money.
Can you post a single reason to believe that?
This is a straw man. USD is a good currency because it is widely accepted, engaged with, and in use by people and organizations in commerce.
BTC is not a good currency because it is not widely accepted, engaged with, and in use by people and organizations in commerce. Even in your paypal example, they first convert your hobby money to USD (a real currency) before commencing the transaction.
Having billions traded or invested in it is a characteristic of an asset, which you keep repeating, and not a currency. You're failing to understand this distinction.
Do you have a single reason to believe it's a hobby currency?
Most have closed. The last one in use, Empire, had an exit scam this summer. Before that, Wall Street Market was taken over by feds and used as a honey pot - where they used traced bitcoin transactions to arrest dealers/people involved.
Any drug dealers still doing online trading prefer Monero, and even then, I would still say that using a currency solely to buy drugs online is the definition of hobby money.
Yeah actually.
If you think Empire was “the last one in use” you obviously have no idea what you’re talking about. There are more DNM transactions happening now than ever before.
There are closer to 20 markets in operation, XMR makes up less than 10% of the transactions. I’m sure many dealers would prefer Monero, but few customers do.
Most of the new ones that aren't invite only are suspected honey pots until they go a period of time without busts or exit scams.
You'd think that would be stupid because it's public, but so are blockchains.
I can think of these criteria on the top of my head: * trading volume * number of shops where it's accepted * whether you can pay taxes with it
Did you have something like that in mind? Or something else? What would lead you to say "this is not just a hobby currency anymore"?
For Bitcoin, transaction volume is not a good indicator of this because many of the trades (estimated >80%) these days are HFTs. Bitcoin is an asset for sure, but not a real currency.
Until then a bitcoin is like a call option or financial derivatives or really exotic instruments. Financially very relevant, heavily used, but so niche that it's of no relevance to basically everybody.
You might think this is a silly definition, because it means that the determination of how "proper" a currency is depends on where that person lives. And that's absolutely correct.
I have no functional use for Turkish Lira. The only reason I would possess any is because I'm speculating that the value of Lira will increase relative to the currency I use to pay for my needs.
Using that definition, one could create a Proper Currency Score by taking the number of people or businesses that use each currency and multiply it by the gross value of transactions performed in the currency (excluding currency exchange). This definition is at least reasonable on the surface, as the top currencies would be USD, EUR, and RMB.
Or if you’re in Turkey or Northern Cyprus.
If the OP wants a metric to use to gauge how "proper" a currency is, that metric should be primarily weighted by 1) how many people need to use it day-to-day, 2) the volume of goods and services transacted it in every day.
Hashcash, eGold and other similar pioneered the "dark ages" of digital money/value-transfer. Now we are in the ARPANET/Compuserve stage. Cryptocats and crypto-games is akin to "90s" internet. Next 10 years will bring really interesting thinks.
Bitcoin has been consistently "around the corner" from mass market for a decade now, while other technologies have been released and adopted.
do you even know how old bitcoin is?
APPL's market cap is $2 trillion and so by that logic it should be an excellent currency.
Second of all, just because US classifies bitcoin as an asset, doesn't mean the rest of the world has to agree with that. My country doesn't.
And from the wikipedia page of bitcoin: "It is a decentralized digital currency"
In retrospect, I think the primary reason they haven't is a real politik appraisal of the good crypto does to our cybersecurity. Finally attackers have a way to extract money from the entities they hack, rather than selling access or information to third parties. Even so, it still boggles the mind. It's so lawless and anarchistic.
EDIT: I meant of course our parents, not us - there might be a few 90-year old readers among us though :)
It’s crazy how a bit of knowledge can drastically alter your life.
There you go. No more buying drugs on the dark web for 99.99% of the people that currently do so.
https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusion...
The author of that comment is Co-founder, CEO at Pachyderm (W15) pachyderm.io, and First employee at RethinkDB (S09).
This goes to show that, despite you might be a smart individual like Joe Doliner, you can be absolutely wrong about the future.
To be clear: I have a high opinion of Joe Doliner; in this particular stance, he was obviously very wrong about the future of Bitcoin. Like most other people.
Watch a real-time visualization of the global Bitcoin transaction flow, as it is happening right now:
https://dailyblockchain.github.io/
Each square is a bitcoin address (like a cryptographic public key)
Each graph component is a transaction. The components appear as transactions are broadcast into the bitcoin P2P network (but before they are verified and committed to the blockchain)
Each transaction simply transfers bitcoin: from one or more input addresses, to one or more output addresses. In other words, money flows from one or more previous owners, to one or more new owners. That's how a currency works
Coin ownership flows from green to red (yellow is in/out: I pay you and take some change back at the same address)
When the output of one transaction becomes an input for a new transaction, the components are pulled together
This illustrates how Bitcoin is used. What do you notice?
Formation of large aggregates?
[edit]: pretty blinkenlights?
I wish it had the relative size included in the visualization.
If you just take a 10 min snapshot of transactions in any currency I don't expect to see a lot of transactions flowing to each other.
Is this: send me £10 in BTC but actually send me £15 in case the price changes and I'll send you back the difference.
Let's say you have $20 in your address, and you want to spend $10 on candy bars. A common pattern of use is to spend all $20: $10 goes to the candy bar company, and $10 goes to a new address you just created. This helps obfuscate how much money you actually have.
The analogy I would use is that Bitcoin exists in your wallet as like a bag of gold nuggets. To do a Bitcoin transactions is to take a pile of gold nuggets, melt them together, and then pour off a handful of new piles that you let cool back into nuggets. These nuggets are inherently of awkward value units as, if nothing else, the price of gold keeps changing. So you aren't going to have a set of nuggets that ever correctly maps to "price of hamburger". What you do with the resulting nuggets is up to you, but the total amount of gold in the input nuggets and the total amount of gold in the output nuggets has to be the same. This inherently will lead to most transactions involving creating an output nugget that is "change" (all the gold left over from the input nuggets that I wasn't actively intending to use).
Money/Currency/Value in general can't be reduced or derived from first principles. You always have to take into account human nature, economic activity, and most unfortunately: psychology. So all criticism about how bitcoin inherently being pointless, sounds like off-tune. I want good reasons to/NOT-to buy in.
First-world country citizens kind of trust their governments to at least behave lawfully, or at least be eventually accountable. There are systems in place for transactions and accounting, and "everyone" has access.
The "Value" of bitcoin, coming from a struggling third-world country (Lebanon), is in the ability to be independent of a currency that is inflating quickly, being able to transact with the outside world (even if only in bulk) without being under the mercy of a failing financial system that is lurking around to take a share in every which way possible.
The energy consumption needs of bitcoin are an obvious drawback. But I don't think it's fair to brush away the whole thing for only that reason.
Disclosure: I own an embarrassingly small amount of bitcoin (~0.4BTC).
Gold fluctuates a lot less. Its hard to swallow "ok ok bitcoin is useless but it can still be a stable currency/safe asset" when the price is booming and crashing every year.
The whole decentralization-as-design principle of Bitcoin has shown that, given few constraints, anything of value naturally centralizes on the select few with the means to control it anyways.
The block size debate, and the tragedy of the commons that it shines a light on, is a prime example of that.
For many reasons, such as stealing electricity and having access to chip manufacturers, there are a handful of miners in China who have the majority of the computing power for Bitcoin. They can mine bitcoins at a cost that is less than for everyone else.
This creates problems because there are updates to Bitcoin that are needed, such as allowing the Bitcoin network to process more than 7 transactions a second (for reference, Visa does 40,000 a second). Unfortunately, this small block size rate means people have to pay extra fees to prioritize their bitcoin transactions to happen in the next 20 minutes.
The miners get to keep these additional fees, so they are incentivized to keep the network slow and people paying more. This is why the Chinese miners have rejected any updates to improve Bitcoin transaction rate, meaning bitcoin is slower and more expensive for everyone but the miners extract more money from the network. It's tragedy of the commons.
This means that the people who get the most decision making power are incentivized to only make changes that help their investment. Any change that would help a majority of users, but harm these top users, is basically a non-starter.
This is incorrect and a common misunderstanding about Bitcoin. Hard forks require users to update, and it doesn't matter what the miners do. It also doesn't require a majority of users to upgrade, anyone who does upgrade will be on the new network, and anyone who does not upgrade will be on the old network.
Bitcoin (and other blockchains) are structured so that miners have as little power as possible. Pretty much the only thing miners can do in practice is choose to censor transactions, and that would be considered an attack. Networks have recourse like bricking all mining hardware, which typically acts as a sufficient deterrent to such attacks. Miners can also double-spend (a form of creative self-censorship), but the same network recourse applies.
In practice I don't think there are any examples of miners intentionally making a blockchain slower and more expensive. Miners pretty much always fit every possible transaction into every block, and any throughput restrictions are determined at the protocol level by protocol devs, not by miners.
This is why I reference the bitcoin block size debacle. Bitcoin Cash was created as a hard fork that miners ultimately did not accept and is now just a dwindling alt coin.
Segwit2x had 80% hashrate support at the time it was proposed. It also had the support of most of the exchanges and major centralized players in the space. And yet, Segwit2x did not succeed.
Miners don't control Bitcoin.
Block producers (miners) must find buyers for the blocks they produce, if they don't find buyers, they go bankrupt.
>changes to update the Bitcoin protocol need to be accepted by the miners
You've got it backwards, changes to Bitcoin need to be accepted by block consumers (node operators). If they don't demand those changes, blocks with those changes don't get produced.
Demand and supply are fundamental components to economic action. The steal man version of your argument is: "While consumers induce production, some consumers' demands might be flippant -- They signal they will only buy kosher bread but they'll accept an alternate good. Though production switching costs are practically zero in SHA256 PoW, and entry into production is non excludable, an adversary has enough funding to pay premiums to producers to forego market demand, for the good they produce, longer than consumers are willing to refrain from consumption -- inducing a consumer-demand shift."
In game theory and economics its not a dominating strategy which is indicative of the many failed attempts to cartelize SHA256 PoW
In a buyers market. With the small block size, bitcoin is a seller's (miner's) market and refusing to upgrade preserves their market power - hence the tragedy of the commons.
>You've got it backwards, changes to Bitcoin need to be accepted by block consumers (node operators).
The number of bitcoin nodes has been dropping for years. The rational actors who are incentivized to support the network are making the decisions right now by choosing which forks to support.
The produced good (SHA256 hashes and the transferable UTXO set of bitcoin nodes) is an excludable, rivalrous good. Hence it doesn't suffers from tragedy of the commons problems. This is the foundation of excludability in economics.
https://en.wikipedia.org/wiki/Excludability
"seller's" or "buyer's" "markets" are weak concepts that don't control which goods are produced. If an agent market sells or market buys that doesn't dictate which goods are produced.
Again, no amount of production nor no amount of consumption can get a consumer or producer to shift their consumption or production to a good they do not want.
Edit: This wasn't intended to be a hypothetical- I agree BTC uses significantly more per transaction, but I'm curious how it compares to the entirety of a system like Mastercard divided by number of transactions (including all employee/office space/commute/etc energy consumption). There are clearer/fewer inputs for Bitcoin for sure but that doesn't mean we shouldn't account for the total environmental cost of a behemoth like Mastercard.
Bitcoin can never and should never replace our current payments network as it simply cannot scale in its current form. But, I do think people simply look at the cost to run the technology itself and assume that's the total environmental cost of a system.
You should also include the cost of running all of the world's central banks.
US Federal Reserve budget is about $5B. Assuming 328.5k BTC mined per year, no tx fees, $20k BTC value, and mining at break even, mining energy costs are about $6.57B. It seems like they're on the same order of magnitude.
I am more concerned about the misaligned incentives for PoW, and to a lesser extent for PoS.
Bitcoin's energy bills are paid for by its users via transaction fees and inflation. It's a weird form of gatekeeping to single out Bitcoin as 'a waste' when plenty of people create economic waste buying large houses, buying makeup, buying meat instead of grains, etc etc.
If you are concerned about the environment, regulate the creation of energy, not the use of energy. Restricting Bitcoin on environmental concerns will just result in people using more energy elsewhere. But if you mandate that power plants must be X efficient and Y sustainable, the market will naturally figure out how to best allocate the limited energy.
Gold has limited value as a commodity and widespread usage in central bank reserves. People I know who value Bitcoin highly do it on the expectation that either high net worth individuals will start to hold some small part of their net worth in BTC OR central banks will adopt it as a reserve currency.
How viable those two outcomes are determines whether you view BTC and gold similarly.
It has value even in the absence of a market to buy/sell it. It can be melted down and formed into jewelry, as a simple example.
The reason I won't buy into crypto is it's impossible to make informed investment decisions because, as an investment, the price is driven too highly by unknown market forces (at least unknown to me...).
Perhaps it's a good investment if you truly feel you understand what drives the price of bitcoin, or have insider knowledge that you know will affect its price that others don't.
I guess the argument is that you can still make pennies on the dollar if there isn't a market for it anymore?
Your other arguments I can understand, although I do think the use of cryptocurrencies will keep growing whether I like it or not.
The informed investment decision is that crypto is entirely new asset class and bitcoin is king. There is redistribution happening between asset classes and especially this year when 30% of all USD in existence was printed, there will be large inflows into bitcoin. Of course it will be volatile for a while.
Gold is just the physical version of that. Just like all money is made up, the value of bitcoin and gold are pretty much imaginary.
It's physical so it can't be 'cracked' and people like physical things.
It's universal in how it is understood. Bitcoin is 'well understood' by basically 0.0001% of the population arguably not even most it's traders.
Actually, not really. In historical terms, the gold standard is historically limited to cultures that existed in (direct or indirect) trading relationships with the Mediterranean culture. Notably, China (and correspondingly East and Southeast Asia) instead used a silver standard, while the New World cultures eschewed gold or silver for monetary standards.
In the case of asteroid mining, it'd likely go the way of the diamond. Diamonds are not rare and easy to create in labs yet still retain high values due to monopolization of the supply. No company that mines asteroids will want to flood the markets. Instead, they will monopolize the supply and find a balance of introducing supply and maintaining prices.
Pretty much. It is insane that gold mines pollute the environment while central banks hoard double-digit percentage of ever mined gold in their vaults. And I see also no difference in the stupidity of central banks supporting gold price or cryptocurrency price.
(There is a small difference, though, as a noble metal, gold actually has some utility outside inves^H^H^H^Hgambling and illegal trade)
But more crucially, if you need to use extraordinary quantities of gold to settle a transaction (ie. When nation states buy something with their gold reserves) the gold likely won't even move: most of it are stored in "trusted" first world nation central banks like the bank of england.
But then again, with bitcoin you don't need "trusted" central banks.
Although Bitcoin's current implementation limits the supply to 21M BTC, the idea of a cryptocurrency can be replicated ad-nauseum and is 100% fungible. For all intents and purposes, it has no intrinsic advantage over, say Ethereum or Monero. The fact there are perfectly fine alternatives for it makes the value proposition much more shaky than gold. If people en masse, for any reason switch to other cryptocurrency, the existing tokens are rendered useless. And there are many scenarios in which this can happen - government action, protocol attack, untangling of distributed trust, breaking SHA256, BTC no longer fashionable, transaction cost creep,...
There are a few asic's for ETH, but the hash algo is fundamentally executed through memory. Even if you build an asic for ETH, you are always tied to the speed of memory.
Therefore, a GPU is going to be the most ROI efficient mechanism for a long time (asics cost more to build than a commodity GPU) and even more so, older GPUs work just as well from a ROI perspective because newer GPUs are more expensive.
This means ETH does not see the same hashrate growth (and energy usage) as BTC, while maintaining the same level of security.
The vast majority of energy usage for blockchains, is green energy hydropower using excess power from facilities that already exist. Why? Because this is the lowest cost and prior to this current bull run, was the only way to be profitable.
Why would this be true? The R&D costs of a commodity GPU can be amortized across more customers than an ASIC, and the same is somewhat true for capital costs (masks, etc) -- but the manufacturing cost of an ASIC should be at worst the same as a GPU (with one fewer middleman adding a margin on top of those costs), and in general cheaper (since die size can be reduced, or an older process can be used).
It really boils down to economy of scale. AMD can produce chips (and solutions) at much more scale (and thus far less expensive) than relatively small Innosilicon can. AMD has closer relationships to the fabs.
It also is other factors that go into this. Like the critical memory controller component. AMD owns the patents. AMD can also buy memory chips in larger bulk (and thus less expensive).
Also, the R&D on GPU's is an already amortized cost. They already exist. ASICs have to be engineered from the ground up and do what GPU's already do.
At the end of the day, this is also beneficial because GPU's can be repurposed, while sha256 ASICs are just e-waste every time a new round of smaller nm tech comes out.
I see a place for both BTC and ETH. BTC is digital gold (yes, I know HN hates that, but short of a better set of words, it is what it is.)
The thing that, in my opinion, disconnects ETH from BTC is CeFi/DeFi. It really is the programmable money... but not money in the context of a currency every day people spend.
I'm talking about money in the context of "institutional money". Like the trading desks in Wall Street. Where money goes to use in making more money. All those crazy algo's that people use to pool funds and hedge and trade are getting created out in the open now and solidified (see the pun?) in code.
That is where ETH shines. The amount of development and innovation happening there, at 'move fast and break things' speed is literally amazing. Heavy emphasis on 'break' because these things are getting hacked almost daily. But just like crypto exchanges (which used to get hacked daily), it'll settle down eventually.
Interestingly, as soon as I could (Nov 6th), I bought $100 each of BTC and ETH on paypal within minutes of each other. A little experiment. Today, the ETH is worth 5.5% more and both are up a combined 32%. I don't think people are paying close enough attention to this difference because they are blinded by the 32%.
Any improvements to the efficiency of proof of work will be countered by a difficulty adjustment, by design.
But hey, at least the rest of world leaders are virtue signaling about their greenness, that’ll help the planet!
US has achieved a lot (especially Tesla) _despite_ the leadership working against it for a long time.
I’m not sure I follow this (admittedly I don’t know much about how BTC actually works). Doesn’t mining also serve the purpose of verifying transactions?
https://www.jbs.cam.ac.uk/faculty-research/centres/alternati...
How so? That is a non binding resolution where the world's greatest polluters are still allowed to increase their carbon footprint. Countries receive all sorts of praise for signing it and their so called commitment to "battle climate change", even though it's still business as usually, but at least they signed it I guess.
And since a lot of mining is done in countries where the majority of their energy comes from fossil energy sources it has a footprint.
I'm more interested in the variety of "energy recovery" startups out there - eg https://www.crusoeenergy.com/ - that are harvesting wasted energy to mine cryptocurrencies
They might bring down transaction fees, but most of the money in mining is from block rewards, which depends on the market price of Bitcoin rather than transaction volume.
It seems to me that the nature of Bitcoin as a pseudonymous currency actually facilitates and encourages illicit power stealing arrangements like this. In other words, it’s pretty easy for me to just send you some of my freshly minted BTC from the mining farm your company is powering, and nobody is likely to ever find out.
Unless corruption can be rooted out (highly unlikely), there will be no incentive for Bitcoin mining energy to come from legitimate sources, never mind clean sources.
Could those governments pull the plug on bitcoin?
The carbon footprint is funded by the block reward which is halved every 4 years until it dwindles to nothing. Progress is slow, but inexorable.
https://www.prnewswire.com/news-releases/layer1-launches-bit...
https://www.crusoeenergy.com/news-and-media/2020/1/10/denver...
The Bitcoin now stands for that lost value, and there is now a corresponding psychological motive to replace the valuable thing that was lost (electricity, and all that goes with it including environmental impact) by mentally investing that loss in the Bitcoin token. So you protect it, you support the network that it exists within, you talk it up to your social circle, you do everything you can to make it as valuable to others as it is to you. All of these activities also take time and resources, aggravating the impact of the original loss commitment. You do this because someday you want to give it to someone else, whom you've convinced of its worth, in order for them give you back the value you lost by creating it.
There is no "environmental mitigation" for Bitcoin's energy use, this behavior (or a permutation of it in term of other forms of irreversibly burned value, like time* ) is an essential property of cryptocurrency, without which it would cease to exist.
Disclaimer I hold Bitcoin, not because I think it is a new form of money or "decentralized" in any way that matters (quite the opposite in fact), but because it is possibly the most clever and subtle ruse to access the gambling instinct in a demographic whose constituents commonly believe themselves to be "above" playing the lottery or falling for Ponzi schemes. Yes, the irony is not lost on me. Still, this is a huge untapped market.
* also a bit of a dodge as IIRC POS still requires keeping a machine running even if it's not dedicating all cycles to the staking algo. Anything that "recovers value" from the process of "burning value" defeats the entire purpose of burning value to create psychological motivation to mentally allocate it to the token it replaces.
Which, incidentally, is why you won't see much growth from cryptos that try to do something "useful" (like fold proteins) while also standing as a counter for burned value. If running the algo is more useful for A, because A is in a position to monetize the work outside the currency being created, than it is for B, who can't use the data or results from the work algo, why would B prefer to support that crypto over another whose work algo is equally useless for all?
This is based on the false premise that energy, or anything else needs to be given up in exchange for crypto, or any other form of currency.
We could create a zillion cryptos out of thin air and just hand them out. That's one way to do it.
Central banks do it another way.
The 'energy' thing is just nonsense, it's just something that happens to be baked into this specific form of BTC generation.
It's just a peculiarity of bitcoin and the way some cryptos are generated.
There is no theoretical generalization to the notion of energy->currency so the OPs premise of energy->value doesn't make any practical sense ... other than for BTC.
Gold has that mechanism by being a rare metal - there’s only so much of it in our vicinity. Bitcoin gets that mechanism from universal law of physics - you can’t create energy from nothing.
The 'security feature' of BTC, which happens to be related to energy has nothing to do with currency, or necessarily even crypto-currenices in the general sense.
The OP was trying to imply some kind of theoretical implication between 'energy used + value creation' (and you're also tying that to energy 'secure' usage).
Yes - we know BTC is 'tied to energy' - but that's irrelevant in the bigger picture, it's a specific feature of BTC - it's not a 'fundamental' problem.
There are myriad ways if distributing currency, even 'security' that don't involve arbitrary amounts of energy usage.
BTC/Crypto is kind of infuriating space of very smart technical people who have almost no financial knowledge 'discover' what they think of as new, but in reality, most of this has been known since the dawn of classical economics. BTC is a novel thing, that's about it.
it's literally the mechanism that solves double spend problem, which i'm pretty sure is quite important for a currency and to my knowledge wasn't solvable in trustless manner prior to bitcoin.
The difference with stocks, however, is that stocks don't make a big show of pretending to be decentralized. Everyone knows and acknowledges that a relative handful of well-connected actors have enough leverage to wash everyone else out of TSLA if they so chose, but for the Bitcoin cultists it's anathema to even suggest the same inexorably centralizing forces are at work. A lot of collective effort is spent on propping up the "decentralization" meme (and its accomplice, the "anonymity" meme), effort which ironically makes the proponents value their Bitcoin all the more; they want to realize a return on that work.
With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand.)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Also, what's the latest on scaling? The last time I looked into it, Lightening was a thing, but I don't follow it closely.
I've been in the Bitcoin/crypto space since 2009 and been through it all. My opinion now is that Bitcoin is an accidental Ponzi scheme - it started out with good intentions but got hijacked by tw*ts. Most of the discourse in the crypto community now looks like a carbon copy of any spread betting / gambling / day trading community. However, instead of a centralised market, there is a Rube Goldberg machine that provides the market infrastructure.
As for lightning, it adds a layer of trust into a system whose reason for existence is trustlessness.
If you don't care about trustlessness, you can already have fast and scalable transactions through normal banking.
If an intermediary is not behaving, the worst that can happen is that your found are blocked for a small amount of time.
What would happen if there was collusion between nodes?
And while it is true that you are still limited by the Blockchain speed if the nodes don't cooperate, all the incentives are made so they do cooperate and that transactions happen near instantly.
But businesses have to follow the law. If a regulation were imposed, people would feel a need to comply. If they said to block transactions from Iran, on penalty of imprisonment, then they would do so. Etc. Avoiding all of that was the exact motivation for bitcoin. Adding all of the features and drawbacks of existing systems into bitcoin would undermine bitcoin's reason for existence.
Centralization at every layer of bitcoin has been the rule. Mining, exchanges, etc. Their dominance is so complete that if only a few of the primary exchanges were to blacklist an individual, they would have a very difficult time. In the same way that Mastercard and VISA banning PornHub is a major harm to that website.
Censorship-resistance is thus out the window, and there really isn't that many benefits left for bitcoin after that.
That's not true. That's the beauty of lightning, it manages to add a layer without needing to trust any of the intermediate party
I see this repeated a lot. I think you're saying bitcoin is no better than normal banking for moving value.
Do you really believe this? Yes, in the US I can immediately wire money somewhere as long as:
1) I do it within east coast business hours. Weekend? Sorry, wait til Monday 2) I have the correct information for the receiving institution, some of which require a small transfer up front to confirm the setup. 3) My bank actually supports wiring (Wealthfront, for example, only supports ACH transfers which take a few days) 4) I'm sending within the US, otherwise there are a bunch of other complications and requirements
I also need to trust that the bank actually has my money.
With cryptocurrency you can confirm that your stored value exists and is stilled owned by you, and transfer it to anywhere else within 30 minutes, in a provably secure and verifiable way.
Plus the incredible annoyance of having to go through the KYC/AML procedures everywhere to do any kind of meaningful transactions. And still risk getting flagged for fraudulent transactions and possibly having your funds locked/confiscated.
On top of that, you'd also have all the additional risk and liability of dealing with potential fraud and uninsured institutions.
This means transactions have to go unverified and that you have to trust the person you transact with by design.
They still have the risk of the government clamping down on them but I could hardly see it affecting bitcoin. Maybe a 5-10% price suppression at most.
For example, Okex froze withdrawals a month ago on its exchange. I had a 5 figures there that I was able to move by mirror trading on another exchange. If many people mirror traded (which they probably did), the prices will start to diverge. The prices very slightly diverged, which means a well capitalized third-party had strong conviction/guarantees that Okex is good for the coins/money, and played the reverse trade by injecting even more capital into Okex (they still allowed deposits).
If you are trading and notice these patterns, this gives you an idea about the probability that the exchange is going back to business. Same thing for Tether, their liquidity and price stability is even better than USDC.
It hasn't grown much in the last year and a half. Personally I don't see Lightning Network winning the battle for high-bandwidth, low-cost transactions against all the other protocols.
* This only shows public channels. Most wallet apps that people install on their phone, etc open private channels
* This shows capacity, it doesn't show throughput. I work at a company that accepts payments over lightning, and our volume has grown a lot over the past year, but our channel capacity really hasn't had to grow all that much (since we withdraw funds to layer 1 regularly)
Lightning cannot scale on it's own as Bitcoin will be the bottleneck, and when fees rise Lightning will stop being efficient for small transactions (since you need to pay an expensive Bitcoin fee to open a channel). Even the Lightning Network whitepaper says it needs much larger blocks.
Yet the Bitcoin devs are focusing on Segwit and Schnorr, which are woefully inadequate for any sort of scale. At this point it seems clear if you're looking for Bitcoin scaling, best look at other cryptocurrencies.
> When this [rally to near $20,000] happened in 2017, there was a real lack of products for the new converts to experience, whereas today there are endless uses, protocols, services across farming, lending, standard trading, etc
Is this really true though? My first instinct isn’t at all to go to blockchain/cryptocurrency for farming.
anyway, it makes digital assets and cryptocurrencies yield producing instruments and it is predictably popular.
along side that there is a fast growing autonomous insurance sector too.
institutions are now buying bitcoin as a diversified asset class
I 100% understand what you are saying but I also 100% disagree with it.
This is all greed with no substance. Wealthy people and those who desire to be wealthy are doing everything they can to arbitrarily prop up something which does not really have value. And they seem to be winning- which is everything that is wrong with the world right now.
The pricing mechanism for crypto is always going to be screwed by PoW, I think, because it naturally concentrates power into the hands of a few that can coordinate relatively easily.
The very topic of this post "Bitcoin breaks above $20k or $20,000 USD / BTC". How can something that can only be quoted in terms of another currency be inflation resistant?
it’s an inflation protected asset, perhaps even more so than gold since there’s a known quantity of it that will never change.
I don't understand why you make this comparison?
Gold is a physical item with real-world use cases. Gold is rare and has physical applications which is why it's valuable. We can't magically create more gold.
Now you are going to say bitcoin is fixed as well. Fine, but it has basically no use case. Also, it can be replicated a billion times over with any other cryptocurrency. So I would even say it's debatable to call it 'rare' or 'fixed', even though I know what you mean.
The amount of gold which has been mined in the entire human history is about a 20m cube. That's it. Gold is used in very useful in many industries around the world and is visually appealing. THAT is why it has value.
If Gold was "rare" but looked like garbage and had no physical application then it would NOT be valuable. I don't get how you are trying to make this argument.
All of human history (and perhaps biology) has always been about continually trying to accumulate more even at expense of others. Bitcoin doesn't detract or contribute to this human nature.
If you really want to talk about profiting off the backs of others, look no further than interest bearing loans. It isn't for no reason that parasitic and immoral practice had been declared prohibited in Islam, Judaism, and Christianity. Most, if not all of the economy today is based off of interest, and the sooner we get rid of it the better.
Well what I find ironic is you are against the concept of interest but consider a cool technology like blockchain an "investment". If you were really so righteous about economics you would realize turning cryptos into "investing" is a total scam.
Right now, bitcoin is the best medium of exchange for the modern world. It beats physical stuff like gold, because it can be transferred digitally, across physical boundaries. It beats sovereign currencies, because you don't have to depend on the policies of arbitrary governments.
Bitcoin's scarcity is artificial, but that is a red herring. Bitcoin has the value that it has because the scarcity is real and believable. No one in a position to manipulate the network or protocol (a position that it is doubtful anyone could ever achieve at this point) would stand to gain from 'hacking' it, since that would instantly destroy it.
All that said, yeah, the price rises are probably driven to a large extent by greed and ignorance. But so is a lot of the stock market and other investment vehicles.
That I completely agree with and have almost as much issue with. But at least the underlying's have some value. The actual value is up for debate, but it's actual value of something (like an underlying company and their cash/IP/other assets etc) or a commodity which is physically useful (an ounce of gold, a barrel of oil).
Bitcoin has no underlying value. You equate that to conch shells- ok, but that's all they had when they used it. We already have currencies. So comparing it to a situation where a civilization may have used conch shells is pretty laughable. If all we had was conch shells and you came up with bitcoin? Great! Seems like a nice idea, it's an improvement. Bitcoin, however, is not an improvement by any stretch of the imagination.
>The world wants and needs a medium of exchange, otherwise we are back to bartering fish for sheep skins.
That's what... currencies are for especially the USD in particular. You say otherwise we are back to bartering fish for sheep skins.. huh? We are not there, we have currencies... Are they perfect? Of course not. But we have a few extremely large currencies (like USD, EUR) that do exactly what you say.
And now here's the humorous thing. You will tell related to currencies- "well, what good does USD do to me, I'm in Country X and can't use it or don't have it!" The fucking price of crypto is being quoted RELATIVE TO CURRENCIES so... wtf?
If you are in Country X and want to send some value to the person in Country Y.. ok so yes you can send bitcoin. Great. But what if you actually want to use your money? You have to convert bitcoin into X or Y?? There is no point to all of this!
And because of different costs of living all throughout the world, the 'amount' of bitcoin you pay someone would still 'relative' to their underlying currencies worth.
I'm just getting tired even trying to type this insane circular logic.
If there were no thieves and people were perfect, then crypto might make sense. But because there is no recourse for accidentally sending money to the wrong person, literally losing your hard drive or whatever and you can't recover, someone hacking into your account etc.. crypto is MEANINGLESS for any normal use.
But I wouldn't say these are the _main_ reason why Bitcoin is going up. More likely reasons:
- Inflation concerns from the massive QE efforts in 2020 - Equities market are very overvalued right now, people are looking for alternate asset classes and fiat isn't a great option (see point #1) - Institutional (more risk adverse) names are getting in. Ex: Mass Mutual bought $100M of BTC last week. Because this was for their general account it needed Fed approval, which is a big milestone. - The idea of BTC as a true alternate store of value to gold is becoming more widely accepted.
Specifically in regard to the point around Bitcoin as an alternative to gold, the market cap of gold is around $9T. If even half of that moves to BTC we'd hit about $130k/BTC.
Avoid Ledger if possible.
I own all three. Currently using Coldcard + Casa.
Which is not great. The entire reason you use a hardware wallet is because you assume that less secure hardware has been compromised.
I don't know that I would go as far as saying 'don't use ledger' though, all the hardware wallets have pros and cons and we don't really have a champion 'this one is best' yet. Though I might point to https://foundationdevices.com/ as being on the right track.
Trezor has had better service but this could as easily happen to them. To be really safe Coldcard is the best option.
[1] https://news.bitcoin.com/ledger-wallet-customer-data-leak-in...
If you just want to HODL as securely as possible, then you don't need a hardware wallet. Just generate a BIP39 seed from a high-quality source of entropy and derive an address from it. Then lock the seed away somewhere very safe. (My recommendation is to generate the seed by hashing a reasonably-long passphrase together with one word that you never write down anywhere. Then store the passphrase in a few places: password manager, piece of paper in a safety deposit box, etc.) When it comes time to finally withdraw, you can buy a hardware wallet then, or use cold wallet software on an airgapped laptop.
If you need to withdraw from your wallet regularly, then a hardware wallet makes more sense. Any of the big names are fine, honestly, unless your threat model includes "evil maids" (sophisticated attackers who have physical access to your device). AFAIK the only viable attacks against major hardware wallets are evil maid attacks, wherein someone either tampers with the device, or measures its power consumption while you're using it, or replaces the client software on your computer/phone with a malicious version. So if you're worried about that, you should spring for the most paranoid option that's still user-friendly, which in my opinion is the Passport.
Two more things to note. First, you probably don't want to be using your hardware wallet for most crypto transactions. Instead, set up a second, lower-security wallet (e.g. an account on cash.app) with a maximum balance, and top it up with withdrawals from your hardware wallet as needed. Importantly, this means you'll never have to carry your hardware wallet around with you; it can sit safely at home. Second, if your hardware wallet breaks, you're screwed, so you still need to back up your seed somewhere secure. That's why if you just want to HODL I recommend not bothering with the hardware wallet -- it won't save you much effort.
Foundation devices is committed to using fully open source designs, all the way from the software down to the firmware, the hardware designs, and eventually I believe they hope to open source the secure elements and semiconductor designs as well.
Bitcoin's usage lies in it's use as an immutable ledger, that no one can change the past. We can put other information inside it,alongside with the money transactions, and we can be absolutely sure that no one messed with that information. An infinite number of use cases.
For example say a cop makes an arrest. How can we be sure that the arrest was legitimate? A random person with a video camera may record the arrest, go to his home, edit it however he likes, upload it to the internet, and boom huge civil unrest! The solution lies with the cop recording the arrest by himself, uploading the information right away to the blockchain, and no person on the planet, no state, no goverment, can mess up with that information. The timestamp of the arrest is important too!
That's the basic problem with blockchain: it only really provides nonrepudiation (someone can't back away from a statement they made previously). It doesn't have a solution for people willing to commit perjury, and when you look at all of the social situations where official records are distrusted, the main reason for that is that officials are known to be committing perjury and face no repercussions for it.
I'm pro-Bitcoin, and I own some, but what worries me is whether the scalability problem will ever be satisfactorily solved. It's been 5 years since Lightning was first suggested and it's still only at Alpha stage.
And if the scalability problems are never overcome, will Bitcoin still maintain whatever value it has now?
Eventually we could see institutions and brokerages being the main coin holders because if it costs $1000- $10000 per transaction, it only makes sense to do so in $500k+ transactions. Last time Bitcoin was $19000/ea, it cost me $180 to move the coins from one wallet to another.
There is no decentralized social network in spite of people being dissatisfied with the centralized alternatives. The last time I tried an IPFS website it didn't load. The last time I tried Scuttlebutt it couldn't connect. It's been 12 years now and everything in crypto feels perpetually broken, unusable, beta-grade and stagnant, and it's very disappointing because I really wanted these solutions to exist.
Ironically, I think "crypto" would have fared better if it was without monetary value, and its development was optimized for utility (like most other computer programs) instead of buying Lambo's. The way I see it, BitTorrent is still the most successful and useful decentralized tech of the last few decades. It's useful, ubiquitous, safe, clients can be maintained by a lone hobbyist out in Nebraska, and it requires no propaganda whatsoever to prosper because its value proposition is evident to anyone. With crypto, the perpetual funding of technologies that are never going to work ironically makes it a very un-libertarian economy.
That said, I like having it around as an emergency payment system, and with the devaluation of fiat money and general downturn, BTC provides an attractive asset class next to stocks, gold and real estate.
If that was the case, wouldn’t we see inflation in USD prices for a basket of goods? Isn’t inflation very close to zero?
Others say they are sick of talking about BTC price and would rather focus on its utility. This makes sense, but for the same reason above it cannot happen since on a basket of goods basis BTC is deflationary. Your options if you hold it are to buy something with it today or to hold onto it for a short period of time and buy 2 things with it later.
If BTC is actually viable as a currency, shouldn’t the goal be to get it to some kind of CPI stability?
Another way inflation is "hidden" is in things like product packaging. Look at how jars of spaghetti sauce, cereal boxes, packages of coffee etc. are shrinking. You pay the same price for fewer goods.
House prices are up 20-30% over the same time frame.
The stock market is up close to 50% over the same time frame...
This is not happening because the economy is booming.
It is happening because the limits on printing money have been completely erased.
>In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses.
Any American Bank can lend any amount of money without holding anything in reserve. Let that sink in for a minute.
The reserve requirements used to be 10%... for decades... and money was still being created very fast due to lending from fractional reserve banks...
Now fractional reserve banking is not even a thing... it's just no reserve banking.
I am seriously concerned that north america will experience hyper inflation over the next few years as a result of that meeting back in March.
Pens are powerful.
[0] https://www.federalreserve.gov/newsevents/pressreleases/mone...
A) In an environment where banks can lend every penny they have, is there a way to see how much of the money outstanding is loan money and vs how much is hard money? With a 10% reserve ratio, the theoretical max was $10 of loan money for every $1 of hard money. Therefore the ratio could be as high as 10:1.
2) What would happen if some banks wound up having -10% assets in reserve after a few defaults?
(Banks cannot only lend out ONLY every penny they have...)
Banks have (until March 2020) been able to lend out 10x the amount of pennies they have... aka assets listed on their books.
Now they are able to lend out an infinite amount of pennies they have.
Theoretically all money is "loan money". That's how money is primary created through fractional reserve banking, through loans.
I own a house that is worth $1m.
Somebody buys my house with $100k downpayment and $900k in loaned money from a bank in the form of a mortgage.
Now I have $1m, the bank has $1m worth of assets listed on their books, and (until March 2020) the same bank would be able to loan out another $9m in money from the $1m in hard assets they have just added to their books.
1)You start with boomer’s 1M of savings in BankA
2) The bank lends out 1M of that to Judy who deposits it in bank b.
3) bank b lends out that 1M to James who deposits it into his account in bank A.
4) bank a lends out that 1M to Jesse who buys a house from Karen. Karen deposits the money in her account at bank b.
5) bank B lends that 1M out to Jordan who buys cryptocurrencies. The Cryptocurrency seller Jake deposits the proceeds into bank A.
We now have: Boomer: 1M in bank A(the only “real money)
Judy: 1M bank B
James: 1M in bank A
Karen: 1M in bank B
Jake: 1M in bank A.
4 million dollars has been created from the initial 1M dollars. 5M in bank assets, 4M in bank liabilities. This process goes on and on.
What do you mean by all money is loan money?
Given the rate of artificially keeping the economy going by printing money at unprecedented rates I'm surprised the house of cards hasn't come down a long time ago.
> Others say they are sick of talking about BTC price and would rather focus on its utility.
Perfect example of its utility is the other day when Pornhub started accepting bitcoin after Visa/Mastercard shut down their transactions. Drugs are another obvious one. A third one is not being controlled/manipulated (at least directly) by governments.
> Your options if you hold it are to buy something with it today or to hold onto it for a short period of time and buy 2 things with it later.
This hasn't deterred people from buying computers/smartphones, even if they know they can get a better one if they wait a year.
For further reference: http://www.shadowstats.com/alternate_data/inflation-charts
Of course, this would mean accelerated wealth concentration on a minority of people and be a challenge for society.
The primary manner asset inflation leaks into public exposure is higher rent, real estate prices v/s wages.
BTC market cap is still smaller than Google, Facebook etc. Wait until it reaches 10-100x market cap before volatility is significantly reduced.
1. There is no use case for crypto currencies, except fraud and crime.
1. There may be use cases for centralized ledgers, however it seems like people are desperately trying to "find" use cases just the same way they are trying to find machine learning use cases. It's a marketing hype.
If crypto currencies were actually "required" to solve any major use case, the implementation would follow easily from the requirements. The things its being used for right now are essentially crying out for crypto currencies and it doesn't take a genius to derive a crypt currency implementation for those requirements. However I would argue that 99% of these "use cases" are made up and would work as well or even better on a centralized architecture.
So you have found a way to protect your wealth against inflation, I guess?
Would love to hear what that is.
That is generally known as investing.
It's literally the entire point of buying stock instead of putting your money in a savings account.
Pornhub seems to disagree.
For instance, if USD had features designed to make life easier for counterfeiters, money launderers, and other kinds of financial criminals we would probably say that it has been designed for fundamentally the wrong ends.
To give a goofy analogy: if it turned out that space travel was mostly gimmicky and used to cheat people, that would not undo the great technical achievement that it is.
Crypto is one of those things that no one saw coming. I dont think most people--even rather technical and well read--even considered such an idea prior to 2007.
I agree. Currently it's being treated as an investment vehicle more than a currency. I wonder if the house of cards will ever crumble.
What I notice is that so many of the kind of posts you respond to seem to be self-serving. To generate the kind of hype and demand and awe.
But there is nothing.
It's the largest vacuum cleaner in the world.
But there's no going back. Cryptocurrencies have their place, and they're here to stay.
Same reason why asset (stocks, housing) prices have skyrocketed even though there's a pandemic going on: money printing.
Gold doesn't have the same curve as BTC. Neither does pretty much anything else. Why has Bitcoin alone gone up 20% in the last month?
edit Even the post facto explanations of Bitcoins price fluctuations generally do not seem to be agreed or understood.
We can look at how economics have worked in the past to get some hints about the present, but ultimately we have no idea. We may have just entered a new era of financial and economic patterns, or we may be teetering on the verge of complete and literal collapse that would put the Great Depression to shame and have absolutely no idea. We just don't know.
Unemployment rates are slowly going back down, and the economy seems to have come to grips with how to handle the virus over the summer, so for now I think we're probably good, but the long term effects of COVID's shock to the system and the tax breaks we passed before it are probably at least 6-12 months away from starting to materialize.
The narrative that people are flocking to Bitcoin as an inflation hedge has some plausibility currently, but it doesn't explain what happened in 2017.
[1] https://www.coindesk.com/price/bitcoin
That's a new feature across asset classes, and some market participants value that. Given the limited supply, there can be supply shocks as ore market participants value its attributes.
Anything trade-able is in the same category.
Things only have value because someone, somewhere is ready to buy it.
It's called supply and demand.
The implication is that the value of the USD isn't.
That seems like a foolhardy assumption given that what I can go to the store and buy with $1 stays relatively constant day-to-day, while what I can buy with 1 BTC fluctuates wildly.
Let's assume bitcoin becomes the dominant currency for payments down the road. At its max supply, each bitcoin would be worth well over 10 million USD (in today's value of USD). And it would keep increasing in "value" because of its deflation scheme (unless of course conscencius vote for upping the supply limit for whatever reason)
So, we have a fiat currency on one side, manipulated by (at best) incompetent politicians, suffering inflation in the near term with all the stimulus we absurdly accept, a growing global debt, without a solution to repay in the horizon. And on the other side, a sane monetary policy system backed by a very solid network (all those farms + battle tested software).
In a 5+ years, these comments will look funny when people will argue that a 100k bitcoin is overvalued.
What if we don't assume that?
It's a possibility. And I don't have a crystal ball. People will make that choice. Fiat currencies may solve its deficiencies and we will happily with them. Given how global and digital the world is becoming, crypto currencies would most likely be somewhat popular anyways, unless something better comes along.
2. speculation: "Someone speculating on Bitcoin over a week cares little about its fundamental value: even if you told her that Bitcoin would crash to zero for sure in three years, it would make essentially no dent in her trading profits, since you can make a lot of money in a volatile market over the course of a week if you get on the right side of the volatility."
https://review.chicagobooth.edu/finance/2018/article/bitcoin...
This is basically how all money works, as a medium for productivity and assets.
Enter modern governments who print paper currency because it's far more convenient than gold but for the most part it was the same principle. When the US was still on the gold standard the idea was that the US government stored all the gold and any US dollar technically represented a share of gold in the US vaults. In fact if you were a foreign country with USD you could redeem your USD for gold. We abandoned the gold standard ~1971 and started printing fiat money which isn't technically backed by anything. There's a bunch of controversy around this but the undeniable fact is that now the Fed can and does manipulate the USD to cause inflation and deflation at certain times.
So why is holding one Bitcoin appreciating so much faster than the USD? Because the Fed is TRYING to cause inflation with the USD. They've said themselves that they are trying to target about 2% inflation I believe, (I could be wrong on that target). You do this by increasing the supply of USD whereas Bitcoin has a fixed supply so it's inherently deflationary.
So is it illogical to place value in Bitcoin? Maybe but the same can be said of the USD, moreso. Not only is it not backed by anything, it's inherently inflationary and loses value over time. Bitcoin doesn't. So if you get a paycheck for being a productive worker and you want a medium to store that value of productivity Bitcoin seems like a logical medium to store it in so that you know later on you can withdraw and it won't have lost it's value to inflation. Ofc, it could lose its value in other ways but that's the same with any asset.
I'm very afraid that people who should know better, like pension funds, start buying this crap, in search for any return.
This game of musical chairs will come down eventually.
The comment I originally replied was basically saying we know it has real value because people have valued it for a decade. That isn't a convincing reason.
We've been in a massive credit bubble for well over a decade, we saw it wiggle a bit in 2008, but we're still deep in it. Just because these insane illusions are able to maintain themselves for absurdly long periods of time doesn't make them real.
What we've seen is capital desperately seeking to find a new source of value to exploit, perpetually failing to do so and getting ever more delirious in its search.
We've also seen a massive liquidity pump (aka money printer), so it isn't just credit.
Unlike stocks that have to justify valuations with financial metrics, BTC has no such obligations and remains a peg against the massive liquidity influx.
Sounds like your opinion. Not seeing much in the way of justification.
Here's to hoping you've shorted Bitcoin hard.