Bitcoin is largely controlled by a small group of investors and miners
techspot.com
techspot.com
https://www.bloomberg.com/news/articles/2021-10-25/bitcoin-s...
which is itself reporting on this paper from the NBER:
https://www.nber.org/system/files/working_papers/w29396/w293...
"We first document that 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity."
"We show that the Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity. Furthermore, this concentration of mining capacity is counter cyclical and varies with the Bitcoin price."
"We show that the balances held at intermediaries have been steadily increasing since 2014. By the end of 2020 it is equal to 5.5 million bitcoins, roughly one-third of Bitcoin in circulation. In contrast, individual investors collectively control 8.5 million bitcoins by the end of 2020. The individual holdings are still highly concentrated: the top 1000 investors control about 3 million BTC and the top 10,000 investors own around 5 million bitcoins."
I haven't read the methods yet, but the idea that the authors were able to do this analysis is fascinating.
"no one can control" means:
1. you can't get bail-outs from phishing/fraud/mistakes (there are card companies/banks that actually provide this service)
2. combined with anonymity, means more wiggle-room for tax-evasion/black-market... (though if you look carefully, you'll have to 'financially-dance' a lot to get actual anonymity in bitcoin... all transactions are logged, right?)
Except the "small group controlling 90%" of mining power that introduced that change (in the hypothetical example) would use it. And their chain would grow longer and be the canonical one (though that, of course, is also just a convention encoded in the code). And they could still spend some 20% or so of their hash power to entirely mess up the one true chain, if they so desired.
You would need to control the majority (of the important) nodes to be able to pull this off. If the nodes are incentivised to keep the limit, they will.
The history of the bitcoin blockchain can't be changed unless a miner can contribute the same amount of work it took to generate the section of blockchain they'd wish to change (so from a historical start block to the latest block). Even then, the most they can do is undo payments and double spend coins. This would probably not be economically viable since Bitcoin clients would probably start to blacklist expenditures from the miners addresses if suspicions of a double spend attack arose. Because wallets and nodes can tell when there's forks, people would also pick up on double spends which would disqualify any and all money attempted for the double spend. Overall it would probably be cheaper to just spend coins fairly.
Also, as an aside, the protocol-valid bitcoin blockchain with the most work gets chosen, not the longest* blockchain
No, you trust the 50 miners that control the majority of the hash power not to mess with the code that embodies your math (or doesn't, as the case may be).
Not quite. The only people bitten by inflation in the long run are those who stockpile cash and intend to perpetually live off capital gains without contributing anything to society. Meanwhile, the vast majority, which are either salaried employees or own businesses, see both their income and expenditures adjusted to inflation.
This is in fact one of the often ignored aspects of inflation, as well as taxes: a way to mitigate or avoid concentrations of wealth detrimental to society.
I appreciate a good appeal to pity, but unfortunately you got it completely wrong. Even though pension funds use investments to complement their investment pool, they are primarily funded through contributions from the employer and existing members as an income redistribution scheme[1].
This is completely missing the point. People with big amounts of cash never keep it, they invest in something to avoid inflation. The only people who suffer are poor people who happen to have a small amount of USD saved for a rainy day.
As somebody living in Argentina, a country with usual double digit inflation, your argument is complete bullshit.
Here the wealthy are not affected by inflation: they can save in real state, strong currencies, shares... And the same rich families stay rich for generations. We also have very high taxes.
Inflation harms the poor more than the rich. Try living in Argentina for some years and you will learn.
The only bullshit I spot is this idea to use Argentina, or Zimbabwe or Venezuela, as the posterchild of responsible monetary and economic policies, when they are actually the result of gross and perpetual mismanagement.
https://www.wsj.com/articles/why-argentina-faces-an-economic...
Meanwhile most of the world reaps the benefits of sane and responsible monetary policies, and thus is free from hyperinflation, and somehow that's supposed to mean nothing? Only your cherry-picked appeals to emotion matter?
Even the European Union, which has been subjected to quantitative easing policies from around a whole decade and thus has been seeing their central banks print money like crazy, at most only complains about low inflation and mild economic stagnation.
What about your idea regarding inflation as a way to avoid concentrations of wealth? (the idea I quoted and I replied to). That one is unsustainable.
You're free to discuss the facts I've pointed out, instead of going off on a tangent with a non-sequitur regarding Argentina's hyperinflation. It's undeniable that stockpiling cash out of the economy has a deeply negative social, economic, and even fiscal impact on a nation. Inflation provides an incentive to actually put the money to use, and interest rates for the most conservative investments, like risk-free bonds, are then used to provide incentives to couple investments with economic cycles.
As a counterargument I said that rich people don't save in cash and that inflation damages the poor more than the rich, the world bank has evidence for that: https://openknowledge.worldbank.org/bitstream/handle/10986/1...
> Inflation provides an incentive to actually put the money to use,
Inflation provides an incentive to get rid of the money that loses its value over time and instead change it for something else. This not only affects the rich, but also the poor. An effect is that it becomes more difficult for the poor to save and invest. The rich can handle inflation much better than the poor.
I found another article that arguments about this https://mises.org/library/whats-so-scary-about-deflation
When inflation is present, but less than 3%, there isn't an incentive to hoard it, because simply sticking it in a bank account means it will be slightly less valuable a year from now than it is today. For poor people, who are spending most of their money on necessities, it won't mean much (unless their employers don't match incomes with inflation, which IS a problem). But for rich people, it offers a powerful incentive to spend today, or to invest their money with hopes that the returns will offset the inflation. A rich person's money flowing through the economy, be it through exchange for goods, or through investment, is far more valuable to society than it is sitting under their mattress.
Debts are also easier to pay off. With inflation, your debt of $X is easier to pay off in the future than it is today. Poor people struggle to pay off debt more than rich people, and governments are more likely to rack up debts to pay for public works and infrastructure, knowing the bill will be easier to pay down the line with inflation.
Compare that to deflation. With deflation, your money gets more valuable over time, not because you invested it in something useful, but simply because it exists. Now if you are rich, why do anything at all with your money other than stick it under a mattress? Why spend it, or take the risks that come with investment, when you are guaranteed it will be worth more than you have now in the future? Poor people don't have this luxury. They have to spend money on their needs today, which means they are missing out on even more value tomorrow.
Deflation is just as toxic to the economy, and especially poor people, as hyperinflation.
mainly the referenced links
The way I see this, there's a fallacy there.
The claim, that inflation won't matter much for poor people is wrong. Even if their employers compensate for inflation with accordingly increased salary (which they don't always do) then there's still the fact that poor people are treading their treadmill, unable to advance one bit. In the best case they stay right where they are (relative to others).
Rich people on the other hand have the "burden" of sitting on assets that do not suffer inflation. And any excess money they earn which they don't need to spend on everyday items, they can put into investments that again do not lose value like cash does (under inflationary circumstances).
Quite simple: rich people have opportunities to invest and earn profits, letting them improve their position relative to poor people even further. Poor people don't have these opportunities and they even have to constantly fight for compensation of inflation while having shorter levers to push everywhere in society.
If rich people weren't urged to invest money they have sitting around (by threat of inflation), they'd maybe just hoard bigger proportions of it and sometimes spend some, instead of using it to acquire ever increasing proportions of assets from poorer people who have to sell. I'd say inflation almost directly causes wealth concentration.
In this way, inflation does indeed mean much for poor people. No, it's not totally obvious, kind of counterintuitive even. But it's true.
The current development is like a continuously happending race along a path of steadily increasing availability of pleasant goods and opportunities ... where the rich are moving significantly faster along the path than the poor. Yes, the poor do advance, but the lead of the rich continually grows larger. Since wealth is psychologically very much a relative thing, this is bad, even if the absolute wealth of the poor is indeed increasing over time.
The US, unlike Argentina, hasn't spent over a decade experiencing with a >10% inflation rate, and half a decade at >25%.
Most of the world hasn't.
Until it does, any comparison with Argentina, or any country experiencing years of hyperinflation as a result of gross mismanagement, is overwhelmingly positive.
The part with print money like crazy is absolutely true. The claim that there's low inflation in Europe, is absolutely false. Official inflation numbers are relatively low only because real estate and other things are arbitrarily excluded from cpi. It's always astounding to me how people can pretend as if rising real estate prices did somehow not trickle down to rents and thus effectively all everyday purchases, people make.
The world is full of zero-sum games whose existence people often deny ... just because many of them are long and complex and interconnected chains of interactions which means they are lots of work to describe accurately doesn't mean they're not there.
There are a lot of similarities for sure between Tesla stock and BTC in terms of price versus traditional measures of value (based on current income and enterprise value), not to mention the volatility.
There is not as much price discovery when a handful of owners own more than 50% of stock or crypto and are easily diamond handing. The price discovery is only happening on the portion that's actively trading which can distort the market price. I bet in the early days of BTC there were a lot of tricks like the Jason Fried/DHH Basecamp unicorn example[1].
As they eventually lose interest/need to pass assets to the kids, when they start unloading, there will be price drops as there were once Bill Gates started unloading MSFT stock. Part of the challenge that Steve Ballmer faced (other than lackluster leadership) was the headwinds and downward pressure created by BillG's retirement related unloading of MSFT stock.
[1] https://signalvnoise.com/posts/1941-press-release-37signals-...
People sell at some point. I'd argue it's incredibly hard to diamond hand for early holders, that is why there are more stories of people selling their coin for cheap rather than diamond hands.
If everyone stopped buying BTC and only held BTC and bought another crypto currency, BTC would go to zero since no one would be putting money in. Similar to a pyramid scheme, once there is no new money it collapses.
On the other hand, if investors decided to never buy MSFT again and sold their stock the price could go down a lot, but it couldn't go to zero because that would make the dividend yield go to infinity. If MSFT went down to $20/share it would yield over 10% a year, and it is absurd to think that no one would want to get 10% a year return.
Obviously companies can and do go bankrupt, but for this comparison I'm comparing successful crypto to successful companies.
It feels foolish to be long USD at the moment.
Perhaps its better to throw in some growth stocks that ended up not being particularly amazing such as WeWork, Evernote, Zynga, etc. All had low stock float, no/negative income and so were trading on emotion.
Are you talking secondary markets?
If said investor abused his leverage to manipulate the stock value to dump his holding on unwitting buyers prior to making it tank, he would be facing a prison sentence.
In BTC that would be just another uneventful day.
It's more likely that the developers has leverage that could be abused, but then their own holdings would tank, so unlikely to happen.
That makes as much sense as claiming that a free society isn't really free because you're subjected to arbitrary restrictions that punish you for stealing and embezzling.
I mean, are you surprised that some things are illegal? Of course not, no one is surprised by this.
Could you imagine what a clusterfuck the market would be with no regulations?
Generally regulations are written after clusterfucks have occurred to reduce the risk of them happening again.
It's the same reason we have building codes: after a Great Fire or two happens in a given city, fire breaks are usually mandated.
It’s amazing to me how many times we’re repeating the same mistakes over and over again that we’ve made in the relatively recent past because “it’ll be different this time because technology!” or whatever—and i don’t only mean in the coin sphere.
I work, live, breathe, eat and play with technology however, quite a few people, usually those falling for marketing hype have deluded themselves pretty hard. Humanity scale chaotic complexity problems still exist and technology isn’t even close to solving those and won’t be for a long, long time.
There's a reason for this: while in the short term dropping these rules gives flexibility, lower costs and the promise of new sources of profit, inevitably if unruly capital markets get big, small investors get screwed and a lot of investor wealth gets destroyed. We've seen this pattern a lot over the last two centuries.
Simplistic free market ideology has a lot to answer for: successful markets need well-functioning institutions.
Edit-This would also provide people who want to cash a large amount of crypto to cash an incentive to prop up the value during their transaction period.
Edit2-latest I can find, it was about $6.6 trillion dollars worth of daily forex activity back in 2019. Also note, this is cited as the biggest market in the world by trading volume. https://www.bis.org/statistics/rpfx19_fx.htm
Is that how it works for currency? I would think that if people tried to sell every single Euro for USD, the conversion rate would absolutely change.
Realistically, I was thinking of trading cash for cash of one nationality- which absolutely wouldn't change the face denominated. Kind of tautological and not as helpful. Probably testing whether bitcoin to usd acts similarly to another foreign currency to usd may be a useful metric.
But why do people exchange international currencies? So some are just forex traders performing intraday arbitrage. But the real/biggest use of it is to exchange goods across national borders. That's a use which cannot exist with the cryptos in quite the same way. Even if a nation adopts a crypto like bitcoin as its currency it does not have the same function as a currency backed by that government since bitcoin is controlled by other people - see the nber article referenced here.
Edit - my main point remains about the exchange elasticity of crypto to usd/a national currency. If the exchange rate changes rapidly with the number of crypto exchanged then it's not very liquid, by definition, and not storing value nor acting like a currency.
Poor people can't get in and fat cats dominate so the more you zoom out the more you're right.
I.e. isn't the BTC I have parked at Coinbase is in the same wallet as many of their other customers' BTC, and shows up on the blockchain as one owner by this analysis?
So, the much-vaunted "mathematical guarantee" that only 21m BTC will ever be mined depends on the benevolence of those 50 miners not to fiddle with the code base. Makes perfect sense to trust those honourable individuals more than the central bankers in control of fiat. /s
That is not the issue caused by this concentration of mining power.
There's no telling whether it'd be the "hijacked" branch or the original one - assuming they control 50%+ of the mining power, there's a decent argument that the remaining miners would follow their lead if only to stay on the largest branch.
Usually forks have checkpoints as well so things can't change willy-nilly.
There is a protocol and system specification. There are implementations of that specifications. There is a distributed system running those implementations. And the distributed system has a state. Each of those can change and each of those or a combination of them could arguably be called Bitcoin.
If everyone would run new implementations with a different coin cap, you can argue that it is no longer Bitcoin because Bitcoin is a very specific specification with a 21M coin cap, but this would have little bearing on the actual situation.
Yes, these 100 miners are pools. But where pool participants will go then? Will pools who have not forked keep pool participation fees low?
Etc.
The game here is not quite simple. It is much more complex than appears at first sight.
Here’s a graph of the time blocks took over the last three years:
https://bitinfocharts.com/comparison/bitcoin-confirmationtim...
Look at the peaks and try to remember the issues that resulted in.
Second, instead of two weeks to hash rate adjustment, it will take four weeks.
And if these staying with this slow bitcoin would decide to leave to more profitable currencies (not necessarily Bitcoin, there are other SHA256-based PoW schemes), that will push hash rate adjustment even further into future.
https://www.cnbc.com/2021/07/03/bitcoin-mining-difficulty-dr...
We survived.
Money has worth because people accept it in exchange for goods and services.
Bitcoin has worth because people accept it in exchange for goods and services.
It’s not the miners that create value, it’s the merchants. If miners start some fork they’ll leave the main blockchain, which will run fine without them. And they have absolutely no way of forcing anyone to use their fork. Only if the merchants start accepting coins from the forked blockchain will it become valuable. But that’s up to the merchants, not the miners.
There are problems with one miner controlling over 50% of the mining power. This is not such a problem.
It's been quite educational watching the whole cryptocurrency community re-invent economics 101 and find out the problem has never been technical, always been political.
This is less a criticism towards you @CompuHacker and more about how ill-informed reporters are (especially it's most vocal critics) about Bitcoin's history.
We already went through this during the USAF/Segwit war that went on for far too long if you were there and delayed so many other key features that we are only now catching up to. With the added caveat that Roger Veer (a VERY ignorant whale with influencer status) and Jihan (CEO at the time of Bitmain with a monopoly on ASIC miners and large hashing power on the network) decided to hi-jack Bitcoin for their own ends. There were other whales/high net worth entities, including Coinbase, but lets keep it simple for arguments sake.
In short, it didn't work and no one uses/used their fork (Bcash) because the end result was that Bitcoin's mainchain and it's features was valued far more than what whales and hashing power/devices. Furthermore, upon the fork people arbitraged the coin and dumped it in exchange for Bitcoin and Bcash has never recovered since. Showing that playing by the rules has it's incentives and is rewarded: rewarding consensus is one of Bitcoin's core features, and I wish more people would realize this is the ecosystem is far more conducive toward progress than abject discord.
What's even more amusing is that a core developer of Bitcoin Core decided to help patch some of Bcash's source code, showing that what you fear has actually already played out and proved why Bitcoin has already proven itself and has a the battle scars to prove it.
It's remarkable what has happened in this space in the last 12 years, and in my ideal World I think their would be more time spent on that and what it has taught us via empirical experimentation rather than just the price.
Sidenote: It's why the plot of the 51% attack on the series Silicon Valley only made sense to people who really have no idea how the network attack would actually play out on decentralized networks.
Therefore, over a long enough time scale, the number of available BTC tends towards zero.
Currently, you can only chop them up into atoms worth 1e-8 BTC (satoshis), but there isn't much that needs be changed in the code and the protocol to get that to much finer grained.
Therefore, it's unlikely that there will ever be zero bitcoins.
Such a change would be a hard fork and, as you know, we don't do that in Bitcoin. But, no worries because we have millisatoshis in Lightning. Because Bitcoin scales in layers, each layer can implement more and more divisibility as required.
https://bitcoin.stackexchange.com/a/69704
As you said, bitcoin is infinitely divisible, therefore the world economy can run on 1 btc or 1 satoshi.
True, it'd be a hard fork. However, I don't believe hard forks are impossible if managed properly.
The taproot upgrade (not a hard fork, I know) was rather uncontroversial and accepted rather easily.
I suspect a hard fork allowing for - say - bitcoin amounts encoded in 64 bits would not necessarily generate the kind of upheaval the blocksize wars did.
And, hopefully, even for controversial upgrades, the lessons of said wars will have been learnt and the process of upgrading Bitcoin can be done in a slightly more reasonable / orderly fashion.
In a world where only 1,000,000 BTC remain in circulation if one person owns 500,000 of them means he controls half of the total value of BTC and that everyone else's coins will add up to the other 500,000 BTC, and being able to divide the each BTC into smaller and smaller amounts doesn't change that fact. Whether we can divide 500,000 BTC into 50 trillion Satoshis or 5 quadrillion "New Satoshis" worth 1e-10 BTC each doesn't make new wealth appear.
https://www.investopedia.com/terms/d/deflationary-spiral.asp
Also, it exacerbates inequality immensely. When deflation is high, it means your existing money becomes more and more valuable for no other reason than existing. So the "rich get richer" in the most literal sense, for no other reason than having been rich in the first place. No investment or risk required.
Miners can't change the protocol of the entire network.
The only malevolent thing they could do is perform a 51% attack if they all colluded together. And even that wouldn't achieve much, so there's not much incentive to do it. All they can do is a double spend. They would've been better off spending that energy on mining blocks to be rewarded with the Bitcoin subsidy.
Sure, it's unlikely. But not impossible. Just as runaway inflation in a reasonably managed fiat currency is not impossible. Just unlikely. (And, yes, hyper inflation has happened historically. Similarly, rewriting of the immutable Ethereum chain and BTC forks have happened historically.)
> If they're bored, they can devote some of their hash power to double spend attack the "good" chain. Which chain will come out on top?
That's a different attack entirely.
What mechanisms do those 50 miners have to coordinate amongst each other, starting with how do they identify each other, communicate with each other, then overcome Prisoner's Dilemma in negotiating with each other?
This is incorrect. Replace "miners" with "mining pools" and they're closer to the mark. What's happened is that the block construction (done by the pool operator) and the PoW (done by miners) are mostly decoupled. Some miners will run everything themselves, but they're not represented in those numbers. (There are some things that can change here in stratum2, the new protocol used for coordinating mining pool s, but whatever)
Sure, pool operators can abuse their power. But as the paper shows, hash power is liquid; miners do move between pools for various reasons.
While there is a bit of a systemic risk there, it's not necessarily as bad as it might seem.
IMO the biggest risk here is censorship; and we saw how responsive miners are to things like that earlier this year with the whole "OFAC-compliant" debacle.
It is correct. They are talking about miners not mining pools.
One thing I’m noting is that they exclude ~70% of miners and assign ~30% as exchange miners (note that those two figures only coincidentally add up to 100%). One possible methodology error I can see (and again, further digging would have to be done to verify) is that exchanges often pool their user wallets together; it could be that for some exchange(s), they mistakenly lump together several users as one. Since their claimed concentration is very high, it should be feasible to look at the top 50-100 to cross-check.
Would be awesome to get more research like this.
Overall it’s an insightful article and the authors show great understanding.
Their work is nonsense. They assume address=single investor, which is not the case. That large address that has hundreds of thousands of bitcoin on it? It could be a whale, sure. It could also be Bitfinex's cold storage wallet representing tens of thousands of individual investors.
What do you think a similar metric would look like for the US dollar, when you consider the $600 trillion-plus derivatives markets?
Is there any reason to think bitcoin is that much different from ownership ratios of other financial assets?
Say all you want about the efficacy of the above measures, they are absolutely not perfect. But it's completely different to bitcoin where none of the above applies, and often the opposite occurs.
Regulated by them, so in practice not all that regulated
Specific examples: UK capital gains tax is lower than income taxes. This means if you are born in to a wealthy family and given a £1MM index fund, you will pay less yearly tax on your capital gains while chilling at home all day than someone with a £50K job working hard and contributing to society
Ok - so the rich have decided on regulations which are not the ones that are best for everyone. So…missing regulations? By definition, if we have the wrong regulations, then we’re missing the correct ones.
Capital gains taxes are lower for a specific reason: the capital that was initially invested was already taxed. These laws benefit average people much more than they do the rich on a relative basis. Go model out a retirement portfolio that is taxed/compounded at ordinary rates vs capital gains rates.
What people really want is higher capital gains for rich people which is fine, but you fundamentally misunderstand why they’re lower in the first place, which is double taxation.
Additionally, the higher the capital gains tax, the higher the expected returns have to be. Lower capital gains incentivizes riskier investment, which, within reason, is a net positive for society.
And I don't think we need to incentivize even more investment, given where things are at the moment. All it does is concentrate more market in the hands of the same people (who already have enough money to throw it around). It doesn't actually benefit the society as a whole, unless your metric for that is some mindlessly averaged metric like GDP.
CGT generally has the same rate as income tax: the reason why the rich are better off earning through capital increases than wages is that they get to decide when the capital gains happens, which means that their wealth managers and tax accountants can optimise their affairs to minimise tax.
The fundamental misunderstanding is yours.
If by “CGT generally” you mean “short-term capital gains tax”. But, that's not true of long-term capital gains that kick in at a year and a day of holding the asset.
That's an excuse, not a meaningful explanation. When I pay sales tax at the store, the money I pay it with has already been taxed when I was paid my wages.
These laws benefit the ultra-rich more so than everybody else for the simple reason that most of the former' income is capital gains, while most of the income for average people is wages.
That is not a sensible reason for capital gains (which apply only to gains) to be taxed lower, since the gains have not already been taxed.
It also doesn't explain why the reduced rate (compared to “regular” income) applies to long-term gains, since the original capital was taxed regardless of whether the gain is long or short term.
The best fairness-grounded argument I’ve seen for reduced LTCG taxes is that, in a progressive annual income tax system treating gains earned over multiple years but realized at the end as single-year income at full tax rates overtaxes compared to what would have occurred if the income was spread out over the time it took to accumulate before realization, unless the recipient would already have been at the max marginal rate every year before the gains at issue were considered.
This is a valid point, but allowing free voluntary advance tax recognition of income and deferring tax recognition after realization for windfalls (say, spreading amounts above the middle actual realized income of the last three years over up to ten subsequent years) deals with that problem more comprehensively (not just for capital income) without undertaxing those who would be at the maximum marginal rate even without the particular long-term gain, or who are continuously rolling out long-term gains year after year repeatedly.
Favorable LTCG rates are a way to use a poor approximation of fairness for middle-class earners with occasional long-term gains to sneak in wildly favorable treatment forn the super-rich, instead of just treating income fairly all around.
(There's also a trickle-down economics argument for low capital gains rates, that is not fairness-grounded: “we want to encourage the already rich to invest and make more money, because positive side effects of this will trickle-down on the lower socioeconomic classes”.)
If all non-rich people took that view, then only rich people would be arguing about what the rules should be, and thus they will represent what rich people want.
Self-fulfilling.
Well, I absolutely don’t.
Nice try though.
Now the question about "fairness" that rich people can structure to pay less tax than others - they don't -
The top 1 percent in America earn 20 percent of the income but pay 40 percent of the tax.
We can generate top 50 lists of the more-regulated wealth, but there is also significant wealth hiding with little accountability.
I understand the need to try to dismiss this problem, specially from those who have a dog in the race, but the dream of having a magical pseudo-currency that solves all problems and unexplainably makes everyone richer and richer just falls out flat if there are actually men behind the curtain manipulating it's value to screw everyone over in order to benefit themselves.
To everyone I’ve misjudged who genuinely enjoys the theory being crypto: I’m sorry.
The article does not support the claim that the top investors and miners are engaging in cryptocurrency manipulation with bitcoin.
That's not what's exciting about bitcoin. What's exciting is that it is the first digital, global money that isn't protected by the proof of violence of the state. The US dollar is the world reserve currency because the United States is the best in the world at deploying destructive power, and the British and French currency before that when they were at the height of their power.
It's a neutral currency that every nation state on the planet can be ok with, because the system is completely agnostic to who the participants are. The only thing it requires is that you have hash power and internet connectivity. Nation states will have proportional power in the system based on their respective abilities to deploy energy and compute power to the security of the network.
No, not really. At all. You're trying to make it sound like everyone is just an anarchist activist trying to fight the power, when in reality it's just people scrambling to make a quick buck.
Let's be real and put it in perspective: do you feel that people such as the Winklevoss twins give a damn about theoretical concepts such as "proof of violence by the state"?
The key problem you're trying to glance over is the fact that not all participants have the same degree of influence or control.
A greedy participant who is in a position to manipulate the market to fit his goals is in an entirely different position than a greedy participant who is completely powerless and vulnerable to this manipulation.
Is it ok if someone participating in a Ponzi scheme is fleeced just because you accuse him of being greedy?
I know this is counter-intuitive, but yes. Yes, they think that.
They think that human nature is to be greedy and screw other people over to your own advantage. This is what they mean that capitalism is natural because it builds on human nature. Nevermind that for most of history human societies have been built on gift economies or that humans always cooperate in times of extreme crisis unless there are external influences explicitly preventing it.
Social interactions are transactional to them and if you luck out by participating in a Ponzi scheme early that's good and righteous but if you lose by coming in late and being fleeced, it's your own fault. Luck justifies the spoils of success.
The key point here is that in BTC, or any crypto or unregulated market, there is no external influence preventing it. In fact, there are only external influences ensuring that they will screw up the little guy and fleece them out of their hard-earned money.
With real money, we have central banks actively working to both stabilize it's value and increase economic growth. That's as close there is to "cooperating in times of extreme crisis" there is at a national or even regional scale.
With crypto in general and BTC in particular, the name of the game is pumping it and let everyone else end up holding the bag.
I'm not sure you're replying to the right point since it seems you largely also share the opinion that crypto is mostly a scam even if not every participant is in on it.
I was talking about hierarchies of power. Capitalism, caste systems, patriarchies (think of Middle Eastern "honor" systems), literally having a gun pointed at your head, etc. Those are external influences that can prevent and disrupt cooperation that would otherwise arise naturally.
If I see an overturned car on the road side, I stop to see if I can help. But if I'm on the way to my job which I need to continue having a roof over my head and feed my family and being late could get me fired and it's hard to find something else, I'm more likely to just move on.
It isn't working though. It isn't practically useful for anything. They only people getting value out of bitcoin are doing so by converting it back to fiat. You can't buy virtually anything with Bitcoin.
If Bitcoin was meant to be a pyramid scheme where you get rich by convincing others to prop it up long enough for you to cash out, it is working. As a currency, its a total failure.
They of course do give a damn about theoretical concepts such as "The Great Monetary Inflation"
They make a pretty good case for bitcoin at https://winklevosscapital.com/the-case-for-500k-bitcoin/
But don't worry about all of this, I'm sure you can just dismiss this all. Meanwhile our investments are going through the roof :P
It seems you tried to shift the subject mid-discussion and thus move the goalpost. The point being discussed was "proof of violence by the state", but somehow you've tried to change subject mid-discussion to inflation and how they argue that going long in BTC is a profitable investment.
In fact, the Winklevoss Capital article you quoted even praise the US dollar as "a reliable store of value" and even go as far as praising the Federal Reserve and it's "comparatively good management".
This doesn't sound like "fight the power" to me. In fact, it just reads as a marketing brochure selling an investment.
Haha, you must be blind. Nowhere in the article did they say that. I quote: "we believe there are fundamental problems with gold, oil, and the U.S. dollar as stores of value going forward". Then they go on to explain how the dollar is mismanaged.
Have fun living in your own world.
Second paragraph. Hard to miss by anyone who clicked on the link. Be my guest and check it out.
> I quote: "we believe there are fundamental problems with gold, oil, and the U.S. dollar as stores of value going forward".
Somehow you managed to skip just enough of the text to glance over the part I quoted and you claimed it doesn't exist. That isn't very honest of you.
Anyway, it seems you also failed to notice that the thesis of that article is that the economic stimulus programs adopted by not only the US but also essentially the whole world, like any Keynesian policy applied to an economic downturn, involves policies that devalue the dollar through inflation.
They also argue that they believe that gold is immune but has a fixed supply that can accompany increases in demand.
Based on these points, they proceed to argue that Bitcoin is a better long term investment because, unlike gold and the US Dollar, it's supply is capped, thus it's value is bound to grow faster than inflation and gold prices, provided that demand continues to grow.
With this in mind, do you actually understand the sales pitch made by Winklevoss Capital?
I'm not a native English speaker, but "has been" is a past tense. Then they explain why these times have indeed passed.
If you cannot interpret past, present and future, then there is no point in us discussing this further.
EDIT: Ok, no problem then, Winklevoss twins think the US dollar is a reliable store of value. Great article they wrote about that!
Not being a native English speaker seems to have led you down the wrong path here.
As a native English speaker, I can confirm that you're incorrect in your assessment.
The phrase "has been," e.g., 'the dog has been feeling poorly', or 'Steve has been lying to you', or 'For the last 75 years, the U.S. dollar has also been a reliable store of value.' absolutely refers to what has already happened, but it certainly does not exclude the idea that whatever 'has been' is still happening.
In fact, both of my examples, as well as your quote strongly imply that what "has been" the case continues to be so.
If you cannot properly interpret English as it's actually used, then perhaps someone can help you with that, rather than refuse to engage with you[0].
Unless, of course, you are uninterested in anything that contradicts what you want to believe.
Oh, and you're welcome.
[0] See what I did there?
Just to clarify, I didn't read the article in question, nor do I care what those folks think about anything.
I merely provided you with information about English usage that seemed to have eluded you. Again, you're welcome.
Basically their whole schtick: "we believe that the US dollar has been amazing, now we found this new asset class we believe we can invest and earn money on, this is our marketing piece for why you should believe that too".
They aren't "fighting the man", they are trying to convince others to jump onto the bandwagon which they are heavily invested in to make a profit.
Not sure why you are still caught up on this ideological debate when Bitcoin has long ago left that camp of ideology and got absorbed into the pure financial-capitalist camp...
Bitcoin now is to make money, not to fight the system. Fighting the system is just the marketing fluff being used to capture people like you.
Good luck and godspeed.
I would also add that the Winklevoss Capital article actually reads like a self-serving plea to get third parties to validate their own investment, instead of a selfless heads-up.
The Winklevoss twins already have a few billion dollars worth of BTC, and in their opinion piece they are very clear in the way they argud that as BTC supply is restricted by design then any increase in demand ensures an increase in price. Consequently, the only thing they need to do to ensure that they get richer from BTC is to pump it up and sit on their early mover's ass.
Your argument is a bit naive and this sentence I quoted is the one that shows the reason. Proof of Work is a energy intensive activity, not to mention the specialized tech it requires.
Access to energy today is more than ever a sign of the power (including military power) of a nation, so much that energy itself could be regarded as the ultimate currency [1]. Who has more energy is richer. In short that is because nations with abundance of energy enable all sort of activities. In nations in which energy is scarce, opportunities are constrained by the cost of energy.
Because energy in the world is still a relatively scarce resource, powerful nations control natural resources needed to produce energy in any way they can. The obvious example is oil, but also land itself can be seen as a means to produce energy: think of the space needed for solar.
So in the end when talking about Bitcoin we are back at square one. Even if it was the only currency of the world, it would still be controlled by those with more power.
In short: Bitcoin is governed by spending energy and CPU -> ability to produce energy and CPU -> control over means of production of energy and CPU -> international strength ensuring control over natural resources and IP.
You don't have to be a miner to use Bitcoin and miners don't control Bitcoin. Miners can't force a protocol change, no matter how much hash power they have.
You can't use it anywhere as currency! I guess you can buy weed with it online, but that's about it
The same can be said about jugs of Tide detergent, but somehow that's not presented as disruptive technology of the future.
I really like the idea of trying to build at least some part of society on top of mathematics instead of the laws of physics, but I am not really convinced that cryptocurrencies are an example or that this is even possible. The entire Bitcoin system is still made up of humans and hardware, there are still a lot of ways in which the laws of physics could overrule mathematics. Being distributed admittedly makes this harder but I think it is far from to point of being really effective.
The problem is a deep misunderstanding of currency. The structure of currency is a tool humans use to exert and identify power within groups. The idea that a decentralized currency will change human nature or goals to control miss the forrest for the trees.
We are animals the violence, control and waning and waxing dominance is the only predictable outcome.
> The problem is a deep misunderstanding of currency. The structure of currency is a tool humans use to exert and identify power within groups. The idea that a decentralized currency will change human nature or goals to control miss the forrest for the trees.
I agree with this. Most people see currency as money or wealth when, in reality, it's a representation of the structure of the system. That's why some countries are experiencing high inflation: It's not the printing of money but rather a symptom of deep internal problems within their economy. See Argentina for example.
Great example. I dont think its a bug that crypto is almost fully adopted by people who come from means. People are living in very different systems even in the US currently
Orrrrr.... because its value is backed by the world's largest economy?
There's also the fact that oil is quoted in US dollars, and about 65 countries, about a third of all the countries in the world, peg their currency to the US dollar[1].
[1] https://www.investopedia.com/articles/forex/040915/countries...
There was a ton of talk about the 2001 invasions being about the US oil reserves for itself but that's based on a very simplistic understanding of US foreign policy. The US didn't annex the oil fields, it disrupted the national oil company's monopoly to allow privatization of the market and invite international (especially US and US-friendly) investors. It was really more of a hostile takeover backed by the world's largest military.
Again, I'm not claiming that this was the sole reason behind the invasion or the primary motivator, but the US has a history of privatizing nationalized industries of countries it successfully invades, overthrows or interferes in the elections of.
[0]: Not a conspiracy theory. Here's an article from Nov 2000: http://content.time.com/time/subscriber/article/0,33009,9985...
As a former trader, this claim cracks me up. It makes the times I quoted crude contracts in euros and loonies and yen seem so subversive…
The truth is, until recently, dollars were easy to transfer. The Fed started moving money electronically in 1915; by 1918, a national wire system was established [1]. Between the USSR and U.S., only one embraced free movement of capital. As a result, when Lufthansa bought Airbus jets, they settled in dollars, and trades quoted in pounds would be settled in New York in dollars. That has since changed; so has how oil is traded.
The last time the petrodollar hypothesis was remotely true was in the early 1980s.
You say this as if it was a good thing. But is it? Look at it from the other direction: it's a tremendous optimization. Imagine a world of Bitcoin, where someone comes and proposes: "Look, we can all keep spending almost all of the world's energy production on scaling basic trade, or... we can just agree that I'll beat up anyone not playing ball, and we can put all that energy to productive use - like farming, medicine, construction, entertainment, science". Does it sound like a bad deal now?
Also, the only reason there isn't much threats of violence[0] associated with Bitcoin yet is because cryptocurrencies are tiny. Barely anyone in the real economy cares about crypto[1]. If, by some scary miracle of a trickster god, the economy starts caring for real, cryptocurrencies will get quickly integrated into the mainstream by regulatory means - and regulations are backed by proof of violence. And almost everyone will want that, too, because people will be tired of getting robbed or cheated out of their money. You can't correct an act of violence without another act of violence[2].
(It's not even that hard to rein in Bitcoin. All it would take is for the US govt to announce which chain is considered legitimate by them for the purpose of paying taxes, and that the rest is considered counterfeit money.)
--
[0] - Criminal activity notwithstanding.
[1] - No, noises made by large banks about running their own blockchains isn't caring - it's just exploring new potential areas of growth and profit.
[2] - At least if we generalize "violence" enough, to encompass credible threats of violence. If me stealing your money at gunpoint is an act of violence, then so is the court ordering me to give it back under threat of forcing me into prison.
States won't give up their currencies because that would put all of them in the position of, say, Liberia, rather than the position of the US, EU or China who can literally print money to pay.
And even if all state currencies vanished over night, this would change nothing for individuals because the vast majority of wealth is claimed by a minority of individuals and the only thing guaranteeing their claim is the exact monopoly of violence of the state that also backs its currency.
You don't have a private yacht because the state guarantees the value of your money with violence against foreign nation state actors. You have a private yacht because the state will ruthlessly punish anyone other than itself trying to take it away from you.
The state may be holding a gun to your head to be able to take away what's yours at any time, but it also holds a gun to everyone else's head to prevent them from taking it first. This is why the extremely rich spend so much time, money and energy influencing politics. Not because they want to dismantle the state, but because they want to keep it from using the gun against them while still keeping it pointed at everyone else.
Without a state threatening violence to protect your claims on "private property" you'd literally have to raise your own private army to defend it. This is why leftists call anarcho-capitalism "feudalism with extra steps".
El Salvador is considered by many to be a state.
El Salvador is a fun case because they didn't exactly switch to the US dollar because their economy was doing so great but because it was either that or massively devaluing their already dodgy currency because they are a very small country and their economy heavily relies on international trade.
They introduced Bitcoin as "legal tender" on top of the US dollar against the will of the majority of their citizens but the law was part of a program to lure in foreign investments. This too followed earlier economic problems, so it's more of a cashgrab than a genuine interest in crypto currencies.
El Salvador replaced its currency with the US dollar. It did not replace its currency with Bitcoin. It also didn't replace the US dollar with Bitcoin, it just added it as a form of legal tender. It also suffered almost immediate consequences when the price of Bitcoin crashed and they had to dump additional money into it to compensate for this.
It's too early to say but at the moment this doesn't sound like a wise political move for El Salvador rather than a risky publicity stunt for the president.
I completely agree that the US govt and all super powers before it have made many mistakes, and shed much blood.
But the world isn't a utopian bubble free of conflict. The US military doesn't bestow value to the dollar because it goes around nuking every country in sight...it bestows value because it this huge potential of force keeps more peace than we would otherwise have. It's the same rationale for why a 51% attack on bitcoin is so unlikely: those with the ability to attack, also have the most to lose. Mutually assured destruction was not a new concept that started and ended with the cold war. It's fundamentally game theoretic and is why cooperative strategies are so powerful.
If you take into consideration all of the atrocities of the past 50 years, even the truly horrific scars on the US military industrial complex, this has been the most peaceful and prosperous period in all of humanity by a large margin. Could it be better? Of course, and we should strive for that.
But the same underlying reasons that the dollar is considered safe are the same forces that allow bitcoin to be successful. The fact that the world has come together and cooperated on a massive information sharing network called the internet is an example of something that, ignoring the tech advancements, would have been unfathomable mere centuries ago.
It's a speculative instrument, and its value is propped up by Tether, which pretty much everyone agrees is incredibly fraudulent.
Average velocity of money is 1.5.
https://www.thebalance.com/velocity-of-money-3306130
If you want to compare the usefulness of a bitcoin as an investment locked up for 20 years, then don't compare it to cash, which is used for day to day expenses. The whole point of cash is to spend it whenever you want.
It's fine if you view bitcoin as an investment. But then your alternatives are other investments.
[0] https://hbr.org/2021/05/how-much-energy-does-bitcoin-actuall...
Yes, there is a lot of small scale shenanigans with crypto currencies, but Bitcoin has become very hard to manipulate due to the sheer size of the market.
> Yes, there is a lot of small scale shenanigans with crypto currencies, but (...).
There are no buts. Either the market is manipulated, or it isn't. You already acknowledged it is manipulated, but somehow the degree of difficulty to pull it off is of any relevance? Why do you feel this matters?
Meanwhile, here's an interesting read.
https://www.bloomberg.com/news/articles/2021-01-14/research-...
That is not what cryptocurrency enthusiasts believe.
I understand that you have to explain to yourself why others are dumber than you, even though they made crazy amounts of gains.
But maybe in the end, we just see something that you refuse to see.
I'm assuming you see an infinite supply of greater fools.
I never heard that claim from crypto supporters, only from critics.
I would expect much wealth concentration if the emission had been purely linear with a fixed block reward, taking MUCH longer to get down to a small yearly supply inflation (100 years to get to 1%). Such a SLOW emission would focus on the use as a currency rather than "store of value".
It likely would have made Bitcoin's environmental impact much smaller as well, without speculators pushing up the price.
You would end up with the same situation as now, just with some name swapped.
"Our brand new environmentally-inefficient, difficult-to-regulate, needlessly-complicated, easy-to-surveil currency also falls prey to the same financial consolidation outcomes of every other traditional currency" is not really the strong defense of Bitcoin that people seem to think it is. And "Bitcoin isn't established by state violence" doesn't work when states/corporations control most of the supply and have outsized control over the protocol. This kind of consolidation undermines Bitcoin's value as an experimental/democratic currency.
From the article:
> These observations led the NBER to conclude that despite the attention Bitcoin has received over the past few years, the ecosystem is still dominated by a concentration of key players, making the ecosystem susceptible to systemic risk like a 51 percent attack, where a group of miners could take control of the majority of the network.
If someone is legitimately, honestly trying to pitch Bitcoin as a democratizing currency, then seeing outcomes like this should be worrying to them. The regular dismissal that traditional currencies have the same problems makes it hard to take Bitcoin proponents seriously when they talk about societal benefits that the coin purportedly provides.
There's a disconnect here between the theory that Bitcoin allows equal participation by anyone in the network, and the reality that even the resources required to start participating in the network can be tightly regulated and are often controlled and manipulated through centralized state/corporate apparatus. And hand-wavy dismissals of that problem don't do the currency any favors. Why adopt a new currency that still has multiple downsides, if the upsides are constantly being waved away as unimportant by even the currency's own proponents?
Users running software nodes validates the blocks, limiting what miners can do. Miners can be pushed to change the rules with methods like a 'User Activated Soft Fork'. The proof of work algorithm can even be changed, rendering all the ASIC hardware of the mining industry worthless.
Isn't the role of a central bank to enact monetary policy and to contribute to financial stability? I mean, actively working to stabilize the value of money and to ensure inflation meets the government's policy goals, which are motivated by the need to ensure the economy stays healthy, don't sound like something that creates controversy. I mean, do we really need a vote do check if we want Zimbabwean hyperinflation?
Given the alternative is the perpetual risk of seeing the value of your currency halve in less than a week, like BTC experienced a few months ago, how exactly is the service provided by a central bank bad or undesirable?
And there are countless historical examples (even recent) of peaceful or violent protests causing change to corrupt governments.
__Developers:__
* Profit motive: Paid salaries / bounties / donations by users, business that build off the Blockchain, miners, and appreciation from their BTC holdings
* The consequence of all the core developers going rogue would be the price of BTC collapsing, salaries or donations no longer getting paid by either or all of the above groups
__Miners:__
* Profit motive: Appreciation of BTC holdings, income derrived from doing their job by validating transactions and appending them to the blockchain for the block reward and transaction fees
* Rogue miners can't exert much force on the system until they get close to 50% of the hashing power.
* A collective of miners (e.g. a mining pool) can negatively impact the ecosystem by buying developers, or messing with transactions. This would result in a large cost by way of their holdings losing value and no longer being able to derrive as much income from mining.
__Users:__
* Profit motive: Transacting and speculating with BTC gives it value. If a significant group of users dislike a developer's proposed changes or feels they are corrupt, they can make their voice heard which can force the miners and other developers to weigh in resolve the issue. If this does not happen, then the loss of confidence in Bitcoin can result in a fork (the troublemakers leaving the chain, or the majority / active users moving to a new coin and leaving the troublemakers behind).
No one party in the above can force any issue on the other two stakeholders, and doing so against all economic incentives will typically cause enough damage that none of the other actors would likely go along with such an act.
For example, the main active developers could get bought off and push out a client with 10GB transaction blocks. Assuming the miners also get bought off, the users can choose not to use such cyrpto and sell their coins while they can still get a decent value for them. The miners and developers would be king of their fiefdom, which means very little. This is only possible though if you treat the miners and developers each as a single entity. This is far from the case though.
Do you believe all states to be corrupt?
Developers: Profit from being a user, as well as from the power to drive additional demand by improving the ecosystem (make it easier to use, more powerful or more efficient), and lastly by way of bounty/salary/donation based on how well they are achieving #2.
Miners: Arbitrage between cost of electricity and price of crypto, transaction fees mined, block reward, and finally from being a user.
The funny money some exchanges offer to make moving fiat easier or faster between other exchanges is pretty irrelevant. As long as tether is not committing massive fraud by minting billions to buy crypto on a fraudulent basis, it doesn’t matter what token people use to move their fiat. Tether could explode tomorrow or in decades from now, but I don’t see them bringing down crypto longterm, just like I don’t see an Elon tweet having the potential for long term impact.
I would certainly never touch Tether, and anyone who does is taking a not insignificant risk of getting burnt if there is no-one willing to buy their tether when they want to sell (Tethers are not and have not been redeemable for dollars from Tether corp for a long time).
As the article shows, BTC's user side of the equation is actually controlled by a small group of investors. Thus, users like you and me have absolutely zero control or influence over the value of BTC, and are vulnerable to the manipulation done by this small group of investors.
We already saw BTC's value tank to half in a matter of days. How do you explain that as being something that meets the users' best interests?
This is not about money invested but about social consensus over which version of software is the bitcoin.
Let's not forget that bitcoin's monetary policy is fixed. Everyone earns coins the same way as everyone else: by mining or buying. No printing of new money for example. Central banks are far bigger whales than bitcoin's given their ability to print new money on a whim.
No, not really. It is in the interests of those with lots of bitcoins to sell high and buy low. This means whales stand to profit by pumping BTC's value to leave everyone else holding the bag when it's value tanks. Rinse and repeat, and fat whales get fatter. But for this scheme to work, first you need unwitting users to fall for the promise of quick and easy fortunes at arm's reach. A tale as old as time.
[0] https://bitcoinmagazine.com/culture/bitcoin-independence-day...
Miners can, but it’s costly. By a majority mining empty blocks on the chain they wish users to switch away from they make that chain useless. However, they need to sacrifice profit on some other chain (by not mining on that) to do so.
Are all governments inherently corrupt in your mind?
Major governments in wealthy countries have done an excellent job of managing currency. It's far more stable than cryptocurrencies, and the stability has improved as knowledge of economics has improved. They went through two massive economic calamities in 13 years (the Great Recession and the Coronavirus Pandemic) with almost no economic instability.
Cryptocurrency seems to me to be a far greater threat to economic stability and for corruption and undemocratic seizure of power.
Calling 10,000 unaffiliated people "a small group" by comparison is kind of disingenuous.
1. https://oxfamilibrary.openrepository.com/bitstream/handle/10...
Pretty ironic to bring up a major example of state control of currency as good example of Bitcoin adoption.
I made the point that it being used as a currency, right now
Discussion about the morality of legal tender laws is another matter
Quite the opposite: fiat is what allows wealth to be built.
Under (e.g.) the Gold Standard, those who owned the gold controlled the wealth as the amount of gold was fixed and finite. If you wanted to expand the economy and needed "money" to do so, you had to literally dig up more gold. The finite amount was a limit on how economic activity could happen. And those in control of the gold could dictate terms (e.g., interest rates on loans) on its use.
And while Bitcoin can perhaps be sliced more finely (satoshis) than gold (ounces/grams), the principal is the same: there's a finite amount.
Meanwhile, in a credit-based fiat currency system, any bank can create money on demand by issuing loans. Need more liquidity to help an economy (keep) grow(ing)? Just encourage more loans.
Wat
(In a BTC world they wouldn't hold much BTC either, if they do that'd be a pretty bad outcome since wealth would be moved to a none productive asset)
Here are the first two google searches:
https://www.forbes.com/sites/martinrivers/2021/06/15/how-bit...
https://www.businessinsider.com/this-is-how-bitcoin-can-end-...
I've experienced hyperinflation first hand some 25 years ago - it's not fun. I protected myself somewhat by buying (and then gradually selling) dollars, but that won't work if the dollar starts circling down the shitter, which it might.
Going into foreign currencies is also not ideal because they are not legal tender, so you'll have to exit into your local currency, and to protect _themselves_ against inflation the currency exchanges pretty dramatically increase the spread, so you lose some money converting back and forth. BTC is not legal tender either, but it could be used "under the table" in lieu of cash if shit hits the fan, much like silver, gold, or ammo.
With a modicum of lawmaking it could also be used for payments between companies, which in hyper-inflationary economy based on fiat currencies make inflation even worse, because there's a latency between the time the company gets supplies and the time it ships product, and the company must be able to afford the new batch of supplies, so they eyeball what the prices will be, say, 2 weeks from now and set their prices accordingly (and sandbag on top of that as well). Do this 10 times through the supply chain and you get eye watering prices for final product on the shelves. BTC would fix that. It did not exist at the time, so people would barter instead, but that's pretty horrible, since you don't always have the stuff the other side needs, so you end up with horrendous chains of exchanges which fall through from time to time, causing a cascade of problems.
TL;DR: BTC could come in handy when printer goes brrrr.
Further lower income folks tend to have a disproportionate amount of their net worth in debt instruments, and debt holders win in an inflationary environment.
> TL;DR: BTC could come in handy when printer goes brrrr.
That's not generally speaking what causes hyperinflation. It's caused by the population rejecting the currency.
And there are only so many "assets" you'll be able to buy if there's a run on assets - their prices launch into the stratosphere immediately in this situation, and then they just disappear. Besides, people of moderate means spend a large chunk of their disposable income/savings on necessities: gas, housing, groceries, car repair, healthcare, all of which are going to also launch into the stratosphere in this scenario. Some of them you can cut down on, others not so much. What will happen to the stocks (which most people on this site feel "protected" by owning) I don't even know.
[1] https://en.numista.com/catalogue/photos/transnistrie/5eb1ed1...
[2] https://dic.academic.ru/pictures/wiki/files/66/Banknote_5000...
In part because what you do with that money matters. Personal saving rates are near all-time highs, and velocity near all-time lows, meaning that new money? It's not actually moving through the economy and therefore not contributing to a secular increase in prices, or a reduction in purchasing power. This is why measurement matters. [1, 2]
The money supply wasn't increased to "mask" a contraction in the economy, it was done to avoid a deflationary spiral thereby preventing the economy from contracting further and allowing it to recover. The economy did in fact recover in part as a result of the influx of capital. You can see this in reduced unemployment rates and increased GDP in real dollar terms.
The money supply today is controlled via fractional reserve lending wherein a loan creates both new money in circulation and an obligation to repay that debt. That means all new money that's created is fully backed by demand for that same money. As that loan is repaid the money blinks out of existence. The Fed has the capability therefore to reduce the money supply by simply increasing interest rates. This in turn decreases demand for new loans, and causes a net reduction in outstanding supply as the existing loans are repaid.
What you're describing isn't a bet that an increase in the supply will lead to hyperinflation but rather a bet against the Fed's tool chest. That's not one I'd personally take, but to each their own.
What you saw in your [1] and [2] isn't an isolated increase in supply leading to massive inflation - after all, they'd just, you know stop - but rather political instability causing the population to reject the currency as I described in the post to which you responded. It's far more nuanced than you're making it out to be as you can see for yourself. The M2 supply doubled in 2020 but prices are up, what, 5% YoY - even after massive supply chain disruptions and tons of re-opening demand chasing limited supply? The M2 supply exploded after 2008 but inflation once again did not. The M2 supply is something like 30X now what it was in the 1970s but prices are 8X higher. Your model cannot account for this, and is such, it is broadly no longer accepted as it is obviously, observably incomplete.
> What will happen to the stocks (which most people on this site feel "protected" by owning) I don't even know.
You can research this, as there are countless examples in other world economies. Companies that provide necessities will continue to exist, as they do in Venezuela, and they will retain some value - or even grow in real dollar terms, depending on the industry. Some will collapse. Venezuela has a stock exchange, after all.
However, at the end of the day, it's incredibly, incredibly unlikely that hyperinflation will occur in any primary reserve currency anywhere in the world due to demand for that currency both at home and abroad. If it did, guns, ammo, canned food and potentially gold would the be the currency of choice. Requiring an internet connection and all the world's power and semiconductors to transact? Not so much, in a Mad Max-esque dystopia. You can't use Bitcoin in NK right? What makes you think you'd be able to use it in post-apocalyptic Kansas?
>> incredibly unlikely that hyperinflation will occur
Au contraire. It _will_ almost certainly occur, though maybe not to the extent of Venezuela or Zimbabwe. I'm scratching my head at the moment trying to figure out what to do about that. Can't really think of anything other than borrowing a ton of money and buying real estate and land somewhere far away from population centers, which is what Bill Gates and Black Rock seem to be doing. They certainly know something we don't.
The Yuan is not a reserve currency and entirely out of scope of this conversation.
However, I strongly suggest you look at Japan's money supply, its debt levels and its actual inflation.
> So no, you can't "research" this, and your historical stuff and definitions won't be any good when hyperinflation arrives, which is what's about to happen.
Wait hold on, you're referencing historical trends including "hyperinflation" so remind me again why you can refer to history but I cannot? How would you know my definition won't be any good, for a fact, unless you're referencing a historical basis?
> You can already see it in the stock market and real estate.
Nah, an increase in asset prices isn't necessarily inflation, as 1 share of AAPL will buy you a lot more this year than it did last year. You have to compare it adjusted for inflation - not just shoot from the hip and say big number bad, and it must be the Fed! This is called a return on investment, and is generally what investors... want from an investment is it not?
Real estate is mostly a zoning issue, where city councils refuse to permit sufficient new construction to meet demand - and also a lot of demand chasing limited supply. This is a demand-pull increase in price, not one caused by an increase in money supply entirely - although a reduction in interest rates does allow a property substantially more expensive to be more affordable, too.
Some things will always be above CPI, some below - it's an average. Tech goods for instance keep getting cheaper and cheaper. The divide between below-CPI and above-CPI tends to, roughly, be "things that require human labor cost more now" and "things that don't cost less now." Like TVs.
> It's not like Google is worth twice as much as a year ago.
Why not? They actually made 63% more money in Q2 of 2021 as compared to Q2 of 2020 [1]. Combined with a lower cost of borrowing, high margin debt, and a shift in investor sentiment towards tech companies in our new work-from-home world, I'd say their valuation is actually quite fair.
> Where you don't see it is the bullshit metrics that the federal government pumps out to make themselves look good.
They publish their calculations and methods, and you're free to disagree but a blanked, un-backed, un-substantiated "it's bullshit because it doesn't align with my preconceived notions" is definitely insufficient.
> I mean, sure if you exclude all the things that get more expensive, you get "5% YoY", but you don't need to be a Nobel laureate to see that this figure is already bullshit as of today - you just need to go to a grocery store once.
Groceries aren't the sole component of the CPI. They're a contributor, but some things went up and some thing went down. Please use some rational thinking here. I suspect this a cost-push price increase due to supply chain issues.
> Au contraire. It _will_ almost certainly occur, though maybe not to the extent of Venezuela or Zimbabwe.
You said there's no historical basis so how can you be so sure? It seems like you just have a gut feeling of some sort and no backing for it.
> ...which is what Bill Gates and Black Rock seem to be doing. They certainly know something we don't.
Really? Bill Gates is buying up a ton of farmland, which is a productive asset, and something Buffett has advocated forever. As for Black Rock, I suspect they're betting that folks are willing to be long-term renters, but again, I think that's a function of zoning constraining supply and making housing inaccessible to more and more people. In Japan where they have national zoning rules, a new, 3-bedroom house in downtown Tokyo costs $300K USD, right around the cost of construction. Cost of construction in the US is about $150/sqft, and if you're paying more than that, it's the manifestation of an externality.
[1] https://www.statista.com/statistics/267606/quarterly-revenue...
But most important issue at hand is your insistence that it "can't happen here". It can. You will see it for yourself over the next 2-3 years. You can't do what the Fed did and experience no repercussions. Keep believing what you believe, I'll take the other end of your bets.
This is tinfoil hat economics. It's no better than the man at the corner yelling that I should repent before the rapture. It's coming this time, I swear, he yells into his megaphone. This time is different, he repeats more and more aggressively.
> I believe that when things get really out of hand (which is where they seem to be headed at the moment)...
Again, you have no basis to make that claim other than the big bad fed making the number of money in circulation go up and you believe they can't make the number go down even though they can.
> Physical assets are worth something. And this time around, non-inflationary digital assets might be worth something too, as long as enough people believe in them enough to use them as a payment instrument.
Yes the magical power of belief. Which is all you have, as Bitcoin only supports 2-3 transactions per second, enough to support a small Costco, not a global economy.
> Truly stratospheric real estate and land prices for one thing (hence Gates and Black Rock), as well as stratospheric price of crypto.
Again, Gates is buying farms and you're speculating about Blackrock even though I provided you a much more reasonable alternate narrative. They're buying fundamentally different kinds of land for fundamentally different reasons and purposes.
> But most important issue at hand is your insistence that it "can't happen here". It can. You will see it for yourself over the next 2-3 years.
Ok cool, so no evidence of this either, just your gut. I'm not saying it can't, anything can happen. I'm saying there's no reason to believe it will, certainly not in the next 2-3 years, just as folks said in 2008. But instead of a cataclysm we got bailout loans repaid for substantial profits - and a Fed happily unwinding its balance sheet without issue until, you know, COVID.
> You can't do what the Fed did and experience no repercussions.
Again, no basis for this assertion. And they can reduce the supply at their discretion. Because there's no printer. They control the demand for fractional reserve loans by managing interest rates, and they control the supply by adjusting reserve rates. They brought the money into the world and they can just as well take it back out.
> Keep believing what you believe, I'll take the other end of your bets.
Ok, again.
You haven't refuted a single point I've made, just re-asserted yours each time with less basis.
It's some combination of Gish gallop and a motte-and-bailey I think.
The hype is all about how it’s distributed and nobody controls it, when in practice it’s not much different from conventional money except that those with power are even more hidden.
So far the only things of note that Bitcoin has achieved is having a considerable impact on global warming and making it near impossible for mere mortals to buy GPUs at reasonable prices.
Even if any of the touted advantages were to finally materialize now, it wouldn't have been worth it.
Graphics cards were definitely bought in stupid amounts for this purpose.
Maybe not for Bitcoin anymore, since there is specialized hardware now, but it doesn't really matter which proof-of-watts-per-hour cryptocurrency we're talking about. They're all shit and the planet would be better off without them.
Only people who are rationally mining bitcoin with GPUs are those who don't pay for their own power.
Hashes per watt efficiency has risen very fast.
That number sounds trivial for even a very wealthy private individual to get them each in a vulnerable position.
For example, how many are in China or the U.S.’s reach? Because that means literally two people, Xi and POTUS, could round them up and effect a change. (Not saying they would. But a damning vulnerability for a libertarian ideal.)
Incentives are actually an important part of the equation. Why would a wealthy individual or government spend billions of dollars to do a 51% attack? There's basically no incentive to do so. The best they could achieve is to censor transactions for a while until the Bitcoin community decides to fork to a slightly different PoW algorithm.
China has banned cryptocurrencies [1]. So there is precedent. (Until recently, I believed nobody had an incentive to mess with cryptocurrencies. They're too niche and too attractive as a revenue source.)
> best they could achieve is to censor transactions for a while until the Bitcoin community decides to fork to a slightly different PoW algorithm
In the scenario that close to 50% of Bitcoin miners and a similar fraction of Bitcoins become possibly (though not irrefutably) state controlled, you're claiming it would be trivial to just fork them away? Who makes that decision? If those people can just uncoin wallets of their choosing, why bother with a cryptocurrency in the first place?
[1] https://www.nytimes.com/2021/09/24/business/china-cryptocurr...
China's ban on crypto had very little effect on Bitcoin although a large share of the Bitcoin mining used to be located in China.
> In the scenario that close to 50% of Bitcoin miners and a similar fraction of Bitcoins become possibly (though not irrefutably) state controlled, you're claiming it would be trivial to just fork them away? Who makes that decision? If those people can just uncoin wallets of their choosing, why bother with a cryptocurrency in the first place?
First, let me preface by saying that I find this scenario very unlikely. China might have had the ability to do it at some point but no longer now that all the miners have left. USA now has the largest share of the mining power but it can't just suddenly seize all miners to perform a 51% attack due to the way government works. At minimum, a law would have to be passed and the miners would have already left the country by the time it did. Finally, the US does not even have 51% of the hash rate (about 35% currently).
But let's say it does happen. The vast majority of the community (exchanges, merchants, users, etc.) would likely move to a hard fork with a slightly changed PoW algorithm that would render all those seized miners obsolete. Governments and wealthy individuals know about this possibility which gives them even less of an incentive to pursue a costly 51% attack.
Actually, that's exactly what Xi (or the CCP, if you like) did[0] a month ago.
[0] https://www.reuters.com/world/china/china-central-bank-vows-...
We still don't live in a dictatorship, the President alone can't do this.
One can imagine scenarios where the President would have the power, motivation and even duty to do this, e.g. in times of war or other exigent circumstances. Point is, this sort of concentration opens up Bitcoin to concrete routes of attack which were previously purely hypothetical.
Bitcoin holders have no say in this. Bitcoin miners have no say in this.
This has been thoroughly proven in the bitcoin block size wars. The miners where in favor of an increase, but this meant nothing as the nodes where not, and a change in the protocol requires the nodes to adopt it.
Not entirely true. If holders decide to sell massively and buy into a fork they perceive as "a better bitcoin", this surely has influence.
Because of network effect and inertia, the bar is very high for a contentious fork to take over, but if push comes to shove, holders selling massively to buy into the contentious fork does carry some weight.
Also, spinning up a ton and a half of "nodes" on some random cloud isn't that expensive these days (in terms of what you can gain in gaining the system), yet no one has done it so far.
That's not what it means.
Decentralization simply means that there is no central power that can make unilateral decisions about the system like a government can with its currency.
This explicit decentralization of power is what people are excited about, because it means any change to the system requires a supermajority of consent and there are no central points of attack that power hungry fascists can target and take over.
Centralization can be incredibly efficient, but also incredibly fragile.
Bitcoin is the anti fragile monetary system.
That's it.
Even if they did, once the Internet was back up and running what would stop the Bitcoin network from continuing where it left off?
There's thousands of people around the world running their own Bitcoin nodes, many also protected behind Tor [1]. In what realistic way could governments shut it down globally?
They could go for centralised custodial businesses like the exchanges, but that doesn't stop the Bitcoin network itself. Also there are decentralised exchanges like Bisq that can't be shutdown.
"Yes (you will not find a solution to political problems in cryptography.), but we can win a major battle in the arms race and gain a new territory of freedom for several years.
Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own." — Satoshi Nakamoto
"A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system." — Satoshi Nakamoto
It also doesn't really matter if the person fucking with a resource is a state or an extremely rich individual or a company, except for ideological reasons. Diamonds (even natural ones) are fairly abundant and largely worthless but that doesn't stop De Beers from selling them at ridiculously inflated prices because they hold enough of a monopoly to be able to create artificial scarcity (and spend a lot of money on marketing to distinguish their "product" from the cheaper but higher quality artificial alternative).
That crypto currencies aren't subject to the power hierarchies of the institutions you name in the exact same way as state-backed currencies doesn't mean they are not impacted by real world power hierarchies at all -- nor at least less so. Literally the only thing guaranteeing the "value" of anything is (state) violence. The reason you can charge ten bucks for a fancy cup of coffee is that if I drink without paying, you can call the cops.
There are an estimated 40 trillion dollars in circulation alone. The US government debt is currently close to 30 trillion dollars.
The world's richest person has an estimated value of around 180 billion dollars, less than 1% of the US debt alone. I'm talking about projected value, not cash.
In contrast, it was already reported that a mere 100 individuals control around 13% of BTC's coins, and 1000 users control around 40%.
https://www.businessinsider.com/bitcoin-whales-the-key-facts...
If 100 people control 13% of Bitcoin, then the question is how much Dollar top 100,000 people hold.
Suddenly, Bitcoin does not sound so centralized in comparison...
(1) PoW hardware or staked coins, in PoW and PoS Sybil control mechanisms, respectively, do give their owners the power to issue new currency and collect transaction fees, but it is an open market where all capital earns the same percentage return, and thereby does not exacerbate wealth inequality.
There is ofcourse also the moral argument for inflation: society pays you because you it values what you sold or did. That valuable service is not going to be worth as much 50 years into the future, so inflation is the cost imposed on withholding that money from public circulation for your private benefit of being able to decide 50 years later what you do with that money for a thing you did back then.
The wealthy love inflation since it's just going to pump their assets and redistribute money from the poor into their pockets.
It also negatively affects earners of the currency.
When your salary is constantly getting devalued, employers effectively get to constantly cut your salary while saying with straight face that they haven't done anything.
Now, everyone on this forum is well educated and valuable enough to be able to regularly negotiate salary increases. It's poor and uneducated people who get most taken advantaged by it.
Just look at how minimum wage is a never ending fight.
Inflation gives employers and the holders of capital the high ground fighting to maintain the status quo of wages and forces the poor and desperate to take time out of their personal lives to fight for more pay.
The problem is that these “large holders of currency” are the poorest people. Rich people have their wealth invested in various assets, e.g. stocks, bonds, land. The poorest people live paycheck to paycheck and can’t possibly invest in anything.
As the Bitcoin inflation rate falls, transaction fees will rise.
(1) https://www.theblockcrypto.com/data/on-chain-metrics/bitcoin...
Deflation does however accrue economic rent to currency holders, so is an economic inefficiency. Fortunately in a decentralized economy, multiple currencies can co-exist and seamlessly operate in parallel, allowing the growth of the total money supply to keep pace with the demand for currency.
> top 1,000 individual investors accounted for about three million of the 8.5 million Bitcoins controlled by the top 10,000 investors
I beleive same stats are available for stock markets. I wonder what numbers are there.
https://awealthofcommonsense.com/2021/10/ownership-inequalit...
Which means that bitcoin is not fringe and should be taken seriously
Which means that bitcoin investors are not basement dwellers selling tulips, but your average fellow citizen.
So please no more bitcoin investor bashing
https://mobile.twitter.com/n3ocortex/status/1356673243734822...
1. If you are saying that investors separate from miners have "control" over Bitcoin, then you are strictly talking about the price and not the protocol. Investors (who are not miners, so no point in mentioning them) have zero influence over the Bitcoin protocol on a technical level. Perhaps you could make a separate argument about manipulating the community.
2. Barring the previous misnomer, miners alone do not control the Bitcoin protocol. Miners in combination with full nodes (running a full node requires a relatively tiny investment compared to mining) control the future of the Bitcoin protocol. Miners may choose to go down a certain protocol or ledger altering fork, but if even a small amount of full nodes go a different direction and users/holders follow the full nodes, then the path the full nodes chose will "win out," or at least survive.
If you want to talk about investors controlling crypto currencies at any scale, then look towards proof of stake. Otherwise you are conflating price control and protocol control.
Thousands of people are doing it and these sorts of things make it easy to do:
This is evidenced by the fact that almost no one these days actually runs a local wallet. The number of logical nodes has decreased while the number of wallets has dramatically increased.
One thing the article or some people interpreting the article miss is that miners actually don't control the future of bitcoin as much as they think. From 2017 we actually know that the people running the nodes have more power then the big miners - because the biggest miners back then were not able to push the protocol changes (like block size) through - because nodes just didnt validate/accept those new blocks. So in the end the end user decides.
This is true for changes to the protocol or code, it is not true for doing fraudulent transactions within the current protocol version. So colluding miners can have impact in that realm I'd say.
> Prices could be high, but mostly they weren’t. Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house), I was able to identify only 37 people who spent more than 300 guilders on bulbs, around the yearly wage of a master craftsman. Many tulips were far cheaper. With one or two exceptions, these top buyers came from the wealthy merchant class and were well able to afford the bulbs. Far from every chimneysweep or weaver being involved in the trade, the numbers were relatively small, mainly from the merchant and skilled artisan class – and many of the buyers and sellers were connected to each other by family, religion, or neighbourhood. Sellers mainly sold to people they knew.
> When the crash came, it was not because of naive and uninformed people entering the market, but probably through fears of oversupply and the unsustainability of the great price rise in the first five weeks of 1637. None of the bulbs were actually available – they were all planted in the ground – and no money would be exchanged until the bulbs could be handed over in May or June. So those who lost money in the February crash did so only notionally: they might not get paid later. Anyone who had both bought and sold a tulip on paper since the summer of 1636 had lost nothing. Only those waiting for payment were in trouble, and they were people able to bear the loss.
> No one drowned themselves in canals. I found not a single bankrupt in these years who could be identified as someone dealt the fatal financial blow by tulip mania. If tulip buyers and sellers appear in the bankruptcy records, it’s because they were buying houses and goods of other people who had gone bankrupt for some reason – they still had plenty of money to spend. The Dutch economy was left completely unaffected. The “government” (not a very useful term for the federal Dutch Republic) did not shut down the trade, and indeed reacted slowly and hesitantly to demands from some traders and city councils to resolve disputes. The provincial court of Holland suggested that people talk it out among themselves and try to stay out of the courts: no government regulation here.
[0]: https://theconversation.com/tulip-mania-the-classic-story-of...
they can print more bitcoins into existence? they can fake a transaction? they can undo a transaction? they can steal from other wallets?
Basically, the first to mine a block has control over the history since the previously mined block. Because they have superior mining capability, they are more likely to be first to mine a block. They are also able to refuse to accept others blocks, which could effectively fork the blockchain, causing a split head, which results in other other issues.
EDIT: just reread, and theres 2 aspects to control. Theres the mining aspect (which i mention above) and then there is the market manipulation aspect (which is to do with pump/dump - unrelated to above).
In this particular instance, it means "they have more than me".
The relevant comparison here is to other currencies, not to organizations in general, and to the ability and incentive of these controllers to influence the trajectory of the currency.
Two points:
1. 10,000 people controlling 33% is dramatically less control and centralization than the Federal Reserve, which ultimately has about 10 powerful people.
2. These 10,000 people have very little ability and even less incentive to affect the price of Bitcoin. Again, unlike the Fed, which can print money at will and increase inflation.
https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserv...
That's the theory.
In practice, there's always this aspect to consider (attributed to a Rothschild familly member in the 19th century):
"Permit me to issue and control the money of a nation, and I care not who makes its laws"
How to mitigate that? It is IMO understudied area of economics because economists prefer thinking of "value" of anything as a scalar, not as random variable. In cases where it isn't possible they just conveniently assume normal/gaussian random distribution. (See @nntaleb)
Transfer payments.
Historically made under the threat of violence by a populist king or warlord. Who, in almost all cases where the transfer payments continued, was swiftly replaced by a republic. Bitcoin turns the clock back to the feudal reality of land-owning nobles. We just made the cost of defending the land vanishing.
Whereas increasing the supply of USD boils down to a single database "update" statement. I'm exaggerating for dramatic effect, obviously, but not by all that much.
You can't "control" a currency as widely used as the USD. The Fed (and other countries, and large enough institutions) can try to influence it. The chair of the Fed doesn't just wake up one morning and say "you know, I think I'll do X to the value of the USD."
US monetary policy in the very simplest sense is controlled by a small group (governors of the fed) but those people are nominated by the president, appointed by congress. We know who they are, and they do not operate in an isolation chamber. The president can remove them, though not without potential economic and political repercussions. Their actions have to pass muster with a lot of people - for example, investors on the stock market, other countries (ex: China holds a foreign reserve of over a trillion dollars. That is a fairly sizeable lever. But using that lever, again, has repercussions.)
The people who control Bitcoin and do the majority of the mining aren't even known. We have no idea how many of them there really are (as pointed out in the article, one person could have an unlimited number of addresses.) There are effectively no repercussions for their actions other than the value of BTC changing. We have no idea if they are colluding. There's nothing whatsoever anyone can do to influence them from taking action that are not in the best interests of stability, the currency, the people using the currency, etc.
Someone mentioned recently that a couple of years ago, some people coordinated enough between themselves that they were able to force a rollback of the blockchain...
https://www.thehoopsnews.com/wp-content/uploads/2015/06/Zimb...
in fact most of the alt coins are the same way. and its super obvious that its being manipulated by those with the largest amounts.
the market is too immature. the financial gene pool is too shallow.
If they only have the altcoin then all they can do is sell. Its not like they can manipulate the price upwards unless they have additional assets.
For some market participants they have multiple pools of capital. But the mere existence of consolidated ownership doesn't mean its manipulated because that alone doesn't make sense?
Curious if you could articulate the process you imagined. I've seen your version of events mentioned alot on twitter, discord, telegram and similar threads, but its just like the reductive "must be money laundering" comment also often seen, how does that work exactly?
Wait until you hear about the proportions in other industries that have a far more direct impact on the real world than Internet funny money does.
At current market price, $60,000, bitcoin costs $19.7 billion USD.
Or, 13x Tesla’s famous investment. You’d need a Tesla sized investment every month for a year just to balance sell pressure from miners. This is without any existing investor cashing out.
And this scales linearly with market price. People often talk of BTC to $1 million.
900 * 365 * $1,000,000 = $328, 500,000
Almost $1 billion per day. The 900 will change to 450 in about 3 years after the next halving, but until then that’s the cost formula.
Madness if you ask me. Bitcoin is a heavily negative sum game. You can only take out what others put in, and miners have to take out their share as well, a negative dividend.
That's 6.5 years at a 900 per day rate.
Then 450, 225, 112.25 etc
Bitcoin volume in the past 24 hours was actually $36 BN.
Miners pay bills from net dollars moving into the system from outside. There are no stats which track such inflows in crypto: it’s a hard thing to calculate.
You’re also massively overestimating dollar volume. Bitcoin volume is 36 billion Tethers, which aren’t dollars.
Dollar volume is max $2 billion per day. Today coinbase was $800 million. It’s tiny.
But let's say they do $2B USD per day. That still seems to be plenty, given that supply is meeting demand.
They could very well be HODLErs buying at a huge discount.
Actually, I’m not. If a Bitcoin is worth $60,000, then in an efficient market miners will spend just under $60,000 to get it.
Will some choose to keep the Bitcoin? Certainly. But, they still have to pay the bills. To do so they have a few options:
* Raise money from private investors or on the public markets. RIOT and MARA have done this. They pay their bills by selling shares.
* Loans. There are many ways for miners to put the Bitcoin up as collateral and get a loan, keeping the bitcoin
It turns out it doesn’t matter if the miners sell or not: both methods above involve getting an influx of money, either from equity or from lenders. All that matters for the analysis above is whether the market is efficient.
If the market isn’t efficient, and Bitcoin costs $20,000-$30,000 to mine, then my analysis falls apart. And you and I should start bitcoin mining companies to boot.
> They could very well be HODLErs buying at a huge discount.
See comment about efficient market above. There’s no discount. You could work a job, earn $60,000 and buy 1 bitcoin.
Or, you could take the $60,000, buy $60,000 worth of ASIC and coal and burn through it to mine 1 Bitcoin on average.
It works out the same, if market efficient
https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-...
Is that the average electricity price paid today, after the China ban? If either electric rates or hardware costs have risen, then the cost rises.
The article also ignores other costs: staff, accounting, real estate, all the other costs involved in running a company.
It’s just looking at an ASIC magically teleported to a generator, and magically protected from the elements. Useful calculation but not 100% of costs.
Would be very interested if someone did that calc. Probably can find it for RIOT or MARA by digging through their books. May do it for fun later.
Not if they have money in the first place and see spending said money as investing in Bitcoin on the cheap.
As to whether mining gets you a Bitcoin at, above or below market price is an interesting question.
Seeing the hashrate leads me to believe that the answer is "below".
Lastly: if you can point to a way to get BTC-collateralized loans without taking a massive risk because of volatility, I'd love to hear about it.
(If you're planning to hodl, you can hodl either by mining or by buying on the open market, so an efficient market should ensure the cost of each is roughly equal.)
https://www.frontiersin.org/articles/10.3389/fbloc.2020.5654...
Anyway, we won. The attributes in the title look like the ones that describe a currency to me!
Never mind that doing so would destroy the value of the cap/opex invested.
But yea... bitcoin is dead, again.
"Bitcoin is centralized, but that's OK because the central authorities can be trusted to do the right thing" isn't exactly a compelling argument. Especially when decentralization is supposed to be one of Bitcoin's major selling points.
The fact that those efforts have failed, despite them being the largest miner, is pretty strong evidence that Bitcoin is not under the control of any small group of people.
There also is no "central authority" since anyone can become a validator. Bitmain, while absolutely huge producer of hardware and a miner, is not the only manufacturer of the hardware.
Even better, there is a giant financial incentive to build the best miner [1].
[1] https://www.cnbc.com/2021/10/15/square-ceo-jack-dorsey-says-...
By this reasoning, there is no central authority in the dollar system since anyone could become chair of the federal reserve. The odds for an individual without specific hardware to actually mine (and then becoming a validator) a single block are extremely thin. (Granted it's more likely than becoming the chair of the Fed, but less likely than becoming the head of the central bank of Malta for a citizen of that country …)
Being a Bitcoin validator requires nothing particularly powerful in terms of hardware. A cell phone won't cut it, but a 10 year old laptop is enough to be a validator.
For more information, this is a good explainer:
The only “validation” in the bitcoin protocol occurs at mining time (and ironically enough, it's not even mandatory so invalid blocks have been mined by Antpool before), everything else is just social convention (and assume that laypeople can have access to an untampered bitcoin executable: what if Google Chrome, or Windows, or whatever software running on the same machine replaced it with an alternative binary on behalf of the NSA?).
As a side note, Bitcoin, like all p2p protocols, is extremely brittle if run only by benevolent individuals. It's only secure because it's more of a federated ecosystem of players with pockets deep enough and a relational network between one another to cooperate.
For bitcoin, this federated network is fairly adversarial, and nobody ever managed to get a dangerous leadership on it. But if you look at Ethereum, you'll see a very hierarchical social structure, where Vitalik & Al. have almost complete power over the so called “distributed” network. (rolling back transactions, or completely changing the protocol at the expense of the miners with their move to proof of stake).
"Note that in the future, it is likely that Ethereum will switch to a proof-of-stake model for security"
It doesn't get more clear than that.
Ok, you win! Nobody knew PoS was coming! What a great surprise! /s :facepalm:
The inevitable problem that I see is that they will be able to censor transactions, since transactions are not private. But they can't change the rules or the chain splits, so what else do you think people are trusting them not to do?
We don't need to trust miners for bitcoin to work and if we do trust them, what is the downside to someone who is just validating transactions?
They built a better gold. People trust gold. They put the majority of it into vaults and trust the people who run those vaults. This is the best solution anyone has ever come up with to digitize gold. It doesn't tick all the boxes 100% and isn't perfect, but it sure does one single thing well.
The world revolves on financial transactions. I wish I could have said that I built something that can be validated by anyone at any time and then get people all over the world to freely invest insane amounts of capex/opex. All without a marketing budget or CEO. It has never been done before.
And I say that as a bitcoin and eth proponent and long time holder. I'm just saying, we should be careful before we jump to conclusions this is still experimental technology ( even encryption itself is still young, and implementation is very prone to error )
I'd also bet that bitcoind is probably the most deeply studied codebase on the planet.
I won't deny that they do hold some power, but I don't think it is as complete as you claim. There is in effect counter-powers to the devs: miners and users.
Imagine a scenario where the guys who have commit access tot the repo decided to change the block size via a hard fork (much like what happened with bitcoin cash).
The next day, there would be a new github repo with the unforked original code, and there would be two Bitcoins sharing a common history up until the fork.
Some miners would switch to the new fork, some would stay on the original one.
Much like what happened with bcash, there would quickly be people selling the fork they don't believe in and buying the one they like.
Before long, the users (and the miners) would essentially do what amounts to a vote (some with mining power, others with buying and selling), and we would end up in a situation like the one we have today: BTC at $66000, BCASH at $600.
So, some power (like with the taproot upgrade, which ended up having actual consensus with miners and did not create a revolution with the users), not absolute power to decide what Bitcoin is and isn't.
r/bitcoin is and has been for a very long time an absolute cesspit, even before the censorship plays came about.
No one I know really interested/involved in Bitcoin goes there anymore.
When you drive on the highway, every single driver in the oncoming traffic is in control of a car that would kill you if they just decide to move their steering wheel into your direction. Luckily, there is little incentive for them to do so. So driving is relatively safe.
When you invest into Bitcoin, there might or might not be people who could devalue it to some degree. Luckily, those are the people with a substantial investment in the same asset you are invested in. So there is no incentive for them to do so.
When you invest in fiat currency, the incentive of the people in power are completely misaligned with the holders of that currency. The people in power gain more power by printing fiat that they then can spend.