What is a Bitcoin worth?
bankunderground.co.uk
bankunderground.co.uk
1. the price the last person paid to buy a bitcoin
2. the price the next person is willing to pay to buy a bitcoin
Until human beings figure out the Truth of the universe or at least the meaning of life, the word "value" means nothing. We don't deserve to use the word "value", because we haven't being able to define it.
the chain is worthless if there are regular re-orgs
The chain's security is primarily paid by the block subsidy
The block subsidy trends to zero.
Either the fees need to increase or the security property falls away and 1 Bitcoin = 2 Bitcoin
> The block subsidy trends to zero.
These statements are misleading. As the block subsidy trends to zero, the chain's security will be primarily paid by transaction fees. This will likely happen within two decades, in which the block subsidy will diminish by a factor 2^5 = 32.
> Either the fees need to increase or the security property falls away
The security will diminish, but not fall away completely as long as bitcoin maintains a constant backlog of high-fee paying transactions.
In the limit Bitcoin either is a chain that you can use for under 60 bucks a txn (two of which are needed for each lighting network channel) and it has meh security or it costs greater than 60 bucks a txn and is like an extra expensive wire txn system and used as financial infra.
As long as the problem is somewhere in the future it is in the present because it's all about speculation & speculation depends on future value.
There are two other things to think of in this thought experiment: other cryptocurrency, they can set higher subsidy, use different L2 solutions
And dark miners. Even if bitcoin's security parameter is stable is it goes down then miners will turn off and try to sell their hardware at a discount. If that happens >50% then there's a persistent threat that a single actor bought it all and is waiting to turn it on.
No one admits this simple truth that you just did. It worth what someone is willing to pay for it. End of story.
Asking WHY someone is willing to pay a certain amount is definitely an interesting question but a very different one.
money issued by central banks, fiat money, acts as a ‘store of value’ – it preserves the spending power of income and wealth, so that you can be confident that a pound, say, will buy about as much in a year’s time as it would today.
That's generally true for most fiat money in stable countries, but it becomes an absolutely terrible store of value for anything longer than a few years.
- It does not bring back dividends
- It does not work well as a currency
- It's not a good storage of value (too easy to get stolen)
The only thing it's mildly good at is enabling otherwise illegal transactions, such as ransomware.
Moving money any other way (ACH/wire) feels primitive by comparison. Plus often you have to use a bank as an intermediary which doubles the send time - not anymore.
This goes for mineable crypto and stable coins alike. Mineable crypto has the added benefit of controlled inflation which is amazing for storing value without the rug being pulled out from under you.
Easy to get stolen? You can literally store millions of dollars yourself with a 12 word pass code that never touches the internet.
Given how irresponsible the government has been printing trillions of dollars, dollars are not a store of value.
Stocks and real estate are good, like crypto it’s about diversification. All asset classes will fluctuate. Crytpo is still early days.
But as a liquid store of value really nothing beats it. Inflation controlled, fast to transfer, easy to verify, able to hold yourself, zero weight, decentralized, etc.. <- THIS is the intrinsic value of crytpo and what makes it valuable.
Show me another form of money with better properties than these and I’ll use it.
Oh, I can do that too. The problem is when I’m on the receiving side, because most goods are sold in fiat and I have a hard time explaining where this large sum of fiat came from to unfreeze my bank account.
You’re talking like bitcoin is a uncontrolled sea, and now that it’s there, it’s so easy to send a boat from Asia to North America. Problem is, North America is US and Canada, both running their border protection services. And there is just nothing in the sea itself.
The regulations and tax reporting requirements from the IRS at least are very clear. No problems at all with that.
There are a multitude of remittence organizations which provide the same service, you could run down to your local Hawala for example. In non western parts of the world, remittences are quite often done outside of banks.
I gather you are in the US since you mention ACH. Here in Asia the concept of non bank transactions have existed for a long time due to the amount of unbanked people in the world. I can even have money delivered to my door.
There are tradeoffs on both sides, if I send bitcoin to the wrong address I would likely never see it again vs a bank where I have a high probability of getting it back even if it was my mistake.
Neither am I either, I am using Asia as an example because the financial system has similar features to those you mention you desire in a system. There is an entire world out there with many countries (contrary to the world series of baseball), and many of them have different needs and services.
I am a westerner, I grew up having to go into banks to make transactions and I have seen the technical advancements which banks have made over many decades. I moved to Asia, and the financial system here is different. It functions different, many people do not have bank accounts let alone id to open one.
What I am suggesting is that the issues you may have have grown from a market with different drivers. The banks aren't just difficult because they want to be, they need to be. Legislation and regulation has made them that way.
> It doesn’t matter what banking or remittance services are available, crypto not just works, but works in a way that lets you send more money, cheaper, with zero paperwork’s or middlemen. Really frictionless.
You are describing part of the system, not its entirety. It is easy to send money, you could send me 10,000 USD now for an example (feel free to :)), I cannot access it easily. To access it I would have to sell it on Binance, then have the proceeds sent to a virtual wallet. I am fortunate, I have these accounts setup, many people in Asia and other places in the world don't have bank accounts, they don't have id's, they don't even have smart phones. All you are doing is moving blocks on a block chain it's not really moving, while people in other parts of the world still use money as a functional part of their daily lives.
> Like handing cash to someone in real life (which I guess in your world wouldn’t be allowed because you might not get it back)
It's not like that at all. I live in a real cash based economy, one where shops cannot even take credit cards in almost all but the minority of cases. I would not hesitate to say that 99% of transactions in the country which I am currently in are cashed based, real cash, not swiping your credit card, real paper. I would be lucky to find a store which could sell me a banana for a full bitcoin.
Of course I would be worried if I sent 10,000 USD to the wrong person and could not get it back. Now in saying that I am not an opponent to the idea of crypto in fact I have some, I am not sure even if I am proponent of regulation of the crypto industry. But I did need to point out that the problems you mention are because of the attributes of the banking system, in some ways crypto lacks attributes which makes it worse in other areas. If USDT crashes one day, we can compare why the regulation of the banking sector made that industry a better one for example.
Total international transfer of whatever form of crytpo you want, without banks or middlemen, that is instantly usable in whatever local currency. Diversify - store some of your money across different crypto’s, stable coins, and when you want to use it you can easily do that through a debit card or take out hard cash with the same debit card.
Seriously crypto is the first real form of digital cash that can be personally held. It is revolutionary. Before crytpo all electronic forms of money were basically abstractions of bank transfers.
This is a last mile issue, those services simply do no exist or are not accessible in other parts of the world.
I agree with you that Crypto is efficient for the transfer of money. But I disagree with you on its frictionless use and availability.
A quick Google search points to the global remittence market being worth over 700 Billion USD annually. A lot of this is not done via banks, they go through 3rd party services such at Western Union, or Zoom or one of many other services. People have been doing money transfers for a long time prior to crypto and without banks and still have not resolved the last mile issue, and crypto hasn't either.
> Diversify - store some of your money across different crypto’s, stable coins, and when you want to use it you can easily do that through a debit card or take out hard cash with the same debit card.
That's pretty hard to do, when there is an ATM for 100KM for some people. But this is the irony, you say that Crypto is without banks, and is more efficient but then you revert back to a banking solution like debit cards to fix the last mile issue. Take away the ATM, take away the debit card, take away the bank, take away the merchants who accept it, you have crypto now in your wallet and you pretty much cannot do a single thing with it. But I guess you can transfer crypto fast.
I’m talking about easily moving and using crytpo in countries that have access to ATMs and debit cards, in which case it’s very useful.
"does not work well"
So if it did a good job on those things it would be worth a lot, but when it does a bad job its worth nothing at all, rather than a small amount? I invite you to steal my Bitcoin and see how easy it is, and when you fail at that task I invite you to remain of low financial status from the great skeptical ignorance your presumptions of the acidity content of the grapes has cast you in, metaphorically speaking.
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No one gets to "maxi" without first going through all the ups and downs and common questions and misunderstandings
First step for this specific concern at all? Definitely not. It's been raised and debated for years.
Front and center is the number of transactions per second it can process. It's no where near being able to handle the volume of transactions that happen around the world.
The idea that any blockchain could squeeze all of the world's transactions on the system's layer one was always an absurd proposition to anyone with a basic understanding of computer science.
Most people believe a layered approach is necessary, and indeed, many are building L2 solutions on Bitcoin (Lightning) and other cryptocurrencies.
I think Bitcoin can and should be L1.
Why?
Heh. The above assumes that world governments will not collude to inflate their currency.
Full disclosure: I have no cryptocurrency assets whatsoever, and never have.
It’s a race to the bottom.
The existence of BTC as a deflationary asset is a threat to the power of central banks to keep their economy under control; there is a way out for individuals and businesses.
Hence the qualifier.
> A weak domestic currency makes a nation's exports more competitive in global markets, and simultaneously makes imports more expensive. Higher export volumes spur economic growth, while pricey imports also have a similar effect because consumers opt for local alternatives to imported products. This improvement in the terms of trade generally translates into a lower current account deficit (or a greater current account surplus), higher employment, and faster GDP growth. The stimulative monetary policies that usually result in a weak currency also have a positive impact on the nation's capital and housing markets, which in turn boosts domestic consumption through the wealth effect.
https://www.investopedia.com/articles/investing/090215/3-rea...
What does that mean? The fact that a currency depreciation can result in higher GDP, doesn't mean it has to. The Turkish lira has been steadily depreciating against every major currency since 2007 and yet Turkey's real GDP is now below its 2007 level. Its current account balance has not only not improved but it's got worse. Nothing suggests that, as a general rule, countries have "strong incentives" to weaken their currencies.
Also https://www.investopedia.com/articles/forex/042015/what-curr...
... or default.
It will be interesting after the midterms next year if Biden ends up a lame duck President, and Mitch manages to block any further raising of the US debt ceiling. Everyone says it's practically impossible for America to default given its debt denominated in U.S. dollars, but blocking its ability to borrow more so it's unable to pay bond coupons will trigger a default.
I wouldn't discount cryptocurrencies as a store of value just yet.
Not sure about this reasoning. I have a piece of rock with a unique shape. There is no other piece of rock with this particular shape, so it's incredibly scarce. Still it doesn't mean it has any value.
21 Million btc? Bitcoins are divisible so if the unit is considered the smallest division, there are 2.100.000.000.000.000 units.
What happens when the last btc is mined? Well, storing and shipping gold bars is also expensive and that doesn't make gold worthless
There is absolutely NO argument in the world that could make them doubt their own belief that cryptocurrencies are the future of money.
Nassim Taleb says that Bitcoin is worth exactly 0.
(To your first point, not your second.)
The coin rewards would drop, but the rewards for being able to steal whatever else is running on top of the chain stay the same. So to be secure the layer 1 chain has to stay more valuable than everything else that's being secured on top of it, otherwise it becomes worth doing a 51% attack on the underlying chain to get the stuff on top.
It's like when religious people say: "Jesus will come again, but he may tarry...".
Oh what's that? You really think 12 years of development is too long to buy a sandwich. Well if that's an issue for you I recommend you look into this thing "Quantum Computing." They can't even make those things do calculator math and its been forever. Sheesh.
I took a pragmatic view: 1) it seems a useful hedge asset against stock market (although it becomes more and more linked nowadays) and other fiat money dominant security market. 2) it seems have some value of bringing financial products to more people (albeit today the new users are fleeced immediately when they enter the market, without getting any value from it). 3) it seems has a lot of engineers working in this space (which seems a good technical problem).
It's worth what someone is willing to pay for it, which, right now, is about $47k USD.
For me, it's worth something because I own things now that I could only own because someone valued Bitcoin highly.
Maybe he has a different definition of worth.
His statements are about context. It was about BTC being worth 0 as currency due to its volatility and worthless as a store of wealth due the extrinsic values aka what someone is willing to pay for it, and its backing.
It's basically wishful thinking. You cannot really "store" economic value without maintaining the productive capacity needed to counter its depreciation (due to laws of thermodynamics). As an extreme example, you cannot buy bread for 10 years today, keep it and then just eat it. Instead, you need "access" to a bakery and a wheat plantation.
So the value is really stored in the functioning society, which maintains the production capacity. (And thus society is what you have to care about, to libertarians' dismay.) Money (currency) is just a convenient abstraction, an accounting trick, to keep track of one's share of the society's productive capacity.
As an aside, if the production capacity of society decreases (e.g. due to war, or natural disaster, or underinvestment during COVID), you get an inflation because suddenly sum of all accounts (money) is greater than the total production capacity, and so your share in economy, expressed in your savings, also shrinks (in absolute terms).
To me, the only reasonable explanation for the success of Bitcoin is the story behind it. A mathemetical, virtual thing, created by some mysterious guy, challenging the powers to be, 'mined' by underground groups all over the world. That is just so cool ;-)
I never saw the meme culture coming and still am not sure if it is temporarely or something that will stay. It gives value to things that have (had) no clear value previously. Their only value comes from stories, discussions around it, like GameStop on r/wallstreetbets and NFTs. Most people do not understand and do not want to understand. They just want to be part of something cool and at the same time become rich ;-)
Made good profits, and took an optimistic approach to learning about real problems crypto has, meaning I had a good idea of what new projects were going in the right direction. You're only contribution to the list of issues is that "it feels cool," and "some people bought it without fully understanding it," which I fail to see your authority in saying as you have only just done the inverse: gathered a superficial understanding and not bought. So far it seems you're astrology has picked the wrong horse.
I heard the Fed is working on lowering bank transfer fees.
> For one thing, it’s likely that transaction fees will rocket, as miners try to replace revenues no longer provided by the emission of new Bitcoins.
Difficulty readjusts every 2016 blocks, changing money needed to mine a block. Congestion would be temporary.
> The hope was that by having a hard-coded limit on the number of Bitcoins ever to be produced, the value of a Bitcoin couldn’t be inflated away by an endless supply of new coins.
Technically not true, the code was written incorrectly so as to trigger undefined behavior / underflow, allowing far more than 21 million bitcoins. This was corrected in a non-controversial hard fork.
This is interesting. What amounts are we talking about here? What would be the equivalent tx costs if BitCoin were used do you know?
The equivalent transaction costs would be $0.53- Bitcoin fees don’t increase if the amount is higher: https://mempool.space/ (and it works on weekends and arrives in an hour)
If Bitcoin means “be your own bank,” Bitcoin is a decent bank. You can even get a trustless, psuedonymous Visa debit card with Lightning: https://paywithmoon.com
The number of transactions per block is fixed (IIRC it's about 6 transactions/second), so transaction fees will always rise to the level that the world is willing to pay for 6 transactions/second at.
That's not how Bitcoin fees work. Miners do not define a fee. A transaction has at least 1 input and 1 output. If the input value differs from the output value, the miner gets to keep the difference. Miners will prioritize transactions that offer the most change/fee per byte.
Fees go up because users want their transaction processed before other transactions.
Fees are more based on congestion than on whether there are block rewards.
If the fees are too low, less efficient miners will stop mining and difficulty will drop, making mining cheaper.
Effectively, infinity / 21 million. $100k? $1M? $10M? $100M? Infinity Dollars. Infinity Euros. Infinity Yuan.
or not :-)