Over $170B wiped off crypto as market tanks on Mt. Gox Bitcoin payout fears
cnbc.com
cnbc.com
Bitcoin windfall for Mt. Gox creditors after 10 year wait
So let's see whether that's a sustainable drop. Sustainable as in "miners waste less energy" sustainable.
There's plenty of liquidity on the big exchanges' spot markets, for example there's around $1B worth of bitcoin exchanged daily for USD on Coinbase alone, 24/7.
Investors in bitcoin are in two camps - the custodians and the miners:
- custodians contribute towards running the network through transaction fees - once you've bought bitcoin, you can store it for as long as you like free of charge, with just another transaction fee when you sell. The more value you store in bitcoin, the lower the relative fee as it's unrelated to transaction size. You could store $10M for 100 years for a 0.004% transaction fee.
- miners pay for the mining costs through selling the bitcoin that they mine together with the transaction fees collected.
It's very similar to the gold market, but the transaction fees are much less, and the commodity is digital with all the benefits that brings e.g. sending $1B worth around the world in minutes for around $2 currently. On top of that the total supply doesn't double every 40 years (halving the value) which is the case for gold.
I think you might be trying to say that most bitcoin is custodied on exchanges, and doesn't change hands via the bitcoin network itself? That could well be correct, and makes the exchanges a second-layer network with more emphasis on speed and low transaction price than security.
"People" (bitcoin owners) pay for the operation of the net via a free market on transaction costs. If less people start using the base-layer bitcoin network, the transaction costs reduce due to less demand, and therefore it becomes more attractive to use. Transactions on the base layer are a scarce resource just like bitcoin itself, and follow the same laws of supply and demand.
If you try answering my questions on gold in response to your other comment, you should start to get a better idea of things.
Not only that, but harder money (i.e. low supply inflation) will always go up in price relative to softer money, all else being equal. Even if someone introduced a new version of bitcoin that was softer money AND managed to convince a majority to upgrade to it (practically impossible unless by mistake), the previous version would ultimately still prevail as people realised it was harder and switched back to it, just as more and more value is flowing out of fiat currencies, real estate, gold etc into bitcoin. The genie is out of the bottle now.
So the answer really is that both are governed by rules no one can change and the rules governing bitcoin issuance are by far superior (perfectly predictable issuance tending to zero).
And my questions about gold were hypothetically supposing that we could change the rules governing its issuance. Feel free to have a think about them and leave your comments.
The funniest thing about it is how by design it's deflating to zero as people eventually lose access to their keys.
Would it be better if it took less energy to mine gold?
What if a small select group of people were able to mine gold without using any energy? Would that be preferable?
And so monetary energy can't be created or destroyed but instead it flows from one system (dollars, bitcoin, real estate, gold, TVs, art etc) to another, and the value of each unit of a system is proportional to the density of the monetary energy the unit is storing.
It will inevitably be attracted to rest in the system whose units store it well and without dilution due to addition of empty units to the system (e.g. freshly printed dollars)
To say precisely where the monetary energy moved to is impossible, but the energy density of units of both gold and the dollar have increased relative to bitcoin over the last few weeks, so those systems are prime candidates