The Target Value for Bitcoin is $100K to $1M
falkvinge.net
falkvinge.net
Also, Even though Bitcoin cant be destroyed in a physical sense, it can still be completely devalued by litigation. The US has shown they are serious about anti-gambling and if this starts taking off, they simply need to go after the exchanges. Making it hard to buy bitcoins = BTC value goes down. Making it hard to sell (remember when pokerstars was shutdown? Everyone withdrew everything from ALL sites) and the value goes down catastrophically fast.
Basically, all it takes to completely devalue bitcoins is to have one event that makes most bitcoin owners think the amount of time they have to cash out is minimal.
How do you think the market would react if mtgox had a 'megaupload' style moment? It doesn't even have to be realistic- The US gov could just say terrorists might be using it to funnel funds or something.
But anyways, If mtgox was raided or taken down (and please don't say its not possible- Its totally possible) the effects on the market would be massive and instantaneous. When megaupload was taken down, all its competitors shut down out of fear as well. Its likely that would happen in this situation in a similar fashion.
There is no intrinsic value in bitcoins unless it is possible to easily trade them with a outcome of receiving capital. Yes you can trade bitcoins for services, but the person giving you services is not going to do that unless HE can get cash from this. People are not going to trade services/items to each other in a giant circle if the value of the currency is not hinged on a dollar amount.
I think the pro-bitcoin line to counter what I am saying is that someday people wont care if it converts into USD, because bitcoins will be more valuable. Its not totally bullshit- The USD is no more 'real' than a bitcoin, with the exception of it being established and backed by our gov. However, I doubt BTC would ever get gov backing, so it will eternally be at risk.
Nice try, buddy, but it's services all the way down. If I can pay for food and rent with it, no exchange is needed.
That said, right now you basically can't. Soon, though, soon.
I hate when people use word 'intrinsic' when criticizing bitcoin. Anything that is in limited supply, transferable and durable becomes valuable or forgotten. There's no way that bitcoin will be forgotten and bitcoin is as durable as any P2P network. Whether you can legally buy and sell bitcoins is irrelevant. Of course I'd much prefer if bitcoin was mainstream than black market but being black market only still places price of bitcoin higher that it is today, I believe.
When megaupload was raided, it wasn't the only one that was effected. Almost all of the other file lockers shuttered/closed immediately. Its foolish to think other exchanges would not follow suit if one was taken down. If there is no way to turn your bitcoins into another currency, you would be silly to think you could still buy goods that cost someone else money with them. Whos going to spend money to lose money?
I agree. I just don't think it would kill bitcoin. Because killing one exchange would just make others more popular. That's what happened when most popular bitcoin exchange in my country lost their wallet. :-)
World consists of many countries with many laws. I just don't see all of them cooperating in killing bitcoin.
Besides how well megaupload raid worked for Hollywood people?
I also think that Bitcoin will suffer from the same problems that plagued Flooz: the chief advantage of underground currencies is that they better support a black market, and this limits their potential to break out into the mainstream economy. As I see it, there's three reasons why I would want to use bitcoin:
1. Price speculation
2. Purchasing illegal goods (which currently dominate the bitcoin economy, per my understanding)
3. Money laundering
The first does nothing to support the bitcoin economy, while the second and third expose it to risk from government action (and also make it icky: if bitcoin is mainly used to buy drugs, guns, and child pornography, then I don't really want to use it to buy dinner).
On the other hand, a reputable company may take a chance by simultaneously investing in bitcoin, and then attempting to drive adoption, e.g. by subsidizing purchases made through bitcoin. That might help it shed its black market pedigree and break out into the mainstream.
If you'd mentioned Flooz as counterexample to the claim that WoW gold has bright future as currency and store of value then I'd wholeheartedly agree.
MtGox is just biggest place where people trade bitcoins but there are many alternative markets. Talented developer can set up new market within few months. Of course fall of MtGox would anger and put off many people but end of MtGox is not the end of bitcoin.
Price speculation and money laundering increase value of bitcoin which attracts more investors to it and draws public interest to bitcoin. Purchasing illegal goods with bitcoin is also good because it provides immediate utility as more and more things nowadays are illegal.
> if bitcoin is mainly used to buy drugs, guns, and child pornography, then I don't really want to use it to buy dinner
Does financing manufacturing of military grade weapons that are constantly used to kill lots of people not bother you? Does financing dictatorships by purchasing of their oil with dollars not bother you? Does participating in global casino where whole banks play (calling it "investment") that artificially raises cost of such basic things as food for millions of impoverished people not bother you over your dinner bought with dollars? I think this last thing is what dollars are "mainly" used for nowadays.
Isn't a second, or third such p2p currency due to come? Won't this distroy the current bitcoin uniqness, thus devaluation, etc, ?
What is protecting the bitcoin from this?
I believe more in a energy-bound trading value for the future, much like the petro-dollar. Why not solar-coins, based on the value of solar energy ( GWh based ) traded on the markets? We all consume energy, right?
Link: https://en.bitcoin.it/wiki/FAQ#What_if_someone_creates_a_new...
Take my advice (and prediction too): Energy backed currencies will be the future. Not now, but in 50-100 years.
Gold ( used to back currencies now) is also popular, but it has also _some_ intrinsic value attached to it. But at some point the switch will be made so that the currencies will be backed by the amounts of energy reserves/production.
I'm sure Firaxis wasn't the first to think of this idea - but it does make sense as energy has intrinsic utility and value. If not pure energy, then definitely currency backed by resources that create energy (ie, solar farms, gas/coal mines, nuke plants, etc).
Also, in order to appeal to the proven Bitcoin audience, new cryptocoins might in fact attempt to be complementary to their 'older brother' Bitcoin -- fix some of the issues in certain domains, but interoperate. (They might even find it useful to make some of their initial distribution to exactly the set of Bitcoin holders, as a starting gift.)
Sorry, but this is categorically false. There have been many mediums of exchange in history that were not hinged on the fiat currency of their time. Bitcoin has the advantage in the sense that it can potentially become ubiquitous thanks to today's technology.
I address that in my post (read it). Those mediums you mention have always been government/nation backed or had tangible value (spices/jewelery/precious metals/etc.). Also, you pretty much said it yourself in your post. There have been mediums. Not anymore, they didn't last.
This is no different than, say, linking your bank account to TD Ameritrade to do stock trading. And nobody uses this excuse to claim that it is a "major pain in the ass" to start trading stocks as an individual investor.
You seemed to use an argument to explain that it is a major pain slowing down the adoption of Bitcoin. I am just pointing out it is not the case for stock trading platforms, so it should not be the case for Bitcoin exchanges.
Not if you know where to look. People are buying coins on Bitcoinary within minutes. https://www.bitcoinary.com/
> it can still be completely devalued by litigation.
I doubt that. You can't litigate globally.
> Basically, all it takes to completely devalue bitcoins is to have one event that makes most bitcoin owners think the amount of time they have to cash out is minimal.
True for nearly all currencies or stocks. http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
> But anyways, If mtgox was raided or taken down (and please don't say its not possible- Its totally possible)
Unlikely, but I suspect another exchange would spring in its place.
> There is no intrinsic value in bitcoins unless it is possible to easily trade them with a outcome of receiving capital.
Same for all currencies. The value of currency is belief in the piece of paper you hold.
> However, I doubt BTC would ever get gov backing, so it will eternally be at risk.
Perhaps not, but Bitcoin doesn't have to be the currency of a country to be successful. It's just an alternative currency and with some intersting properties.
I suppose if you dont mind the risk of your paypal account being limited, or the chance of being fucked in the trade- sure.
> I doubt that. You can't litigate globally.
Tell that to the USA and Megaupload. They took down one site (in another country) and the rest of the filelockers immediately shut down out of fear. Nobody wants to go to jail / lose their profits. Exchanges are motivated by profit, not philanthropy or zealotry to the bitcoin cause.
> True for nearly all currencies or stocks.
Stocks are a tangible asset. They are tied to the ownership of a company. Sometimes they pay dividends. Bitcoins are tied to nothing. Currency is tied to the status/growth of the nation attached to it.
> Unlikely, but I suspect another exchange would spring in its place.
Didnt happen that way for megaupload. Or pokerstars.
> Same for all currencies. The value of currency is belief in the piece of paper you hold.
Agreed. Other currency's have the benefit of being nation backed though.
The open issue is whether these will be fatal or simply learning and buying opportunities.
And even if fatal, will the lessons learned help spawn a followup that fixes the issues (whether they be technical, social, economic, or legal)?
The US has NO jurisdiction on many of the Bitcoin exchanges (btcchina.com, btc-e.com, bitcoin.de, virwox.com, cavirtex.com, bitcoin-central.net, etc). In fact, if the US were to seize the biggest US-based exchanges (mtgox.com, etc) I would expect the exchange rate to naturally go up on all the other worldwide exchanges, because of the reduced supply of Bitcoins due to the seizure. (The US only represents a fraction of the total Bitcoin economy, so I doubt non-US Bitcoin users would sell in panick.)
That is a nice consequence of the fully decentralized nature of Bitcoin. No single government can take it down.
The US claim jurisdiction on anything with a .com - and they've seized control of .com domains hosted abroad previously.
> No single government can take it down.
The US would find it trivially easy to take down Bitcoin if they wanted to.
Care to elaborate?
The attacker generates a blockchain that's larger than the real blockchain. That prevents any transactions being confirmed. To do this the attacker needs as much computing power as the rest of the Bitcoin economy, and they need to want to spend money to destroy Bitcoin. (Because they'd make more money either mining or double spending).
Even if that did happen, I think bitcoin could recover. All you'd need to do is get everyone to agree on a point in time where the blockchain was untarnished and to reset to then. That would be easier than it sounds, given the small number of existing clients. It would be damaging, but only in the short term.
"The US would find it trivially easy to take down Bitcoin if they wanted to."
No they cannot. For the same reason that the US cannot take the illegal drug market down, or cannot take Bittorrent down. Decentralized systems or industries (whether in the digital or real world) are very resilient.
And if they were really serious they could 'just' devote some computing time to destroying the blockchain.
5 of the top 10 (out of the Top500) computers are in the US. If they were really serious they'd spend the money and burn the time and own the block chain.
The global network hash rate is currently 35 Thash/s.
A typical GPU found in a supercomputer (Nvidia Tesla K10/K20/C20xx) does roughly 100-200 Mhash/s.
A typical modern CPU core does roughly 1-2 Mhash/s.
You would either need 175k-350k GPUs, or 17.5M-35M CPU cores to attack Bitcoin. If you look at the Top500 list, they have maybe a few tens of thousands of GPUs combined, and about 10M CPU cores (watch out, the core counts in the list combines CPUs and GPUs, I found this out when making sense of the numbers years ago: http://blog.zorinaq.com/?e=14 )
Plus the network hash rate is predicted to increase by at least +20 Thash/s (to 55 Thash/s total) in the next month due to Avalon finishing delivery of their first batch of ASICs. Bottom line, no, all Top500 computers combined could not attack Bitcoin.
(Just curious)
Bitcoins are fractionable to 8 decimal places
Maximum existance of 21Mi bitcoin. (If we disregard the decimal places)
So, let's see, if, as he says, the value of BtC should be 100k dollars, that would represent 2.1e12 dollars (or 2 Trillion dollars)
Unless there's a massive devaluation of the dollar, I don't see this happening. BtCs have no intrinsic value.
It's not a reliable store of value (ok, you lost your wallet.dat now what). Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable.
Reliable: liquid and is not subject to big variations.
Now you learn to keep you wallet.dat as safe as you keep your wallet with same amount of money. :-)
> Right now even pieces of paper issue by a central bank somewhere under the mattress seem more reliable.
Nothing forbids you from keeping your wallet.dat on a pendrive or DVD under your mattress.
Good read about reliability of paper money here: http://en.wikipedia.org/wiki/Hyperinflation
Even though the monetary expansion of BtC is limited, I think we may see other events that have not have happened with 'real money'
There is no need for the USD to be massively devalued for this scenario to be possible. Technically and economically speaking, all the currencies in the world need to be devalued by merely 10% for this scenario to be possible.
PS: you can back up your wallet.dat, which you cannot do with physical money.
Working backwards (bottom-up) usually gives a more realistic estimate. Especially if you base this on existing data.
Oh sure, you can back your wallet.dat.
It also can be copied over the internet by a malicious sw, unlike physical money.
There are multiple efforts from different groups/companies developing hardware wallets to precisely reduce this risk (think tamper-proof chips storing your coins). This format would still allow backups to exist (eg. saving coins in a 2nd identical chip, or saving the "seed" generating private addresses externally, for example on paper if you want to mimic the security feature of physical money).
If the title was "Why I went all-in on Bitcion" would that be less of an anomaly for you?
There is some terrible math/economics here. You can have the bitcoin value @ $1/bitcoin and fulfill 6 trillion USD/day transactions if you want. The author forgot that Btc velocity matters here, and a lot.
BTC can be worth $1m right now, we don't have to wait for the 6 trillion USD transactions for that to happen. It's about investors, speculators and hoarders. Will the velocity of BTC be different than other currencies velocities? Well, we can't know for sure now, but it'll be interesting to watch how this currency evolve.
If you are betting on BTC, you should bet on a BTC business and not on the value of BTC itself.
Anyway, there is a chance I'll be wrong and bitcoin will be worth $1 million one day. To hedge against this possible situation I have procured myself 0.05 of a coin, some year or two ago when they were worth $0.8 each. At the time I basically took the number of bitcoins that will ever exist and divided by current population of the US. 21m/300m = 0.07, of which my 0.05 is pretty close to.
Example of a lightweight client: electrum.org
Bitcoin economy exists solely by the confirmation of transactions by other people, so you're just doing normal housekeeping. The network is the bank. The very nature of the currency makes you to take some odd ways about generating and maintaining it.
However, these predictions are completely wrong. At best the drivers of Bitcoin growth in the foreseeable future will be illegal trade and people trying to capitalise on the growth in value by speculatively buying up Bitcoins. The growth of Bitcoins has a theoretical cap though, because the more common they become in illegal trade, the more likely they are to be outright banned by governments. If they can't ban people from buying drugs they will just stop them by proxy by banning Bitcoins.
The idea that ordinary people will go through the hassle of transacting in Bitcoins is nonsensical.
Things seem to be getting out of hand.
You could have said that the total market for IRC is 7bn people using it every day but now there are more people using other systems like Facebook Messenger.
*The price of bitcoin is volatile, because the future of bitcoin is volatile*
I can think also of a transition period when bitcoin will widely acceptd and function in parallel with the dollar. For such a future the price range seems about right
Torrents for various digital content delivery needs?
I think the parent meant someone to execute grand strategy all the way, not the very powerful and important rock that started the avalanche.
I think such entity is not necessary. On the internet good things that get started tend to grow on their own to fulfill all the need if they are useful without wealthy entity to support the growth, sometimes even against coalition of wealthy entities.
Easily transferable wealth storage is useful.
Do you really think bitcoin is going to continue increasing in value? It seems to me like people are almost exclusively buying bitcoin as an investment. Very few people buy it to spend it. Doesn't that mean that as soon as people lose a bit of confidence, which is likely to happen some point, the price will completely dump? I am sure this has been talked about a lot - is there a better argument one way?
So, here's the question. Is anyone willing to lend me 200k BTC for a few days?? :p This seems like the better investment right now... borrow someone else's bit coins, sell them on the market, and then buy them back after the crash.
Its called "short selling". And if enough people short sell at the same time, the short sellers can spook the market into a selling frenzy, and the short sellers will siphon out all the money from the system...
Here's the mtgox depth: http://bitcoincharts.com/markets/mtgoxUSD_depth.html
If you sold 200k BTC in a "fill or kill" fashion without giving the market time to respond, you would definitely wipe out most of the bid order book. The highest bid price standing after your apocalyptic trade would be $5. You would get about 4MM for your 200k coins (avg $20 ea).
However, there are currently only 66,000 bitcoins for the asking on mtgox. So how are you going to cover your short?
You might trigger enough of a panic to pump another 100k bitcoins or so into the market at fire sale prices.
However, it's much more likely you will get killed on the ask side trying to buy your 200k BTC back.
If Mr. Shark were a bitcoin bank (such as Flexcoin), then they would have enough BTC to cover the short. Mt.Gox themselves presumably has ~100k BTC on hand, and would also have the power to crash the market in this manner.
FlexCoin and Mt.Gox however have a vested interest in making sure Bitcoins succeed. So they probably wouldn't do this. A more likely malicious actor would be the hackers who stole 50,000 BTC some time a year and a half ago. http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+...
Crashing BTC with stolen BTC is free.
The presumption is that a lot of people right now would sell their BTC when they see BTC drop down to $5. People panic when they see losing value... and you buy back the BTC you sold at that point.
> Crashing BTC with stolen BTC is free.
Yes, agree that you could definitely crash the bid price by dumping 50k stolen BTC. This might also happen naturally if someone holding lots of BTC is forced to sell to get USD quick (e.g. "oh no, huge unexpected medical bill, tax bill, fine...").
[Not sure it's "free" though; what about opportunity cost?]
> The presumption is that a lot of people right now would sell their BTC when they see BTC drop down to $5. People panic when they see losing value... and you buy back the BTC you sold at that point.
So during your buyback, you'll be bidding against all the bitcoin loons who also want to buy after you crashed the price. These people are just irrationally exuberant about internet play money and have been waiting for the price to hit $5 or $10 again.
You also have to convince the other loons who are holding lots of BTC that their play money is now worthless. You need to convince them to put down the cheetos, transfer BTC to mtgox and plug those sell orders in there. I'm not convinced crashing the bid price alone would be enough to achieve that. As well as manipulating price, you also need to kill the enthusiasm and belief.
I think to really trigger some selling for your buyback, you would want to carry out a smear campaign at the same time. You want to inject some fake news articles (either via hacking or social engineering) and create confusion on the forums. Convince people that bitcoin is doomed (e.g. "all BTC exchanges to be illegal, say regulators"). Or that you have a technical attack on the network.
Pub the articles first, smear forums, then DoS forums (to prevent corrections), then trigger the "mother sell"... that would give you the best chance of success for the attack you are thinking of.
</devilsadvocate>
What I wanted to finish with though, is that anyone trying to pull something this would have to actually believe that BTC are valuable, or equivalently that suckers will pay more for them later. Otherwise they wouldn't be buying them back.
But recently there have been quite a number of reports of perfectly legitimate businesses starting to accept Bitcoins, lending some credibility to the scenario that people will start using Bitcoins like just another currency.
I would not expect big crashes due to pure speculation. And I'm quite confident that amount of money, people and experience in this game is big enough to ensure much more stable growth than 2 years ago.
Mr. Shark notices that MtGox only has 107159 BTC trading volume. When converted into USD, that is about $5 Million. So... Mr. Shark learns that he can control the market price in any direction, with approximately only $5 million USD of investment.
Mr. Shark's strategy therefore, is to build up enough money to "spook" the market by controlling it for a full day. ~100,000 BTC would be enough to crash the market for a full day: and hopefully the spooked long investors will help create the crash afterwards. Mr. Shark would then make sure the majority of his bet is in the form of a Long Straddle. Mr. Shark rides the market up till BTC has hit some absurdly high value, maybe issue a press release or two to help fuel BTC's rise.
One day, Mr. Shark sells 100,000 BTC all at once on the Mt. Gox market. He cashes in at BTC's high price, then BTC crashes. (EDIT: For clarification... Mr. Shark loses some money here, on purpose).
Mr. Shark then cashes in on his Call Options portion of his Long Straddle, and makes money because the market went down.
Long story short: Mr. Shark wins a ton of money, and everyone who has "invested" into BTC these past few weeks loses their money to Mr. Shark. Mr. Shark leaves the market without any worries that investigators will be after him. (Its not like there is a Bitcoin version of the FTC)
Until Mt. Gox's volume gets high enough to resist an adversarial trader, or until there is some group in charge to make sure that blatantly adversarial trading doesn't happen on the Bitcoin market... the BTC currency will be too risky for me.
If the the daily volume is about 100,000 BTC, how do you expect to sell 100,000 at once at "the high price"?
Mr. Shark makes his money from options trading and short-selling. The $5 million / 100k BTC is seen as an investment, its the cost that Mr. Shark pays to have unilateral control over the market for a day.
Short Selling is when Mr. Shark comes up to you and says "Hey, I'll give you $100 right now if I can borrow 10k bitcoins for a week. I promise I'll give the bitcoins back". Mr. Shark can now build up 100k BTC to sell without actually risking $5 million USD.
Call options is when Mr. Shark comes up to you and says "Hey, I'll give you a BTC on Wednesday next week if you give me $20 today". Since Bitcoins cost $40 today, its a good deal, so you buy these contracts.
On Saturday, Mr. Shark crashes the market. He not only sells his 100k BTC, he short-sells more BTC. The BTC market panics, and BTCs drop down to pennies again.
Come next Wednesday, Mr. Shark fulfills his contract. He buys a bitcoin for $1, and gives it to all of the people he sold Call options to, or participated in his Short-selling deal.
Again, the $5 million is just the amount of money Mr. Shark is willing to lose to gain control of the market. Mr. Shark is making money through other means.
AFAIK there's no liquid market for BTC derivatives, but let's assume it comes to exist.
> Call options is when Mr. Shark comes up to you and says "Hey, I'll give you a BTC on Wednesday next week if you give me $20 today". Since Bitcoins cost $40 today, its a good deal, so you buy these contracts.
That sounds... unusual. A more usual formulation would be "I give you the right to buy BTC from me for $20 on Wednesday if you give me $x today". The fair value of x (the premium) depends on other factors besides the current price. But, more importantly, there's no "good deal": if you set $x below the fair value then the buyers will arbitrage the hell out of you.
E.g. if the fair price for the call option above is greater than $20 but you sell it for $20, then a buyer will happily take your offer: they sell 1 BTC short and get $40 in cash, pay you $20 and put the remaining $20 in the bank. Come Wednesday, they withdraw $20 (keeping the interest) and use that to cover their short sell: at worst they have to buy the stock from you for $20 (but they still make money on the interest), at best the stock has crashed and they make even more.
a) There's a lot more bids than asks. It's a lot easier to ratchet the price up than it is to lower it. If Mr Shark sold 50k BTC in one hit right now, he would move the price from $46 to $31. If he tried to buy 50k BTC in one hit, BTC would shoot up to $100 USD.
b) Since the last crash and subsequent boom, there are lots of people now who yearn for the days of $5, $10 or even $15 BTC and will happily buy at those prices[1]. Mr Shark will be competing with their orders during his buyback.
Strangely I think the first crash made bitcoin stronger.
c) I'm not sure Mr Shark appreciates the psychology of the current bitcoin market. I think he assumes there are people sitting on a ton of BTC who are going to panic and sell at $5. Even a cursory reading of the bitcoin forums would show that this is not the case.
[1] I sadly confess that the kool aid is delicious and I am one of them.
So someone else makes money off of your scheme, thats fine. Both players contribute to the crashing of BTC and now profit off of it.
See "As an investment, is Bitcoin a sure thing?".
Because the FTC is the government agency designed to stop bull$$$$ like Mr. Shark, and throw people like him into jail. Who is to protect me when Mr. Shark come after bitcoins?
Then Mr. Stingray buys cheap bitcoin for 5mil and the story goes on.
And small fish like us tag along for the ride, trying to figure out when to buy and when to sell.
I thought that's exactly how stock market works, and commodities market and every market that people with money use for "investment". Plus sometimes some ridiculous rules about selling or buying just before or after making positive or negative hype that helps to punish 3% (my guess) of most obvious cases when that happens.
I guess you are sure that there is some way to make people panic if you have 1 daily MtGox volume in BTC - but it is only because you don't have it and you imagine that if only you had it you'll be able to fool all the bitcoin market players.