Author Topic: Is it too late [bitcoin]?  (Read 90689 times)

phil22

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Re: Is it too late [bitcoin]?
« Reply #500 on: December 29, 2017, 04:08:24 PM »
lol no dude intrinsic value is like paying a dividend, owning assets, profits from an established customer base, etc.

Right, all investments generate profits.  When you buy stock you are buying a slice of that corporation's future quarterly cash flow.  When you buy bonds you are buying future interest payments.  When you buy real estate you are buying future (real or imputed) rents.  The generation of regular future profits is what makes them investments.

When you buy beanie babies, they produce nothing.  There is no dividend, no interest, no utility you can sell every month.  The only potential way to make money is to find some "greater fool" willing to pay a higher price for an otherwise depreciating asset. 

Bitcoin is much closer to beanie babies than it is to real estate.  It doesn't do anything.  It only has value as long as it remains popular to collect.

edited to add:  my wife made some serious money on beanie babies.  Some people still pay good money for mint condition original issue ones, even today.  That doesn't make them an investment.

a share of a stock does not itself do anything.  yes, you may get dividends but that lowers the market price proportionally.  the share of stock represents partial ownership of a company that produces value.  and that share of stock is currently priced at 3x the company's book value, so 2/3 of your stock "value" is simply speculation on future earnings*.

for a unit of bitcoin to exist (not be valueless) there has to be a miners or other nodes consuming electricity and putting real work into the blockchain on which that coin exists, processing transactions.  similar to a share of stock, each unit of bitcoin doesnít do anything** but it represents its a functioning global payment network, and that global payment network produces value.

for price/book for bitcoin, it's probably mostly speculation.  but again, bitcoins cost about as much to create as they're worth (the mining difficulty tracks the market price and mining profit tends to zero) and you can't just wave your hands to create some.

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* see price/book at "3.0x": https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0585#tab=2

** unlike a share of stock, units of bitcoin have utility: you can freely transact units of bitcoin with others around the world using the built-in payment network
« Last Edit: December 29, 2017, 04:12:06 PM by phil22 »

phil22

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Re: Is it too late [bitcoin]?
« Reply #501 on: December 29, 2017, 04:22:47 PM »
What cracks me up about listening to people defend bitcoin or these other cryptos, is that all I hear how great the technology that involves them is. What I can't understand is how few address how many cryptos there are, how many that are no doubt being developed (and I mean, who wouldn't want to create an artificial currency, sell it all off to morons, and walk away with a profit?). Think things are confusing now? Wait a couple of years. Today its Bitcoin, tomorrow it seems it will be Ripple. Well, wait, after Ripple it will be something else. And where am I able to spend all this funny money? Can I buy gas with it? Groceries? Pay my mortgage? No? Then what the hell am I paying $1000s for them? Oh wait, Bitcoin lists some 20 companies foolish enough to deal with it. Its hysterical. I know people have made some money off trading bitcoin, but its really much like making money trading Monopoly money.

Some people bring up comparing it to gold. I don't own gold either. I figure if the sh!t hits the fan where GOLD is more important than the US dollar, then society as we know it will have collapsed and I am better off stocking up on bullets and cigarettes, but I know people have made money off that too. But gold is a natural resource and there is a finite amount on Earth. Its been sought after by just about every civilization. I have no need for it, but I can understand others that might.

I can develop a crypto currency. You can. We all can. And that's a problem.

how is that a problem?  have you looked at the open source software movement?  there are tons of near-clones of any kind of software imaginable.  anyone on earth can create any software at any time.  does that mean Microsoft is worthless?  anyone can create any website or blog they want, does that make websites worthless?  cryptocurrencies are only worth something if they are secure and people use them.*  people have to expend effort and money to make a cryptocurrency worth something.  yes, if you create a cryptocurrency today it'll probably be worthless, as it should be.  bitcoin or any other crypto can go poof to zero overnight if they are abandoned or proven not secure.

i agree with you that gold and cryptocurrencies will be worthless if society collapses.  but that doesn't make those useless non-correlated asset classes while society is running along normally.  (i personally think gold is about as useless as it gets so i don't own any.)

* https://forum.mrmoneymustache.com/investor-alley/official-crypto-currency-portfolios-and-discussion/msg1706244/#msg1706244

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #502 on: December 29, 2017, 04:47:14 PM »

how is that a problem?  have you looked at the open source software movement?  there are tons of near-clones of any kind of software imaginable.  anyone on earth can create any software at any time.  does that mean Microsoft is worthless?  anyone can create any website or blog they want, does that make websites worthless?  cryptocurrencies are only worth something if they are secure and people use them.*  people have to expend effort and money to make a cryptocurrency worth something.  yes, if you create a cryptocurrency today it'll probably be worthless, as it should be.  bitcoin or any other crypto can go poof to zero overnight if they are abandoned or proven not secure.

i agree with you that gold and cryptocurrencies will be worthless if society collapses.  but that doesn't make those useless non-correlated asset classes while society is running along normally.  (i personally think gold is about as useless as it gets so i don't own any.)

* https://forum.mrmoneymustache.com/investor-alley/official-crypto-currency-portfolios-and-discussion/msg1706244/#msg1706244
Despite other alternatives, gold alloy is still the best material for dental work.

Gold powder is used in other medical treatments, such as for reducing swelling of arthritis.

Gold is one of the best materials for shielding ultraviolet rays; think satellites and astronaut face visors.

Gold is highly conductive and malleable, and never tarnishes.  Got a cell phone or computer?  Chances are there's about 50 milligrams of gold in each of them, simply because of its unique physical properties.

And of course, there's the obvious applications in jewelry and building materials, etc., for anything from modest to extravagant expressions of love or wealth.

I'm sure there's other examples; but hopefully you get my point.  It's not just an otherwise valueless metal that sits as inert bricks in a vault.  Its unique properties give it an intrinsic value that goes far beyond just a betting chip for speculators.

Bitcoin, as a payment system, is inferior, on balance, to existing systems.  Sure, that's just my opinion, and I'm sure it's debatable. 

Leaving that aside, what else can I do with a bitcoin, other than sell it to someone willing to pay a higher price than I did?

If society collapses, gold will still retain intrinsic value that will remain unexploited, but only until society rebuilds itself.  Golds unique physical properties do not depend on any specific social structure. 

Case in point: Confederates who used Confederate dollars to buy gold had an asset that was valuable long after the war was lost to the Union.  Any who held on to paper currency found that their money simply expired, valueless, six months after the war was lost.

If society collapses permanently, then yeah, it's a moot point in any case.

 

« Last Edit: December 29, 2017, 05:05:23 PM by ILikeDividends »

phil22

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Re: Is it too late [bitcoin]?
« Reply #503 on: December 29, 2017, 05:23:07 PM »
Bitcoin, as a payment system, is inferior, on balance, to existing systems.  Sure, that's just my opinion, and I'm sure it's debatable. 

Leaving that aside, what else can I do with a bitcoin, other than sell it to someone willing to pay a higher price than I did?

yes of course, if you "leave aside" the main function of something you don't have much left.  if you "leave aside" transport from point A to B, what else is a car good for?

i completely agree that those of us in the US* and elsewhere have "good enough" electronic finances already.  there is not a lot of benefit to bitcoin when all you're doing is paying your credit card balance and making a Vanguard transaction every now and then.  but anyway:

- you can embed the signature of an electronic file/document in the blockchain, which proves the document existed at that time
- you can store value for escrow or trusts, for example with time-locked transactions or M-of-N-signatures-to-redeem transactions
- you can store value purely in your brain with a memorized wallet seed -- no EULA to agree to

If society collapses, gold will still retain intrinsic value that will remain unexploited, but only until society rebuilds itself.  Golds unique physical properties do not depend on any specific social structure.  If society collapses permanently, then yeah, it's a moot point in any case.

i think it's fair to say gold "may" retain some value.  not "will."  and again in that situation, food, clean water, your ability to do physical work, perhaps weapons, etc., will have value.  you'd better hope whoever you're desperately buying food from wants a few shavings of gold, and not something else.  your 10 pounds of gold or whatever won't tarnish, but it may get stolen or it may be a nice doorstop until society rebuilds.  and yes in this situation bitcoin and the internet itself would be only a memory.

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* only ~5% of people on earth live in the US

ILikeDividends

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Re: Is it too late [bitcoin]?
« Reply #504 on: December 29, 2017, 05:44:12 PM »
Bitcoin, as a payment system, is inferior, on balance, to existing systems.  Sure, that's just my opinion, and I'm sure it's debatable. 

Leaving that aside, what else can I do with a bitcoin, other than sell it to someone willing to pay a higher price than I did?

yes of course, if you "leave aside" the main function of something you don't have much left.  if you "leave aside" transport from point A to B, what else is a car good for?

i completely agree that those of us in the US* and elsewhere have "good enough" electronic finances already.  there is not a lot of benefit to bitcoin when all you're doing is paying your credit card balance and making a Vanguard transaction every now and then.  but anyway:

If the main function of bitcoin is as a payment system, then it seems you are agreeing that it has no real intrinsic value to those of us in the USA and other developed countries.

And of course, as a resident of the USA, that is the perspective I am coming from. A car will take you from point A to point B in the USA, North Korea, or Venezuela, so I think that comparison is a bit of a red herring.

If I lived in Venezuela, then of course I would have to agree that bitcoin would be the least worst choice available for protecting my wealth from government seizure.  But I don't live there, so it's an obviously inferior vehicle as a payment system for me.
 
Quote

- you can embed the signature of an electronic file/document in the blockchain, which proves the document existed at that time
- you can store value for escrow or trusts, for example with time-locked transactions or M-of-N-signatures-to-redeem transactions
- you can store value purely in your brain with a memorized wallet seed -- no EULA to agree to

That is a hypothetical "value" that has yet to find a real-world scenario.  I would never sell my house and put it in an escrow account denominated in bitcoin, simply because I have no guarantee of getting paid in a real currency anywhere near the value of my house after closing escrow. That would seem to defeat the whole purpose of escrow.
Quote

If society collapses, gold will still retain intrinsic value that will remain unexploited, but only until society rebuilds itself.  Golds unique physical properties do not depend on any specific social structure.  If society collapses permanently, then yeah, it's a moot point in any case.

i think it's fair to say gold "may" retain some value.  not "will."  and again in that situation, food, clean water, your ability to do physical work, perhaps weapons, etc., will have value.  you'd better hope whoever you're desperately buying food from wants a few shavings of gold, and not something else.  your 10 pounds of gold or whatever won't tarnish, but it may get stolen or it may be a nice doorstop until society rebuilds.  and yes in this situation bitcoin and the internet itself would be only a memory.

There have been numerous massive societal collapses throughout history, and gold has always emerged as the same coveted asset that it was before the collapse.  History is on the side of "will" not "may."

I don't think anyone is arguing that gold is more valuable than food, clean water, or the ability to do physical work.  But if that is the point of your assertion, then of course, I would have to agree.

But in the worst possible scenario, gold would at least still exist in the physical world, and not just as a fading memory.  I would rather own something that is at least worth stealing, than own nothing anyone wants at all.  Who wouldn't?
Quote

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* only ~5% of people on earth live in the US
« Last Edit: December 29, 2017, 08:40:07 PM by ILikeDividends »

theolympians

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Re: Is it too late [bitcoin]?
« Reply #505 on: December 29, 2017, 06:44:56 PM »
I'm surprised more countries have not cracked down on bitcoin as it effectively undermines their currencies, the dollar included. I wonder about the intentions of the creators as well. The idea may be neat, a global currency of one value.

However, I find it a little funny a bunch of "investors" are falling over themselves to buy the next "it". I read an article on a site that said "ripple" is now the number 2 cryptocurrency....WTF? Someone posted earlier there are "thousands" or cryptos out there. I don't know about the number, but if there is a bunch what is the point. No one is using these as currencies, they are just pumping money into one or another hoping it will take off. Looks like a sucker's game to me.

Reminds me of a corny commercial I saw a while back where some huckster was hawking penny stocks, "Pump and Dump!" He actually used those words.

At some point in the future we will perhaps all be on some cryptocurrency but it will be government regulated, and not created in a basement.

WhiteTrashCash

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Re: Is it too late [bitcoin]?
« Reply #506 on: December 29, 2017, 07:23:03 PM »
I just had to talk a colleague out of blowing her life savings on Bitcoin. Probably saved her future retirement in the process. At the same time, I helped her recognize that her teenage son is probably doing illegal sales of some type on the Darkweb. Hope she can keep him out of jail. That seems to be the primary function of cryptocurrencies. Doing illegal stuff like selling guns and drugs. It's like the Wild West out there on the internet these days and lots of people are going to end up getting hurt because they lack basic common sense.

Indexer

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Re: Is it too late [bitcoin]?
« Reply #507 on: December 29, 2017, 11:07:56 PM »
Cryptos are a fringe 'investment' (~ I hate calling it that)

Then stop calling it that. People misuse the word investment to describe all sorts of stupid things. People will say a new pair of shoes are an investment. No they aren't and neither is bitcoin.

Itís baffling to me that people look at the current state of cryptocurrencies and think theyíll never be anything more

It's not that I don't think the idea has merit, it's that I think bitcoin and the rest of these early coins will be virtually worthless.

Remember that when you pay $17k for a bitcoin, you are not investing in a blockchain technology company.  You are not betting on the successful future of crypto currencies in the global economy.  You are only betting that some other buyer in the future will pay you more than $17k for a specific bitcoin.  Just like with beanie babies.

THIS!!!  Blockchain technology will likely do great things, and I see reasons to invest in it. That doesn't mean anything for Bitcoins.


lol no dude intrinsic value is like paying a dividend, owning assets, profits from an established customer base, etc.

Right, all investments generate profits....

a share of a stock does not itself do anything.  yes, you may get dividends but that lowers the market price proportionally.  the share of stock represents partial ownership of a company that produces value.  and that share of stock is currently priced at 3x the company's book value, so 2/3 of your stock "value" is simply speculation on future earnings*.

for a unit of bitcoin to exist (not be valueless) there has to be a miners or other nodes consuming electricity and putting real work into the blockchain on which that coin exists, processing transactions.  similar to a share of stock, each unit of bitcoin doesnít do anything** but it represents its a functioning global payment network, and that global payment network produces value.

for price/book for bitcoin, it's probably mostly speculation.  but again, bitcoins cost about as much to create as they're worth (the mining difficulty tracks the market price and mining profit tends to zero) and you can't just wave your hands to create some.

This is a false equivalency.

1. Stock dividends = profits. Dividends don't make the stock price go down over time, they just make it drop when the dividend is paid. The reason the stock price goes down when a dividend is paid is because the dividend was priced in, investors knew it was coming so they drove the stock price up in anticipation of the dividend. Investors buying the stock the following day want a lower price because they missed out on the dividend. The next time there is a dividend the stock price will likely rise in advance to that dividend, unless of course the stock price moves for other reasons as well, like long term appreciation due to earnings growth. The stock represents ownership in a company and claims to profits and assets. Profitable companies normally trade higher than their book value, people want access to those profits and future profits. Yes, part of this is speculation, speculation that the company will continue to grow and be more profitable. Note, the speculation is that a company with assets and earnings will grow those assets and earnings over time. That is investing, not gambling.

2. The fact that a miner mined Bitcoin doesn't give it value. The fact that it uses stupid amounts of electricity doesn't give it value. If I use my valuable time and resources to draw "B" on a bunch of Chuckie Cheese coins that doesn't make them valuable(actual person did this and sold them as Bitcoins, made over $1 million). A Bitcoin doesn't represent the profits of blockchain technology or claims against assets or profits. That would be a stock. A Bitcoin is code that some people have decided to trade like a currency. Speculation with Bitcoin is not that assets and earnings will grow, there aren't any. Speculation with Bitcoin is that someone will be willing to pay more for a Bitcoin in the future. This is the textbook definition of the "Greater Fool Theory." This is gambling, not investing.

See the difference?

On the note of a global payment network:  in 1950 that would be cool. In 2017 there are more than enough means of transporting money and data worldwide. A current transaction prices using Bitcoin is more expensive than a bank wire.

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #508 on: December 29, 2017, 11:57:01 PM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.
« Last Edit: December 30, 2017, 12:01:33 AM by thenextguy »

powskier

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Re: Is it too late [bitcoin]?
« Reply #509 on: December 30, 2017, 12:17:15 AM »


i assume by "bitcoin" you mean "cryptocurrencies" here. 

No, I explicitly meant bitcoin.  The language was precise.  Other cryptocurrencies may find utility someday, but bitcoin will not.  Bitcoin will be worthless in a few years, except to novelty collectors.  Which is why the current price of bitcoin is stupid. 

[/quote]

I rode bitcoin up from $2.5k and sold out at $18k,  fully agree with Sol's opinion above (the second quote, messed up the edit). I also hold a small but rapidly growing portfolio of crypto after gotten back my original investment plus some profit. It's interesting to watch this "not real until I sell" money go from $4k to $20k in a month and then up to $35 k in a few days ( thanks Ripple). No plans on buying bitcoin again.
« Last Edit: December 30, 2017, 12:34:01 AM by powskier »

marty998

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Re: Is it too late [bitcoin]?
« Reply #510 on: December 30, 2017, 12:21:58 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Still not buying it. I will call it a currency when it is stamped as legal tender.

And proof of stake doesn't equate to dividends either. You may receive a benefit in proportion to your holding, but you still have to actively mine the "currency".

Assuming the value of the "currency" (and I am using that term very very generously) stays stable (which it should if you want to call it a currency), then you are telling me the only way you generate a return is by doing work?

Sounds to me you have to sell your computing services to the company that created the cryptocurrency, which seems shockingly like an employee/employer relationship, where you get paid in things you hope other people place a greater value on than you...

sol

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Re: Is it too late [bitcoin]?
« Reply #511 on: December 30, 2017, 12:23:40 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

You seem confused about the definitions of all of the important words in your own post.

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #512 on: December 30, 2017, 12:28:00 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Still not buying it. I will call it a currency when it is stamped as legal tender.

And proof of stake doesn't equate to dividends either. You may receive a benefit in proportion to your holding, but you still have to actively mine the "currency".

Assuming the value of the "currency" (and I am using that term very very generously) stays stable (which it should if you want to call it a currency), then you are telling me the only way you generate a return is by doing work?

Sounds to me you have to sell your computing services to the company that created the cryptocurrency, which seems shockingly like an employee/employer relationship, where you get paid in things you hope other people place a greater value on than you...

Except you canít just sell your computing services. You have to stake your currency and validate transactions. Yes, itís not exactly the same as bond dividends but also not exactly the same as working for money. Surprise! This is new territory; it doesnít fit exactly into our predefined definitions of things.

But the bottom line is that you can buy ETH and use negligible amounts of power (itís not mining) to earn more ETH.

thenextguy

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Re: Is it too late [bitcoin]?
« Reply #513 on: December 30, 2017, 12:29:00 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

You seem confused about the definitions of all of the important words in your own post.

Are you 5 years old? Cuz you just did the equivalent of stomping your feet and saying ďnuh uhĒ!

marty998

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Re: Is it too late [bitcoin]?
« Reply #514 on: December 30, 2017, 12:58:12 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Still not buying it. I will call it a currency when it is stamped as legal tender.

And proof of stake doesn't equate to dividends either. You may receive a benefit in proportion to your holding, but you still have to actively mine the "currency".

Assuming the value of the "currency" (and I am using that term very very generously) stays stable (which it should if you want to call it a currency), then you are telling me the only way you generate a return is by doing work?

Sounds to me you have to sell your computing services to the company that created the cryptocurrency, which seems shockingly like an employee/employer relationship, where you get paid in things you hope other people place a greater value on than you...

Except you canít just sell your computing services. You have to stake your currency and validate transactions. Yes, itís not exactly the same as bond dividends but also not exactly the same as working for money. Surprise! This is new territory; it doesnít fit exactly into our predefined definitions of things.

But the bottom line is that you can buy ETH and use negligible amounts of power (itís not mining) to earn more ETH.

Perish the thought that my investment relies on me having a computer on 24/7 to do the work in validating transactions of others around the world*. Better hope there are no blackouts.

* Just a thought. If my computer validates an illegal transaction, (I don't know, say someone who has extorted some poor sod using ransomware) allowing funds to be transferred as part of a criminal enterprise... am I aiding and abbetting that criminal syndicate?


thenextguy

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Re: Is it too late [bitcoin]?
« Reply #515 on: December 30, 2017, 01:17:47 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Still not buying it. I will call it a currency when it is stamped as legal tender.

And proof of stake doesn't equate to dividends either. You may receive a benefit in proportion to your holding, but you still have to actively mine the "currency".

Assuming the value of the "currency" (and I am using that term very very generously) stays stable (which it should if you want to call it a currency), then you are telling me the only way you generate a return is by doing work?

Sounds to me you have to sell your computing services to the company that created the cryptocurrency, which seems shockingly like an employee/employer relationship, where you get paid in things you hope other people place a greater value on than you...

Except you canít just sell your computing services. You have to stake your currency and validate transactions. Yes, itís not exactly the same as bond dividends but also not exactly the same as working for money. Surprise! This is new territory; it doesnít fit exactly into our predefined definitions of things.

But the bottom line is that you can buy ETH and use negligible amounts of power (itís not mining) to earn more ETH.

Perish the thought that my investment relies on me having a computer on 24/7 to do the work in validating transactions of others around the world*. Better hope there are no blackouts.

* Just a thought. If my computer validates an illegal transaction, (I don't know, say someone who has extorted some poor sod using ransomware) allowing funds to be transferred as part of a criminal enterprise... am I aiding and abbetting that criminal syndicate?

I donít know. Are you guilty of a war crime if a tax-funded missile blows up a hospital? Arenít hypotheticals fun?!

Indexer

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Re: Is it too late [bitcoin]?
« Reply #516 on: December 30, 2017, 07:18:19 AM »
Except you canít just sell your computing services. You have to stake your currency and validate transactions. Yes, itís not exactly the same as bond dividends but also not exactly the same as working for money. Surprise! This is new territory; it doesnít fit exactly into our predefined definitions of things.

But the bottom line is that you can buy ETH and use negligible amounts of power (itís not mining) to earn more ETH.

Yes, you are selling your computing services when you mine Bitcoin. That is exactly what you are doing. You are processing other people's Bitcoin transactions, and being paid in Bitcoin. If you chose a different currency then you would be processing their transactions instead.

It is not a bond. With a bond you are loaning an entity, normally a corporation or government, money and they are paying you interest in exchange. With a stock you are buying ownership in a corporation, and as a rightful owner they share their profits with you in the form of dividends.

* Just a thought. If my computer validates an illegal transaction, (I don't know, say someone who has extorted some poor sod using ransomware) allowing funds to be transferred as part of a criminal enterprise... am I aiding and abbetting that criminal syndicate?

I don't think the individual miner is at risk since you don't know what each transaction is used for.  Now exchanges have been shut down for money laundering.

In the traditional, legal, financial system you have to know your customer before you store or move money on their behalf. If you suspect they are doing something illegal you are legally required to report it. Unless a Bitcoin exchange is gathering information on each customer, the same information you would need to open a bank account, then they are at risk of aiding money launderers.

Example 1: https://www.cbsnews.com/news/two-bitcoin-exchange-operators-charged-in-money-laundering-scheme/
Example 2: http://fortune.com/2017/07/27/btc-e-digital-currency/

maizeman

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Re: Is it too late [bitcoin]?
« Reply #517 on: December 30, 2017, 08:40:48 AM »
Indexer & thenextguy, I think you are talking past each other. Indexer, you're talking about mining bitcoin which is a form of proof-of-work validation. thenextguy, you're talking about proof-of-stake validation in ethereum, which, to be far, is supposed to roll out as the way only a small small percentage of ethereum's blocks are validated sometime in 2018 with the Constantinople/Metropolis upgrade, although the roadmap has ethereum moving to 100% proof-of-stake eventually.

Indexer, in proof-of-stake validation you don't need to have a computer on. You can use a smart contract (essentially code embedded in the ethereum blockchain) to let a validator somewhere in the world use ether you own as part of the pot of currency they are putting at stake as a guarantee that they will only validate valid transactions. The more ether the validator has at stake, the more frequently they will get to create a block and receive a block reward + transaction fees. The validator then pays out a portion of the ether they receive each time they create a block to people who let the validator use their ether. In practice, it is anticipated that this would work a little like* a savings account at a bank, where essentially you're letting others use money you don't need at the moment, and are rewarded with interest payments.

thenextguy, I think it is a little disingenuous to describe the change to proof of stake in ether as automatically making cyptocurencies into investments. First of all, a lot of major currencies (like bitcoin) have shown no interest in transitioning to proof of stake. Secondly, even in ethereum, you wouldn't be getting rewarded for just holding ether, you'd get rewarded if you decided to risk forfeiting your ether to provide a validator with an increased stake. It is probably also worth bringing up that the overall return on investment for proof of stake validation is going to be rather low for the folks who have gotten excited to see their money double every couple of months as cryptocurrency exchange rates change. The discussions I've read suggest that proof-of-stake will grow the ether money supply perhaps 2% per year. Not all ether will be staked, so let's say 50% of the ether is receiving interest payments from that growth. Now we're at 4% ether-on-ether return annually. Add in some transaction fees and maybe we can make it 6% or 8%.

*Please note that I am not saying it IS a savings account. There are also a number of critical differences (such as the risk of completely losing the ether you've agreed to let the validator use if they decide to validate an invalid block).

phil22

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Re: Is it too late [bitcoin]?
« Reply #518 on: December 30, 2017, 11:15:09 AM »
lol no dude intrinsic value is like paying a dividend, owning assets, profits from an established customer base, etc.

Right, all investments generate profits....

a share of a stock does not itself do anything.  yes, you may get dividends but that lowers the market price proportionally.  the share of stock represents partial ownership of a company that produces value.  and that share of stock is currently priced at 3x the company's book value, so 2/3 of your stock "value" is simply speculation on future earnings*.

for a unit of bitcoin to exist (not be valueless) there has to be a miners or other nodes consuming electricity and putting real work into the blockchain on which that coin exists, processing transactions.  similar to a share of stock, each unit of bitcoin doesnít do anything** but it represents its a functioning global payment network, and that global payment network produces value.

for price/book for bitcoin, it's probably mostly speculation.  but again, bitcoins cost about as much to create as they're worth (the mining difficulty tracks the market price and mining profit tends to zero) and you can't just wave your hands to create some.

This is a false equivalency.

1. Stock dividends = profits. Dividends don't make the stock price go down over time, they just make it drop when the dividend is paid. The reason the stock price goes down when a dividend is paid is because the dividend was priced in, investors knew it was coming so they drove the stock price up in anticipation of the dividend. Investors buying the stock the following day want a lower price because they missed out on the dividend. The next time there is a dividend the stock price will likely rise in advance to that dividend, unless of course the stock price moves for other reasons as well, like long term appreciation due to earnings growth. The stock represents ownership in a company and claims to profits and assets. Profitable companies normally trade higher than their book value, people want access to those profits and future profits. Yes, part of this is speculation, speculation that the company will continue to grow and be more profitable. Note, the speculation is that a company with assets and earnings will grow those assets and earnings over time. That is investing, not gambling.

when a company pays out dividends, the price doesn't go down because investors are sad they missed the dividend.  that's ridiculous.  the price goes down because the company is not worth as much because it just gave away a big chunk of its cash assets.  if a company keeps profits instead of giving dividends, then the value of the stock should go up, because as a share owner you are entitled to a slice of that company's assets -- which for the average share of stock is about 33% the market price.

2. The fact that a miner mined Bitcoin doesn't give it value. The fact that it uses stupid amounts of electricity doesn't give it value. If I use my valuable time and resources to draw "B" on a bunch of Chuckie Cheese coins that doesn't make them valuable(actual person did this and sold them as Bitcoins, made over $1 million). A Bitcoin doesn't represent the profits of blockchain technology or claims against assets or profits. That would be a stock. A Bitcoin is code that some people have decided to trade like a currency. Speculation with Bitcoin is not that assets and earnings will grow, there aren't any. Speculation with Bitcoin is that someone will be willing to pay more for a Bitcoin in the future. This is the textbook definition of the "Greater Fool Theory." This is gambling, not investing.

bitcoin's market price is largely due to speculation.  i think we're in agreement about that.  the point about miners is that they're not creating bitcoin for $100 and selling them for $13000.

the chuckie cheese coins example you use here, a scam, is a false equivalency.  bitcoin miners' profits tend to zero.  that scammer's profits were high because he was scamming people.  if his profits were close to zero you'd have never heard of it.

On the note of a global payment network:  in 1950 that would be cool. In 2017 there are more than enough means of transporting money and data worldwide. A current transaction prices using Bitcoin is more expensive than a bank wire.

yes as has been noted all over the internet, the consensus fork of bitcoin is not performing well, and in my opinion it's doomed.  the bitcoin cash fork works the same way but has much lower transaction fees.


Indexer

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Re: Is it too late [bitcoin]?
« Reply #519 on: December 30, 2017, 01:02:22 PM »
when a company pays out dividends, the price doesn't go down because investors are sad they missed the dividend.   the price goes down because the company is not worth as much because it just gave away a big chunk of its cash assets.

We are saying the same thing. The company isn't worth as much after the dividend = investors aren't willing to pay as much for it.

Yes, we are in agreement about the speculation. Chuckie Cheese guy was a scam, that's the point. He sold something that was completely worthless. Do I care how much work he put into making those coins? Nope. Same thing with Bitcoin miners. The fact that they made something doesn't make it valuable. People keep going on about the cost to make Bitcoin as if that justifies the price. If it's worthless than I don't care how much work someone put into creating it.

Quote from: Phil22
yes as has been noted all over the internet, the consensus fork of bitcoin is not performing well, and in my opinion it's doomed.  the bitcoin cash fork works the same way but has much lower transaction fees.

So the price should be $0, not $13,000?

Busta

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Re: Is it too late [bitcoin]?
« Reply #520 on: December 30, 2017, 04:14:11 PM »
It's the beginning. Many more currencies are to come and the possibilities will be endless. Bitcoin investments are still profitable if you invest now. It will continue going up the more popular it gets. There are rumors that Ripple is about to be launched with other household names. This is good news for that currency and it will also be great news for bitcoin. A great place to check on the movements of bitcoins and all other currencies is https://coinmarketcap.com/ Compare the prices and history of the currencies with a lil googling on why they moved up and down. You will form the knowledge to predict when to buy or sell. One thing for sure is bitcoin does not move like the traditional stock market. Things that would point to bitcoin failing does not seem to work when it comes to crypto currencies

Busta

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Re: Is it too late [bitcoin]?
« Reply #521 on: December 30, 2017, 04:21:05 PM »
I also think that eventually this craze with bitcoin will help in the fight for cleaner/safer and cost efficient energy. When we have solved this problem the transitions over the blockchain will work perfectly. The only problem would be the computer power which at this time could be cheaper but due to the vast majority of miners byuing up all the graphics card it has become a nightmare finding good cards at a great price.

sol

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Re: Is it too late [bitcoin]?
« Reply #522 on: December 31, 2017, 04:56:03 PM »
The only problem would be the computer power which at this time could be cheaper but due to the vast majority of miners byuing up all the graphics card it has become a nightmare finding good cards at a great price.

On this point, this hackernoon article makes the observation that bitcoin transactions are so terribly inefficient that scaling up to the size of the VISA processing network would require all of the electricity generated on Earth.

Quote
Plus, itís not actually that good a payment system ó Visa can handle sixty thousand transactions per second, while Bitcoin historically taps out at seven. There are technical modifications going on to improve Bitcoinís efficiency, but as a starting point, you have something thatís about 0.01% as good at clearing transactions. (And, worth noting, for those seven transactions a second Bitcoin is already estimated to use 35 times as much energy as Visa. If you brought Bitcoinís transaction volume up to Visaís it would be using as much electricity as the rest of the world put together.)

It's a good read all around, I recommend it:  https://hackernoon.com/ten-years-in-nobody-has-come-up-with-a-use-case-for-blockchain-ee98c180100

maizeman

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Re: Is it too late [bitcoin]?
« Reply #523 on: December 31, 2017, 05:16:19 PM »
On this point, this hackernoon article makes the observation that bitcoin transactions are so terribly inefficient that scaling up to the size of the VISA processing network would require all of the electricity generated on Earth.

Quote
Plus, itís not actually that good a payment system ó Visa can handle sixty thousand transactions per second, while Bitcoin historically taps out at seven. There are technical modifications going on to improve Bitcoinís efficiency, but as a starting point, you have something thatís about 0.01% as good at clearing transactions. (And, worth noting, for those seven transactions a second Bitcoin is already estimated to use 35 times as much energy as Visa. If you brought Bitcoinís transaction volume up to Visaís it would be using as much electricity as the rest of the world put together.)

That's a rather misleading way to describe it. The amount of electricity being spent mining bitcoin today is indeed huge, but it's the exact same amount of electricity whether there are  4,200 transactions per block (7 per second), or 1 transaction per block.

The amount of electricity used can also vary dramatically without the number of transactions which can be sent per block changing. In 90% of the ASIC farms currently mining for bitcoin disappeared tomorrow, the exact same number of transactions could be sent each second, but the electricity usage per transaction would magically be 1/10th as much. This is easy to see when you look at bitcoin cash, which is essentially the exact same mathematics and software as bitcoin except that its blocks are 8x larger and only 1/10th as much hashing power is devoted to mining for new bitcoin cash coins. As a result, without changing anything about the underlying technology, the amount of electricity used per transaction in bitcoin cash uses only 1.25% (1/80th) as much electricity as the original bitcoin.

TL;DR There is no direct relationship between the number of transactions processed by bitcoin and the amount of electricity used to mine for bitcoin. Therefore trying to project how much electricity bitcoin would need to confirm X times more transactions per second than it does today by looking at total bitcoin electrical usage divided by total bitcoin transactions doesn't work.

sol

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Re: Is it too late [bitcoin]?
« Reply #524 on: December 31, 2017, 06:10:32 PM »
That's a rather misleading way to describe it.

Sure, but it's not irrelevant either.  Bitcoin can't handle the massive throughput that would be required for it to be a genuine currency.  It inefficiently duplicates information everywhere, instead of just where it is needed.  The decentralization that makes it so unique is the same thing that handicaps it, at scale.

Besides, the rest of that article seems like a pretty elegant restatement of the same arguments we've been having here.  Namely, that bitcoin doesn't actually do anything better than existing systems that we already have, so there seems to be very little potential future for it outside of black markets.

It wouldn't surprise me if it lives on in some other little niche community somewhere, like gamers or furries or preppers or something.  Nazis, maybe.  But as a widespread alternative to USD?  No chance.  That's all marketing hype, paid for by people trying to turn a quick buck.

ChpBstrd

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Re: Is it too late [bitcoin]?
« Reply #525 on: December 31, 2017, 06:13:07 PM »
I expect there to be lots of bargain solid state drives and graphics cards on eBay when this bubble busts. Nvidia might not be the best place to work.

sol

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Re: Is it too late [bitcoin]?
« Reply #526 on: December 31, 2017, 06:17:00 PM »
I expect there to be lots of bargain solid state drives and graphics cards on eBay when this bubble busts. Nvidia might not be the best place to work.

Sweet, I'm due for an upgrade.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #527 on: December 31, 2017, 06:24:34 PM »
The statement that scaling bitcoin to handle as many transactions as the VISA network would require all the electricity on earth is A) false and B) contributes to people misunderstanding how the actual tech works even more than most of them already do.

It sounds like we actually agree on the above, you're just okay with it as dramatic license to emphasize the problem with scaling and I'm more focused on actually trying to get people to understand the tech better.

Edit: The other problem with promoting the idea that dividing total electricity usage by number of transactions and treating that as a scaling factor is that it implies that bitcoin cash (the exact same tech) could scale to handle all of VISAs transactions using only 1.25% of the earths energy, and less popular cryptocurrencies (like zclassic) with lower hashrates could scale to handle all of VISAs transactions with vastly less electricity than either of them (which is also false).
« Last Edit: December 31, 2017, 06:44:31 PM by maizeman »


maizeman

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Re: Is it too late [bitcoin]?
« Reply #529 on: January 02, 2018, 06:34:22 AM »
Yup. By letting its transaction fees get so extraordinarily high, bitcoin is essentially destroying its first mover advantage/network effect, which was the main reason bitcoin was getting used for illegal transactions more than other currencies (you paid for drugs with bitcoin because that's the cryptocurrency your online dealer was set up to accept, and your online dealer wasn't going to go to the work of setting up alternative payment methods because all of his or her customers were already set up to pay in bitcoin).

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #530 on: January 02, 2018, 07:05:02 AM »
I just wanted to add to the conversation about Bitcoin and electricity consumption. Here is an article and video that discuss this that I hope will help those understand why it is a fallacy that Bitcoin's energy consumption is excessive relative to our other financial systems and why it won't "consume all the energy on our planet to scale".

https://hackernoon.com/the-bitcoin-vs-visa-electricity-consumption-fallacy-8cf194987a50
https://www.youtube.com/watch?feature=youtu.be&v=2T0OUIW89II

As Maizeman said, the amount of energy consumed by the Bitcoin network is not relative to a per transaction basis. So saying something like the amount of energy required to process one transaction is as much as powering 10 households for a day is very misleading. The Bitcoin network already consumes enough energy to maintain a globally secure currency and payment network and it doesn't matter whether that network is processing 400k or 400 million+ transactions per day.

There are also a lot of comparisons between Bitcoin and VISA and the energy costs of VISA alone, but again this is extremely misleading. VISA is not a standalone network. Any VISA transaction goes through a large number of intermediaries, that without, VISA would not function. So to leave them out of the equation when making the comparison between VISA and Bitcoin (which is a standalone network) fails to compare apples to apples. The Hackernoon article I linked to talks to this in greater detail.

Finally, the bitcoin network is not geographically dependent for its mining to function and because its mining profitability is directly dependent upon its energy efficiency, then bitcoin mining is essentially a form of energy market arbitrage. This is why bitcoin mining typically takes place in areas with cheap energy. Areas with cheap energy typically have cheap energy because there is an overabundance of energy; energy that would otherwise go wasted. Also, as Andreas explained, Bitcoin mining can and does allow for the subsidizing of costs for renewable energy installation. Since it is often the case that new renewable power plants are built for a given area's future needs and not today's needs, then the return on investment in such a power plant won't be for decades. Building Bitcoin mining infrastructure along with renewable energy allows the investment of renewable energy to be returned in a few years instead of decades.

This is not true for the energy consumption of the rest of our financial system. All the energy that goes into creating a traditional functioning financial system is stuck to the whims of whatever energy source is available in the area where the system is require to function. The bank branch buildings, offices, datacenters, armored trucks, currency minting, forexs, etc. There is a massive amount of energy consumed by all this infrastructure and while bitcoin won't be replacing all of it, it CAN replace a greater portion of it than the amount of energy the Bitcoin network currently consumes. This is why merely stating that the Bitcoin network consumes more energy on a per transaction basis alone is extremely misleading because we aren't just looking at the costs on a per transaction basis alone, we're looking at what the costs are compared to the systems we use today as a whole. Our current financial systems are much more energy inefficient than Bitcoin is, it just so happens that the energy consumption of Bitcoin is a lot more transparent and calculable than the costs of our traditional systems which are much more hidden in nature.

Finally, when we talk about whether the energy of the Bitcoin network is a waste, in my opinion creating a completely secure, immutable and independent transaction network is much more worthwhile than the amount of energy spend on a lot of things in this world. After all, more energy is spent on Christmas lights every year during one holiday than is spent powering the Bitcoin network and what benefit do Christmas lights provide society?
« Last Edit: January 02, 2018, 07:12:34 AM by lifeanon269 »

sol

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Re: Is it too late [bitcoin]?
« Reply #531 on: January 02, 2018, 08:17:45 AM »
The Bitcoin network already consumes enough energy to maintain a globally secure currency and payment network and it doesn't matter whether that network is processing 400k or 400 million+ transactions per day.

I think this is missing the point.  It sounds like the bitcoin network can't process 400 million transactions per day, at any cost.  The article quoted suggests a historical max of seven transactions per second.

PizzaSteve

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Re: Is it too late [bitcoin]?
« Reply #532 on: January 02, 2018, 08:49:57 AM »
Bitcoin, as a payment system, is inferior, on balance, to existing systems.  Sure, that's just my opinion, and I'm sure it's debatable. 

Leaving that aside, what else can I do with a bitcoin, other than sell it to someone willing to pay a higher price than I did?

yes of course, if you "leave aside" the main function of something you don't have much left.  if you "leave aside" transport from point A to B, what else is a car good for?

i completely agree that those of us in the US* and elsewhere have "good enough" electronic finances already.  there is not a lot of benefit to bitcoin when all you're doing is paying your credit card balance and making a Vanguard transaction every now and then.  but anyway:

If the main function of bitcoin is as a payment system, then it seems you are agreeing that it has no real intrinsic value to those of us in the USA and other developed countries.

...
--

* only ~5% of people on earth live in the US

I don't want to enter the debate fully, as I dont have any crypto skin in the game, but I would point out that building a global payment system is historically non-trivial to create and lucrative to operate.

I would put crypto's future as a potential competitor in the Paypal/VISA/AMEX/UnionPay/NYSE space, and the opportunity to shave points off global financial transactions is intrinsically valuable.  It is an asset class I used to call either Habit or Brand when I wrote about value creation strategies. Payment habits, if fully established, can become 'sticky' and pay out some revenue to owners (the member banks in VISA's case).  Plastic has been disintermediating cash currency and bank checks markers share for some time, and it is rightly pointed out that crypto will need to be able to outperform the plastic networks, which will also fight back with new tech.

Payment networks and financial marketplaces (and increasingly to varying degrees other commodity exchange marketplaces) are highly lucrative business to be in, so I believe crypto networks do have a business opportunity to survive, and the network can create value. How ownership of the network's assets and revenues are distributed among banks, governments, companies and individuals remains to be seen.

« Last Edit: January 02, 2018, 08:56:54 AM by PizzaSteve »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #533 on: January 02, 2018, 09:12:08 AM »
I think this is missing the point.  It sounds like the bitcoin network can't process 400 million transactions per day, at any cost.  The article quoted suggests a historical max of seven transactions per second.

Saying that because the Bitcoin network today can't process 400 million transactions so therefore it won't ever be able to process 400 million transactions is an extremely close-minded outlook to have on a technology.

We send extremely high definition video over the internet today and we didn't solve that problem by simply throwing massive amounts of bandwidth at the problem. We solved that from a technical standpoint by implementing new innovations such as complex codecs that can compress large amounts of video and audio data to allow it to be streamed as efficiently and quickly as possible.

The on-chain transaction layer of bitcoin is just one layer of this new technology and there will be many many layers to come that will all serve different purposes. Some of those layers will serve the purpose of allowing the Bitcoin network to scale to the level of millions of transactions per second without requiring the constant involvement of the base on-chain layer.

dougules

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Re: Is it too late [bitcoin]?
« Reply #534 on: January 02, 2018, 10:41:39 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Mining and validating are investments because, yes, they do make a return.  If I understand it correctly, the currency itself is NOT an investment, though, because it itself isn't making any return if it just sits there. 

And people get confused with stocks because some of the return comes from capital gains due to reinvested earnings improving the company.  That's different than just getting more money because somebody is willing to pay more for the exact same thing that hasn't been improved in any way. 


GuitarStv

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Re: Is it too late [bitcoin]?
« Reply #535 on: January 02, 2018, 11:06:57 AM »

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #536 on: January 02, 2018, 11:34:45 AM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Mining and validating are investments because, yes, they do make a return.  If I understand it correctly, the currency itself is NOT an investment, though, because it itself isn't making any return if it just sits there. 

And people get confused with stocks because some of the return comes from capital gains due to reinvested earnings improving the company.  That's different than just getting more money because somebody is willing to pay more for the exact same thing that hasn't been improved in any way.

I understand where you're both coming from, but what about resources? Can resources be considered investable? Resources provide no returns themselves. Whether or not a resource provides a return on investment later in the future becomes a question about whether or not its future scarcity and demand will contend with each other.

For example, gold is a resource. Is gold considered an investment above and beyond its industrial uses? What about water? Water may not provide a large return over the short-term, but long term it may be extremely scarce and therefore the work required to acquire water may be extensive. Due to the work required to obtain it and its future demand likely to rise, it will be exponentially more valuable in the future.

I think this is where the crux of the question lies. Resources themselves have value due to their scarcity and the work required to acquire them. They also have value and demand because of the utility they provide.

So if these same properties are taken into the context of bitcoin, then bitcoin requires work to acquire and process them. This work is extensive and bitcoin is also a scarce resource in the sense that they will only exist in limited quantity on the Bitcoin network itself. The Bitcoin network is not something that can simply be duplicated, so the idea that an infinite number of crypto-currencies can be created with the same value is false. Also the Bitcoin network, where these tokens are utilized, is where the value resides. So in order to utilize the value of the Bitcoin network, these tokens must be used. Therefore the value of the Bitcoin network is passed onto the tokens themselves as well. Even though the tokens have no inherent value on their own (since they're virtual), they still acquire the value of the Bitcoin network due to the fact that they can't be decoupled from each other. This means a network effect begins to take hold. The more people that are using this network, the more value it has. So the question then comes down to whether or not you feel that the Bitcoin network will have value to a larger number of people in the future than it does today. If so, then I feel that the "investability" of Bitcoin today is no different than that of other resources that are both scarce and in demand.

The question then comes down to the same question we have for gold, water, or any other resource. Do you feel that the future value of this resource (the Bitcoin network) will be in demand in the future? There is the debate.

Otherwise arguing over whether or not you feel Bitcoin can be categorized as an "investment" is rather pointless. I think people like to pigeon hole the term of what is "investable" down to very specific properties, but in my opinion that is very limiting in scope of where true value is found in this world.
« Last Edit: January 02, 2018, 11:37:14 AM by lifeanon269 »

sol

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Re: Is it too late [bitcoin]?
« Reply #537 on: January 02, 2018, 12:15:42 PM »
So if these same properties are taken into the context of bitcoin, then bitcoin requires work to acquire and process them. This work is extensive and bitcoin is also a scarce resource in the sense that they will only exist in limited quantity on the Bitcoin network itself. The Bitcoin network is not something that can simply be duplicated, so the idea that an infinite number of crypto-currencies can be created with the same value is false. Also the Bitcoin network, where these tokens are utilized, is where the value resides. So in order to utilize the value of the Bitcoin network, these tokens must be used. Therefore the value of the Bitcoin network is passed onto the tokens themselves as well. Even though the tokens have no inherent value on their own (since they're virtual), they still acquire the value of the Bitcoin network due to the fact that they can't be decoupled from each other. This means a network effect begins to take hold. The more people that are using this network, the more value it has. So the question then comes down to whether or not you feel that the Bitcoin network will have value to a larger number of people in the future than it does today. If so, then I feel that the "investability" of Bitcoin today is no different than that of other resources that are both scarce and in demand.

This argument seems to ignore the nearly-limitless list of alternative digital coins currently multiplying on the internet.  Arguing that bitcoins can't be duplicated seems a little like arguing that Toyota Tercels can't be duplicated.  They absolutely can be duplicated, functionally in every way except name, or better alternatives can be introduced to supplant it.

If the value in bitcoins is in the network, I think we need to identify why THIS network is better than the alternatives.  Where is the Buffet moat?  What is the added value, or the market incentive for adoption?  In what use case is bitcoin better than existing alternatives?  What is the track record of the person managing the growth and build-out strategy, and are their financial incentives aligned with yours?  These are the basic questions we ask of ANY investment before deciding if it is worthwhile.

Frankly I don't see it yet.  Bitcoin necessarily uses instantaneous irreversible transactions, which seem like a terrible idea from a consumer's perspective.  I'd much rather get 3% cash back and fraud protection with my credit card, which is more widely accepted, more convenient to manage online, faster and easier to use for purchases, and has an established dispute resolution process already in place.  I will use cash if I want to be anonymous or avoid government oversight.  I will trade pounds for remninbi if I want to speculate in currencies.  I will invest in the NASDAQ if I believe in the power of future technologies.

The only benefit I can identify in bitcoin is that it is super volatile, and currently getting outsized media hype, which together mean crazy short term gains.  I am not tempted by get-rich-quick schemes, though, because I've seen how those play out before.  Hard pass, thanks.

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #538 on: January 02, 2018, 12:55:03 PM »
So if these same properties are taken into the context of bitcoin, then bitcoin requires work to acquire and process them. This work is extensive and bitcoin is also a scarce resource in the sense that they will only exist in limited quantity on the Bitcoin network itself. The Bitcoin network is not something that can simply be duplicated, so the idea that an infinite number of crypto-currencies can be created with the same value is false. Also the Bitcoin network, where these tokens are utilized, is where the value resides. So in order to utilize the value of the Bitcoin network, these tokens must be used. Therefore the value of the Bitcoin network is passed onto the tokens themselves as well. Even though the tokens have no inherent value on their own (since they're virtual), they still acquire the value of the Bitcoin network due to the fact that they can't be decoupled from each other. This means a network effect begins to take hold. The more people that are using this network, the more value it has. So the question then comes down to whether or not you feel that the Bitcoin network will have value to a larger number of people in the future than it does today. If so, then I feel that the "investability" of Bitcoin today is no different than that of other resources that are both scarce and in demand.

This argument seems to ignore the nearly-limitless list of alternative digital coins currently multiplying on the internet.  Arguing that bitcoins can't be duplicated seems a little like arguing that Toyota Tercels can't be duplicated.  They absolutely can be duplicated, functionally in every way except name, or better alternatives can be introduced to supplant it.

I absolutely addressed it, perhaps you didn't catch it. I bolded it above. If you don't understand why that is true and can't extrapolate that statement to understand the actual reasons why it can't be duplicated, then I can certainly elaborate on that for you if you'd like.

Proof to the above statement is the fact that Bitcoin has been forked or attempted to be forked and all of those attempts have been valued differently than the actual Bitcoin network's token. BCash, which was a fork of Bitcoin, has a different value in the market than Bitcoin. If their networks provided the same inherent value to the market, then their prices would be the same. The same can be said of any other crypto-currency.

Bitcoin has more computing power than any other payment network in the world. There are tens of thousands of nodes around the world validating and storing copies of the Bitcoin blockchain. There is massive amounts of economic infrastructure built up around this network providing value-add use cases and economic activity. The market understand this and this is the very reason why it isn't something that can be simply duplicated. That's like suggesting that the talent of a particular artist doesn't yield demand of their work because there are many people in the world that could probably replicate their work extremely similarly.

I am not here trying to convince you that Bitcoin is the right investment for you. What I am trying to do is to get you to stop thinking from merely your own perspective and realize that Bitcoin is an option that can provide value to many people in this world that no other financial instrument can provide. All of your examples you've provided are strictly speaking from your own perspective. You may prefer the consumer protection that VISA provides, but someone else might prefer the consumer protection that Bitcoin provides, especially if VISA isn't an option for them. You might prefer using cash to remain anonymous, but someone else either might not have a stable currency available to them for use or the localized requirement of cash might not be suitable for someone looking to participate in the global market. You may look to other investments that meet your needs and risk appetite while someone else might prefer the benefits that Bitcoin provides (I've listed numerous benefits in another thread that you can find in this forum). It isn't enough that some other financial instruments can provide some of the benefits of Bitcoin, because Bitcoin provides all of those benefits all of the time. So it is only natural for it to provide a unique value proposition beyond what our traditional financial system can provide to many people all around the world.

KTG

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Re: Is it too late [bitcoin]?
« Reply #539 on: January 02, 2018, 01:06:07 PM »
Hold on. Last week it was Bitcoin, then yesterday Ripple. Now its Stellar.

https://www.cnbc.com/2018/01/02/theres-a-new-hottest-coin-of-2018-so-far-stellar.html

Peeps jumping over each other to get in on a crypto before 'it explodes'. I can't sell help but laugh at the insanity. Just check out all the cryptos that are out there, and realize than just about all of these cannot be used as payment to the vast majority of the millions and millions of businesses on the planet.

https://coinmarketcap.com/all/views/all/

But I guess this just means that I 'dont understand the technology'. Lets check back at the end of 2018 and see how many new cryptos there are. If there are fools willing to buy these, then people are going to bend over backwards creating more.

We might as well create a MMMCoin. Announce it to the world that is uses BLOCKCHAIN!!! and the money will come pouring in.

KTG

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Re: Is it too late [bitcoin]?
« Reply #540 on: January 02, 2018, 01:19:42 PM »
I can't wait to see some idiot on CNBC talking about a diversified crypto portfolio. Maybe its already happened.

"What you want if you want to play aggressive to put 30% in Bitcoin, 20% in Ripple, Stellar, and Monero each, and then 5% in Ethereum, which will leave you 5% to invest in a wildcard like Wild Beast Block or PonziCoin."

I can just hear it out of the mouths of one of the morons on Fast Money.

Still Being

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Re: Is it too late [bitcoin]?
« Reply #541 on: January 02, 2018, 01:21:29 PM »
Did we figure out if it's too late yet?

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #542 on: January 02, 2018, 01:35:23 PM »
To be fair KTG, many currencies aren't looking to become the next payment network. Many of these currencies are proposing new alternatives to a vast array of ideas out there such as identity management, advertising, secure messaging, storage, voting, public ownership, notarization, marketplaces/exchanges, AI communication, etc. Certainly there is probably more money flowing into these ideas than is warranted which will only result in pain for those that over-extended. But the idea that there are "too many" crypto-currencies out there is like saying there is too much innovation taking place. I can absolutely guarantee you that next year there will be way more crypto-currencies in existence than there are today. That doesn't necessarily mean that is a bad thing. In my opinion, in a world where the only currency that was ever in existence were those that only the elite and sovereign nations of the world sanctioned, it is refreshing to see that anyone with an idea can create something that the world can then freely decide upon.

dougules

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Re: Is it too late [bitcoin]?
« Reply #543 on: January 02, 2018, 02:21:34 PM »
Anyone that says cryptocurrencies arenít investments because they donít provide a return, well, youíre wrong.

In 2018, ETH is moving from Proof of work to proof of stake. By staking your currencies and validating payments, you will receive a return on your investment similar to dividends.

So, move on from that criticism because it is flat out objectively wrong.

And if anyone is geared up to say itís not an investment yet because theyíre not doing that now, weíll, thatís wrong too. A stock, for example, is an investment based on future returns; it doesnít matter if theyíre paying dividends today.

Mining and validating are investments because, yes, they do make a return.  If I understand it correctly, the currency itself is NOT an investment, though, because it itself isn't making any return if it just sits there. 

And people get confused with stocks because some of the return comes from capital gains due to reinvested earnings improving the company.  That's different than just getting more money because somebody is willing to pay more for the exact same thing that hasn't been improved in any way.

I understand where you're both coming from, but what about resources? Can resources be considered investable? Resources provide no returns themselves. Whether or not a resource provides a return on investment later in the future becomes a question about whether or not its future scarcity and demand will contend with each other.

For example, gold is a resource. Is gold considered an investment above and beyond its industrial uses? What about water? Water may not provide a large return over the short-term, but long term it may be extremely scarce and therefore the work required to acquire water may be extensive. Due to the work required to obtain it and its future demand likely to rise, it will be exponentially more valuable in the future.

I think this is where the crux of the question lies. Resources themselves have value due to their scarcity and the work required to acquire them. They also have value and demand because of the utility they provide.

So if these same properties are taken into the context of bitcoin, then bitcoin requires work to acquire and process them. This work is extensive and bitcoin is also a scarce resource in the sense that they will only exist in limited quantity on the Bitcoin network itself. The Bitcoin network is not something that can simply be duplicated, so the idea that an infinite number of crypto-currencies can be created with the same value is false. Also the Bitcoin network, where these tokens are utilized, is where the value resides. So in order to utilize the value of the Bitcoin network, these tokens must be used. Therefore the value of the Bitcoin network is passed onto the tokens themselves as well. Even though the tokens have no inherent value on their own (since they're virtual), they still acquire the value of the Bitcoin network due to the fact that they can't be decoupled from each other. This means a network effect begins to take hold. The more people that are using this network, the more value it has. So the question then comes down to whether or not you feel that the Bitcoin network will have value to a larger number of people in the future than it does today. If so, then I feel that the "investability" of Bitcoin today is no different than that of other resources that are both scarce and in demand.

The question then comes down to the same question we have for gold, water, or any other resource. Do you feel that the future value of this resource (the Bitcoin network) will be in demand in the future? There is the debate.

Otherwise arguing over whether or not you feel Bitcoin can be categorized as an "investment" is rather pointless. I think people like to pigeon hole the term of what is "investable" down to very specific properties, but in my opinion that is very limiting in scope of where true value is found in this world.

Resources aren't investments in and of themselves.  The thing that produces the resources is an investment.  If you're just betting on the value going up, it's speculation. 

Gold is not actually an investment either.  It's a store of value.  Gold might be useful to have alongside investments, but it doesn't actually produce anything.  An actual investment in gold would be buying a gold mine, or just stock in a company that has one.  Gold and Bitcoin are similar in some ways.  Bitcoin is not an investment, but mining it is. 

Other resources like water aren't investments.  It's the thing that produces the resources that's an investment.  Water isn't an investment, but a well and a pump are. 

I don't know if Bitcoin will be important in the future, but I also strongly believe nobody else does either.  You can speculate on it, but high reward = high risk. 

Usually I'd say semantic arguments about what "investment" means are pointless, but here I think it's really important.  The difference between using the word "investing" and the word "speculating" has a big impact on how people treat trying to make dollars off of cryptocurrencies. 


To be fair KTG, many currencies aren't looking to become the next payment network. Many of these currencies are proposing new alternatives to a vast array of ideas out there such as identity management, advertising, secure messaging, storage, voting, public ownership, notarization, marketplaces/exchanges, AI communication, etc. Certainly there is probably more money flowing into these ideas than is warranted which will only result in pain for those that over-extended. But the idea that there are "too many" crypto-currencies out there is like saying there is too much innovation taking place. I can absolutely guarantee you that next year there will be way more crypto-currencies in existence than there are today. That doesn't necessarily mean that is a bad thing. In my opinion, in a world where the only currency that was ever in existence were those that only the elite and sovereign nations of the world sanctioned, it is refreshing to see that anyone with an idea can create something that the world can then freely decide upon.

True, but if you're looking to speculate on one of them specifically, eg bitcoin, then the wide diversity is a bad thing for you.   

maizeman

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Re: Is it too late [bitcoin]?
« Reply #544 on: January 02, 2018, 04:28:55 PM »
I agree that both resources (commodities) and currencies (conventional or crypto) are in a different basket from stocks and bonds. Stocks and bonds inherently are expected to increase in value over time (although obviously in some cases individual ones go to zero).

If we think about the value of a ton of zinc, or the value of polish 100 złoty note in dollars, the value might go up in ten years, it might go down in ten years, but there's no inherent reason that its more likely to go in one direction than the other (although you can certainly do lots of analysis and make your best guess about which direction either is going to move).

That's why you see so many stock index funds, and bond index funds, but you don't see a lot of commodity index funds or currency index funds. The former has an inherent upward trend, the latter only really provides a positive return if you're fortunate enough to pick winners.

I can't wait to see some idiot on CNBC talking about a diversified crypto portfolio. Maybe its already happened.

"What you want if you want to play aggressive to put 30% in Bitcoin, 20% in Ripple, Stellar, and Monero each, and then 5% in Ethereum, which will leave you 5% to invest in a wildcard like Wild Beast Block or PonziCoin."

I can just hear it out of the mouths of one of the morons on Fast Money.

From all the way back in August. I agree, it's ridiculous:

https://www.cnbc.com/video/2017/08/16/heres-how-to-build-your-cryptocurrency-portfolio.html

lifeanon269

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Re: Is it too late [bitcoin]?
« Reply #545 on: January 02, 2018, 04:39:48 PM »
True, but if you're looking to speculate on one of them specifically, eg bitcoin, then the wide diversity is a bad thing for you.

That's like saying that competition to Apple is bad for the consumer. In my opinion, I'd much rather see new ideas and innovations tried and tested out in markets that are only a few million dollars in size as opposed to seeing those ideas tested out in a 300+ billion dollar market. If those ideas prove to be truly innovative, then they can always be adopted much like Apple can adopt new innovations that Samsung releases.

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sol

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Re: Is it too late [bitcoin]?
« Reply #547 on: January 02, 2018, 06:19:59 PM »
http://www.mrmoneymustache.com/2018/01/02/why-bitcoin-is-stupid/

Just for the record, I'd like to state that our site founder agrees with me and not with 90% of the people in this thread. 

But hey, he and I could both be wrong!

I genuinely want you all to get rich.  I think bitcoin is a bad way to do that, but if you can make it work for you I won't hold it against you.  Good luck, bitcoiners.

maizeman

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Re: Is it too late [bitcoin]?
« Reply #548 on: January 02, 2018, 06:35:47 PM »
Just for the record, I'd like to state that our site founder agrees with me and not with 90% of the people in this thread. 

Sol, by my count there are at most five active accounts potentially arguing that it makes sense to invest in some kind of cryptocurrency* sometimes (shadow, phil22, lifeanon269, thenextguy, and Tonyahu), and at least fifteen accounts (myself included) who have posted that it does not make sense to purchase cryptocurrencies as investments in the two most recent pages of posts alone.

*And I think at least several of them also have agreed that the current price of bitcoin represents a bubble.

sol

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Re: Is it too late [bitcoin]?
« Reply #549 on: January 02, 2018, 07:00:38 PM »
Sol, by my count there are at most five active accounts potentially arguing that it makes sense to invest in some kind of cryptocurrency* sometimes (shadow, phil22, lifeanon269, thenextguy, and Tonyahu), and at least fifteen accounts (myself included) who have posted that it does not make sense to purchase cryptocurrencies as investments in the two most recent pages of posts alone.

You could stop being all "logical" and "correct" and just let me indulge my petty meanness for a moment, you know. 

"Na Na Na, I told you so...  pbbbttttt."

Okay, I think I have that out of my system.