Author Topic: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion  (Read 55280 times)

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #500 on: October 24, 2017, 01:10:01 PM »
Sherr didn't say a billion people owning and no one selling, Sherr said no one buying. That's a crucial difference. You're right that everyone values their bitcoin above what people are willing to pay in that scenario, and that value is (some amount of money -- e.g. 0.01 for lots of bitcoins) and no buyers are willing to pay any amount of money.

Ah, you're right, I read that wrong. I saw he said there were two different scenarios at the end of the paragraph and then I got the two scenarios in my head (no buyers versus no sellers) and started writing about them both. Either way, I covered both scenarios in my post even though Sherr was only talking about the one.

runbikerun

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #501 on: October 24, 2017, 02:07:33 PM »
"All mass appeal technology adoptions follow an S-curve."

All mass appeal technology adoptions involve a drastic reduction in price as the technology is adopted. They would be utter failures otherwise.

That's true of the technology is a mass-produced good with no scarcity that can achieve production improvements over time. That's not true for a limited scarce asset that achieves critical mass adoption.

The adoption S-curve and the price of said technology are two different functions.

I'd argue that they're actually quite closely related, and that disregarding one in a prediction of likely future behaviours is equivalent to assuming that the Cleveland Browns won a match because they scored fifteen points.

But that's beside the principal point, which is that there's no evidence that cryptocurrencies are actually following a technology-adoption S-curve rather than a classical bubble trajectory. At the moment, the pattern for demand fits both; however, as far as I'm aware, the technology S-curve has historically been marked by an increase in supply that outstrips the increase in demand, hence the reduction in price. That's not an easily dismissed incidental; it's been a core feature of how technology has been adopted throughout history. What cryptocurrencies are doing is far closer in terms of supply/demand relationships to historical bubbles, which would indicate that we're better off looking at tulip bulbs and the Irish property market (where ever-increasing demand crashed against limited supply growth and triggered booms in pricing) than the iPod and the printing press (where supply continuously ramped up as demand kept increasing) for an idea of what the crypto market is likely to do.

This isn't a particularly controversial point: the guy who literally wrote the book on economic bubbles (and won a Nobel for it) has specifically argued that cryptocurrencies are in a bubble. You've even acknowledged that the motivations of investors in the market is principally speculative.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #502 on: October 24, 2017, 05:04:13 PM »
as far as I'm aware, the technology S-curve has historically been marked by an increase in supply that outstrips the increase in demand, hence the reduction in price.

I don't think that is true. The adoption S-curve has nothing to do with the supply of the innovation in question and everything to do with the rate at which the public adopts the innovation. Cars, radio, TV, electricity, the internet, cell phones, GPS, social networks, etc are all technologies that have followed or are currently following an S-curve for adoption. The S-curve has less to do with supply and demand and more simply to do with the adoption of the innovation by the public at large. The price of commodities has more to do with supply and demand and production economies of scale and less to do with the S-curve of its public adoption.

What cryptocurrencies are doing is far closer in terms of supply/demand relationships to historical bubbles, which would indicate that we're better off looking at tulip bulbs and the Irish property market (where ever-increasing demand crashed against limited supply growth and triggered booms in pricing) than the iPod and the printing press (where supply continuously ramped up as demand kept increasing) for an idea of what the crypto market is likely to do.

What criteria are you using for your analysis? You see, this is the main problem I have with those who are making claims about bubbles. Howard Marks, Peter Schiff, Mark Cuban, Jamie Dimon, Robert Shiller, ...these are all people who called Bitcoin a bubble, fad, a pyramid scheme and yet not a single one of them have given a decent analysis as to why they think so. Most of them in their critique have shown (or blantantly said) that they clearly don't understand the technology itself. Ultimately, their analysis has been based simply on the price of Bitcoin alone and nothing more. Howard Marks called it a pyramid scheme even though that's impossible for Bitcoin to be one and even acknowleged that he doesn't understand the technology. Mark Cuban once called it a bubble and yet now he's investing in crypto and changing his tune on Bitcoin. I've yet to see these experts who claim that Bitcoin is a bubble reveal any detailed or reasoned analysis as to why they think Bitcoin is a bubble.

Let look at it this way:

Bitcoin is currently has a market cap of about $90-100 billion. A year ago it was about $10b. That's about $90 billion dollars that have flooded into Bitcoin over the last year. Let's look short term. Where do we think this could go next year? I firmly believe over the next year we'll see Bitcoin go up at least the same amount and hit a market cap of about $200 billion and give it a price above $10,000. Why? Here are a few markers that I believe lead this to be likely:

1) The continued stable operation of the Bitcoin network.
2) Bitcoin options/futures trading
3) The eventual approval of a Bitcoin ETF
4) Continued government approval and regulation (see Japan, Australia, Mexico, Russia, Ukraine, etc)
5) Increased hedge fund crypto investment
6) Massive sign-up rates for online wallets in recent months

You see all these things are creating and generating sentiment and a tailwind for Bitcoin that will allow its continued adoption among users. This is all fueled, as I said, by the fact that the technology that underpins it will continue to operate smoothly.

Now I fully understand that theoretically Bitcoin can go to $0. But, what are some situations that would make that possible?

Perhaps governments all over could crack down on it. But, that would require a drastic change of heart coming from many democratic countries all over the world. China just recently cracked down on exchanges and ICOs and yet Bitcoin still continued on upward. So a crackdown on a few countries (even one as large as China) is not enough to impact Bitcoin. For governments to have a hinderance on Bitcoin's adoption, you'd need a complete worldwide crackdown on some of the world's largest economies, many of which are democratic (and thus less likely to enact such a crackdown).

There could come along another crypto-currency which does exactly what Bitcoin does, only better. Maybe, but Bitcoin has such a drastic lead on other crypto-currencies, that such a huge change in circumstances is highly unlikely to occur over the next year. Also, features that other crypto-currencies have that would give reason for the market to move to something different could be implemented into Bitcoin itself (see SegWit activation).

Then, like I suggested, another possible outcome is that something happens to the Bitcoin network that causes a catastrophic failures which in turn causes the market to lose its trust in Bitcoin. This is certainly possible, but Bitcoin is software and with so much money in the economy, it is more likely that such an economy would look to resolve a failure and fix what's broken instead of abandon it. However, you never know how the market would react to such a failure, so its always possible that a technology failure could cause a market failure. This, however, I find highly unlikely.

Do you have any other thoughts on what might cause a drastic market decline over the next year? Given the markers for positive gain over the next year and the unlikelihood of some of the leading possibilities that could lead to a market decline, it is much more likely that Bitcoin will continue to see heavy growth in 2018. Not just a mediocre growth. I'm talking about a doubling in price which would again make Bitcoin a better investment than just about any other traditional option out there.

This isn't a particularly controversial point: the guy who literally wrote the book on economic bubbles (and won a Nobel for it) has specifically argued that cryptocurrencies are in a bubble.

As I said for you, the same goes for any other person who feels they're an expert. If someone is going to claim bubble, then it behooves them to explain their rationale for making such a claim that goes beyond just a simple price analysis.

You've even acknowledged that the motivations of investors in the market is principally speculative.

I've already said that doesn't matter. The market price for gold has never dropped to the point where it only met the demand for its industry usage. The price for gold above and beyond that is strictly based on speculation as well and yet through all sorts of economic conditions gold has continued to be valued based on speculation alone. What drives this speculative market? The fact the investors place value on its scarcity. Bitcoin is digital scarcity that has been developed based on decades of cryptographic research. People put value on this just like they put value on the scarcity of gold. It is my belief that this will always continue to hold value. This is obviously hard to imagine because this is the first time that something has ever been digital and scarce at the same time. But, this is a big innovation and I see things going in Bitcoin's favor well into 2018.

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #503 on: October 24, 2017, 05:49:07 PM »
In response to the technology adoption s-curve and it's correlation with the decline in the cost of the technology:

The price of one bitcoin has essentially no relationship to the cost of the technology.

To use bitcoin as a technology to store value, the cost is 1) the fees charged by exchanges to buy bitcoin and general headache of learning how to transfer money to exchanges, how to buy bitcoins, and how to store them once you have them 2) any loss in value from the fluctuating price of bitcoin.

To use bitcoin as a medium of exchange, the cost is 1) same as #1 above and 2) the cost of transaction fees charged by miners to actually send bitcoins from one wallet to another.

The cost of #1 has been coming down (slowly) as a result of both improved technology and educational resources, as well as competition between exchanges. OTOH, #1 increases from time to time when new regulations or limitations come out exchanges. I'm not sure if the overall trend over the last several years is towards higher or lower prices at this point.

For #2 in using bitcoin as a medium of exchange, the price has actually been increasing dramatically as a result of blockchain congestion (although maybe segregated witness will fix this eventually?). For #2 in using bitcoin as a store of value, this cost is linked to volatility, more volatility = higher cost for using it as a store of value, less volatility = less cost for this use. I haven't actually seen any analyses on whether the volatility of bitcoin has been increases, decreasing, or staying the same.

*shrug*

Anyway, my point is just that an increase in the cost per unit of an individual cryptocurrency doesn't tell you anything either way about whether the cost of using the cryptocurrency is increases or decrease. And it's the cost of using it, not the cost of the currency units, that needs to decline is you're going to see an S-curve shaped adoption of the technology.
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waltworks

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #504 on: October 24, 2017, 06:17:52 PM »
Indeed. Widespread use (that doesn't mean constantly converting back and forth to dollars to buy things) and a low transaction cost, along with *stable prices* would mean you could start talking about how efficient/inefficient it was for it's purpose (facilitating exchange of real-world goods and services). So far none of those conditions exist, so you can't really say anything one way or the other about Bitcoin as a *currency*.

As e-gold/store of value it is certainly cheaper than handling physical gold. Thus far it's not as secure, however.

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maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #505 on: October 24, 2017, 06:42:02 PM »
Walt, this is a point where I know you and I disagree. I think bitcoin (or similar currencies) can do a great job as a medium of exchange even if all prices are still set in dollars and everyone trades in an out of their native currencies before and after every transaction. But it does require that the cost of transactions (in both currency and time/hassle) continue to decrease over time.

Note that this use case says nothing about the value of bitcoin. It can work just as well if bitcoin is $0.01/coin of $1M/coin as long as the exchange markets between bitcoin and other currencies highly liquid (which they are today).
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waltworks

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #506 on: October 24, 2017, 09:15:41 PM »
I guess that could be the case, though it would be more of a vote of confidence if you paid someone directly in bitcoin, and they then could use it for the next transaction and so on.

I agree that the price itself doesn't matter (you can just pay with tiny fractions of a bitcoin if it's worth $1,000,000). Stability of that price over long periods of time *does*, though. I don't see that happening anytime soon.

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lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #507 on: October 25, 2017, 06:07:00 AM »
I don't necessarily think that the stability in Bitcoin's price is a huge barrier for its use as a medium of exchange if the price of goods is still set in fiat currency. This comes from someone who uses Bitcoin as their spending money.

If Bitcoin goes up or down $300 when its price is around $5500, then that's a change of around 5%. That's not an unheard of daily change for Bitcoin, but I'd also say that its well above average for a daily change.

So if I have $315 in spending money, then that means I could check my balance in the morning and have $315 and then check again later that evening and have $300 or maybe $330. But, that change matters even less when I go to spend it that day. If I spend $20 on a day where the price changed 5%, then that's really only an extra dollar difference +/-. So long as the price of the good stays the same since it is set in fiat currency, then my expenditures will generally average out over the course of a month. Because my spending money is generally exhausted each month, it usually only sees minor gains over the course of each month depending on what transpired with Bitcoin's price during that time. Unless you're doing extremely large purchases, then the volatility matters less when it comes to daily purchases.

With that said, I do think volatility would need to level out if we ever were to get to a point where goods are priced in Bitcoin and people's salaries are set in Bitcoin. I doubt we'd ever see that day in my lifetime, but volatility would certainly be bad in those cases. If goods themselves are priced in Bitcoin, then people need to have a general sense of what a good costs relative to what a Bitcoin is worth and that number would have to remain fairly stable from month to month.

simonsez

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #508 on: October 25, 2017, 06:23:25 AM »
The S-curve has less to do with supply and demand and more simply to do with the adoption of the innovation by the public at large.
That just sounds like demand.  How can the public adopt an innovation but not buy it?  If they really are separate concepts, how do you measure the adoption rate/prevalence without looking at how many good and services are bought?


lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #509 on: October 25, 2017, 06:48:30 AM »
That just sounds like demand.  How can the public adopt an innovation but not buy it?  If they really are separate concepts, how do you measure the adoption rate/prevalence without looking at how many good and services are bought?

Demand is slightly different than adoption. They're certainly close in concept, but they are different. Demand is how much of or often something is utilized or purchased, whereas adoption is simply how much of the public at large is using a given technology.

For example, demand could be the measure of how many cars I am buying, whereas adoption would be whether or not I've chosen to buy a car at all. If I purchase a car, then I've adopted it, but if I only purchase one car and keep that same car for 15 years, then my demand is low. However, I could go even further and purchase a new car every two years and my demand for cars is high. So they're closely related, but not the same.

The adoption S-curve only measures the adoption rate of the technology, not the demand for it.
« Last Edit: October 25, 2017, 06:50:18 AM by lifeanon269 »

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #510 on: October 25, 2017, 07:22:01 AM »
I agree that the price itself doesn't matter (you can just pay with tiny fractions of a bitcoin if it's worth $1,000,000).

Agreed, but I was actually also trying to make the opposite point. Widespread adoption of any particular currency as a medium of exchange (but not a store of value) doesn't necessarily mean that the value of the currency would increase a lot. So that fact I'm arguing that the medium-of-exchange bit is likely to happen (whether is bitcoin or some other cryptocurrency) doesn't tell you a lot about whether buying whichever currency it turns out to be for capital appreciation is a good idea or not.

I could imagine a hypothetical future where cryptocurrency is widely used to settle payments, but the tools for trading in and out of it on both ends are so fast/efficient that the total value of that cryptocurrency only needs to be a few billion to facilitate millions of transactions per day.
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shadow

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #511 on: October 25, 2017, 11:17:09 AM »
Widespread adoption of any particular currency as a medium of exchange (but not a store of value) doesn't necessarily mean that the value of the currency would increase a lot.

Yes, and that's why we need to consider other aspects, such as crypto that can directly validate the network and receive tx fees; where value will partially come from fee and volume.

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #512 on: October 26, 2017, 02:12:36 PM »
Crypto currencies are to investing what a brand new GM truck is to Mustachians.   

Isn't this the opposite of what this blog preaches ?     ...

I want to hear from the 40+ crowd who have experienced these kinds of events.   

I'm new here but will respond to this as I'm pushing 50 and yet have been in crypto since 2012.  I agree that crypto is not what this blog is about and that most people should probably stay away.  However crypto is a new asset class with unique properties and the potential for significant impact on the world.  For those with the technical background to understand it and the ability and resources to manage some limited risk, I see it as a valid high-risk/high-return speculation.

Quote
Do any of you ever experienced an extended bear market?   Where you lost hundreds of thousands in equity value in a matter of months? 

I have seen several bear markets. I got cooked in the tech crash of 2000 and lost a significant amount of my investing assets and a good chunk of my 401k.  I managed to move my 401k to cash several months before the 2008 crash but before you call me a genius I failed to get back in until after missing much of the later recovery.  My paranoia of being cooked like I was in 2000 has driven a long term interest in trading and index timing (which is also not in line with much of this blog).

However it's worth noting that Wall Street bear markets are nothing compared to bear moves in crypto.  You cannot be successful in crypto without being able to deal with massive moves down even as longer term the asset is moving up.  For example bitcoin investors had to deal with falls from $10 down to $1 and later $1100 down to $250. They've also had to dodge dozens of potential pitfalls including malware wallet thefts, exchanges being hacked, millions of scams, etc. 

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If so, do you feel comfortable with things like bitcoin?     Yes?  How?

I'm a Computer Scientist with 30 years of software development experience.  Beyond that my main side interests ever since the internet took off have been money and markets.  When I eventually found bitcoin I felt like my whole life had been preparing me for it.

Again I don't think crypto really fits with this blog, however if you have the knowledge and the ability to deal with massive volatility, putting a bit of speculative money into crypto might result in big returns.  I never put more into crypto than would be too much for me to lose, and it has worked out extremely well for me.

sherr

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #513 on: October 27, 2017, 08:02:12 AM »
For those with the technical background to understand it

I know that this is not what you're doing, so don't take it personally because I'm not accusing you of anything. I'm just going to piggyback on your comment to say something that's been on my mind.

I've seen a lot of comments in this thread and other places that tend to imply that those who "understand" cryptocurrencies are for them, and that people who aren't don't. I just wanted to state for the record that I'm also a Senior Software Engineer. I understand the technology. I think it's probably nothing but a pyramid scheme and a tulip-style speculation bubble that will eventually pop. So does everyone else I work with.

There seems to be a recurring dismissal of finance guys who are calling Bitcoin a worthless bubble as "just not getting it". I think they probably do, you don't get to be the CEO of JPMorgan or whatever by being a dummy. I think it's somewhat arrogant to dismiss all criticisms as "well they just don't understand as much as I do" (again, I know you're not doing this).

I think MystryBox's approach is actually very rational and well-grounded. Using play money to speculate in an uncorrelated asset class seems to me to be exactly what the crypto market is good for right now. If that's what you (generic reader) are doing then more power to you, have fun. However if you're someone who is caught up in the hype and is investing serious money in crypto because "everyone who understands it agrees it's a good investment", maybe take a step back and realize that's not true.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #514 on: October 27, 2017, 09:03:25 AM »
I understand the technology. I think it's probably nothing but a pyramid scheme

This seems to contradict the idea that you understand the technology of Bitcoin. Either you don't understand Bitcoin or you don't understand what a pyramid scheme is.

There seems to be a recurring dismissal of finance guys who are calling Bitcoin a worthless bubble as "just not getting it". I think they probably do, you don't get to be the CEO of JPMorgan or whatever by being a dummy. I think it's somewhat arrogant to dismiss all criticisms as "well they just don't understand as much as I do" (again, I know you're not doing this).

There are plenty of valid criticisms of bitcoin and crypto-currencies that have been discussed throughout this thread (bogus/fraudulent ICOs, harmful regulations, competing currencies, scaling issues, etc). However, when Jamie Dimon, that CEO of JP Morgan Chase that you refer of, is in an interview and is asked a question about ICOs and that is literally the first time he's ever heard of the term ICO, then that makes me question his knowledge on the subject matter of which he is speaking. Therefore, when he makes the claim that Bitcoin is a bubble, I have little faith that he's actually done any analysis to come up with that claim. The same goes for Howard Marks, where as I mentioned before, in his memo that he released to his investors, he actually admitted that he doesn't understand the technology at all.

So I find it hard to agree with you on idea that some of these people that are claiming Bitcoin is a bubble actually have done a detailed analysis as to why they think so. No doubt they are very smart people, but that doesn't make them an expert of all things. They certainly haven't shared their analysis from what I've seen outside of a simple "yup, the price is too high too fast!" In fact, I rarely ever hear an analysis as to why someone thinks Bitcoin is a bubble, all I hear is that another financial person has claimed Bitcoin is a bubble and then it makes a news headline. When that's been going on for several years, it grows increasingly difficult to take them seriously.

I agree that you shouldn't invest any money in crypto-currencies that you aren't prepared to lose. I also think that the amount of money you put into crypto-currencies should be proportional to the amount of understanding you have of the technology. That same advice could be said of just about any investment. For example, I'd advise against putting money into the stock of a company that you have little understand of and don't follow on a daily/hourly basis. I also don't think you should invest in real estate if you don't understand the real estate market in which you're investing.

sherr

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #515 on: October 27, 2017, 09:14:59 AM »
I understand the technology. I think it's probably nothing but a pyramid scheme

This seems to contradict the idea that you understand the technology of Bitcoin. Either you don't understand Bitcoin or you don't understand what a pyramid scheme is.

There seems to be a recurring dismissal of finance guys who are calling Bitcoin a worthless bubble as "just not getting it". I think they probably do, you don't get to be the CEO of JPMorgan or whatever by being a dummy. I think it's somewhat arrogant to dismiss all criticisms as "well they just don't understand as much as I do" (again, I know you're not doing this).

There are plenty of valid criticisms of bitcoin and crypto-currencies that have been discussed throughout this thread (bogus/fraudulent ICOs, harmful regulations, competing currencies, scaling issues, etc). However, when Jamie Dimon, that CEO of JP Morgan Chase that you refer of, is in an interview and is asked a question about ICOs and that is literally the first time he's ever heard of the term ICO, then that makes me question his knowledge on the subject matter of which he is speaking. Therefore, when he makes the claim that Bitcoin is a bubble, I have little faith that he's actually done any analysis to come up with that claim. The same goes for Howard Marks, where as I mentioned before, in his memo that he released to his investors, he actually admitted that he doesn't understand the technology at all.

So I find it hard to agree with you on idea that some of these people that are claiming Bitcoin is a bubble actually have done a detailed analysis as to why they think so. No doubt they are very smart people, but that doesn't make them an expert of all things. They certainly haven't shared their analysis from what I've seen outside of a simple "yup, the price is too high too fast!" In fact, I rarely ever hear an analysis as to why someone thinks Bitcoin is a bubble, all I hear is that another financial person has claimed Bitcoin is a bubble and then it makes a news headline. When that's been going on for several years, it grows increasingly difficult to take them seriously.

I agree that you shouldn't invest any money in crypto-currencies that you aren't prepared to lose. I also think that the amount of money you put into crypto-currencies should be proportional to the amount of understanding you have of the technology. That same advice could be said of just about any investment. For example, I'd advise against putting money into the stock of a company that you have little understand of and don't follow on a daily/hourly basis. I also don't think you should invest in real estate if you don't understand the real estate market in which you're investing.

Way to demonstrate exactly my point an hour and one minute after I posted.

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #516 on: October 27, 2017, 09:25:32 AM »
For those with the technical background to understand it

I know that this is not what you're doing, so don't take it personally because I'm not accusing you of anything. I'm just going to piggyback on your comment to say something that's been on my mind.

...
To clarify, when I say people should have the technical background, I was talking about the technical aspects of the bitcoin asset that make it difficult for the non-technically savvy to even use it safely.  For example, it acts like cash or gold in that if it gets stolen or you forget your passwords it is gone.  You can't call up someone and get it back. 

I realize not everyone that understands bitcoin thinks it's a good investment and I respect your view that it's a speculation.  It is a speculation.  Though it's not a pyramid scheme by definition (if you read the details on a pyramid scheme bitcoin doesn't fit), but it is a tulip-style bubble in some ways.  However most monies are basically bubbles, including the US dollar.

Before I got into bitcoin and other crypto, I was a gold bug.  I spent a lot of time studying commodity money, symbolic money, representative money, fiat money, etc. The breakthrough that bitcoin achieved was a non-replicable, transferable, digital token--essentially it was the first digital asset that literally acted like physical property. People giving that useful token value came naturally, just as people giving unique shiny rocks (gold) came naturally. I recognized what was happening early, why it was happening, and where it might go--and I got on board.  It was a risk but it was a good risk.  I knew bitcoin wasn't what people were calling it for years...  it wasn't a fraud, a scam, or a pyramid scheme.  It was something new and groundbreaking and would have some real value and lead to even bigger things.
« Last Edit: October 27, 2017, 09:28:02 AM by MystryBox »

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #517 on: October 27, 2017, 09:30:18 AM »
Way to demonstrate exactly my point an hour and one minute after I posted.

I love a good debate that involves analysis on any given subject. I'll also try and never make personal attacks with those I debate with. If I dismiss someone's statement on a given subject matter, it is usually only due to a lack of reasoning behind said statement. Therefore, I don't dismiss "financial gurus" simply because they're "financial gurus". Jamie Dimon could've just as easily been a developer who was originally involved with Bitcoin and had he made the same statements Jamie Dimon did without giving his reasons, then I'd question it all the same. I'm prejudice not against stature or job title, but against a lack of reasoning.

If you want to debate the potentials of an ICO bubble and its potential impacts on Bitcoin, that's fine. There is a debate to be had there. But saying Bitcoin is a pyramid scheme or calling it a bubble simply because one believe's so just doesn't jive with me. The same goes for those that say that Bitcoin will one day reach $300,000 by such and such date without giving their reasons.

The more you post about Bitcoin being a bubble without actually giving your detailed reasons for it being so, then the more you prove my point.

waltworks

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #518 on: October 27, 2017, 10:24:36 AM »
I could imagine a hypothetical future where cryptocurrency is widely used to settle payments, but the tools for trading in and out of it on both ends are so fast/efficient that the total value of that cryptocurrency only needs to be a few billion to facilitate millions of transactions per day.

Yes, this is sort of where I see it going. As it stands, if you want to pay for something electronically (with a debit card, we'll leave credit cards out of this) you swipe the card, and then the card processor charges the merchant a fee (~3%) in exchange for transferring the money between you and providing some level of fraud prevention/security.

But they *don't* trade your dollars into Visa-Bux and back again to do that. And there's not really a reason that bitcoin/blockchain tech needs to have a "currency" attached to it with *any particular value* in order to facilitate transactions, if both parties just want dollars in the end. All the bitcoin on earth could be worth $500 million and you could use it for exchange that way (dollars instantaneously to bitcoin instantaneously to dollars) or it could be worth $500 quadrillion. Doesn't matter.

At some point you start to wonder about the point of having the "currency" part of it at all, if you're just transferring dollars to dollars.

So while I see the technology being a great thing and possibly a wonderful way to get the vampire squid credit/debit card companies from siphoning 2-3% of the every transaction, I *don't* think that means buying bitcoins (or any other crypto "currency") is a good investment or correlated to the potential of the technology.

I think that's where my main disagreement here is. I think you could invest in companies that are developing this technology (still pretty speculative since most of them will fail) and maybe do great, but buying the currency itself seems crazy when it's hardly used for transactions and mostly owned by crazy rich Asians (great book, btw) who are trying to hide their money from the government and/or living in the Chinese equivalent of late 1800s America and investing willy-nilly in every crazy crypto/railroad scheme that comes along. 

We ended up with a kickass rail system... and most of the investors lost everything in the process. I'd guess crypto will be the same story.

-W

Scortius

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #519 on: October 27, 2017, 10:30:26 AM »
I think some of the recent debate brings up a good point. Bitcoin is touted as a currency, hell, coin is part of its name. But, by most definitions of true currency, Bitcoin falls short.  Where it does line up is as a commodity, just like gold. You 'mine' it. It has limited supply. You can exchange it for currency. And, like gold these days, it has little (but some) intrinsic value (compared to a more utilized metal like copper, for example).

Bitcoin has all the hallmarks of what made gold so valuable before the advent of paper currency.  It was difficult to counterfeit, it could be quickly verified as genuine, it was easy to label, and it was relatively liquid and easy to exchange.

To that end, I see something like Bitcoin (or most any other crypto) as eventually mirroring behavior seen in a commodity market. It will be used as a hedge against inflation, possibly a store of value against the destruction of the US economy (although that would pretty much wipe Bitcoin out).  It will have value in allowing black market exchanges and hiding wealth.

The catch then is that the value of Bitcoin becomes heavily tied to consumer confidence in Bitcoin.  There is no 'gold standard', it's not tied to any economy, thus it has the potential to fluctuate wildly with ebbs and flows of consumer speculation and valuation, and yes possibly creating speculation bubbles.

Blockchain technology has some fascinating potential, but Bitcoin itself is just a token. Blockchain isn't some magic formula anymore, and Bitcoin has no 'moat' beyond its current branding and market share. What's to stop some independent nation state from promoting their own blockchain currency using the same formula, but physically backing it with local currency (say, the Cayman Islands, or even Switzerland, which promise to provide a secure and anonymous exchange).  Sure, it would lose some of its value in being only semi-autonomous, but the implementation could be distributed, and backing a new crypto with real currency would increase consumer confidence in this new coin, giving it stability.  Black market players and tax avoiders could continue to operate only in Swiss-coins while legal intermediaries could buy and sell coins and exchange them for cash. Not that this scenario is likely, but one point here is that Bitcoin itself would have zero claim to the value of any other coin as they would be fundamentally decoupled. The value of Bitcoin is only equal to the value the market believes it has.

What about the use of blockchain technology to verify financial transactions, like a digital handshake? Maybe to provide confidence in the validity of a national election in some way.  Once again, Bitcoin has zero claim to capitalize on any new system using the same technology. It only has the value people believe it does. That value could persist for a long long time, or maybe just a long time. But, there is no fundamental backing to it.  At some point something new could come along and the value of Bitcoin could go to zero overnight in a way that physical commodities never could.

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #520 on: October 27, 2017, 11:07:25 AM »
Why would a blockchain token having a backing tie to some foreign currency be particularly useful?  Just use the foreign currency, they are already digital.

The value crypto brings is in how it is disconnected from any government/nation state and from banks.  It can't be inflated by some government nor confiscated, nor devalued, etc. If you hold the crypto yourself it won't be loaned out by your bank, nor can it be taken out of your account due to legal demand.  Understanding why this is valuable is difficult if you don't have much wealth.  If you don't have much wealth you don't worry about protecting it, moving it, or it being locked down or taken away from you. 

To get a idea what I mean, consider you held several million worth of crypto.  A crypto wallet, including all crypto balances and historical transactions, can be completely encoded by a dozen secret words you can memorize.  So now no matter where you go, those dozen words uniquely control your millions, and nobody else can touch it.  If you get on a plane and fly to another country, when you land your millions went with you, in your head.  You don't have to request a bank to send money to another country, no bank can put a hold on that wealth, no government can confiscate it, and no physical asset had to be shipped.  The other people in the plane had to report even small amounts of cash they were traveling with, your millions already exist everywhere on the planet already.  No other money or asset in the world has that ability.  Crypto is like nothing else.
« Last Edit: October 27, 2017, 11:14:32 AM by MystryBox »

runbikerun

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #521 on: October 27, 2017, 11:21:30 AM »
"Either you don't understand Bitcoin or you don't understand what a pyramid scheme is."

This is, to put it mildly, an extravagantly dismissive attitude. It's not an exact copy of a pyramid scheme (because if it was, it would be completely illegal), but the characteristics are not too dissimilar. In each case, you're seeing a progressively larger flow of money into a product, fuelled by the gains realised by prior investors, and fuelling a still larger flow of money into the product. There are enough characteristics in common that the comparison isn't unwarranted. It's not as tight a match as with Robert Schiller's description of a bubble, but it's still a reasonable comparison to make.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #522 on: October 27, 2017, 11:30:38 AM »
As it stands, if you want to pay for something electronically (with a debit card, we'll leave credit cards out of this) you swipe the card, and then the card processor charges the merchant a fee (~3%) in exchange for transferring the money between you and providing some level of fraud prevention/security.

At some point you start to wonder about the point of having the "currency" part of it at all, if you're just transferring dollars to dollars.

That's part of the problem and one of the very reasons why Bitcoin was created in the first place. This was discussed in the first part of the Bitcoin whitepaper. Financial institutions currently facilitate our transactions on the internet and fraud is rampant. A certain level of fraud in simply accepted and the costs of combating that fraud is very high. Because trust must be placed in a financial institution for transactions, completely non-reversible transaction aren't possible and this is a problem if your business is selling non-reversible services. Furthermore, because of the costs of a system like this (~3% fees), micro-transactions are not economical which prevents the ability to offer services or systems that could benefit from micro-transactions. Bitcoin can offer these benefits along all while preventing massive amounts of online credit card fraud. So even if Bitcoin's only use is to facilitate transactions where both parties simply convert immediately to fiat, there are still a lot of benefits to be had that Bitcoin provides. As an Information Security professional that works directly with PCI compliance, I'd certainly welcome a change such as this to our current system that would help prevent fraud in the financial space. To those that invest in this system and help it become a reality, then I'd be glad to see their financial fortunes benefit as a result.

I think some of the recent debate brings up a good point. Bitcoin is touted as a currency, hell, coin is part of its name. But, by most definitions of true currency, Bitcoin falls short.

Bitcoin has all the hallmarks of what made gold so valuable before the advent of paper currency.

I think part of the problem is that people are simply trying to mold Bitcoin into existing models of currency and assets that they're already familiar with as opposed to just seeing the benefits of Bitcoin as they are and seeing how they can be transformative. Why does Bitcoin need to have all of the criteria of a currency to be a currency and why does Bitcoin need to have all of the benefits of gold to be a store of value?

The way I see it, Bitcoin can be both partly currency and partly store of value and provide something that is the best of both worlds in a whole new type of asset. Gold was great as a store of value throughout history and for a long time was great as a currency. But it isn't very portable and therefore better currencies came along to help us facilitate or daily transactions. Bitcoin, while it may not have the history that gold has as being a store of value, can still be such while being much better as a transactional currency. Meanwhile, our current fiat currencies and the systems that are based on them are adequate at facilitating transactions, but they're horrible as a store of value and history has repeatedly shown that they're, not portable, corruptible, devalued, manipulated, and depending on where you live can be discriminatory. In both of these areas (store of value/medium of exchange) I can see Bitcoin providing a lot of benefits to our world.

In a world that is becoming more and more globally interactive, I see a future for Bitcoin. A friend of mine just left the US to go live in Europe for several months. All he brought with him (financially speaking) is his Bitcoin. Although, he really didn't bring anything with him since Bitcoin is technically just stored on the blockchain. He then just set up and account with a local exchange upon reaching Europe and he's just been exchanging what he needs from Bitcoin as he needs it. You see, Bitcoin is universal and allows people to move anywhere and have their finances travel with them without worry. No one can take his Bitcoin from him as he travels beyond borders. Our current traditional financial system cannot provide this value to people.
« Last Edit: October 27, 2017, 11:42:55 AM by lifeanon269 »

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #523 on: October 27, 2017, 11:35:44 AM »
This is, to put it mildly, an extravagantly dismissive attitude. It's not an exact copy of a pyramid scheme (because if it was, it would be completely illegal), but the characteristics are not too dissimilar. In each case, you're seeing a progressively larger flow of money into a product, fuelled by the gains realised by prior investors, and fuelling a still larger flow of money into the product. There are enough characteristics in common that the comparison isn't unwarranted. It's not as tight a match as with Robert Schiller's description of a bubble, but it's still a reasonable comparison to make.

Bitcoin has the same exact supply/demand economic model as any scarcely limited resource on this planet. To take that very basic economic model and compare it to a fraudulent scheme that requires exponential recruitment of investors into the scheme in order to support itself fails to understand the important differences. So no, I'm not being dismissive when I say that Bitcoin is not a pyramid scheme.

Scortius

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #524 on: October 27, 2017, 11:37:55 AM »
Why would a blockchain token having a backing tie to some foreign currency be particularly useful?  Just use the foreign currency, they are already digital.

The value crypto brings is in how it is disconnected from any government/nation state and from banks.  It can't be inflated by some government nor confiscated, nor devalued, etc. If you hold the crypto yourself it won't be loaned out by your bank, nor can it be taken out of your account due to legal demand.  Understanding why this is valuable is difficult if you don't have much wealth.  If you don't have much wealth you don't worry about protecting it, moving it, or it being locked down or taken away from you. 

To get a idea what I mean, consider you held several million worth of crypto.  A crypto wallet, including all crypto balances and historical transactions, can be completely encoded by a dozen secret words you can memorize.  So now no matter where you go, those dozen words uniquely control your millions, and nobody else can touch it.  If you get on a plane and fly to another country, when you land your millions went with you, in your head.  You don't have to request a bank to send money to another country, no bank can put a hold on that wealth, no government can confiscate it, and no physical asset had to be shipped.  The other people in the plane had to report even small amounts of cash they were traveling with, your millions already exist everywhere on the planet already.  No other money or asset in the world has that ability.  Crypto is like nothing else.

Yes, I understand what crypto-currency is.

No, I'm not saying Switzerland runs the crypto-coin, and I especially am not saying that they have access to any type of ledger.  Further, the network is by definition distributed, so a country backing a coin would have no more ability to examine the exchanges than any other independent entity.

You mention your millions, yes they are encrypted and safe in a cold or paper wallet. Now, those millions are coins, not currency.  They are tokens that can be given to other people, but they are not de facto government currency. And yes, I get that this is considered a good thing.

If you want to exchange money, there will be a record if you use foreign currency.  If you exchange crypto-coins backed by a currency, there will still be no record.  The only thing backing means is that the government honors exchanges of coins to their currency at a specific valuation. That provides price stability and intrinsic value. People wanting to avoid operating in a foreign currency can continue to do so.  This is exactly how the US dollar worked while backed by gold. In a vast majority of transactions It was not exchanged for gold, it was exchanged for labor, goods, or other services.  But the fact that it could be exchanged for gold gave consumers confidence in the value of the token they held (which in this case would be a dollar bill or the like).

Since the value of any crypto-coin is heavily tied to the level of market confidence in that coin, it is possible that the value gained by the backing of a coin by a legitimized public entity may outweigh the loss in value the potential coin loses by being tied to a institution.  I'm not saying this will happen, I'm just pointing out a scenario where a new coin is introduced to the market in a new way that might fundamentally undermine the value of a separate coin like Bitcoin. Once again, Bitcoin has no moat beyond its current market share and consumer confidence.  Its market share is a somewhat dangerously recursive valuation, as any loss in market share could lead to a rapid feedback loop of further decreasing consumer confidence and market share.
« Last Edit: October 27, 2017, 11:43:31 AM by Scortius »

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #525 on: October 27, 2017, 12:01:46 PM »
...
The only thing backing means is that the government honors exchanges of coins to their currency at a specific valuation. That provides price stability and intrinsic value.

It provides stability, but not intrinsic value as government currency has no intrinsic value either.  Your entire argument has an underlying assumption that government money is somehow "real" money with "real" value while crypto value is not real, but that's simply not true.  In some ways crypto value is more real than government money value as it came from a global market, not by decree of a single government. Governments and their fiat currencies come and go, global assets (including crypto) are not so transitory.
« Last Edit: October 27, 2017, 12:07:34 PM by MystryBox »

waltworks

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #526 on: October 27, 2017, 12:37:11 PM »
Dude, if you want intrinsic value, you want stocks, or land, or useful commodities, or something else that produces something. No currency (at least none that I'm aware of) has "intrinsic" value, bitcoin included. In fact you don't really even want currency to have intrinsic value, since you want it used for exchange, not hoarding.

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shadow

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #527 on: October 27, 2017, 01:04:47 PM »
Dude, if you want intrinsic value, you want stocks, or land, or useful commodities, or something else that produces something. No currency (at least none that I'm aware of) has "intrinsic" value, bitcoin included. In fact you don't really even want currency to have intrinsic value, since you want it used for exchange, not hoarding.

-W

Can you clarify what you mean by "something else that produces something"?

There are crypto that pay dividends or some form similiar.

Also, would you say that cryptography itself has or does not have intrinsic value?

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #528 on: October 27, 2017, 01:21:48 PM »
Crypto would be valuable even if it didn't have intrinsic value, but it's arguable that crypto has intrinsic value.  At its core crypto is digital property that has various uses, including uses that nothing else can do.  Some of the newer cryptos, like ethereum, include an entire programmable environment (smart contracts) that can solve a near infinite number of monetary/legal/contract issues in a cheaper, automated way.  The future for such systems is thought to be as big a deal as the internet was.  These are useful, intrinsic properties that have value and give crypto an intrinsic value. 

shadow

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #529 on: October 27, 2017, 01:37:21 PM »
Crypto would be valuable even if it didn't have intrinsic value, but it's arguable that crypto has intrinsic value.  At its core crypto is digital property that has various uses, including uses that nothing else can do.  Some of the newer cryptos, like ethereum, include an entire programmable environment (smart contracts) that can solve a near infinite number of monetary/legal/contract issues in a cheaper, automated way.  The future for such systems is thought to be as big a deal as the internet was.  These are useful, intrinsic properties that have value and give crypto an intrinsic value.

What I want to say is that cryptography does have intrinsic value. As a math formula codified, it was sold as a technology in the past and sold today as ssl certs. You can't do modern banking and commerce without it. Cryptocurrency is an extension of cryptography in blockchain form. It can function as a currency, but it can also function as fuel or be treated as exchange network, asset, stock, platform, protocol, etc.

« Last Edit: October 27, 2017, 01:42:43 PM by shadow »

Scortius

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #530 on: October 27, 2017, 01:57:08 PM »
I think I got off track on the intrinsic value piece. The point I was trying to focus on more was the vulnerability of the value and adoption of any one type of coin to be completely overtaken by another newer coin with some extra feature.  We could argue about the intrinsic value of non-commodity backed national currency like the US dollar (which is backed by the value of the US economy, although susceptible to inflation/deflation), but that's more of a red herring in this context.

Crypto is valuable, extremely valuable. You could definitely make the argument that a system of exchange involving digital coins/tokens/keys/hashes/whatever is valuable. But the value to me seems more in the conceptualization of the distributed process itself and not the actual tokens. This can be seen to some extent in how easily and quickly new coins are popping up. The idea itself is in the public domain, even if your set of Bitcoins are not. What makes Bitcoin more valuable than Dogecoin? Is it the technology or the adoption? I think in the end that is really my question. What forces are out there that will make sure Bitcoin will not be overtaken by Dogecoin, or Etherium, or Litecoin, or Etherium-v2, or whatever the next leap is. Because without that moat, the Bitcoin tokens themselves will only be valuable until the next coin takes over its market share. You can still play the game by keeping a broad portfolio of coins, but with no barrier to entry in the market, I don't see how things will ever stabilize on any one coin to the point where you would feel confident using them as long term speculative investments. If anyone can make their own coin by forking public code repos, there will be no need to be dependent on one type of coin for specific use cases. Thus I don't see how coins can be considered good vehicles for the long-term storage of wealth. But then maybe I'm missing something and you guys can help me out.

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #531 on: October 27, 2017, 02:22:19 PM »
I could imagine a hypothetical future where cryptocurrency is widely used to settle payments, but the tools for trading in and out of it on both ends are so fast/efficient that the total value of that cryptocurrency only needs to be a few billion to facilitate millions of transactions per day.

Yes, this is sort of where I see it going. As it stands, if you want to pay for something electronically (with a debit card, we'll leave credit cards out of this) you swipe the card, and then the card processor charges the merchant a fee (~3%) in exchange for transferring the money between you and providing some level of fraud prevention/security.

But they *don't* trade your dollars into Visa-Bux and back again to do that. And there's not really a reason that bitcoin/blockchain tech needs to have a "currency" attached to it with *any particular value* in order to facilitate transactions, if both parties just want dollars in the end. All the bitcoin on earth could be worth $500 million and you could use it for exchange that way (dollars instantaneously to bitcoin instantaneously to dollars) or it could be worth $500 quadrillion. Doesn't matter.

At some point you start to wonder about the point of having the "currency" part of it at all, if you're just transferring dollars to dollars.

So while I see the technology being a great thing and possibly a wonderful way to get the vampire squid credit/debit card companies from siphoning 2-3% of the every transaction, I *don't* think that means buying bitcoins (or any other crypto "currency") is a good investment or correlated to the potential of the technology.

So I think we're in agreement about a lot of this. However, I would argue having the currency part actually is important, even if you're ultimately buying and selling in dollars, just because I really can send you bitcoins/ethereum/whatever over the internet without us both needing a trusted third party (like mastercard or western union), whereas if I did want to sent you dollars directly over the internet, we're always going to need some kind of trusted third party, and they're always going to extract the highest fees that they can manage for serving in that role. That's just the inherent nature of dollars.

And of course if I'm buying with RMB, but you want to sell in USD, the importance of an intermediate currency like bitcoin becomes even more important (regardless of the price of an individual bitcoin) since there are currency controls on actually sending RMB out of China.
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effigy98

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #532 on: October 27, 2017, 02:29:07 PM »
What makes Bitcoin more valuable than Dogecoin? Is it the technology or the adoption? I think in the end that is really my question. What forces are out there that will make sure Bitcoin will not be overtaken by Dogecoin, or Etherium, or Litecoin, or Etherium-v2, or whatever the next leap is. Because without that moat, the Bitcoin tokens themselves will only be valuable until the next coin takes over its market share.

It is the usage numbers that make things valuable in the tech world. The best technology, lower fees, better marketing, luck, all these can be factors, but usage is really what counts. There are only a handful of coins that have the majority of usage and that is where the money and development resources will follow.

For example, Bitcoin is slower and has higher transaction fees, but you see all the time people in poor countries saying itís the one they know and are used to doing transactions with so they trust it and stick with it rather than using another one of the 1000 cryptos (most with lower fees and better tech), even if they are paying massive fees when moving in and out of their local fiat to protect their assets from inflation.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #533 on: October 27, 2017, 02:31:56 PM »
What makes Bitcoin more valuable than Dogecoin?

What makes gold more valuable than silver? People simply value it more. You can argue about gold's industrial uses, but gold was still held in high value long before those industrial uses came along. Personally, I like the look of silver or platinum more in jewelry than gold. Gold is simply valuable because a lot of people place value on it. Because of that value placed on it combined with its scarcity (you can't just go in your back yard and dig some up), it has a lot of value. There are some metals out there that are more scarce, have more industrial function, or even perhaps are better ornamentally, yet gold is still one of the better store of values. Gold historically has no "moat" against other precious metals outside of humans just blindly valuing it for what it is.

The same is true for Bitcoin. There may be better functioning alt-coins out there for specific tasks. There may be better alt-coins out there that are more secure or anonymous. There may be better alt-coins that are technologically or cryptographically better or easier to use. But, they're not better enough to overtake Bitcoin as a store of value. People simply value it more than all other currencies by a lot. Some reasons make sense as to why, some don't. However, unlike gold that is a static element, Bitcoin is not so static. It can be molded through consensus to become what the market needs it to be. There are other alt-coins that are similar enough where specific functionality can be tested within smaller markets to see how they perform and then those very same features can be added to Bitcoin if needed. Bitcoin's market lead along with the fact that new features can and likely will be added will keep Bitcoin as the #1 currency for the foreseeable future.

A new crypto-currency popping up out of the blue is no more of a threat to Bitcoin's value than a new metal being discovered is a threat to gold's value as a precious metal. That's not to say I wouldn't keep a close eye on the market over the next several years to see what's going on in the industry to see what new technology is out there. Anything is possible and if you're just blindly stashing away Bitcoin and turning your back on it, there is always a chance you'll get burned. But, I don't see the threat of other alt-coins as a reason to avoid Bitcoin altogether. I'd merely view other currencies as lively experimentation is a burgeoning new industry; definitely something to keep an eye on.
« Last Edit: October 27, 2017, 02:35:59 PM by lifeanon269 »

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #534 on: October 27, 2017, 02:45:58 PM »
I think I got off track on the intrinsic value piece. The point I was trying to focus on more was the vulnerability of the value and adoption of any one type of coin to be completely overtaken by another newer coin with some extra feature.  We could argue about the intrinsic value of non-commodity backed national currency like the US dollar (which is backed by the value of the US economy, although susceptible to inflation/deflation), but that's more of a red herring in this context.

First off, I agree with your points about the value of crypto being questionable due to new cryptos coming online, forks, etc.  When I first got into crypto there was really just bitcoin and the arguments about bitcoin being "digital gold" seemed quite strong.  However since then there have been thousands of new coins as well as forks of bitcoin itself.  Gold doesn't fork and gold isn't at risk of gold 2.0 coming out next year.  So no, bitcoin is not "digital gold" and crypto is a speculation.  I think it will have a significant role in the future but exactly what the future looks like and what value it will have are unknowns. I'm still interested in participating in the road crypto is traveling, but I'm not fool enough to believe bitcoin (or any crypto) is the end-all-be-all of digital currency value.  I actually think bitcoin is going to lose its lead coin status in the next year or so.

However I disagree with you about the US dollar.  The US dollar is not backed by the value of the US economy in any meaningful meaning of the word "backed."  Governments and their fiat currencies regularly fail despite the country having rich resources and functional economies.  At best you might say the US dollar value is related to the US economy, but unfortunately its more related to how the government manages the currency and its own finances.  The US government can (and IS) going further and further into debt, adding more and more unfunded liabilities, and otherwise walking the path to bankruptcy which very well could one day result in defaults, overhauls of the government, and significant collapse the dollar's value (if not outright destruction of the currency).  However the economy of the US itself can continue on, new government structures and monies can be created, etc.  In short any value and stability of a fiat currency is much more linked to the government making the fiat mandate than the links to economy, resources, military, or other sources.

Scortius

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #535 on: October 27, 2017, 02:56:54 PM »
What makes Bitcoin more valuable than Dogecoin?

What makes gold more valuable than silver? People simply value it more. You can argue about gold's industrial uses, but gold was still held in high value long before those industrial uses came along. Personally, I like the look of silver or platinum more in jewelry than gold. Gold is simply valuable because a lot of people place value on it. Because of that value placed on it combined with its scarcity (you can't just go in your back yard and dig some up), it has a lot of value. There are some metals out there that are more scarce, have more industrial function, or even perhaps are better ornamentally, yet gold is still one of the better store of values. Gold historically has no "moat" against other precious metals outside of humans just blindly valuing it for what it is.

The same is true for Bitcoin. There may be better functioning alt-coins out there for specific tasks. There may be better alt-coins out there that are more secure or anonymous. There may be better alt-coins that are technologically or cryptographically better or easier to use. But, they're not better enough to overtake Bitcoin as a store of value. People simply value it more than all other currencies by a lot. Some reasons make sense as to why, some don't. However, unlike gold that is a static element, Bitcoin is not so static. It can be molded through consensus to become what the market needs it to be. There are other alt-coins that are similar enough where specific functionality can be tested within smaller markets to see how they perform and then those very same features can be added to Bitcoin if needed. Bitcoin's market lead along with the fact that new features can and likely will be added will keep Bitcoin as the #1 currency for the foreseeable future.

A new crypto-currency popping up out of the blue is no more of a threat to Bitcoin's value than a new metal being discovered is a threat to gold's value as a precious metal. That's not to say I wouldn't keep a close eye on the market over the next several years to see what's going on in the industry to see what new technology is out there. Anything is possible and if you're just blindly stashing away Bitcoin and turning your back on it, there is always a chance you'll get burned. But, I don't see the threat of other alt-coins as a reason to avoid Bitcoin altogether. I'd merely view other currencies as lively experimentation is a burgeoning new industry; definitely something to keep an eye on.

I'm not sure I agree with a lot of these points.  There are some very specific reasons why gold is more valuable than silver.  Two big ones are that 1) gold is more rare, and 2) it's chemically inert (whereas silver tarnishes for example). In fact, gold is extremely unique in its combination of softness and chemical stability. So right off the bat we have two good predictors on value: rarity and practicality. That does seem to make sense to me.

Bitcoin certainly gets to claim rarity on the grounds that it has a finite supply, but then so does any other crypto coin, so I'm honestly not sure how to factor that in. As for practicality, again it's hard to measure how Bitcoin directly compares to other coins as the comparison may be use-case dependent. But, you do see effects like Etherium (which maybe should be called Bitcoin-v2) coming out of nowhere and claiming a significant market share due to perceived practicality improvements.

And that's the thing. You mention that Bitcoin is not so static, but I look at it and see it as being very static. A coin is a token that can be anonymously exchanged with a way to verify the exchange. There are going to be a fixed number of coins, and that's that. I don't get this idea of it 'becoming what the market needs it to be'.  They are what they are, and that's a secure distributed system for the validated exchange of tokens. But, anyone can pretty much on a whim fork/clone the code and create their own parallel system decoupled from the valuation of any other system.

And yes, I agree that most of Bitcoin's value is due to it being first-to-market, but if that's the main reason it's worth over 1,000 times more than equivalent (or even functionally superior) alt-coins, I don't see how that represents a stable system over a significant number of years. If at any single point in the near or distant future Bitcoin starts to lose market share to an emerging new technology, there will be nothing to stop its value from plummeting due to this feedback loop of its value being tied to its market share.  If everyone's jumping to Super-coin and Bitcoin's market share starts dropping, who's going to be sitting there willing to buy Bitcoins at their current price when the value of Super-coin is exploding and there's possible reason to thing that Bitcoin will be come a completely outdated dominated implementation of the next big crypto-currency? If consumer confidence starts declining, the value of a Bitcoin could evaporate in a cloud of smoke as hoarders make a 'run on the bank' and try and offload their inventory in exchange for The Next Big Thing.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #536 on: October 27, 2017, 06:29:58 PM »
I'm not sure I agree with a lot of these points.  There are some very specific reasons why gold is more valuable than silver.  Two big ones are that 1) gold is more rare, and 2) it's chemically inert (whereas silver tarnishes for example). In fact, gold is extremely unique in its combination of softness and chemical stability. So right off the bat we have two good predictors on value: rarity and practicality. That does seem to make sense to me.

Bitcoin certainly gets to claim rarity on the grounds that it has a finite supply, but then so does any other crypto coin, so I'm honestly not sure how to factor that in. As for practicality, again it's hard to measure how Bitcoin directly compares to other coins as the comparison may be use-case dependent. But, you do see effects like Etherium (which maybe should be called Bitcoin-v2) coming out of nowhere and claiming a significant market share due to perceived practicality improvements.

And that's the thing. You mention that Bitcoin is not so static, but I look at it and see it as being very static. A coin is a token that can be anonymously exchanged with a way to verify the exchange. There are going to be a fixed number of coins, and that's that. I don't get this idea of it 'becoming what the market needs it to be'.  They are what they are, and that's a secure distributed system for the validated exchange of tokens. But, anyone can pretty much on a whim fork/clone the code and create their own parallel system decoupled from the valuation of any other system.

And yes, I agree that most of Bitcoin's value is due to it being first-to-market, but if that's the main reason it's worth over 1,000 times more than equivalent (or even functionally superior) alt-coins, I don't see how that represents a stable system over a significant number of years. If at any single point in the near or distant future Bitcoin starts to lose market share to an emerging new technology, there will be nothing to stop its value from plummeting due to this feedback loop of its value being tied to its market share.  If everyone's jumping to Super-coin and Bitcoin's market share starts dropping, who's going to be sitting there willing to buy Bitcoins at their current price when the value of Super-coin is exploding and there's possible reason to thing that Bitcoin will be come a completely outdated dominated implementation of the next big crypto-currency? If consumer confidence starts declining, the value of a Bitcoin could evaporate in a cloud of smoke as hoarders make a 'run on the bank' and try and offload their inventory in exchange for The Next Big Thing.

Bitcoin's scarcity doesn't just come from the limited number of coins that are programmed into the code. It's scarcity comes from the network itself. There is a massive amount of proof-of-work that went into mining the coins that are in existence today just like there was a massive amount of work that went into mining gold from the ground. It isn't just scarcity that matters when determining the value that humans place on a limited supply commodity, it is also the amount of work it took to get that commodity into existance and the amount of work it will take to create more. This is why alt-coins don't pose as much of a threat to Bitcoin. Sure, other coins can just come along and appear out of no where, but they won't have the same amount of proof-of-work or hashrate behind them and therefore they won't equate to the same amount of value and rarity that Bitcoin possesses. The computing power that is a part of the Bitcoin network is more power than the top 600 supercomputers combined. This provides a huge amount of resistance to attacks and adds to the security of the network. It also ensures that Bitcoins that are being mined require a sufficient amount of proof-of-work to justify their value that the market puts on them. This is why just any alt-coin that gets created today won't have the same amount of value placed on it by investors. It takes something like $50 billion dollars to try and create one fraudulant Bitcoin. Bitcoin is completely resistant to counterfeiting. That is something that almost no other physical commodity can make a claim to. Not only is Bitcoin an established crypto-currency from a community and industry point of view, it is also an established network from an infrastructure point of view.

Bitcoin is not static. It has been changed and upgraded several times. It has weathered forks. Segregated Witness, which was a feature added to Bitcoin a couple months ago, allows for other overlay networks on top of Bitcoin that will ensure that it remains flexible enough in the future for additional functionality without necessarily the need for hardforks. Smart Contracts are also a possibility. So no, I don't think Bitcoin is as static as you make it out to be. However, one thing is certain, it requires consensus in order to change. That means that it won't change unless the entire network (or an overwhelming majority) agrees to it. That's the glory of a decentralized network like this. The overlay networks that are added on top of Bitcoin (like the Lightning Network) are completely opt-in. Therefore, you can still use Bitcoin just as it always was while allowing users who choose so to take advantage of additional functionality all on top of the stable and secure network that Bitcoin has established itself as. This not only will add more and more value to Bitcoin, but provides a huge amount of resistance to other crypto-currencies from overtaking Bitcoin as the dominant coin.

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #537 on: October 28, 2017, 11:28:36 AM »
Here's some advice from someone who reached FI using crypto.

What To Do

- Don't spend more than you can afford to lose
- Know what you are buying and why
- Make your purchase
- Move to a paper wallet (or similar offline wallet)*
- Store offline wallet in a safety deposit box or other secure location where you won't be tempted to move the coins without good reason
- Hold
- Sell only when your target is reached, or if something significant and fundamental in the investment or situation changed
- Keep good records and pay your taxes

* If you don't know how to make a paper wallet safely you're probably not technically savvy enough to be in crypto

What Not To Do

1) Do not leave coins on exchanges.  Exchanges have a large number of risks.  All the following have happened...  Funds can be stolen by hackers or insiders. Funds can be lost by error or incompetence. Exchanges and funds can be seized by governments (for money laundering or whatever). These risks are real--even by 2014 (the last time I checked) half of all exchanges had failed or lost funds somehow.  The exceptions to this are if you're not technically competent to secure your own crypto (in which case you shouldn't be in crypto), or if you worry about being able to prove source of funds later (see #3). In that case accept the risk of loss and leave on the exchange, but don't touch!

2) Do not trade.  To trade you'll have to leave funds on exchanges, see (1).  If you trade you will almost surely do worse than just holding, usually much worse.  If you trade and somehow manage to make an overall gain, taxes (which will be a pain-in-the-ass to figure out) will eat up a huge chunk of that gain, again making you make less than you would've just holding.  I know a lot of people who were in crypto early and very few of them have actually made what they should have due to not following (1) and (2).

3) Avoid "anonymous" crypto.  Using anonymous crypto makes proving source of funds difficult or impossible.  If you actually succeed in your goal and make a lot of wealth in crypto, yet you cannot show source of funds, you'll find it very difficult to convert back to fiat.  Many exchanges that convert to fiat don't want to deal with you if have a lot of crypto and you can't show source of funds.  You could be a drug dealer as far as they know and they don't want to be shut down for laundering money so they will just refuse to deal with you.  Taxes potentially become more difficult also. 

4) Avoid anonymizing services, gambling sites, darknet, etc. for the same reasons as (3). Also there are additional risks in that you might not get your money back, and these services attract criminals and such.  You don't want to be associated with potentially illegal uses of crypto.  Exchanges that convert crypto to fiat have to be very careful not to deal with criminals.  These exchanges can and do examine crypto movement of customers and will refuse to convert your crypto into cash or even lock your account and funds if they see shady usage. 

5) Avoid the "investments" that constantly pop-up in crypto. Most of these don't end well.  Besides, crypto is the breakthrough, potentially world changing technology, not whatever these companies are offering.  Especially avoid shady, or anonymous businesses for risks of (1,3,4) beyond the other obvious reasons.

Does anyone have further advice?
« Last Edit: October 28, 2017, 11:30:22 AM by MystryBox »

shadow

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #538 on: October 28, 2017, 11:47:31 AM »
Does anyone have further advice?

2. If you do trade, distinguish between your longterm hodl and trade stacks. Your trade stack should be no more than 5-10% of your hodl stack. Don't margin trade.

Crypto is still early phase, and it's not user friendly in terms of security. Learn about security. At the very least use a fresh install on a brand new, nonrefurbished device for crypto related activies (this can also apply mutally to banking and other sensitive-info services). A linux bootable disk can also suffice. For longterm storage, use ledger or encrypted usbs, with multiple copies of private key/seed/phrase.



 

phil22

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #539 on: October 28, 2017, 02:14:59 PM »
"Either you don't understand Bitcoin or you don't understand what a pyramid scheme is."

This is, to put it mildly, an extravagantly dismissive attitude. It's not an exact copy of a pyramid scheme (because if it was, it would be completely illegal), but the characteristics are not too dissimilar. In each case, you're seeing a progressively larger flow of money into a product, fuelled by the gains realised by prior investors, and fuelling a still larger flow of money into the product. There are enough characteristics in common that the comparison isn't unwarranted. It's not as tight a match as with Robert Schiller's description of a bubble, but it's still a reasonable comparison to make.

isn't that an exact description of the stock market?  if you own VTSAX or any other index fund you're not researching individual companies.  most of the return on stocks is simply waiting for someone else to come along and buy it from you later for a higher price than you paid.  dividends of course result in the proportional reduction of the share price so those don't count as returns.  the price/book ratio of the s&p 500 is over 3.0, so don't tell me you're gladly purchasing something for more than 3x the "intrinsic value".  you buy stocks because you hope buyers will be there when you go to sell 4% of your shares every year.


Dude, if you want intrinsic value, you want stocks, or land, or useful commodities, or something else that produces something. No currency (at least none that I'm aware of) has "intrinsic" value, bitcoin included. In fact you don't really even want currency to have intrinsic value, since you want it used for exchange, not hoarding.

-W

is a 24/7 global, secure, cheap, fast, censorship-resistant payment network not producing value?  are visa, paypal, and western union valueless as well?

phil22

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #540 on: October 28, 2017, 02:23:48 PM »
Does anyone have further advice?

great advice in that post.

i would add:
-do not sell more than 5% of your holdings in any given year even if everyone is shouting about bubbles, tops, and tulips.  this applies to blockchain forks as well.

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #541 on: October 28, 2017, 02:31:39 PM »
MystryBox, a good set of advice. I'm not sure about #3 on the what-not-to-do list just because I think assumed anonymous nature of cryptocurrencies was one of the things that got people really excited about bitcoin in the early days (before people realized how straightforward it would often be to link an anonymous "wallet" to a particular person). So I still think the anonymous cryptocurrencies are likely candidates if there ever is a significant switch from bitcoin to something else.

That said, even if I'm right about that, you certainly raise a very valid point about the difficulty of getting money back out of crypto without looking like a potential drug dealer if you've got a lot of money sitting in monero or zcash (or whichever other anonymous coins are out there).

Dude, if you want intrinsic value, you want stocks, or land, or useful commodities, or something else that produces something. No currency (at least none that I'm aware of) has "intrinsic" value, bitcoin included. In fact you don't really even want currency to have intrinsic value, since you want it used for exchange, not hoarding.

-W

is a 24/7 global, secure, cheap, fast, censorship-resistant payment network not producing value?  are visa, paypal, and western union valueless as well?

I cannot speak for Walt, but I certainly think the bitcoin network and the ability to send payments all over the world is producing value. But the folks who produce that value (and get paid for it) are the miners, not the folks who hold bitcoin. Now if at some point in the future there is a switch to a proof-of-stake instead of proof-of-work on a major cryptocurrency (I think that is still on Ethereum's roadmap), then the folks who just buy and hold the currency could, indeed, be producing value.
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phil22

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #542 on: October 28, 2017, 02:55:34 PM »
Now if at some point in the future there is a switch to a proof-of-stake instead of proof-of-work on a major cryptocurrency (I think that is still on Ethereum's roadmap), then the folks who just buy and hold the currency could, indeed, be producing value.

i don't know how Ethereum's PoS will work but i imagine it would have to somehow involve spending money on electricity and computer hardware to process transactions and store the blockchain -- therefore a nonzero input to keep generating value via the payment network.

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #543 on: October 28, 2017, 03:08:30 PM »
It's been a long time since I've updated on my ZEC mining experiment.* I stopped updating because the capital appreciation on the fees from ZEC mining which I was holding in bitcoin was going up so fast that it really dwarfed the financial effects of continuing to mine. But my mining rig has continued to chug away in the corner of my basement the last couple of months, so I thought I'd pull together an update.

The last data in my records is from August 18th, 2017, at which point I had climbed out of the ~$1,400 cost of setting up my rig and was up ~$800 (so total gain of approx. $2,200) based on ~$550 of mining income with the rest coming from capital appreciation. Two months later I'm up to ~$1,700 net (so total gain ~$3,100), with mining income at ~$750. I don't have detailed records for the last two months, but whenever I've checked my rig has been pretty consistently pulling in $100/month (~3x the cost of the electricity). People seem to have mostly stopped talking about investing in mining hardware (or maybe it's just an artifact of which forums I do or don't frequent), which is consistent with the profit from mining being a lot more stable.



All in all, I may still break even on the cost of hardware from mining fees at some point. I certainly did end up making money as the result of this experiment, but it was from an unconsidered side effect of my plan (holding more cryptocurrency), not the actual thing I set out to do (turn a profit from setting up a bunch of GPUs in my basement).


*Original details here on the first page of the thread.. Details on power usage here on the second page.
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maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #544 on: October 28, 2017, 03:26:37 PM »
Now if at some point in the future there is a switch to a proof-of-stake instead of proof-of-work on a major cryptocurrency (I think that is still on Ethereum's roadmap), then the folks who just buy and hold the currency could, indeed, be producing value.

i don't know how Ethereum's PoS will work but i imagine it would have to somehow involve spending money on electricity and computer hardware to process transactions and store the blockchain -- therefore a nonzero input to keep generating value via the payment network.

Agreed, but the vast majority of the current computer hardware and energy usage from cryptocurrencies that use proof of work (basically all the big ones everyone has heard of right now) isn't spent on storing the blockchain or communicating about transactions, it is spent on what is essentially a security measure to prevent people from rewriting the blockchain (churning away at asymmetrically hard math problems).

In proof of stake you probably still need to have a computer running in order to help mine (or do they call it minting with PoS?), but you don't get extra minting/mining rewards from having extra more computers/CPUs/GPUs/ASICs only from owning more of the currency and being willing to stake that currency on not allowing invalid transactions to go forward.
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Scortius

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #545 on: October 28, 2017, 05:16:46 PM »
Just wanted to chime in and say thanks for the comments. While I do feel that crypto could be hanging on a speculation bubble, I truly am excited about the possible applications of the underlying technology, especially in areas beyond basic currency exchanges. I'll certainly be keeping my eyes on things and the technology continues to progress.

MystryBox

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #546 on: October 28, 2017, 06:12:25 PM »
MystryBox, a good set of advice. I'm not sure about #3 on the what-not-to-do list just because I think assumed anonymous nature of cryptocurrencies was one of the things that got people really excited about bitcoin in the early days (before people realized how straightforward it would often be to link an anonymous "wallet" to a particular person). So I still think the anonymous cryptocurrencies are likely candidates if there ever is a significant switch from bitcoin to something else.

I would've agreed with you in the past, but after some direct experience cashing out a non-trivial amount of crypto my view has changed.  Fully anonymous crypto are sure to be used for transactions, especially on the darknet, but as an investment I don't think they will ever be very big.  I could be wrong, but here's my thinking:
- Exchanges are likely to run into regulatory issues converting them to fiat in large amounts in many countries.
- I suspect large institutional traders and hedge funds will avoid them precisely because of the anonymous factor/darknet-link and the above exchange issues.  Value won't go very far without larger traders buying.

I think cryptos that are normally traceable but can have anonymization when needed (like eth and bitcoin will eventually support) are better investments than a fully anonymous crypto.  JMO.

Quote
That said, even if I'm right about that, you certainly raise a very valid point about the difficulty of getting money back out of crypto without looking like a potential drug dealer if you've got a lot of money sitting in monero or zcash (or whichever other anonymous coins are out there).

I would recommend if you invest in anonymous cryptos and expect significant gains, you should leave them on the exchange.  Then when it is time to sell there is no question about where they came from.  These concerns are only for significant amounts of crypto.  And if you have a lot of crypto you can run into other problems like hidden caps that some exchanges have on fiat movement, even if source of funds isn't a problem.  For example I believe Kraken has an annual limit where even for highest tier customers it would take you literally 10 years to cash out of a million dollars worth of crypto off the exchange.  So make sure your exchange will actually handle the value you expect to end up with.
« Last Edit: October 28, 2017, 06:19:19 PM by MystryBox »

maizeman

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #547 on: October 28, 2017, 08:06:03 PM »
Thanks! I certainly don't have direct experience cashing out large sums of cypto (anonymous or otherwise) so it's great to hear from someone who has gone through the process recently and seen where the potential snags are.
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Bicycle_B

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #548 on: October 28, 2017, 09:49:29 PM »
Maizeman, I continue to love the clarity and reliability of your mining reports. 

MystryBox, welcome to the forum.

lifeanon269

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Re: OFFICIAL: Blockchain / Crypto-Currency Portfolios and Discussion
« Reply #549 on: October 29, 2017, 08:25:02 AM »
The most recent Bitcoin difficulty change was pretty significant. It dropped my daily BTC earning from about .00185 to about .00146. Back when I first got this rig in July I was earning about .00269. So it has dropped by almost half in about 3 months. Luckily the price has skyrocketed since then as well. I believe I'll still be profitable with my mining for the foreseeable future, but the difficulty has risen significantly with all the recent BTC price increases. I'm curious to see how the hashrate responds if the 2X fork ends up going through. I'm torn, I think the 2X fork is wreckless and poorly executed because it doesn't have replay protection, but I wouldn't mind seeing some hashrate go to another chain to allow BTCs difficulty to go down or at the very least hold steady for a while.