Author Topic: What do you think of adding a low% of crypto allocation  (Read 73431 times)

Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #150 on: October 08, 2021, 01:01:00 PM »
Yeah, I don't get the "missing out" angle.

I missed out on a zillion rocket to the moon investments in my life, because, you know, I'm not omniscient. But just plugging extra money into boring investments and not buying stuff I didn't need cut my (not particularly well paid, even) working career to something like 10 years. It's hard to say I "missed out" on anything there.

-W

Right.  I missed out on Bitcoin equally as much as I missed out on Enron. 

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #151 on: October 08, 2021, 01:07:26 PM »
I have a question about bitcoin that has always bugged me, and hasn't really been satisfactorily answered.

Bitcoin depends on mining in order to keep writing it's block chain and remain a functional currency.  Without 'mining' of the block chain, bitcoin shuts down.  Currently almost all the computer/energy costs associated with this are foisted upon individual miners which makes transaction costs as cheap as they'll ever be.  The miners choose to do this because they're paid for their busywork in bitcoin.  However, since bitcoin mining is designed to yield less and less bitcoin over time the motive to keep mining will drop and eventually end.  This is true even if the price of Bitcoin inflates to gigantic sums . . . because consistent returns will end and it will become a random boon like winning the lottery.

The solution to this problem that I've seen presented is that people who use bitcoin as a currency will be happy to pay 'miners' to keep wasting energy and computing cycles to allow their transactions to go through.  But this solution means that once Bitcoin starts to mature as a 'currency', it is guaranteed to become significantly more expensive to use.  Most purchases with currency are small . . . a donut, a coffee, some paper or a pen at a store.  Doesn't this all but guarantee that Bitcoin is doomed for use as a real currency?

I think the factor your predictions don't take into account is the difficulty adjustment built into bitcoin's hashing.

In the long term people can mine as much or as little as they'd like, the blockchain still works, the same number of transactions get processed with the same transaction fees and the total mining rewards per day or per week.

So ultimately the amount of money spent by miners (buying hardware and electricity primarily), adjusts to how much money is being spent on transaction fees + the shrinking block mining rewards, rather than the cost of the transaction fees having to increase or decrease to match the amount of money the miners are spending on hardware and electricity.

Rosy

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Re: What do you think of adding a low% of crypto allocation
« Reply #152 on: October 08, 2021, 01:11:27 PM »
Quote by @onecoolcat   
Quote
I've been listening to people hate on Bitcoin since it was $1,200.  I hated on Bitcoin long before it got to $1,000.  Back then, I knew my arguments were weak, I understood what Bitcoin was doing, but I was stubborn and felt jealous of the folks that made a lot money in it.  I missed out on it for the longest time because of my stubbornness and that is on me.  I understand where GuitarStv is coming from.  He is a smart guy.  He won't admit it but he will come around sooner or later.
I don't doubt for a second that GuitarStv is a smart guy. In fact, he is one of my long-time favorite posters, even when he is like a dog with a bone when something irks him:). It wouldn't be a good forum if we couldn't have discussions and disagreements.

My personal view on crypto is fairly idealistic,
more like @taekvideo not a view all that welcome everywhere. I care to support a movement (that is all it was from the beginning) to make the world a better place. I see and embrace the global aspect.

I love that:
The first big bitcoin currency experiment in El Salvador is going well. It took a lot of work and guts to go up against the IMF.
Their people are benefitting, the country coffers gained a few million, the GDP is up and their real estate is on fire.

I rejoice for every poor person anywhere who gets to keep an extra five to ten bucks a week because there are no remittance fees to send money home. I care that people fleeing Afghanistan were able to get some or most of their money out - thanks to Crypto. It is amazing that there is a game that allows you to make money in-game so that a kid can support his family in Africa/Asia thanks to crypto. I love the projects that Cardano is pursuing in Africa.

Innovation - Money Transfer
Nobody is talking about it, but - Square - Cash App - After Pay - Twitter - their payment app is underpinned by bitcoin. It is a monumental shift taking place quietly. Social Networks that span the globe and connect us with the Bank of the Future. As they say - the future is here.
(166M active daily users for Twitter) (Cash app 40M active daily users)
Jack Dorsey CEO of Twitter, is a huge fan of bitcoin. So yes, I do think bitcoin will be around for a while longer.

I can't say that I have ever been envious of others making bank on crypto except for one friend who made what he called "a drunk purchase" on his cell while out with his friends at the local hotspot. $35K that turned into $280K and is still going up. Life is so unfair:).

talltexan

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Re: What do you think of adding a low% of crypto allocation
« Reply #153 on: October 08, 2021, 02:10:02 PM »
I'm glad for your friend's fortune.

But I couldn't imagine carrying out a $35,000 transaction on public wifi. Unless he used phones to buy the bitcoin off of one of his friends who was right there.

But then I wonder about performing a five-figure financial transaction with a friend when you have a whole market available.

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #154 on: October 08, 2021, 02:51:53 PM »
I have a question about bitcoin that has always bugged me, and hasn't really been satisfactorily answered.

Bitcoin depends on mining in order to keep writing it's block chain and remain a functional currency.  Without 'mining' of the block chain, bitcoin shuts down.  Currently almost all the computer/energy costs associated with this are foisted upon individual miners which makes transaction costs as cheap as they'll ever be.  The miners choose to do this because they're paid for their busywork in bitcoin.  However, since bitcoin mining is designed to yield less and less bitcoin over time the motive to keep mining will drop and eventually end.  This is true even if the price of Bitcoin inflates to gigantic sums . . . because consistent returns will end and it will become a random boon like winning the lottery.

The solution to this problem that I've seen presented is that people who use bitcoin as a currency will be happy to pay 'miners' to keep wasting energy and computing cycles to allow their transactions to go through.  But this solution means that once Bitcoin starts to mature as a 'currency', it is guaranteed to become significantly more expensive to use.  Most purchases with currency are small . . . a donut, a coffee, some paper or a pen at a store.  Doesn't this all but guarantee that Bitcoin is doomed for use as a real currency?

An economics-minded crypto-booster would answer that the transactions cost you'd pay to spend cryptocurrency would be less than the net difference in inflation between government fiat and crypto fiat currencies. In theory, cryptocurrencies would have a cost for using them, and government currencies would have a cost for holding them.

This would of course open up an arbitrage opportunity where you want to hold crypto and transact in govt. currencies. Thus in a world where you could buy goods with either, the markets can be expected to move toward an equilibrium where the cost (bid/ask spread plus transaction costs) to trade crypto for govt. currency is equal to the cost of simply transacting in crypto (transaction cost alone). This equilibrium would be impossible to actually achieve though, because the bid/ask + transaction cost must be greater than the transaction cost alone. Therefore, the incentive would be to simply transact in crypto, rather than paying to convert to dollars and then transacting with dollars. This incentive structure would lead to growing demand for transaction processing, which would lead to more processing supply, which would keep costs stable in the long run at some point just above the marginal supplier's cost of providing the service. The crypto-pundits keep saying it'll be any year now that lots of vendors/suppliers start accepting crypto. This would be because it's cheaper to just deal in crypto than to switch back and forth.

The end result of such a world, according to crypto-boosters, would be that we've traded/sold inflation in exchange for environmental degradation.

What the above analysis leaves out is that vendors will have to charge currency conversion costs to their buyers if they need to receive government currency in the end - i.e. the entire supply chain has not yet adopted the new currency. A retailer in the US or EU can sell you things for dollars and euros and pay their Chinese or Saudi suppliers in dollars in euros, but their Chinese or Saudi suppliers cannot/will not accept crypto. The vendor must pay the currency conversion cost to replenish, so they pass this cost along to their customers. You end up with a system like truck stops that will sell fuel for one price in cash and a higher price if credit cards are used, to recoup the credit card processing fee. For people in possession of dollars, why pay the cost to trade the dollars for crypto so that you can then pay the higher cost the vendor charges?

If neither consumers nor vendors can escape the dynamic of government currency having a cost to hold and cryptocurrency having a cost to transact, then it will be hard for people to do anything different with crypto than what they're doing now - holding it. Likewise it will be hard for people to do anything different with dollars/euros/yen than what they're doing now - spending it.

What we're still leaving out is the situation for people in countries who earn their local currency, but when buying imports must pay a retail price which includes the cost to convert to dollars or similar reserve currencies. In theory, they should be agnostic about using their local currency or a cryptocurrency when spending. Except there's the minor detail that wages are paid in their local currency, so they'd have to pay the conversion cost to exchange local currency for crypto, only to then pay another conversion cost - built into prices quoted in crypto - for the retailer to exchange crypto for dollars so that international suppliers can be paid. For people in this situation, using crypto would involve paying for two currency conversions instead of one. But what if they're paid in crypto by their employer? If that were the case, they'd pay one currency conversion, crypto-to-dollars perhaps, and be paying for the same number of conversions as they were when they were being paid in local currency.

This is all a roundabout way of explaining why cryptocurrencies still - after years and many billions of dollars of investment and R&D - are not routinely transacted as currencies for goods and services. Consumers would have to be willing to pay currency conversion costs, plus whatever their payment processing service charged, and in addition suffer the inconvenience of their cryptocurrency not being universally accepted - until the entire supply chain changed over. That's a PITA when I can just whip out my VISA, pay in dollars, and only pay the CC payment processing service charge as part of my vendor's price. For widespread adoption of crypto throughout the supply chain to happen, crypto would have to be easier and cheaper than continuing to use dollars.

So far, it hasn't happened for the same reason your keyboard has the QWERTY layout from the 1800s, even though better designs have been invented. Imagine being so devoted to making he Dvorak or Colemak keyboards work that you carried your own special keyboard everywhere you went. People aren't willing to suffer even the mildest inconveniences to save their lives, much less foot the bill for this level of changeover costs. That's why crypto will always be a collectible, not a currency.

Rosy

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Re: What do you think of adding a low% of crypto allocation
« Reply #155 on: October 08, 2021, 03:10:04 PM »
I feel like I missed out on Bitcoin. I am age 60, with NW = 80x my comfortable yearly spend...so no big deal. I did look at some tweets pumping up dozens of other coins, each with an animal or cartoon mascot all promising a rocket ship to the moon. The due diligence is usually a sub-penny price chart and a few sentence about why this coin is the best. Elon seems to be a common mascot of sorts. Then I saw some posts from people who said that their wallets got corrupted or they lost their secret number and I could really sense their misery.

So I continue to 'miss out' even though I do see great value in the technology, especially involving intellectual property. I am sorta waiting for that aspect to evolve and develop a bit more. However back in my 'risk-on' days I would have been all in on Bitcoin.

Are you seriously comparing $54K bitcoin to Doge at $0.22 ? - then it may be a good thing that you 'missed out'.
OK - I can't help myself - but wherever were you looking?:) Just kidding.
I promise you I have no investments involving an animal or a cartoon. But I do follow youtube channels that occasionally have rockets - you got me there.
How else would we get to the moon?:)

Shucks - BTC is $54K today and ETH is $3.6K today and to my never-ending chagrin, the altcoin I wanted to buy when it was $23 (SOL) is $164 or so today. Crypto has gotten expensive.

FWIW
You can look up the white paper for any project/coin online, see the use cases and review their network, see who the developer and the investors are. You can look at the tokenomics and evaluate from there. But that takes time and work beyond reading a Twitter from Elon and his doggies.

Well, actually I lied I do own Doge and I am not selling it either - that dog will have its day!:)

Congrats on the NW! I think if I were in your shoes I wouldn't bother with crypto either. Well done:).

Rosy

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Re: What do you think of adding a low% of crypto allocation
« Reply #156 on: October 08, 2021, 03:31:26 PM »
I'm glad for your friend's fortune.

But I couldn't imagine carrying out a $35,000 transaction on public wifi. Unless he used phones to buy the bitcoin off of one of his friends who was right there.

But then I wonder about performing a five-figure financial transaction with a friend when you have a whole market available.

Right:)
I think that is where the 'drunken' part of " drunken purchase" came in. It wasn't bitcoin. He had cash at the exchange and clicked on buy SOL.

Maybe we should ban rich people from investing in crypto and just make it available to desperate people.
But then what would Bitcoin be without the much maligned banks?

taekvideo

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Re: What do you think of adding a low% of crypto allocation
« Reply #157 on: October 08, 2021, 03:33:23 PM »
the US dollar isn't and has never been backed by oil.  If it was, the price of the US dollar and the price of oil would move in lockstep.  They don't.  Closest I can figure is that the US dollar is backed by the GDP of the US.

Yeah that's my bad I shouldn't have said "backed by", I'm just looking at the mechanisms for what sustains its value over time. The dollar isn't pegged to oil like it was pegged to gold during the gold standard. The gold standard bootstrapped the dollar as the reserve currency, but now the dollar is fiat. Oil being traded only in dollars sets a demand floor and forces countries to keep a strategic reserve of dollars, which helps maintain it as the reserve currency. Without that deal the dollar would have collapsed once Nixon exit scammed.
The dollar isn't the reserve currency because it's the most stable, it's the most stable because it's the reserve currency, which is achieved by force and politics.

A decentralized currency backed by math & hashpower is a lot cleaner and more peaceful than empire notes backed by fossil fuel cartels and war.

Math isn't a backing.  'Hashpower' isn't even a real word.

I'm not sure you fully understand the other terms you're using either.  A 'backed currency' is a currency that comes with a guarantee that it can always be exchanged for a predetermined amount of another asset.  That's the dictionary definition.

Neither the US dollar, nor bitcoin are backed currencies.

"secured by" then?
Bitcoin isn't backed by an asset, it's the asset itself, like gold.
Gold doesn't need to be backed by anything, it's the layer 1 money because it's the commodity with the most scarcity and resistance to supply inflation.
Or at least it was before the discovery of Bitcoin.


Bitcoin will be a lot better for the people as well, both within the empire and outside. Abandoning the gold standard has been a disaster for the average US citizen, since 1971 real wages flatlined and the divide between rich and poor skyrocketed.  The gold standard wasn't perfect as it still allowed the banks to commit legalized fraud in the form of fractional reserve banking, but it at least limited the damage they could do and kept real interest rates from going negative.

The gold standard was abandoned in the US 1933 by FDR.  It was abandoned by Britian in 1931 and then the rest of the UK and most of it's allies as part of the Bretton Woods agreement in '44.  Not sure I understand what you're talking about here.  Since abandoning the gold standard in 1933, I'd argue that the lives of most Americans have significantly improved.

FDR banned citizens from owning gold, but nation states could redeem dollars for gold until 1971. Once the money printing got so extreme that other countries lost confidence & started draining our gold reserves Nixon pulled the rug out from under them.



Fractional reserve banking started in the 17th century.  It was a significant economic contributor as it allowed greater access to capital to people trying to start and build businesses.  Not exactly sure what your issue is with this, could you explain?

It's easier to understand in the context of a gold standard. Due to certain flaws with gold as a medium of exchange, people end up trusting 3rd party vaults to store the gold, which issue gold receipts that are "as good as gold", but more portable/divisible/etc.
This trust eventually gets betrayed and the banks issue more gold receipts than they have gold in their vaults, which is fraud. As long as not many people actually redeem the certificates for gold, they'll get away with it. But if people lose confidence, then they rush to redeem their certificates, and the scheme blows up. This is basically what happened at an international nation-state level in 1971 when the US scammed the rest of the world with their fraudulent gold receipts.

In a fiat economy things get a little more confusing, but the end result is the same. The banks push risk and leverage out into the system, privatize the gains, and socialize the losses when it all blows up. The same "dollars" are loaned out to a bunch of different people at the same time, at interest. It's a scam, a confidence game. If I did what the banks do every day they would call it check kiting and I would go to jail.

Issuing more on-demand cash receipts (eg checking/savings balances) than they have cash in the vault is legalized fraud.
If a bank wants to issue loans without being fraudulent, that's certainly possible:
1) they can loan out their own capital reserves, or
2) they can raise money by issuing bonds for at least the amount and maturity dates of the loans they want to issue.
Being a credit middle-man is okay, that's a useful service banks can provide. But creating fraudulent cash receipts is a confidence game that always blows up eventually and we all suffer the consequences.

FDIC insurance wouldn't be necessary if the owners & managers of banks were held personally liable for defaults (they used to be long ago), but limited liability creates a severe moral hazard. FDIC makes it worse.

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #158 on: October 08, 2021, 03:42:36 PM »
Square - Cash App - After Pay - Twitter - their payment app is underpinned by bitcoin.

Underpinned? As in, when I transfer dollar-denominated cash to someone via CashApp, you're saying they convert my dollars to Bitcoin and use Bitcoin to transfer the value to the recipient, only converting back to dollars at the last step before reaching the recipient's account??

Or do you mean that BTC is one of the items that I can transfer to someone, just like dollars are, and CashApp somehow makes a profit on the BTC transfers, with the result that the BTC line of business may be profitable to Square's Cash App division?

taekvideo

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Re: What do you think of adding a low% of crypto allocation
« Reply #159 on: October 08, 2021, 04:38:34 PM »
... And when a nation like Iraq or Libya tries to sell oil for something other than dollars the US swiftly invades and puts a stop to that.

There are a couple big reasons I haven't invested in crypto-

1. The US and EU could follow China and outlay crypto mining and transactions tomorrow. Crypto getting too big takes the power away from central governments and governments tend not to give away power. You are making the argument the US uses its military to go in and prevent destruction of the petrodollar, then ignoring the possibility the government will use its pen to outlaw crypto to prevent destruction of the petrodollar? China did it last month.

2. The credit market is 10-12x the size of the money supply. Borrowing for an asset today and using more efficient future work (productivity gains) to later pay on that credit is a  fundamental way economics has worked since Roman times. How does lending work with BTC? Can I borrow 8 BTC to buy a home today and promise to pay back those 8 BTC with interest over 30 years? The fundamentals you are using to say BTC is a good investment make it a bad currency. If BTC is increasing in value faster than productivity then I am paying back BTC with more hours worked in the future then hours worked today. On a fundamental level, credit breaks down.

1) That's the biggest risk for sure. But I don't think so. The politics are a lot different here. It would violate the 1st amendment for starters, but that wouldn't necessarily stop them. There are interest groups here that strongly support it. And Congress is dysfunctional. But most of all, I think they know the dollar is on the way out, and they would rather nobody gain control of the reserve currency status than hand it over to China. But I could be wrong. Maybe I'm too much of an optimist.

2) After it levels off BTC will increase in value at the same rate as productivity, not faster.
The type of credit you describe is counter-productive. Taking from the future to consume in the present is a problem with the current system, not a benefit, especially if the government has the power to do that on our behalf. If borrowing is done to increase productivity (eg capital investments for a business), then it works just fine under a Bitcoin standard, and capital will be put to its most productive use on the free market. If borrowing is done to consume, then you'll have to pay more (interest) for the privilege, as you well should.
Low time preference is a good thing. It's a feature of the Bitcoin standard.


taekvideo

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Re: What do you think of adding a low% of crypto allocation
« Reply #160 on: October 08, 2021, 04:49:34 PM »
I have a question about bitcoin that has always bugged me, and hasn't really been satisfactorily answered.

Bitcoin depends on mining in order to keep writing it's block chain and remain a functional currency.  Without 'mining' of the block chain, bitcoin shuts down.  Currently almost all the computer/energy costs associated with this are foisted upon individual miners which makes transaction costs as cheap as they'll ever be.  The miners choose to do this because they're paid for their busywork in bitcoin.  However, since bitcoin mining is designed to yield less and less bitcoin over time the motive to keep mining will drop and eventually end.  This is true even if the price of Bitcoin inflates to gigantic sums . . . because consistent returns will end and it will become a random boon like winning the lottery.

The solution to this problem that I've seen presented is that people who use bitcoin as a currency will be happy to pay 'miners' to keep wasting energy and computing cycles to allow their transactions to go through.  But this solution means that once Bitcoin starts to mature as a 'currency', it is guaranteed to become significantly more expensive to use.  Most purchases with currency are small . . . a donut, a coffee, some paper or a pen at a store.  Doesn't this all but guarantee that Bitcoin is doomed for use as a real currency?

Transaction fees are gradually taking over to pay the miners.
These fees are only for transactions on the blockchain... 99.9% of future transactions will be done off-chain (eg on the Lightning Network, which has much lower fees).

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #161 on: October 08, 2021, 05:58:34 PM »

2) After it levels off BTC will increase in value at the same rate as productivity, not faster.
The type of credit you describe is counter-productive. Taking from the future to consume in the present is a problem with the current system, not a benefit, especially if the government has the power to do that on our behalf. If borrowing is done to increase productivity (eg capital investments for a business), then it works just fine under a Bitcoin standard, and capital will be put to its most productive use on the free market. If borrowing is done to consume, then you'll have to pay more (interest) for the privilege, as you well should.
Low time preference is a good thing. It's a feature of the Bitcoin standard.

To me this sounds like you're describing an idealized "Bitcoin standard." It's pretty rare that something works exactly as designed, especially in a system as large as the world's finances. What happens if there's a deviation from the plan?


onecoolcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #162 on: October 08, 2021, 07:18:42 PM »
I have a question about bitcoin that has always bugged me, and hasn't really been satisfactorily answered.

Bitcoin depends on mining in order to keep writing it's block chain and remain a functional currency.  Without 'mining' of the block chain, bitcoin shuts down.  Currently almost all the computer/energy costs associated with this are foisted upon individual miners which makes transaction costs as cheap as they'll ever be.  The miners choose to do this because they're paid for their busywork in bitcoin.  However, since bitcoin mining is designed to yield less and less bitcoin over time the motive to keep mining will drop and eventually end.  This is true even if the price of Bitcoin inflates to gigantic sums . . . because consistent returns will end and it will become a random boon like winning the lottery.

The solution to this problem that I've seen presented is that people who use bitcoin as a currency will be happy to pay 'miners' to keep wasting energy and computing cycles to allow their transactions to go through.  But this solution means that once Bitcoin starts to mature as a 'currency', it is guaranteed to become significantly more expensive to use.  Most purchases with currency are small . . . a donut, a coffee, some paper or a pen at a store.  Doesn't this all but guarantee that Bitcoin is doomed for use as a real currency?

I didn't read the next 20 posts so this may have been answered, but each block contains a fixed block reward (that halves every approx. 4 years) and miner fees.  Miner fees are akin to transaction fees the person sending a transaction pays.  In about 100 years the fixed block reward will be zero.  At that point, there will be a hard-cap on the amount of Bitcoin (21m) and the miners will only be incentivized by the miner fees. 

Bitcoin is not guaranteed to become more expensive to use in the future.  To the contrary, it is expected to be cheaper through safe, secure Layer 2 ("L2") solutions that are already in use by many Bitcoiners; including the entire nation of El Salvadore.  In theory, L2 solutions can process a near infinite amount of transactions per second (TPS) near instantaneously.  The Lightning Network already provides near free and instantaneous Bitcoin transactions to thousands of its users and it can scale seamlessly if needed by setting up additional nodes (we are nowhere near reaching congestion on the Lightning Network or paying noticeable fees for transactions so its just not necessary). 

So thinking 100 years into the future, Bitcoin already has the framework to scale to support exponentially more transactions that are already taking place and through L2 solutions these fees can be split amongst thousands of individuals at nominal rates and paid to the miners.  Finally, Bitcoin is not unchanging.  There are somethings that will probably never change with Bitcoin (e.g. the 21m cap) but Bitcoin and and does change.  The technology improves and so does Bitcoin so its possible L2 solutions wont even be necessary to fix the congestion problem (which is related to your concern about block rewards).

taekvideo

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Re: What do you think of adding a low% of crypto allocation
« Reply #163 on: October 08, 2021, 08:47:25 PM »
I have a question about bitcoin that has always bugged me, and hasn't really been satisfactorily answered.

Bitcoin depends on mining in order to keep writing it's block chain and remain a functional currency.  Without 'mining' of the block chain, bitcoin shuts down.  Currently almost all the computer/energy costs associated with this are foisted upon individual miners which makes transaction costs as cheap as they'll ever be.  The miners choose to do this because they're paid for their busywork in bitcoin.  However, since bitcoin mining is designed to yield less and less bitcoin over time the motive to keep mining will drop and eventually end.  This is true even if the price of Bitcoin inflates to gigantic sums . . . because consistent returns will end and it will become a random boon like winning the lottery.

The solution to this problem that I've seen presented is that people who use bitcoin as a currency will be happy to pay 'miners' to keep wasting energy and computing cycles to allow their transactions to go through.  But this solution means that once Bitcoin starts to mature as a 'currency', it is guaranteed to become significantly more expensive to use.  Most purchases with currency are small . . . a donut, a coffee, some paper or a pen at a store.  Doesn't this all but guarantee that Bitcoin is doomed for use as a real currency?

An economics-minded crypto-booster would answer that the transactions cost you'd pay to spend cryptocurrency would be less than the net difference in inflation between government fiat and crypto fiat currencies. In theory, cryptocurrencies would have a cost for using them, and government currencies would have a cost for holding them.

This would of course open up an arbitrage opportunity where you want to hold crypto and transact in govt. currencies. Thus in a world where you could buy goods with either, the markets can be expected to move toward an equilibrium where the cost (bid/ask spread plus transaction costs) to trade crypto for govt. currency is equal to the cost of simply transacting in crypto (transaction cost alone). This equilibrium would be impossible to actually achieve though, because the bid/ask + transaction cost must be greater than the transaction cost alone. Therefore, the incentive would be to simply transact in crypto, rather than paying to convert to dollars and then transacting with dollars. This incentive structure would lead to growing demand for transaction processing, which would lead to more processing supply, which would keep costs stable in the long run at some point just above the marginal supplier's cost of providing the service. The crypto-pundits keep saying it'll be any year now that lots of vendors/suppliers start accepting crypto. This would be because it's cheaper to just deal in crypto than to switch back and forth.

The end result of such a world, according to crypto-boosters, would be that we've traded/sold inflation in exchange for environmental degradation.

What the above analysis leaves out is that vendors will have to charge currency conversion costs to their buyers if they need to receive government currency in the end - i.e. the entire supply chain has not yet adopted the new currency. A retailer in the US or EU can sell you things for dollars and euros and pay their Chinese or Saudi suppliers in dollars in euros, but their Chinese or Saudi suppliers cannot/will not accept crypto. The vendor must pay the currency conversion cost to replenish, so they pass this cost along to their customers. You end up with a system like truck stops that will sell fuel for one price in cash and a higher price if credit cards are used, to recoup the credit card processing fee. For people in possession of dollars, why pay the cost to trade the dollars for crypto so that you can then pay the higher cost the vendor charges?

If neither consumers nor vendors can escape the dynamic of government currency having a cost to hold and cryptocurrency having a cost to transact, then it will be hard for people to do anything different with crypto than what they're doing now - holding it. Likewise it will be hard for people to do anything different with dollars/euros/yen than what they're doing now - spending it.

What we're still leaving out is the situation for people in countries who earn their local currency, but when buying imports must pay a retail price which includes the cost to convert to dollars or similar reserve currencies. In theory, they should be agnostic about using their local currency or a cryptocurrency when spending. Except there's the minor detail that wages are paid in their local currency, so they'd have to pay the conversion cost to exchange local currency for crypto, only to then pay another conversion cost - built into prices quoted in crypto - for the retailer to exchange crypto for dollars so that international suppliers can be paid. For people in this situation, using crypto would involve paying for two currency conversions instead of one. But what if they're paid in crypto by their employer? If that were the case, they'd pay one currency conversion, crypto-to-dollars perhaps, and be paying for the same number of conversions as they were when they were being paid in local currency.

This is all a roundabout way of explaining why cryptocurrencies still - after years and many billions of dollars of investment and R&D - are not routinely transacted as currencies for goods and services. Consumers would have to be willing to pay currency conversion costs, plus whatever their payment processing service charged, and in addition suffer the inconvenience of their cryptocurrency not being universally accepted - until the entire supply chain changed over. That's a PITA when I can just whip out my VISA, pay in dollars, and only pay the CC payment processing service charge as part of my vendor's price. For widespread adoption of crypto throughout the supply chain to happen, crypto would have to be easier and cheaper than continuing to use dollars.

So far, it hasn't happened for the same reason your keyboard has the QWERTY layout from the 1800s, even though better designs have been invented. Imagine being so devoted to making he Dvorak or Colemak keyboards work that you carried your own special keyboard everywhere you went. People aren't willing to suffer even the mildest inconveniences to save their lives, much less foot the bill for this level of changeover costs. That's why crypto will always be a collectible, not a currency.


lol I love the analogy. I actually use Dvorak. Took a little bit to retrain but soooo worth it in the long run with how much I type. You don't need a special keyboard, you can change the layout in the settings on Windows.

Your analysis about transaction costs is wrong though. It's a lot cheaper to transact in crypto than in fiat. Just a couple cents on Lightning. BTC to fiat exchange fees are around 0.1% (and will be driven lower in time). So a payment with a currency conversion on both sides is only 0.2% + 2cents (compared to VISA which charges 2.9% + 30 cents). Stores won't charge a premium to pay with Bitcoin, if anything they might offer a discount to avoid the VISA fees, like some places do with cash.
Strike is making this process seamless, enabling peer-to-peer payments with automatic currency conversions, you only pay a ~2 cents for the Lightning Network fee plus the market-spread execution cost on the currency conversion so you can receive the payment in fiat. Only available in the US and El Salvador currently, but will be expanding globally. You can link your Strike account to your Twitter account and receive the Bitcoin tips in dollars from any Lightning-compatible source anywhere in the world (I think they support blockchain payments too but the fees are higher than Lightning).
« Last Edit: October 08, 2021, 08:52:24 PM by taekvideo »

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #164 on: October 09, 2021, 02:35:55 AM »
It's a lot cheaper to transact in crypto than in fiat. Just a couple cents on Lightning. BTC to fiat exchange fees are around 0.1% (and will be driven lower in time). So a payment with a currency conversion on both sides is only 0.2% + 2cents (compared to VISA which charges 2.9% + 30 cents). Stores won't charge a premium to pay with Bitcoin, if anything they might offer a discount to avoid the VISA fees, like some places do with cash.
Strike is making this process seamless, enabling peer-to-peer payments with automatic currency conversions, you only pay a ~2 cents for the Lightning Network fee plus the market-spread execution cost on the currency conversion so you can receive the payment in fiat.
Well, that got my hopes up, but there's "intermediate node fees", which can be far more expensive.  In this example, a transaction of $550 costs about $6.60 in node fees, which overwhelms all other fees.
https://medium.com/suredbits/lightning-101-lightning-network-fees-86abbbc17024

My hope is for crypto currency to do something useful.  That's even more interesting than making a profit off my 0.7% crypto allocation.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #165 on: October 09, 2021, 09:04:14 AM »
The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

Telecaster

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Re: What do you think of adding a low% of crypto allocation
« Reply #166 on: October 09, 2021, 10:49:59 AM »

lol I love the analogy. I actually use Dvorak. Took a little bit to retrain but soooo worth it in the long run with how much I type. You don't need a special keyboard, you can change the layout in the settings on Windows.

Do you mind discussing the process to learn Dvorak?   I love to do it, but I type all the time for work, so I can't really have a downtime when in the middle of learning two systems.  Put it another way, can you use either while you are learning?

onecoolcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #167 on: October 10, 2021, 03:28:00 AM »
The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

No, you are mistaken.  There are only two Bitcoin transactions when one uses the Lightning Network.  The first is when you open a channel (i.e. you lock up you Bitcoin in a smart contract).  What you confuse is that what happens next are not Bitcoin transactions.  You transact peer-to-peer via the Lightning Network's smart contract.  Your wallet will show your Bitcoin balance that is in the smart contract and you can transact off-chain with whoever else you want that is on the Lightning Network.  Everytime you make a transaction off-chain it updates the smart contract.  You can do this millions of times off-chain and anyone can close the smart contract at anytime.  When that happens, the a second Bitcoin transaction occurs and the person that closed the channel gets whatever Bitcoin they are owed out of the smart contract. 

All the intermediary transactions are not recorded onto the Bitcoin blockchain because they are "off-chain".  Fundamentally, they are not Bitcoin transactions (they are Lightning Network transaction) so it makes no sense for them to be on the Bitcoin blockchain.  All Bitcoin transactions are recorded on the blockchain as normal and are just as secure as ever.

Finally, I don't understand what you are getting at by "traceability and enforcement via blockchain".  I think you are suggesting, incorrectly, that because all the intermediary transaction are not recorded on the Bitcoin blockchain that Bitcoin is somehow less secure.  That doesn't make any sense because the Lightning Network is its own thing and nothing that happens on the network changes Bitcoin's function or security.

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #168 on: October 10, 2021, 08:39:14 AM »
The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

No, you are mistaken.  There are only two Bitcoin transactions when one uses the Lightning Network.  The first is when you open a channel (i.e. you lock up you Bitcoin in a smart contract).  What you confuse is that what happens next are not Bitcoin transactions.  You transact peer-to-peer via the Lightning Network's smart contract.  Your wallet will show your Bitcoin balance that is in the smart contract and you can transact off-chain with whoever else you want that is on the Lightning Network.  Everytime you make a transaction off-chain it updates the smart contract.  You can do this millions of times off-chain and anyone can close the smart contract at anytime.  When that happens, the a second Bitcoin transaction occurs and the person that closed the channel gets whatever Bitcoin they are owed out of the smart contract. 

All the intermediary transactions are not recorded onto the Bitcoin blockchain because they are "off-chain".  Fundamentally, they are not Bitcoin transactions (they are Lightning Network transaction) so it makes no sense for them to be on the Bitcoin blockchain.  All Bitcoin transactions are recorded on the blockchain as normal and are just as secure as ever.

Finally, I don't understand what you are getting at by "traceability and enforcement via blockchain".  I think you are suggesting, incorrectly, that because all the intermediary transaction are not recorded on the Bitcoin blockchain that Bitcoin is somehow less secure.  That doesn't make any sense because the Lightning Network is its own thing and nothing that happens on the network changes Bitcoin's function or security.

Y'all are saying the same thing.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #169 on: October 10, 2021, 10:26:16 AM »
The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

No, you are mistaken.  There are only two Bitcoin transactions when one uses the Lightning Network.  The first is when you open a channel (i.e. you lock up you Bitcoin in a smart contract).  What you confuse is that what happens next are not Bitcoin transactions.  You transact peer-to-peer via the Lightning Network's smart contract.  Your wallet will show your Bitcoin balance that is in the smart contract and you can transact off-chain with whoever else you want that is on the Lightning Network.  Everytime you make a transaction off-chain it updates the smart contract.  You can do this millions of times off-chain and anyone can close the smart contract at anytime.  When that happens, the a second Bitcoin transaction occurs and the person that closed the channel gets whatever Bitcoin they are owed out of the smart contract. 

All the intermediary transactions are not recorded onto the Bitcoin blockchain because they are "off-chain".  Fundamentally, they are not Bitcoin transactions (they are Lightning Network transaction) so it makes no sense for them to be on the Bitcoin blockchain.  All Bitcoin transactions are recorded on the blockchain as normal and are just as secure as ever.

Finally, I don't understand what you are getting at by "traceability and enforcement via blockchain".  I think you are suggesting, incorrectly, that because all the intermediary transaction are not recorded on the Bitcoin blockchain that Bitcoin is somehow less secure.  That doesn't make any sense because the Lightning Network is its own thing and nothing that happens on the network changes Bitcoin's function or security.

Y'all are saying the same thing.

Yes, I think we are.

Rosy

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Re: What do you think of adding a low% of crypto allocation
« Reply #170 on: October 10, 2021, 11:16:56 AM »
[quote the blockchain as normal and are just as secure as ever.

Finally, I don't understand what you are getting at by "traceability and enforcement via blockchain".  I think you are suggesting, incorrectly, that because all the intermediary transaction are not recorded on the Bitcoin blockchain that Bitcoin is somehow less secure.  That doesn't make any sense because the Lightningauthor=onecoolcat link=topic=123904.msg2914027#msg2914027 date=1633858080]
The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

No, you are mistaken.  There are only two Bitcoin transactions when one uses the Lightning Network.  The first is when you open a channel (i.e. you lock up you Bitcoin in a smart contract).  What you confuse is that what happens next are not Bitcoin transactions.  You transact peer-to-peer via the Lightning Network's smart contract.  Your wallet will show your Bitcoin balance that is in the smart contract and you can transact off-chain with whoever else you want that is on the Lightning Network.  Everytime you make a transaction off-chain it updates the smart contract.  You can do this millions of times off-chain and anyone can close the smart contract at anytime.  When that happens, the a second Bitcoin transaction occurs and the person that closed the channel gets whatever Bitcoin they are owed out of the smart contract. 

All the intermediary transactions are not recorded onto the Bitcoin blockchain because they are "off-chain".  Fundamentally, they are not Bitcoin transactions (they are Lightning Network transaction) so it makes no sense for them to be on the Bitcoin blockchain.  All Bitcoin transactions are recorded on  Network is its own thing and nothing that happens on the network changes Bitcoin's function or security.

Y'all are saying the same thing.
  [/quote]


No, definitely not.
The traceability is off chain via smart contract and since every peer-to-peer smart contract is off chain it does not change Bitcoin's function or security.

Here is a rather good article and video about what the Lightning network is.
Excerpt from https://river.com/learn/what-is-the-lightning-network/

Quote
What Is the Lightning Network?
The Lightning Network is a second-layer protocol designed to enable off-chain Bitcoin transactions, which are not recorded on the blockchain. Because they are not recorded on the blockchain, and thus require no mining, Lightning payments are extremely fast and cheap.
« Last Edit: October 10, 2021, 11:22:02 AM by Rosy »

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #171 on: October 10, 2021, 03:50:08 PM »
I know of a bunch of fast and free ways to pay people/buy stuff that don't involve bitcoin, though. Why would I use Lightning?

-W

mjr

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Re: What do you think of adding a low% of crypto allocation
« Reply #172 on: October 10, 2021, 05:41:15 PM »
Bitcoin's transaction rate capacity is too slow, so let's build a whole new layer of payment processors on top of bitcoin.

Oh and there's an infinite number of potential cryptos other than bitcoin and an inifinite potential number of L2 processors that can sit on on the base currencies.

Genius!

Rosy

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Re: What do you think of adding a low% of crypto allocation
« Reply #173 on: October 10, 2021, 07:52:08 PM »
Bitcoin's transaction rate capacity is too slow, so let's build a whole new layer of payment processors on top of bitcoin..
SNIP Genius!

That is an old old old debate. Settled by consensus in 2015 by building the Lightning Network - the recent upgrades look pretty damn good.
The intent is to keep bitcoin secure.
You can't have your cake and eat it too. Bitcoin can handle 7 transactions per second that's it.
In comparison, Visa can handle 45,000+ transactions vs Lightning currently at 25Mil per second but with the potential to do hundreds of millions.
Lightning solved the scaleability issue in this instance but there are always new projects and improvements in the wings.

https://river.com/learn/what-is-the-lightning-network/
Quote
The Lightning Network is an example of how Bitcoin can become a global medium of exchange without sacrificing the security or decentralization of the Bitcoin network.

The Lightning network is growing exponentially.
The narrative surrounding bitcoin, its use, and scaleability continue to morph. If projects are not successfully implemented and adopted they die a natural death. Looks to me like the Lightning upgrades turned out to be wildly successful - judging from the number of investment dollars pouring in and the fact that nodes doubled in the space of three months. The need, speed and utility are firmly established. 

https://www.yahoo.com/now/nodes-bitcoin-lightning-network-double-213744044.html#:~:text=All%20in%20all%2C%20the%20first,Bitcoin%20blockchain%20as%20one%20transaction.
[quoteThere are several implementations of Lightning being developed by different teams, all working toward the same goal: making Lightning more stable, secure, efficient, private and easy to use.][/quote]

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #174 on: October 11, 2021, 10:39:37 AM »
You mention "can handle" and "investment dollars".  What about actual purchase of goods on lightning network?

Also, if the article I quoted is correct, node fees could make Lightning Network costly:
... but there's "intermediate node fees", which can be far more expensive.  In this example, a transaction of $550 costs about $6.60 in node fees, which overwhelms all other fees.
https://medium.com/suredbits/lightning-101-lightning-network-fees-86abbbc17024

I recently came across DASH (digital cash) with thousands of nodes allowing crypto payments.  Is there any ranking of consumer usage of crypto?  Number of transactions doesn't cover it - many people are buying and selling BTC, without using it.  The consumer spending volume would be a key metric.  But I don't see it.

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #175 on: October 11, 2021, 01:05:37 PM »
I'd guess it's a fraction of 1%/rounding error. Nobody has ever so much as offered to pay me/my business in bitcoin, and I do thousands of transactions a year. The bitcoin transactions being tracked are presumably all just people exchanging crypto with each other.

-W

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #176 on: October 11, 2021, 01:25:52 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?


BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #177 on: October 11, 2021, 01:37:19 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

I think they're saying that the fast transactions on Lightning are fairly secure, just not via the permanent record provided by Blockchain, while recording the net effect of numerous fast transactions does get very securely recorded on the Blockchain. Kind of like saying the financial statements of a company are accurate and publicly known, but the individual transactions summarized therein are not themselves public. This method of blockchain recording for net effects of transactions allows even the fast transactions to be denominated usefully in the main currency, which means the system can be (and is) based on crypto one can buy today, in this case BTC.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #178 on: October 11, 2021, 01:52:29 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

i think this is most true of bitcoin - since its just code in cyberspace not being managed - many of the others are managed by some group like eth just did an upgrade so in theory it could keep pace if the technology underlying it doesn't fundamentally change significantly.   And if there is one thing i like to bet on its the tech today being the same in 30 years. 

taekvideo

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Re: What do you think of adding a low% of crypto allocation
« Reply #179 on: October 13, 2021, 12:14:50 PM »

lol I love the analogy. I actually use Dvorak. Took a little bit to retrain but soooo worth it in the long run with how much I type. You don't need a special keyboard, you can change the layout in the settings on Windows.

Do you mind discussing the process to learn Dvorak?   I love to do it, but I type all the time for work, so I can't really have a downtime when in the middle of learning two systems.  Put it another way, can you use either while you are learning?

I made the switch a few weeks before I started an online tutoring job.
It's not that hard, the brain can relearn a new layout 10x easier than mastering touch-typing for the first time.
There was a program I used to do the training I forget what it was called though.
It starts with just the middle row and adds more keys as you master them.
After an hour or 2 a day for ~ 2 weeks I was back up to speed.
They say you can type faster in Dvorak but my speed improvement after full mastery was only like 3%, I was already really fast, I mostly switched to reduce the strain on my fingers from long hours of constant typing and it worked wonders for that.
You should be able to do both but you'd make more typos during the learning process, and the learning process would take longer. I planned to do that but ended up abandoning qwerty entirely.
It might be easier to wait until you have at least a week off work and just grind it out.


The lightning network allows bitcoin transactions without writing to the block chain?  Doesn't that undermine the single thing that bitcoin has going for it . . . which it traceability and enforcement via blockchain?

There is an increased attack surface for the nodes because a node has to actively monitor the blockchain to prevent the nodes its connected to from stealing the funds, but it's still trustless and quite secure. The typical end user won't be running their own lightning node and won't have to worry about how any of it works. Most lightning wallets are custodial, so users are trusting their wallet provider. Muun & Breez have self-custodial lightning wallets but I'm not clear on how they work internally (submarine swaps?).
Best bet is to keep the bulk of your Bitcoin safe in cold storage and use Muun or Breez for fast/frequent transactions.

When a lightning transaction goes through a channel between 2 nodes, they exchange an update to the channel state off-chain.
Either party can close the channel any time by submitting the final channel state to the blockchain.
But any of the prior channel states could also be submitted to the blockchain in an attempt to steal Bitcoin, by using an earlier channel state where there was more BTC on your side of the channel than in the final valid state.
To prevent this, the channel closing has a wait period (I think 1 week is normal). During this time the other node can submit the actual final channel state which proves the fraud attempt, and the scammer loses the entire channel balance.
As an extra measure most nodes employ 1 or more "watchtower" services from 3rd parties that monitor the blockchain for these fraud attempts and submit the proofs (which could be necessary if your node is offline for a week and unable to do that).

Also, if the article I quoted is correct, node fees could make Lightning Network costly:
... but there's "intermediate node fees", which can be far more expensive.  In this example, a transaction of $550 costs about $6.60 in node fees, which overwhelms all other fees.
https://medium.com/suredbits/lightning-101-lightning-network-fees-86abbbc17024

That example is higher than most real-world Lightning fees, but even in that case VISA or PayPal would charge $16.25 in fees on a $550 transaction, so even in your over-estimate Lightning is still cheaper.
« Last Edit: October 13, 2021, 12:19:07 PM by taekvideo »

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #180 on: October 14, 2021, 08:14:44 AM »
Also, if the article I quoted is correct, node fees could make Lightning Network costly:
... but there's "intermediate node fees", which can be far more expensive.  In this example, a transaction of $550 costs about $6.60 in node fees, which overwhelms all other fees.
https://medium.com/suredbits/lightning-101-lightning-network-fees-86abbbc17024
That example is higher than most real-world Lightning fees, but even in that case VISA or PayPal would charge $16.25 in fees on a $550 transaction, so even in your over-estimate Lightning is still cheaper.
You are incorrectly attributing the estimate to me, when I have repeated twice already that it came from an article on the topic.  By the way, when are you going to quote a source with "most real-world Lightning fees"?

You also claim Visa charges 2.9%, which is false.  Three separate websites claim lower rates than that.
https://paymentdepot.com/blog/average-credit-card-processing-fees/
https://www.valuepenguin.com/what-credit-card-processing-fees-costs
https://www.bankrate.com/finance/credit-cards/merchants-guide-to-credit-card-processing-fees/

onecoolcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #181 on: October 16, 2021, 01:32:02 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

Lightning is very fast and very secure.  Please read the basics on how it works.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #182 on: October 16, 2021, 02:38:33 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

Lightning is very fast and very secure.  Please read the basics on how it works.

Are you not aware of the long standing history of security problems with the lightning network?

The history of vulnerabilities and problems is not too encouraging . . . multiple security vulnerabilities that allowed for theft of bitcoin were reported last year - https://www.bleepingcomputer.com/news/security/lightning-network-discloses-concerning-crypto-vulnerabilities/.  It's possible today to prevent someone from closing their channel and getting their bitcoin out by executing a 'griefing' attack - https://bitcoinmagazine.com/technical/good-griefing-a-lingering-vulnerability-on-lightning-network-that-still-needs-fixing.  There was this research paper published last year demonstrating how a 'time dilation attack' can occur in the lightning network allowing someone to steal the total contents of a channel - https://arxiv.org/abs/2006.01418.  Then you've got all the disk management related issues described here - https://bitcoinmagazine.com/technical/why-the-bitcoin-lightning-network-doesnt-work . . . basically, if the record of any transaction on lightning network is lost (say due to a disk failure) your transaction is also lost.  Theoretically, some day watchtowers will be working on all transactions to cover this problem . . . but that's not how it works today.

With the lightning network, you are relying on buggy software for security.  Fast it may well be, but 'very secure'?  Not really.

onecoolcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #183 on: October 16, 2021, 04:11:45 PM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

Lightning is very fast and very secure.  Please read the basics on how it works.

Are you not aware of the long standing history of security problems with the lightning network?

The history of vulnerabilities and problems is not too encouraging . . . multiple security vulnerabilities that allowed for theft of bitcoin were reported last year - https://www.bleepingcomputer.com/news/security/lightning-network-discloses-concerning-crypto-vulnerabilities/.  It's possible today to prevent someone from closing their channel and getting their bitcoin out by executing a 'griefing' attack - https://bitcoinmagazine.com/technical/good-griefing-a-lingering-vulnerability-on-lightning-network-that-still-needs-fixing.  There was this research paper published last year demonstrating how a 'time dilation attack' can occur in the lightning network allowing someone to steal the total contents of a channel - https://arxiv.org/abs/2006.01418.  Then you've got all the disk management related issues described here - https://bitcoinmagazine.com/technical/why-the-bitcoin-lightning-network-doesnt-work . . . basically, if the record of any transaction on lightning network is lost (say due to a disk failure) your transaction is also lost.  Theoretically, some day watchtowers will be working on all transactions to cover this problem . . . but that's not how it works today.

With the lightning network, you are relying on buggy software for security.  Fast it may well be, but 'very secure'?  Not really.

The history of vulnerabilities with cash and credit card is even less encouraging because, unlike cash and credit card vulnerability, Lightning Network fixed their issues well over a year ago.  Also, no one lost funds due to a lightning network vulnerability.  The same cannot be said about the alternative.

I am not familiar with "griefing attacks" so I can't speak on them apart from what your articles wrote about it.  Its seems like a nuisance more than anything.  Additionally, its just another thing that can be patched if its real problem. 

The research papers theorizing on vulnerabilities is exactly why cryptocurrency is the best money we ever had.  Its open source and you have all the brightest folks looking for vulnerabilities, sharing their ideas, and making it better.  It's great.  That's the theme behind all your articles as well.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #184 on: October 18, 2021, 07:30:56 AM »
If we're going to tout the benefits of cryptocurrency as a secure, trustless method of exchange utilizing blockchain, we cannot also tout Lightning as the solution to slow processing speeds, because by using Lightning it sounds like we are bypassing true blockchain and its benefits/drawbacks. In other words, it's fast OR secure, not fast AND secure. You lose one when you obtain the other, and this might be a fundamental tradeoff with cryptocurrencies.

If security is the most important thing, the current crop of cryptocurrencies will have to be replaced by new technologies that can scale while maintaining security. If instead the market rewards speed and low cost, we can expect non-blockchain currencies to emerge to meet this need. Either way, any crypto one can buy today is toast, right?

Lightning is very fast and very secure.  Please read the basics on how it works.

Are you not aware of the long standing history of security problems with the lightning network?

The history of vulnerabilities and problems is not too encouraging . . . multiple security vulnerabilities that allowed for theft of bitcoin were reported last year - https://www.bleepingcomputer.com/news/security/lightning-network-discloses-concerning-crypto-vulnerabilities/.  It's possible today to prevent someone from closing their channel and getting their bitcoin out by executing a 'griefing' attack - https://bitcoinmagazine.com/technical/good-griefing-a-lingering-vulnerability-on-lightning-network-that-still-needs-fixing.  There was this research paper published last year demonstrating how a 'time dilation attack' can occur in the lightning network allowing someone to steal the total contents of a channel - https://arxiv.org/abs/2006.01418.  Then you've got all the disk management related issues described here - https://bitcoinmagazine.com/technical/why-the-bitcoin-lightning-network-doesnt-work . . . basically, if the record of any transaction on lightning network is lost (say due to a disk failure) your transaction is also lost.  Theoretically, some day watchtowers will be working on all transactions to cover this problem . . . but that's not how it works today.

With the lightning network, you are relying on buggy software for security.  Fast it may well be, but 'very secure'?  Not really.

The history of vulnerabilities with cash and credit card is even less encouraging because, unlike cash and credit card vulnerability, Lightning Network fixed their issues well over a year ago.  Also, no one lost funds due to a lightning network vulnerability.  The same cannot be said about the alternative.

I am not familiar with "griefing attacks" so I can't speak on them apart from what your articles wrote about it.  Its seems like a nuisance more than anything.  Additionally, its just another thing that can be patched if its real problem. 

The research papers theorizing on vulnerabilities is exactly why cryptocurrency is the best money we ever had.  Its open source and you have all the brightest folks looking for vulnerabilities, sharing their ideas, and making it better.  It's great.  That's the theme behind all your articles as well.

The lightning network is still vulnerable to all of the issues mentioned that are not in the first link.  I'd encourage you to read up the basics of how these existing vulnerabilities work - particularly if you're under the mistaken impression that the lightning network is safe and secure.

yachi

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Re: What do you think of adding a low% of crypto allocation
« Reply #185 on: October 18, 2021, 08:50:53 AM »

That is the real reason why the IMF hated the idea of El Salvador choosing bitcoin as their legal tender. It means everyone incl the IMF has to accept it as currency.


There is a very big difference between El Salvador choosing bitcoin as their legal tender, and El Salvador making bitcoin legal tender.

El Salvador did not move their entire economy from the US dollar to Bitcoin, they just started accepting Bitcoin in addition to the US Dollar.  If you're imagining 90% of the population paying for meals, taxi rides, rent, and getting their salary in Bitcoin, then you've read it wrong.

Just because El Salvador made something legal tender in their country does not strong arm the IMF into accepting it for payment.  When the IMF makes a loan, it dictates what currency will be used for repayment.  That's true for all loans.  You see it happen all the time: countries with unstable currencies will not be able to borrow in their own currency.  Instead the loan will be denominated in US dollars or Euro.

Do you mean something different when you say "has to accept it as currency"?

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #186 on: October 19, 2021, 08:35:41 AM »
Bitcoin now has a futures ETF, which means more people can get exposure to cyrpto through their retirement accounts. 

https://www.cnbc.com/quotes/BITO

As of this post....
Over 100 million people own bitcoin...check
Nation States are beginning to accept it as currency....check
Large institutional buying is now occurring through ETF's....check

Look, I'm not trying to put Bitcoin on the same level as the Dollar, Yuan, or Euro at this point.  That would be nonsense.  But let's face it, there are MANY legitimate national currencies that can't check the three boxes above like Bitcoin does.  For those saying...sure, blockchain is here to stay, but it's to early to have ANY IDEA which will last...I think that's not giving Bitcoin enough credit.  To me I see real and tangible reasons why a PARTICULAR blockchain has staying power. 
« Last Edit: October 19, 2021, 08:47:28 AM by aceyou »

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #187 on: October 19, 2021, 09:14:24 AM »
I'm both excited about a Bitcoin Futures ETF (BITO), and also aware I shouldn't be excited.  I prefer to have an alternative to GBTC, even one that suffers from contango when rolling into new contracts.  But fundamentally payment systems is rather competitive, and I'm not sure Bitcoin will turn out to succeed there.

I now have equal investments in BITO and GBTC.  GBTC's market price changes trailed Bitcoin's price changes by 162% in the past 12 months.  Unless BITO spends that much renewing futures contracts, I expect their performance will beat GBTC.  Once that happens, I'm switching to BITO.

But there's a risk Bitcoin doesn't become something new and useful.  Facebook's payment system will likely gain more customers than Bitcoin.  China's two most popular payment apps already were well ahead of Bitcoin, before Bitcoin was banned there.  So while I'm happy BITO exists, I wonder about the long term prospects of Bitcoin doing something useful and unique.

JohnnyZ

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Re: What do you think of adding a low% of crypto allocation
« Reply #188 on: October 19, 2021, 09:14:58 AM »
Bitcoin now has a futures ETF, which means more people can get exposure to cyrpto through their retirement accounts. 

https://www.cnbc.com/quotes/BITO

As of this post....
Over 100 million people own bitcoin...check
Nation States are beginning to accept it as currency....check
Large institutional buying is now occurring through ETF's....check

Look, I'm not trying to put Bitcoin on the same level as the Dollar, Yuan, or Euro at this point.  That would be nonsense.  But let's face it, there are MANY legitimate national currencies that can't check the three boxes above like Bitcoin does.  For those saying...sure, blockchain is here to stay, but it's to early to have ANY IDEA which will last...I think that's not giving Bitcoin enough credit.  To me I see real and tangible reasons why a PARTICULAR blockchain has staying power.

El Salvador's adoption of bitcoin didn't go as smoothly as one might think:
https://nypost.com/2021/09/16/protests-in-el-salvador-after-bitcoin-made-official-currency/
If I were a shop owner forced to accept a speculative and risky currency I'd probably take to the streets too.

Also there are fundamental issues already raised here that have never been answered by bitcoin proponents.
- How is a currency that is designed to have a ceiling to the amount of it that's ever created supposed to work? Who is going to actually spend (as opposed to swing-trade) a currency that's going to be worth more in the future?
- Proponents say it's awesome for poor and unbanked people, yet we constantly hear about bitcoin scams and hacks. If I'm poor and/or don't even have a bank account, what are the odds that I'm also tech-savvy enough not to have my wallet stolen or be otherwise robbed?

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #189 on: October 19, 2021, 09:28:48 AM »
@MustacheAndaHalf the other way to read all this good news for Bitcoin is as a sell signal. What other good news remains to catalyze even more appreciation? Bear in mind there’s a lot more bad news on the way, such as more hacks, more bans, higher interest rates, etc. At what point are things as good as they get for BTC?

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #190 on: October 19, 2021, 09:55:03 AM »
@MustacheAndaHalf the other way to read all this good news for Bitcoin is as a sell signal. What other good news remains to catalyze even more appreciation? Bear in mind there’s a lot more bad news on the way, such as more hacks, more bans, higher interest rates, etc. At what point are things as good as they get for BTC?
Bitcoin gained +429% in the past 12 months.  I think it can handle interest rates hitting 2%!  :)  I also question your point about "more hacks", as I'm not aware of any recent, significant hacks.

Only a ban in the U.S. would carry as much weight as the ban in China.  At the time China banned it, a majority of Bitcoin was mined in China.  I know BTC was over $60k earlier this year, and I have one purchase for below $30k... so it dropped in half (and has recovered above $60k now).  That's normal for Bitcoin - anyone who doesn't like losing half their balance should avoid it.

For whatever reason, Bitcoin is more likely to gain +50% than to collapse.  My guess is that Bitcoin has a 1 in 5 chance of collapse over the long term.  So I keep my allocation very small, such that if it hit zero, I wouldn't miss it.  A fat zero for BTC wouldn't even be my biggest loss this year.

Bitcoin reminds me of the dot-com era, both with the boom and potential bust.  That's why I stick to BTC and ETH.  Are they the Apple and Amazon of the crypto currency era?  I don't know, but they seem safer than new coins with no history or institutional investment.  BTC and ETH have massive volatility, while newer coins are volatility squared.

JohnnyZ

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Re: What do you think of adding a low% of crypto allocation
« Reply #191 on: October 19, 2021, 10:37:30 AM »
I also question your point about "more hacks", as I'm not aware of any recent, significant hacks.

I guess that depends on your tolerance for "significant" or "recent".
https://www.cnbc.com/2021/08/13/poly-network-hack-nearly-all-of-600-million-in-crypto-returned.html

grmagne

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Re: What do you think of adding a low% of crypto allocation
« Reply #192 on: October 19, 2021, 11:05:46 AM »
Also there are fundamental issues already raised here that have never been answered by bitcoin proponents.
- How is a currency that is designed to have a ceiling to the amount of it that's ever created supposed to work? Who is going to actually spend (as opposed to swing-trade) a currency that's going to be worth more in the future?
- Proponents say it's awesome for poor and unbanked people, yet we constantly hear about bitcoin scams and hacks. If I'm poor and/or don't even have a bank account, what are the odds that I'm also tech-savvy enough not to have my wallet stolen or be otherwise robbed?

To be honest, I'm more concerned about the second than the first.

El Salvador & other countries considering adopting Bitcoin are some of the poorest countries on Earth with the vast majority of the population having savings rates near zero. The idea that they'll suddenly stop spending money because a deflationary currency disincentivizes consumption seems completely unrealistic to me. More likely they'll keep on spending nearly 100% of their income to sustain their subsistence lifestyle, but those tiny amounts of unspent Satoshis could give them a touch of extra wealth.

My biggest concern for the El Salvadoran people is that someone will find a security flaw in the Chivo app and steal any remittance payments before they can be cashed out. It's a very high crime country and the people are keeping their money on the Lightning Network and won't be able to afford the safer blockchain.

bacchi

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Re: What do you think of adding a low% of crypto allocation
« Reply #193 on: October 19, 2021, 12:30:41 PM »
Bitcoin reminds me of the dot-com era, both with the boom and potential bust.  That's why I stick to BTC and ETH.  Are they the Apple and Amazon of the crypto currency era?  I don't know, but they seem safer than new coins with no history or institutional investment.  BTC and ETH have massive volatility, while newer coins are volatility squared.

Or maybe they're AOL and Yahoo! :) Those were great investments in 1998.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #194 on: October 19, 2021, 12:41:31 PM »
Bitcoin reminds me of the dot-com era, both with the boom and potential bust.  That's why I stick to BTC and ETH.  Are they the Apple and Amazon of the crypto currency era?  I don't know, but they seem safer than new coins with no history or institutional investment.  BTC and ETH have massive volatility, while newer coins are volatility squared.

Or maybe they're AOL and Yahoo! :) Those were great investments in 1998.

Better than Pets.com, AskJeeves, Lycos, Web Crawler, Jumpstation, Altavista . . .

:P

yachi

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Re: What do you think of adding a low% of crypto allocation
« Reply #195 on: October 19, 2021, 12:49:22 PM »
Bitcoin gained +429% in the past 12 months.

This is what I see getting in the way of Bitcoin as a currency.  I can't imagine a contract or salary denominated in a currency whose value can swing by 400% in a year.
Can you imagine last October your hourly rate was set at the bitcoin equivalent of $10 an hour (0.00084 bitcoin), now you're making the bitcoin equivalent of $52.90 per hour (still 0.00084 bitcoin)?

When it starts gaining only 2% to 3% per year for years on end, then we can talk about it being a currency substitute.  But at that point, less people will be excited about it because it's not gaining by leaps and bounds.


Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #196 on: October 19, 2021, 12:55:12 PM »
Bitcoin gained +429% in the past 12 months.

This is what I see getting in the way of Bitcoin as a currency.  I can't imagine a contract or salary denominated in a currency whose value can swing by 400% in a year.
Can you imagine last October your hourly rate was set at the bitcoin equivalent of $10 an hour (0.00084 bitcoin), now you're making the bitcoin equivalent of $52.90 per hour (still 0.00084 bitcoin)?

When it starts gaining only 2% to 3% per year for years on end, then we can talk about it being a currency substitute.  But at that point, less people will be excited about it because it's not gaining by leaps and bounds.

Interesting point, and one I hadn't considered.  Thanks.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #197 on: October 19, 2021, 01:09:21 PM »
Bitcoin gained +429% in the past 12 months.

This is what I see getting in the way of Bitcoin as a currency.  I can't imagine a contract or salary denominated in a currency whose value can swing by 400% in a year.
Can you imagine last October your hourly rate was set at the bitcoin equivalent of $10 an hour (0.00084 bitcoin), now you're making the bitcoin equivalent of $52.90 per hour (still 0.00084 bitcoin)?

When it starts gaining only 2% to 3% per year for years on end, then we can talk about it being a currency substitute.  But at that point, less people will be excited about it because it's not gaining by leaps and bounds.

Interesting point, and one I hadn't considered.  Thanks.

its not a currency just b/c its called a currency doesnt make it one -

Currency - a system of money in general use in a particular country.

no country is using this generally as money still even though some have activated it as accepted as tender.

is it a store of value - well currently its a store of the value people believe it will have and the growth they expect.  Will that level of value be maintained over decades after it reaches the peak of growth - will it act similar to gold and younger generations see it as a safe place to keep value outside of under the mattress or in US dollars? Will it even continue to grow or will the massive amounts of coins bought with debt come crashing down like a house of cards and bring equities with it - i'd say this is the most likely outcome in the next 5-10 years.


grmagne

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Re: What do you think of adding a low% of crypto allocation
« Reply #198 on: October 19, 2021, 02:21:40 PM »
Bitcoin gained +429% in the past 12 months.

This is what I see getting in the way of Bitcoin as a currency.  I can't imagine a contract or salary denominated in a currency whose value can swing by 400% in a year.
Can you imagine last October your hourly rate was set at the bitcoin equivalent of $10 an hour (0.00084 bitcoin), now you're making the bitcoin equivalent of $52.90 per hour (still 0.00084 bitcoin)?

When it starts gaining only 2% to 3% per year for years on end, then we can talk about it being a currency substitute.  But at that point, less people will be excited about it because it's not gaining by leaps and bounds.

Interesting point, and one I hadn't considered.  Thanks.

its not a currency just b/c its called a currency doesnt make it one -

Currency - a system of money in general use in a particular country.

no country is using this generally as money still even though some have activated it as accepted as tender.

is it a store of value - well currently its a store of the value people believe it will have and the growth they expect.  Will that level of value be maintained over decades after it reaches the peak of growth - will it act similar to gold and younger generations see it as a safe place to keep value outside of under the mattress or in US dollars? Will it even continue to grow or will the massive amounts of coins bought with debt come crashing down like a house of cards and bring equities with it - i'd say this is the most likely outcome in the next 5-10 years.

I don't think Bitcoin has any chance for long-term survival as just a "store of value". That would just make it a virtual version of gold, but with a ridiculously high carbon footprint. No way is that sustainable at all. Bitcoin has to achieve its destiny as a global currency (or regional currency, possibly in Latin America) to have any long-term value, which I'd guess is less than 15% likely, or its long-term value will crash down.

But I do invest in it, because it seems to be in the middle stages of a very lengthy bull run that could last several more years before we learn its long-term fate.

bacchi

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Re: What do you think of adding a low% of crypto allocation
« Reply #199 on: October 19, 2021, 02:32:31 PM »
Bitcoin reminds me of the dot-com era, both with the boom and potential bust.  That's why I stick to BTC and ETH.  Are they the Apple and Amazon of the crypto currency era?  I don't know, but they seem safer than new coins with no history or institutional investment.  BTC and ETH have massive volatility, while newer coins are volatility squared.

Or maybe they're AOL and Yahoo! :) Those were great investments in 1998.

Better than Pets.com, AskJeeves, Lycos, Web Crawler, Jumpstation, Altavista . . .

:P

I've never heard of Jumpstation. The U of Stirling missed an opportunity.

https://en.wikipedia.org/wiki/JumpStation