Hope Bitcoin Bubble Blows Up For Good

[mraikes]

I just bought a new computer for my home desk. With bitcoin. Oh, I didn't pay for bitcoin anything but time to click on websites offering Satoshi for clicking. But that was when 1 bitcoin was worth 300 Euros or less. After buying my 3000-Euro-machine I decided to take a holiday with the whole family (three mothers of five childs and the five childs, too). For me it is christmas and birthday at the same time since weeks. Should I care about the bitcoin value tomorrow? No, I shouldn't because I never invested anything but time to click on faucets.

To all the other facts you wrote about and what should have to be mentioned not only by you: there are a lot of businesses and shops here (in germany) where you can pay with bitcoin. Yes, they are enthusiams. But their enthusiam helps me to get things just because I decided to click on websites years ago. At the moment it is time for me to harvest the fruits of former decisions how to spend a bit of my time.

That's cool! It sounds like you really caught the wave and I have no problem with that whatsoever. But do you exchange your Euros for bitcoins today? It doesn't sound like it. And where I live we definitely don't have "a lot" of businesses that accept bitcoin. Not regular ones you pass on the street anyway. But the US has always been behind on such things. We can't even properly implement chip readers for credit cards.

But here's an uncomfortable sentence for me: "Should I care about the bitcoin value tomorrow?" No, probably not because you've received your reward. The practical application of bitcoin for you is not as common currency, but rather a prize like a lottery ticket that you've now cashed in.

But as more and more people are "investing" in bitcoin not using, investing, we should care about the value tomorrow. Because if they lose their money, that's going to affect us all.

 

[DataMedics]

It's true that BitCoin has no hard and fast physical asset to back it up. However, when it comes to putting a value to Bitcoin, it helps to think in terms of closed loops because that's how these little sub-economies work. The criminal element involved just keeps forcing the wheel to turn.

Criminal gets paid coin --> Sells coin to investor ---> Sells coin to person with hostage data ---> Gives coin back to criminal (and the loop completes/ then repeats)

Even mining which generates coin for "free" still costs money in the form of equipment and electricity costs. So even though it's not backed by anything tangible, it has value because people paid real value to get it in the first place. Just like the paper money governments print, it has value only because we all believe it has value. If we ever all stopped believing in it any currency (even gold) could lose its value.

Money is constantly going into this market. Not just from investors (which is where we get the bubble fears from) but also from the perpetuation of this cycle and the fact that not enough people are cashing out of the BitCoin economy.

 

[Umbra]

The thing is how fast can you resell your bitcoins into real ol'cash? Because if you have to wait too long, you are doomed in case of crisis.

 

[phaZed]

IMO the problem is that bitcoin doesn't equal anything whatsoever. There's nothing to back it but smoke and mirrors. No hard value. Not even the the sometimes hollow promise of "full faith and credit". Nothing but the enthusiasm of bitcoin investors. And investor enthusiasm is a fickle mistress.
And yet, each time I think there must be a limit to that enthusiasm, I'm proved wrong! So ask I myself, what am I missing now?

What you are missing is that Bitcoin IS backed by something, the value of which, can be found on your choice of exchange. The value and the backing are two separate issues. If we think of fiat currency, there is absolutely no guarantee as to it's value - eg. income not matching inflation, deflation of currencies or hyper inflation. Like fiat, there is nothing that is going to "guarantee" the value of Bitcoin, either.
As for backing, at least Bitcoin has a true backing. As you say for fiat's "sometimes hollow promise of full faith and credit" - Bitcoin's backing is an answer to a mathematical equation.. there's the backing, which is more tangible than most fiat currencies.

So I check to see if bitcoin it suddenly easy to use/spend/own like "real" money. But no it's not. If I want a cheeseburger at a drive through, a steak at a decent restaurant, gas for my truck, or groceries for my family, I'm can't conveniently use bitcoin (or even inconveniently use it). And if I can't somewhat easily use the most famous cryptocurrency on the planet, I can't use any cryptocurrency.

Perhaps you're not looking very hard then? Cards and NFC abound:

Prepay Bitcoin Visa:
https://cryptopay.me/bitcoin-debit-card

Shift card, connects to Coinbase Acct:
https://www.shiftpayments.com/card

Bitwala, like others, Visa and can be NFC'ed to a phone:
https://www.bitwala.com/get-the-bitwala-bitcoin-prepaid-card/

WB21 Mastercard preload
https://www.wb21.com/fees/

Coinsbank Mastercard or Visa
https://coinsbank.com/cards

Xapo
http://www.xapo.com/

Here's a list for just 2017: https://steemit.com/bitcoin/@bitcoinshirtz/a-full-list-of-bitcoin-debit-cards-for-2017

It seems like bitcoin miners (people, not the devices) did and do create their currency from nothing. And people are creating more right now - based upon nothing but the ability to purchase the right hardware and wait out the process. Currency from nothing. But it sure seems the electric utilities and video card companies have benefitted!

Again, it's not creating currency "from nothing". Miners are doing the transaction "work" for the blockchain and are rewarded as if it were a bank transaction fee. So, do Banks make fiat money from nothing? Paying the electricity bills and purchasing equipment is not "nothing". The currency is backed by a mathematical equation and corresponding answer, again, something provable and non-falsifiable; virtually tangible. Everyone knows how much Bitcoin there is and how much there will be. There is an absolute limit to Bitcoin. Take from that what you will.

The thing is how fast can you resell your bitcoins into real ol'cash? Because if you have to wait too long, you are doomed in case of crisis.

I can turn any of my cryptocurrencies into fiat in about 3 seconds via numerous exchanges.


You guys really need to check this stuff out and do your homework on this stuff. Put a couple of $20's on Coinbase and sign up for an Exchange and see for yourselves how easy this really all is... for if you did, many of these questions would be readily answered and your fears of "using crypto" would be calmed.

IMO, the biggest fear for Crypto is Government Interference and heavy-handed moves, such as the new tax legislation by Trump or Gov'ts flat out banning the use of Crypto.

 

[maclaptech]

By from china, wait, when you get your products the ones you were waiting for will be in stock locally.

I have seen the knock offs... they suck.

 

[mraikes]

What you are missing is that Bitcoin IS backed by something, the value of which, can be found on your choice of exchange. The value and the backing are two separate issues. If we think of fiat currency, there is absolutely no guarantee as to it's value - eg. income not matching inflation, deflation of currencies or hyper inflation. Like fiat, there is nothing that is going to "guarantee" the value of Bitcoin, either.
As for backing, at least Bitcoin has a true backing. As you say for fiat's "sometimes hollow promise of full faith and credit" - Bitcoin's backing is an answer to a mathematical equation.. there's the backing, which is more tangible than most fiat currencies.

Yeah, I guess I'm missing that. For me, tangibility is something I can see, hold, feel. A currency backed by hard treasure - for example tying the dollar back to gold and silver again - would be more tangible than fiat currency. But a mathematical formula invented by some guy tied to nothing physical doesn't seem any more tangible.

Perhaps you're not looking very hard then? Cards and NFC abound:
......

No, I wasn't thinking about the ways bitcoin might be converted to real money and then spent. I was thinking about how/where I might spend bitcoin directly as stand alone currency. I mean, don't we lose a lot of the theoretical benefits of cryptocurrency (no middleman, peer to peer, no oversight, etc) when I have to use the middlemen you list above, pay a number of fees, have additional accounts, and in the end I'm STILL spending dollars, pounds, euros rather than bitcoins?

Again, it's not creating currency "from nothing". Miners are doing the transaction "work" for the blockchain and are rewarded as if it were a bank transaction fee. So, do Banks make fiat money from nothing? Paying the electricity bills and purchasing equipment is not "nothing". The currency is backed by a mathematical equation and corresponding answer, again, something provable and non-falsifiable; virtually tangible. Everyone knows how much Bitcoin there is and how much there will be. There is an absolute limit to Bitcoin. Take from that what you will.

I'll be honest, I'm kind of lost there. People with the means to purchase mining hardware are just solving a puzzle, so to speak, and being rewarded by the creator of that puzzle with a digital credit that for some reason people are now attaching tremendous value to. So yes, miners (the people) are making an investment to receive something (cryptocurrency). But it seems that the value being placed on Bitcoin has so far outstripped the cost of production that "backing value" of the original investment is inconsequential. If some portion of your argument is that Bitcoin has a stronger basis than fiat currency just because it cost someone time, money and electricity to create, then I guess I'd point out that fiat currency also costs time, money, electricity, paper, etc. to create.

You mention the absolute limit to bitcoin, but why does that matter? Practically speaking, Bitcoin is infinitely divisable. So while there may only be 21 million possible bitcoins, runaway bitcoin inflation like we've been seeing could push the current smallest element, the Satoshi, to exceed common micropayment needs. Then we'd need something smaller than the Satoshi. Pushing that decimal point another notch to the left would dramatically increase the pieces of bitcoin in existence without increasing the number of bitcoins. So really, why does it matter that there's a maximum?

You guys really need to check this stuff out and do your homework on this stuff. Put a couple of $20's on Coinbase and sign up for an Exchange and see for yourselves how easy this really all is... for if you did, many of these questions would be readily answered and your fears of "using crypto" would be calmed.

IMO, the biggest fear for Crypto is Government Interference and heavy-handed moves, such as the new tax legislation by Trump or Gov'ts flat out banning the use of Crypto.

I'm not sure my misgivings are properly called fears, but so be it. Since I'm not currently involved in the cryptocurrency world in any way, I have no skin to gain or lose. And putting a couple of 20s in Coinbase in no way would answer my question of how Bitcoin is more useful to the average person than traditional money.

Because I'm a "techy" lots of people ask me about Bitcoin, or bring it up in conversations. I'd really like to be able to articulate how they can benefit in their day to day lives from using (not speculative investing in) a cryptocurrency. But so far that doesn't seem possible.

 

[sapphirescales]

I'd really like to be able to articulate how they can benefit in their day to day lives from using (not speculative investing in) a cryptocurrency. But so far that doesn't seem possible.

Hence the reason why I think that Bitcoin isn't going to be around much longer. Cryptocurrencies themselves will survive, but Bitcoin is too inefficient and too difficult to use for most people. I'm waiting for a decent cryptocurrency to come around that's easy to use and accessible to all. Bitcoin is like the early computers of the 70's and 80's. Most people didn't own or use computers back then. Why? Because they were difficult to use, expensive, and impractical. Back in the 70's and even the 80's, typewriters and even handwritten paper was more efficient than a computer.

Handwritten paper = physical cash
Typewriter paper = credit/debit cards
Computers = cryptocurrencies

Credit/Debit cards > Physical cash > Cryptocurrencies (in regards to ease of use and accessibility). I'm waiting for the Compaq/Dell of the cryptocurrency market. I suppose you could compare bitcoin to IBM and the many other crypto currencies to the many IBM clones.

 

[Moltuae]

Yeah, I guess I'm missing that. For me, tangibility is something I can see, hold, feel. A currency backed by hard treasure - for example tying the dollar back to gold and silver again - would be more tangible than fiat currency.

And yet gold and silver are really no different. Aside from any usable/functional value they may have as practical/manufacturing materials, most of the value they hold is just an agreed value, derived from trades and their use as a medium of exchange and a store of wealth. There's nothing intrinsically special about gold and silver, except for their scarcity, which is a quality that Bitcoin replicates. Unlike gold and silver, whose scarcity is not guaranteed (new reserves could be found, for example, or science may some day find a way to synthesise gold or silver inexpensively) Bitcoin has mathematically guaranteed scarcity that ensures a limited supply.

No, I wasn't thinking about the ways bitcoin might be converted to real money and then spent. I was thinking about how/where I might spend bitcoin directly as stand alone currency. I mean, don't we lose a lot of the theoretical benefits of cryptocurrency (no middleman, peer to peer, no oversight, etc) when I have to use the middlemen you list above, pay a number of fees, have additional accounts, and in the end I'm STILL spending dollars, pounds, euros rather than bitcoins?

The number of places that accept Bitcoin payments is growing rapidly, especially in some countries like Japan. In other parts of the world that are in a state of economic crisis, such as Venezuela, Bitcoin is already replacing the country's own fiat currency. It will likely take another year or two before direct cryptocurrency payments are widespread. Prepaid cards and the conversion back and forth into fiat is just a way to temporarily bridge the gap.

You mention the absolute limit to bitcoin, but why does that matter? Practically speaking, Bitcoin is infinitely divisable. So while there may only be 21 million possible bitcoins, runaway bitcoin inflation like we've been seeing could push the current smallest element, the Satoshi, to exceed common micropayment needs. Then we'd need something smaller than the Satoshi. Pushing that decimal point another notch to the left would dramatically increase the pieces of bitcoin in existence without increasing the number of bitcoins. So really, why does it matter that there's a maximum?

Dividing Bitcoin doesn't dilute it; it's still the same fraction of a Bitcoin. It doesn't change the price of Bitcoin any more than breaking gold up into grams or ounces changes the value of a gold bullion.

I'm not sure my misgivings are properly called fears, but so be it. Since I'm not currently involved in the cryptocurrency world in any way, I have no skin to gain or lose. And putting a couple of 20s in Coinbase in no way would answer my question of how Bitcoin is more useful to the average person than traditional money.

Because I'm a "techy" lots of people ask me about Bitcoin, or bring it up in conversations. I'd really like to be able to articulate how they can benefit in their day to day lives from using (not speculative investing in) a cryptocurrency. But so far that doesn't seem possible.

You really just need to start using and studying cryptocurrencies to understand what all the fuss is about. We've all been there. I ignored them for a long time too, for all the same criticisms and reasons you have mentioned. I can assure you that, once you begin to understand this technology and its potential, the realisation will hit you.

I could sit here typing all day trying to explain cryptocurrencies and why you should not ignore them but you'll understand them better and quicker by just delving in. I'll even send you a small amount of Bitcoin if you like. Just install a Bitcoin wallet (eg Electrum or Mycelium) and post one of your BTC addresses.

If you do nothing else, watch a few of Andreas' videos, especially this one to begin with:

 

[Alexey]

Miners are doing the transaction "work" for the blockchain and are rewarded as if it were a bank transaction fee. So, do Banks make fiat money from nothing? Paying the electricity bills and purchasing equipment is not "nothing". The currency is backed by a mathematical equation and corresponding answer, again, something provable and non-falsifiable; virtually tangible.

There is a difference between "proof of work done" and "proof of something useful done". See, I can dig water well and I get dollars for it, because water well is useful. And I can dig an equivalent hole in tundra somewhere, and I can't generally get dollars for it, because that work is not useful. Digging stupid hole in the ground is at the same time "work" and "nothing".

An item becomes money when people agree, or it becomes customary, to use that item as proof of something useful done or exchanged. There are many items in the world which are hard to produce, but being hard to produce does not make them money. Being not-falsifiable is not enough; being provable and non-copyable does not automatically make an item money. People do.

 

[Moltuae]

There is a difference between "proof of work done" and "proof of something useful done". See, I can dig water well and I get dollars for it, because water well is useful. And I can dig an equivalent hole in tundra somewhere, and I can't generally get dollars for it, because that work is not useful. Digging stupid hole in the ground is at the same time "work" and "nothing".

An item becomes money when people agree, or it becomes customary, to use that item as proof of something useful done or exchanged. There are many items in the world which are hard to produce, but being hard to produce does not make them money. Being not-falsifiable is not enough; being provable and non-copyable does not automatically make an item money. People do.

Mining (aka Proof of Work) does not exist to establish a cryptocurrency's value but the process can effect and regulate the value. Miners are unlikely to sell if a coin's value becomes less than it cost to mine, which can have a regulatory affect on the price by reducing the supply until the price begins to rise.

PoW and other 'minting' mechanisms such as Proof of Stake, Proof of Storage, etc exist to ensure that new coins are created in a gradual and controlled way. Making it proportionally expensive to earn new coins ensures that there is a 'cost' in producing them, regulating how often new coins can be introduced and therefore protecting their scarcity and perceived value. It's a really ingenious and elegant solution to the problem of how to gradually introduce new coins into a currency. Far better than having a central authority who can mint as many coins as they like, whenever they like, which inevitably leads to corruption.

 

[Alexey]

Far better than having a central authority who can mint as many coins as they like, whenever they like, which inevitably leads to corruption.

After the Etherium fork (which was effectively transaction rollback as I understand it), I'd rather trust US government, than a decentralized whatever which was (or at least it seems to me it was) demonstrably screwed.

 

[Moltuae]

After the Etherium fork (which was effectively transaction rollback as I understand it), I'd rather trust US government, than a decentralized whatever which was (or at least it seems to me it was) demonstrably screwed.

Yes, the infamous DAO hack: https://en.wikipedia.org/wiki/The_DAO_(organization)

That was certainly a controversial decision. However to put things into perspective, you have to bear in mind a few things: This was much earlier in Ethereum's development when the user base was relatively small and when 1 ETH was worth a mere 10 USD or so. However, despite being considered a relatively new experimental network at the time, the decision to hard-fork Ethereum was not taken lightly (it was discussed with the community at length). And it did not (and could not) happen without a majority consensus. And, even after all that, for anyone who didn't support the decision, the original blockchain remained intact, continuing on as Ethereum Classic (ETC). In a hard fork you hold the same number of coins in each currency after the fork as you held in the original currency before the fork, so Ethereum holders lost nothing.

It's impossible to get complete agreement so any consensus mechanism has to allow for at least a small amount of disagreement, otherwise upgrades and improvements would never get deployed (just look at how long the BTC blocksize debate has raging on, for example). If the majority vote in favour, it happens; if they don't, it doesn't .... which is more than can be said about most governmental decisions.

 

[nlinecomputers]

I know I'm getting old and my brainwaves are often stuck in well rutted paths. But what is it specifically about cryptocurrencies that poses an actual value and convenience to the average "man on the street" that doesn't already exist in the mainstream economy?

Nothing. Bitcoin does not meet the scientific definition of money. Therefore it can never be a replacement for currency. It is simply a hyped up investment with no intrinsic value what so ever. So are Dollars but Dollars and other real currency can be created and destroyed as needed. Banks do so every day. Bitcoin's bubble will last so long as people have spare cash to invest. In other words until the next big recession. When the players need to pull out to save their houses from foreclosure demand for real cash will go up and the price of BC will collapse.

 

[mraikes]

Nothing. Bitcoin does not meet the scientific definition of money. Therefore it can never be a replacement for currency. It is simply a hyped up investment with no intrinsic value what so ever. So are Dollars but Dollars and other real currency can be created and destroyed as needed. Banks do so every day. Bitcoin's bubble will last so long as people have spare cash to invest. In other words until the next big recession. When the players need to pull out to save their houses from foreclosure demand for real cash will go up and the price of BC will collapse.

Yes, this is the conclusion I keep returning to myself.

 

[nlinecomputers]

Which is why digital currency, especially Bitcoin, is a Ponzi scheme and always has been. It was created so that the initial players could create the first sets of currency easily and then sit on them as the price rises and then cash out when the value is high for as long as people are willing to pay them. The only reason this didn't already occur with Bitcoin is that I think one of those major players is dead and took his bitcoin wallet to his grave. SO not only is it a Ponzi scheme, it is a FAILED, Ponzi scheme. It will still collapse at some point and lose a lot of investor money except for those smart enough to pull out early.

 

[phaZed]

Bitcoin does not meet the scientific definition of money.

Not to be a tart, first money isn't science and therefor does not have a scientific meaning or definition.

Economists define money as:

"...something that serves as a medium of exchange, a unit of accounting, and a store of value."

 

[nlinecomputers]

Not to be a tart, first money isn't science and therefor does not have a scientific meaning or definition.

Economists define money as:

"...something that serves as a medium of exchange, a unit of accounting, and a store of value."

Economics is a science. Thus the objects of examination within that field of study have scientific definitions.

 

[mraikes]

Ha! Given all the discussion in this thread the last day or so, I find it funny that this golden opportunity just hit my in inbox:

"I'm starting a crypto currency mining operation and I need (50) 1070 ti GPUs. I'm having a hard time find quantities on the net. Do you carry any? If not, do you have the ability to order them? I would pay in advance for all them. Thank you."

I guess it's not too late to make (real) money from the crypto-craze after all! I'm sure it's a legit request. /sarc!

Anyone want to pick up this bit of business? I'd be happy to forward the message to you.

 

[phaZed]

Economics is a science. Thus the objects of examination within that field of study have scientific definitions.

It's a "social science" - It is not scientific in the same sense as chemistry or maths. Regardless, the "social science" definition of money is:

Something that serves as
1. a medium of exchange
2. a unit of accounting
3. and a store of value

All of which Crypto would seem to fit, no?

 

[nlinecomputers]

It's a "social science" - It is not scientific in the same sense as chemistry or maths. Regardless, the "social science" definition of money is:

Something that serves as
1. a medium of exchange
2. a unit of accounting
3. and a store of value

All of which Crypto would seem to fit, no?

Not really,

1. A medium of Exchange: Yes you can with select few places buy things with Bitcoin or other Digital currency. But not most places. I CANNOT pay my rent, taxes, electric bill, the grocery store, gasoline, etc with Bitcoin. By definition, a Medium of Exchange must be accepted by all parties. The fact that most people will not accept it means that it is NOT. Could it become that? Sure but so could dead cat hides but I doubt that will catch on either.

2. A unit of accounting: In other words, you do your books and calculate your net worth in Bitcoin. You look at the daily things in your life and know how much in Bitcoin they are worth. Of course not. You do that in dollars. A gallon of Milk right now is $3.25. I'd have to get a calculator out to figure out what it is Bitcoin right now. And that changes every day, sometimes significantly. So that is two strikes. Shall we try for three?

3. Store of Value. "A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved" That obviously cannot be said for Bitcoin that had a nearly 47% change in value in 5 days just a few weeks ago. If I have $1000 in the bank I can reasonably be assured that it will buy the same amount of goods on the 1st of the month as it does on the 30th. Yes, it does change but not a so drastic a rate as digital currencies.

There is absolutely nothing about Digital currencies that truly make them money. They have some of the basic trappings but the nature of them will NEVER allow that to come to pass.

And your list goes from least important to most important. Store of Value is the MOST important aspect of something to be adopted as money. If you can't hold value then you can't evaluate your assets in the terms of that money and you certainly can't expect to trade an asset that can change in value before the end of the day.

And so NO it is NOT MONEY. And it never will be.