Cryptocurrencies

[rkbabang]

The price of many cryptocurrencies continues to move way up, they have been on a tear all week.

 

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

 

Bitcoin now has a >$25B marketcap and Ether >$8B.  There are 4 cryptocurrencies with marketcaps above $1B, 13 above $100M, and ~185 of them above $1M.

 

My once small speculative/experimental positions in BTC, ETH, DASH, & XMR are starting to look significant.

 

[vegaseller]

i don't really understand crypto.

 

It seems like a successful one required widespread adoption, yet being volatile and hoarded by speculators goes counter to merchant adoption. On the other hand one that is stable and non-volatile which merchants may adopt is not one which you can speculate on.

 

It is basically lose lose.

[mttddd]

i don't really understand crypto.

 

It seems like a successful one required widespread adoption, yet being volatile and hoarded by speculators goes counter to merchant adoption. On the other hand one that is stable and non-volatile which merchants may adopt is not one which you can speculate on.

 

It is basically lose lose.

 

ya at this point i view it as complete speculation, i know some folks making good money off of that but there is no real downside protection. Also at least on the bitcoin side of things China dominates the mining capacity which adds a whole geopolitical risk to it, sort of defeating the purpose of it all.

[premfan]

The price of many cryptocurrencies continues to move way up, they have been on a tear all week.

 

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

 

Bitcoin now has a >$25B marketcap and Ether >$8B.  There are 4 cryptocurrencies with marketcaps above $1B, 13 above $100M, and ~185 of them above $1M.

 

My once small speculative/experimental positions in BTC, ETH, DASH, & XMR are starting to look significant.

 

Congrats.  I read the paper on this forum late 2011 and the high conviction posters were framing this as digital gold. I loved the philosophy of the paper.  The math i didnt understand so i stayed away.  For others to learn( myself):

 

1.) What was thesis when invested?

2.) What is current thesis?

3.) When is this vehicle a sell? Or riding it out using power law?

 

Thanks

 

-premfan

 

[rkbabang]

The price of many cryptocurrencies continues to move way up, they have been on a tear all week.

 

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

 

Bitcoin now has a >$25B marketcap and Ether >$8B.  There are 4 cryptocurrencies with marketcaps above $1B, 13 above $100M, and ~185 of them above $1M.

 

My once small speculative/experimental positions in BTC, ETH, DASH, & XMR are starting to look significant.

 

Congrats.  I read the paper on this forum late 2011 and the high conviction posters were framing this as digital gold. I loved the philosophy of the paper.  The math i didnt understand so i stayed away.  For others to learn( myself):

 

1.) What was thesis when invested?

2.) What is current thesis?

3.) When is this vehicle a sell? Or riding it out using power law?

 

Thanks

 

-premfan

 

 

The math/mechanics of how it works is basically a public ledger secured by "mining" (basically you need enormous compute power to fraudulently edit the ledger) and individual accounts are secured with public key cryptology (i.e. you have a public key and a private key).   

 

I can't speak for anyone else, but my thesis was, and is, that this solves a number of problems with government controlled currencies and transaction time and costs (especially remittance of wealth across large distances), and blockchains can be used for other things besides money.  With government / central bank controlled currencies you have constant inflation risk.  You have no way of knowing, much less controlling, the creation of new units.  You are not only at the whim of someone else, but that someone else is a political entity.  Politics doesn't make good business, the incentives are not in the right places.  With cryptocurrencies you can know how many new units will be created in the future.  With bitcoin as an example there will never be more than 21 million bitcoins, but with Ethereum there will be a small perpetual inflation, so you can take that into account when trying to figure out what to value them at.  Whereas you have no idea how many US dollars outstanding there will be in year 2026.

 

As far as transaction frictional costs, western union charges an insane amount to send money across the world and there is really no reason for this in the 21st century.  With a cryptocurrency there is no difference between sending money to someone in the same room as you as there is sending money to someone on a different continent.  You send value directly without middle men.

 

There are many other uses for blockchains other than currencies.  There are smart contracts.  You could use them to keep track of and trade shares of companies to replace stock exchanges.  Any form of database or record keeping where you wanted it difficult, if not impossible, for the records to be tampered with, etc.

 

The risks are that these currencies are easy to create.  There is nothing stopping you from downloading the bitcoin code and creating an identical cryptocurrency called premfancoin.  You can even change the parameters on how it works or how it is mined, etc.  I have no doubt that some form of cryptocurrency is the future of wealth ownership and exchange, but I'm not all that sure it will be bitcoin, which was my thesis for diversifying a little bit.  I didn't buy any of the bitcoin clones, such as dodgecoin or litecoin, because my thesis was that bitcoin has first mover advantage and for something to overtake it or even be close to as successful as it a competitor will need to have some type of difference which makes people choose it over bitcoin.  Ethereum is very different it is turing complete.  I don't think ether will be used much as a currency or a store of long term wealth, but will be used for smart contracts and the creation of businesses which run on its blockchain.  It will be more of a short term store of value used for doing business or small everyday transactions, the digital coppers to the bitcoin digital gold.  That is how I see it anyway.  I bought some DASH and Monero (XMR) because I like their privacy features and I wonder if bitcoin isn't just a little too public.  I think there will always be a market for untraceable transactions which can live right alongside bitcoin and ether.  DASH and XMR work differently and while I like XMR better, DASH seems to have the better development/marketing behind it, so I diversified into both.

 

I have no idea about when to sell.  If my thesis is wrong, sell now.  If my thesis is correct then some or all of these will have marketcaps which will be the equivalent of trillions of 2017 USD someday.

 

[premfan]

Thank you for the post.  Your level of math and thesis synthesis is above my pay grade.  It seems to me that the blockchain and insert any currency that has trust could fundamentally change the bottom 20 percent of the world's population.  This is a great service and invention if executed. 

[solobz]

a16z had a recent podcast that I thought was an insightful convo on cryptos for novices (like myself)

http://a16z.com/2017/04/03/cryptocurrencies-protocols-appcoins/

 

I own pretty insignificant amounts of ethereum and bitcoin. ether has the advantage of (maybe?) being more of a blockchain/platform/application play, rather than a pure store of value like bitcoin, but I know nothing

[SharperDingaan]

You need to be very clear why you are in these things, and what your thesis is.

 

You also need to mindful that the distributed security of Bitcoin isn't really working as claimed anymore, as >50% of miners are under the same 'controlling mind'.

 

SD

 

 

[Parsad]

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned!  Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys.

 

Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people!

 

Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving.

 

Cheers!

[rkbabang]

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned!  Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys.

 

Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people!

 

Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving.

 

Cheers!

 

+1

 

The last paragraph above articulates the largest risk I see investing in these. That was what I was trying to say when I said that I was sure that this was the future, but not sure that it will be Bitcoin. The way I see it is that this will be a winner take almost all industry. There will be thousands of cryptocurrencies but only 1-3 real winners. My cost basis in my basket of these is less than 1% of my portfolio even though the current value is over 8% right now. I'm not buying any more.

[gg]

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned!  Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys.

 

Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people!

 

Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving.

 

Cheers!

 

Agree 100% when these sort of people are getting excited about stocks or real estate, or other assets they can speculate on, which have a maximum intrinsic value... the one difference here is that bitcoin has positive network effects, so hysteria/speculation can actually end up increasing their intrinsic value

[SharperDingaan]

Bitcoin is an 'Oracle' with a token called 'Bitcoin'. Because other people will accept 'Bitcoin' as payment for goods or services, 'Bitcoin' functions as money. Because it uses cryptography we call  it 'cryptocurrency', & assign magical properties to it. Long time ago we assigned similar properties to anything ended '.com' - & it didn't go so well.

 

Bitcoin owes its popularity to first mover advantage, and the blockchain technology that runs it. As it features prominently in a number of textbooks, it is probably never going to go away. And with more people reading those textbooks, demand is likely to increase - driving price and volatility changes.  Mougayar (2016) The Business Blockchain. Nothing wrong in any of this, but at least recognize the drivers.

 

The underlying blockchain technology is the killer app, and it is operating in 'blue sky' - on just about everything it touches. New monopolies are being created almost quarterly, and are in the process of scaling up; once complete they will make the old Standard Oil Trust look like kiddies play.

 

The potential impact has started to register with the public, but it is being articulated as 'Bitcoin'; ie: the wrong words are being used. Just as many people thought a 'mouse' was a rodent - when the first computers came out.

 

SD

 

 

 

 

[rkbabang]

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned!  Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys.

 

Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people!

 

Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving.

 

Cheers!

 

Agree 100% when these sort of people are getting excited about stocks or real estate, or other assets they can speculate on, which have a maximum intrinsic value... the one difference here is that bitcoin has positive network effects, so hysteria/speculation can actually end up increasing their intrinsic value

 

Exactly.  Similar to Facebook. The more people using it the more valuable it is.  The only question is if Bitcoin is the Facebook of cryptocurrencies or the MySpace?

[rkbabang]

To further diversify, Tezos looks interesting.  I am thinking about participating in the ICO at the end of this month.  If you participate in the first 2 days you get 6000 TEZ per Bitcoin which decreases down to 5000 TEZ/BTC over the 10 day offering.  It is an open-ended ICO, so the resultant market cap will depend on how many participate, they are hoping to raise $20M.  I would be using my current bitcoin holdings to further diversify my cryptocurrency basket, not new money.

 

Some info:

 

https://bitcoinmagazine.com/articles/tezos-receives-investment-smart-contact-system-polychain-capitals-digital-currency-fund/

 

Tezos, the generic self amending crypto-ledger

 

Tezos.com

 

[Jurgis]

Perhaps I should ask if people are paying taxes on cryptocurrency gains.  8)

[wachtwoord]

Tezos isn't even clear about the number of tokens they are giving out which makes it impossible to calculate a market cap. Completely uninvestible.

[tng]

 

Exactly.  Similar to Facebook. The more people using it the more valuable it is.  The only question is if Bitcoin is the Facebook of cryptocurrencies or the MySpace?

 

I'm not sure if it is even comparable like this. If there is a huge advancement in social media, Facebook can simply change their core code to put that feature into it. Other smaller social networks did stuff like videos, live streaming, stories, etc first and Facebook adopted the ones that worked well. Facebook at launch was a wall that people can write on. Now it is very different.

 

The crypto-currencies are very limited in their ability to change like that. What if someone figures out something better than Bitcoin's block chain? It's almost certain to happen over time. When someone invents a vastly superior crypto-currency, is everybody going to stick with the old one?

[wachtwoord]

 

Exactly.  Similar to Facebook. The more people using it the more valuable it is.  The only question is if Bitcoin is the Facebook of cryptocurrencies or the MySpace?

 

I'm not sure if it is even comparable like this. If there is a huge advancement in social media, Facebook can simply change their core code to put that feature into it. Other smaller social networks did stuff like videos, live streaming, stories, etc first and Facebook adopted the ones that worked well. Facebook at launch was a wall that people can write on. Now it is very different.

 

The crypto-currencies are very limited in their ability to change like that. What if someone figures out something better than Bitcoin's block chain? It's almost certain to happen over time. When someone invents a vastly superior crypto-currency, is everybody going to stick with the old one?

 

Over time sure something better might be found. Thus far it took all of human civilization to come up with a solution for the Byzantine generals problems allowing for the trust-less transactions enabled in Bitcoin.

[rkbabang]

 

Exactly.  Similar to Facebook. The more people using it the more valuable it is.  The only question is if Bitcoin is the Facebook of cryptocurrencies or the MySpace?

 

I'm not sure if it is even comparable like this. If there is a huge advancement in social media, Facebook can simply change their core code to put that feature into it. Other smaller social networks did stuff like videos, live streaming, stories, etc first and Facebook adopted the ones that worked well. Facebook at launch was a wall that people can write on. Now it is very different.

 

The crypto-currencies are very limited in their ability to change like that. What if someone figures out something better than Bitcoin's block chain? It's almost certain to happen over time. When someone invents a vastly superior crypto-currency, is everybody going to stick with the old one?

 

Over time sure something better might be found. Thus far it took all of human civilization to come up with a solution for the Byzantine generals problems allowing for the trust-less transactions enabled in Bitcoin.

 

Yes, but once a solution to a problem is found using new technology (remember in the grand scheme of things the internet and even computers themselves are new technologies) is the first solution likely to be the best solution?  It took all of human civilization to get off the ground, but the Wright brothers original aircraft has been improved upon a bit over the years.  But that is just playing devil's advocate a little, because we don't really know.  To answer tng's question, cryptocurrencies can be changed in how they work.  ETH has forked a number of times to change things and add features, there is a huge debate going on now in the Bitcoin community over forking the blockchain to change some things.  It isn't easy to do. Building consensus is never easy to do, and it probably shouldn't be easy to do, but it can be done.  If something was invented that didn't evolve a blockchain at all, could bitcoin and others evolve to support that?  I don't know, probably not, but I don't think that is likely.  I think blockchains in one form or another are going to be the fundamental building blocks for many useful technologies in the coming decades.  Blockchain technology in 2017 is like the internet in 1985, most people have no idea it even exists, and even those who are excited about it have no idea what exactly it will look like in a few decades.  And maybe the killer app (such as the WWW was for the internet) hasn't even been invented or thought of yet.  I think it is possible that revolutionising money is just the beginning of what the blockchain will do.  Back in 1985 the internet was supposed to revolutionise mail delivery and personal communication, I don't think many people thought it would change the entire global retail industry or the entire entertainment industry in their lifetimes.

 

[wachtwoord]

The right question isn't whether it can be improved but rather whether it's good enough :)

[SharperDingaan]

It's more useful to think of blockchain technology as the start of another industrial revolution; over time the technologies don't go away, they just get subsumed by something better. But each time the revolution starts - it is a material improvement on what went before it.

 

Blockchain is evolving; some suggest that we're even currently entering Blockchain 4.0.

Each version takes us to a fork.

 

SD 

[Mark Jr.]

i don't really understand crypto.

 

It seems like a successful one required widespread adoption, yet being volatile and hoarded by speculators goes counter to merchant adoption. On the other hand one that is stable and non-volatile which merchants may adopt is not one which you can speculate on.

 

It is basically lose lose.

 

That sounds pretty close to what happened with the precursor to crypto-currencies: digital gold currencies of the early 00's era.

 

e-gold was widely used, liquid but had horrible governance and was eventually shut down.

Goldmoney had a much better governance structure but nobody used it outside of storing gold digitally (merchants were not using goldmoney for payments, e-gold had that pretty much locked).

 

e-gold went more or less to zero (well it was shutdown, there is still a lingering class action settlement going for what's left)

 

goldmoney is still around to this day, most recently being merged with Toronto based Bitgold, so interestingly, you can now convert bitcoin into vaulted gold (goldmoney) or even physical gold. Bitgold is also publicly traded on the TSX under "XAU".

 

[Mark Jr.]

When your mechanic and plumber start investing and touting the wonders of cryptocurrency, you should start to get concerned!  Both have tried to arrange meetings with me recently on how amazing and hot Bitcoin is, as well as they want to introduce me to their Bitcoin guys.

 

Those are the people who are reacting purely to the price of Bitcoin, in that sense we are probably in another bubble, not the first or the last for the BTC price. One thing I have noticed about the crypto-currency economy is that their "secular cycles" are a lot more compressed than other cycles. The whole space is moving so fast it is simply dizzying. If I were a New-Age Futurist Flake (NAFF?) I would say that a "monetary-technological singularity has occurred" (but I'm not).

 

Also, the fact that Patrick Byrne is now spending Overstock.com money on this, should also concern people!

 

I know one of the investments Overstock made into the space and it's actually one of the better ones I've seen.  Real company, actual service, has a nice geographical niche completely locked down, I've met the CEO and he's quite smart and capable. I actually use his platform sometimes.

 

Cryptocurrency is the future, but the winners will be few and far between, like how Amazon presently leads the internet wars with the dead carcasses of its competitors littering the street or barely surviving.

 

I still think it's for the most part too early to tell not only who the winners will be but what they're going to be. It may not even be bitcoin (wonderful comment made earlier in this thread was "is bitcoin facebook? or myspace?").

 

There is a compelling book about this entire phenomenon by Nick Gogerty called "The Nature of Value" (I may have mentioned it in the books forum once), about how technology shifts go through 4 distinct quadrants and 2 of them are horrible for capital allocators. Blockchain is still in that "emerging" quadrant.

 

Personally all I did was a few years ago I just started accepting bitcoin as payment at my business (domain registations & web hosting), the volume was so low we just threw it into a pile and left it there. Now that pile isn't looking so small anymore, between the incremental daily transactions of a few years and the price rise it's looking quite nice.

 

Ethereum could be meaningful, when Goldman and JPM et al formed the Enterprise Ethereum Alliance I knew this was the one "alt-coin" to take a flyer on and my first tranche is a 10x. How often does that happen? (I should have bet it EVERYTHING I had! Just kidding). I just knew that with GS and JPM involved it was going to separate from the pack of altcoins. That said, I still haven't seen an actual application that's very far beyond the crypto-currency / blockchain / smart contract equiv. of "hello world" running on ethereum.

 

[SharperDingaan]

If you are holding Bitcoin - you may want to exit in the next few days.

https://www.yahoo.com/tech/hackers-exploit-stolen-u-spy-agency-tool-launch-000320843--finance.html

 

What isn't being stated in this story is that the payment is to be made in Bitcoin, & that the corrective software patch was released by Microsoft almost 6 months ago. Russian hackers that want to live, don't shit where they sleep.

 

Payment in Bitcoin indicates the attack was not meant to succeed. To collect the payment the payer has to know the public key to pay to - & the seller cannot rely on intimidation to keep the keys quiet as they don't know which networks will get hit. The transparency of Bitcoin also makes tracking very easy. But what does happen is a spike in the price and liquidity of Bitcoin as folks rush to purchase the coin - enabling bulk sale of existing coin. In the securities world its called 'working the box'.

 

To use the spike you must already have the coin, & in quantity; there are few possibilities.

Buyer beware.

 

SD 

 

 

 

[rkbabang]

There are Bitcoin mixers which can anonymize your Bitcoin, but you could be correct. I am not concerned about the short term price though. If it falls by half or more it won't be the first time nor the last. I plan to hold for a decade or more.