Money Mustache: Why Bitcoin is stupid

[doc75]

There's been a lot of recent discussion of bitcoin on CoBF and I didn't keep up.  So I'm doing the lazy thing and asking:  Has the computational complexity (in particular energy requirements) of bitcoin transactions been discussed here somewhere?

 

 

[beerbaron]

There's been a lot of recent discussion of bitcoin on CoBF and I didn't keep up.  So I'm doing the lazy thing and asking:  Has the computational complexity (in particular energy requirements) of bitcoin transactions been discussed here somewhere?

 

I have asked the question many times with very few answers... scability does not seem to be a concern for Bitcoin bulls. Maybe that is because trasaction volumes are of no concern because bitcoin if aimed as a store of value, not a transactional vehicle. Not sure but there is no free lunch, if a transaction today costs 20$ in energy someone has to pay for it and that that is the minimal cost not including capex. Similar to stock dilution, bitcoin dilution has a cost. People might not be seeing it because demand exceeds supply but it still is a cost.

 

BeerBaron

[SnarkyPuppy]

There's been a lot of recent discussion of bitcoin on CoBF and I didn't keep up.  So I'm doing the lazy thing and asking:  Has the computational complexity (in particular energy requirements) of bitcoin transactions been discussed here somewhere?

 

I have asked the question many times with very few answers... scability does not seem to be a concern for Bitcoin bulls. Maybe that is because trasaction volumes are of no concern because bitcoin if aimed as a store of value, not a transactional vehicle. Not sure but there is no free lunch, if a transaction today costs 20$ in energy someone has to pay for it and that that is the minimal cost not including capex. Similar to stock dilution, bitcoin dilution has a cost. People might not be seeing it because demand exceeds supply but it still is a cost.

 

BeerBaron

 

Transaction fees for transferring bitcoin are already starting to scale.  Costs me $15 to send either $20 or $20,000 right now (on-chain transfers - please ignore whatever fees coinbase is currently charging).  This isn't significantly different from trading gold with a brokerage. 

 

In terms of electricity cost to mine-  I don't understand the bear argument here.  The cost of mining a bitcoin will reach an equilibrium in the long term whereby the incremental cost of mining = incremental value of the mining reward.  If the cost of mining a bitcoin exceeds its current price, less people will mine and supply/demand will resolve at equilibrium.  Bitcoin transactions will be added to the block every 10 minutes regardless of the electricity requirement dictated by the supply/demand mining dynamics. 

 

Ultimately it's hard to see where the technology is in 5-10 years in terms of scaling, but my thesis isn't predicated on fast transfers.  The "fiat replacement"/"currency" thesis alludes me and I have no idea how to calibrate likelihood.  Replacement of gold as a flight-to-safety government-resistant store-of-value is the thesis with the highest probability of success IMO.  This doesn't require fees any less than they are today and it doesn't require transaction speed any faster than they are today.

[matjone]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

[SnarkyPuppy]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

I'd suggest watching some videos by Andreas Antonopoulos on youtube (https://www.youtube.com/user/aantonop/videos).  He's a little nutty at times, but he understands the technology better than most.   

 

I have no opinion on bitcoin as a currency (my hunch is that the probability of the currency thesis playing out is orders of magnitude lower than the probability of the flight-to-safety store of value thesis playing out).   

[Guest cherzeca]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

take a look at ripple.  they are focused at reducing cost for global money transfers using blockchain, and they are selling to financial institutions to use their software/platform.  i'll ignore for the moment that they have *sshole gene sperling as a director.

 

so buying coffee is a far down the road app for blockchain, though i imagine at some point you will have a digital wallet that will let you do exactly that.  ripple is private.  for a public vehicle to invest in blockchain apps, i would rec you look at ostk.  as for buying coins themselves as an investment, i wouldnt rec

[Cardboard]

"Please enlighten us on the gold market, its properties, its owners, and why your insights demonstrate that bitcoin has <=5% chance of obtaining a $7tn value (gold)"

 

I don't have more time to waste with you as I already explained why your probabilities are way off but, you are too stubborn and greedy to understand.

 

Cardboard

[SnarkyPuppy]

"Please enlighten us on the gold market, its properties, its owners, and why your insights demonstrate that bitcoin has <=5% chance of obtaining a $7tn value (gold)"

 

I don't have more time to waste with you as I already explained why your probabilities are way off but, you are too stubborn and greedy to understand.

 

Cardboard

 

A reasonable person might argue the same about your reaction to bitcoin/crypto.  I think the way I phrased my first response in this thread invited an unnecessary level hostility - I apologize.    At the same time, I have noticed a patterned animosity towards anyone with a slight variant view on crypto/bitcoin and I do not think its warranted or fair - I've never claimed it's not speculation and I've never said "buy it because we're all going to get lambos!~".  Simply think there is value in a very hated asset. 

[KJP]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

The ultimate supply of BTC is fixed.  Assuming BTC becomes a store of value and the human population continues to grow, then won't the value of BTC continue to increase in nominal terms?  For example, would you expect a gallon of milk to cost less BTC in year 20 relative to year 1, because of the deflationary effect of a fixed supply of BTC versus a growing population of humans?  If that is so, why would you ever spend BTC rather than your local fiat currency that has no fixed supply?

 

The fixed supply of BTC (a feature, not a bug to many) is one of the reasons it's hard to see its use as a dominate currency, because I don't think people would accept the consequences of such "hard" money.   

[rkbabang]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

The ultimate supply of BTC is fixed.  Assuming BTC becomes a store of value and the human population continues to grow, then won't the value of BTC continue to increase in nominal terms?  For example, would you expect a gallon of milk to cost less BTC in year 20 relative to year 1, because of the deflationary effect of a fixed supply of BTC versus a growing population of humans?  If that is so, why would you ever spend BTC rather than your local fiat currency that has no fixed supply?

 

The fixed supply of BTC (a feature, not a bug to many) is one of the reasons it's hard to see its use as a dominate currency, because I don't think people would accept the consequences of such "hard" money.   

 

The "it will be worth so much that no one will use it and that makes it worthless" argument again.  Yes, it will not circulate as much as the dollar, nor does gold, because it is not a payment rail it is a store of value.  It makes sense only to use it for long term storage or to move very large amounts.

 

I don't foresee anyone ever buying milk or coffee with Bitcoin.

 

EDIT: Unless you are talking about a tractor trailer tanker full of milk or a shipping container full of bulk unroasted coffee beans.  Those transactions might be done in bitcoin.

 

[JimBowerman]

@rk

 

this was not a gold question.  i am only pointing out that the proliferation of blockchain doesnt necessarily mean that digital coins will do well if digital fiat is introduced into the blockchain...which i expect is what the fed/treasury will eventually want

 

There isn't much point in switching to government issued digital currencies.  I can already pay instantly with Apple Pay.  I can pay almost instantly with credit/debit cards and if I pay my balance every month (which I do), not only does it not cost me anything, but they pay me to do it.  Why would I care if there was a fedcoin dollar or not?  What makes people care about Bitcoin is that it is digital gold and not state/corporate controlled.

 

i am not saying you would care.  i am saying that the fed/treasury would care

 

Why would the Fed need to create Fedcoin on a blockchain?  Blockchains are much less efficient than simple SQL databases and are really only useful if you don't have a trusted 3rd party.  In the case of Fedcoin, the fed is clearly the trusted third party so all they would need to do is run it on a SQL database (much faster tx and less expensive). 

 

Flowchart on whether you need blockchain -->  https://pbs.twimg.com/media/Cn3XX0yWYAEw1vJ.png

[KJP]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

The ultimate supply of BTC is fixed.  Assuming BTC becomes a store of value and the human population continues to grow, then won't the value of BTC continue to increase in nominal terms?  For example, would you expect a gallon of milk to cost less BTC in year 20 relative to year 1, because of the deflationary effect of a fixed supply of BTC versus a growing population of humans?  If that is so, why would you ever spend BTC rather than your local fiat currency that has no fixed supply?

 

The fixed supply of BTC (a feature, not a bug to many) is one of the reasons it's hard to see its use as a dominate currency, because I don't think people would accept the consequences of such "hard" money.   

 

The "it will be worth so much that no one will use it and that makes it worthless" argument again. 

 

Where did I say it would be "worthless"?  What I said is that it won't be used as a currency in the sense that it will not be the medium of exchange for small day-to-day transactions.  Just like gold today is not a day-to-day currency, but that doesn't make it worthless as a result.

 

Also, I'm raising the point to suggest that people who are focusing on the ability to use BTC as an everyday currency may be focused on the wrong things.

[rkbabang]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

The ultimate supply of BTC is fixed.  Assuming BTC becomes a store of value and the human population continues to grow, then won't the value of BTC continue to increase in nominal terms?  For example, would you expect a gallon of milk to cost less BTC in year 20 relative to year 1, because of the deflationary effect of a fixed supply of BTC versus a growing population of humans?  If that is so, why would you ever spend BTC rather than your local fiat currency that has no fixed supply?

 

The fixed supply of BTC (a feature, not a bug to many) is one of the reasons it's hard to see its use as a dominate currency, because I don't think people would accept the consequences of such "hard" money.   

 

The "it will be worth so much that no one will use it and that makes it worthless" argument again. 

 

Where did I say it would be "worthless"?  What I said is that it won't be used as a currency in the sense that it will not be the medium of exchange for small day-to-day transactions.  Just like gold today is not a day-to-day currency, but that doesn't make it worthless as a result.

 

Also, I'm raising the point to suggest that people who are focusing on the ability to use BTC as an everyday currency may be focused on the wrong things.

 

Oh, I agree with you then.  I don't see many people who still believe that other than those who don't understand bitcoin at all.  A lot of those who still want to focus on replacing cash in everyday transactions have moved onto to BCH (or LTC, DASH, XRP, etc) and have abandoned BTC.

 

[KJP]

So it sounds like you think it has a future as a currency and not just as a replacement for gold, snarky puppy?  This was what they said in the original paper.

 

Where would you guys see the transaction costs leveling out to?  Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price?

 

The ultimate supply of BTC is fixed.  Assuming BTC becomes a store of value and the human population continues to grow, then won't the value of BTC continue to increase in nominal terms?  For example, would you expect a gallon of milk to cost less BTC in year 20 relative to year 1, because of the deflationary effect of a fixed supply of BTC versus a growing population of humans?  If that is so, why would you ever spend BTC rather than your local fiat currency that has no fixed supply?

 

The fixed supply of BTC (a feature, not a bug to many) is one of the reasons it's hard to see its use as a dominate currency, because I don't think people would accept the consequences of such "hard" money.   

 

The "it will be worth so much that no one will use it and that makes it worthless" argument again. 

 

Where did I say it would be "worthless"?  What I said is that it won't be used as a currency in the sense that it will not be the medium of exchange for small day-to-day transactions.  Just like gold today is not a day-to-day currency, but that doesn't make it worthless as a result.

 

Also, I'm raising the point to suggest that people who are focusing on the ability to use BTC as an everyday currency may be focused on the wrong things.

 

Oh, I agree with you then.  I don't see many people who still believe that other than those who don't understand bitcoin at all.  A lot of those who still want to focus on replacing cash in everyday transactions have moved onto to BCH (or LTC, DASH, XRP, etc) and have abandoned BTC.

 

Understood.  My post was in response to someone who asked "Is this going to be something where I can buy a cup of coffee with bitcoin at a sensible price."

 

By the way, I think your posts are quite helpful in understanding why people believe in bitcoin as a store of value, particularly your comparison of its characteristics to gold's.  Very useful points in a thread that started with the opposite theory -- that's an item's inherent characteristics are irrelevant to its use as a store of value.